[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited consolidated financial information, including financial statements, management's discussion, market risk disclosures, and controls and procedures [ITEM 1. FINANCIAL STATEMENTS (Unaudited)](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(Unaudited)) This section presents the unaudited consolidated financial statements of The Glimpse Group, Inc. for the periods ended December 31, 2021, including the balance sheets, statements of operations, stockholders' equity (deficit), and cash flows, along with detailed notes explaining the company's business, accounting policies, and significant transactions [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of December 31, 2021, and June 30, 2021 Consolidated Balance Sheet Highlights | Metric | Dec 31, 2021 (Unaudited) | Jun 30, 2021 (Audited) | Change | | :-------------------------- | :----------------------- | :--------------------- | :--------------------- | | Cash and cash equivalents | $24,828,043 | $1,771,929 | +$23,056,114 | | Total current assets | $30,863,750 | $3,178,868 | +$27,684,882 | | Total assets | $32,267,150 | $3,221,040 | +$29,046,110 | | Total current liabilities | $1,213,670 | $2,339,037 | -$1,125,367 | | Total liabilities | $1,837,498 | $4,392,818 | -$2,555,320 | | Total stockholders' equity (deficit) | $30,429,652 | $(1,171,778) | +$31,601,430 | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) This section outlines the company's financial performance, presenting revenues, expenses, and net loss for the three and six months ended December 31, 2021 Consolidated Statements of Operations Highlights | Metric | 3 Months Ended Dec 31, 2021 | 3 Months Ended Dec 31, 2020 | Change (YoY) | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | Change (YoY) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Revenue | $1,690,002 | $1,259,845 | +34.14% | $2,712,535 | $1,519,772 | +78.49% | | Gross Profit | $1,477,748 | $713,653 | +107.08% | $2,354,894 | $836,456 | +181.49% | | Total operating expenses | $3,053,276 | $1,407,035 | +117.00% | $5,327,076 | $2,769,259 | +92.37% | | Net Loss | $(1,575,394) | $(741,088) | +112.58% | $(3,232,155) | $(2,018,412) | +60.14% | | Basic and diluted net loss per share | $(0.14) | $(0.11) | +27.27% | $(0.30) | $(0.29) | +3.45% | [Consolidated Statements of Stockholders' Equity (Deficit)](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Deficit)) This section details changes in stockholders' equity (deficit) over the three and six months ended December 31, 2021, reflecting capital transactions and accumulated losses Stockholders' Equity (Deficit) Changes (Three Months) | Metric | Balance as of Oct 1, 2021 | Balance as of Dec 31, 2021 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Common Stock (Shares) | 10,291,638 | 12,480,416 | | Common Stock (Amount) | $10,292 | $12,480 | | Additional Paid-In Capital | $36,595,898 | $55,764,735 | | Accumulated Deficit | $(23,772,169) | $(25,347,563) | | Total Stockholders' Equity (Deficit) | $12,834,021 | $30,429,652 | Stockholders' Equity (Deficit) Changes (Six Months) | Metric | Balance as of Jul 1, 2021 | Balance as of Dec 31, 2021 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Common Stock (Shares) | 7,579,285 | 12,480,416 | | Common Stock (Amount) | $7,580 | $12,480 | | Additional Paid-In Capital | $20,936,050 | $55,764,735 | | Accumulated Deficit | $(22,115,408) | $(25,347,563) | | Total Stockholders' Equity (Deficit) | $(1,171,778) | $30,429,652 | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes the cash inflows and outflows from operating, investing, and financing activities for the six months ended December 31, 2021 Consolidated Statements of Cash Flows Highlights | Activity | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(2,359,760) | $(776,244) | $(1,583,516) | | Net cash used in investing activities | $(597,510) | $(15,036) | $(582,474) | | Net cash provided by financing activities | $26,013,384 | $225,705 | $25,787,679 | | Net change in cash and cash equivalents | $23,056,114 | $(565,575) | $23,621,689 | | Cash and cash equivalents, end of period | $24,828,043 | $469,271 | $24,358,772 | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of the accounting policies, significant transactions, and financial position of The Glimpse Group, Inc., including information on its business, liquidity, acquisitions, debt, equity, and subsequent events [NOTE 1. DESCRIPTION OF BUSINESS](index=10&type=section&id=NOTE%201.%20DESCRIPTION%20OF%20BUSINESS) This note describes The Glimpse Group, Inc. as a VR/AR company, highlighting its IPO, recent capital raises, and strategic acquisition of Sector 5 Digital - The Glimpse Group, Inc. is a Virtual (VR) and Augmented (AR) Reality company comprising a diversified portfolio of eleven wholly-owned VR and AR software and services subsidiaries[25](index=25&type=chunk) - The company completed an initial public offering (IPO) on Nasdaq on **July 1, 2021**, under the ticker VRAR, and sold additional common stock to institutional investors in November 2021 via a Securities Purchase Agreement (SPA)[28](index=28&type=chunk) - In December 2021, Glimpse entered into a definitive agreement to purchase Sector 5 Digital, LLC (S5D), an enterprise-focused immersive technology company, with the purchase closing in February 2022[26](index=26&type=chunk) [NOTE 2. LIQUIDITY AND CAPITAL RESOURCES](index=10&type=section&id=NOTE%202.%20LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This note assesses the company's financial liquidity, capital resources, and ability to meet future obligations, considering recent financing activities and operational losses - The company incurred a net loss of **$3.23 million** for the six months ended December 31, 2021, an increase from **$2.02 million** in the prior year, primarily due to funding operational expenses like R&D, G&A, and S&M[29](index=29&type=chunk) - Net proceeds from the IPO on July 1, 2021, were approximately **$11.8 million**, and an additional **$13.6 million** was raised from a Securities Purchase Agreement in November 2021[30](index=30&type=chunk) - Management believes existing cash and cash equivalents of approximately **$19 million** (after the S5D purchase) will be sufficient for at least twelve months, with plans for future equity and/or debt financings if needed[31](index=31&type=chunk) [NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=11&type=section&id=NOTE%203.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the key accounting principles and policies applied in preparing the financial statements, including revenue recognition and expense treatment - The unaudited consolidated financial statements are prepared in accordance with GAAP for interim financial information and SEC rules, reflecting normal recurring adjustments[34](index=34&type=chunk) - Revenue is disaggregated into two categories: Software Services (VR/AR projects, solutions, consulting) and Software License & SaaS (VR/AR software licenses or subscriptions)[57](index=57&type=chunk)[59](index=59&type=chunk) Revenue Timing | Timing of Revenue | 3 Months Ended Dec 31, 2021 | 3 Months Ended Dec 31, 2020 | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Products transferred at a point in time | $1,634,998 | $1,099,423 | $2,590,749 | $1,292,598 | | Products and services transferred over time | $55,004 | $160,422 | $121,786 | $227,174 | | Total Revenue | $1,690,002 | $1,259,845 | $2,712,535 | $1,519,772 | - Research and development expenses are expensed as incurred, including payroll, benefits, stock-based compensation, and third-party development costs, due to the emerging industry and uncertain market environment[72](index=72&type=chunk) [NOTE 4. ASSET ACQUISITIONS](index=17&type=section&id=NOTE%204.%20ASSET%20ACQUISITIONS) This note details the company's asset acquisitions, including AUGGD and XR Terra, and their strategic impact on market access and technology platforms - In August 2021, the Company acquired certain assets from Augmented Reality Investments Pty Ltd (dba AUGGD) for **$0.75 million** in common stock, gaining access to the AEC market[80](index=80&type=chunk)[81](index=81&type=chunk) - In October 2021, the Company acquired assets from XR Terra, Inc., a developer of VR/AR coding teaching platforms, for **$0.60 million** (50% cash, 50% common stock)[83](index=83&type=chunk)[84](index=84&type=chunk) [NOTE 5. INTANGIBLE ASSETS](index=18&type=section&id=NOTE%205.%20INTANGIBLE%20ASSETS) This note provides a breakdown of intangible assets acquired, their valuation, and estimated amortization expenses over future fiscal years Intangible Assets Breakdown (as of Dec 31, 2021) | Intangible Assets | AUGGD ($) | XR Terra ($) | Total ($) | Amortization Period (Years) | | :-------------------------- | :---------- | :----------- | :---------- | :-------------------------- | | Customer Relationships | 250,000 | - | 250,000 | 3 | | Technology | 250,000 | 300,000 | 550,000 | 3 | | Less: Accumulated Amortization | (62,500) | (24,999) | (87,499) | | | Intangible Assets, net | 437,500 | 275,001 | 712,501 | | Estimated Intangible Asset Amortization Expense | Fiscal Year Ended | Amortization Expense ($) | | :-------------------------- | :------------------- | | Remaining FYE June 30, 2022 | $133,333 | | Fiscal Year Ended June 30, 2023 | $266,667 | | Fiscal Year Ended June 30, 2024 | $266,667 | | Fiscal Year Ended June 30, 2025 | $45,834 | [NOTE 6. CONTINGENT ACQUISITION LIABILITY](index=18&type=section&id=NOTE%206.%20CONTINGENT%20ACQUISITION%20LIABILITY) This note describes the contingent liabilities related to past acquisitions, detailing how these obligations were triggered and settled through common stock issuance - Contingent acquisition consideration for Kabaq 3D Technologies, LLC (**$750,000**) was triggered and satisfied in August 2021 through the issuance of common stock[89](index=89&type=chunk) - Contingent acquisition consideration for KreatAR, LLC (**$500,000**) was triggered in August 2021 and partially satisfied in December 2021 through common stock issuance, with the remainder settled in January 2022[90](index=90&type=chunk)[136](index=136&type=chunk) [NOTE 7. DEBT](index=18&type=section&id=NOTE%207.%20DEBT) This note outlines the company's debt obligations, specifically convertible promissory notes, and their conversion into common stock following the IPO - Convertible Promissory Notes 1 (**$1.33 million** issued in Dec 2019) were primarily converted into common stock at **$4.00/share** in Dec 2020/Jan 2021, with remaining notes converting at IPO at **$4.25/share**[91](index=91&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) - Convertible Promissory Notes 2 (**$1.48 million** issued in March 2021) automatically converted at **$5.00/share** upon the Company's IPO, with no further obligations[97](index=97&type=chunk)[99](index=99&type=chunk) - A non-cash loss of approximately **$280,000** was recorded on the conversion of both Notes 1 and 2 at the time of the IPO[96](index=96&type=chunk)[100](index=100&type=chunk)[103](index=103&type=chunk) [NOTE 8. EQUITY](index=19&type=section&id=NOTE%208.%20EQUITY) This note details the company's equity transactions, including its IPO, private placement, and issuance of shares for acquisitions and convertible note conversions - The Company completed an IPO on **July 1, 2021**, selling **1.91 million shares** at **$7.00/share**, raising **$11.82 million** in net proceeds[101](index=101&type=chunk) - In November 2021, the Company sold **1.50 million shares** and warrants to purchase **0.75 million shares** to institutional investors in a private placement for **$10.00 per unit**, generating **$13.58 million** in net proceeds[105](index=105&type=chunk)[106](index=106&type=chunk) - During the six months ended December 31, 2021, the Company issued **324,150 shares** for convertible note conversions, approximately **111,000 shares** for AUGGD and XR Terra acquisitions, and **395,000 shares** for legacy acquisition obligations[109](index=109&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk) - Stock option-based compensation expense for the six months ended December 31, 2021, was approximately **$1.19 million**, with total unrecognized compensation expense of **$1.29 million** expected to be recognized over **2.22 years**[120](index=120&type=chunk) [NOTE 9. EARNINGS PER SHARE](index=22&type=section&id=NOTE%209.%20EARNINGS%20PER%20SHARE) This note presents the calculation of basic and diluted net loss per share, along with a summary of potentially dilutive securities Basic and Diluted Net Loss Per Share | Metric | 3 Months Ended Dec 31, 2021 | 3 Months Ended Dec 31, 2020 | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net loss | $(1,575,394) | $(741,088) | $(3,232,155) | $(2,018,412) | | Weighted-average common shares outstanding | 11,637,318 | 7,053,986 | 10,802,570 | 7,046,510 | | Basic and diluted net loss per share | $(0.14) | $(0.11) | $(0.30) | $(0.29) | Potentially Dilutive Securities (Anti-Dilutive) | Security Type | At Dec 31, 2021 | At Dec 31, 2020 | | :-------------------------- | :---------------- | :---------------- | | Stock Options | 3,974,702 | 4,168,162 | | Warrants | 837,500 | - | | Convertible Notes | - | 281,667 | | Total | 4,812,202 | 4,449,829 | [NOTE 10. COMMITMENTS AND CONTINGENCIES](index=22&type=section&id=NOTE%2010.%20COMMITMENTS%20AND%20CONTINGENCIES) This note discloses the company's contractual obligations, including office leases and potential payouts, and discusses the impact of the COVID-19 pandemic - The Company has an office lease in New York expiring **December 31, 2022**, with approximately **$300,000** due for the remaining term[123](index=123&type=chunk)[124](index=124&type=chunk) - New office leases in Turkey, effective **December 1, 2021**, expire **November 30, 2022**, with monthly rent expense of approximately **$2,400**[127](index=127&type=chunk)[128](index=128&type=chunk) - The Company is contractually obligated to distribute up to **10%** of net proceeds from a subsidiary divestiture or sale to the divested subsidiary's senior management team[129](index=129&type=chunk) - The COVID-19 pandemic has caused business disruption and prolonged sales cycles, but given expected revenue growth and current cash, the company does not anticipate the impact to worsen[130](index=130&type=chunk)[132](index=132&type=chunk) [NOTE 11. SUBSEQUENT EVENTS](index=24&type=section&id=NOTE%2011.%20SUBSEQUENT%20EVENTS) This note reports significant events occurring after the balance sheet date, including the acquisition of Sector 5 Digital and settlement of contingent liabilities - The acquisition of Sector 5 Digital, LLC (S5D) closed in **February 2022**, with an initial payment of **$8.0 million** (**$4.0 million cash**, **$4.0 million common stock**) and potential future considerations up to **$19.0 million** based on revenue milestones[133](index=133&type=chunk)[134](index=134&type=chunk) - The remaining contingent acquisition liability for KreatAR, LLC was settled in **January 2022** through the issuance of **42,978 shares** of common stock and **15,000 stock options**[136](index=136&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=26&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the company's financial condition, operating results, liquidity, and cash flows for the three and six months ended December 31, 2021, compared to the prior year, highlighting significant transactions, revenue growth, expense increases, and non-GAAP financial measures [Overview](index=26&type=section&id=Overview) This overview introduces The Glimpse Group as a diversified VR/AR platform company, emphasizing its strategy to mitigate risk in a growing market - The Glimpse Group is a Virtual (VR) and Augmented (AR) Reality platform company, operating a diversified group of wholly-owned VR and AR companies focused on enterprise software, services, and solutions[141](index=141&type=chunk) - The company aims to provide significant exposure to the growing VR and AR markets while mitigating risk through its diversified model and ecosystem[141](index=141&type=chunk) [Significant Transactions](index=27&type=section&id=Significant%20Transactions) This section highlights key financial and strategic transactions, including the IPO, private placement, and recent acquisitions, impacting the company's capital structure and growth - Completed an IPO on Nasdaq on **July 1, 2021**, raising **$11.82 million** in net proceeds[143](index=143&type=chunk) - Acquired XR Terra, Inc. in **October 2021** for **$0.60 million** (cash and common stock)[144](index=144&type=chunk) - Sold **1.50 million shares** and warrants in a private placement in **November 2021**, generating **$13.6 million** in net proceeds[145](index=145&type=chunk) - Closed the acquisition of Sector 5 Digital, LLC (S5D) on **February 1, 2022**, with an initial payment of **$8.0 million** and potential future considerations up to **$19.0 million**[147](index=147&type=chunk) [Financial Highlights for the three and six months ended December 31, 2021 compared to the three and six months ended December 31, 2020](index=27&type=section&id=Financial%20Highlights%20for%20the%20three%20and%20six%20months%20ended%20December%2031,%202021%20compared%20to%20the%20three%20and%20six%20months%20ended%20December%2031,%202020) This section presents a comparative analysis of the company's financial performance for the three and six months ended December 31, 2021, against the prior year [Results of Operations](index=27&type=section&id=Results%20of%20Operations) This section summarizes the consolidated financial results, including revenue, gross profit, operating expenses, and net loss, for the reported periods Consolidated Results of Operations Summary | Metric (in millions) | 3 Months Ended Dec 31, 2021 | 3 Months Ended Dec 31, 2020 | Change ($) | Change (%) | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | Change ($) | Change (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Revenue | $1.69 | $1.26 | $0.43 | 34% | $2.71 | $1.52 | $1.19 | 78% | | Cost of Goods Sold | $0.21 | $0.55 | $(0.34) | -62% | $0.36 | $0.68 | $(0.32) | -47% | | Gross Profit | $1.48 | $0.71 | $0.77 | 108% | $2.35 | $0.84 | $1.51 | 180% | | Total Operating Expenses | $3.05 | $1.41 | $1.64 | 116% | $5.33 | $2.77 | $2.56 | 92% | | Net Loss | $(1.57) | $(0.75) | $(0.82) | 109% | $(3.24) | $(2.02) | $(1.22) | 60% | [Revenues](index=28&type=section&id=Revenues) This section analyzes the company's revenue performance, breaking down growth by software services and software license/SaaS categories Revenue Breakdown and Growth | Revenue Category (in millions) | 3 Months Ended Dec 31, 2021 | 3 Months Ended Dec 31, 2020 | Change ($) | Change (%) | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | Change ($) | Change (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Software Services | $1.61 | $1.19 | $0.42 | 35% | $2.42 | $1.38 | $1.04 | 75% | | Software License/SaaS | $0.08 | $0.07 | $0.01 | 14% | $0.29 | $0.14 | $0.15 | 107% | | Total Revenue | $1.69 | $1.26 | $0.43 | 34% | $2.71 | $1.52 | $1.19 | 78% | - Non-project revenue (VR/AR Software and Services) increased by approximately **70%** to **$0.85 million** for the three months ended December 31, 2021, and by **166%** to **$1.70 million** for the six months ended December 31, 2021[153](index=153&type=chunk) - Non-project revenue accounted for approximately **50%** of total revenues for the three months ended December 31, 2021 (up from **40%** in 2020) and **63%** for the six months ended December 31, 2021 (up from **42%** in 2020)[153](index=153&type=chunk) [Customer Concentration](index=28&type=section&id=Customer%20Concentration) This section discusses the company's reliance on a few key customers and the expected variability in customer concentration given the industry's early stage - Two customers accounted for approximately **75%** of total gross revenues for the three months ended December 31, 2021, and **67%** for the six months ended December 31, 2021[154](index=154&type=chunk) - Due to the early stage of the industry and customer exploration, high variability in customer concentration is expected to continue until revenue reaches a larger scale with a higher percentage from Software Licenses/SaaS[155](index=155&type=chunk) [Gross Profit](index=29&type=section&id=Gross%20Profit) This section examines the company's gross profit and margin trends, attributing improvements to higher-margin revenue and cost management strategies Gross Profit and Margin | Metric | 3 Months Ended Dec 31, 2021 | 3 Months Ended Dec 31, 2020 | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Gross Profit | $1.48 million | $0.71 million | $2.35 million | $0.84 million | | Gross Profit Margin | 88% | 56% | 87% | 55% | - The increase in gross profit margin was driven by higher margin non-project revenue, improved management of project revenue costs, and utilization of lower-cost Glimpse Turkey staff[156](index=156&type=chunk) [Operating Expenses](index=29&type=section&id=Operating%20Expenses) This section provides an overview of the company's operating expenses, detailing increases across R&D, G&A, and S&M due to growth and public company costs Operating Expenses Summary | Expense Category (in millions) | 3 Months Ended Dec 31, 2021 | 3 Months Ended Dec 31, 2020 | Change ($) | Change (%) | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | Change ($) | Change (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Research and development expenses | $1.19 | $0.59 | $0.60 | 102% | $2.18 | $1.33 | $0.85 | 64% | | General and administrative expenses | $1.19 | $0.37 | $0.82 | 222% | $1.98 | $0.71 | $1.27 | 179% | | Sales and marketing expenses | $0.67 | $0.45 | $0.22 | 49% | $1.17 | $0.73 | $0.44 | 60% | | Total operating expenses | $3.05 | $1.41 | $1.64 | 116% | $5.33 | $2.77 | $2.56 | 92% | - The overall increase in operating expenses was due to employee headcount additions, costs associated with being a publicly traded company, and the addition of two new subsidiaries[157](index=157&type=chunk) [Research and Development](index=29&type=section&id=Research%20and%20Development) This section details the increase in R&D expenses, driven by headcount additions and new subsidiaries, including the impact of non-cash stock option expenses - R&D expenses increased by **102%** to **$1.19 million** for the three months and **64%** to **$2.18 million** for the six months ended December 31, 2021, driven by headcount additions and new subsidiaries[158](index=158&type=chunk) - Non-cash stock option expenses comprised approximately **22%** of total R&D expenses for the three months and **28%** for the six months ended December 31, 2021, expected to decrease as a percentage over time[159](index=159&type=chunk) [General and Administrative](index=30&type=section&id=General%20and%20Administrative) This section analyzes the surge in G&A expenses, attributed to infrastructure build-out, public company costs, and new subsidiaries, including non-cash stock option and common stock expenses - G&A expenses surged by **221%** to **$1.19 million** for the three months and **179%** to **$1.98 million** for the six months ended December 31, 2021, reflecting infrastructure build-out, public company costs (e.g., D&O insurance, listing fees), and new subsidiaries[160](index=160&type=chunk) - Non-cash stock option and common stock expenses accounted for approximately **20%** of G&A for the three months and **23%** for the six months ended December 31, 2021, expected to decrease as a percentage over time[161](index=161&type=chunk) [Sales and Marketing](index=30&type=section&id=Sales%20and%20Marketing) This section reviews the increase in S&M expenses, driven by headcount, revenue growth initiatives, and new subsidiaries, including non-cash stock option and common stock expenses - S&M expenses increased by **49%** to **$0.67 million** for the three months and **60%** to **$1.17 million** for the six months ended December 31, 2021, due to headcount additions, revenue growth initiatives, and new subsidiaries[162](index=162&type=chunk) - Non-cash stock option and common stock expenses represented approximately **30%** of S&M for the three months and **28%** for the six months ended December 31, 2021, expected to decrease as a percentage over time[164](index=164&type=chunk) [Other Income and Expense, net](index=31&type=section&id=Other%20Income%20and%20Expense,%20net) This section explains the net other income and expense, primarily due to a non-cash loss on convertible note conversion at the time of the IPO - Other income and expense, net, for the six months ended December 31, 2021, was an expense of **$0.26 million**, an increase of **$0.17 million** compared to the prior year, primarily due to a **$0.28 million** non-cash loss on convertible note conversion at IPO[165](index=165&type=chunk) [Net Losses](index=31&type=section&id=Net%20Losses) This section discusses the increase in net loss, primarily driven by higher operating expenses and a non-cash loss from convertible note conversion - Net loss increased by **109%** to **$1.57 million** for the three months and **60%** to **$3.24 million** for the six months ended December 31, 2021, driven by increased operating expenses and the non-cash loss on convertible note conversion, partially offset by higher revenue and gross profit[166](index=166&type=chunk) [Non-GAAP Financial Measures](index=31&type=section&id=Non-GAAP%20Financial%20Measures) This section presents the reconciliation of net loss to Adjusted EBITDA, a non-GAAP measure used by management to assess core operating performance - Adjusted EBITDA is used by management and investors to evaluate core operating results by removing non-operational impacts[169](index=169&type=chunk) Reconciliation of Net Loss to Adjusted EBITDA | Metric (in millions) | 3 Months Ended Dec 31, 2021 | 3 Months Ended Dec 31, 2020 | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net loss | $(1.58) | $(0.74) | $(3.23) | $(2.02) | | Interest expense, net | - | 0.05 | - | 0.10 | | Depreciation and amortization | 0.08 | 0.01 | 0.10 | 0.01 | | EBITDA (loss) | $(1.50) | $(0.68) | $(3.13) | $(1.91) | | Stock based compensation expenses | 0.60 | 0.87 | 1.31 | 1.59 | | Stock based financing related expenses | - | - | 0.28 | - | | Public company expenses | 0.35 | - | 0.53 | - | | Acquisition related expenses | 0.09 | - | 0.11 | - | | Adjusted EBITDA (loss) | $(0.46) | $0.19 | $(0.90) | $(0.32) | - Adjusted EBITDA loss increased by **$0.65 million** to **$0.46 million** for the three months and by **$0.58 million** to **$0.90 million** for the six months ended December 31, 2021, primarily due to increased net loss partially offset by public company and acquisition expenses[171](index=171&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) This section details the company's cash flow activities, current capital position, and future funding outlook, emphasizing the significant impact of recent financing activities on liquidity [Operating Activities](index=32&type=section&id=Operating%20Activities) This section analyzes the cash used in operating activities, attributing the increase to higher net loss and accounts receivable Net Cash Used in Operating Activities | Metric | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | Change ($) | Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net cash used in operating activities | $(2.36) million | $(0.78) million | $(1.58) million | -203% | - The increase in cash used in operating activities was primarily driven by a **$1.22 million** increase in net loss and higher accounts receivable due to increased revenue[173](index=173&type=chunk) [Investing Activities](index=33&type=section&id=Investing%20Activities) This section details the cash used in investing activities, primarily due to asset purchases and investments in corporate fixed income securities Net Cash Used in Investing Activities | Metric | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | Change ($) | Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net cash used in investing activities | $(0.60) million | $(0.02) million | $(0.58) million | -2,900% | - The significant increase in cash used in investing activities was due to the cash portion of the XR Terra asset purchase and investments in corporate fixed income securities[175](index=175&type=chunk) [Financing Activities](index=33&type=section&id=Financing%20Activities) This section highlights the substantial cash provided by financing activities, mainly from the IPO and private placement of common stock Net Cash Provided by Financing Activities | Metric | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | Change ($) | Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net cash provided by financing activities | $26.01 million | $0.23 million | $25.78 million | 11,209% | - The substantial increase in cash from financing activities was primarily due to net proceeds from the IPO and Securities Purchase Agreement common stock transactions[176](index=176&type=chunk) [Capital Resources](index=33&type=section&id=Capital%20Resources) This section outlines the company's cash and cash equivalents, debt obligations, and management's assessment of sufficient funding for future operations - As of **December 31, 2021**, the Company had **$24.8 million** in cash and cash equivalents, which decreased to approximately **$19.0 million** by **February 14, 2022**, after the S5D acquisition[177](index=177&type=chunk) - The Company had no outstanding debt obligations as of **December 31, 2021**, except for a **$0.62 million** Paycheck Protection Program loan expected to be fully forgiven[178](index=178&type=chunk) - Management believes the Company is sufficiently funded to meet operational plans and future obligations beyond the next **12 months**[179](index=179&type=chunk) [Off-Balance Sheet Arrangements](index=33&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of any off-balance sheet arrangements as defined by SEC regulations - The Company does not have any off-balance sheet arrangements as defined in Regulation S-K Item 303(a)(4)[180](index=180&type=chunk) [Recently Adopted Accounting Pronouncements](index=33&type=section&id=Recently%20Adopted%20Accounting%20Pronouncements) This section states that no recently issued accounting standards are expected to materially impact the company's financial statements - Management does not believe that any recently issued, but not yet effective, accounting standards would have a material effect on the Company's financial statements if currently adopted[78](index=78&type=chunk)[181](index=181&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=33&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section states that quantitative and qualitative disclosures about market risk are not required for smaller reporting companies - Quantitative and qualitative disclosures about market risk are not required for smaller reporting companies[182](index=182&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=33&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section details the evaluation of the company's disclosure controls and procedures and internal control over financial reporting, concluding on their effectiveness as of December 31, 2021 [Evaluation of Disclosure Controls and Procedures](index=33&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and internal control over financial reporting as of December 31, 2021 - Management, with CEO and CFO participation, evaluated the effectiveness of disclosure controls and procedures as of **December 31, 2021**, concluding they were effective[184](index=184&type=chunk) - Management also concluded that the internal control over financial reporting was effective as of **December 31, 2021**, based on the COSO 2013 framework[187](index=187&type=chunk) - No material changes occurred in internal control over financial reporting during the period ended **December 31, 2021**[187](index=187&type=chunk) [PART II. OTHER INFORMATION](index=35&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, equity sales, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=35&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section states that there are no legal proceedings to report - There are no legal proceedings to report[190](index=190&type=chunk) [ITEM 1A. RISK FACTORS](index=35&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section refers to the Annual Report on Form 10-K for a discussion of material risks, noting no material changes - There have been no material changes to the risk factors described in the Annual Report on Form 10-K for the year ended **June 30, 2021**[191](index=191&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=35&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section details the unregistered sales of equity securities during and subsequent to the quarter ended December 31, 2021, primarily for consulting services, employee compensation, and legacy acquisition expenses - During the three months ended **December 31, 2021**, the Company issued **18,169 shares** of Common Stock for consulting services and employee compensation[192](index=192&type=chunk) - Subsequent to **December 31, 2021**, the Company issued **43,466 shares** of Common Stock for legacy acquisition expense and consulting services[192](index=192&type=chunk) - These transactions were exempt from registration requirements under Section 4(a)(2) or Section 3(a)(9) of the Securities Act of 1933[193](index=193&type=chunk) [ITEM 6. EXHIBITS](index=35&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including agreements, warrants, certifications, and XBRL documents - The report includes various exhibits such as the Placement Agent Agreement, Form of Securities Purchase Agreement, Forms of Warrants, Registration Rights Agreement, Membership Interest Sale Agreement for S5D, and certifications from executive officers[198](index=198&type=chunk)[199](index=199&type=chunk) [SIGNATURES](index=37&type=section&id=SIGNATURES) This section contains the official signatures of the Chief Executive Officer and Chief Financial Officer, certifying the accuracy of the report [Signatures](index=37&type=section&id=Signatures) This section contains the signatures of the Chief Executive Officer and Chief Financial Officer, certifying the report - The report was duly signed on **February 14, 2022**, by Lyron Bentovim, Chief Executive Officer and President, and Maydan Rothblum, Chief Financial Officer[201](index=201&type=chunk)[202](index=202&type=chunk)

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis of The Glimpse Group, Inc [ITEM 1. FINANCIAL STATEMENTS (Unaudited)](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for The Glimpse Group, Inc., including the balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes explaining the company's business, accounting policies, recent transactions, and financial position [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement presents the company's assets, liabilities, and equity, reflecting the IPO's impact on its financial position Balance Sheet Summary | Metric | September 30, 2021 (Unaudited) | June 30, 2021 (Audited) | | :--------------------------------- | :----------------------------- | :---------------------- | | Cash and cash equivalents | $12,567,632 | $1,771,929 | | Total current assets | $13,747,274 | $3,178,868 | | Total assets | $14,609,954 | $3,221,040 | | Total current liabilities | $1,152,105 | $2,339,037 | | Total liabilities | $1,775,933 | $4,392,818 | | Total stockholders' equity (deficit)| $12,834,021 | $(1,171,778) | - The company's **cash and cash equivalents** significantly increased from **$1.77 million** at June 30, 2021, to **$12.57 million** at September 30, 2021, primarily due to the **IPO** **net proceeds**[12](index=12&type=chunk) - **Total stockholders' equity** shifted from a deficit of **$(1.17) million** at June 30, 2021, to a positive **$12.83 million** at September 30, 2021, reflecting the impact of the **IPO**[12](index=12&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement details the company's revenues, expenses, and net loss, highlighting revenue growth and increased operating costs Statements of Operations Summary | Metric (Three Months Ended Sep 30) | 2021 | 2020 | Change ($) | Change (%) |\n| :--------------------------------- | :------------ | :------------ | :------------ | :------------ |\n| Total Revenue | $1,022,533 | $259,927 | $762,606 | 293.3% |\n| Cost of goods sold | $145,387 | $137,124 | $8,263 | 6.0% |\n| Gross Profit | $877,146 | $122,803 | $754,343 | 614.3% |\n| Total operating expenses | $2,273,800 | $1,362,224 | $911,576 | 66.9% |\n| Net Loss | $(1,656,761) | $(1,277,324) | $(379,437) | 29.7% |\n| Basic and diluted net loss per share | $(0.17) | $(0.18) | $0.01 | -5.6% | - **Total revenue** increased by **293%** year-over-year, driven by **revenue growth** in both **software services** and **software license/SaaS**[14](index=14&type=chunk) - Despite significant **revenue growth**, **net loss** increased by **29.7%** due to a substantial rise in **operating expenses** and a non-cash loss on conversion of **convertible notes**[14](index=14&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity (Deficit)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Deficit)) This statement tracks equity changes, primarily reflecting the substantial increase from the IPO and other stock issuances Equity Activity Summary | Equity Activity (Three Months Ended Sep 30, 2021) | Shares | Amount ($) | Additional Paid-In Capital ($) | Accumulated Deficit ($) | Total ($) |\n| :------------------------------------------------ | :------------ | :------------ | :----------------------------- | :---------------------- | :------------ |\n| Balance as of July 1, 2021 | 7,579,285 | 7,580 | 20,936,050 | (22,115,408) | (1,171,778) |\n| Common stock issued in IPO, net | 1,912,500 | 1,913 | 11,819,451 | - | 11,821,364 |\n| Common stock issued for convertible note conversion | 324,150 | 324 | 1,605,852 | - | 1,606,176 |\n| Common stock issued for acquisition | 77,264 | 77 | 749,923 | - | 750,000 |\n| Common stock issued for legacy acquisition obligation | 375,000 | 375 | 749,625 | - | 750,000 |\n| Stock option-based compensation expense | - | - | 536,524 | - | 536,524 |\n| Net loss | - | - | - | (1,656,761) | (1,656,761) |\n| Balance as of September 30, 2021 | 10,291,638 | 10,292 | 36,595,898 | (23,772,169) | 12,834,021 | - The company's **total stockholders' equity** significantly increased from a deficit of **$(1.17) million** to a positive **$12.83 million**, primarily driven by **$11.82 million** in **net proceeds** from the Initial Public Offering (**IPO**)[17](index=17&type=chunk) - Issuances of **common stock** for **convertible note conversion** (**$1.61 million**), **asset acquisition** (**$0.75 million**), and legacy acquisition obligation (**$0.75 million**) also contributed to the increase in **additional paid-in capital**[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes cash flows from operating, investing, and financing activities, highlighting the significant cash injection from the IPO Cash Flow Summary | Cash Flow Activity (Three Months Ended Sep 30) | 2021 | 2020 |\n| :--------------------------------------------- | :------------ | :------------ |\n| Net cash used in operating activities | $(1,053,136) | $(160,542) |\n| Net cash used in investing activities | $(18,225) | $(15,004) |\n| Net cash provided by financing activities | $11,867,064 | $10,820 |\n| Net change in cash and cash equivalents | $10,795,703 | $(164,726) |\n| Cash and cash equivalents, end of period | $12,567,632 | $870,120 | - **Net cash used in operating activities** increased significantly to **$(1.05) million** in Q3 2021 from **$(0.16) million** in Q3 2020, primarily due to increased **net loss** and one-time **public company expenses**[22](index=22&type=chunk)[174](index=174&type=chunk) - **Net cash provided by financing activities** surged to **$11.87 million** in Q3 2021, mainly from the **net proceeds** of the Initial Public Offering (**IPO**)[22](index=22&type=chunk)[176](index=176&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section details the company's business, accounting policies, and significant financial events impacting the consolidated statements [NOTE 1. DESCRIPTION OF BUSINESS](index=9&type=section&id=NOTE%201.%20DESCRIPTION%20OF%20BUSINESS) The Glimpse Group, Inc. is a Virtual (VR) and Augmented (AR) Reality company, operating a diversified portfolio of ten wholly-owned VR/AR software and services subsidiaries. The company completed an IPO on Nasdaq in July 2021 and a subsequent securities purchase agreement in November 2021 - The Glimpse Group operates as a **VR/AR platform company** with ten wholly-owned operating subsidiaries, simplifying challenges in the emerging **VR/AR** industry[25](index=25&type=chunk)[27](index=27&type=chunk) - The company completed an Initial Public Offering (**IPO**) on the **Nasdaq** Capital Market Exchange on July 1, 2021, under the ticker VRAR[28](index=28&type=chunk) - A **Securities Purchase Agreement (SPA)** for the sale of additional **common stock** to institutional investors was completed on November 2, 2021[28](index=28&type=chunk) [NOTE 2. LIQUIDITY AND CAPITAL RESOURCES](index=9&type=section&id=NOTE%202.%20LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company incurred a net loss of $1.66 million for the three months ended September 30, 2021, but significantly improved its cash position through an IPO in July 2021 ($11.8 million net proceeds) and a subsequent SPA in November 2021 ($13.6 million net proceeds), bringing total cash to approximately $26 million. Management believes current cash is sufficient for at least 12 months, but anticipates continued net losses due to growth investments Net Loss by Period | Metric (Three Months Ended Sep 30) | 2021 | 2020 |\n| :--------------------------------- | :------------ | :------------ |\n| Net Loss | $(1.66) million | $(1.28) million | - The company raised approximately **$11.8 million** in **net proceeds** from its **IPO** on July 1, 2021[30](index=30&type=chunk) - A subsequent **Securities Purchase Agreement (SPA)** on November 2, 2021, generated approximately **$13.6 million** in **net proceeds**, bringing the total **cash and cash equivalents** to approximately **$26 million**[30](index=30&type=chunk)[31](index=31&type=chunk) - Management expects to continue generating **net losses** in the foreseeable future due to investments in business growth but believes current **cash balances** are sufficient for at least **twelve months**[31](index=31&type=chunk) [NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=10&type=section&id=NOTE%203.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section outlines the significant accounting policies, including the basis of presentation for unaudited interim financial statements, principles of consolidation, use of accounting estimates, and specific policies for cash, accounts receivable, equipment, business combinations, intangibles, goodwill, fair value of financial instruments, and revenue recognition. It also details the disaggregation and timing of revenue recognition, employee stock-based compensation, R&D costs, income taxes, and earnings per share - **Revenue** is disaggregated into two main categories: **Software Services** (**VR/AR** projects, solutions, and consulting) and **Software License & SaaS** (**VR/AR** software licenses or subscriptions)[57](index=57&type=chunk) Revenue Recognition Timing | Revenue Timing (Three Months Ended Sep 30) | 2021 | 2020 |\n| :----------------------------------------- | :------------ | :------------ |\n| Products transferred at a point in time | $955,751 | $193,175 |\n| Products and services transferred over time| $66,782 | $66,752 |\n| Total Revenue | $1,022,533 | $259,927 | - Two customers accounted for approximately **70%** of **total gross revenues** for the three months ended September 30, 2021, indicating significant **customer concentration**[42](index=42&type=chunk) - **Research and development costs** are expensed as incurred due to the emerging industry and uncertain market environment[72](index=72&type=chunk) [NOTE 4. ASSET ACQUISITION](index=15&type=section&id=NOTE%204.%20ASSET%20ACQUISTION) In August 2021, the company acquired certain assets from Augmented Reality Investments Pty Ltd, an Australian AR software and services provider, for $0.75 million in common stock. This acquisition aims to facilitate the company's expansion into the Architecture, Engineering, and Construction (AEC) market segments, resulting in the recognition of intangible assets (customer relationships, technology) and goodwill - In August 2021, the company acquired assets from **Augmented Reality Investments Pty Ltd**, an Australia-based AR software and services company, for **$0.75 million**, paid in **77,264 shares** of **common stock**[80](index=80&type=chunk)[83](index=83&type=chunk) - The acquisition included **customer relationships** (**$250,000**), **technology** (**$250,000**), and **goodwill** (**$250,000**), with **intangible assets** amortized over 3 years[83](index=83&type=chunk) - The acquisition is expected to facilitate the company's endeavors in the Architecture, Engineering and Construction (**AEC market segments**)[80](index=80&type=chunk) [NOTE 5. CONTINGENT ACQUISITION LIABILITY](index=16&type=section&id=NOTE%205.%20CONTINGENT%20ACQUISITION%20LIABILITY) Contingent acquisition considerations for Kabaq 3D Technologies, LLC and KreatAR, LLC were triggered in August 2021 due to the company's Nasdaq listing and stock trading volume thresholds. The $750,000 obligation for Kabaq was satisfied by issuing 375,000 shares of common stock, while a $500,000 obligation for KreatAR was also incurred - A **$750,000** **contingent acquisition liability** for **Kabaq 3D Technologies, LLC** was triggered in August 2021 and satisfied by issuing **375,000 shares** of **common stock**[85](index=85&type=chunk) - A **$500,000** **contingent acquisition liability** for **KreatAR, LLC** was also triggered in August 2021[86](index=86&type=chunk) [NOTE 6. DEBT](index=16&type=section&id=NOTE%206.%20DEBT) The company's Convertible Promissory Notes 1 ($1.33 million issued in 2019) and Notes 2 ($1.48 million issued in 2021) were fully converted into common stock upon the IPO in July 2021. This resulted in the issuance of 324,150 shares of common stock and a total loss on conversion of approximately $280,000 - **Convertible Promissory Notes 1** (issued in Dec 2019) and **Notes 2** (issued in Mar 2021) were fully converted into **common stock** upon the company's **IPO**[87](index=87&type=chunk)[91](index=91&type=chunk)[93](index=93&type=chunk)[95](index=95&type=chunk) - The conversion of these notes resulted in the issuance of **324,150 shares** of **common stock**[99](index=99&type=chunk) - A total loss on conversion of approximately **$280,000** was recorded at the time of the **IPO**[92](index=92&type=chunk)[96](index=96&type=chunk)[99](index=99&type=chunk) [NOTE 7. EQUITY](index=17&type=section&id=NOTE%207.%20EQUITY) The company completed its IPO on Nasdaq on July 1, 2021, selling 1.91 million shares at $7.00 per share, generating $11.82 million in net proceeds. In connection with the IPO, convertible notes were converted into 324,150 shares, and an underwriter warrant was issued. Additionally, common stock was issued for an asset acquisition, a legacy acquisition obligation, vendor compensation, and option exercises. Stock option-based compensation expense for the quarter was $653,615 - The company completed an **IPO** on July 1, 2021, selling approximately **1.91 million shares** of **common stock** at **$7.00 per share**, resulting in **$11.82 million** in **net proceeds**[97](index=97&type=chunk)[101](index=101&type=chunk) - An **underwriter warrant** to purchase **87,500 shares** at **$7.00 per share** was issued, valued at approximately **$520,000**[98](index=98&type=chunk) Common Stock Issuances | Common Stock Issuance (Three Months Ended Sep 30, 2021) | Shares | Value ($) |\n| :------------------------------------------------------ | :------------ | :------------ |\n| IPO (net) | 1,912,500 | 11,821,364 |\n| Convertible note conversion | 324,150 | 1,606,176 |\n| Asset acquisition | 77,264 | 750,000 |\n| Legacy acquisition obligation | 375,000 | 750,000 |\n| Vendors for compensation | 6,045 | 65,395 |\n| Exercise of options | 17,394 | 45,700 | Stock Option-Based Compensation Expense | Stock Option-Based Expense (Three Months Ended Sep 30) | 2021 | 2020 |\n| :----------------------------------------------------- | :------------ | :------------ |\n| Total Stock option-based expense | $653,615 | $689,813 | [NOTE 8. EARNINGS PER SHARE](index=20&type=section&id=NOTE%208.%20EARNINGS%20PER%20SHARE) The basic and diluted net loss per share for the three months ended September 30, 2021, was $(0.17), an improvement from $(0.18) in the prior year. Potentially dilutive securities, including stock options and warrants, were anti-dilutive and thus excluded from the diluted EPS calculation Earnings Per Share Metrics | EPS Metric (Three Months Ended Sep 30) | 2021 | 2020 |\n| :------------------------------------- | :------ | :------ |\n| Net loss | $(1,656,761) | $(1,277,324) |\n| Weighted-average common shares outstanding | 9,967,821 | 7,039,928 |\n| Basic and diluted net loss per share | $(0.17) | $(0.18) | Anti-Dilutive Securities Summary | Anti-Dilutive Securities (as of Sep 30) | 2021 | 2020 |\n| :-------------------------------------- | :------------ | :------------ |\n| Stock Options | 4,360,344 | 4,184,108 |\n| Warrants | 87,500 | - |\n| Convertible Notes | - | 296,111 |\n| Total | 4,447,844 | 4,480,219 | [NOTE 9. PROVISION FOR INCOME TAXES](index=21&type=section&id=NOTE%209.%20PROVISION%20FOR%20INCOME%20TAXES) The company reported no current or deferred income tax provision for the three months ended September 30, 2021 and 2020. It maintains a full valuation allowance against its deferred tax assets, which primarily consist of net operating loss (NOL) carryforwards totaling approximately $12.35 million, due to uncertainty regarding their future realization - **No current or deferred income tax provision** was recorded for the three months ended September 30, 2021 and 2020[119](index=119&type=chunk) Deferred Tax Assets and Valuation Allowance | Deferred Tax Assets (as of Sep 30) | 2021 | 2020 |\n| :--------------------------------- | :------------ | :------------ |\n| Net-operating loss carryforward | $4,269,910 | $2,961,194 |\n| Stock-based compensation | $586,042 | $394,742 |\n| Total Deferred Tax Assets | $4,855,952 | $3,355,936 |\n| Valuation allowance | $(4,855,952) | $(3,355,936) |\n| Deferred Tax Asset, Net | $- | $- | - The company has potential utilizable aggregate gross **net operating loss carryforwards (NOLs)** of approximately **$12.35 million**[120](index=120&type=chunk) - A **full valuation allowance** is maintained on **deferred tax assets** due to uncertainty regarding their future utilization[122](index=122&type=chunk) [NOTE 10. COMMITMENTS AND CONTINGENCIES](index=22&type=section&id=NOTE%2010.%20COMMITMENTS%20AND%20CONTINGENCIES) The company has an office lease expiring December 31, 2022, with approximately $384,000 remaining due. It also has a contractual obligation to distribute up to 10% of net proceeds from any subsidiary divestiture or sale to the divested company's senior management. The COVID-19 pandemic has caused prolonged sales cycles, but the company does not expect its impact to worsen given current revenue growth and cash balance - The company has an **operating lease** for office space expiring on **December 31, 2022**, with approximately **$384,000** remaining due[127](index=127&type=chunk) - **Contractually obligated** to distribute up to **10%** of **net proceeds** from any **subsidiary divestiture or sale** to the divested company's senior management team[128](index=128&type=chunk) - The **COVID-19 pandemic** has caused **prolonged sales cycles**, but the company does not expect its impact to worsen given current **revenue growth** and **cash balance**[129](index=129&type=chunk)[131](index=131&type=chunk) [NOTE 11. SUBSEQUENT EVENTS](index=23&type=section&id=NOTE%2011.%20SUBSEQUENT%20EVENTS) Subsequent to September 30, 2021, the company completed an asset acquisition of XR Terra, Inc. in October 2021 for $0.60 million (50% cash, 50% common stock) to enhance its VR/AR programming teaching platforms. In November 2021, it also entered into a Securities Purchase Agreement (SPA), selling 1.50 million shares of common stock and warrants for $15.0 million, generating $13.6 million in net proceeds - In October 2021, the company completed an **asset acquisition** of **XR Terra, Inc.**, a developer of **VR/AR programming teaching platforms**, for **$0.60 million** (**50% cash, 50% common stock**)[133](index=133&type=chunk)[134](index=134&type=chunk) - In November 2021, the company completed a **Securities Purchase Agreement (SPA)**, selling **1.50 million shares** of **common stock** and **warrants** to purchase **0.75 million shares** for **$15.0 million**, yielding approximately **$13.6 million** in **net proceeds**[135](index=135&type=chunk)[136](index=136&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=24&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the company's financial performance, condition, liquidity, and cash flows for the three months ended September 30, 2021, compared to the prior year. It highlights significant revenue growth, increased operating expenses, and the impact of recent financing activities, including the IPO and subsequent private placement, on the company's capital resources [Overview](index=24&type=section&id=Overview) This overview introduces The Glimpse Group as a VR/AR platform company, detailing its recent IPO and strategic asset acquisitions - The Glimpse Group is a **Virtual (VR)** and **Augmented (AR) Reality platform company**, offering diversified enterprise-focused software, services, and solutions[140](index=140&type=chunk) - The company completed an **IPO** on **Nasdaq** on July 1, 2021, raising **$11.82 million** in **net proceeds**[142](index=142&type=chunk) - Significant **asset acquisitions** occurred in August 2021 (**Augmented Reality Investments Pty Ltd**) and October 2021 (**XR Terra, Inc.**), expanding capabilities in **AEC** and **VR/AR programming**[143](index=143&type=chunk)[144](index=144&type=chunk) - On November 2, 2021, the company sold **1.50 million shares** and **warrants** in a **private placement**, generating approximately **$13.6 million** in **gross proceeds**[145](index=145&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) This section analyzes financial performance, highlighting revenue growth, gross profit, and the impact of operating expenses on net loss Key Financial Metrics | Metric (Three Months Ended Sep 30) | 2021 ($M) | 2020 ($M) | Change ($M) | Change (%) |\n| :--------------------------------- | :-------- | :-------- | :---------- | :--------- |\n| Revenue | 1.02 | 0.26 | 0.76 | 292% |\n| Cost of Goods Sold | 0.15 | 0.14 | 0.01 | 7% |\n| Gross Profit | 0.87 | 0.12 | 0.75 | 625% |\n| Total Operating Expenses | 2.27 | 1.36 | 0.91 | 67% |\n| Net Loss | (1.66) | (1.28) | (0.38) | 30% | Revenue Breakdown by Category | Revenue Category (Three Months Ended Sep 30) | 2021 ($M) | 2020 ($M) | Change ($M) | Change (%) |\n| :------------------------------------------- | :-------- | :-------- | :---------- | :--------- |\n| Software Services | 0.80 | 0.19 | 0.61 | 321% |\n| Software License/Software as a Service | 0.22 | 0.07 | 0.15 | 214% |\n| Total Revenue | 1.02 | 0.26 | 0.76 | 292% | - **Gross profit margin** increased from **46%** in Q3 2020 to **85%** in Q3 2021, driven by **higher-margin non-project revenue** and improved **cost management**[156](index=156&type=chunk) Operating Expenses Breakdown | Operating Expense (Three Months Ended Sep 30) | 2021 ($M) | 2020 ($M) | Change ($M) | Change (%) |\n| :-------------------------------------------- | :-------- | :-------- | :---------- | :--------- |\n| Research and Development | 0.99 | 0.74 | 0.25 | 34% |\n| General and Administrative | 0.78 | 0.34 | 0.44 | 129% |\n| Sales and Marketing | 0.50 | 0.29 | 0.21 | 72% | - Other income and expense, net, shifted to a **$0.26 million expense** in Q3 2021 from a **$0.04 million expense** in Q3 2020, primarily due to a **$0.28 million non-cash loss on convertible note conversion**[165](index=165&type=chunk) [Non-GAAP Financial Measures](index=29&type=section&id=Non-GAAP%20Financial%20Measures) This section presents Adjusted EBITDA as a non-GAAP measure, showing an improvement in the adjusted loss for the period Adjusted EBITDA Reconciliation | Adjusted EBITDA (Three Months Ended Sep 30) | 2021 ($M) | 2020 ($M) |\n| :------------------------------------------ | :-------- | :-------- |\n| Net loss | (1.66) | (1.28) |\n| EBITDA (loss) | (1.63) | (1.22) |\n| Stock based compensation expenses | 0.72 | 0.70 |\n| Stock based financing related expenses | 0.28 | - |\n| Public company expenses | 0.18 | - |\n| Acquisition related expenses | 0.01 | - |\n| Adjusted EBITDA (loss) | (0.44) | (0.52) | - **Adjusted EBITDA loss improved by $0.08 million**, or approximately **15%**, for the three months ended September 30, 2021, compared to the prior period[172](index=172&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, cash flow, and capital-raising efforts, highlighting the IPO's impact on financial stability Cash Flow Summary (MD&A) | Cash Flow Activity (Three Months Ended Sep 30) | 2021 ($M) | 2020 ($M) | Change ($M) | Change (%) |\n| :--------------------------------------------- | :-------- | :-------- | :---------- | :--------- |\n| Net cash used in operating activities | (1.05) | (0.16) | (0.89) | -556% |\n| Net cash provided by financing activities | 11.87 | 0.01 | 11.86 | 118600% |\n| Cash and cash equivalents, end of period | 12.58 | 0.87 | 11.71 | 1346% | - **Net cash used in operating activities** increased by **$0.89 million**, primarily due to a **higher net loss** and **one-time cash payments** related to becoming a **public company**[174](index=174&type=chunk) - As of September 30, 2021, the company had **$12.6 million** in **cash and cash equivalents**, which increased to **over $25.0 million** by **November 15, 2021**, following a **$13.6 million** **net cash** raise from a subsequent securities sale[177](index=177&type=chunk) - The company believes it is **sufficiently funded** to meet **operational plans** and **future obligations** beyond the next **12 months**[179](index=179&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=31&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section states that quantitative and qualitative disclosures about market risk are not required for smaller reporting companies [ITEM 4. CONTROLS AND PROCEDURES](index=31&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management, with the participation of the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures and internal control over financial reporting as of September 30, 2021, concluding that both were effective. No material changes in internal control over financial reporting occurred during the period - The company's **disclosure controls and procedures** were evaluated and deemed **effective** as of September 30, 2021[184](index=184&type=chunk) - The company's **internal control over financial reporting** was evaluated and concluded to be **effective** as of September 30, 2021[187](index=187&type=chunk) - **No material changes in internal control over financial reporting** occurred during the period ended September 30, 2021[188](index=188&type=chunk) [PART II - OTHER INFORMATION](index=33&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section covers other essential information including legal proceedings, risk factors, equity sales, and required exhibits [ITEM 1. LEGAL PROCEEDINGS](index=33&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company reported no legal proceedings [ITEM 1A. RISK FACTORS](index=33&type=section&id=ITEM%201A.%20RISK%20FACTORS) There have been no material changes to the risk factors previously described in the company's Annual Report on Form 10-K for the year ended June 30, 2021 [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=33&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) During the three months ended September 30, 2021, the company issued 324,150 shares of common stock upon conversion of $1.60 million in convertible promissory notes and 6,045 shares for consulting services. Subsequent to this period, an additional 11,847 shares were issued for consulting services and employee compensation. The net proceeds of $11.82 million from the IPO are being used as described in the Registration Statement, with no material change in planned use - During the three months ended September 30, 2021, the company issued **324,150 shares** of **common stock** upon conversion of **$1.60 million** in outstanding **convertible promissory notes**[192](index=192&type=chunk) - An aggregate of **6,045 shares** of **common stock** were issued for **consulting services** during the three months ended September 30, 2021, with an additional **11,847 shares** issued subsequently[192](index=192&type=chunk)[193](index=193&type=chunk) - The **$11.82 million** **net cash proceeds** from the **IPO** are being used as described in the **Registration Statement**, with **no material change** in the planned use[194](index=194&type=chunk) [ITEM 6. EXHIBITS](index=34&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed as part of this Quarterly Report on Form 10-Q, including certifications from the Principal Executive Officer and Principal Financial Officer, and Inline XBRL documents [SIGNATURES](index=35&type=section&id=SIGNATURES) The report is duly signed on November 15, 2021, by Lyron Bentovim, Chief Executive Officer and President, and Maydan Rothblum, Chief Financial Officer

The Glimpse Group, Inc. (NASDAQ:VRAR) Q4 2021 Results Conference Call September 28, 2021 4:30 PM ET Company Participants Lyron Bentovim - President and CEO Maydan Rothblum - CFO and COO Mark Schwalenberg - IR Conference Call Participants Kevin Dede - H.C. Wainright Christopher Grosvenor - New York Life Operator Greetings, and welcome to The Glimpse Group Fiscal Year 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the ...

Company Overview - The Glimpse Group, Inc. operates a diversified portfolio of ten wholly-owned VR and AR subsidiary companies, focusing on enterprise solutions [173]. - The company employs approximately 65 full-time employees and contractors, primarily in software development and engineering roles [178]. Financial Performance - The company reported continued revenue growth for the periods ended June 30, 2021, and June 30, 2020, despite challenges posed by the COVID-19 pandemic [180]. - Total revenue for the year ended June 30, 2021 was approximately $3.42 million, an increase of approximately 75% compared to $1.95 million for the year ended June 30, 2020 [205]. - Software Services revenue was approximately $3.08 million, representing a 73% increase from approximately $1.78 million in the previous year [207]. - Software License revenue increased by 100% to approximately $0.34 million from approximately $0.17 million year-over-year [208]. - Non-project revenue grew approximately 239% to $1.73 million, accounting for 50.6% of total revenues compared to 26.1% in the prior year [209]. - Gross profit for the year was approximately $1.96 million, with a gross profit margin of approximately 57%, up from 42% in the previous year [211]. - Operating expenses increased by approximately 16% to $6.67 million, primarily due to increases in research and development and general administrative expenses [213]. - Research and development expenses rose approximately 31% to $3.18 million, with expectations for continued increases as software products are developed [216]. - Net loss for the year was approximately $6.09 million, a decline of approximately 22% compared to a net loss of $4.99 million in the previous year [222]. Cash Flow and Financing - Net cash used in operating activities improved by approximately 40% to $1.21 million from $2.02 million year-over-year [230]. - Cash and cash equivalents at the end of the period increased by 70% to $1.77 million compared to $1.04 million at the beginning of the year [229]. - Net cash used in investing activities for the year ended June 30, 2021 was approximately $28,000, a decrease from approximately $32,600 for the year ended June 30, 2020 [231]. - Net cash provided by financing activities for the year ended June 30, 2021 was approximately $1.97 million, which included $1.475 million from the issuance of unsecured Convertible Promissory Notes and a $0.624 million Paycheck Protection Program loan [232]. - The Company's cash position post-IPO was approximately $13.5 million, with contracted revenue backlog exceeding $1.5 million [239]. - Estimated cash operating expense requirements over the next 12 months for existing operations is approximately $6.0 million, with over 80% of costs being variable [242]. - The Company plans to utilize both equity and cash for potential acquisitions in its future growth strategy [243]. - The Company received a PPP2 loan of approximately $0.624 million, expected to be fully forgiven in 2021 or early 2022 [236]. - The Company has no outstanding debt, convertible notes, or preferred equity, aside from the PPP2 loan [238]. Strategic Initiatives - The company aims to expand its portfolio through organic growth and acquisitions, targeting various industry verticals including healthcare and education [176][177]. - Management believes that its Nasdaq listing significantly increases its ability to access capital going forward [241]. - The Company is classified as an "emerging growth company" and intends to take advantage of various reporting exemptions [244]. Impact of COVID-19 - The company received approximately $1.171 million in Paycheck Protection Program loans to support operations during the pandemic [181]. - The company has not had to reduce headcount due to the pandemic, maintaining its workforce throughout the crisis [181]. - The adoption of ASC 606 for revenue recognition did not materially impact reported sales or net earnings [187].

Company Overview - The Glimpse Group operates 10 VR/AR subsidiary companies focused on different industry verticals[8] - The company anticipates revenues exceeding $3.25 million in FY '21, demonstrating an 84% CAGR over the past 3 years[8] - The Glimpse Group raised $23 million to date, primarily through common shares[8] Market and Strategy - The VR/AR industry is projected to grow to over $35 billion by 2023, with a 49% projected CAGR in 2021-23[16] - The company's strategy is based on three core tenets: ecosystem, economies of scale, and diversification[27] - The Glimpse Group aims to leverage its position to add VR/AR companies accretively[25] Financial Highlights - The company has a strong cash position with $13 million in cash[49] - The company has $1.8 million in contracted backlog[49] - The company's IPO on July 1, 2021, generated gross proceeds of approximately $14.1 million[51]