All right. Welcome to The Glimpse Group Fiscal Second Quarter 2022 Financial Results Webinar. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded.

The earnings release that accompanies this call is available on the investor section on the company's website at ir.theglimpsegroup.com.

Before we begin the formal presentation, I’d like to remind everyone that statements made on today’s call and webcast, including those regarding future financial results and industry prospects are forward-looking and may be subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the call.

Please refer to the company’s regulatory filings for a list of associated risks. And we would also refer you to the company's website for more supporting industry information. I would now like to hand the call over to Lyron Bentovim, President and CEO of The Glimpse Group. Lyron, the floor is yours..

Thank you, Mark. And thank you everyone for joining us. I am pleased to welcome you to The Glimpse Group fiscal second quarter 2022 financial results investor call for our quarter-ended December 31, 2021.

Glimpse's fiscal second quarter was highlighted by record revenue, continued strong growth, our largest acquisition to-date, our healthy follow-on financing, and additional key customer engagements that further confirm the adoption of our enterprise focused VR/AR Software and Services. To review these operational highlights in more detail.

During the quarter, we continue to see strong top line growth as a result of new customer engagements and existing customer follow on engagements, including multi-year commitments.

Record six months financial '22 revenue for the first half of $2.71 million, a 78% increase compared to the first half of our fiscal '21 excluding as far as the acquisition. Record six months core software and services revenue increased by 166% compared to the first half of AR '21 excluding Glimpse project based revenue, and the S5D acquisition.

One of the most impactful second quarter highlights was our acquisition of Sector 5 Digital or S5D, an enterprise focus immersive technology company and Glimpse's largest acquisition to-date.

We believe that this accretive and well-structured acquisition has the potential to be a game changer, as it not only strengthens our financial and operational foundations, but also significantly improves our ability to scale and creates synergies. I'll expand on this later in the presentation.

Including S5Ds unreviewed six month revenue of approximately $2 million, the combined company's revenue was approximately $4.7 million for the first half of our financial year 2022.

With continued internal growth, we're now on an unexpected annual revenue run rate of over $10 million without any additional organic growth or additional potential acquisitions.

Post to S5D acquisition between our combined revenues and with over 120 VR/AR Software developers, engineers and 3d artists and five issued patents, I believe we are one of the largest independent VR/AR Software and Services company and we plan on continuing to strengthen this position.

Our position in the industry is translating into increased traction with major enterprise customers for VR/AR Software and Services.

For example, during the quarter we signed the largest contract in the company's history, a 1 million master service agreement and statement of work with the leading global social media and metaverse company for AR Software and Services.

Our healthcare subsidiary company Immersive Health Group, IHG entered into a five year VR Software and Services contract with Boston Medical Centre, a large health system in New England.

Our subsidiary company's QReal's collaboration with Bollè and M7 Innovations on AR campaigns showcasing Bollè's sunglasses, goggles and helmets in try-on and try-out experiences was awarded the Best Use of Technology by the Modern Retail Awards in 2021 in competition with tech leaders like Google and Snap.

Importantly, the campaign saw commercial results that led to significant increase in sales growth. This helps validate our belief that AR technologies will fundamentally change the retail environment and the way customers evaluate trial on and ultimately purchase products.

One of the key benefits to being early to an industry is the potential to capture very wide concepts that we envision may be of great significance in the future as the industry matures.

That effect we added to our intellectual property portfolio with the issuance of our fifth patent and have additional patents previously filed and in process we expect to file more patents throughout this year. Together with immersive technologies, Blockchain and AI will be a vital part of the infrastructure of the Metaverse.

A demonstration of this is the rapidly growing NFT markets. We believe NFTs will play an important role in the creation and transacting processes of assets in the Metaverse. To that end, we created a limited-edition, 3D collectible Glimpse Medal Non-Fungible Token that showcases our advanced capabilities.

Over the coming quarters, we expect to make additional significant steps exploring AI and blockchain technologies. We continue to strengthen the composition of our Board and recently added two new directors.

Ian Charles, an experienced tech CFO, with an expertise in software and services scaling, joined our Board as an Independent Director in January 2022, and took the role of Chair of our Audit Committee.

And Jeff Meisner, a longtime industry veteran in addition to continuing a Sector 5 Digital's General Manager, became Glimpse's Chief Revenue Officer, as well as the Director. This brings the number of directors to nine, five of which are independent, and demonstrates the importance of strong corporate governance practice for us.

During the quarter, we completed a $15 million private placement comprised of common stock at approximately 43% premium to our IPO price, and warrants price at approximately 110% premium to our IPO price. We have a strong and clean balance sheet, low burn rates relative to our cash position, and are very well positioned for further growth.

In conjunction with our organic growth, we added three companies to The Glimpse umbrella during the second half of 2021.

And we continue to look to add high quality companies that will expand us into new industry segments, increase our scale, further diversify and deepen The Glimpse ecosystem and enhance and strengthen our positioning in existing and new markets and geographies.

Even the immediate impact is transformative potential of the Sector 5 Digital acquisition, I'd like to further elaborate on the many benefits we believe it will come to bear. S5D is a leading and award winning immersive technologies company.

With a first year customer base including American Airlines, BAE Systems, Bell flight, Ecolab, Halliburton, Galderma and Textron systems among many others.

This acquisition approximately doubles Glimpse's pre-acquisition annual revenue, significantly improves our business operating and financial scale, open new markets to Glimpse such as defense, government contractors, while generating compelling go-to-market synergies across Glimpse's diverse ecosystem.

These acquisitions helps grow our team by approximately 25 hard to combine immersive technology talents, including a high caliber industry executive in Jeff Meisner.

From total revenue, immersive technology headcount and customer diversification perspective, we believe this acquisition makes Glimpse one of the largest independent enterprise VR/AR Software and Services company.

I express this as building scale in this emerging industry is critical, and in our view creates a strong competitive advantage on several fronts.

This acquisition, as well as the other two was well structured with relatively small upfront payments, and with most of the purchase price consideration dependent on the achievement of significant revenue growth milestones over the next three years to be phased primarily in common stock based on Glimpse's stock price at those times.

We always seek to align interests with our shareholders when we acquire companies, they understand that it is not an exit, but rather aligning their future with Glimpse and becoming part of a larger ecosystem.

While Glimpse has been added for almost six years, the Meta Facebook announcement in October 2021, set off a tidal wave of interest and awareness for the potential of the metaverse and immersive technology with other tech giants such as Microsoft, ROBLOX, Nvidia and all of this, also embracing that vision as well.

Companies and consumers around the globe are exploring the new possibilities that exist to bring the Metaverse to life and enable its development. We see this surge as the beginning of a hyper growth cycle for this nascent industry, which will last for decades to come. I often get asked, what is the Metaverse.

As we see it, the Metaverse will be a third immersive dimension to the two dimensional digital world created in the previous tech cycle. It will be a combination of virtual 3D worlds brought to life using VR/AR, AI and blockchain technologies.

While still in early stages of development, in time, the Metaverse will fundamentally transform the way we learn, work, shop, get entertain and engage with society. Glimpse's subsidiary companies today provide the VR/AR Software and Service solutions that are enabling companies and organizations to make initial forays into the immersive world.

As the Metaverse develops, we believe that The Glimpse's subsidiary companies will be supplying the underlying immersive software solutions, picks and shovels that will facilitate enterprises and organizations ability to build their presence and establish their footprints in the Metaverse.

Their ability to transact will become a crucial component in the underlying functionality of the metaverse. In this regard, during the quarter as a proof-of-concept of our capabilities we launched The Glimpse Medal, one of the first fully Metaverse-ready NFT.

By Metaverse-ready, I mean that it can seamlessly and easily be used across all augmented and virtual reality platforms. From AR on a mobile phone to a TV website on our computer to a VR headsets and brought into all existing and future NFT based virtual worlds.

As the Metaverse matures, we plan to continue expanding our NFT capabilities and offerings by integrating it with our wide array of VR and AR technologies across its diverse base of subsidiary companies into their emerging Web3 ecosystem and related business applications.

With that, I will now turn it over to a Maydan Rothblum, Glimpse's CFO and COO to review the financial results.

Maydan?.

Thank you, everyone. I will limit my portion to a single review of our financial results, the full breakdown is available in our 10-Q and in our press release that were filed after market closed today. Please note that I will refer to adjusted EBITDA and other non-GAAP measures.

For the calculation of adjusted EBITDA and other non-GAAP measures, please refer to the MD&A which is available in our 10-Q filing, which you can find on our website under SEC filings.

Total revenue for the six months ended December 31, 2021 was approximately $2.71 million, compared to approximately $1.52 million for the six months ended December 31, 2020, an increase of 78%. The increase was due to organic growth and the addition of new customers. Including S5D unreviewed.

revenue for the six month period, we estimate approximately 4.7 combined revenue for the six month period. Total revenue for the three months ended December 31, 2021 was approximately $1.69 million compared to approximately $1.26 for the three months ended December 31, 2020, an increase of 34%.

This increase was impacted by a delay of revenues from Q1 fiscal year '21 to Q2 fiscal year '21 due to COVID-19 constraints.

On normalized basis, the relative growth quarter-to-quarter would have been significantly higher, Including S5D unreviewed revenue for three months period ended December 31, 2021 we estimate $2.45 million combined revenue for the three months period.

I would also add that compared to our previous quarter Q1 fiscal year '22 ending September 30, 2022 revenue increased by 65% from $1.02 million to $1.69 million.

For the six months ended December 31, 2021, software license revenue was approximately $0.29 million compared to approximately $0.14 for the six months ended December 31, 2020, an increase of approximately 107%.

As VR and AR continue to mature, we expect our software licensed revenue to continue to grow on an absolute basis and as an overall percentage of total revenue.

For the six months ended December 31, 2021, core VR software and services excluding non-project revenue was approximately $1.7 million compared to approximately $0.64 million for the six months ended December 31, 2020, an increase of approximately 166%.

For the six months ended December 31, 2021 non project revenue accounted for approximately 63% of total revenues compared to approximately 42% for the three months ended December 31, 2020. For the three months ended December 31, 2021, non-project revenue, i.e.

VR/AR Software and Services revenue only was approximately $0.85 million compared to approximately $0.5 million for three months ended December 31, 2020, an increase of approximately 70%. As I mentioned previously, the three months ended December 31, 2020 revenues included delay sales from Q1 fiscal year '21, into Q2 fiscal year '21 due to COVID-19.

On a normalized basis, the relative growth quarter-to-quarter would have been significantly higher. For the three months ended December 31, 2021, non-project revenue accounted for approximately 50% of total revenues compared to approximately 40% for the three months ended December 31, 2020.

Gross profit was approximately 88% for the three months ended December 31, 2021, compared to approximately 56% for the three months ended December 31, 2020. Gross profit was approximately 87% for the six months ended December 31, 2021 compared to approximately 55% for the six months ended December 31, 2020.

The increase in gross profit for both periods was driven by the increase in non-project revenue, which produces higher margin, improved management of project revenue, cost of goods sold and utilization of lower costs Glimpse Turkey staff. On a going forwarded basis, we expect overall gross profit to stabilize in the 65% to 75% range.

Operating expenses for the three months ended December 31, 2021 were approximately $3.05 million compared to $1.41 million for the three months ended December 31, 2020, an increase of approximately 116%.

Operating expenses for the six months ended December 31, 2021 were approximately $5.33 million, compared to $2.77 million for the six months ended December 31, 2020, an increase of approximately 92%.

The increase for both periods was driven by employee headcount additions to support growth, the incurrence of expensive specific to Glimpse being a publicly traded company and the addition of two new subsidiary companies.

For the three months ended December 31, 2021 net loss from operations was approximately $1.4 million, compared to a net loss of approximately $1.24 million for the three months ended December 31, 2020 an increase of approximately 13% period-to-period.

We sustained a net loss of $1.57 million for the three months ended December 31, 2021, as compared to a net loss of $0.75 million for the prior 2020 period, a loss increase of $0.82 million or 109%. This reflects a period-over-period increase in revenue and related gross profit offset by an increase in operating expenses.

Net loss for the six months ended December 31, 2021 was $3.24 million, compared to a net loss of $2.02 million with a prior 2020 period, a loss increase of $1.22 million or 60%.

This reflects a period-over-period increase in revenue and related gross profit offset by an increase in operating expenses, the occurrence of non-cash loss on conversion of convertible notes to common stock as a result of the July 1, 2021 Initial Public Offering offset by a decrease in non-cash interest expense.

Net cash used in operating expenses was $2.36 million for the six months ended December 31, 2021 compared to $0.78 million during the prior period, an increase of approximately $1.5 million.

This was primarily driven by an increase in net loss of approximately $1.22 million and an increase in accounts receivable reflective of increased revenue period-over-period.

For the three months ended December '21, adjusted EBITDA loss was $0.47 million, and increased by $0.67 million as compared to $0.2 million gain for the three months ended December 31, 2020.

Adjusted EBITDA loss of $0.9 million for the six months ended December 31, 2021 increased by $0.58 million as compared to $3.2 million loss for the six months ended December 31, 2020.

Our current net cash burn is approximately $2.5 million to $3 million annual, which is relatively low in our view, given our growth profile in relation to our cash position, and is predominantly variable and under tight control.

To recap our fiscal second quarter had a strong cash balance of approximately $24.8 million at the end of the quarter December 31, 2021.

As of today, we have approximately $21 million in cash and cash equivalents following the closing of the Sector 5 Digital acquisition, which includes 2 million in escrow to satisfy future potential performance based earnouts. We have no material cast liabilities, no preferred equity outstanding and no convertible debt.

With a fortified balance sheet, strong revenue growth and a relatively low cash burn and improving operating scale, we remain well positioned for future growth. I now like to pass it back to Lyron for some closing remarks, after which we will begin our question-and-answer session..

Thank you, Maydan. Well, this was just our second quarter as a NASDAQ listed company, we have continued to demonstrate successful execution of our growth strategy, adding customers, companies, IP funding, growth and market positioning.

With a clear vision of the significant opportunities in front of us, the balance sheet and operational scale to capture these in a world increasingly curious about in driving towards the next frontier of connection through immersive technologies, blockchain and AI, we expect a strong reminder to our financial year of 2022, January 22 to June 22.

We'd like to thank all of our shareholders for their ongoing support as we continue to push forward with creating the leading enterprise focused software and services company in the emerging XR space. I thank you all for your interest in support of The Glimpse Group. And now I'll turn the call back over to Mark to take some questions..

Thank you, Lyron. [Operator Instructions] And it looks like our first question is going to come from Ben Piggott at EF Hutton. Ben you can go ahead and unmute..

Thanks guys. Congratulations on a nice quarter. Lyron really curious what the M&A pipeline looks like from here. Clearly, you know, closing S5D was a transformational deal for the company. But just curious what else you're seeing out there these days..

So there is a significant interest by companies to become part of our ecosystem. And I'm spending a significant part of my day, talking with them, understanding their technology and their fit to Glimpse, and exploring the potential for them joining our platform.

So I think there is a lot of interests out there and a lot of opportunities, and we're definitely very active..

Awesome, I appreciate that. And then, maybe just, just lastly, any kind of high level customer synergies you can touch on since closing of S5D in terms of being able to market, other Glimpse services across the different customer bases..

Yes, and kind of -- so a couple of points on that. So we just closed S5D about a week and half ago and even though it's been a short period of time, the connection between S5D team and Jeff as the CRO, and the other subsidiaries is pretty strong.

So I think there's already four different opportunities that our teams are working together with S5D and one of The Glimpse subsidiaries. Obviously kind of sales cycle is long.

So kind of this will take kind of a few months to kind of convert those into close deals, but there is kind of a lot of discussions with multiple kind of historical Glimpse subsidiaries and S5D together.

In addition to that, Jeff and I have been working with each one of our subsidiaries on our 2022 plan and part of that has been Jeff's understanding their profile of the customers are looking for and exploring ways to open the kind of the network S5D has into those opportunities..

Our next question is going to be from Darren Aftahi at Roth Capital..

Thanks for taking my question. Just if I could dovetail on the last one. I know you close this within, you know, a couple of weeks. But Sector 5, just can you talk about maybe any benefits to your pipeline, kind of near and intermediate term.

And kind of any verticals, you kind of call out where you think there's low hanging fruit? And then just maybe a general question. You speak about Metaverse in the PR. Do you think we're at a tipping point yet in that discussion? And if not, what's the catalyst to kind of get to that tipping point from where you guys set. Thanks..

Okay. So I'll take the second one on the Metaverse and then go back and talk about S5D. So regarding the Metaverse, I think we are at a tipping point in terms of the awareness of large corporations and organizations of the power of the Metaverse and putting this kind of the wheels in motion to start making it happen.

There is a lot of work to be done to take all these technologies that right now are basically on an island and creating the connectivity between them. The glue that will make them all one part of one Metaverse. That's definitely a piece that needs to happen over the next few years.

And a part of the role that we expect to play as this turns out to move from a vision to a reality. Going back to the S5D opportunity, one of the large opportunities that we as Glimpse has not touched historically, as being the DOD and DOD related companies.

And there is a lot of opportunities to take the scale that we have at Glimpse together with capabilities that S5D is adding and position these together to really start appealing to that marketplace and that's definitely an area of focus, again, long sales cycle but that's definitely a significant opportunities that we have historically have not addressed..

Our next question is coming from David Williams at Benchmark..

Thanks for taking the question. Certainly appreciate the time. And I'll also give my congrats on the quarter. You guys have clearly done a good job, just really developing the story and getting a lot of traction. But wanted to ask you, kind of think about the landscape and maybe the development of that ecosystem.

How do you think S5D, especially with their relationship with maybe one of the leading Metaverse players? How do you think about that in terms of how quickly the market develops maybe over time, and maybe walk us through that natural evolution of how you think maybe VR and AR will become integrated into maybe organizational workflows or how we can see this kind of develop over time..

Thanks for the question. It's a good one and it's been a something I've been spending time thinking about. So as you look at where we are right now, organizations are really kind of exploring how the new technologies, both virtual reality and augmented reality, but also kind of AI, blockchain, NFTs are kind of impacting their business.

And at this point, they're really trying kind of things out. And no one organization has really fully committed themselves to kind of implement that. And that's where we see the opportunity. At this point, our companies are in a sense holding their hands as they're exploring, coming into this kind of new technology and how to kind of come into it.

And we are kind of helping them try different things out. And one of the benefits of The Glimpse ecosystem is the fact that we've got diverse solutions. So we can offer organizations anything from marketing solutions to data visualization from corporate training to event and kind of telling their story in a different way.

So we've got all these solutions. And one of the things that kind of the past that kind of default on Jeff in his CRO role and myself as COO, is to go out there and basically tell the story to those organizations and getting a senior level and help them guide their vision for this industry going forward..

Fantastic, thanks.

And then I wanted to kind of think about in terms of the growth strategy, both organic and inorganic, but it seems like you have a lot of subsidiaries now there's there'd be a lot of synergies, natural synergies, but how much do you think you need to continue to grow maybe from that acquisition perspective versus organic? And is there a point where you reach scale that you can begin to developing internally and really drive the scale from that momentum versus needing to buy the bolt-ons or the additional acquisitions is ever maybe a tipping point there that you think you could get to?.

Potentially. So the way I see it, we're continuing to have hyper growth internally. So each one of our companies is focusing and kind of led by the general managers focusing on kind of growing their brand, their story, their business.

They're doing that as part of the ecosystem, and every kind of new company that comes in actually makes their job of growing their organic business even better.

So at this point, based on what I'm seeing out there, there are a lot of companies that will truly enhance kind of our positioning in the marketplace, add new technologies, new geographies, new areas of focus.

Over time, as we grow, kind of I assume, we will have less of these, but I think we will kind of given our structure will continue to grow as a mix of both organic and inorganic growth..

Fantastic, certainly appreciate that. And one more, if you don't mind me thrown in there -- thinking about the just on the OpEx line. How do you think that trends over time, especially as we get this newest acquisition all the way in.

Your burn rate is exceptionally low and so should we continue to think about it staying around these levels or how I guess from a modelling standpoint, how should we model the OpEx line..

We like to actually to improve it, right, we want to get to the point where we're at least breakeven from our internal operations as, as quickly as possible. That's just in our nature as, you know, it's in our DNA as operators. We also, you know, we want to be always functioning from a position of strength.

Now, we have to counterbalance that with the growth potential, and there's just so many opportunities out there. So, you know, we don't want to choke those off as we get to cash flow profitability, but at the end of the day, the sooner we can get that, to that level, the better Sector 5D is a cashflow positive company.

You know, they never raised outside capital, and they've been to space for a while. And so, you know, that's a cap loss to the management team there, and it's one of the reasons that we were attracted to their, to them as operators in the business model.

So yes, it hard to say, you know, to put exactly you know, what, when, when that magical point that we get to breakeven plus as Glimpse will be, but that's certainly a mindset here. And this, I don't envision this being, you know, a high burn type of environment..

I'd like to add and just kind of reinforce what Maydan said. So kind of, we've got Glimpse to the point where if we want it to be cashflow positive today, we could, it's just, we see opportunities to invest both in R&D, and in sales and marketing, that we think are a great investor, investment for us as a company.

And therefore we're willing to sustain a kind of relatively minor cash flow, net burn to invest in those areas. But if the situation arises, or we don't see the opportunity to make those big investments, we can kind of bring Glimpse to profitability at the current level. And definitely as we continue to grow..

I mean, at this point, I would say not you know, we're not far from 85%, 90% of our operating costs, headcount related. Right, so those are variable in nature, if we ever need to get to that point. And it also, you know, it relates to your prior question about, you know, those acquisitions and getting to scale.

You know, clearly it's one thing to run a company, that's a growth company that has 1 million, 2 million or 3 million revenues from the scale and operating perspective, there are many benefits to being a 10 million plus.

And as we bring in, you know, potentially additional companies, those dynamics should -- those underlying operating dynamics should improve as we get to higher scale..

We have another question here. Kind of go ahead and allow you to talk. Go ahead..

That caller has is dropped or?.

Okay, we'll move on then. [Operator Instructions].

Congrats again on the good quarter. I just curious if you could talk about the pipeline for projects, how that looks these days..

So we have a pretty strong pipeline, it's kind of we actually kind of had the strongest booking quarter as well, that's not a kind of GAAP number. And we don't kind of put those numbers out there but kind of the pipeline is strong both on kind of the historical Glimpse side, as well as on the S5D.

And we expect to continue to grow kind of into the rest of our financial year..

Okay. And you're -- from just doing the math of your project revenue, it seems like it was six months, it was up from around 900,000 to a 1 million.

Is that roughly correct?.

You've managed to ask a numbers question, we're just trying to figure out..

Yes.

Can you just repeat the question for me, please?.

Yes. When I back out your non-project revenue from your total revenue, it seems like your project revenue was up from around 900,000 to a 1 million. So I just wanted to see if I did the math, right. And do you have any comment about that, that rate of growth that's around 10%, 15%. And so just curious if you can comment about that..

The math is correct. Two notes on that, first, we fundamentally see ourselves as a software and services company. And the more revenue we generate from software and services, the better. So that's reflected in our very high gross margins.

On the project side, it is, given the sales cycle of these projects, very hard on a quarterly basis, to you know, one quarter could be higher than the other one -- we have another quarter lower than the other. But as for the prior question, as part of the pipeline, there's also a significant project.

S5D historically has been more projects than Software and Services. We hope that that will change over time. Yes, so your observation is, is correct..

Okay, fine, just want to understand the picture there. All right, thanks very much, guys..

Yes, so just to kind of do the emphasize kind of, we look at kind of the revenue mix, kind of shifting towards software as a positive, we expect some shift back towards projects as kind of we integrate S5D, but kind of long term as Maydan said kind of we expect -- kind of software revenue to kind of dominate the picture..

Understood, thank you..

And by the way, that also go -- I keep on harping back to scale, right? The larger -- because, you know, it could be next quarter, but you'll have a very large project.

And I'm not saying it well, but you know, just theoretically, quarter-to-quarter, a very large project, for example, could fall and that skews some of the, you know, other, let's say software and services as a percentage of total revenue. And so as we get to larger scale, some of these issues will work with them -- work themselves out naturally..

All right. At this time, this concludes our question-and-answer session. I'd like to now turn the call back over to Lyron for closing remarks..

Thank you, Mark. I would like to thank each of you for joining our earnings conference call. We look forward to continuing to update you on our ongoing progress and growth. If we were unable to answer any of your questions, please reach out to us directly or through our IR firm MZ Group..

This does conclude today's webinar and have a nice day. Thanks..