BTLN 10-Q
Glimpse Group, Inc. (BTLN)
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 No.) | |
| (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, a 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 | ||
| 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 ☐ No
As of November 7, 2024, the registrant had shares of common stock, par value $ per share, outstanding.
THE GLIMPSE GROUP, INC.
TABLE OF CONTENTS
| Page No. | ||
| PART I | FINANCIAL INFORMATION | |
| ITEM 1. | FINANCIAL STATEMENTS (Unaudited) | 4 |
| Condensed Consolidated Balance Sheets | 5 | |
| Condensed Consolidated Statements of Operations | 6 | |
| Condensed Consolidated Statements of Stockholders’ Equity | 7 | |
| Condensed Consolidated Statements of Cash Flows | 8 | |
| Notes to Condensed Consolidated Financial Statements | 9 | |
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 27 |
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 34 |
| ITEM 4. | CONTROLS AND PROCEDURES | 34 |
| PART II | OTHER INFORMATION | 35 |
| ITEM 1. | LEGAL PROCEEDINGS | 35 |
| ITEM 1A. | RISK FACTORS | 35 |
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 35 |
| ITEM 6. | EXHIBITS | 36 |
| SIGNATURES | 37 | |
| 2 |
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
| 3 |
THE GLIMPSE GROUP, INC.
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| Index to Condensed Consolidated Financial Statements (Unaudited) | Page |
| Condensed Consolidated Balance Sheets | 5 |
| Condensed Consolidated Statements of Operations | 6 |
| Condensed Consolidated Statements of Stockholders’ Equity | 7 |
| Condensed Consolidated Statements of Cash Flows | 8 |
| Notes to Condensed Consolidated Financial Statements | 9-26 |
| 4 |
THE GLIMPSE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| As of September 30, 2024 | As of June 30, 2024 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Deferred costs/contract assets | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Equipment, net | ||||||||
| Right-of-use assets, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Deferred revenue/contract liabilities | ||||||||
| Lease liabilities, current portion | ||||||||
| Contingent consideration for acquisitions, current portion | ||||||||
| Total current liabilities | ||||||||
| Long term liabilities | ||||||||
| Contingent consideration for acquisitions, 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, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 5 |
THE GLIMPSE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| 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 | ||||||||
| Amortization of acquisition intangible assets | ||||||||
| Goodwill impairment | ||||||||
| Intangible asset impairment | ||||||||
| Change in fair value of acquisition contingent consideration | ( | ) | ||||||
| Total operating expenses | ||||||||
| Loss from operations before other income | ( | ) | ( | ) | ||||
| Other income | ||||||||
| Interest income | ||||||||
| 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 condensed consolidated financial statements.
| 6 |
THE GLIMPSE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2024
(Unaudited)
| Common Stock | Additional Paid-In | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Balance as of July 1, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common stock and stock option based compensation expense | ||||||||||||||||||||
| Stock option-based board of directors expense | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of September 30, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
THE GLIMPSE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2023
(Unaudited)
| Common Stock | Additional Paid-In | Subscription | Accumulated | |||||||||||||||||||||
| Shares | Amount | Capital | Receivable | Deficit | Total | |||||||||||||||||||
| Balance as of July 1, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Common stock subscribed but unissued | - | |||||||||||||||||||||||
| Common stock issued to vendors | ||||||||||||||||||||||||
| Common stock issued for exercise of options | ( | ) | ||||||||||||||||||||||
| Common stock issued to satisfy contingent acquisition obligations | ||||||||||||||||||||||||
| Common stock and stock option based compensation expense | ||||||||||||||||||||||||
| Stock option-based board of directors expense | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 7 |
THE GLIMPSE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Three Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| 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 | ||||||||
| Accrued non cash performance bonus fair value adjustment | ( | ) | ||||||
| Acquisition contingent consideration fair value adjustment | ( | ) | ||||||
| Impairment of intangible assets | ||||||||
| Issuance of common stock to vendors | ||||||||
| Amortization of right-of-use assets | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Deferred costs/contract assets | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Other assets | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued liabilities | ( | ) | ( | ) | ||||
| Deferred revenue/contract liabilities | ( | ) | ||||||
| Lease liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flow from investing activities: | ||||||||
| Purchases of equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows provided by financing activities: | ||||||||
| Cash provided by financing activities | ||||||||
| Net change in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents, beginning of year | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Non-cash Investing and Financing activities: | ||||||||
| Issuance of common stock for satisfaction of contingent liability | $ | $ | ||||||
| Issuance of common stock for non cash performance bonus | $ | $ | ||||||
| Lease liabilities arising from right-of-use assets | $ | $ | ||||||
| Common stock subscription receivable | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 8 |
THE GLIMPSE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS
The Glimpse Group, Inc. (“Glimpse”, the “Company”) is an Immersive technology company, providing Virtual Reality (“VR”), Augmented Reality(“AR”) and Spatial Computing software and services. Glimpse’s operating entities are located in the United States and Turkey. The Company was incorporated in the State of Nevada in June 2016.
Glimpse’s unique business model builds scale and a robust ecosystem, while simultaneously providing investors an opportunity to invest directly into this emerging industry via a diversified platform.
The Company completed an initial public offering (“IPO”) of its common stock on the Nasdaq Capital Market Exchange on July 1, 2021, under the ticker VRAR.
NOTE 2. GOING CONCERN
At each reporting period, the Company evaluates whether there are conditions or events that raise doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The Company’s evaluation entails analyzing expectations for the Company’s cash needs and comparing those needs to the current cash and cash equivalent balances. The Company is required to make certain additional disclosures if it concludes substantial doubt exists and it is not alleviated by the Company’s plans or when its plans alleviate substantial doubt about the Company’s ability to continue as a going concern.
The
Company has incurred recurring losses since its inception, including a net loss of approximately $
Outside of potential revenue growth generated by the Company, in order to restore the going concern the Company may take actions which could include but are not limited to: further cost reductions, equity or debt financings and restructuring of potential future cash contingent acquisition liabilities. There is no assurance that these actions will be taken or be successful if pursued.
The condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described.
Potential liquidity resources
Potential
liquidity resources may include the further sale of common stock pursuant to the unused portion of the $
| 9 |
THE GLIMPSE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. NASDAQ LISTING NOTIFICATION
On September 3, 2024, the Company received a notification letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, because the closing bid price for the Company’s common stock listed on Nasdaq was below $ for the prior 30 consecutive business days, the Company no longer meets the minimum bid price requirement for continued listing on the Nasdaq Capital Market. In accordance with Nasdaq Marketplace rules, the Company has a period of 180 calendar days from September 3, 2024, or until March 3, 2025, to regain compliance with the Minimum Bid Price Requirement. If at any time before March 3, 2025, the bid price of the Company’s common stock closes at or above $ per share for a minimum of 10 consecutive business days, Nasdaq will provide written notification that the Company has achieved compliance with the Minimum Bid Price Requirement.
The Company’s receipt of the notification letter has no immediate effect on the listing of the Company’s shares, which will continue to trade uninterrupted on Nasdaq under the ticker “VRAR”. In addition, it does not affect the Company’s business, operations or reporting requirements with the Securities and Exchange Commission. In order to regain compliance with the Minimum Bid Price Requirements, the Company and its Board of Directors are reviewing various potential measures. The Company is not considering a reverse stock split at this time.
NOTE 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The unaudited condensed 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 condensed 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, 2024, the results of operations for the three months ended September 30, 2024 and 2023, and cash flows for the three months ended September 30, 2024 and 2023. The financial data and other information disclosed in these notes to the interim condensed financial statements related to these periods are unaudited. The results for the three months ended September 30, 2024 are not necessarily indicative of the results to be expected for the entire year ending June 30, 2025 or for any subsequent periods. The condensed consolidated balance sheet at June 30, 2024 has been derived from the audited consolidated financial statements at that date. 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 condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended June 30, 2024.
Principles of Consolidation
The accompanying condensed 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 condensed 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 condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
| 10 |
THE GLIMPSE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The principal estimates relate to the valuation of allowance for doubtful accounts, stock options, warrants, revenue recognition, allocation of the purchase price of assets relating to business combinations, calculation of contingent consideration for acquisitions, fair value of intangible assets and goodwill impairment.
Cash and Cash Equivalents
Cash and equivalents represent cash and short-term, highly liquid investments, that are both readily convertible to known amounts of cash and so near their maturity they present insignificant risk of changes in value because of changes in interest rates, with maturities three months or less at the date of purchase.
Accounts Receivable
Accounts receivable consists primarily of amounts due from customers under normal trade terms. We recognize accounts receivable at the amount we expect to collect from our customers. We provide an allowance for credit losses to reflect the estimated amount of accounts receivable that may not be collectible. We determine the allowance for credit losses through a combination of specific identification of troubled accounts, historical loss experience, industry trends, current market conditions, and customer creditworthiness. The allowance for credit losses is adjusted periodically to reflect changes in these factors. As of September 30 and June 30, 2024 no allowance for doubtful accounts was recorded as all amounts were considered collectible.
Customer Concentration and Credit Risk
Three
customers accounted for approximately
Two
customers 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. Acquisition 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 determining fair values of assets acquired and liabilities assumed in a business combination.
| 11 |
THE GLIMPSE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Intangible assets (other than Goodwill)
Intangible assets include developed technology purchased. Intangible assets are stated at allocated cost less accumulated amortization and less impairments. 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.
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.
Impairment of Long-Lived Assets
The Company reviews long-lived assets to be held and used, other than goodwill, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If an evaluation of recoverability is required, the estimated undiscounted future cashflows directly associated with the asset are compared with the asset’s carrying amount. If the estimated future cash flows from the use of the asset are less than the carrying value, an impairment charge would be recorded to write down the asset to its estimated fair value.
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 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.
| 12 |
THE GLIMPSE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 condensed consolidated balance sheets as of September 30 and June 30, 2024. Contingent consideration has been recorded at its fair values using unobservable inputs and have included, at the time of acquisition, 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, at times, the assistance of a third-party valuation specialist.
The Company’s other financial instruments consist primarily of accounts receivable, accounts payable, and other liabilities, and approximate fair value due to the short-term nature of these instruments.
Revenue Recognition
Nature of Revenues
The Company reports its revenues in two categories:
| ● | Software Services: VR, AR and Spatial Computing projects, solutions and consulting services. |
| ● | Software License and Software-as-a-Service (“SaaS”): VR, AR or Spatial Computing 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 fulfils 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 and deferred costs, respectively, in the accompanying condensed consolidated balance sheets. Contract assets include 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.
| 13 |
THE GLIMPSE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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, 2024 and 2023 by delivering: (i) Software Services, consisting primarily of VR/AR/Spatial Computing software projects, solutions and consulting services, and (ii) Software Licenses & SaaS, consisting primarily of VR, AR and Spatial Computing software licenses or SaaS. The Company currently generates its revenues primarily from customers in the United States.
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 Licenses is recognized at the point of time in which the Company delivers the software and customer accepts delivery. Software Licenses often include third party components that are a fully integrated part of the Software License stack and are therefore considered as one deliverable and performance obligation. 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 years ended June 30, 2024 and 2023 was as follows:
| For the Three Months Ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| 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.
| 14 |
THE GLIMPSE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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).
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, 2024 and 2023,
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 based upon historical volatility for a rolling previous year’s trading days of the Company’s common stock. 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.
| 15 |
THE GLIMPSE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Foreign Currency
Assets and liabilities recorded in foreign currency are translated at the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates of exchange prevailing during the year. Translation adjustments resulting from this process, which are deminimis, are recorded in general and administrative expenses on the consolidated statement of operations.
Income Taxes
The Company records income taxes using the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax effects attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases, and operating loss and tax credit carryforwards. The Company establishes a valuation allowance if it is more likely than not that the deferred tax assets will not be recovered based on an evaluation of objective verifiable evidence. For tax positions that are more likely than not of being sustained upon audit, the Company recognizes the largest amount of the benefit that is greater than 50% likely of being realized. For tax positions that are not more likely than not of being sustained upon audit, the Company does not recognize any portion of the benefit.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, or ASC 740, also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’s consolidated financial statements. The Company believes that its income tax positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in material changes to its financial position.
The Company’s policy for recording interest and penalties associated with audits is to record such expense as a component of income tax expense. There were no amounts accrued for penalties or interest for the three months ended September 30, 2024 and 2023. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.
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.
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for the Company’s annual periods beginning July 1, 2025. The Company is currently evaluating the ASU to determine its impact on the Company’s disclosures.
| 16 |
THE GLIMPSE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. IMPAIRMENT OF GOODWILL AND LONG-LIVED ASSETS
PulpoAR, LLC (“Pulpo”)
During
the three months ended September 30, 2023 a decision was made by the Company to divest the operations of its wholly owned subsidiary
Pulpo due to poor revenue performance and non-strategic alignment. Accordingly, the fair value of intangible assets, including
goodwill, originally recorded at the time of the purchase, were determined to be to be zero. The net assets of $
For
the three months ended September 30, 2023, Pulpo had revenue of $
The divestiture did not have a material impact on the Company’s operations or financial results.
NOTE 6. GOODWILL AND INTANGIBLE ASSETS
The composition of goodwill as of September 30 and June 30, 2024 is as follows:
| As of September 30 and June 30, 2024 | ||||||||||||
| XRT | BLI | Total | ||||||||||
| Goodwill | $ | $ | $ | |||||||||
Intangible assets, their respective amortization period, and accumulated amortization as of September 30 and June 30, 2024 are as follows:
| As of September 30, 2024 | ||||||||||||||||||||
| Value ($) | Amortization Period (Years) | |||||||||||||||||||
| XR Terra | BLI | inciteVR | Total | |||||||||||||||||
| Intangible Assets | ||||||||||||||||||||
| Technology | | |||||||||||||||||||
| Less: Accumulated Amortization | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Intangible Assets, net | $ | $ | $ | $ | ||||||||||||||||
| 17 |
THE GLIMPSE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| As of June 30, 2024 | ||||||||||||||||||||
| Value ($) | Amortization Period (Years) | |||||||||||||||||||
| XR Terra | BLI | inciteVR | Total | |||||||||||||||||
| Intangible Assets | ||||||||||||||||||||
| Technology | | |||||||||||||||||||
| Less: Accumulated Amortization | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Intangible Assets, net | $ | $ | $ | $ | ||||||||||||||||
Intangible
asset amortization expense for the three months ended September 30, 2024 and 2023 was approximately $
Estimated intangible asset amortization expense for the remaining lives as of September 30, 2024 are as follows:
| Years Ended June 30, | ||||
| 2025 (remaining 9 months) | $ | |||
| 2026 | $ | |||
NOTE 7. FINANCIAL INSTRUMENTS
Cash and Cash Equivalents
The Company’s money market funds are categorized as Level 1 within the fair value hierarchy. As of September 30, and June 30, 2024, the Company’s cash and cash equivalents were as follows:
| As of September 30, 2024 | ||||||||||||||||
| Cost | Unrealized Gain (Loss) | Fair Value | Cash and Cash Equivalents | |||||||||||||
| Cash | $ | $ | $ | |||||||||||||
| Level 1: | ||||||||||||||||
| Money market funds | $ | |||||||||||||||
| Total cash and cash equivalents | $ | $ | $ | $ | ||||||||||||
| As of June 30, 2024 | ||||||||||||||||
| Cost | Unrealized Gain (Loss) | Fair Value | Cash and Cash Equivalents | |||||||||||||
| Cash | $ | $ | $ | |||||||||||||
| Level 1: | ||||||||||||||||
| Money market funds | $ | |||||||||||||||
| Total cash and cash equivalents | $ | $ | $ | $ | ||||||||||||
| 18 |
THE GLIMPSE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Contingent Consideration
As of September 30, and June 30, 2024, the Company’s contingent consideration liabilities related to acquisitions are categorized as Level 3 within the fair value hierarchy. Contingent consideration was valued at September 30, and June 30, 2024 using unobservable inputs, primarily internal revenue forecasts. Contingent consideration was valued at the time of acquisitions using unobservable inputs and have included using the Monte Carlo simulation model. This model incorporated revenue volatility, internal rate of return, and a 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, at times, of a third-party valuation specialist.
As of September 30, 2024, the Company’s contingent consideration liabilities current and non-current balances were as follows:
| As of September 30, 2024 | ||||||||||||||||||||
| Contingent Consideration at Purchase Date | Consideration Paid | Changes in Fair Value | Fair Value | Contingent Consideration | ||||||||||||||||
| Level 3: | ||||||||||||||||||||
| Contingent consideration, current - BLI | ||||||||||||||||||||
| Contingent consideration, current - XRT | ( | ) | ||||||||||||||||||
| Total contingent consideration, current portion | $ | $ | $ | $ | $ | |||||||||||||||
| Level 3: | ||||||||||||||||||||
| Contingent consideration, non-current - BLI | ( | ) | ( | ) | ||||||||||||||||
| Total contingent consideration, net of current portion | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||
Revenue
projections for Brightline Interactive, LLC (“BLI”) are expected to trigger potential additional gross consideration of
$
The
change in fair value of contingent consideration for BLI for the three months ended September 30, 2024 was a non-cash expense of approximately
$
The
change in fair value of contingent consideration for XR Terra, LLC (“XRT”) for the three months ended September 30, 2024
was a non-cash gain of approximately $
As of June 30, 2024, the Company’s contingent consideration liabilities current and non-current balances were as follows:
| 19 |
THE GLIMPSE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| As of June 30, 2024 | ||||||||||||||||||||
| Contingent Consideration at Purchase Date | Consideration Paid | Changes in Fair Value | Fair Value | Contingent Consideration | ||||||||||||||||
| Level 3: | ||||||||||||||||||||
| Contingent consideration, current - BLI | $ | $ | $ | $ | $ | |||||||||||||||
| Contingent consideration, current - XRT | ( | ) | ||||||||||||||||||
| Total contingent consideration, current portion | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
| Level 3: | ||||||||||||||||||||
| Contingent consideration, non-current - BLI | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||
| Total contingent consideration, net of current portion | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||
Revenue
projections for BLI are expected to trigger potential additional gross consideration of $
The contingent consideration related to XRT at June 30, 2024 represents an accrual for anticipated achievement of an additional revenue threshold though the end of the contingent consideration period September 2024.
The
change in fair value of contingent consideration for the three months ended September 30, 2023 was a non-cash gain of approximately $
NOTE 8. DEFERRED COSTS/CONTRACT ASSETS AND DEFERRED REVENUE/CONTRACT LIABILITIES
As of
September and June 30, 2024, deferred costs/contract assets totaling $
| 20 |
THE GLIMPSE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table shows the reconciliation of the costs in excess of billings and billings in excess of costs for contracts recognized over time:
| As of September 30, 2024 | As of June 30, 2024 | |||||||
| 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 9. EQUITY
Securities Purchase Agreement (“SPA”)
On
September 28, 2023, the Company entered into a SPA with certain institutional investors to sell shares of common stock for
approximately $
The
SPA shares were issued on October 3, 2023. Simultaneously, the exercise price on warrants to purchase
Common Stock Issued
Common stock issued to Employees as Compensation
During the three months ended September 30, 2024, the Company issued shares of common stock to an employee as compensation and recorded share-based compensation of approximately $ million in sales and marketing expenses on the condensed consolidated statement of operations.
| 21 |
THE GLIMPSE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
During the three months ended September 30, 2023, the Company issued approximately shares of common stock to various employees as compensation and recorded share-based compensation of approximately $ million in general and administrative and sales and marketing expenses on the condensed consolidated statement of operations.
Common stock issued to Vendors
During the three months ended September 30, 2023, the Company issued approximately shares of common stock to various vendors for services performed and recorded share-based compensation of approximately $ million, primarily in sales and marketing expenses on the condensed consolidated statement of operations.
Common stock issued for Exercise of Stock Options
During
the three months ended September 30, 2023, the Company issued approximately shares of common stock in cashless transactions upon
exercise of the respective option grants and realized cash proceeds of
Common stock issued to satisfy Contingent Acquisition Obligations
During
the three months ended September 30, 2023, the Company issued approximately shares of common stock, with a fair value of approximately
$
Warrants
In connection with the July 2021 IPO and the November 2021 SPA, the Company issued warrants, which are exercisable into Company common shares on a one-for-one basis, as detailed below. warrants have been exercised since issuance. The warrants are not publicly traded.
| Warrants Outstanding | Exercise Price | Expiration Date | ||||||||
| July 2021 IPO | $ | |||||||||
| November 2021 SPA | $ | |||||||||
| November 2021 SPA | $ | |||||||||
| Total | ||||||||||
Employee Stock-Based Compensation
Stock Option issuance to Executives
In February 2023, pursuant to the Equity Incentive Plan, the Company granted certain executive officers million stock options as a long-term incentive. The options have an exercise price of $ per share. million of these options vest ratably over four years (“Initial Options”). The remainder (“Target Options”) vest in fixed amounts based on achieving various revenue or common stock prices within seven years of grant date. Given the Company’s current stock price and revenue, the Company views the achievement of the milestones that would trigger vesting of the Target Options as remote.
Equity Incentive Plan
The Company’s 2016 Equity Incentive Plan (the “Plan”), as amended, has approximately million common shares reserved for issuance. As of September 30, 2024, there were approximately million shares available for issuance under the Plan. The shares available are after the granting of million shares of executive Target Options.
The Company recognizes compensation expense relating to awards ratably over the requisite period, which is generally the vesting period.
| 22 |
THE GLIMPSE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| For the Three Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| 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, 2024 and 2023 was approximately $ million and $ million, respectively.
| Weighted Average | ||||||||||||||||
| Remaining | ||||||||||||||||
| Exercise | Contractual | Intrinsic | ||||||||||||||
| Options | Price | Term (Yrs) | Value | |||||||||||||
| Outstanding at July 1, 2024 | $ | $ | ||||||||||||||
| Options Granted | ||||||||||||||||
| Options Exercised | ||||||||||||||||
| Options Forfeited / Cancelled | ( | ) | ||||||||||||||
| Outstanding at September 30, 2024 | $ | $ | ||||||||||||||
| Exercisable at September 30, 2024 | $ | $ | ||||||||||||||
The above table excludes executive Target Options: granted, $ exercise price, remaining term in years, no intrinsic value. Vesting of these is considered remote.
| Weighted Average | ||||||||||||||||
| Remaining | ||||||||||||||||
| Exercise | Contractual | Intrinsic | ||||||||||||||
| Options | Price | Term (Yrs) | Value | |||||||||||||
| Outstanding at July 1, 2023 | $ | $ | ||||||||||||||
| Options Granted | ||||||||||||||||
| Options Exercised | ( | ) | ||||||||||||||
| Options Forfeited / Cancelled | ( | ) | ||||||||||||||
| Outstanding at September 30, 2023 | $ | $ | ||||||||||||||
| Exercisable at September 30, 2023 | $ | $ | ||||||||||||||
The above table excludes executive Target Options: granted (includes attributable to an executive who resigned in July 2024), $ exercise price, remaining term in years, no intrinsic value. Vesting of these is considered remote.
The intrinsic value of stock options at September 30, 2024 and 2023 was computed using a fair market value of the common stock of $ per share and $ per share, respectively.
| 23 |
THE GLIMPSE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| For the Three Months Ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Stock option-based expense: | ||||||||
| Research and development expenses | $ | $ | ||||||
| General and administrative expenses | ||||||||
| Sales and marketing expenses | ||||||||
| Board option expense | ||||||||
| Total | $ | $ | ||||||
There is no expense included for the executive officers’ Target Options.
At September 30, 2024 total unrecognized compensation expense to employees, board members and vendors related to stock options was approximately $ million (excluding executive Target Options of $ million) and is expected to be recognized over a weighted average period of years (which excludes the executive Target Options).
| For the Three Months Ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Numerator: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Denominator: | ||||||||
| Weighted-average common shares outstanding for basic and diluted net loss per share | ||||||||
| Basic and diluted net loss per share | $ | ) | $ | ) | ||||
| As of September 30, 2024 | As of September 30, 2023 | |||||||
| Stock options | ||||||||
| Warrants | ||||||||
| Total | ||||||||
Stock options include and executive Target Options as of June 30, 2024 and 2023, respectively.
| 24 |
THE GLIMPSE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. COMMITMENTS AND CONTINGENCIES
Lease Costs
The
Company made cash payments for all operating leases for the three months ended September 30, 2024 and 2023, of approximately $
The
total rent expense for all operating leases for the three months ended September 30, 2024 and 2023, was approximately $
Lease Commitments
The Company has various operating leases for its offices. These existing leases have remaining lease terms ranging from approximately 0 to 2 years. Certain lease agreements contain options to renew, with renewal terms that generally extend the lease terms by 1 to 3 years for each option. The Company determined that none of its current leases are reasonably certain to renew.
Future approximate undiscounted lease payments for the Company’s operating lease liabilities and a reconciliation of these payments to its operating lease liabilities as of September 30, 2024 are as follows:
| Years Ended June 30, | ||||
| 2025 (9 remaining months) | ||||
| 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 | $ | |||
| 25 |
THE GLIMPSE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Contingent Consideration for Acquisitions
Contingent consideration for acquisitions, consists of the following as of September 30 and June 30, 2024, respectively (see Note 7):
| As of September 30, | As of June 30, | |||||||
| 2024 | 2024 | |||||||
| BLI, current portion | $ | $ | ||||||
| XRT | ||||||||
| Subtotal current portion | ||||||||
| BLI, net of current portion | ||||||||
| Total contingent consideration for acquisitions | $ | $ | ||||||
S5D
has significantly underperformed revenue expectations that were employed to determine fair value at acquisition. The possibility of achieving
any remaining revenue targets to trigger additional consideration is remote and all earned consideration has been paid. Accordingly,
there is no future contingent consideration recorded related to the S5D acquisition as of September 30 and June 30, 2024. The range of
potential additional contingent consideration related to S5D in excess of the amounts reflected on the balance sheet at September 30,
2024 is
The
range of potential contingent consideration related to the previous divestiture of AUGGD assets at September 30, 2024 is
Potential Future Distributions Upon Divestiture or Sale
In some instances, upon a divestiture or sale of a subsidiary company or capital raise into subsidiary company, the Company is contractually obligated to distribute a portion of the net proceeds or capital raise to the senior management team of the divested subsidiary company.
NOTE 12. SUBSEQUENT EVENTS
As part of its previously announced strategic realignment around Spatial Core and divestiture of non-core assets, effective October 1, 2024, the Company divested the business of its wholly owned subsidiary company QReal, LLC (“QReal”) and its related operating entity GLIMPSE GROUP YAZILIM VE ARGE TİCARET ANONİM ŞİRKET (“Glimpse Turkey”) in a management buyout by the current General Manager of QReal (the “Divestiture”).
The Company does not expect material changes to its expected revenues for years ended June 30, 2025 and 2026.
The
Company retains the revenues from QReal’s largest customer in full until such time that the Company has collected and retained
$
The
Company was issued a $
The
approximate assets and liabilities to be divested from this transaction included on the condensed consolidated balance sheet as of
September 30, 2024 were $
| 26 |
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 our audited financial statements and notes thereto, and related disclosures, as of and for the fiscal year ended June 30, 2024, which are included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 filed with the Securities and Exchange Commission (the “SEC”). 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 entities.
Cautionary Statement Regarding 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 (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 I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 filed with the SEC 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 an Immersive technology company, providing enterprise focused Virtual Reality (VR), Augmented Reality (AR) and Spatial Computing software and services. Glimpse’s operating entities are located primarily in the United States. We believe that we offer significant exposure to the rapidly growing and potentially transformative Immersive technology markets, while mitigating downside risk via our diversified model and ecosystem.
Our ecosystem of Immersive technology entities, collaborative environment and diversified business model aims to simplify the challenges faced by companies in the emerging Immersive technology industry, create scale, build operational efficiencies, reduce time to market and enhance go-to-market synergies, while simultaneously providing investors an opportunity to invest directly via a diversified infrastructure.
The Immersive technology industry is an early-stage technology industry with nascent markets. We believe that this industry has significant growth potential across verticals, may be transformative, and that our diversified ecosystem create important competitive advantages. We currently target a wide array of industry verticals, including but not limited to: Corporate Training, Education, Healthcare, Government & Defense, Branding/Marketing/Advertising, Retail, Media & Entertainment, Corporate Events and Social VR support groups and therapy. We focus primarily on the business-to-business (B2B) and business-to-business-to-consumer (B2B2C) segments and we are hardware agnostic.
In fiscal year 2024, we shifted our businesses focus to providing immersive technology solutions software and services (“Strategic Shift”) that are primarily driven by Spatial Computing, Cloud and Artificial Intelligence (AI), which we refer to as “Spatial Core.” While this transition is still ongoing, we believe that Spatial Core is a key differentiator, growth driver and competitive advantage for us.
At the time of this filing, we have approximately 45 full time employees, primarily software developers, engineers and 3D artists.
| 27 |
The Glimpse Group, Inc. was incorporated in June 2016 under the laws of the State of Nevada, and is headquartered in New York, New York.
Business Organization Chart (as of September 30, 2024):
Significant Transactions
Divestiture
Subsequent to period end, as part of our strategic realignment around Spatial Core and divestiture of non-core assets, on October 7, 2024 the Company announced that, effective on October 1, 2024, it had entered into an agreement to divest the business of its wholly owned subsidiary company QReal, LLC (“QReal”) and its related operating entity GLIMPSE GROUP YAZILIM VE ARGE TİCARET ANONİM ŞİRKET in a management buyout by then General Manager of QReal (the “Divestiture”).
Pursuant to the Divestiture, we retain the contract and resulting revenues from QReal’s largest customer in full until such time that we have collected and retained $1.35 million net cash in the aggregate, after taking into account all related operating expenses and fees (the “Milestone”). After satisfaction of the Milestone, we will receive a monthly cash revenue share for a period of 18 months in relation to any revenues generated from this same customer. In connection with the Divestiture, we were also issued (i) a $1.56 million senior secured convertible note in the new independent entity and (ii) a minority equity stake in the new independent entity. Principal payback on the senior secured convertible note is tied directly to revenue collected by the new entity (separate from the Milestone).
| 28 |
Financial Highlights for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.
Results of Operations
The following table sets forth our results of operations for the three months ended September 30, 2024 and 2023:
Summary P&L
| For the Three Months Ended | ||||||||||||||||
| September 30, | Change | |||||||||||||||
| 2024 | 2023 | $ | % | |||||||||||||
| (in millions) | ||||||||||||||||
| Revenue | $ | 2.44 | $ | 3.10 | $ | (0.66 | ) | -21 | % | |||||||
| Cost of Goods Sold | 0.52 | 1.18 | (0.66 | ) | -56 | % | ||||||||||
| Gross Profit | 1.92 | 1.92 | - | 0 | % | |||||||||||
| Total Operating Expenses | 2.96 | 2.09 | 0.87 | 42 | % | |||||||||||
| Loss from Operations before Other Income | (1.04 | ) | (0.17 | ) | (0.87 | ) | -512 | % | ||||||||
| Other Income | 0.02 | 0.05 | (0.03 | ) | 60 | % | ||||||||||
| Net Loss | $ | (1.02 | ) | $ | (0.12 | ) | $ | (0.90 | ) | -750 | % | |||||
Revenue
| For the Three Months Ended | ||||||||||||||||
| September 30, | Change | |||||||||||||||
| 2024 | 2023 | $ | % | |||||||||||||
| (in millions) | ||||||||||||||||
| Software Services | $ | 2.23 | $ | 3.01 | $ | (0.78 | ) | -26 | % | |||||||
| Software License/Software as a Service | 0.21 | 0.09 | 0.12 | 133 | % | |||||||||||
| Total Revenue | $ | 2.44 | $ | 3.10 | $ | (0.66 | ) | -21 | % | |||||||
Total revenue for the three months ended September 30, 2024 was approximately $2.44 million compared to approximately $3.10 million for the three months ended September 30, 2023, a decrease of approximately 21%. The decrease reflects our Strategic Shift, which has resulted in a significant turnover in our historical customer base and the divestiture of, and consolidation of, several of our entities.
We break out our revenues into two main categories - Software Services and Software License.
| ● | Software Services revenues are primarily comprised of Immersive technology projects, services related to our software licenses and consulting retainers. |
| ● | Software License revenues are comprised of the sale of our internally developed Immersive technology software as licenses or as software-as-a-service (SaaS). |
For the three months ended September 30, 2024, Software Services revenue was approximately $2.23 million compared to approximately $3.01 million for the three months ended September 30, 2023, a decrease of approximately 26%. The decrease reflects our Strategic Shift and the divestiture of, and consolidation of, several of our entities.
For the three months ended September 30, 2024, Software License revenue was approximately $0.21 million compared to approximately $0.09 million for the three months ended September 30, 2023. The increase was due to the addition of one significant customer in 2024.
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Customer Concentration
Two customers accounted for approximately 57% (29% and 28%, respectively) of the Company’s total gross revenues during the three months ended September 30, 2024. One of the same customers and a different customer accounted for approximately 50% (33% and 17%, respectively) of the Company’s total gross revenues during the three months ended September 30, 2023.
Gross Profit
| For theThree Months Ended | ||||||||||||||||
| September 30, | Change | |||||||||||||||
| 2024 | 2023 | $ | % | |||||||||||||
| (in millions) | ||||||||||||||||
| Revenue | $ | 2.44 | $ | 3.10 | $ | (0.66 | ) | -21 | % | |||||||
| Cost of Goods Sold | 0.52 | 1.18 | (0.66 | ) | -56 | % | ||||||||||
| Gross Profit | 1.92 | 1.92 | - | 0 | % | |||||||||||
| Gross Profit Margin | 79 | % | 62 | % | ||||||||||||
Gross profit was approximately 79% for the three months ended September 30, 2024 compared to approximately 62% for the three months ended September 30, 2023. The increase was driven by our Strategic Shift, which is less reliant on outside contractors’ costs and higher Software License revenues.
For the three months ended September 30, 2024 and 2023, internal staffing was approximately $0.43 million (83% of total cost of goods sold) and approximately $0.65 million (55% of total cost of goods sold), respectively. The increase in internal staffing as a percentage of total cost of goods sold was due to our Strategic Shift.
Operating Expenses
| For theThree Months Ended | ||||||||||||||||
| September 30, | Change | |||||||||||||||
| 2024 | 2023 | $ | % | |||||||||||||
| (in millions) | ||||||||||||||||
| Research and development expenses | $ | 1.12 | $ | 1.68 | $ | (0.56 | ) | -33 | % | |||||||
| General and administrative expenses | 0.94 | 1.10 | (0.16 | ) | -15 | % | ||||||||||
| Sales and marketing expenses | 0.74 | 0.81 | (0.07 | ) | -9 | % | ||||||||||
| Amortization of acquisition intangible assets | 0.13 | 0.37 | (0.24 | ) | -65 | % | ||||||||||
| Intangible asset impairment | - | 0.89 | (0.89 | ) | N/A | |||||||||||
| Change in fair value of acquisition contingent consideration | 0.03 | (2.76 | ) | 2.79 | -101 | % | ||||||||||
| Total Operating Expenses | $ | 2.96 | $ | 2.09 | $ | 0.87 | 42 | % | ||||||||
Operating expenses for the three months ended September 30, 2024 were approximately $2.96 million compared to approximately $2.09 million for the three months ended September 30, 2023, an increase of approximately 42%. The increase reflects expense reductions driven by reduced revenue and non-strategic business divestitures more than offset by the non-cash 2023 gain in change in fair value of acquisition contingent consideration not occurring in 2024.
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Research and Development
Research and development expenses for the three months ended September 30, 2024 were approximately $1.12 million compared to approximately $1.68 million for the three months ended September 30, 2023, a decrease of approximately 33%. This decrease represents expense reductions, primarily headcount related, driven by reduced revenue and non-strategic business divestitures.
General and Administrative
General and administrative expenses for the three months ended September 30, 2024 were approximately $0.94 million compared to approximately $1.10 million for the three months ended September 30, 2023, a decrease of approximately 15%. The decrease was driven by headcount reductions along with reduced corporate overhead expenses.
Sales and Marketing
Sales and marketing expenses for the three months ended September 30, 2024 were approximately $0.74 million compared to approximately $0.81 million for the three months ended September 30, 2023, a decrease of approximately 9%. This decrease represents expense reductions, primarily headcount related, driven by reduced revenue and non-strategic business divestitures. This is partially offset by a 2023 non-cash gain in the change in fair value of stock-based incentive compensation not occurring in 2024.
Amortization of Acquisition Intangible Assets
Amortization of acquisition intangible assets expense for the three months ended September 30, 2024 was approximately $0.13 million compared to approximately $0.37 million for the three months ended September 30, 2023, a decrease of approximately 65%. The decrease is attributable to the write off in the prior fiscal year of certain customer relationship intangible assets and divestiture of a certain entity.
Intangible Asset Impairment
Intangible asset impairment for the three months ended September 30, 2024 was zero compared to approximately $0.89 million for the three months ended September 30, 2023. The 2023 impairment represents the write-off of goodwill and the net intangible asset - technology attributable to the divestiture a certain entity.
Change in Fair Value of Acquisition Contingent Consideration
Change in fair value of acquisition contingent consideration for the three months ended September 30, 2024 was a expense of approximately $0.03 million compared to a gain of approximately $2.76 million for the three months ended September 30, 2023. The expense for the three months ended September 30, 2024 represents the change in the present value of BLI cash contingent consideration. The gain in 2023 was driven by a decrease in the common stock price of Glimpse between measurement dates related to BLI and S5D contingent consideration measured in Company stock.
Net Loss
Net loss for the three months ended September 30, 2024 and 2023 was approximately $1.02 million and $0.12 million, respectively, a loss increase of approximately $0.90 million. This reflects the 2023 non-cash gain in the change in fair value of acquisition contingent consideration not occurring in 2024 partially offset by expense reductions driven by reduced revenue and non-strategic business divestitures.
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Non-GAAP Financial Measures
The following discussion and analysis includes both financial measures in accordance with Generally Accepted Accounting Principles (“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 aforementioned 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 income (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.
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, 2024 and 2023:
| For the Three Months Ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| (in millions) | ||||||||
| Net loss | $ | (1.02 | ) | $ | (0.12 | ) | ||
| Depreciation and amortization | 0.16 | 0.40 | ||||||
| EBITDA income (loss) | (0.86 | ) | 0.28 | |||||
| Stock based compensation and vendor expenses | 0.37 | 0.69 | ||||||
| Change in fair value of acquisition contingent consideration | 0.03 | (2.76 | ) | |||||
| Change in fair value of accrued performance bonus | - | (0.39 | ) | |||||
| Intangible asset impairment | - | 0.89 | ||||||
| Adjusted EBITDA loss | $ | (0.46 | ) | $ | (1.29 | ) | ||
Adjusted EBITDA loss was $0.46 million for the three months ended September 30, 2024 compared to $1.29 million loss for the three months ended September 30, 2023. This improvement reflects expense reductions, primarily headcount related, driven by reduced revenue and non-strategic business divestitures.
Going Concern
The Company evaluated whether there are conditions and events, considered in the aggregate, that raise doubt about its ability to continue as a going concern within one year after the date that these condensed consolidated financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued.
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The Company has incurred recurring losses since its inception, including a net loss of $1.02 million for the three months ended September 30, 2024. In addition, as of September 30, 2024, the Company had an accumulated deficit of $64.05 million. While the Company has been reducing its expense base, it expects to continue to generate negative cash flow for the foreseeable future. The Company expects that its cash and cash equivalents as of September 30, 2024 may not be sufficient to fund operations for at least the next twelve months from the date of issuance of these condensed consolidated financial statements and the Company will need to obtain additional funding. Accordingly, the Company has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for a period of at least 12 months from the date of issuance of these condensed consolidated financial statements.
Outside of potential revenue growth generated by the Company, in order to alleviate the going concern the Company may take actions which could include, but are not limited to, further cost reductions, equity or debt financings and restructuring of potential future cash contingent acquisition liabilities. There is no assurance that these actions will be taken or be successful if pursued.
The condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described.
Potential liquidity resources
Potential liquidity resources may include the further sale of common stock pursuant to the unused portion of the Company’s $100 million S-3 registration statement filed with the SEC on October 28, 2022 (subject to SEC I.B.6 or “baby shelf” limitations). Such financing may not be available on terms favorable to the Company, or at all.
Liquidity and Capital Resources
| For the Three Months Ended | ||||||||||||||||
| September 30, | Change | |||||||||||||||
| 2024 | 2023 | $ | % | |||||||||||||
| (in millions) | ||||||||||||||||
| Net cash used in operating activities | $ | (0.42 | ) | $ | (1.68 | ) | $ | 1.26 | 75 | % | ||||||
| Net cash used in investing activities | (0.01 | ) | (0.01 | ) | - | % | ||||||||||
| Net decrease in cash and cash equivalents | (0.43 | ) | (1.69 | ) | 1.26 | -75 | % | |||||||||
| Cash and cash equivalents, beginning of year | 1.84 | 5.62 | (3.78 | ) | -67 | % | ||||||||||
| Cash and cash equivalents, end of period | $ | 1.41 | $ | 3.93 | $ | (2.52 | ) | -64 | % | |||||||
Operating Activities
Net cash used in operating activities was approximately $0.42 million for the three months ended September 30, 2024, compared to approximately $1.68 million during the three months ended September 30, 2023, an improvement of approximately $1.26 million. This was driven by expense reductions, primarily headcount related, driven by reduced revenue and non-strategic business divestitures.
Investing Activities
Net cash used in investing activities for the three months ended September 30, 2024 was approximately $0.01 million, consistent compared to the 2023 period.
Financing Activities
None
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Capital Resources
As of September 30, 2024, the Company had cash and cash equivalents of $1.41 million, plus $0.87 million of accounts receivable.
As of September 30, 2024, the Company had no outstanding debt obligations.
As of September 30, 2024, the Company had no issued and outstanding preferred stock.
As of September 30, 2024, contingent consideration for acquisition liabilities contains cash components ranging up to $3.0 million, potentially payable through September 2025 contingent on BLI achieving certain revenue milestones.
Recently Adopted Accounting Pronouncements
Please see Note 4 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q that describes 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 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 the SEC’s 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 our Chief Executive Officer and our 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.
During the period ended September 30, 2024, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 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, 2024, the Company issued 8,000 shares of common stock for:
| Number of Shares | Cash Proceeds | Value of Shares | ||||||||||
| Employee compensation | 8,000 | $ | 0 | $ | 8,000 | |||||||
Please refer to Note 9 of the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
The foregoing transactions were exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) thereof.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None
Item 3. Defaults Upon Senior Securities
Not Applicable.
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 Exchange Act. | |
| 31.2 | Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange Act. | |
| 32.1 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rules 13a-14(b) or 15d-14(b) of the Exchange Act 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). |
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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, 2024.
| THE GLIMPSE GROUP, INC. | |
| /s/ Lyron Bentovim | |
| Lyron Bentovim | |
| Chief Executive Officer | |
| (Principal Executive Officer) | |
| /s/ Maydan Rothblum | |
| Maydan Rothblum | |
| Chief Financial Officer | |
| (Principal Financial Officer) |
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