THE GLIMPSE GROUP, INC. The following discussion and analysis summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and cash flows of our Company as of and for the periods presented below. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto, and related disclosures, as of and for the year endedJune 30, 2022 , which are included in the Form 10-K filed with theSecurities and Exchange Commission (the "SEC") onSeptember 28, 2022 . Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to "we," "us," "our" or "the Company," refer toThe Glimpse Group, Inc. , aNevada corporation and its subsidiaries. Forward-Looking Statements
The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), which are subject to the "safe harbor" created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words "anticipates," "believes," "estimates," "expects," "intends," "may," "plans," "projects," "will," "would" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, "Risk Factors" in this Quarterly Report on Form 10-Q and in our other filings with theSEC . The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements. Overview We are a Virtual ("VR") and Augmented ("AR") Reality platform company, comprised of a diversified group of wholly-owned and operated VR and AR companies, providing enterprise-focused software, services and solutions. We believe that we offer significant exposure to the rapidly growing and potentially transformative VR and AR markets, while mitigating downside risk via our diversified model and ecosystem. We were incorporated asThe Glimpse Group, Inc. in theState of Nevada , onJune 15, 2016 and are headquartered inNew York, New York . We currently own and operate numerous subsidiary companies ("Subsidiary Companies", "Subsidiaries") operating under the following business names as represented in the organizational chart below: [[Image Removed]] 29 Significant Transactions
None since last filed 10Q.
Financial Highlights for the three and six months ended
Results of Operations
The following table sets forth our results of operations for the three and six
months ended
Summary P&L
For the Three Months Ended For the Six Months Ended
December 31, Change December 31, Change
2022 2021 $ % 2022 2021 $ %
(in millions) (in millions)
Revenue $ 2.95 $ 1.69 $ 1.26 75 % $ 6.90 $ 2.71 $ 4.19 155 %
Cost of Goods Sold 0.88 0.21 0.67 319 % 2.09 0.36 1.73 481 %
Gross Profit 2.07 1.48 0.59 40 % 4.81 2.35 2.46 105 %
Total Operating
Expenses 0.84 3.05 (2.21 ) -72 % 9.01 5.32 3.69 69 %
Income (Loss) from
Operations before
Other Income (Expense) 1.23 (1.57 ) 2.80 178 % (4.20 ) (2.97 ) (1.23 ) 41 %
Other Income
(Expense), net 0.08 - 0.08 N/A 0.13 (0.26 ) 0.39 150 %
Net Income (Loss) $ 1.31 $ (1.57 ) $ 2.88 183 % $ (4.07 ) $ (3.23 ) $ (0.84 ) 26 %
30
Revenue
For the Three Months Ended For the Six Months Ended
December 31, Change December 31, Change
2022 2021 $ % 2022 2021 $ %
(in millions) (in millions)
Software Services $ 2.89 $ 1.61 $ 1.28 80 % $ 6.75 $ 2.42 $ 4.33 179 %
Software
License/Software as a
Service 0.06 0.08 (0.02 ) -25 % 0.15 0.29 (0.14 ) -48 %
Total Revenue $ 2.95 $ 1.69 $ 1.26 75 % $ 6.90 $ 2.71 $ 4.19 155 %
Total revenue for the three months ended December 31, 2022 was approximately
$2.95 million compared to approximately $1.69 million for the three months ended
December 31, 2021 , an increase of 75%. Total revenue for the six months ended
December 31, 2022 was approximately $6.90 million compared to approximately
$2.71 million for the six months ended December 31, 2021 , an increase of 155%.
The increase for both periods reflect the addition of several subsidiary
companies after December 31, 2021 and new customers.
We break out our revenues into two main categories - Software Services and Software License.
? Software Services revenues are primarily comprised of VR/AR projects, services
related to our software licenses and consulting retainers.
? Software License revenues are comprised of the sale of our internally
developed VR/AR software as licenses or as software-as-a-service ("SaaS").
For the three months endedDecember 31, 2022 , Software Services revenue was approximately$2.89 million compared to approximately$1.61 million for the three months endedDecember 31, 2021 , an increase of approximately 80%. For the six months endedDecember 31, 2022 , Software Services revenue was approximately$6.75 million compared to approximately$2.42 million for the six months endedDecember 31, 2021 , an increase of approximately 179%. The increase for both periods reflect the addition of several subsidiary companies after December
31, 2021 and new customers.
For the three months endedDecember 31, 2022 , Software License revenue was approximately$0.06 million compared to approximately$0.08 million for the three months endedDecember 31, 2021 , consistent period over period. For the six months endedDecember 31, 2022 , Software License revenue was approximately$0.15 million compared to approximately$0.29 million for the six months endedDecember 31, 2021 , reflecting a long term license agreement in the 2021 period. As the VR and AR industries continue to mature, we expect our Software License revenue to continue to grow on an absolute basis and as an overall percentage of total revenue. For the three months endedDecember 31, 2022 , non-project revenue (i.e.,VR/AR Software and Services revenue only), was approximately$0.93 million compared to approximately$0.85 million for the three months endedDecember 31, 2021 , an increase of approximately 9%, reflecting organic growth and the addition of new customers. For the three months endedDecember 31, 2022 , non-project revenue accounted for approximately 32% of total revenues compared to approximately 50% for the three months endedDecember 31, 2021 . For the six months endedDecember 31, 2022 , non-project revenue (i.e.,VR/AR Software and Services revenue only), was approximately$2.21 million compared to approximately$1.70 million for the six months endedDecember 31, 2021 , an increase of approximately 30%, reflecting organic growth and the addition of new customers. For the six months endedDecember 31, 2022 , non-project revenue accounted for approximately 32% of total revenues compared to approximately 63% for the six months endedDecember 31, 2021 . The decrease in both periods reflects the additions ofBrightline Interactive ("BLI") and Sector 5 Digital ("S5D"), which primarily generate project revenue, representing an increased portion of total revenue. Customer Concentration Two customers accounted for approximately 55% (29% and 26%, respectively) of the Company's total gross revenues during the three months endedDecember 31, 2022 . One of the same customers and a different customer accounted for approximately 75% (45% and 30%, respectively) of the Company's total gross revenues during the three months endedDecember 31, 2021 . Two customers accounted for approximately 56% (29% and 27%, respectively) of the Company's total gross revenues during the six months endedDecember 31, 2022 . One of the same customers and a different customer accounted for approximately 67% (49% and 18%, respectively) of the Company's total gross revenues during the six months endedDecember 31, 2021 . 31
We operate in an early stage industry, and customers are exploring various
options for AR and VR solutions and acting as early adopters. As such, there can
be a high degree of variance on our source of revenues while customers are
on-boarded and our software products and solutions are integrated, measured and
digested. A customer that may account for a higher percentage of revenue in one
period may not account for any revenue in subsequent periods. In some cases,
those customers could re-engage after they have evaluated our solutions and may
or may not be a source of future revenue. Recently, a significant percentage of
our revenues have come from two strategic customers. A reduction of revenue from
these strategic customers - which we do not currently anticipate - would have a
detrimental impact on the Company's revenues. The addition of BLI and S5D has
reduced the reliance on a single customer. In general, a customer that makes up
a significant portion of revenues in one period, often does not make up a
significant portion in other periods. Given this dynamic we expect this
variability in Customer Concentration to continue until such point in time when
our revenue has reached larger scale, and with a larger portion of our revenues
coming from Software Licenses/SaaS.
Gross Profit
For the Three Months Ended For the Six Months Ended
December 31, Change December 31, Change
2022 2021 $ % 2022 2021 $ %
(in millions) (in millions)
Revenue $ 2.95 $ 1.69 $ 1.26 75 %
0.88 0.21 0.67 319 % $ 2.09 0.36 1.73 481 %
Gross Profit 2.07 1.48 0.59 40 % 4.81 2.35 2.46 105 %
Gross Profit Margin 70 % 88 %
70 % 87 %
Gross profit was approximately 70% for the three months endedDecember 31, 2022 compared to approximately 88% for the three months endedDecember 31, 2021 . Gross profit was approximately 70% for the six months endedDecember 31, 2022 compared to approximately 87% for the six months endedDecember 31, 2021 . The decrease for both periods was driven by the addition of BLI and S5D lower margin project revenue. For the three months endedDecember 31, 2022 and 2021, internal staffing was approximately$0.50 million (57% of total cost of goods sold) and approximately$0.18 million (86% of total cost of goods sold), respectively. For the six months endedDecember 31, 2022 and 2021, internal staffing was approximately$1.25 million (60% of total cost of goods sold) and approximately$0.32 million (89% of total cost of goods sold), respectively. The decrease for both periods in internal staffing as a percentage of total cost of goods sold was due to the addition of BLI and S5D, which have a higher utilization of external sources. Operating Expenses For the Three Months Ended For the Six Months Ended December 31, Change December 31, Change 2022 2021 $ % 2022 2021 $ % (in millions) (in millions)
Research and development expenses$ 2.53 $ 1.19 $ 1.34 113 %$ 4.53 $ 2.18 $ 2.35 108 % General and administrative expenses 1.26 1.13 0.13 12 % 2.63 1.89 0.74 39 % Sales and marketing expenses 1.93 0.66 1.27 192 % 3.68 1.17 2.51 215 % Amortization of acquisition intangible assets 0.54 0.07 0.47 671 % 0.99 0.08 0.91 1138 % Change in fair value of acquisition contingent consideration (5.42 ) - (5.42 ) N/A (2.82 ) - (2.82 ) N/A Total Operating Expenses$ 0.84 $ 3.05 $ (2.21 ) -72 %$ 9.01 $ 5.32 $ 3.69 69 % Operating expenses for the three months endedDecember 31, 2022 were approximately$0.84 million compared to$3.05 million for the three months endedDecember 31, 2021 , a decrease of approximately 72%. The decrease is driven by a gain in the change in fair value of contingent consideration for the S5D and BLI acquisitions; offset by expenses related to the addition of several new subsidiaries (which includes headcount, amortization of intangibles and professional fees related to the acquisitions) and employee headcount additions to support growth. 32 Operating expenses for the six months endedDecember 31, 2022 were approximately$9.01 million compared to$5.32 million for the six months endedDecember 31, 2021 , an increase of approximately 69%. The increase is driven by expenses related to the addition of several new subsidiaries (which includes headcount, amortization of intangibles and professional fees related to the acquisitions) and employee headcount additions to support growth; offset by a gain in the change in fair value of contingent consideration for the S5D and BLI acquisitions. Research and Development Research and development expenses for the three months endedDecember 31, 2022 were approximately$2.53 million compared to$1.19 million for the three months endedDecember 31, 2021 , an increase of approximately 113%. Research and development expenses for the six months endedDecember 31, 2022 were approximately$4.53 million compared to$2.18 million for the six months endedDecember 31, 2021 , an increase of approximately 108%. For both periods, this reflects the addition of several new subsidiaries and headcount additions to support growth. Going forward, we expect research and development costs to continue to increase as we continue to develop and commercialize our software products. For the three months endedDecember 31, 2022 , non-cash stock option expenses relating to research and development included approximately$0.38 million of employee compensation expenses, comprising approximately 15% of total research and development expenses. For the three months endedDecember 31, 2021 , non-cash stock option expenses relating to research and development included approximately$0.26 million of employee compensation expenses, comprising approximately 22% of total research and development expenses. For the six months endedDecember 31, 2022 , non-cash stock option expenses relating to research and development included approximately$0.77 million of employee compensation expenses, comprising approximately 17% of total research and development expenses. For the six months endedDecember 31, 2021 , non-cash stock option expenses relating to research and development included approximately$0.61 million of employee compensation expenses, comprising approximately 28% of total research and development expenses. Over time, we expect non-cash stock options research and development expenses, as a percentage of the total related expenses, to continue to decrease as we utilize a larger portion of cash for compensation thereby minimizing dilution. General and Administrative
General and administrative expenses for the three months endedDecember 31, 2022 were approximately$1.26 million compared to$1.13 million for the three months endedDecember 31, 2021 , an increase of approximately 12%. General and administrative expenses for the six months endedDecember 31, 2022 were approximately$2.63 million compared to$1.89 million for the six months endedDecember 31, 2021 , an increase of approximately 39%. The increase for both periods primarily reflects expenses related to the addition of several new subsidiaries (which includes headcount, professional fees related to the acquisitions and facility costs) and additional independent board members. For the three months endedDecember 31, 2022 , non-cash stock option expenses relating to general and administrative expenses included approximately$0.18 million of employee and board of directors expenses, comprising approximately 14% of total general and administrative expenses. For the three months endedDecember 31, 2021 , non-cash stock option and common stock expenses relating to general and administrative expenses included approximately$0.24 million of employee, board of directors and vendor expenses, comprising approximately 21% of total general and administrative expenses. For the six months endedDecember 31, 2022 , non-cash stock option expenses relating to general and administrative expenses included approximately$0.38 million of employee and board of directors expenses, comprising approximately 14% of total general and administrative expenses. For the six months endedDecember 31, 2021 , non-cash stock option and common stock expenses relating to general and administrative expenses included approximately$0.46 million of employee, board of directors and vendor expenses, comprising approximately 24% of total general and administrative expenses. Over time, we expect non-cash stock options and common stock general and administrative expenses, as a percentage of the total related expenses, to continue to decrease as we utilize a larger portion of cash for compensation thereby minimizing dilution. 33 Sales and Marketing Sales and marketing expenses for the three months endedDecember 31, 2022 were approximately$1.93 million compared to$0.66 million for the three months endedDecember 31, 2021 , an increase of approximately 192%. Sales and marketing expenses for the six months endedDecember 31, 2022 were approximately$3.68 million compared to$1.17 million for the six months endedDecember 31, 2021 , an increase of approximately 215%. The increase for both periods reflect expenses related to the addition of several new subsidiaries and expansions to headcount and outside marketing firms to drive revenue growth. As our subsidiary companies continue to establish initial market traction and grow their revenue base, we expect to increase our business development and sales expenses. For the three months endedDecember 31, 2022 , non-cash stock option and common stock expenses relating to sales and marketing expenses included approximately$0.14 million of employee compensation expenses, comprising approximately 7% of total sales and marketing expenses. For the three months endedDecember 31, 2021 , non-cash stock option and common stock expenses relating to sales and marketing expenses included approximately$0.20 million of employee, vendor and fee compensation expenses, comprising approximately 30% of total sales and marketing expenses. For the six months endedDecember 31, 2022 , non-cash stock option and common stock expenses relating to sales and marketing expenses included approximately$0.52 million of employee compensation expenses, comprising approximately 14% of total sales and marketing expenses. For the six months endedDecember 31, 2021 , non-cash stock option and common stock expenses relating to sales and marketing expenses included approximately$0.33 million of employee, vendor and fee compensation expenses, comprising approximately 28% of total sales and marketing expenses. Over time, we expect non-cash stock options and common stock sales and marketing expenses, as a percentage of the total related expenses, to continue to decrease as we utilize a larger portion of cash for compensation thereby minimizing dilution.
Amortization of Acquisition Intangible Assets
Amortization of acquisition intangible assets expense for the three months endedDecember 31, 2022 was approximately$0.54 million compared to$0.07 million for the three months endedDecember 31, 2021 . Amortization of acquisition intangible assets expense for the six months endedDecember 31, 2022 were approximately$0.99 million compared to$0.08 million for the six months endedDecember 31, 2021 . For both periods, this primarily reflects the addition of several new subsidiaries.
Change in Fair Value of Acquisition Contingent Consideration
Change in fair value of acquisition contingent consideration expense for the three and six months endedDecember 31, 2022 was a gain of approximately$5.42 and$2.82 million , respectively. For both periods, this represents a decrease in the fair value of the contingent consideration liability related to the S5D and BLI acquisitions. The change in both periods is driven by a decrease in the common stock price of Glimpse between measurement dates and revisions to revenue projections. Other Income (Expense), net For the Three Months Ended For the Six Months Ended December 31, Change December 31, Change 2022 2021 $ % 2022 2021 $ % (in millions) (in millions)
Interest income$ 0.08 $ -$ 0.08 N/A$ 0.13 $ 0.02 $ 0.11 550 % Loss on conversion of convertible notes - - - N/A - (0.28 ) 0.28 N/A Other Income (Expense), net$ 0.08 $ -$ 0.08 N/A$ 0.13 $ (0.26 ) $ 0.39 -150 % Other income for the three months endedDecember 31, 2022 was income of$0.08 million compared to zero for the three months endedDecember 31, 2021 . Other income and expense, net for the six months endedDecember 31, 2022 was income of$0.13 million compared to an expense of$0.26 million for the six months endedDecember 31, 2021 . The change is driven by a loss incurred on conversion of convertible debt to common stock that occurred at the IPO in the 2021 period. Income for all periods reflects interest income on cash and cash equivalent
balances. 34 Net Income (Loss)
Net income for the three months endedDecember 31, 2022 was$1.31 million , as compared to a net loss of$1.57 million for the comparable 2021 period, an absolute change of$2.88 million . This change is driven by the non-cash gain on the change in fair value of acquisition contingent consideration, partially offset by the increase in operating expenses from the acquisition of several subsidiaries. We sustained a net loss of$4.07 million for the six months endedDecember 31, 2022 as compared to a net loss of$3.23 million for the comparable 2021 period, a loss increase of$0.84 million . This change is driven by the increase in operating expenses from the acquisition of several subsidiaries, partially offset by the non-cash gain on change in fair value of acquisition contingent consideration. Non-GAAP Financial Measures The following discussion and analysis includes both financial measures in accordance with Generally Accepted Accounting Principles, or GAAP, as well as non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as supplemental to, and should not be considered as alternatives to, net income (loss), operating income (loss), and cash flow from operating activities, liquidity or any other financial measures. They may not be indicative of the historical operating results of the Company nor are they intended to be predictive of potential future results. Investors should not consider non-GAAP financial measures in isolation or as substitutes for performance measures calculated in accordance with GAAP. Our management uses and relies on EBITDA and Adjusted EBITDA, which are non-GAAP financial measures. We believe that both management and shareholders benefit from referring to the following non-GAAP financial measures in planning, forecasting and analyzing future periods.
Our management uses these non-GAAP financial measures in evaluating its financial and operational decision making and as a means to evaluate period-to-period comparisons. Our management recognizes that the non-GAAP financial measures have inherent limitations because of the described excluded items.
The Company defines Adjusted EBITDA as earnings (or loss) from continuing operations before the items in the table below. Adjusted EBITDA is an important measure of our operating performance because it allows management, investors and analysts to evaluate and assess our core operating results from period-to-period after removing the impact of items of a non-operational nature that affect comparability. We have included a reconciliation of our financial measures calculated in accordance with GAAP to the most comparable non-GAAP financial measures. We believe that providing the non-GAAP financial measures, together with the reconciliation to GAAP, helps investors make comparisons between the Company and other companies. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measures and the corresponding GAAP measures provided by each company under applicableSEC rules. 35
The following table presents a reconciliation of net income (loss) to Adjusted
EBITDA for the three and six months ended
For the Three Months Ended For the Six Months Ended
December 31, December 31,
2022 2021 2022 2021
(in millions) (in millions)
Net income (loss) $ 1.31 $ (1.57 ) $ (4.07 ) $ (3.23 )
Depreciation and amortization 0.58 0.08 1.06 0.10
EBITDA (loss) 1.89 (1.49 ) (3.01 ) (3.13 )
Stock based compensation
expenses 0.74 0.59 1.72 1.31
Stock based acquisition expense 0.20 - 0.20 -
Stock based financing related
expenses - - - 0.28
Acquisition related expenses 0.01 0.09 0.28 0.10
Change in fair value of
acquisition contingent
consideration (5.42 ) - (2.82 ) -
Adjusted EBITDA (loss) $ (2.58 ) $ (0.81 ) $
(3.63 ) $ (1.44 )
Adjusted EBITDA loss of $2.58 million for the three months ended December 31,
2022 increased by $1.77 million compared to a $0.81 million loss for the three
months ended December 31, 2021 . Adjusted EBITDA loss of $3.63 million for the
six months ended December 31, 2022 increased by $2.19 million compared to a
$1.44 million loss for the six months ended December 31, 2021 . The increases in
EBITDA loss were driven by an increase in operating expense outlays in all areas
of the Company to propel future growth, including the acquisition of several new
subsidiaries. This is offset primarily by non-cash expenses, both stock based
and fair value driven.
Liquidity and Capital Resources
For the Six Months Ended
December 31, Change
2022 2021 $ %
(in millions)
Net cash used in operating
activities $ (6.49 ) $ (2.36 ) $ (4.13 ) -175 %
Net cash used in investing
activities (2.60 ) (0.59 ) (2.01 ) -341 %
Net cash provided by financing
activities 0.04 26.01 (25.97 ) -100 %
Net increase (decrease) in cash
and cash equivalents (9.05 ) 23.06 (32.11 ) -139 %
Cash, cash equivalents and
restricted cash, beginning of
period 18.25 1.77 16.48 931 %
Cash, cash equivalents and
restricted cash, end of period
Operating Activities Net cash used in operating activities was$6.49 million for the six months endedDecember 31, 2022 , compared to$2.36 million during the prior period, an increase of approximately$4.13 million . This is primarily driven by an increase in net loss and a decrease in accounts payable and deferred revenue primarily related to the BLI acquisition, offset by increased non-cash expenses (primarily acquisition contingent consideration fair value adjustment, stock based expenses and intangible asset amortization). Investing Activities
Net cash used in investing activities for the six months endedDecember 31, 2022 was approximately$2.6 million compared to$0.59 million during the prior period, an increase of approximately$2.01 million . This primarily represents the cash portion of the BLI acquisition. Financing Activities Cash flow provided from financing activities during the six months endedDecember 31, 2022 was negligible, compared to$26.01 million for the prior 2021 period. Cash flow for the 2021 period primarily reflects the net proceeds from our IPO and Securities Purchase Agreement. 36 Capital Resources As ofDecember 31, 2022 , the Company had cash, cash equivalents and restricted cash balances of$9.20 million , plus$0.2 million of liquid corporate bond investments. TheDecember 31, 2022 balances include$2.0 million cash escrow for potential future contingent consideration of the S5D acquisition, payable upon achievement of S5D and the Company's performance targets (refundable to Glimpse if targets not achieved).
As of
As of
The Company believes that it is sufficiently funded to meet its operational plan and future obligations beyond the 12-month period from the date of this filing.
Recently Adopted Accounting Pronouncements
Please see Note 3 of the attached
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