The Glimpse (VRAR) - 2022 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION 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) 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 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] - Total stockholders' equity shifted from a deficit of $(1.17) million at June 30, 2021, to a positive $12.83 million at September 30, 2021, reflecting the impact of the IPO[12] Condensed Consolidated Statements of Operations This statement details the company's revenues, expenses, and net loss, highlighting revenue growth and increased operating costs Statements of Operations Summary | Metric (Three Months Ended Sep 30) | 2021 | 2020 | Change ($) | 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) | $0.01 | -5.6% | - Total revenue increased by 293% year-over-year, driven by revenue growth in both software services and software license/SaaS[14] - Despite significant revenue growth, net loss increased by 29.7% due to a substantial rise in operating expenses and a non-cash loss on conversion of convertible notes[14] Condensed Consolidated Statements of Stockholders' Equity (Deficit) This statement tracks equity changes, primarily reflecting the substantial increase from the IPO and other stock issuances Equity Activity Summary | Equity Activity (Three Months Ended Sep 30, 2021) | Shares | Amount ($) | 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] - 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] Condensed Consolidated Statements of Cash Flows 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][174] - 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][176] Notes to Condensed Consolidated Financial Statements This section details the company's business, accounting policies, and significant financial events impacting the consolidated statements NOTE 1. DESCRIPTION OF BUSINESS 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][27] - The company completed an Initial Public Offering (IPO) on the Nasdaq Capital Market Exchange on July 1, 2021, under the ticker VRAR[28] - A Securities Purchase Agreement (SPA) for the sale of additional common stock to institutional investors was completed on November 2, 2021[28] NOTE 2. LIQUIDITY AND CAPITAL RESOURCES 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] - 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][31] - 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] NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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] 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] - Research and development costs are expensed as incurred due to the emerging industry and uncertain market environment[72] NOTE 4. ASSET ACQUISITION 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][83] - The acquisition included customer relationships ($250,000), technology ($250,000), and goodwill ($250,000), with intangible assets amortized over 3 years[83] - The acquisition is expected to facilitate the company's endeavors in the Architecture, Engineering and Construction (AEC market segments)[80] NOTE 5. CONTINGENT ACQUISITION LIABILITY 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] - A $500,000 contingent acquisition liability for KreatAR, LLC was also triggered in August 2021[86] NOTE 6. DEBT 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][91][93][95] - The conversion of these notes resulted in the issuance of 324,150 shares of common stock[99] - A total loss on conversion of approximately $280,000 was recorded at the time of the IPO[92][96][99] NOTE 7. EQUITY 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][101] - An underwriter warrant to purchase 87,500 shares at $7.00 per share was issued, valued at approximately $520,000[98] Common Stock Issuances | Common Stock Issuance (Three Months Ended Sep 30, 2021) | Shares | Value ($) |\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 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 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] 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] - A full valuation allowance is maintained on deferred tax assets due to uncertainty regarding their future utilization[122] NOTE 10. COMMITMENTS AND CONTINGENCIES 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] - 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] - 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][131] NOTE 11. SUBSEQUENT EVENTS 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][134] - 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][136] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 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] - The company completed an IPO on Nasdaq on July 1, 2021, raising $11.82 million in net proceeds[142] - 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][144] - On November 2, 2021, the company sold 1.50 million shares and warrants in a private placement, generating approximately $13.6 million in gross proceeds[145] Results of Operations This section analyzes financial performance, highlighting revenue growth, gross profit, and the impact of operating expenses on net loss Key Financial Metrics | Metric (Three Months Ended Sep 30) | 2021 ($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 ($M) | Change (%) |\n| :------------------------------------------- | :-------- | :-------- | :---------- | :--------- |\n| Software Services | 0.80 | 0.19 | 0.61 | 321% |\n| Software License/Software as a Service | 0.22 | 0.07 | 0.15 | 214% |\n| Total Revenue | 1.02 | 0.26 | 0.76 | 292% | - Gross profit margin increased from 46% in Q3 2020 to 85% in Q3 2021, driven by higher-margin non-project revenue and improved cost management[156] Operating Expenses Breakdown | Operating Expense (Three Months Ended Sep 30) | 2021 ($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 $0.28 million non-cash loss on convertible note conversion[165] Non-GAAP Financial Measures This section presents Adjusted EBITDA as a non-GAAP measure, showing an improvement in the adjusted loss for the period Adjusted EBITDA Reconciliation | Adjusted EBITDA (Three Months Ended Sep 30) | 2021 ($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 $0.08 million, or approximately 15%, for the three months ended September 30, 2021, compared to the prior period[172] Liquidity and Capital Resources This section discusses the company's cash position, cash flow, and capital-raising efforts, highlighting the IPO's impact on financial stability Cash Flow Summary (MD&A) | Cash Flow Activity (Three Months Ended Sep 30) | 2021 ($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] - 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] - The company believes it is sufficiently funded to meet operational plans and future obligations beyond the next 12 months[179] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section states that quantitative and qualitative disclosures about market risk are not required for smaller reporting companies ITEM 4. CONTROLS AND PROCEDURES 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] - The company's internal control over financial reporting was evaluated and concluded to be effective as of September 30, 2021[187] - No material changes in internal control over financial reporting occurred during the period ended September 30, 2021[188] PART II - OTHER INFORMATION This section covers other essential information including legal proceedings, risk factors, equity sales, and required exhibits ITEM 1. LEGAL PROCEEDINGS The company reported no legal proceedings ITEM 1A. RISK FACTORS 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 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] - 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][193] - 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] ITEM 6. EXHIBITS 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 The report is duly signed on November 15, 2021, by Lyron Bentovim, Chief Executive Officer and President, and Maydan Rothblum, Chief Financial Officer