Brightline Interactive, Inc 10-Q for FY2023 Q1
Brightline Interactive, Inc. (BTLN)
About this 10-Q
Brightline Interactive, Inc filed this 10-Q on November 14, 2022, covering the quarter ended September 30, 2022 (FY2023 Q1).
Headline figures
Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $3.95M
- up 286.4% from $1.02M a year earlier
- Net loss
- $5.38M
- compared with a net loss of $1.66M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s
telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
| The
|
Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. ☒
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and ‘‘emerging growth company’’ in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company filer | ||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of November 10, 2022, the registrant had shares of common stock, par value $0.001 per share, outstanding.
THE GLIMPSE GROUP, INC.
TABLE OF CONTENTS
Page No. | ||
| PART I | FINANCIAL INFORMATION | |
| ITEM 1. | FINANCIAL STATEMENTS (Unaudited) | 3 |
| Consolidated Balance Sheets | 4 | |
| Consolidated Statements of Operations | 5 | |
| Consolidated Statements of Stockholders’ Equity (Deficit) | 6 | |
| Consolidated Statements of Cash Flows | 7 | |
| Notes to Consolidated Financial Statements | 8 | |
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 28 |
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 35 |
| ITEM 4. | CONTROLS AND PROCEDURES | 35 |
| PART II | OTHER INFORMATION | 36 |
| ITEM 1. | LEGAL PROCEEDINGS | 36 |
| ITEM 1A. | RISK FACTORS | 36 |
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 36 |
| ITEM 6. | EXHIBITS | 37 |
| SIGNATURES | 38 | |
| 2 |
THE GLIMPSE GROUP, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| Page | |
| Index to Consolidated Financial Statements (Unaudited) | |
| Consolidated Balance Sheets | 4 |
| Consolidated Statements of Operations | 5 |
| Consolidated Statements of Stockholders’ Equity (Deficit) | 6 |
| Consolidated Statements of Cash Flows | 7 |
| Notes to Consolidated Financial Statements | 8-27 |
| 3 |
THE GLIMPSE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
As of September 30, 2022 (Unaudited) | As of June 30, 2022 (Audited) | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Investments | ||||||||
| Accounts receivable | ||||||||
| Deferred costs/contract assets | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Equipment, net | ||||||||
| Note receivable | ||||||||
| Right-of-use assets | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Other assets | ||||||||
| Restricted cash | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Accrued bonuses | ||||||||
| Deferred revenue/contract liabilities | ||||||||
| Asset purchase payable | ||||||||
| Lease liabilities, current portion | ||||||||
| Contingent consideration for acquisitions, current portion | ||||||||
| Total current liabilities | ||||||||
| Long term liabilities | ||||||||
| Contingent consideration for acquisition, net of current portion | ||||||||
| Lease liabilities, net of current portion | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ Equity | ||||||||
| Preferred Stock, par value $ per share, million shares authorized; shares issued and outstanding | ||||||||
| Common Stock, par value $ per share, million shares authorized; and issued and outstanding | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 4 |
THE GLIMPSE GROUP, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
| 2022 | 2021 | |||||||
| For the Three Months Ended | ||||||||
| September 30, | ||||||||
| 2022 | 2021 | |||||||
| Revenue | ||||||||
| Software services | $ | $ | ||||||
| Software license/software as a service | ||||||||
| Total Revenue | ||||||||
| Cost of goods sold | ||||||||
| Gross Profit | ||||||||
| Operating expenses: | ||||||||
| Research and development expenses | ||||||||
| General and administrative expenses | ||||||||
| Sales and marketing expenses | ||||||||
| Change in fair value of acquisition contingent consideration | ||||||||
| Total operating expenses | ||||||||
| Loss from operations before other income (expense) | ( | ) | ( | ) | ||||
| Other income (expense) | ||||||||
| Interest income | ||||||||
| Loss on conversion of convertible notes | ( | ) | ||||||
| Total other income (expense), net | ( | ) | ||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted net loss per share | $ | ( | ) | $ | ( | ) | ||
| Weighted-average shares used to compute basic and diluted net loss per share | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 5 |
THE GLIMPSE GROUP, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2022
(Unaudited)
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Common Stock | Additional Paid-In | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Balance as of July 1, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common stock issued for acquisitions | ||||||||||||||||||||
| Common stock issued for exercise of options | ||||||||||||||||||||
| Common stock issued for contingent acquisition obligation | ||||||||||||||||||||
| Stock based compensation expense | - | |||||||||||||||||||
| Stock option-based board of directors expense | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of September 30, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
THE GLIMPSE GROUP, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021
(Unaudited)
| Common Stock | Additional Paid-In | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Balance as of July 1, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Common stock issued in Initial Public Offering, net | ||||||||||||||||||||
| Common stock issued for convertible note conversion | ||||||||||||||||||||
| Common stock issued for acquisition | ||||||||||||||||||||
| Common stock issued for legacy acquisition obligation | ||||||||||||||||||||
| Common stock issued to vendors for compensation | ||||||||||||||||||||
| Common stock issued for exercise of options | ||||||||||||||||||||
| Stock option-based compensation expense | - | |||||||||||||||||||
| Stock option-based board of directors expense | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of September 30, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 6 |
THE GLIMPSE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| 2022 | 2021 | |||||||
| For the Three Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization and depreciation | ||||||||
| Common stock and stock option based compensation for employees and board of directors | ||||||||
| Acquisition contingent consideration fair value adjustment | ||||||||
| Issuance of common stock to vendors as compensation | ||||||||
| Loss on conversion of convertible notes | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Pre-offering costs | ||||||||
| Deferred costs/contract assets | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Other assets | ( | ) | ||||||
| Accounts payable | ( | ) | ( | ) | ||||
| Accrued liabilities | ( | ) | ( | ) | ||||
| Accrued bonuses | ( | ) | ||||||
| Deferred revenue/contract liabilities | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flow from investing activities: | ||||||||
| Purchases of equipment | ( | ) | ( | ) | ||||
| Acquisitions, net of cash acquired | ( | ) | ||||||
| Purchase of investments | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from initial public offering, net | ||||||||
| Proceeds from exercise of stock options | ||||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash, cash equivalents and restricted cash | ( | ) | ||||||
| Cash, cash equivalents and restricted cash, beginning of period | ||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | $ | ||||||
| Non-cash Investing and Financing activities: | ||||||||
| Common stock issued for BLI acquisition | $ | $ | ||||||
| Issuance of common stock for satisfaction of contingent liability, net of note receivable extinguishment | $ | $ | ||||||
| Extinguishment of note receivable for satisfaction of contingent liability | $ | $ | ||||||
| Issuance of common stock for satisfaction of contingent liability | $ | $ | ||||||
| Contingent acquisition consideration liability | $ | $ | ||||||
| Lease liabilities arising from right-to-use assets | $ | $ | ||||||
| Conversion of convertible promissory notes into common stock | $ | $ | ||||||
| Issuance of warrants in connection with initial public offering | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 7 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2022 AND 2021
NOTE 1. DESCRIPTION OF BUSINESS
The Glimpse Group, Inc. (“Glimpse” and together with its wholly owned subsidiaries, collectively, the “Company”) is a Virtual (VR) and Augmented (AR) Reality company, comprised of a diversified portfolio of wholly owned VR and AR software and services companies. Glimpse’s subsidiary companies are located in the United States, Turkey and Australia. The Company was incorporated in the State of Nevada in June 2016.
Glimpse’s robust VR/AR ecosystem, collaborative environment and business model strive to simplify the many challenges faced by companies in an emerging industry. Glimpse cultivates, optimizes and manages business operations while providing a strong network of professional relationships, thereby allowing the subsidiary company to maximize their time and resources in pursuit of mission-critical endeavors, reducing time to market, optimizing costs, improving product quality and leveraging joint go-to-market strategies, while simultaneously providing investors an opportunity to invest directly into the VR/AR industry via a diversified platform.
The Company completed an initial public offering (“IPO”) of its common stock on the Nasdaq Capital Market Exchange (“Nasdaq”) on July 1, 2021, under the ticker VRAR. In addition, pursuant to a Securities Purchase Agreement (“SPA”) the Company sold additional common stock to certain institutional investors in November 2021. See Note 8.
NOTE 2. LIQUIDITY AND CAPITAL RESOURCES
The
Company incurred losses of $
The
Company expects to continue to generate net losses for the foreseeable future as it makes investments to grow its business. Management
believes that the Company’s existing balances of cash and cash equivalents as of the issuance date of these financial statements,
which are approximately $
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the rules and regulations of the SEC. In the opinion of management, the unaudited consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position as of September 30, 2022, the results of operations for the three months ended September 30, 2022 and 2021, and cash flows for the three months ended September 30, 2022 and 2021. The financial data and other information disclosed in these notes to the interim financial statements related to these periods are unaudited. The results for the three months ended September 30, 2022 are not necessarily indicative of the results to be expected for the entire year ending June 30, 2023 or for any subsequent periods. The consolidated balance sheet at June 30, 2022 has been derived from the audited consolidated financial statements as of that date.
| 8 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2022 AND 2021
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to the Securities and Exchange Commission’s rules and regulations.
These unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended June 30, 2022.
Principles of Consolidation
The accompanying consolidated financial statements include the balances of Glimpse and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Accounting Estimates
The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the accompanying consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
The principal estimates relate to the valuation of allowance for doubtful accounts, stock options, warrants, revenue recognition, cost of goods sold, allocation of the purchase price of assets relating to business combinations and calculation of contingent consideration for acquisitions.
Cash and Cash Equivalents, Restricted Cash
Cash and cash equivalents consist of cash and deposits in bank checking accounts with immediate access and cash equivalents that represent highly liquid investments.
Restricted cash represents escrowed cash related to the S5D acquisition.
The components of cash, cash equivalents and restricted cash on the consolidated statement of cash flows as of September 30, 2022 and 2021 are as follows:
SCHEDULE OF COMPONENTS OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
| September 30, 2022 | September 30, 2021 | |||||||
| As of | As of | |||||||
| September 30, 2022 | September 30, 2021 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total | $ | $ | ||||||
Accounts Receivable
Accounts receivable consists primarily of amounts due from customers under normal trade terms. Allowances for uncollectible accounts are provided for based upon a variety of factors, including historical amounts written-off, an evaluation of current economic conditions, and assessment of customer collectability. As of September 30, 2022 and June 30, 2022 no allowance for doubtful accounts was recorded as all amounts were considered collectible.
| 9 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2022 AND 2021
Customer Concentration and Credit Risk
Two
customers accounted for approximately
One
customer accounted for approximately
The Company maintains cash in accounts that, at times, may be in excess of the Federal Deposit Insurance Corporation limit. The Company has not experienced any losses on such accounts.
Business Combinations
The results of a business acquired in a business combination are included in the Company’s consolidated financial statements from the date of the acquisition. Purchase accounting results in assets and liabilities of an acquired business generally being recorded at their estimated fair values as of the acquisition date. Any excess consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred.
The Company performs valuations of assets acquired and liabilities assumed and allocates the purchase price to its respective assets and liabilities. Determining the fair value of assets acquired and liabilities assumed may require management to use significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenues, costs and cash flows. Estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is typically one year from the acquisition date, if new information is obtained about facts and circumstances that existed as of the acquisition date, changes in the estimated values of the net assets recorded may change the amount of the purchase price allocated to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded in the consolidated statement of operations. At times, the Company engages the assistance of valuation specialists in concluding on fair value measurements in connection with determining fair values of assets acquired and liabilities assumed in a business combination.
Further, during the year ended June 30, 2022, the Company early adopted ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires an acquirer to account for the related revenue contracts, acquired in the business acquisition, in accordance with ASC Topic 606 Revenue from Contracts with a Customer as if the Company had originated the contracts.
Intangible assets (other than Goodwill)
Intangibles represent the allocation of a portion of the acquisition’s purchase price (see Note 5). Intangibles are stated at allocated cost less accumulated amortization. Amortization is computed using the straight-line method over the estimated useful lives of the related assets. The Company reviews intangibles, being amortized, for impairment when current events indicate that the fair value may be less than the carrying value.
| 10 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2022 AND 2021
Goodwill
Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations accounted for under the acquisition method. Goodwill is not amortized but instead is tested at least annually for impairment, or more frequently when events or changes in circumstances indicate that goodwill might be impaired.
Fair Value of Financial Instruments
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy, which is based on three levels of inputs, the first two of which are considered observable and the last unobservable, that may be used to measure fair value, is as follows:
● Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities;
● Level 2 — inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or
● Level 3 — unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The Company classifies its cash equivalents and investments within Level 1 of the fair value hierarchy on the basis of valuations based on quoted prices for the specific securities in an active market.
The Company’s contingent consideration is categorized as Level 3 within the fair value hierarchy. Contingent consideration is recorded within contingent consideration, current and contingent consideration, non-current in the Company’s consolidated balance sheets as of September 30 and June 30, 2022. Contingent consideration has been recorded at its fair values using unobservable inputs and have included using the Monte Carlo simulation option pricing framework, incorporating contractual terms and assumptions regarding financial forecasts, discount rates, and volatility of forecasted revenue. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management with the assistance of a third-party valuation specialist.
The Company’s other financial instruments consist primarily of accounts receivable, note receivable, accounts payable, accrued liabilities and other liabilities approximate fair value due to the short-term nature of these instruments.
| 11 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2022 AND 2021
Revenue Recognition
Nature of Revenues
The Company reports its revenues in two categories:
| ● | Software Services: Virtual and Augmented Reality projects, solutions and consulting services. | |
| ● | Software License and Software-as-a-Service (“SaaS”): Virtual and Augmented Reality software that is sold either as a license or as a SaaS subscription. |
The Company applies the following steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
| ● | identify the contract with a customer; | |
| ● | identify the performance obligations in the contract; | |
| ● | determine the transaction price; | |
| ● | allocate the transaction price to performance obligations in the contract; | |
| ● | recognize revenue as the performance obligation is satisfied; | |
| ● | determine that collection is reasonably assured. |
Revenue is recognized when the Company satisfies its performance obligation under the contract by transferring the promised product to its customer or service is performed and collection is reasonably assured. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. A portion of the Company’s contracts have a single performance obligation, as the promise to transfer products or services is not separately identifiable from other promises in the contract and, therefore, not distinct. Other contracts can include various services and products which are at times capable of being distinct, and therefore may be accounted for as separate performance obligations.
Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or providing services. As such, revenue is recorded net of returns, allowances, customer discounts, and incentives. Sales taxes and other taxes are excluded from revenues.
For distinct performance obligations recognized at a point in time, any unrecognized portion of revenue and any corresponding unrecognized expenses are presented as deferred revenue/contract liability and deferred costs/contract asset, respectively, in the accompanying consolidated balance sheets. Contract assets include cash and equity based payroll costs, and may include payments to consultants and vendors.
For distinct performance obligations recognized over time, the Company records a contract asset (costs in excess of billings) when revenue is recognized prior to invoicing, or a contract liability (billings in excess of costs) when revenue is recognized subsequent to invoicing.
Significant Judgments
The Company’s contracts with customers may include promises to transfer multiple products/services. Determining whether products/services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Further, judgment may be required to determine the standalone selling price for each distinct performance obligation.
Disaggregation of Revenue
The Company generated revenue for the three months ended September 30, 2022 and 2021 by delivering: (i) Software Services, consisting primarily of VR/AR software projects, solutions and consulting services, and (ii) Software Licenses & SaaS, consisting primarily of VR and AR software licenses or SaaS. The Company currently generates its revenues primarily from customers in the United States.
| 12 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2022 AND 2021
Revenue for a significant portion of Software Services projects and solutions (projects whereby, the development of the project leads to an identifiable asset with an alternative use to the Company) is recognized at the point of time in which the customer obtains control of the project, customer accepts delivery and confirms completion of the project. Certain other Software Services revenues are custom project solutions (projects whereby, the development of the custom project leads to an identifiable asset with no alternative use to the Company, and, in which, the Company also has an enforceable right to payment under the contract) and are therefore recognized based on the percentage of completion using an input model with a master budget. The budget is reviewed periodically and percentage of completion adjusted accordingly.
Revenue for Software Services consulting services and website maintenance is recognized when the Company performs the services, typically on a monthly retainer basis.
Revenue for Software License is recognized at the point of time in which the Company delivers the software and customer accepts delivery. If there are significant contractually stated ongoing service obligations to be performed during the term of the Software License or SaaS contract, then revenues are recognized ratably over the term of the contract.
Timing of Revenue
The timing of revenue recognition for the three months ended September 30, 2022 and 2021 was as follows:
SCHEDULE OF TIMING REVENUE RECOGNITION
| 2022 | 2021 | |||||||
| For the Three Months Ended | ||||||||
| September 30, | ||||||||
| 2022 | 2021 | |||||||
| Products and services transferred at a point in time | $ | $ | ||||||
| Products and services transferred/recognized over time | ||||||||
| Total Revenue | $ | $ | ||||||
Remaining Performance Obligations
Timing of revenue recognition may differ from the timing of invoicing to customers. The Company generally records a receivable/contract asset when revenue is recognized prior to invoicing, or deferred revenue/contract liability when revenue is recognized subsequent to invoicing.
For certain Software Services project contracts the Company invoices customers after the project has been delivered and accepted by the customer. Software Service project contracts typically consist of designing and programming software for the customer. In most cases, there is only one distinct performance obligation, and revenue is recognized upon completion, delivery and customer acceptance. Contracts may include multiple distinct projects that can each be implemented and operated independently of subsequent projects in the contract. In such cases, the Company accounts for these projects as separate distinct performance obligations and recognizes revenue upon the completion of each project or obligation, its delivery and customer acceptance.
For contracts recognized over time, contract liabilities include billings invoiced for software projects for which the contract’s performance obligations are not complete.
For certain other Software Services project contracts, the Company invoices customers for a substantial portion of the project upon entering into the contract due to their custom nature and revenue is recognized based upon percentage of completion. Revenue recognized subsequent to invoicing is recorded as a deferred revenue/contract liability (billings in excess of cost) and revenue recognized prior to invoicing is recorded as a deferred cost/contract asset (cost in excess of billings).
| 13 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2022 AND 2021
For Software Services consulting or retainer contracts, the Company generally invoices customers monthly at the beginning of each month in advance for services to be performed in the following month. The sole performance obligation is satisfied when the services are performed. Software Services consulting or retainer contracts typically consist of ongoing support for a customer’s software or specified business practices.
For Software License contracts, the Company generally invoices customers when the software has been delivered to and accepted by the customer, which is also when the performance obligation is satisfied. For SaaS contracts, the Company generally invoices customers in advance at the beginning of the service term.
For multi-period Software License contracts, the Company generally invoices customers annually at the beginning of each annual coverage period. Software License contracts consist of providing clients with software designed by the Company. For Software License contracts, there are generally no ongoing support obligations unless specified in the contract (becoming a Software Service).
Unfulfilled
performance obligations represent amounts expected to be earned by the Company on executed contracts. As of September 30, 2022, the Company
had approximately $
The Company recognizes stock-based compensation expense related to grants to employees or service providers based on grant date fair values of common stock or the stock options, which are amortized over the requisite period, as well as forfeitures as they occur.
The Company values the options using the Black-Scholes Merton (“Black Scholes”) method utilizing various inputs such as expected term, expected volatility and the risk-free rate. The expected term reflects the application of the simplified method, which is the weighted average of the contractual term of the grant and the vesting period for each tranche. Expected volatility is derived from a weighted average of volatility inputs for the Company. The risk-free rate is based on the implied yield of U.S. Treasury notes as of the grant date with a remaining term approximately equal to the expected life of the award.
Research and Development Costs
Research and development expenses are expensed as incurred, and include payroll, employee benefits and stock-based compensation expense. Research and development expenses also include third-party development and programming costs. Given the emerging industry and uncertain market environment the Company operates in, research and development costs are not capitalized.
Basic earnings per share (“EPS”) is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential shares of common stock outstanding during the period using the treasury stock method. Dilutive potential common shares include the issuance of potential shares of common stock for outstanding stock options, warrants and convertible debt.
Reclassifications
Certain accounts in the prior period financial statements have been reclassified for comparative purposes to conform with the presentation in the current period financial statements.
| 14 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2022 AND 2021
Recently Adopted Accounting Pronouncements
Leases
Adoption of the New Lease Accounting Standard
On July 1, 2022, the Company adopted ASU No. 2016-02, Leases (Topic 842), using the modified retrospective transition method applied at the adoption date of the standard. Results for reporting periods beginning after July 1, 2022 are presented under the new leasing standard, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historic accounting. The Company has elected to utilize the package of practical expedients at the time of adoption, which allows the Company to (1) not reassess whether any expired or existing contracts are or contain leases, (2) not reassess the lease classification of any expired or existing leases, and (3) not reassess initial direct costs for any existing leases. The Company also has elected to utilize the short-term lease recognition exemption and, for those leases that qualified, the Company did not recognize right-of-use (“ROU”) assets or lease liabilities. As a result of adoption, the Company recorded ROU assets related to office facility leases which are recognized on the consolidated balance sheet and the associated lease liabilities are recognized on the consolidated balance sheet. The present value of the Company’s remaining lease payments, which comprise the lease liabilities, was estimated using an estimated incremental borrowing rate as of the adoption date.
The adoption resulted in no adjustment to July 1, 2022 accumulated deficit on the consolidated balance sheet.
As of July 1, 2022, the Company recorded right-of-use
assets of $
New Lease Accounting Policies
The Company determines if an arrangement is a lease at inception and determines the classification of the lease, as either operating or finance, at commencement.
For short-term leases with expected terms of less than 1 year, the Company does not recognize ROU assets or lease liabilities. The Company does not have any finance leases. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the rate implicit in the Company’s leases is not readily determinable, the Company uses an estimated incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. The Company estimates the incremental borrowing rate to reflect the profile of secured borrowing over the expected term of the leases based on the information available at the later of the initial date of adoption or the lease commencement date.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the Company’s financial statements.
| 15 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2022 AND 2021
NOTE 4. ACQUISITION
Purchase of BLI
On May 25, 2022, Glimpse entered into an Agreement and Plan of Merger (the “Merger Agreement”), with BLI and each of the equity holders of BLI named therein (collectively, the “Members”). BLI is an immersive technology company that provides VR and AR based training scenarios and simulations for commercial and government customers. The acquisition significantly expands the Company’s operating and financial scale, introduces new tier 1 customers specifically in the communication, entertainment and government segments, and bolsters the executive management team.
In August 2022, BLI became a wholly-owned subsidiary of Glimpse.
The aggregate consideration to the Members per the
Agreement consisted of: (a) $
The fair value allocation for the purchase price consideration paid at Closing was recorded as follows:
SCHEDULE OF BUSINESS ACQUISITION PURCHASE PRICE CONSIDERATION
| Purchase price consideration: | ||||
| Cash paid to members at Closing | $ | |||
| Company common stock fair value at Closing | ||||
| Fair value of contingent consideration to be achieved | ||||
| Total purchase price | $ | |||
| Fair value allocation of purchase price: | ||||
| Cash and cash equivalents | $ | |||
| Accounts receivable | ||||
| Deferred costs/contract assets | ||||
| Other assets | ||||
| Equipment, net | ||||
| Accounts payable and accrued expenses | ( | ) | ||
| Deferred revenue/contract liabilities | ( | ) | ||
| Intangible assets - customer relationships | ||||
| Intangible assets - technology | ||||
| Goodwill | ||||
| Total fair value allocation of purchase price | $ | |||
| 16 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2022 AND 2021
The Company’s fair value estimate of the contingent consideration for the BLI acquisition was determined using a Monte Carlo simulation and other methods which account for the probabilities of various outcomes. The Company’s fair value estimate related to the identified intangible asset of customer relationships was determined using the Multi-Period Excess Earnings Method. This valuation method requires management to project revenues, customer attrition and cash flows for the reporting unit over a multiyear period, as well as determine the weighted average cost of capital to be used as a discount rate. The Company’s fair value estimate related to the identified intangible asset of technology was determined using the Relief from Royalty Method. This valuation method requires management to estimate the royalty rate based on market data for royalty arrangements involving similar technology, the obsolesce rate, and the weighted average cost of capital to be used as a discount rate.
The goodwill recognized in connection with the acquisition is primarily attributable to new markets access and will be deductible for tax purposes.
In accordance with GAAP, the fair value of the contingent
consideration was remeasured as of September 30, 2022, based on market conditions as of that date. The remeasurement resulted in a fair
value amount as of September 30, 2022 of $
Unaudited Pro Forma Results
The unaudited pro forma financial information in the table below summarizes the combined results of operations for the Company and BLI, as if the companies were combined for the three months ended September 30, 2022. The unaudited pro forma financial information includes the business combination accounting effects resulting from this acquisition, including adjustments to reflect recognition of intangible asset amortization. The unaudited pro forma financial information as presented below is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisitions had taken place at July 1, 2022.
The approximate unaudited pro forma financial information if BLI was included since July 1, 2022 would be:
SCHEDULE OF PROFORMA FINANCIAL INFORMATION
| For the Three
Months Ended September 30,2022 | ||||
| Revenue | $ | |||
| Net Loss | $ | ( | ) | |
The pro forma net loss was adjusted to exclude approximately
$
Costs related to the acquisition, which include legal,
accounting and valuation fees, in the amount of approximately $
The Company recognized approximately $
The BLI acquisition above was considered a business combination in accordance with GAAP.
| 17 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2022 AND 2021
NOTE 5. INTANGIBLE ASSETS
Intangible assets, their respective amortization period, and accumulated amortization as of September 30, 2022 are as follows:
SCHEDULE OF INTANGIBLE ASSETS, AMORTIZATION PERIOD AND ACCUMULATED AMORTIZATION
| As of September 30, 2022 | ||||||||||||||||||||||||||||
| Value ($) | Amortization Period (Years) | |||||||||||||||||||||||||||
| AUGGD | XR Terra | S5D | PulpoAR | BLI | Total | |||||||||||||||||||||||
| Intangible Assets | ||||||||||||||||||||||||||||
| Customer Relationships | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Technology | $ | |||||||||||||||||||||||||||
| Less: Accumulated Amortization | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | $ | ( | ) | |||||||||||||||
| Intangible Assets, net | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
Intangible asset amortization expense for the three
months ended September 30, 2022 was approximately $
Estimated intangible asset amortization expense for the remaining lives are as follows:
SCHEDULE OF INTANGIBLE ASSET AMORTIZATION EXPENSE
| Remaining Fiscal Year Ended June 30, 2023 | $ | |||
| Fiscal Year Ended June 30, 2024 | $ | |||
| Fiscal Year Ended June 30, 2025 | $ | |||
| Fiscal Year Ended June 30, 2026 | $ | |||
| Fiscal Year Ended June 30, 2027 | $ | |||
| Fiscal Year Ended June 30, 2028 | $ |
NOTE 6. FINANCIAL INSTRUMENTS
Cash and Cash Equivalents and Investments
The Company’s money market funds and investments (short term, investment grade corporate bonds) are categorized as Level 1 within the fair value hierarchy. As of September 30 and June 30, 2022, the Company’s cash and cash equivalents and investments were as follows:
SCHEDULE OF CASH AND CASH EQUIVALENTS AND INVESTMENTS
| As of September 30, 2022 | ||||||||||||||||||||
| Cost | Unrealized Gain (Loss) | Fair Value | Cash and Cash Equivalents | Investments | ||||||||||||||||
| Cash | $ | $ | - | $ | ||||||||||||||||
| Level 1: | ||||||||||||||||||||
| Money market funds | - | |||||||||||||||||||
| Total cash and cash equivalents | $ | $ | - | $ | $ | |||||||||||||||
| Level 1: | ||||||||||||||||||||
| Investments | $ | $ | ( | ) | $ | $ | ||||||||||||||
| 18 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2022 AND 2021
| As of June 30, 2022 | ||||||||||||||||||||
| Cost | Unrealized Gain (Loss) | Fair Value | Cash and Cash Equivalents | Investments | ||||||||||||||||
| Cash | $ | $ | - | $ | ||||||||||||||||
| Level 1: | ||||||||||||||||||||
| Money market funds | - | |||||||||||||||||||
| Total cash and cash equivalents | $ | $ | - | $ | $ | |||||||||||||||
| Level 1: | ||||||||||||||||||||
| Investments | $ | $ | ( | ) | $ | $ | ||||||||||||||
Contingent Consideration
As of September 30 and June 30, 2022, the Company’s contingent consideration liabilities related to the acquisitions are categorized as Level 3 within the fair value hierarchy. Contingent consideration was valued at the time of acquisitions and at September 30 and June 30, 2022 using unobservable inputs and have included using the Monte Carlo simulation model. This model incorporates revenue volatility, internal rate of return, and risk-free rate. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management with the assistance of a third-party valuation specialist.
A summary of the quantitative significant inputs used
to value S5D’s contingent consideration as of September 30, 2022 was: revenue volatility of
A summary of the quantitative significant inputs used
to value BLI’s contingent consideration as of September 30, 2022 was: revenue volatility of
As of September 30, 2022, the Company’s contingent consideration liability related to XR Terra, LLC (“XRT”) is categorized as Level 3 within the fair value hierarchy as it is based on contractual amounts pursuant to the acquisition agreement, of which certain inputs are unobservable.
| 19 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2022 AND 2021
As of September 30, 2022, the Company’s contingent consideration liabilities current and non-current balances were as follows:
SCHEDULE OF FAIR VALUE OF CONTINGENT CONSIDERATION
| Contingent Consideration at Purchase Date | Changes in Fair Value | Fair Value | Contingent Consideration | |||||||||||||
| As of September 30, 2022 | ||||||||||||||||
| Contingent Consideration at Purchase Date | Changes in Fair Value | Fair Value | Contingent Consideration | |||||||||||||
| Level 3: | ||||||||||||||||
| Contingent consideration, current - S5D | $ | $ | ( | ) | $ | $ | ||||||||||
| Contingent consideration, current - BLI | ||||||||||||||||
| Contingent consideration, current - XRT | ||||||||||||||||
| Total contingent consideration, current portion | $ | $ | $ | $ | ||||||||||||
| Level 3: | ||||||||||||||||
| Contingent consideration, non-current - S5D | $ | $ | ( | ) | $ | $ | ||||||||||
| Contingent consideration, non-current - BLI | ||||||||||||||||
| Total contingent consideration, net of current portion | $ | $ | ( | ) | $ | $ | ||||||||||
The change in fair value of contingent consideration
for the three months ended September 30, 2022 was approximately $
A summary of the quantitative significant inputs used
to value S5D’s contingent consideration as of June 30, 2022 was: revenue volatility of
As of June 30, 2022, the Company’s contingent consideration liability related to MotionZone, LLC (“AUGGD”) is categorized as Level 3 within the fair value hierarchy as it is based on contractual amounts pursuant to the acquisition agreement, of which certain inputs are unobservable.
As of June 30, 2022, the Company’s contingent consideration liabilities current and non-current balances were as follows:
| Contingent Consideration at Purchase Date | Changes in Fair Value | Fair Value | Contingent Consideration | |||||||||||||
| As of June 30, 2022 | ||||||||||||||||
| Contingent Consideration at Purchase Date | Changes in Fair Value | Fair Value | Contingent Consideration | |||||||||||||
| Level 3: | ||||||||||||||||
| Contingent consideration, current - S5D | $ | $ | ( | ) | $ | $ | ||||||||||
| Contingent consideration, current - AUGGD | ||||||||||||||||
| Total contingent consideration, current | $ | $ | ( | ) | $ | $ | ||||||||||
| Level 3: | ||||||||||||||||
| Contingent consideration, non-current - S5D | $ | $ | ( | ) | $ | $ | ||||||||||
| Contingent consideration, non-current - S5D | $ | $ | ( | ) | $ | $ | ||||||||||
There was change in fair value of contingent consideration for the three months ended September 30, 2021.
| 20 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2022 AND 2021
NOTE 7. DEFERRED COSTS/CONTRACT ASSETS and DEFERRED REVENUE/CONTRACT LIABILITIES
At September 30 and June 30, 2022, deferred costs/contract
assets totaling $
The following table shows the reconciliation of the costs in excess of billings and billings in excess of costs for contracts recognized over time:
SCHEDULE OF RECONCILIATION OF COST IN EXCESS OF BILLING FOR CONTRACT RECOGNIZED OVER TIME
| As
of September 30, 2022 | ||||
| Cost incurred on uncompleted contracts | $ | |||
| Estimated earnings | ||||
| Earned revenue | ||||
| Less: billings to date | ||||
| Billings in excess of costs, net | $ | ( | ) | |
| Balance Sheet Classification | ||||
| Contract assets includes, costs and estimated earnings in excess of billings on uncompleted contracts | $ | |||
| Contract liabilities includes, billings in excess of costs and estimated earnings on uncompleted contracts | ( | ) | ||
| Billings in excess of costs, net | $ | ( | ) | |
NOTE 8. EQUITY
Initial Public Offering (“IPO”)
On July 1, 2021, the Company completed an IPO of common stock on the Nasdaq under the symbol “VRAR”, at a price of $ per share.
The Company sold approximately million shares
of common stock and realized net proceeds (after underwriting, professional fees and listing expenses) of $
In connection with the IPO, and for services rendered,
the underwriter was issued a warrant to purchase shares of common stock at $ per share. The warrant could not be exercised
prior to December 30, 2021 and expires in June 2026. The warrant was valued at approximately $
In conjunction with the IPO, outstanding convertible
promissory notes totaling approximately $
| 21 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2022 AND 2021
Securities Purchase Agreement (“SPA”)
In November 2021, the Company sold $ million worth
of its common stock and warrants to certain institutional investors in a private placement pursuant to a SPA. The Company realized net
proceeds (after underwriting, professional fees and listing expenses) of $
Under the terms of the SPA, the Company sold
million shares of its common stock and warrants to purchase
Common Stock Issued
Common stock sold to Investors
During the three months ended September 30, 2021,
the Company sold approximately million shares of common stock to investors at the IPO at a price of $ per share, for total net
proceeds of approximately $
Common stock issued to Investors
During the three months ended September 30, 2021, in connection with the conversion of convertible promissory notes and in conjunction with the IPO, the Company issued approximately shares of common.
Common stock issued for Acquisitions
During the three months ended September 30, 2022,
the Company issued approximately shares of common stock, valued at $
Common stock issued for satisfaction of contingent consideration
During the three months ended September 30, 2022 the
Company issued approximately shares of common stock, with a fair value of approximately $
Common stock issued to Vendors
During the three months ended September 30, 2021,
the Company issued approximately shares of common stock, to various vendors for services performed and recorded share-based compensation
of approximately $
| 22 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2022 AND 2021
Common stock issued for Exercise of Stock Options
During the three months ended September 30, 2022 and
2021, the Company issued approximately and shares of common stock in cash and cashless transactions, respectively, upon
exercise of the respective option grants and realized cash proceeds of approximately $
Employee Stock-Based Compensation
The Company’s 2016 Equity Incentive Plan (the “Plan”), as amended, has approximately million common shares reserved for issuance. As of September 30, 2022, there were approximately million shares available for issuance under the Plan.
The Company recognizes compensation expense relating to awards ratably over the requisite period, which is generally the vesting period.
SCHEDULE OF STOCK OPTION FAIR VALUE ASSUMPTIONS
| 2022 | 2021 | |||||||
For the Three Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Weighted average expected terms (in years) | ||||||||
| Weighted average expected volatility | % | % | ||||||
| Weighted average risk-free interest rate | % | % | ||||||
| Expected dividend yield | % | % | ||||||
The grant date fair value, for options granted during the three months ended September 30, 2022 and 2021 was approximately $ million and $ million, respectively.
| 23 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2022 AND 2021
SUMMARY OF STOCK OPTION ACTIVITY
| Weighted Average | ||||||||||||||||
| Remaining | ||||||||||||||||
| Exercise | Contractual | Intrinsic | ||||||||||||||
| Options | Price | Term (Yrs) | Value | |||||||||||||
| Outstanding at July 1, 2022 | $ | $ | ||||||||||||||
| Options Granted | ||||||||||||||||
| Options Exercised | ( | ) | ||||||||||||||
| Options Forfeited / Cancelled | ( | ) | ||||||||||||||
| Outstanding at September 30, 2022 | $ | $ | ||||||||||||||
| Exercisable at September 30, 2022 | $ | $ | ||||||||||||||
| Weighted Average | ||||||||||||||||
| Remaining | ||||||||||||||||
| Exercise | Contractual | Intrinsic | ||||||||||||||
| Options | Price | Term (Yrs) | Value | |||||||||||||
| Outstanding at July 1, 2021 | $ | $ | ||||||||||||||
| Options Granted | ||||||||||||||||
| Options Exercised | ( | ) | ( | ) | ||||||||||||
| Options Forfeited / Cancelled | ( | ) | ( | ) | ||||||||||||
| Outstanding at September 30, 2021 | $ | $ | ||||||||||||||
| Exercisable at September 30, 2021 | $ | $ | ||||||||||||||
SCHEDULE OF STOCK OPTION-BASED EXPENSE
| Three Months Ended September 30, 2022 | Three Months Ended September 30, 2021 | |||||||
| Stock option-based expense : | ||||||||
| Research and development expenses | $ | $ | ||||||
| General and administrative expenses | ||||||||
| Sales and marketing expenses | ||||||||
| Cost of goods sold | ||||||||
| Board option expense | ||||||||
| Total | $ | $ | ||||||
At September 30, 2022 total unrecognized compensation expense to employees, board members and vendors related to stock options was approximately $ million, and is expected to be recognized over a weighted average period of years.
The intrinsic value of stock options at September 30, 2022 and 2021 was computed using a fair market value of the common stock of $/share and $/share, respectively.
| 24 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2022 AND 2021
SCHEDULE OF COMPUTATION OF BASIC AND DILUTED NET LOSS PER SHARE
| For the Three Months Ended | ||||||||
| September 30, | ||||||||
| Numerator: | 2022 | 2021 | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Denominator: | ||||||||
| Weighted-average common shares outstanding for basic and diluted net loss per share | ||||||||
| Basic and diluted net loss per share | $ | ( | ) | $ | ( | ) | ||
SCHEDULE OF POTENTIALLY DILUTIVE SECURITIES
| At September 30, 2022 | At September 30, 2021 | |||||||
| Stock Options | ||||||||
| Warrants | ||||||||
| Convertible Notes | ||||||||
| Total | ||||||||
NOTE 10. RELATED PARTY TRANSACTIONS
Augmented Reality Investments Pty Ltd (“ARI”)
In March 2022, the Company lent to ARI, the entity
from which the assets of AUGGD (see Note 11) were bought, $
The note bore interest at the rate of
The note and any accrued interest were extinguished in July, 2022. See Note 11.
NOTE 11. COMMITMENTS AND CONTINGENCIES
Lease Costs
The Company made cash payments for all operating leases
for the three months ended September 30, 2022 and 2021, of approximately $
The total rent expense for all operating leases for
the three months ended September 30, 2022 and 2021, was approximately $
Lease Commitments
The Company has various operating leases for its offices.
| 25 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2022 AND 2021
Future approximate undiscounted lease payments for the Company’s operating lease liabilities and a reconciliation of these payments to its operating lease liabilities at September 30, 2022 are as follows:
SCHEDULE OF UNDISCOUNTED LEASE PAYMENTS
| Years Ended June 30, | ||||
| 2023 (nine months) | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Total future minimum lease commitments, including short-term leases | ||||
| Less: future minimum lease payments of short -term leases | ( | ) | ||
| Less: imputed interest | ( | ) | ||
| Present value of future minimum lease payments, excluding short term leases | $ | |||
| Current portion of operating lease liabilities | $ | |||
| Non-current portion of operating lease liabilities | ||||
| Total operating lease liability | $ | |||
Contingent Consideration for Acquisitions
Contingent consideration for acquisitions, consists of the following as of September and June 30, 2022 respectively:
SCHEDULE OF CONTINGENT CONSIDERATION FOR ACQUISITIONS
| As of | As of | |||||||
| September 30, 2022 | June 30, 2022 | |||||||
| S5D, current portion | $ | $ | ||||||
| BLI, current portion (see Note 4) | ||||||||
| XRT | ||||||||
| AUGGD | ||||||||
| Subtotal current portion | ||||||||
| S5D, net of current portion | ||||||||
| BLI, net of current portion (see Note 4) | ||||||||
| Total contingent consideration for acquisitions | $ | $ | ||||||
XRT
In October 2021, the Company, through its wholly owned subsidiary company, XRT, completed an acquisition of certain assets, as defined, from XR Terra, Inc.
In September 2022, XRT achieved a revenue performance
milestone as defined in the asset acquisition agreement, and is due approximately $
| 26 |
THE GLIMPSE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2022 AND 2021
AUGGD
In August 2021, the Company, through its wholly owned subsidiary company, AUGGD, completed an acquisition of certain assets, as defined, from ARI.
In June 2022, AUGGD achieved its initial revenue threshold
as defined in the asset acquisition agreement, and was issued shares of Company stock in July 2022 reflecting the payment of additional
asset acquisition consideration. The share issuance was done inclusive of netting the outstanding balance of a $
Potential Future Distributions Upon Divestiture or Sale
Upon a divestiture or sale of a subsidiary company,
the Company is contractually obligated to distribute up to
COVID-19
The COVID-19 pandemic caused significant business and financial markets disruption worldwide and there was significant uncertainty around the duration of this disruption and its ongoing effects on our business. This has primarily manifested itself in prolonged sales cycles.
We continue to monitor the situation and the effects on our business and operations. While some level of potential uncertainty remains, given the current state of the pandemic, our expected revenue growth and current cash balance, we do not expect the impact of COVID-19 to be material to our business and operations.
| 27 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and cash flows of our Company as of and for the periods presented below. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto, and related disclosures, as of and for the year ended June 30, 2022, which are included in the Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on September 28, 2022. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “we,” “us,” “our” or “the Company,” refer to The Glimpse Group, Inc., a Nevada corporation and its subsidiaries.
Forward-Looking Statements
The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q and in our other filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements.
Overview
We are a Virtual (“VR”) and Augmented (“AR”) Reality platform company, comprised of a diversified group of wholly-owned and operated VR and AR companies, providing enterprise-focused software, services and solutions. We believe that we offer significant exposure to the rapidly growing and potentially transformative VR and AR markets, while mitigating downside risk via our diversified model and ecosystem.
| 28 |
We were incorporated as The Glimpse Group, Inc. in the State of Nevada, on June 15, 2016 and are headquartered in New York, New York. We currently own and operate numerous subsidiary companies (“Subsidiary Companies”, “Subsidiaries”) as represented in the below organizational chart:
Significant Transactions
In May 2022, the Company entered into an Agreement and Plan of Merger (the “Agreement”) to purchase all of the membership interests of Brightline Interactive, LLC (“BLI”), an immersive technology company that provides VR and AR based training scenarios and simulations for commercial and government customers. The transaction’s total potential purchase price was $32.5 million, with an initial payment of $8.0 million upon closing, consisting of $3.0 million in cash and approximately 0.71 million shares of the Company’s common stock valued at $5.0 million at the time the Agreement was entered (and issued at closing based on a common stock floor price of $7.00/share). Future potential purchase price considerations, up to $24.5 million, are based on BLI’s achievement of revenue growth milestones in the three years post-closing, the payment of which shall be made up to $12 million in cash and the remainder in common shares of the Company, priced at the date of the future potential share issuance subject to a common stock price floor of $7.00/share. In August 2022, the BLI transaction closed and BLI became a wholly-owned subsidiary of the Company. $3 million in cash was paid (net of adjustments, as defined) and approximately 0.71 million shares of Company stock were issued to the sellers.
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Financial Highlights for the three months ended September 30, 2022 compared to the three months ended September 30, 2021
Results of Operations
The following table sets forth our results of operations for the three months ended September 30, 2022 and 2021:
Summary P&L
| For the Three Months Ended | ||||||||||||||||
| September 30, | Change | |||||||||||||||
| 2022 | 2021 | $ | % | |||||||||||||
| (in millions) | ||||||||||||||||
| Revenue | $ | 3.95 | $ | 1.02 | $ | 2.93 | 287 | % | ||||||||
| Cost of Goods Sold | 1.21 | 0.15 | 1.06 | 707 | % | |||||||||||
| Gross Profit | 2.74 | 0.87 | 1.87 | 215 | % | |||||||||||
| Total Operating Expenses | 8.17 | 2.27 | 5.90 | 260 | % | |||||||||||
| Loss from Operations before Other Income (Expense) | (5.43 | ) | (1.40 | ) | (4.03 | ) | 288 | % | ||||||||
| Other Income (Expense), net | 0.05 | (0.26 | ) | 0.31 | -119 | % | ||||||||||
| Net Loss | $ | (5.38 | ) | $ | (1.66 | ) | $ | (3.72 | ) | 224 | % | |||||
Results of Operations include the results of BLI since its purchase on August 1, 2022
Revenues
| For the Three Months Ended | ||||||||||||||||
| September 30, | Change | |||||||||||||||
| 2022 | 2021 | $ | % | |||||||||||||
| (in millions) | ||||||||||||||||
| Software Services | $ | 3.86 | $ | 0.80 | $ | 3.06 | 383 | % | ||||||||
| Software License/Software as a Service | 0.09 | 0.22 | (0.13 | ) | -59 | % | ||||||||||
| Total Revenue | $ | 3.95 | $ | 1.02 | $ | 2.93 | 287 | % | ||||||||
Total revenue for the three months ended September 30, 2022 was approximately $3.95 million compared to approximately $1.02 million for the three months ended September 30, 2021, an increase of 287%. The increase reflects the addition of several subsidiary companies after September 30, 2021, organic growth and new customers.
We break out our revenues into two main categories – Software Services and Software License.
| ● | Software Services revenues are primarily comprised of VR/AR projects, services related to our software licenses and consulting retainers. | |
| ● | Software License revenues are comprised of the sale of our internally developed VR/AR software as licenses or as software-as-a-service (“SaaS”). |
For the three months ended September 30, 2022, Software Services revenue was approximately $3.86 million compared to approximately $0.80 million for the three months ended September 30, 2021, an increase of approximately 383%. The increase reflects the addition of several subsidiary companies after September 30, 2021, organic growth and new customers.
For the three months ended September 30, 2022, Software License revenue was approximately $0.09 million compared to approximately $0.22 million for the three months ended September 30, 2021, reflecting a long term license agreement in the 2021 period. As the VR and AR industries continue to mature, we expect our Software License revenue to continue to grow on an absolute basis and as an overall percentage of total revenue.
For the three months ended September 30, 2022, non-project revenue (i.e., VR/AR Software and Services revenue only), was approximately $1.28 million compared to approximately $0.86 million for the three months ended September 30, 2021, an increase of approximately 49%, reflecting organic growth and the addition of new customers. For the three months ended September 30, 2022, non-project revenue accounted for approximately 32% of total revenues compared to approximately 84% for the three months ended September 30, 2021. The decrease reflects the additions of BLI and Sector 5 Digital (“S5D”), which currently primarily generate project revenue, representing an increased portion of total revenue.
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Customer Concentration
Two customers accounted for approximately 55% (29% and 26%, respectively) of the Company’s total gross revenues during the three months ended September 30, 2022. One of the same customers and a different customer accounted for approximately 70% (56% and 14%, respectively) of the Company’s total gross revenues during the three months ended September 30, 2021.
We operate in an early stage industry, and customers are exploring various options for AR and VR solutions and acting as early adopters. As such, there can be a high degree of variance on our source of revenues while customers are on-boarded and our software products and solutions are integrated, measured and digested. A customer that may account for a higher percentage of revenue in one period may not account for any revenue in subsequent periods. In some cases, those customers could re-engage after they have evaluated our solutions and may or may not be a source of future revenue. Recently, a significant percentage of our revenues have come from two strategic customers. A reduction of revenue from these strategic customers – which we do not currently anticipate – would have a detrimental impact on the Company’s revenues. The addition of BLI and S5D has reduced the reliance on a single customer. In general, a customer that makes up a significant portion of revenues in one period, often does not make up a significant portion in other periods. Given this dynamic we expect this variability in Customer Concentration to continue until such point in time when our revenue has reached larger scale, and with a larger portion of our revenues coming from Software Licenses/SaaS.
Gross Profit
| For the Three Months Ended | ||||||||||||||||
| September 30, | Change | |||||||||||||||
| 2022 | 2021 | $ | % | |||||||||||||
| (in millions) | ||||||||||||||||
| Revenue | $ | 3.95 | $ | 1.02 | $ | 2.93 | 287 | % | ||||||||
| Cost of Goods Sold | 1.21 | 0.15 | 1.06 | 707 | % | |||||||||||
| Gross Profit | $ | 2.74 | $ | 0.87 | $ | 1.87 | 215 | % | ||||||||
| Gross Profit Margin | 69 | % | 85 | % | ||||||||||||
Gross profit was approximately 69% for the three months ended September 30, 2022 compared to approximately 85% for the three months ended September 30, 2021. The decrease was driven by the addition of BLI and S5D lower margin project revenue.
For the three months ended September 30, 2022 and 2021, internal staffing was approximately $0.75 million (62% of total cost of revenue) and approximately $0.14 million (93% of total cost of revenue), respectively. The decrease in internal staffing as a percentage of total cost of revenue was due to the addition of BLI and S5D, which have a higher utilization of external sources.
Operating Expenses
| For the Three Months Ended | ||||||||||||||||
| September 30, | Change | |||||||||||||||
| 2022 | 2021 | $ | % | |||||||||||||
| (in millions) | ||||||||||||||||
| Research and development expenses | $ | 2.00 | $ | 0.99 | $ | 1.01 | 102 | % | ||||||||
| General and administrative expenses | 1.82 | 0.78 | 1.04 | 133 | % | |||||||||||
| Sales and marketing expenses | 1.74 | 0.50 | 1.24 | 248 | % | |||||||||||
| Change in fair value of acquisition contingent consideration | 2.61 | - | 2.61 | NA | ||||||||||||
| Total Operating Expenses | $ | 8.17 | $ | 2.27 | $ | 5.90 | 260 | % | ||||||||
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Operating expenses for the three months ended September 30, 2022 were approximately $8.17 million compared to $2.27 million for the three months ended September 30, 2021, an increase of approximately 260%. The increase was driven by employee headcount additions to support growth, the addition of several new subsidiaries (which includes headcount, amortization of intangibles and professional fees related to the acquisitions) and the change in fair value of acquisition contingent consideration.
Research and Development
Research and development expenses for the three months ended September 30, 2022 were approximately $2.0 million compared to $0.99 million for the three months ended September 30, 2021, an increase of approximately 102%. This reflects headcount additions to support growth and the addition of several new subsidiaries. Going forward, we expect research and development costs to continue to increase as we continue to develop and commercialize our software products.
For the three months ended September 30, 2022, non-cash stock option expenses relating to research and development included approximately $0.39 million of employee compensation expenses, comprising approximately 20% of total research and development expenses. For the three months ended September 30, 2021, non-cash stock option expenses relating to research and development included approximately $0.35 million of employee compensation expenses, comprising approximately 35% of total research and development expenses. Over time, we expect non-cash stock options and common stock research and development expenses, as a percentage of the total related expenses, to continue to decrease as we utilize a larger portion of cash for compensation thereby minimizing dilution.
General and Administrative
General and administrative expenses for the three months ended September 30, 2022 were approximately $1.82 million compared to $0.78 million for the three months ended September 30, 2021, an increase of approximately 133%. The increase primarily reflects and the addition of several new subsidiaries (which includes headcount, amortization of intangibles, professional fees related to the acquisitions and facility costs) and additional independent board members.
For the three months ended September 30, 2022, non-cash stock option expenses relating to general and administrative expenses included approximately $0.20 million of employee and board of directors expenses, comprising approximately 11% of total general and administrative expenses. For the three months ended September 30, 2021, non-cash stock option expenses relating to general and administrative expenses included approximately $0.16 million of employee, board of directors and vendor expenses, comprising approximately 21% of total general and administrative expenses. Over time, we expect non-cash stock options general and administrative expenses, as a percentage of the total related expenses, to continue to decrease as we utilize a larger portion of cash for compensation thereby minimizing dilution.
Sales and Marketing
Sales and marketing expenses for the three months ended September 30, 2022 were approximately $1.74 million compared to $0.50 million for the three months ended September 30, 2021, an increase of approximately 248%. The increase reflects expansions to headcount and outside marketing firms to drive revenue growth and the addition of several new subsidiaries. As our subsidiary companies continue to establish initial market traction and grow their revenue base, we expect to increase our business development and sales expenses.
For the three months ended September 30, 2022, non-cash stock option expenses relating to sales and marketing expenses included approximately $0.19 million of employee, vendor and fee compensation expenses, comprising approximately 11% of total sales and marketing expenses. For the three months ended September 30, 2021, non-cash stock option and common stock expenses relating to sales and marketing expenses included approximately $0.14 million of employee, vendor and fee compensation expenses, comprising approximately 28% of total sales and marketing expenses. Over time, we expect non-cash stock options and common stock sales and marketing expenses, as a percentage of the total related expenses, to continue to decrease as we utilize a larger portion of cash for compensation thereby minimizing dilution.
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Change in Fair Value of Acquisition Contingent Consideration
Change in fair value of acquisition contingent consideration expense for the three months ended September 30, 2022 was approximately $2.61 million. This represents an increase in the fair value of contingent consideration liability for the period related primarily to the S5D acquisition. The change is primarily driven by the increase in the common stock price of Glimpse during this period.
Other Income (Expense), net
| For the Three Months Ended | ||||||||||||||||
| September 30, | Change | |||||||||||||||
| 2022 | 2021 | $ | % | |||||||||||||
| (in millions) | ||||||||||||||||
| Interest income | $ | 0.05 | $ | 0.02 | $ | 0.03 | 150 | % | ||||||||
| Loss on conversion of convertible notes | - | (0.28 | ) | 0.28 | -100 | % | ||||||||||
| Total Other Income (Expense), net | $ | 0.05 | $ | (0.26 | ) | $ | 0.31 | 119 | % | |||||||
Other income and expense, net for the three months ended September 30, 2022 was income of $0.05 million compared to an expense of $0.26 million for the three months ended September 30, 2021. The change is driven by a loss incurred on conversion of convertible debt to common stock that occurred at the IPO in the 2021 period.
Net Loss
We sustained a net loss of $5.38 million for the three months ended September 30, 2022 as compared to a net loss of $1.66 million for the comparable 2021 period, a loss increase of $3.72 million or 224%. $2.61 million of this loss increase is driven by the non-cash change in fair value of acquisition contingent consideration. The balance primarily represents operating expense growth outpacing revenue and related gross profit. This reflects current expense outlays in all areas of the Company to propel future growth, including the acquisition of several new subsidiaries and related costs.
Non-GAAP Financial Measures
The following discussion and analysis includes both financial measures in accordance with Generally Accepted Accounting Principles, or GAAP, as well as non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as supplemental to, and should not be considered as alternatives to, net income (loss), operating income (loss), and cash flow from operating activities, liquidity or any other financial measures. They may not be indicative of the historical operating results of the Company nor are they intended to be predictive of potential future results. Investors should not consider non-GAAP financial measures in isolation or as substitutes for performance measures calculated in accordance with GAAP. Our management uses and relies on EBITDA and Adjusted EBITDA, which are non-GAAP financial measures. We believe that both management and shareholders benefit from referring to the following non-GAAP financial measures in planning, forecasting and analyzing future periods.
Our management uses these non-GAAP financial measures in evaluating its financial and operational decision making and as a means to evaluate period-to-period comparisons. Our management recognizes that the non-GAAP financial measures have inherent limitations because of the described excluded items.
The Company defines Adjusted EBITDA as earnings (or loss) from continuing operations before the items in the table below. Adjusted EBITDA is an important measure of our operating performance because it allows management, investors and analysts to evaluate and assess our core operating results from period-to-period after removing the impact of items of a non-operational nature that affect comparability.
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We have included a reconciliation of our financial measures calculated in accordance with GAAP to the most comparable non-GAAP financial measures. We believe that providing the non-GAAP financial measures, together with the reconciliation to GAAP, helps investors make comparisons between the Company and other companies. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measures and the corresponding GAAP measures provided by each company under applicable SEC rules.
The following table presents a reconciliation of net loss to Adjusted EBITDA for the three months ended September 30, 2022 and 2021:
| For the Three Months Ended | ||||||||
| September 30, | ||||||||
| 2022 | 2021 | |||||||
| (in millions) | ||||||||
| Net loss | $ | (5.38 | ) | $ | (1.66 | ) | ||
| Depreciation and amortization | 0.48 | 0.03 | ||||||
| EBITDA (loss) | (4.90 | ) | (1.63 | ) | ||||
| Stock based compensation expenses | 0.97 | 0.72 | ||||||
| Stock based financing related expenses | - | 0.28 | ||||||
| Acquisition expenses | 0.27 | - | ||||||
| Non cash change in fair value of acquisition contingent consideration | 2.61 | - | ||||||
| Adjusted EBITDA (loss) | $ | (1.05 | ) | $ | (0.63 | ) | ||
Adjusted EBITDA loss of $1.05 million for the three months ended September 30, 2022 compared to a $0.63 million loss for the three months ended September 30, 2021. The increase was driven by an increase in net loss reflecting current expense outlays in all areas of the Company to propel future growth, including the acquisition of several new subsidiaries. This is offset primarily by non-cash expenses, both stock based and fair value driven.
Liquidity and Capital Resources
| For the Three Months Ended | ||||||||||||||||
| September 30, | Change | |||||||||||||||
| 2022 | 2021 | $ | % | |||||||||||||
| (in millions) | ||||||||||||||||
| Net cash used in operating activities | $ | (3.08 | ) | $ | (1.05 | ) | $ | (2.03 | ) | -193 | % | |||||
| Net cash used in investing activities | (2.56 | ) | (0.02 | ) | (2.54 | ) | 12700 | % | ||||||||
| Net cash provided by financing activities | 0.04 | 11.87 | (11.83 | ) | -100 | % | ||||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | (5.60 | ) | 10.80 | (16.40 | ) | 152 | % | |||||||||
| Cash, cash equivalents and restricted cash, beginning of period | 18.25 | 1.77 | 16.48 | 931 | % | |||||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 12.65 | $ | 12.57 | $ | 0.08 | 1 | % | ||||||||
Operating Activities
Net cash used in operating activities was $3.08 million for the three months ended September 30, 2022, compared to $1.05 million during the prior period, an increase of approximately $2.03 million. This is primarily driven by an increase in net loss and a decrease in accounts payable and deferred revenue primarily related to the BLI acquisition, offset by increased non-cash expenses (primarily acquisition contingent consideration fair value adjustment, stock based expenses and intangible asset amortization).
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Investing Activities
Net cash used in investing activities for the three months ended September 30, 2022 was approximately $2.56 million compared to a negligible amount in the prior period. This primarily represents the cash portion of the BLI acquisition.
Financing Activities
Cash flow provided from financing activities during the three months ended September 30, 2022 was negligible, compared to $11.87 million for the prior 2021 period. 2021 primarily reflects the net proceeds from our IPO.
Capital Resources
As of September 30, 2022, the Company had cash, cash equivalents and restricted cash balances of $12.65 million, plus $0.24 million of liquid corporate bond investments. The September 30, 2022 balances include $2.0 million cash escrow for potential future contingent consideration of the S5D acquisition, payable upon achievement of S5D and the Company’s performance targets (refundable to Glimpse if targets not achieved).
As of September 30, 2022, the Company had no outstanding debt obligations.
As of September 30, 2022, the Company had no issued and outstanding preferred stock.
The Company believes that it is sufficiently funded to meet its operational plan and future obligations beyond the 12-month period from the date of this filing.
Recently Adopted Accounting Pronouncements
Please see Note 3 of the attached September 30, 2022 consolidated financial statements that describe the impact, if any, from the adoption of Recent Accounting Pronouncements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Our management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of such period.
In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, we are required to apply judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
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Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the 2013 framework set forth in the report entitled Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). The COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring.
Based on our evaluation, our management concluded that our internal control over financial reporting was effective as of September 30, 2022.
During the period ended September 30, 2022, there was no change in our internal control over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Our Annual Report on Form 10-K for the year ended June 30, 2022 contains a discussion of the material risks associated with our business. There have been no material changes to the risks described in such Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Recent Sale of Unregistered Equity Securities
During the three months ended September 30, 2022, the Company issued 107,143 of Common Stock related to a contingent acquisition obligation.
The foregoing transactions were exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits
The following exhibits are filed as part of this Quarterly Report on Form 10-Q.
Exhibit Number |
Description of Exhibit | |
| 31.1* | Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act, as amended. | |
| 31.2* | Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act, as amended. | |
| 32.1** | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rules 13a-14(b) or 15d-14(b) of the Securities Exchange Act, as amended, and 18 U.S.C. Section 1350. | |
| 101.INS | Inline XBRL Instance Document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
* Filed herewith.
** Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on this 14th day of November, 2022.
| THE GLIMPSE GROUP, INC. | |
| /s/ Lyron Bentovim | |
| Lyron Bentovim | |
| Chief Executive Officer, President | |
| (Principal Executive Officer) | |
| /s/ Maydan Rothblum | |
| Maydan Rothblum | |
| Chief Financial Officer | |
| (Principal Financial Officer) |
| 38 |
Exhibit 31.1
CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULES 13A-14 AND 15D-14
OF THE SECURITIES EXCHANGE ACT OF 1934
I, Lyron Bentovim, certify that:
| 1) | I have reviewed this quarterly report of The Glimpse Group, Inc.; |
| 2) | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
| 3) | Based on my knowledge, the financial statements and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
| 4) | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared. |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and |
| d. | Disclosed in this quarterly report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5) | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 14, 2022 | /s/ Lyron Bentovim |
| Lyron Bentovim | |
| Chief Executive Officer, President | |
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATIONS OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULES 13A-14 AND 15D-14
OF THE SECURITIES EXCHANGE ACT OF 1934
I, Maydan Rothblum, certify that:
| 1) | I have reviewed this quarterly report on Form 10-Q of The Glimpse Group, Inc.; |
| 2) | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
| 3) | Based on my knowledge, the financial statements and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
| 4) | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared. |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and |
| d. | Disclosed in this quarterly report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5) | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 14, 2022 | /s/ Maydan Rothblum |
| Maydan Rothblum | |
| Chief Financial Officer | |
| (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of The Glimpse Group, Inc. (“Company”) on Form 10-Q for the quarter ending September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (“Report”), the undersigned, in the capacities and on the date indicated below, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the knowledge of each of the undersigned:
| 1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: November 14, 2022 |
| /s/ Lyron Bentovim | |
| Lyron Bentovim | |
| Chief Executive Officer, President | |
| (Principal Executive Officer) |
| /s/ Maydan Rothblum | |
| Maydan Rothblum | |
| Chief Financial Officer | |
| (Principal Financial Officer) |