NOTE 5. QREAL AND GLIMPSE TURKEY DIVESTITURE

As part of an announced strategic realignment around Spatial Core and divestiture of non-core assets, effective October 1, 2024, the Company divested the business of its wholly owned subsidiary company QReal, LLC (“QReal”) and its related operating entity GLIMPSE GROUP YAZILIM VE ARGE TİCARET ANONİM ŞİRKET (“Glimpse Turkey”) in a management buyout by the then General Manager of QReal.

The Company did not experience a material change to its revenue for the year ended June 30, 2025 and does not expect material changes to its expected revenues for year ended June 30 2026. The Company retains the revenues from QReal’s largest customer in full, until such time that the Company has collected and retained $1.35 million net cash in the aggregate, after taking into account all related operating expenses and fees (the “Milestone”). After satisfaction of the Milestone, the Company will receive a monthly cash revenue share for a period of 18 months in relation to any revenues generated from this same customer.

The assets, as defined in the divestiture agreement, of Qreal/Glimpse Turkey, were sold in return for a $1.56 million senior secured convertible note from the purchasing (“New”) entity and a 10% equity stake in New entity. Principal payback of the note is tied directly to revenue collected by New entity (separate from the Milestone). The note converts to New entity equity upon certain equity capital raising of New entity, as defined. The Company accounts for the investment in New entity at cost ($100) because the Company does not control or have significant influence over the investment.

The Company recorded a non-cash gain on the divestiture of approximately $1.40 million which is included in general and administrative expenses on the statement of operations for the year months ended June 30, 2025. The Company has also fully reserved against the note as collectability is considered uncertain and recorded a loan loss reserve of $1.50 million in general and administrative expenses on the statement of operations for the year ended June 30, 2025. The note reserve fully offsets the gain on divestiture detailed above.

Revenue from the divested business that is not being retained going forward was approximately $0.15 million and $0.67 million, respectively, for the years ended June 30, 2025 and 2024.

THE GLIMPSE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Pursuant to the original acquisition of QReal by the Company in 2016, upon sale of the entity the original sellers are due 8% (“economic interest”) of the Milestone proceeds. As the achievement of the Milestone is uncertain, liability for these payments will be recorded as actual Milestone proceeds occur. The Company recorded an expense of approximately $0.04 million related to the economic interest in sales and marketing expense on the statement of operations for the year ended June 30, 2025.

As of June 30, 2025, the Company has received $0.45 million of the Milestone.

In connection with the QReal divestiture, the Company made two personal loans to the majority owner of New entity to assist in startup funding of New entity. These loans are personally guaranteed by said majority owner. The loans bear interest at a nominal rate, have monthly repayment requirements and are due in full by October 31, 2025 and April 30, 2026, respectively. The net outstanding balance on the loans is recorded on the June 30, 2025 balance sheet as notes receivable.