10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549	OMB APPROVAL
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FORM 10-Q

(Mark One)

☒     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021 

or

☐     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to_________

Commission File Number: 001-40329

Troika Media Group, Inc.

Exact name of registrant as specified in its charter)

Nevada	83-0401552
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1715 N. Gower Street, Los Angeles, California	90028
(Address of principal executive offices)	(Zip Code)

(323) 965-1650

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, $.001 par value	TRKA	The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒  Yes     ☐  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes     ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☒ Yes      ☐ No

APPLICABLE ONLY TO ISSUERS INVOLVED IN

BANKRUPTCY PROCEEDINGS DURING THE

PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ☐ Yes     ☐ No

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date.

Class	Outstanding at November 12, 2021
Common Stock, $.001 par value	43,572,950

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Balance Sheets as of September 20, 2021 (Unaudited) and June 30, 2021	3
	Statements of Operations and Comprehensive Loss for the Three Months ended September 30, 2021 and 2020 (Unaudited)	4
	Statements of Stockholders’ Equity for the Three Months Ended September 30, 2021 and 2020 (Unaudited)	5
	Statements of Cash Flows for the Three Months Ended September 30, 2021 and 2020 (Unaudited)	6
	Notes to Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion & Analysis of Financial Condition and Results of Operations.	32
Item 3.	Quantitative and Qualitative Disclosures about Market Risk.	37
Item 4.	Controls and Procedures.	37
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosure	38
Item 5.	Other Information	38
Item 6.	Exhibits	39
SIGNATURES		40

2

Troika Media Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
	September 30, 2021			June 30, 2021
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	9,752,000		$	12,066,000
Accounts receivable, net		1,976,000			1,327,000
Prepaid expenses		625,000			670,000
Other assets – short term portion		67,000			1,000
Total current assets		12,420,000			14,064,000
Other assets -long term portion		628,000			626,000
Property and equipment, net		379,000			343,000
Operating lease right-of-use assets		6,827,000			6,887,000
Intangible assets, net		2,431,000			2,603,000
Goodwill		19,368,000			19,368,000
Total assets	$	42,053,000		$	43,891,000
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses	$	7,396,000		$	8,363,000
Convertible notes payable		50,000			50,000
Note payable - related party - short term portion		180,000			200,000
Due to related parties		7,000			41,000
Contract liabilities		6,873,000			5,973,000
Operating lease liability - short term portion		3,115,000			3,344,000
Derivative liabilities		1,000			13,000
Taxes payable		62,000			62,000
Stimulus loan programs- short term portion		15,000			22,000
Total current liabilities		17,699,000			18,068,000
Long term liabilities:
Operating lease liability - long term portion		5,785,000			5,835,000
Stimulus loan programs - long term portion		425,000			547,000
Rental deposits		119,000			119,000
Other long term liabilities		309,000			477,000
Liabilities of discontinued operations - long term portion		107,000			107,000
Total liabilities		24,444,000			25,153,000
Stockholders’ equity:
Preferred stock, $0.01 par value: 15,000,000 shares authorized
Series A Preferred Stock ($0.01 par value: 5,000,000 shares authorized, 720,000 shares issued and outstanding as of September 30, 2021 and June 30, 2021)		7,000			7,000
Common stock, ($0.001 par value: 300,000,000 shares authorized; 43,572,950 and 39,496,588 shares issued and outstanding as of September 30, 2021 and June 30, 2021, respectively)		44,000			40,000
Additional paid-in-capital		206,973,000			204,788,000
Stock payable		-			1,210,000
Accumulated deficit		(189,028,000	)		(186,889,000	)
Other Comprehensive Loss		(387,000	)		(418,000	)
Total stockholders’ equity		17,609,000			18,738,000
Total liabilities and stockholders’ equity	$	42,053,000		$	43,891,000
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

Troika Media Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
	Three Months Ended September 30,
	2021			2020
Project revenues, net	$	8,349,000		$	4,132,000
Cost of revenues		4,837,000			2,280,000
Gross profit		3,512,000			1,852,000
Operating expenses:
Selling, general and administrative expenses		6,235,000			4,450,000
Professional fees		568,000			788,000
Depreciation expense		30,000			31,000
Amortization expense of intangibles		172,000			540,000
Total operating expenses		7,005,000			5,809,000
Loss from operations		(3,493,000	)		(3,957,000	)
Other income (expense):
Income from government grants		262,000			-
Amortization expense on note payable discount		-			(17,000	)
Interest expense		(13,000	)		(4,000	)
Foreign exchange loss		(16,000	)		(47,000	)
Loss on early termination of operating lease		(3,000	)		-
Gain (loss) on derivative liabilities		12,000			(23,000	)
Other income		1,112,000			127,000
Total other income (expense)		1,354,000			36,000
Net loss before income tax		(2,139,000	)		(3,921,000	)
Provision for income tax		-			-
Net loss after income tax		(2,139,000	)		(3,921,000	)
Net loss	$	(2,139,000	)	$	(3,921,000	)
Net loss attributable to common stockholders		(2,139,000	)		(3,921,000	)
Foreign currency translation adjustment		31,000			(93,000	)
Comprehensive loss	$	(2,108,000	)	$	(4,014,000	)
Basic earnings (loss) per share
Continuing operations	$	(0.05	)	$	(0.22	)
Net loss attributable to common stockholders	$	(0.05	)	$	(0.22	)
Weighted average basic shares outstanding		41,422,781			17,490,910
Weighted average diluted shares outstanding		41,422,781			17,490,910
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

Troika Media Group, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
For the Three Months Ended September 30, 2021 and 2020 (Unaudited)
	Preferred Stock - Series A $ 0.01 Par Value				Preferred Stock - Series B $ 0.01 Par Value				Preferred Stock - Series C $ 0.01 Par Value				Preferred Stock - Series D $ 0.01 Par Value				Common Stock $ 0.001 Par Value				Additional Paid In		Stock			Accumulated			Comprehensive  Income			Total Stockholders'
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Capital		Payable			Deficit			(Loss)			Equity
BALANCE — July 1, 2020		720,000	$	7,000		2,495,000	$	25,000		911,149	$	9,000		1,979,000	$	20,000		15,454,623	$	16,000	$	176,262,000	$	1,300,000		$	(170,892,000	)	$	253,000		$	7,000,000
Issuance of common stock related to convertible notes																		499,223		-		1,400,000		-									1,400,000
Issuance of common stock related to stock payable																		1,733,333		2,000		1,298,000		(1,300,000	)								-
Stock-based compensation on options																						166,000											166,000
Stock-based compensation on warrants																						154,000											154,000
Imputed interest on convertible note payable																						4,000											4,000
Foreign currency translation gain																														(93,000	)		(93,000	)
Net loss																											(3,921,000	)					(3,921,000	)
BALANCE — September 30, 2020		720,000	$	7,000		2,495,000	$	25,000		911,149	$	9,000		1,979,000	$	20,000		17,687,179	$	18,000	$	179,284,000	$	-		$	(174,813,000	)	$	160,000		$	4,710,000
BALANCE — July 1, 2021		720,000	$	7,000		-	$	-		-	$	-		-	$	-		39,496,588	$	40,000	$	204,788,000	$	1,210,000		$	(186,889,000	)	$	(418,000	)	$	18,738,000
Common stock issued relating to Redeeem acquisition																		452,929		-		1,210,000		(1,210,000	)								-
Record vested deferred compensation relating to Redeeem employees																		3,623,433		4,000		801,000											805,000
Stock-based compensation on options																						107,000											107,000
Stock-based compensation on warrants																						67,000											67,000
Foreign currency translation gain																														31,000			31,000
Net loss																											(2,139,000	)					(2,139,000	)
BALANCE — September 30, 2021		720,000	$	7,000		-	$	-		-	$	-		-	$	-		43,572,950	$	44,000	$	206,973,000	$	-		$	(189,028,000	)	$	(387,000	)	$	17,609,000

 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

Troika Media Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
	Three Months Ended September 30,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(2,139,000	)	$	(3,921,000	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation		30,000			31,000
Amortization of intangibles		172,000			540,000
Amortization of discount on convertible note payables		-			17,000
Stock-based compensation on options		107,000			166,000
Stock-based compensation on warrants		67,000			154,000
Stock-based compensation relating to Redeeem acquisition		805,000			-
Imputed interest for note payable		-			4,000
Loss on early termination of operating lease		3,000			-
(Gain)/loss on derivative liabilities		(12,000	)		23,000
Recovery for bad debt provision		(69,000	)		(100,000	)
Change in operating assets and liabilities:
Accounts receivable		(580,000	)		(426,000	)
Prepaid expenses		45,000			(48,000	)
Accounts payable and accrued expenses		(969,000	)		2,030,000
Other assets		(68,000	)		(4,000	)
Operating lease liability		(222,000	)		(171,000	)
Due to related parties		(34,000	)		-
Other long term liabilities		(168,000	)		-
Contract liabilities relating to revenue		1,170,000			181,000
Contract liabilities relating to government grants		(399,000	)		-
Net cash used in operating activities		(2,261,000	)		(1,182,000	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets		(68,000	)		(7,000	)
Net cash used in investing activities		(68,000	)		(7,000	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stimulus program loans		-			565,000
Payments to note payable related party		(20,000	)		-
Proceeds from convertible note payable		-			150,000
Net cash (used in) provided by financing activities		(20,000	)		715,000
Effect of exchange rate on cash		35,000			(9,000	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	$	(2,314,000	)	$	(483,000	)
CASH AND CASH EQUIVALENTS — beginning of period		12,066,000			1,706,000
CASH AND CASH EQUIVALENTS — end of period	$	9,752,000		$	1,223,000
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes	$	-		$	-
Interest expense	$	3,000		$	-
Noncash investing and financing activities:
Initial discount recorded on convertible notes	$	-		$	50,000
Conversion of convertible note payable	$	-		$	1,400,000
Issuance of common stock related to stock payable	$	-		$	1,300,000
Right-of-use assets acquired through adoption of ASC 842	$	467,000		$	-
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

TROIKA MEDIA GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended September 30, 2021 and 2020

NOTE 1 – PRESENTATION OF THE FINANCIAL STATEMENTS        

The terms “Troika,” “the Company,” “we,” “our” and “us” each refer to Troika Media Group, Inc. and its subsidiaries, unless the context indicates otherwise. The accompanying unaudited condensed consolidated financial statements were prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP or GAAP, for interim financial information and Article 8 of Regulation S-X of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures have been condensed or omitted.

In our opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation, in all material respects, of the information contained herein. These unaudited condensed consolidated financial statements should be read in conjunction with our annual report on Form 10-K for the year ended June 30, 2021.

Risks & Uncertainties

Liquidity

The Company has incurred net losses since its inception and anticipates net losses and negative operating cash flows until fiscal year 2024.  For the three months ending September 30, 2021, the Company had a net loss of $2.1 million, which increased the accumulated deficit to $189.0 million at September 30, 2021 from $186.9 million at June 30, 2021.  At September 30, 2021, the Company had approximately $9.8 million in cash and cash equivalents and a total of $12.4 million in current assets in relation to $17.7 million in current liabilities.  While the Company continues to find efficiencies with its acquisitions of Troika Design Group, Inc. and  Mission Group as well as the assets of Redeeem LLC, the departure of Mission’s President and Founder in fiscal year 2019 together with the coronavirus (COVID-19) pandemic impacted revenue more than anticipated.

With the acquisition of Mission Group, the Company is attempting to increase Troika’s footprint in major media markets, such as NY and London.  The Company also continues to expand its consulting services and breadth of product offering with existing Mission and Troika clients and increase business development in NY and London as a result of the Mission acquisition.  Additionally, the Company intends to add to Mission business development due to Troika’s existing clientele.  As a result of these developments and the Company’s intent to save costs in overhead through rationalized headcount from synergies achieved in the acquisition of Mission, the consolidated fiscal year 2024 forecast for the combined entity is $1.7 million in adjusted EBITDA.

If the Company raises additional funds by issuing equity securities, its stockholders would experience dilution. Additional debt financing, if available, may involve covenants restricting its operations or its ability to incur additional debt. Any additional debt financing or additional equity that the Company raises may contain terms that are not favorable to it or its stockholders and require significant debt service payments, which diverts resources from other activities. The Company’s ability to raise additional capital will also be impacted by the outbreak of COVID-19, as well as market conditions and the price of the Company’s common stock.

Based on the recent acquisitions, Company-wide consolidation, and management’s plans, the Company believes that the current cash on hand of $9,752,000and anticipated cash from operations is sufficient to conduct planned operations for one year from the issuance of the consolidated financial statements.  In addition, Management believes they can raise additional capital, if necessary, given the Company has been successful at raising funding through both equity and debt financing.

7

Impact of COVID-19 

In March 2020, the World Health Organization categorized the coronavirus (COVID-19) as a pandemic, and it continues to spread throughout the United States and the rest of the world with different geographical locations impacted more than others. The outbreak of COVID-19 and the resulting public and private sector measures to reduce its transmission, such as the imposition of social distancing and orders to work-from-home, stay-at-home and shelter-in-place, have adversely impacted our business and those of our clients. Businesses have adjusted, reduced, or suspended operating activities, which has negatively impacted the clients we service. We continue to believe our focus on our strategic strengths, including talent, our differentiated market strategy and the relevance of our services, including the longevity of our relationships, will continue to assist our Company as we navigate a rapidly changing marketplace. The effects of the COVID-19 pandemic have negatively impacted our results of operations, cash flows and financial position; however, the continued extent of the impact will vary depending on the duration and severity of the economic and operational impacts of COVID-19.

We took steps to protect the safety of our employees, with a large majority of our worldwide workforce working from home, while developing creative ideas to protect the health and well-being of our communities and setting up our people to help them do their best work for our clients while working remotely. With respect to managing costs, we have implemented multiple initiatives to align our expenses with changes in revenue. The steps taken across our agencies and corporate group include deferred merit increases, freezes on hiring and temporary labor, major cuts in non-essential spending, staff reductions, furloughs in markets where that option is available and salary reductions, including voluntary salary deferment for our senior corporate management team. In addition, we remain committed to and have intensified our efforts around cash flow discipline, including the identification of significant capital expenditures that can be deferred, and working capital management. We began to see the effects of COVID-19 on client spending, notably in the UK and US markets with our Mission subsidiaries throughout the second quarter of calendar 2020 with much of the work force of the UK subsidiary on furlough, and with our Troika Design subsidiary furloughed as March 2020 progressed. Due to mandatory stay at home orders and social distancing, our experiential business has been particularly impacted by COVID-19. Promotional and experiential events with the Company’s assistance are particularly susceptible to external factors and were delayed by many of the Company’s Mission clients due to the effects of COVID-19. The Company had temporarily furloughed employees to reflect current reduced demands associated with those client sets. However, as of the first and second quarters of calendar 2021, we started to see business dramatically improve and expect greater improvement in our results in our next fiscal quarters. As cities have commenced openings with the improvement of vaccines distribution and infection rates declining, our client activities have doubled and there is a real optimism that the economic conditions are improving. Sports, Entertainment, Pharma clients are contracting our services across all entities at rates similar to 2019. 

In the current environment, a major priority for us is preserving liquidity. Our primary liquidity sources are operating cash flow, cash and cash equivalents and short-term investments. Although we expect to experience a decrease in our cash flow from operations as a result of the impact of COVID-19, we have obtained relief under the CARES Act in the form of a Small Business Administration backed loans. In aggregate we received $1.7 million in SBA stimulus “Payroll Protection Program” funding in April 2020 of which the majority of these funds were used for payroll. As per the US Government rules, the funds used for payroll, healthcare benefits, and other applicable operating expenses can be forgiven and the Company reported them as such in December 2020 considering the Company believes we have substantially met these conditions.  On August 14, 2020, the Company received an additional $500,000 in loans with 30 year terms under the SBA’s “Economic Injury Disaster Loan” program which the Company intends to use to address any cash shortfalls that resulted from the current pandemic.  In February 2021, the Company obtained additional relief under the CARES Act in the form of Small Business Administration backed loans and received an additional $1.7 million in SBA stimulus “Payroll Protection Program” funds which were used for payroll, healthcare benefits, and other applicable operating expenses.  In July 2021, the Company was notified that all of the stimulus funds were forgiven with the exception of approximately $8,000 which was returned in the three months ending September 30, 2021.

In the United Kingdom, as of April 1, 2020, Mission furloughed twenty-seven employees, saving £78,000 in April payroll, being made up of £55,000 of furlough monies from the government and £16,000 in associated payroll savings and applied for a 3-month rent holiday. In May 1, 2020, Mission put on furlough an additional 5 employees bringing the total to 32, alongside a 10% pay cut for all employees not furloughed, saving £111,000 in May payroll, being made up of £62,000 of furlough monies from the government, £33,000 of associated payroll savings and £16,000 in savings related to the pay cut. On April 1, 2020, Troika Design Group actioned a 15% salary reduction across the majority of the Los Angeles staff and furloughed one office manager for a total savings of $112,000 per month. Finally, certain members of the Company’s executive team deferred compensation temporarily. In August 2020, the Company received £50,000 in loans related to the COVID pandemic with an interest rate of 2.5% to be paid over five years beginning one year after receipt. The Company used these proceeds to address any cash shortfalls that resulted from the pandemic.

The extent to which the COVID-19 outbreak continues to impact the Company’s results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact. 

8

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of TMG, and its wholly-owned subsidiaries, Troika Design Group, Inc. (California), Troika Services Inc. (New York), Troika Analytics Inc. (New York), Troika Productions, LLC (California), Troika-Mission Holdings, Inc. (New York), Mission Culture LLC (Delaware), Mission-Media Holdings Limited (England and Wales), Mission Media USA, Inc. (New York), and Troika  IO, Inc. (f/k/a Redeeem Acquisition Corp) (California). All significant intercompany accounts and transactions have been eliminated in consolidation.

RECLASSIFICATION OF PRIOR YEAR FINANCIALS

In the three months ended September 30, 2020, the Company reported amortization of right-of-use assets of $320,000 in its Condensed Consolidated Statements of Cash Flows separately in net cash used in operating activities.  For purposes of consistency, this balance was reclassified to operating lease liability within the Condensed Consolidated Statements of Cash Flows resulting in a balance of $171,000 from $(149,000).  The reclassification did not change the net cash used in operating activities as it remains at $(1,182,000).

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods.

Significant estimates and assumptions made by management include, among others, the assessment of the collectability of accounts receivable and the determination of the allowance for doubtful accounts, the valuation and useful life of capitalized equipment costs and long-lived assets, valuation of warrants and options, the determination of the useful lives and any potential impairment of long-lived assets such as intangible assets and goodwill, the allocation of purchase consideration to assets and liabilities due to the Redeeem acquisition, stock-based compensation, and deferred tax assets.  Actual results could differ from those estimates.

FAIR VALUE MEASUREMENT

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. There are three levels of inputs that may be used to measure fair value:

Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Other inputs that are directly or indirectly observable in the marketplace.

Level 3 - Unobservable inputs which are supported by little or no market activity.

 Fair-value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2021 and June 30, 2021.  The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts receivable, accounts payable, accrued liabilities, and convertible notes payable. Fair values for these items were assumed to approximate carrying values because of their short term nature or they are payable on demand. The Company uses Level 3 inputs for its valuation methodology for the embedded conversion option liabilities as the fair values were determined by using the Black-Scholes option-pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. 

9

IMPAIRMENT OF LONG-LIVED ASSETS

The Company evaluates, on a periodic basis, long-lived assets to be held and used for impairment in accordance with the reporting requirements of ASC 360-10. The evaluation is based on certain impairment indicators, such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements, as well as other external market conditions or factors that may be present. If these impairment indicators are present or other factors exist that indicate that the carrying amount of the asset may not be recoverable, then an estimate of the undiscounted value of expected future operating cash flows is used to determine whether the asset is recoverable and the amount of any impairment is measured as the difference between the carrying amount of the asset and its estimated fair value. The fair value is estimated using valuation techniques such as market prices for similar assets or discounted future operating cash flows. 

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company maintains cash and cash equivalent account balances with financial institutions in the United States and United Kingdom which at times exceed federally insured limits for accounts in the United States. Considering deposits with these institutions can be redeemed on demand, the Company believes there is minimal risk. As of September 30, 2021 and  June 30, 2021, the Company had $8,357,000 and $10,125,000 in cash that was uninsured, respectively.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.  As of September 30, 2021 and June 30, 2021, the Company had no cash equivalents.

ACCOUNTS RECEIVABLE

Our accounts receivable are amounts due from our clients. The Company accounts for unbilled accounts receivable using the percentage-of-completion accounting method for revenue recognized and the customer has not been invoiced due to the terms of the contract or the timing of the account invoicing cycle.

For those clients to whom we extend credit, we perform periodic evaluations of accounts receivable and maintain allowances for potential credit losses as deemed necessary.

The Company periodically reviews the outstanding accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. When a customer’s account is deemed to be uncollectible the outstanding balance is charged to the allowance for doubtful accounts. As of September 30, 2021 and June 30, 2021, the Company had $452,000 and $521,000 in allowance for doubtful accounts, respectively.

PROPERTY AND EQUIPMENT, NET

Property and equipment are stated at cost less accumulated depreciation and amortization. Property and equipment consist of furniture and computer equipment. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets, generally ranging from three to seven years. Maintenance and repairs are charged to expense as incurred.  Expenditures that increase the value or productive capacity of assets are capitalized.  When assets are retired or otherwise disposed of, the cost and accumulated depreciation or amortization are removed from the accounts and any resulting gain or loss is reflected in the statements of income in the period realized.

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GOODWILL AND INTANGIBLE ASSETS

As a result of acquisitions, the Company recorded goodwill and identifiable intangible assets as part of its allocation of the purchase consideration.

Goodwill 

Goodwill is the excess of the purchase price paid over the fair value of the net assets of the acquired business. Goodwill is tested annually at June 30 for impairment. The annual qualitative or quantitative assessments involve determining an estimate of the fair value of reporting units in order to evaluate whether an impairment of the current carrying amount of goodwill exists. A qualitative assessment evaluates whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two-step quantitative goodwill impairment test. The first step of a quantitative goodwill impairment test compares the fair value of the reporting unit to its carrying amount including goodwill. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss may be recognized. The amount of impairment loss is determined by comparing the implied fair value of the reporting unit’s goodwill with the carrying amount. If the carrying amount exceeds the implied fair value then an impairment loss is recognized equal to that excess.  There was no goodwill impairment recorded as a result of the Company’s annual impairment assessment on June 30, 2021. The Company has adopted the provisions of ASU 2017-04—Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 requires goodwill impairments to be measured on the basis of the fair value of a reporting unit relative to the reporting unit’s carrying amount rather than on the basis of the implied amount of goodwill relative to the goodwill balance of the reporting unit. Thus, ASU 2017-04 permits an entity to record a goodwill impairment that is entirely or partly due to a decline in the fair value of other assets that, under existing GAAP, would not be impaired or have a reduced carrying amount. Furthermore, the ASU removes “the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test.” Instead, all reporting units, even those with a zero or negative carrying amount will apply the same impairment test. Accordingly, the goodwill of reporting unit or entity with zero or negative carrying values will not be impaired, even when conditions underlying the reporting unit/entity may indicate that goodwill is impaired.

We test our goodwill for impairment annually, or, under certain circumstances, more frequently, such as when events or circumstances indicate there may be impairment. We are required to write down the value of goodwill only when our testing determines the recorded amount of goodwill exceeds the fair value. Our annual measurement date for testing goodwill impairment is June 30. 

None of the goodwill is deductible for income tax purposes.

Intangibles

Intangible assets with finite useful lives consist of tradenames, non-compete agreements, acquired workforce and customer relationships and are amortized on a straight-line basis over their estimated useful lives, which range from three to ten years. The estimated useful lives associated with finite-lived intangible assets are consistent with the estimated lives of the associated products and may be modified when circumstances warrant. Such assets are reviewed for impairment when events or circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset and its eventual disposition are less than its carrying amount. The amount of any impairment is measured as the difference between the carrying amount and the fair value of the impaired asset. There was no impairment recorded for intangibles in the three months ended September 30, 2021 and 2020.

LEASES

Right-of-use assets and lease liabilities are recorded in accordance with Leases (Topic 842).  The Company has recorded a lease liability because the Company has the obligation to make lease payments and a ROU asset for the right to use the underlying asset for the lease term. The lease liability is measured at the present value of the lease payments over the lease term. The right-of-use asset is measured at the lease liability amount, adjusted for lease prepayments, lease incentives received and the lessee’s initial direct costs. The Company uses the optional transitional method and elected to use the package of three practical expedients which allows the Company not to reassess whether contracts are or contain leases, lease classification and whether initial direct costs qualify for capitalization.

Income from subleased properties as well as non-lease items such as common-area maintenance and utilities are recognized as non-operating “other income” on the Consolidated Statements of Operations and Comprehensive Loss.

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REVENUE RECOGNITION

The Company recognizes revenue in accordance with the Financial Accounting Standards Board’s (“FASB”), Accounting Standards Codification (“ASC”) ASC 606, Revenue from Contracts with Customers (“ASC 606”). Revenues are recognized when control is transferred to customers in amounts that reflect the consideration the Company expects to be entitled to receive in exchange for those goods. Revenue recognition is evaluated through the following five steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied.

The Company recognizes primarily four revenue streams and they are retainer fees, project fees, reimbursement income, and fee income.

Retainer fees are non-refundable fixed amounts being received from a client often on a recurring basis and the performance obligation is the staff being available to provide consultation services.  Consulting engagements do not incur a significant amount of direct costs however any costs are recognized as incurred.   Consulting fees are recognized evenly throughout the term of the agreement.

Project fees are associated with the delivery of services and/or goods to a client and the revenue includes both the anticipated costs to deliver the product as well as the Company’s margin.  As per ASC 606-10-25-31, the Company recognizes project fees over time by measuring the progress toward complete satisfaction of a performance obligation by measuring its performance in transferring control of the services contractually delivered to a client by applying the input method.   Revenue is recognized based on the extent of inputs expended toward satisfying a performance obligation and it was determined that the best judge of inputs is the costs consumed by a project in relation to its total anticipated costs.  As part of the close process the Company compiles a preliminary percentage of completion (POC) for each project which is the ratio of incurred costs to date in relation to the anticipated costs from the production team’s approved budgets.  The POC ratio is then applied to the contracted revenue and the pro-rated revenue is then recognized accordingly.

Reimbursement income represents compensation relating to the out-of-pocket costs associated with a staging of a live event.  As per 606-10-25-31, the Company recognizes reimbursement income over time by measuring the progress toward complete satisfaction of a performance obligation by measuring its performance in transferring control of the services contractually delivered to a client by applying the input method.   The revenue is recognized based on the extent of inputs expended toward satisfying a performance obligation and it was determined that the best judge of input is the costs incurred to date in relation to the anticipated costs.  As a result, unless an overage or saving is identified, the reimbursement income equates to the reimbursement costs incurred.   Given that the Company contracts directly with the majority of the vendors and is liable for any overages, the Company is deemed a principal in this revenue transaction as they have control over the asset and transfer the asset themselves.  As a result, this transaction is recorded gross rather than net.  

Fee income represents the Company’s margin on the staging of a live event, is negotiated with the client prior and fixed.  Based on ASC 606, the Company’s progress in satisfying the performance obligation in a contract is difficult to determine so as a result the fee income is only recognized at the conclusion of a project.  Only upon confirmation the Company has performed all its contractual obligations as per the contract does the Company record fee income.

Contract Assets

The Company does not have any contract assets such as work-in-process. All trade receivables on the Company’s consolidated balance sheet are from contracts with customers.

Contract Costs

Costs incurred to obtain a contract are capitalized unless short term in nature. As a practical expedient, costs to obtain a contract that are short term in nature are expensed as incurred. The Company does not have any contract costs capitalized as of September 30, 2021 and June 30, 2021.

Contract Liabilities - Deferred Revenue

The Company’s contract liabilities consist of advance customer payments and deferred revenue. Deferred revenue results from transactions in which the Company has been paid for products by customers, but for which all revenue recognition criteria have not yet been met. Once all revenue recognition criteria have been met, the deferred revenues are recognized.

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ADVERTISING

The Company generally expenses marketing and advertising costs as incurred. During the three months ended September 30, 2021 and 2020, the Company incurred $18,000 and $0, respectively, on marketing, trade shows and advertising.

The Company received rebates on advertising from co-operative advertising agreements with several vendors and suppliers. These rebates have been recorded as a reduction to the related advertising and marketing expense.

BENEFICIAL CONVERSION FEATURE

The Company accounts for convertible notes payable in accordance with the guidelines established by the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 470-20, Debt with Conversion and Other Options, Emerging Issues Task Force (“EITF”) 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, and EITF 00-27, Application of Issue No 98-5 To Certain Convertible Instruments. The Beneficial Conversion Feature (“BCF”) of a convertible note is normally characterized as the convertible portion or feature of certain notes payable that provide a rate of conversion that is below market value or in-the-money when issued. The Company records a BCF related to the issuance of a convertible note when issued and also records the estimated fair value of any warrants issued with those convertible notes. Beneficial conversion features that are contingent upon the occurrence of a future event are recorded when the contingency is resolved.

 The BCF of a convertible note is measured by allocating a portion of the note’s proceeds to the warrants, if applicable, and as a reduction of the carrying amount of the convertible note equal to the intrinsic value of the conversion feature, both of which are credited to additional paid-in-capital. The value of the proceeds received from a convertible note is then allocated between the conversion features and warrants on an allocated fair value basis. The allocated fair value is recorded in the financial statements as a debt discount (premium) from the face amount of the note and such discount is amortized over the expected term of the convertible note (or to the conversion date of the note, if sooner) and is charged to interest expense using interest method.

DERIVATIVE LIABILITY

The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity” and ASC 815, “Derivatives and Hedging”. Derivative liabilities are adjusted to reflect their fair value at each period end with any increase or decrease in the fair value being recorded in results of operations.   The fair value of derivative instruments such as convertible note payables are valued using the Black-Scholes option-pricing model based on various assumptions.

STOCK-BASED COMPENSATION

The Company recognizes stock-based compensation in accordance with ASC Topic 718 “Stock Compensation”, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options and employee stock purchases related to an Employee Stock Purchase Plan based on the estimated fair values.

For non-employee stock-based compensation, the Company has adopted ASC 2018-07, Improvements to Nonemployee Share-Based Payment Accounting which expands on the scope of ASC 718 to include share-based payment transactions for acquiring services from non-employees and requires stock-based compensation related to non-employees to be accounted for based on the fair value of the related stock or the fair value of the services at the grant date, whichever is more readily determinable in accordance with ASC Topic 718.

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FOREIGN CURRENCY TRANSLATION

The consolidated financial statements of the Company are presented in U.S. dollars. The functional currency for the Company is U.S. dollars for all entities other than Mission Media Limited whose operations are based in the United Kingdom and their functional currency is British Pound Sterling (GBP). Transactions in currencies other than the functional currencies are recorded using the appropriate exchange rate at the time of the transaction. All assets and liabilities are translated into U.S. Dollars at balance sheet date, shareholders’ equity is translated at historical rates and revenue and expense accounts are translated at the average exchange rate for the year or the reporting period. The translation adjustments are reported as a separate component of stockholders’ equity, captioned as accumulated other comprehensive (loss) income. Transaction gains and losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the statements of operations.

The relevant translation rates are as follows: for the three months ended September 30, 2021 closing rate at 1.34260 US$: GBP, average rate at 1.37167 US$: GBP, for the three months ended September 30, 2020 closing rate at 1.29180 US$: GBP, average rate at 1.31230 US$: GBP.

INCOME TAXES

The Company accounts for its income taxes in accordance with Income Taxes Topic of the FASB ASC 740, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.

Income tax expense is based on reported earnings before income taxes. Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for consolidated financial reporting purposes and such amounts recognized for tax purposes and are measured by applying enacted tax rates in effect in years in which the differences are expected to reverse.

The Company also follows the guidance related to accounting for income tax uncertainties. In accounting for uncertainty in income taxes, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority.

The Company has net operating losses for both their US and UK entities however a full valuation allowance was recorded due to uncertainties in realizing the deferred tax asset.

COMPREHENSIVE LOSS

Comprehensive loss is defined as a change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources and includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.  For the Company, comprehensive loss for the three months ended September 30, 2021 and 2020 included net loss and unrealized gains (losses) from foreign currency translation adjustments. 

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EARNINGS PER COMMON SHARE

Net income (loss) per common share is calculated in accordance with ASC Topic: 260 Earnings per Share.  Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.  The computation of diluted net loss per share does not include dilutive common stock equivalents in the weighted average shares outstanding as they would be anti-dilutive.  In periods where the Company has a net loss, all dilutive securities are excluded.

The following are dilutive common stock equivalents as of September 30, 2021 and 2020, which were not included in the calculation of loss per share, since the Company had a net loss from continuing operations and net loss:

	September 30,
	2021		2020
Convertible preferred stock		48,000		16,280,397
Stock options		2,793,255		2,576,869
Stock warrants		7,403,569		6,997,518
Total		10,244,824		25,854,785

STIMULUS FUNDING

In accordance with IAS-20, Accounting for Government Grants and Disclosure of Government Assistance, the proceeds from government grants are to be recognized as a deferred income liability and reported as income as the related costs are expensed.   On September 30, 2021, the Company recorded deferred income liabilities of $0 within contract liabilities and $440,000 within stimulus loans, respectively.  On June 30, 2021, the Company recorded deferred income liabilities of $270,000 within contract liabilities and $569,000 within stimulus loans, respectively.  For the three months ending September 30, 2021 and 2020, the Company recognized $262,000 and $0 in income from government grants, respectively.  In the three months ending September 30, 2021, $8,000 of the stimulus funding was not forgiven and returned to the bank.

RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Pronouncements Not Yet Effective

In August 2020, FASB issued ASU 2020-06, “Debt—Debt with Conversion and Other and Derivatives and Hedging—Contracts in Entity’s Own Equity: Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” which simplifies the accounting for convertible instruments by removing the separation models for convertible debt with a cash conversion feature and convertible instruments with a beneficial conversion feature. As a result, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost. These changes will reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that was bifurcated according to previously existing rules. Also, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will be no longer available. The new guidance is effective for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020-06 however it is not believed that it will have a material impact to the financials.

In December 2019, the FASB issued amended guidance in the form of ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This ASU is intended to simplify various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for annual periods beginning after December 15, 2020 and interim periods within those annual periods, with early adoption permitted. An entity that elects early adoption must adopt all the amendments in the same period. Most amendments within this ASU are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company is in the initial stage of evaluating the impact of this new standard however it does not believe the guidance will have a material impact on its financial statements.

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NOTE 2 – PROPERTY AND EQUIPMENT

Property and equipment consist of the following as of September 30, 2021 and June 30, 2021:

	September 30, 2021			June 30, 2021
Computer equipment	$	728,000		$	697,000
Website design		6,000			6,000
Office machine & equipment		95,000			97,000
Furniture & fixtures		456,000			438,000
Leasehold improvements		144,000			135,000
Tenant incentives		145,000			145,000
		1,574,000			1,518,000
Accumulated depreciation		(1,195,000	)		(1,175,000	)
Net book value	$	379,000		$	343,000

During the three months ended September 30, 2021 and 2020, depreciation expense was $30,000 and $31,000, respectively.

NOTE 3 – INTANGIBLE ASSETS

Intangible assets consisted of the following as of September 30, 2021 and June 30, 2021:

	September 30, 2021			June 30, 2021
Customer relationship	$	4,960,000		$	4,960,000
Non-core customer relationships		760,000			760,000
Non-compete agreements		1,430,000			1,430,000
Technology		520,000			520,000
Tradename		470,000			470,000
Workforce acquired		2,125,000			2,125,000
		10,265,000			10,265,000
Less: accumulated amortization		(7,834,000	)		(7,662,000	)
Net book value	$	2,431,000		$	2,603,000

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Purchased intangible assets with finite useful lives are amortized over their respective estimated useful lives (using an accelerated method for customer relationships and trade names) to their estimated residual values, if any. The Company’s finite-lived intangible assets consist of customer relationships, contractor and resume databases, trade names, and internal use software and are being amortized over periods ranging from two to nine years. Purchased intangible assets are reviewed annually to determine if facts and circumstances indicate that the useful life is shorter than originally estimated or that the carrying amount of assets may not be recoverable. If such facts and circumstances exist, recoverability is assessed by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Impairments, if any, are based on the excess of the carrying amount over the fair value of those assets. If the useful life is shorter than originally estimated, the rate of amortization is accelerated and the remaining carrying value is amortized over the new shorter useful life.   For the three months ended September 30, 2021, the Company had no impairments.  During the fiscal year ending June 30, 2021, the Company recorded $0 in impairment expense related to intangibles.

During the three months ended September 30, 2021 and 2020, amortization expense was $172,000 and $540,000, respectively.

NOTE 4 – ACCOUNTS PAYABLE & ACCRUED EXPENSES            

As of September 30, 2021 and June 30, 2021, the Company recorded $7,396,000 and $8,363,000 in accounts payable and accrued expenses respectively.  Both accounts payable and accrued expenses are treated as current liabilities however the difference is that a formal invoice has been received and entered to record an accounts payable.

	September 30, 2021		June 30, 2021
Accounts payable	$	2,135,000	$	2,362,000
Accrued expenses		4,195,000		4,819,000
Accrued payroll		361,000		294,000
Accrued taxes		705,000		888,000
	$	7,396,000	$	8,363,000

NOTE 5 – CONVERTIBLE NOTES PAYABLE

                In October 2020, the Company received gross proceeds of $50,000 representing a convertible note payable issued to an existing investor.   Terms include an interest rate of 10% and a maturity date the earlier of January 1, 2021 or five business days after the Company is listed on a US national securities exchange.  Upon mutual agreement, the outstanding balance can be converted to common stock at a conversion price 25% less the current market price.  In consideration for the loan, 6,667 warrants were issued at an exercise price of $2.25 per share vesting over three years.  The Company determined that the note’s conversion feature should be valued separately and bifurcated from the host instrument and accounted for as a separate derivative liability.   The fair market value of the embedded conversion feature was determined to be $1,000 and $13,000 using the Black-Scholes model as of September 30, 2021 and June 30, 2021, respectively.   The derivative liability was recorded as a short-term liability and interest expense of $1,000 was recorded for the three months ending September 30, 2021.  The assumptions used in the Black-Scholes valuation include a volatility of 64.49%, risk-free rate of 0.98% and a term of one. 

During the three months ended September 30, 2021 and 2020, the Company paid $0 towards the principal of the Promissory Notes.

As of September 30, 2021 and June 30, 2021, there was a total $50,000 in notes payable outstanding.  The Company recorded $1,000 in interest expense relating to convertible note payables during the three months ended September 30, 2021 and 2020.  The Company recorded $0 and $17,000 in amortization expense relating to the note payable discount during the three months ended September 30, 2021 and 2020, respectively.

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NOTE 6 – NOTE PAYABLE RELATED PARTY

As of September 30, 2021 and 2020, the Company owed the founder and CEO of Troika Design Group, Inc., Dan Pappalardo, approximately $180,000 and $217,000, respectively.  The loan was due and payable on demand and accrue interest at 10.0% per annum.  In the year ended June 30, 2021, the Company paid $17,000 to Dan Pappalardo representing miscellaneous expense reimbursements and in the three months ending September 30, 2021 paid $20,000 in principal.  Interest expense of $5,000 were recorded for this note for the three months ending September 30, 2021 and 2020.

As of September 30, 2021 and 2020, the Company owed the estate of his mother Sally Pappalardo $0 and $235,000, respectively.  The loan was due and payable on demand and accrued interest at 10.0% per annum.  Interest expense of $0 and $5,000 were recorded for this note for the three months ending September 30, 2021 and 2020, respectively.  In the year ended June 30, 2021, the Company paid $300,000 to the estate of Sally Pappalardo representing the outstanding principal of $235,000 and accrued interest of $65,000.  The holder provided the Company a signed release acknowledging all obligations under the note had been paid in full. 

During the year ended June 30, 2020, the Company issued a convertible promissory note of $1,300,000 to a related party with an interest rate of 5.0% and convertible into shares of the Company’s common stock at a rate of $0.75 per share. The holder elected to convert the debt into shares of the Company’s common stock in July 2019 at a rate of $0.75 per share for 1,733,334 shares.  This balance was recorded as stock payable on June 30, 2020 as the shares were not issued until July 2020.

Total interest expense on note payable related party was $5,000 and $10,000 for the three months ending September 30, 2021 and 2020, respectively.  Total imputed interest on note payable related party was $0 and $4,000 for the three months ending September 30, 2021 and 2020, respectively.

NOTE 7 – LEASE LIABILITIES

                The Company leases office space and as a result of our adoption of ASC 842, the operating leases are reflected on our balance sheet within operating lease right-of-use (ROU) assets and the related current and non-current operating lease liabilities. ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from lease agreement.  Lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectation regarding the terms. Variable lease costs such as common area maintenance, property taxes and insurance are expensed as incurred.

When the new accounting standard was adopted on July 1, 2019, the Company had current and long-term operating lease liabilities of $2,275,000 and $6,916,000, respectively, and right of use of assets of $8,348,000.  As of September 30, 2021, the Company had current and long-term operating lease liabilities of $3,115,000 and $5,785,000, respectively, and right of use of assets of $6,827,000. As of June 30, 2021, the Company had current and long-term operating lease liabilities of $3,344,000 and $5,835,000, respectively, and right of use of assets of $6,887,000.

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Future minimum lease payments on a discounted and undiscounted basis under these leases are as follows:

	Troika  Gower			Troika LaBrea			Corporate Englewood			Mission US Brooklyn			Mission US Manhattan			Mission UK London			Undiscounted Cash Flows
Discount rate		5.50	%		5.50	%		5.50	%		5.50	%		5.50	%		5.50	%
Remainder of 2022	$	712,000		$	883,000		$	83,000		$	827,000		$	171,000		$	380,000		$	3,056,000
2023		558,000			-			103,000			497,000			-			631,000			1,789,000
2024		580,000			-			107,000			509,000			-			631,000			1,827,000
2025		346,000			-			110,000			522,000			-			631,000			1,609,000
2026		-			-			112,000			535,000			-			526,000			1,173,000
2027		-			-			9,000			455,000			-						464,000
Total undiscounted minimum future payments	$	2,196,000		$	883,000		$	524,000		$	3,345,000		$	171,000		$	2,799,000		$	9,918,000
Imputed interest		(134,000	)		-			(65,000	)		(415,000	)		(24,000	)		(380,000	)		(1,018,000	)
Total operating lease liabilities	$	2,062,000		$	883,000		$	459,000		$	2,930,000		$	147,000		$	2,419,000		$	8,900,000
Short-term lease liabilities	$	762,000		$	883,000		$	85,000		$	824,000		$	147,000		$	414,000		$	3,115,000
Long-term lease liabilities	$	1,300,000		$	-		$	374,000		$	2,106,000		$	-		$	2,005,000		$	5,785,000

Other information related to our operating leases is as follows:

	Three Months Ended September 30, 2021
Weighted average remaining lease term in years	3.7 years
Weighted average discount rate		10.3	%

LEASE AGREEMENTS

On February 8, 2013, our Troika Design Group, Inc. subsidiary entered into a lease agreement for office space in Los Angeles, CA. The lease commenced upon move in, December 15, 2013. As part of the lease agreement, Troika received a rent abatement in months two through six of the lease and partial rent abatement in months seven through nine. The lease also provides for an escalation clause where the Company will be subject to an annual rent increase of 3%, year over year. Initially the lease expired on May 31, 2021, however the Company surrendered the premises in January 2020.

On February 1, 2018, Troika Media Group entered into a five-year lease agreement for office space in Englewood Cliffs, NJ.  The beginning lease expense was $4,120 per month escalating annually at 3.5% and the lease expires on January 31, 2023.  In August 2021, the Company terminated the lease and Troika Services, Inc. entered into a new lease agreement for a larger office space within the same building.  The beginning lease expense was $8,390 per month escalating annually at 3.0% for a term of five years expiring July 2026.   As per accounting standard ASC 842, the Company is treating this lease as new agreement and recorded a loss of $3,000 from the early termination of the operating lease.  As a result of the new lease agreement, the Company acquired $467,000 in right-of-use assets. 

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On January 9, 2014, Mission USA entered into a seven year and five-month lease agreement for office space in New York, NY.  The beginning lease expense was $19,230 per month escalating annually at 2.5%.  As part of the lease agreement, Mission USA received a rent abatement in months one through five of the lease. The lease expires January 2022.

On May 2, 2017, Mission USA entered into a ten-year lease agreement for office space in Brooklyn, NY. The beginning lease expense was $34,278 per month escalating annually at 2.5%. As part of the lease agreement, Mission USA received a rent abatement in months one through four of the lease. The lease expires on May 1, 2027.  In August 2021, the Company amended the lease agreement and lowered the base rent beginning in July 2021 to $24,750 for twelve months, escalating to $28,875 in July 2022 for twelve months, and then returning to the original lease agreement.  Contingent on the Company abiding by the payment terms stipulated in the amendment regarding the outstanding rent, the landlord agreed to abate $120,405 of this balance and the Company is planning on recording this abatement in August 2022 after fulfilling its obligations relating to the payment terms.

On April 6, 2016, Mission UK entered into a ten-year lease agreement for office space in London, UK. The beginning lease expense was £17,365 ($22,432) per month for the first twelve months and then escalated to £40,916 ($52,855) per month for the remainder of the lease which expires April 5, 2026.  As part of the lease agreement, Mission UK received a rent abatement in months sixty-one through sixty-six of the lease.   On September 8, 2020, Mission UK entered into an amendment to the current lease providing a discount for the period between March 25, 2020 and September 28, 2020 in acceptance of an increase in the monthly payments from £40,916 to £46,766 for the months of October 2020 through April 2021.  The amended lease was recorded in accordance ASC 842 and the lease expense was recognized on a straight-line basis over the new lease term.  In April 2021, Mission UK terminated the original lease agreement and has agreed with the landlord to occupy the first floor of the building through June 2021 at £8,858 per month.  In April 2021, Mission UK entered into a three-year lease agreement for office space in London, UK ending in April 2024. The lease expense is £39,173 ($54,016) per month throughout the life of the lease.

On February 1, 2020, Troika Production Group, LLC. entered into a five-year lease agreement for office space in Los Angeles, CA.  The beginning lease expense is $42,265 and the lease provides for an escalation clause where the Company will be subject to an annual rent increase of 3.5%, year over year.  The lease expires on January 31, 2025.

The Company accounts for leases based on the new accounting standard ASC 842 and recorded $345,000 and $782,000 in rent expense for the three months ended September 30, 2021 and 2020, respectively. 

SUBLEASE AGREEMENTS

On January 19, 2018, Mission Media USA, Inc. entered into a four-year sublease agreement pertaining to the aforementioned office space in New York, NY.  The sublease commenced on March 1, 2018 and ends January 2022.  The lease income was $22,496 per month escalating annually at 3.0%.

On April 19, 2018, Mission-Media Limited entered into a sublease agreement pertaining to a floor within the aforementioned office space in London, UK.  The sublease commenced in April 2018 and terminated in March 2021.  The lease income was £5,163 per month.

NOTE 8 – LEGAL MATTERS

We may become a party to litigation in the normal course of business. In the opinion of management, there are no legal matters involving us that would have a material adverse effect upon our financial condition, results of operations or cash flows.

20

STEPHENSON SETTLEMENT

In July 2021, the Company entered into a settlement agreement regarding the Stephenson legal dispute which settled all matters between the Company and the former owners of the Mission entities.  The agreement provided for the full payment of all amounts due to the Company and allowed the Stephensons to sell the shares subject to a leak-out period.  The agreement was filed with the Court and a settlement payment of approximately $905,000 which was recognized in the three months ending September 30, 2021.  In addition to this cash settlement, the Company also reversed approximately $133,000 in accruals relating to the Stephensons which was recorded as other income.

Other than the foregoing, no material legal proceedings to which the Company (or any officer or director of the Company, or any affiliate, to management’s knowledge) is party to or to which the property of the Company is subject is pending, and no such material proceeding is known by management of the Company to be contemplated.

LA BREA LEASE AGREEMENT

The Company was contacted by counsel representing the landlord of Troika Design’s former La Brea office lease in Los Angeles regarding the amounts due under the lease.  The Company is reviewing the claims and assessing the amount due under the lease although an exact figure cannot be ascertained at this time due to potential mitigating factors.  It is management’s belief that the Company has reasonably accrued a corresponding liability and that a settlement will be entered into with payments over time sometime in the near future, but negotiations have not begun.

NOTE 9 – STOCKHOLDERS’ EQUITY
 
REVERSE STOCK SPLIT

In June 2020, our Board of Directors and stockholders holding a majority of the outstanding shares of our voting securities  approved a resolution authorizing our Board of Directors to effect a reverse stock split of our common stock at a certain exchange ratios from 1:10 to 1:15 with our Board of Directors retaining the discretion as to whether to implement the reverse stock split and which exchange ratio to implement.  In September 2020, the Company amended its articles of incorporation and enacted a reverse stock split of one share for each fifteen shares and the accompanying financials reflect the reverse stock split retroactively.

                The reverse stock split resulted in a decrease in authorized shares of all classes of stock from 615,000,000 to 315,000,000 shares consisting of 300,000,000 shares of common stock at a par value of $0.001 and 15,000,000 shares of preferred stock at a par value of $0.01 per share.  Prior to the reverse stock split, the Company had 600,000,000 shares of common stock at a par value of $0.001, 15,000,000 shares of preferred stock at a par value of $0.20 per share.

COMMON STOCK

As of September 30, 2021 and June 30, 2021, the Company had 43,572,950 and 39,496,588 shares of common stock issued and outstanding, respectively. 

In the three months ending September 30, 2020, the holder of a convertible promissory note for $1,000,000 informed the Company that they had elected to convert the balance due to common shares at the agreed upon conversion price of $3.00 per share and 387,223 shares were issued representing the outstanding principal and accrued interest.

In the three months ending September 30, 2020, the holder of a convertible promissory note for $200,000 informed the Company that they had elected to convert the balance due to common shares at the agreed upon conversion price of $3.75 per share and 56,000 shares were issued representing the outstanding principal and loan fee.

21

In the three months ending September 30, 2020, the holder of a convertible promissory note for $200,000 informed the Company that they had elected to convert the balance due to common shares at the agreed upon conversion price of $3.75 per share and 56,000 shares were issued representing the outstanding principal and loan fee.

In July 2020, the holder of a related party convertible promissory note of $1,300,000 elected to convert the debt into shares of the Company’s common stock at a rate of $0.75 per share for 1,733,334 shares.

PREFERRED STOCK

The Company has authorized 15,000,000 shares as preferred stock, par value $0.01 series A, B, C and D, of which 5,000,000 shares have been designated as Series A preferred stock; 3,000,000 shares have been designated as Series B convertible preferred stock; 1,200,000 shares have been designated as Series C convertible preferred stock; and 2,500,000 shares have been designated as Series D convertible preferred stock.

As of September 30, 2021, 720,000 shares of Series A Preferred Stock were issued and outstanding; 0 shares of Series B Preferred Stock were issued and outstanding; 0 shares of Series C Preferred Stock were issued and outstanding; and 0 shares of Series D Preferred Stock were issued and outstanding. 

As of June 30, 2021, 720,000 shares of Series A Preferred Stock were issued and outstanding; 0 shares of Series B Preferred Stock were issued and outstanding; 0 shares of Series C Preferred Stock were issued and outstanding; and 0 shares of Series D Preferred Stock were issued and outstanding.  On May 10, 2021, the Company converted all Preferred Stock Series B, C, and D into Common Stock following its uplisting to the Nasdaq Capital Market.  At the time of the conversion the Company had 2,495,000 shares of Series B Convertible Preferred Stock that were convertible into 594,048 shares of common stock at a price of $4.20 per share; 911,149 shares of Series C Convertible Preferred Stock convertible into 12,287,386 shares of Common Stock at $0.074 per share; and 1,979,000 shares of Series D Convertible Preferred Stock convertible into 5,277,334 shares of Common Stock at $0.375 per share for a total of 18,158,768 shares of Common Stock.

STOCK PAYABLE

                In the fiscal year ended June 30, 2021, the Company recorded a stock payable of $1,210,000 relating to the acquisition of Redeeem, LLC.   As per the asset purchase agreement dated May 21, 2021, 452,929 shares of common stock valued at $2.6715 per share were due to be issued to Redeeem’s employees and these shares were issued in August 2021.

DEFERRED COMPENSATION

On May 21, 2021, the Company entered into an agreement to acquire the assets and specific liabilities of fintech platform Redeeem, LLC for $2.6 million consisting of $1.2 million in cash, $166,000 in specific liabilities, and $1.2 million of the Company’s common stock.  In addition, the Company agreed to provide equity to its employees to be vested over three years valued at $9,680,000 representing 3,623,433 shares of the Company’s common stock at conversion price of $2.6715 per share. Given the equity is contingent on the employees being employed and are vested over three years, the Company is treating this as deferred compensation and the expenses are recorded as the equity is vested.  The vested portion of the deferred compensation was charged to additional paid-in capital and the expenses are recorded as stock-based compensation

In August 2021, all 3,623,433 shares of the Company’s common stock was issued to Redeeem’s employees and held in an escrow account subject to the vesting schedule in the aforementioned escrow agreement.  Based on the vesting schedule summarized below, 3,186,606 shares of the Company’s common stock was issued as of September 30, 2021 but not vested.

22

The following table summarizes the deferred compensation recorded:

	Amount			Unvested Shares
Deferred compensation balance recorded at acquisition date	$	9,680,000			3,623,433
Vested portion of deferred compensation in fiscal year 2021		(362,000	)		(135,425	)
Unamortized deferred compensation at June 30, 2021		9,318,000			3,488,008
Vested portion of deferred compensation in three months ending September 30, 2021		(805,000	)		(301,402	)
Unamortized deferred compensation at September 30, 2021	$	8,513,000			3,186,606

WARRANTS

During the three months ended September 30, 2021, the Company did not issue warrants.

During the three months ended September 30, 2020, the Company issued warrants to certain directors and consultants to purchase 156,667 shares of the Company’s common stock between $0.75 and $3.00 per share which vested during various terms and were valued at $475,000.  The Company recorded compensation of $7,000 for the vested portion during the three months ended September 30, 2020.  The Company recorded compensation of $154,000 for the three months ended September 30, 2020 relating to the vested portion of warrants that were issued in previous periods.   The total compensation of the unvested warrants to be recognized in future periods is $143,000 and the weighted average remaining is 3.2 years.

During the three months ended September 30, 2020, the Company also issued warrants to purchase 400,000 shares of the Company’s common stock at $0.75 relating to the conversion of an aforementioned convertible note which is vested over three years and valued at $1,200,000. 

As of September 30, 2021 and 2020, respectively, the Company has outstanding warrant shares of 8,296,408 with an intrinsic value of $12,158,467 and 8,341,333 warrant shares with an intrinsic value of $11,023,795.

In February 2021, the Company decided to extend all warrants issued in association with its previous Series B Preferred Stock one year beyond their original expiration date. The Company considered recording the increase in the fair value associated with these new terms in the three months ending September 30, 2021 but determined that the change was not material and an adjustment was not necessary.

The Company uses the Black-Scholes Model to determine the fair value of warrants granted. Option-pricing models require the input of highly subjective assumptions, particularly for the expected stock price volatility and the expected term of options. Changes in the subjective input assumptions can materially affect the fair value estimate. The expected stock price volatility assumptions are based on the historical volatility of the Company’s common stock over periods that are similar to the expected terms of grants and other relevant factors. The Company derives the expected term based on an average of the contract term and the vesting period taking into consideration the vesting schedules and future employee behavior with regard to option exercise. The risk-free interest rate is based on U.S. Treasury yields for a maturity approximating the expected term calculated at the date of grant. The Company has never paid any cash dividends on its common stock and the Company has no intention to pay a dividend at this time; therefore, the Company assumes that no dividends will be paid over the expected terms of warrants awards.

The Company determines the assumptions used in the valuation of warrants awards as of the date of grant. Differences in the expected stock price volatility, expected term or risk-free interest rate may necessitate distinct valuation assumptions at those grant dates. As such, the Company may use different assumptions for warrants granted throughout the year.

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                The Company has utilized the following assumptions in its Black-Scholes warrant valuation model to calculate the estimated grant date fair value of the warrants during the three months ended September 30, 2020:

	2020
Volatility - range	64.1% – 64.4%
Risk-free rate	0.2% - 0.3%
Contractual term	4.0 years
Exercise price	$0.75 - $3.00

A summary of the warrants granted, exercised, forfeited and expired for the three months ending September 30, 2021 are presented in the table below:

	Number of Warrant Shares		Weighted-Average Exercise Price		Weighted-Average Grant-Date Fair Value		Aggregate Intrinsic Value of Outstanding Warrant Shares		Weighted-Average Remaining Contractual Term (in years)
Outstanding July 1, 2021		8,296,408	$	1.05	$	1.90	$	12,158,467		2.2
Granted		-		-		-		-		-
Exercised		-		-		-		-		-
Forfeited		-		-		-		-		-
Expired		-		-		-		-		-
Outstanding September 30, 2021		8,296,408		1.05		1.90		12,158,467		1.9
Vested and exercisable September 30, 2021		7,407,440		1.02		1.78		9,961,656		2.0
Non-vested September 30, 2021		888,968	$	1.27	$	2.88	$	2,196,811		1.4

The following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable warrants under the Company’s warrant plans as of September 30, 2021.

		Outstanding Warrant Shares				Exercisable Warrant Shares
Exercise price range		Number of Warrant Shares		Weighted average remaining contractual life		Number of Warrant Shares		Weighted average remaining contractual life
$	0.75		4,106,667		2.0		4,106,667		2.2
$	2.84		20,000		4.6		11,110		1.9
$	3.75		4,051,223		2.0		3,171,145		2.3
$	5.10		33,333		0.1		33,333		0.1
$	27.00		85,185		0.1		85,185		0.1
			8,296,408		1.9		7,407,440		2.0

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A summary of the warrants granted, exercised, forfeited and expired for the three months ending September 30, 2020 are presented in the table below:

	Number of Warrant Shares			Weighted-Average Exercise Price		Weighted-Average Grant-Date Fair Value		Aggregate Intrinsic Value of Outstanding Warrant Shares		Weighted-Average Remaining Contractual Term (in years)
Outstanding July 1, 2020		7,858,741		$	1.52	$	1.92	$	9,234,295		3.0
Granted		556,667			0.79		3.11		1,647,500		4.3
Exercised		-			-		-		-		-
Forfeited		-			-		-		-		-
Expired		(74,075	)		11.30		7.65		110,000		-
Outstanding September 30, 2020		8,341,333			1.24		1.86		11,023,795		2.9
Vested and exercisable September 30, 2020		7,094,851			1.21		1.69		8,064,350		2.8
Non-vested September 30, 2020		1,246,482		$	1.38	$	2.85	$	2,959,445		3.5

The following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable warrants under the Company’s warrant plans as of September 30, 2020.

		Outstanding Warrant Shares				Exercisable Warrant Shares
Exercise price range		Number of Warrant Shares		Weighted average remaining contractual life		Number of Warrant Shares		Weighted average remaining contractual life
$	0.75		7,096,482		3.1		6,328,333		2.9
$	1.50		400,000		2.3		133,333		3.5
$	3.00		76,667		0.6		3,333		4.8
$	3.75		368,333		4.1		230,000		4.2
$	6.00		381,333		0.5		381,333		0.5
$	27.00		18,518		0.9		18,519		0.9
			8,341,333		2.9		7,094,851		2.8

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2017 EQUITY INCENTIVE PLAN 

On June 13, 2017, the Board adopted and approved an amendment to the Troika Media Group, Inc. 2015 Employee, Director and Consultant Equity Incentive Plan (the “Equity Plan”), to change the name from M2 nGage Group, Inc. to Troika Media Group, Inc., in order to attract, motivate, retain, and reward high-quality executives and other employees, officers, directors, consultants, and other persons who provide services to the Company by enabling such persons to acquire an equity interest in the Company. Under the Plan, the Board (or the compensation committee of the Board, if one is established) may award stock options, either stock grant of shares of the Company’s common stock, incentive stock option under IRS section 422 (“ISO’s”) or a non-qualified stock option (“Non-ISO’s”) (collectively “Options”). The Plan allocates 3,333,334 shares of the Company’s common stock (“Plan Shares”) for issuance of equity awards under the Plan. As of September 30, 2021, the Company has granted, under the Plan, awards in the form of NQSO’s

ISO’s Awards

During the three months ended September 30, 2021, the Company issued options to certain employees to purchase 385,167 shares of the Company’s common stock between $2.61 and $2.84 per share which vested during various terms and were valued at $503,000.  In regards to the options issued in the three months ending September 30, 2021, the Company recorded compensation of $0 for the vested portion of these options.  The Company recorded compensation of $107,000 relating to the vested portion of options that were issued in previous periods for the three months ended September 30, 2021.  The total compensation of the unvested options to be recognized in future periods is $1,672,000 and the weighted average remaining is 2.7 years.

During the three months ended September 30, 2020, the Company issued options to certain employees to purchase 76,667 shares of the Company’s common stock at $3.75 per share which vested during various terms and were valued at $123,000.  In regards to the options issued in the three months ending September 30, 2020, the Company recorded compensation of $0 for the vested portion of these options.  The Company recorded compensation of $166,000 relating to the vested portion of options that were issued in previous periods for the three months ended September 30, 2020.  The total compensation of the unvested options to be recognized in future periods is $719,000 and the weighted average remaining is 1.7 years.

The Company uses the Black-Scholes Model to determine the fair value of Options granted. Option-pricing models require the input of highly subjective assumptions, particularly for the expected stock price volatility and the expected term of options. Changes in the subjective input assumptions can materially affect the fair value estimate. The expected stock price volatility assumptions are based on the historical volatility of the Company’s common stock over periods that are similar to the expected terms of grants and other relevant factors. The Company derives the expected term based on an average of the contract term and the vesting period taking into consideration the vesting schedules and future employee behavior with regard to option exercise. The risk-free interest rate is based on U.S. Treasury yields for a maturity approximating the expected term calculated at the date of grant. The Company has never paid any cash dividends on its common stock and the Company has no intention to pay a dividend at this time; therefore, the Company assumes that no dividends will be paid over the expected terms of option awards.

The Company determines the assumptions used in the valuation of Option awards as of the date of grant. Differences in the expected stock price volatility, expected term or risk-free interest rate may necessitate distinct valuation assumptions at those grant dates. As such, the Company may use different assumptions for options granted throughout the year.

The Company has utilized the following assumptions in its Black-Scholes options valuation model to calculate the estimated grant date fair value of the options during the three months ended September 30, 2021 and 2020

	2021			2020
Volatility - range		65.3	%		64.8	%
Risk-free rate		0.9	%		0.3	%
Contractual term		3.0 years			3.0 years
Exercise price	$	2.61 - $2.84		$	3.75

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A summary of the options granted, exercised, forfeited and expired for the three months ending September 30, 2021 are presented in the table below:

	Number of Option Shares		Weighted-Average Exercise Price		Weighted-Average Grant-Date Fair Value		Aggregate Intrinsic Value of Outstanding Option Shares		Weighted-Average Remaining Contractual Term (in years)
Outstanding July 1, 2021		3,088,333	$	1.13	$	1.06	$	1,829,999		0.4
Granted		385,167		2.61		1.31		88,205		3.8
Exercised		-		-		-		-		-
Forfeited		-		-		-		-		-
Expired		-		-		-		-		-
Outstanding September 30, 2021		3,473,500		1.29		1.09		1,918,204		0.4
Vested and exercisable September 30, 2021		2,812,439		0.93		1.04		1,672,318		0.2
Non-vested September 30, 2021		661,061	$	2.85	$	1.56	$	245,886		2.7

The following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable options under the Company’s warrant plans as of September 30, 2021.

		Outstanding Option Shares				Exercisable Option Shares
Exercise price range		Number of Option Shares		Weighted average remaining contractual life		Number of Option Shares		Weighted average remaining contractual life
$	0.75		2,546,667		0.2		2,494,106		0.2
$	1.50		200,000		0.3		200,000		0.3
$	2.61		383,500		3.0		-		-
$	2.84		1,666		3.0		-		-
$	3.75		341,667		1.7		118,333		1.2
			3,473,500		0.4		2,812,439		0.2

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A summary of the options granted, exercised, forfeited and expired for the three months ending September 30, 2020 are presented in the table below:

	Number of Option Shares			Weighted-Average Exercise Price		Weighted-Average Grant-Date Fair Value		Aggregate Intrinsic Value of Outstanding Option Shares		Weighted-Average Remaining Contractual Term (in years)
Outstanding July 1, 2020		3,377,222		$	1.10	$	1.06	$	2,030,000		0.7
Granted		76,667			3.75		1.61		-		2.8
Exercised		-			-		-		-		-
Forfeited		-			-		-		-		-
Expired		(143,333	)		0.95		1.01		-		-
Outstanding September 30, 2020		3,310,556			1.10		1.01		1,830,000		0.6
Vested and exercisable September 30, 2020		2,589,106			0.80		0.83		1,110,651		0.3
Non-vested September 30, 2020		721,450		$	2.19	$	1.87	$	719,349		1.7

The following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable options under the Company’s warrant plans as of September 30, 2020.

		Outstanding Option Shares				Exercisable Option Shares
Exercise price range		Number of Option Shares		Weighted average remaining contractual life		Number of Option Shares		Weighted average remaining contractual life
$	0.75		2,768,889		0.4		2,417,995		0.2
$	1.50		200,000		1.0		166,667		1.0
$	3.75		341,667		2.5		4,444		1.6
			3,310,556		0.6		2,589,106		0.3

NOTE 10 – DISAGGREGATION OF REVENUE & LONG-LIVED ASSETS

The following table presents the disaggregation of gross revenue between revenue types:

	Three Months Ended September 30,
	2021		2020
Project fees	$	4,871,000	$	2,153,000
Retainer fees		461,000		565,000
Fee income		1,276,000		729,000
Reimbursement income		1,736,000		685,000
Other revenue		5,000		-
	$	8,349,000	$	4,132,000

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The following table presents the disaggregation of gross revenue between the United States and the United Kingdom for the three months ended:

	Three Months Ended September 30,
	2021		2020
Gross Revenue:
United States	$	6,079,000	$	3,303,000
United Kingdom		2,270,000		829,000
Total gross revenue	$	8,349,000	$	4,132,000

The following table presents the disaggregation of gross profit between the United States and the United Kingdom for the three months ended:

	Three Months Ended September 30,
	2021		2020
Gross profit:
United States	$	2,443,000	$	1,303,000
United Kingdom		1,069,000		549,000
Total gross profit	$	3,512,000	$	1,852,000

The following table presents the disaggregation of net loss between the United States and the United Kingdom for the three months ended:

	Three Months Ended September 30,
	2021			2020
Net loss;
United States	$	(1,787,000	)	$	(3,239,000	)
United Kingdom		(352,000	)		(682,000	)
Total net loss	$	(2,139,000	)	$	(3,921,000	)

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The following table presents the disaggregation of fixed assets between the United States and the United Kingdom as of September 30, 2021:

	United States			United Kingdom			Total
Computer equipment	$	485,000		$	243,000		$	728,000
Website design		6,000			-			6,000
Office machine & equipment		51,000			44,000			95,000
Furniture & fixtures		373,000			83,000			456,000
Leasehold improvements		144,000			-			144,000
Tenant incentives		145,000			-			145,000
		1,204,000			370,000			1,574,000
Accumulated depreciation		(890,000	)		(305,000	)		(1,195,000	)
Net book value	$	314,000		$	65,000		$	379,000

The following table presents the disaggregation of fixed assets between the United States and the United Kingdom as of June 30, 2021:

	United States			United Kingdom			Total
Computer equipment	$	468,000		$	229,000		$	697,000
Website design		6,000			-			6,000
Office machine & equipment		51,000			46,000			97,000
Furniture & fixtures		352,000			86,000			438,000
Leasehold improvements		135,000			-			135,000
Tenant incentives		145,000			-			145,000
		1,157,000			361,000			1,518,000
Accumulated depreciation		(867,000	)		(308,000	)		(1,175,000	)
Net book value	$	290,000		$	53,000		$	343,000

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The following table presents the disaggregation of intangible assets and goodwill between the United States and the United Kingdom as of September 30, 2021. 

Intangibles	US			UK		Total
Customer relationship	$	4,960,000		$	-	$	4,960,000
Non-core customer relationships		760,000			-		760,000
Non-compete agreements		1,430,000			-		1,430,000
Technology		520,000			-		520,000
Tradename		470,000			-		470,000
Workforce acquired		2,125,000			-		2,125,000
		10,265,000			-		10,265,000
Less: accumulated amortization		(7,834,000	)		-		(7,834,000	)
Net book value	$	2,431,000		$	-	$	2,431,000

The following table presents the disaggregation of intangible assets and goodwill between the United States and the United Kingdom as of June 30, 2021. 

Intangibles	US			UK		Total
Customer relationship	$	4,960,000		$	-	$	4,960,000
Non-core customer relationships		760,000			-		760,000
Non-compete agreements		1,430,000			-		1,430,000
Technology		520,000			-		520,000
Tradename		470,000			-		470,000
Workforce acquired		2,125,000			-		2,125,000
		10,265,000			-		10,265,000
Less: accumulated amortization		(7,662,000	)		-		(7,662,000	)
Net book value	$	2,603,000		$	-	$	2,603,000

NOTE 11 – SUBSEQUENT EVENTS

EQUITY INCENTIVE PLAN

On October 28, 2021, the Board of Directors convened and voted to amend and adopt a revised equity incentive plan increasing the plan pool to as much as 12,000,000 shares.  The final amount of shares is subject to shareholder approval as well as approval by the compensation committee. 

WARRANTS ISSUED

In October 2021, the Company issued warrants to a member of the Board of Directors to purchase 150,000 shares of the Company’s common stock at an exercise price of $1.24 per share.  The warrants are valued at approximately $100,000 using Black-Scholes model.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following management’s discussion and analysis should be read in conjunction with the Company’s historical consolidated financial statements and the related notes thereto included in our audited financial statements for the year ended June 30, 2021, and the notes thereto. The management’s discussion and analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect” and the like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this quarterly report. The Company’s actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this quarterly report.

Critical Accounting Policy & Estimates

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period.

On an ongoing basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions and conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. These accounting policies are described at relevant sections in this discussion and analysis and in the condensed consolidated financial statements included in this quarterly report.

OVERVIEW

Troika Media Group, Inc. was incorporated in Nevada in 2003.  In October 2016, our secured lenders took control of the Company’s then operating subsidiaries which ceased operations and are included in discontinued operations. The Company is a transatlantic agency focusing on branding, digital marketing and performance media services, using actionable intelligence across all broadcast digital media and live experiences. On June 12, 2017, we commenced our current operations upon the merger with Troika Design Group, Inc., a strategic brand consultancy with deep expertise in entertainment media, sports, consumer goods and service brands. On June 29, 2018, we acquired all of the equity interests of Mission Culture LLC and Mission Media Holdings Limited, a company headquartered in London, with North American operations since 2009, as a brand experience and communications agency that specializes in consumer immersion through a cultural lens, via live experiences, brand partnerships, public relations and social and influencer engagement.  On May 21, 2021, we acquired substantially all of the assets of Redeeem LLC (n/k/a Troika IO, Inc.), a peer-to-peer NFT blockchain exchange founded in 2018.

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The Impact of the Global COVID-19 Virus

In March 2020, the World Health Organization categorized the coronavirus (COVID-19) as a pandemic, and it continues to spread throughout the United States and the rest of the world with different geographical locations impacted more than others. The outbreak of COVID-19 and the resulting public and private sector measures to reduce its transmission, such as the imposition of social distancing and orders to work-from-home, stay-at-home and shelter-in-place, have adversely impacted our business and those of our clients. Businesses have adjusted, reduced, or suspended operating activities, which has negatively impacted the clients we service. We continue to believe our focus on our strategic strengths, including talent, our differentiated market strategy and the relevance of our services, including the longevity of our relationships, will continue to assist our Company as we navigate a rapidly changing marketplace. The effects of the COVID-19 pandemic have negatively impacted our results of operations, cash flows and financial position; however, the continued extent of the impact will vary depending on the duration and severity of the economic and operational impacts of COVID-19.

We took steps to protect the safety of our employees, with a large majority of our worldwide workforce working from home, while developing creative ideas to protect the health and well-being of our communities and setting up our people to help them do their best work for our clients while working remotely. With respect to managing costs, we have implemented multiple initiatives to align our expenses with changes in revenue. The steps taken across our agencies and corporate group include deferred merit increases, freezes on hiring and temporary labor, major cuts in non-essential spending, staff reductions, furloughs in markets where that option is available and salary reductions, including voluntary salary deferment for our senior corporate management team. In addition, we remain committed to and have intensified our efforts around cash flow discipline, including the identification of significant capital expenditures that can be deferred, and working capital management. We began to see the effects of COVID-19 on client spending, notably in the UK and US markets with our Mission subsidiaries throughout the second quarter of calendar 2020 with much of the work force of the UK subsidiary on furlough, and with our Troika Design subsidiary furloughed as March 2020 progressed. Due to mandatory stay at home orders and social distancing, our experiential business has been particularly impacted by COVID-19. Promotional and experiential events with the Company’s assistance are particularly susceptible to external factors were delayed by many of the Company’s Mission clients due to the effects of COVID-19. The Company had temporarily furloughed employees to reflect current reduced demands associated with those client sets. However, as of the first and second quarters of calendar 2021, we started to see business dramatically improve and expect greater improvement in our results in our next fiscal quarters. As cities have commenced openings with the improvement of vaccines distribution and infection rates declining, our client activities have doubled and there is a real optimism that the economic conditions are improving. Sports, Entertainment, Pharma clients are contracting our services across all entities at rates similar to 2019. 

In the current environment, a major priority for us is preserving liquidity. Our primary liquidity sources are operating cash flow, cash and cash equivalents and short-term investments. Although we expect to experience a decrease in our cash flow from operations as a result of the impact of COVID-19, we have obtained relief under the CARES Act in the form of a Small Business Administration backed loans. In aggregate we received $1.7 million in SBA stimulus “Payroll Protection Program” funding in April 2020 of which the majority of these funds were used for payroll. As per the US Government rules, the funds used for payroll, healthcare benefits, and other applicable operating expenses can be forgiven and the Company reported them as such in December 2020 considering the Company believes we have substantially met these conditions.  On August 14, 2020, the Company received an additional $500,000 in loans with 30 year terms under the SBA’s “Economic Injury Disaster Loan” program which the Company intends to use to address any cash shortfalls that may result from the current pandemic.  In February 2021, the Company obtained additional relief under the CARES Act in the form of a Small Business Administration backed loans and received an additional $1.7 million in SBA stimulus “Payroll Protection Program” funds which will be used for payroll, healthcare benefits, and other applicable operating expenses.  In July 2021, the Company was notified that all of the stimulus funds were forgiven with the exception of approximately $8,000 which was returned in the three months ending September 30, 2021.

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In the United Kingdom, as of April 1, 2020, Mission furloughed twenty-seven employees, saving £78,000 in April payroll, being made up of £55,000 of furlough monies from the government and £16,000 in associated payroll savings and applied for a 3-month rent holiday. In May 1, 2020, Mission put on furlough an additional 5 employees bringing the total to 32, alongside a 10% pay cut for all employees not furloughed, saving £111,000 in May payroll, being made up of £62,000 of furlough monies from the government, £33,000 of associated payroll savings and £16,000 in savings related to the pay cut.  On April 1, 2020, Troika Design Group actioned a 15% salary reduction across the majority of the Los Angeles staff and furloughed one office manager for a total savings of $112,000 per month.  Finally, certain members of the Company’s executive team deferred compensation temporarily. In August 2020, the Company received £50,000 in loans related to the COVID pandemic with an interest rate of 2.5% to be paid over five years beginning one year after receipt. The Company used these proceeds to address any cash shortfalls that resulted from the pandemic.

The extent to which the COVID-19 outbreak continues to impact the Company’s results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.

RESULTS OF OPERATIONS

For the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

Our revenues for the three months ended September 30, 2021 and 2020 were $8,349,000 and $4,132,000, respectively, an increase of approximately $4,217,000 or 102.1%.   The driver of this increase is a resurgence of business at Troika Design and the UK subsidiary of Mission-Media Holdings which recognized increases of $2,575,000 (113.2%) and $1,440,000 (173.6%), respectively, in revenue in relation to the prior period which was significantly impacted by the COVID pandemic. 

The costs of revenue exclusive of operating expenses for the three months ended September 30, 2021 and 2020 were $4,837,000 and $2,280,000, respectively, an increase of $2,557,000, or 112.1%. The increase is directly correlated to the aforementioned increase in revenue at Troika Design and the UK subsidiary of Mission-Media Holdings as result of these business units beginning their recovery from the COVID pandemic and the gradual return of live-events.  The gross profit margin for the three months ended September 30, 2021 and 2020 decreased from 44.8% to 42.1% due to a higher proportion of consulting fees being generated in the prior period which have a higher gross profit margin in comparison to revenue generated from project-based and live-event business.

The operating costs for the three months ended September 30, 2021 and 2020 were $7,005,000 and $5,809,000 respectively, an increase of $1,196,000 or 20.6%.  The primary driver of this increase was $857,000 in additional salary cost and payroll taxes primarily due to the Redeeem acquisition and the return of furloughed employees, $659,000 increase in stock-based compensation, due to the Redeeem acquisition, and a $373,000 increase in board of director fees. This was offset by a $436,000 decrease in rental expense and $268,000 reduction in legal fees.

As a result of the foregoing, our net loss for the three months ended September 30, 2021 decreased to $2,139,000 from $3,921,000 for the three months ended September 30, 2020.

LIQUIDITY & CAPITAL RESOURCES

As of September 30, 2021, compared with June 30, 2021:

As of September 30, 2021, the Company has a working capital deficit of $(5,279,000) compared with a deficit of $(4,004,000) at June 30, 2021. The increase in working capital deficit was primarily the result of a net loss of $2,139,000 for the three months ended September 30, 2021.  The increase in working capital deficit also reflects a decrease of $2,314,000 in cash and an increase of $900,000 in contract liabilities offset by a decrease of $967,000 in accounts payable and accrued expenses and an increase of $649,000 in accounts receivable.

34

As of September 30, 2021, compared with September 30, 2020:

Net cash used in operating activities increased by $1,079,000 from $(1,182,000) to $(2,261,000) for the three months ended September 30, 2020 and 2021, respectively. The increase was the result of an increase of $2,999,000 in cash used relating to accounts payable and accrued expenses, $368,000 reduction in the amortization of intangibles, and $399,000 increase in contract liabilities to government grants.   This was offset by a $1,782,000 decrease in net loss, $805,000 increase in stock-based compensation relating to the Redeeem acquisition, $989,000 increase in contract liabilities relating to revenue.

Net cash used in investing activities increased by $61,000 as a result of capital expenditures being increased to $68,000 from $7,000 for the three months ended September 30, 2021 and 2020, respectively.

Net cash provided by financing activities decreased by $735,000 from $715,000 to $(20,000) for the three months ended September 30, 2020 and 2021, respectively. The decrease was the result of a $565,000 decrease in proceeds from stimulus loan programs and a $150,000 decrease in proceeds from convertible note payables.

During the three months ended September 30, 2021 and 2020, the Company did not recognize any proceeds from the sale of its securities.

As a result of the forgoing, the Company had a decrease in cash of $2,314,000 for the three months ended September 30, 2021 in comparison to a decrease of $483,000 for the three months ended September 30, 2020.  

Non-GAAP Measures

The following table sets forth the reconciliation of Adjusted Earnings Before Interest Taxes Depreciation & Amortization ("Adjusted EBITDA") to Net Income (Loss):

Adjusted Earnings before Interest, Taxes, Depreciation and Amortization ("Adj. EBITDA"): 

 The adjusted EBITDA metric is most helpful when used in determining the value of a company for transactions such as mergers, acquisitions or raising capital.

The adjustments made to a company's EBITDA can vary quite a bit from one company to the next, but the goal is the same. Adjusting the EBITDA metric aims to "normalize" the figure so that it is somewhat generic, meaning it contains essentially the same line-item expenses that any other, similar company in its industry would contain.

We believe that our financial statements and the other financial data included, have been prepared in a manner that complies, in all material respects, with generally accepted accounting principles in the United States (“GAAP”). However, for the reasons discussed below, we have presented certain non-GAAP measures herein.

We have presented the following non-GAAP measures to assist investors in understanding our core net operating results on an on-going basis: (i) Adjusted EBITDA as it relates to Net Income.  These non-GAAP financial measures may also assist investors, securities analysts and others in making comparisons of our core operating results with those of other companies and making informed business decisions.

As used herein, net income represents net loss plus depreciation and amortization, interest expense, net and income tax expense. As used herein, Adjusted EBITDA represents Net Income plus the following add backs;

Net Income plus unrealized gains, depreciation and amortization, interest expense, non-operating related management bonus compensation, foreign exchange losses, stock-based compensation expense and litigation expenses. 

35

We recognize that Adjusted EBITDA off net income, have limitations as analytical financial measures. For example, neither EBITDA nor Adjusted EBITDA reflects:

· our capital expenditures or future requirements for capital expenditures or mergers and acquisitions;

· the interest expense or the cash requirements necessary to service interest expense or principal payments, associated with indebtedness;

· depreciation and amortization, which are non-cash charges, although the assets being depreciated and amortized will likely have to be replaced in the future, or any cash requirements for the replacement of assets;

· changes in cash requirements for our working capital needs; or

· changes in fair value of contingent earn-out liabilities, warrant liabilities, and amortization of inventory step-up from acquisitions (included in cost of goods sold) and transition costs from acquisitions.

Additionally, Adjusted EBITDA excludes non-cash expense for stock-based compensation, which is currently and is expected to remain a key element of our overall long-term incentive compensation package.

The bulk of the adjustments are often different types of expenses that are added back to EBITDA. The resulting adjusted EBITDA often reflects a higher earnings level because of the reduced expenses.

EBITDA Adjustments included below:

· Unrealized gains or losses

· Non-cash expenses (depreciation, amortization)

· Litigation expenses

· Non-operating related management bonuses

· Gains or losses on foreign exchange

· Goodwill impairments

· Non-operating income

· Stock-based compensation

· Litigation expenses

Non-GAAP Financial Measures

Non-GAAP Measures	Three Months Ended September 30,
Un-Audited	2021			2020
	Un-Audited			Un-Audited
Net Operating Income (loss)	$	(2,139,000	)	$	(3,921,000	)
*  Unrealized gains or losses - Rent Abatement		160,000			-
*  Non-cash expenses (Depreciation, amortization of intangibles & amortization of note payable discount)		201,000			588,000
*  Interest expense		13,000			3,000
*  Non-operating related management bonuses expense		150,000			-
*  Losses on foreign exchange		16,000			47,000
*  Stock-based compensation non-cash expense		979,000			320,000
*  Litigation expenses		-			200,000
Adjusted EBITDA	$	(620,000	)	$	(2,763,000	)

36

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

The Issuer is not required to provide the information called for in this item due to its status as a Smaller Reporting Company.

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures

The term “disclosure controls and procedures” is defined in Rules 13(a)-15e and 15(d) - 15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company’s principal executive officer and principal financial officer has evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2021. They have concluded that, as of September 30, 2021, our disclosures, controls and procedures were not effective to ensure that:

(1)

Information required to be disclosed by the Company in reports that it files or submits under the act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms; and

(2)

Controls and procedures are designed by the Company to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management including the principal executive and principal financial officers or persons performing similar functions, as appropriate to allow timely decisions regarding financial disclosure.

This term refers to the controls and procedures of a Company that are designed to ensure that information required to be disclosed by a Company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within the required time periods. Management continues to take steps to improve its controls and procedures, and expects, further, that the growing scale of the business will enable the Company to obtain additional resources to assist in that effort.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting or in any other factors that could significantly affect these controls during the quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The Company is in the process of consolidating its bank accounts into one institution, investigating a consolidated general ledger system, and formalizing policies and procedures which, upon their implementation, should dramatically improve internal controls. The Company is also considering employing additional accounting staff which will improve segregation of duties. The Company intends to implement these controls in the near future in order to prevent and detect mistakes, noncompliance and potential fraud.

37

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is not a party to any material pending legal proceedings or a proceeding being contemplated by a governmental authority nor is any of the Company’s property the subject of any pending legal proceedings or a proceeding being contemplated by a governmental authority except as set forth in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, from which there have been no material changes.

Item 1A. Risk Factors.

None.

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds

The Company’s registration statement on Form S-1 (Nos. 333-255328 and 333-255353) was declared effective by the SEC on April 19, 2021. The offering commenced on April 19, 2021 and was completed on April 22, 2021. The Company’s co-managing underwriters were Kingswood Capital Markets, a division of Benchmarks Investments, Inc., and Westpark Capital, Inc.

The Company registered and sold 5,783,133 shares of Common Stock and Warrants to purchase 5,783,133 shares of Common Stock, at an initial public offering price of $4.15 per share and accompanying warrant. The Company sold shares and warrants for gross proceeds of $24,000,002.

The Company paid estimated offering expenses of $3,298,000, consisting of $1,920,000 of underwriting discounts and commissions, a 1% non-accountable expense allowance ($240,000) and other expenses including legal and accounting of approximately $1,138,000. Payments of approximately $3,616,000 were made to directors, officers and ten (10%) percent or greater shareholders and to affiliates of its issuer for deferred compensation, severance payments, bonuses, and taxes. The net proceeds to the Company after deducting total expenses set forth above were approximately $17,086,000.

From the effective date of the Registered Statements through September 30, 2021, the amount of net proceeds were used for: the acquisition of Redeeem LLC ($1,380,000; repayment of indebtedness (approximately $4,104,000), working capital and any other purpose for which at least five (5%) percent of total offering proceeds or $100,000 (whichever is less) has been used, including approximately $1,012,000 for legal expenses outside of the offering and $761,475 for deferred consultant fees and $1,666,660 of deferred compensation for officers, directors and employees.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosure

Not Applicable.

Item 5. Other Information

None.

38

Item 6. Exhibits

Exhibit Number	Exhibit Title
31.1	Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS *	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH *	Inline XBRL Taxonomy Extension Schema Document.
101.CAL *	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF *	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB *	Inline XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE *	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.

* Furnished herewith. XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

39

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Troika Media Group, Inc.
	(Registrant)
		/s/ Christopher Broderick
		(Signature)
Date: November 12, 2021	Name:	Christopher Broderick
	Title:	Chief Financial Officer
		(Principal Financial Officer)

40

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert Machinist, the Chief Executive Officer of Troika Media Group, Inc., certify that:

I have reviewed this quarterly report on Form 10-Q of Troika Media Group, Inc. for the quarter ended September 30, 2021;

1.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
2.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
3.	I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

4. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 12, 2021	By:	/s/ Robert Machinist
	Name:	Robert Machinist
	Title:	Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Christopher Broderick, the Chief Financial Officer of Troika Media Group, Inc., certify that:

I have reviewed this quarterly report on Form 10-Q of Troika Media Group, Inc. for the quarter ended September 30, 2021;

1.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
2.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
3.	I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

4. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 12, 2021	By:	/s/ Christopher Broderick
	Name:	Christopher Broderick
	Title:	Chief Financial Officer
		(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Troika Media Group, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert Machinist, the Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 12, 2021	By:	/s/ Robert Machinist
	Name:	Robert Machinist
	Title:	Chief Executive Officer
		(Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Troika Media Group, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christopher Broderick, the Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 12, 2021	By:	/s/ Christopher Broderick
	Name:	Christopher Broderick
	Title:	Chief Financial Officer
		(Principal Financial Officer)

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Cover - shares	3 Months Ended
	Sep. 30, 2021	Nov. 12, 2021
Cover [Abstract]
Entity Registrant Name	Troika Media Group, Inc.
Entity Central Index Key	0001021096
Document Type	10-Q
Amendment Flag	false
Current Fiscal Year End Date	--06-30
Entity Small Business	true
Entity Shell Company	true
Entity Emerging Growth Company	false
Entity Current Reporting Status	Yes
Document Period End Date	Sep. 30, 2021
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2022
Entity Common Stock Shares Outstanding		43,572,950
Document Quarterly Report	true
Document Transition Report	false
Entity Interactive Data Current	Yes
Entity File Number	001-40329
Entity Incorporation State Country Code	NV
Entity Tax Identification Number	83-0401552
Entity Address Address Line 1	1715 N. Gower Street
Entity Address City Or Town	Los Angeles
Entity Address State Or Province	CA
Entity Address Postal Zip Code	90028
City Area Code	323
Local Phone Number	965-1650
Security 12b Title	Common Shares, $.001 par value
Trading Symbol	TRKA
Security Exchange Name	NASDAQ

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Condensed Consolidated Balance Sheets - USD ($)	Sep. 30, 2021	Jun. 30, 2021
Current assets:
Cash and cash equivalents	$ 9,752,000	$ 12,066,000
Accounts receivable, net	1,976,000	1,327,000
Prepaid expenses	625,000	670,000
Other assets - short term portion	67,000	1,000
Total current assets	12,420,000	14,064,000
Other assets -long term portion	628,000	626,000
Property and equipment, net	379,000	343,000
Operating lease right-of-use assets	6,827,000	6,887,000
Intangible assets, net	2,431,000	2,603,000
Goodwill	19,368,000	19,368,000
Total assets	42,053,000	43,891,000
Current liabilities:
Accounts payable and accrued expenses	7,396,000	8,363,000
Convertible notes payable	50,000	50,000
Note payable - related party - short term portion	180,000	200,000
Due to related parties	7,000	41,000
Contract liabilities	6,873,000	5,973,000
Operating lease liability - short term portion	3,115,000	3,344,000
Derivative liabilities	1,000	13,000
Taxes payable	62,000	62,000
Stimulus loan programs- short term portion	15,000	22,000
Total current liabilities	17,699,000	18,068,000
Long term liabilities:
Operating lease liability - long term portion	5,785,000	5,835,000
Stimulus loan programs - long term portion	425,000	547,000
Rental deposits	119,000	119,000
Other long term liabilities	309,000	477,000
Liabilities of discontinued operations - long term portion	107,000	107,000
Total liabilities	24,444,000	25,153,000
Stockholders' equity:
Common stock, ($0.001 par value: 300,000,000 shares authorized; 43,572,950 and 39,496,588 shares issued and outstanding as of September 30, 2021 and June 30, 2021, respectively)	44,000	40,000
Additional paid-in-capital	206,973,000	204,788,000
Stock payable	0	1,210,000
Accumulated deficit	(189,028,000)	(186,889,000)
Other Comprehensive Loss	(387,000)	(418,000)
Total stockholders' equity	17,609,000	18,738,000
Total liabilities and stockholders' equity	42,053,000	43,891,000
Series A Preferred Stock [Member]
Stockholders' equity:
Preferred stock, $0.01 par value: 15,000,000 shares authorized	$ 7,000	$ 7,000

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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2021	Jun. 30, 2021
Stockholder's Equity
Preferred stock, shares par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	15,000,000	15,000,000
Common stock, shares par value	$ 0.001	$ 0.001
Common stock, shares authorized	300,000,000	300,000,000
Common stock, shares issued	43,572,950	39,496,588
Common stock, shares outstanding	43,572,950	39,496,588
Series A Preferred Stock [Member]
Stockholder's Equity
Preferred stock, shares par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	720,000	720,000
Preferred stock, shares outstanding	720,000	720,000

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Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($)	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
Project revenues, net	$ 8,349,000	$ 4,132,000
Cost of revenues	4,837,000	2,280,000
Gross profit	3,512,000	1,852,000
Operating expenses:
Selling, general and administrative expenses	6,235,000	4,450,000
Professional fees	568,000	788,000
Depreciation expense	30,000	31,000
Amortization expense of intangibles	172,000	540,000
Total operating expenses	7,005,000	5,809,000
Loss from operations	(3,493,000)	(3,957,000)
Other income (expense):
Income from government grants	262,000	0
Amortization expense on note payable discount	0	(17,000)
Interest expense	(13,000)	(4,000)
Foreign exchange loss	(16,000)	(47,000)
Loss on early termination of operating lease	(3,000)	0
Gain (loss) on derivative liabilities	12,000	(23,000)
Other income	1,112,000	127,000
Total other income (expense)	1,354,000	36,000
Net loss before income tax	(2,139,000)	(3,921,000)
Provision for income tax	0	0
Net loss after income tax	(2,139,000)	(3,921,000)
Net loss	(2,139,000)	(3,921,000)
Net loss attributable to common stockholders	(2,139,000)	(3,921,000)
Foreign currency translation adjustment	31,000	(93,000)
Comprehensive loss	$ (2,108,000)	$ (4,014,000)
Basic earnings (loss) per share
Continuing operations	$ (0.05)	$ (0.22)
Net loss attributable to common stockholders	$ (0.05)	$ (0.22)
Weighted average basic shares outstanding	41,422,781	17,490,910
Weighted average diluted shares outstanding	41,422,781	17,490,910

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Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($)	Total	Series A, Preferred Stock	Series B, Preferred Stock	Series C, Preferred Stock	Series D, Preferred Stock	Common Stock	Additional Paid-in Capital	Stock Payable	Accumulated Deficit	Accumulated other comprehensive loss
Balance, shares at Jun. 30, 2020		720,000	2,495,000	911,149	1,979,000	15,454,623
Balance, amount at Jun. 30, 2020	$ 7,000,000	$ 7,000	$ 25,000	$ 9,000	$ 20,000	$ 16,000	$ 176,262,000	$ 1,300,000	$ (170,892,000)	$ 253,000
Issuance of common stock related to convertible notes, shares						499,223
Issuance of common stock related to convertible notes, amount	1,400,000					$ 0	1,400,000	0
Issuance of common stock related to stock payable, shares						1,733,333
Issuance of common stock related to stock payable, amount	0					$ 2,000	1,298,000	(1,300,000)
Stock-based compensation on options	166,000						166,000
Stock-based compensation on warrants	154,000						154,000
Imputed interest on convertible note payable	4,000						4,000
Foreign currency translation gain	(93,000)									(93,000)
Net loss	(3,921,000)								(3,921,000)
Balance, shares at Sep. 30, 2020		720,000	2,495,000	911,149	1,979,000	17,687,179
Balance, amount at Sep. 30, 2020	4,710,000	$ 7,000	$ 25,000	$ 9,000	$ 20,000	$ 18,000	179,284,000	0	(174,813,000)	160,000
Balance, shares at Jun. 30, 2021		720,000				39,496,588
Balance, amount at Jun. 30, 2021	18,738,000	$ 7,000				$ 40,000	204,788,000	1,210,000	(186,889,000)	(418,000)
Stock-based compensation on options	107,000						107,000
Stock-based compensation on warrants	67,000						67,000
Foreign currency translation gain	31,000									31,000
Net loss	(2,139,000)								(2,139,000)
Common stock issued relating to Redeeem acquisition, shares						452,929
Common stock issued relating to Redeeem acquisition, amount	0					$ 0	1,210,000	(1,210,000)
Record vested deferred compensation relating to Redeeem employees, shares						3,623,433
Record vested deferred compensation relating to Redeeem employees, amount	805,000					$ 4,000	801,000
Balance, shares at Sep. 30, 2021		720,000				43,572,950
Balance, amount at Sep. 30, 2021	$ 17,609,000	$ 7,000				$ 44,000	$ 206,973,000	$ 0	$ (189,028,000)	$ (387,000)

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (2,139,000)	$ (3,921,000)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation	30,000	31,000
Amortization of intangibles	172,000	540,000
Amortization of discount on convertible note payables	0	17,000
Stock-based compensation on options	107,000	166,000
Stock-based compensation on warrants	67,000	154,000
Stock-based compensation relating to Redeeem acquisition	805,000	0
Imputed interest for note payable	0	4,000
Loss on early termination of operating lease	3,000	0
(Gain)/loss on derivative liabilities	(12,000)	23,000
Recovery for bad debt provision	(69,000)	(100,000)
Change in operating assets and liabilities:
Accounts receivable	(580,000)	(426,000)
Prepaid expenses	45,000	(48,000)
Accounts payable and accrued expenses	(969,000)	2,030,000
Other assets	(68,000)	(4,000)
Operating lease liability	(222,000)	(171,000)
Due to related parties	(34,000)	0
Other long term liabilities	(168,000)	0
Contract liabilities relating to revenue	1,170,000	181,000
Contract liabilities relating to government grants	(399,000)	0
Net cash used in operating activities	(2,261,000)	(1,182,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets	(68,000)	(7,000)
Net cash used in investing activities	(68,000)	(7,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stimulus program loans	0	565,000
Payments to note payable related party	(20,000)	0
Proceeds from convertible note payable	0	150,000
Net cash (used in) provided by financing activities	(20,000)	715,000
Effect of exchange rate on cash	35,000	(9,000)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(2,314,000)	(483,000)
CASH AND CASH EQUIVALENTS - beginning of period	12,066,000	1,706,000
CASH AND CASH EQUIVALENTS - end of period	9,752,000	1,223,000
Cash paid during the period for:
Income taxes	0	0
Interest expense	3,000	0
Noncash investing and financing activities:
Initial discount recorded on convertible notes	0	50,000
Conversion of convertible note payable	0	1,400,000
Issuance of common stock related to stock payable	0	1,300,000
Right-of-use assets acquired through adoption of ASC 842	$ 467,000	$ 0

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PRESENTATION OF THE FINANCIAL STATEMENTS

3 Months Ended

Sep. 30, 2021

PRESENTATION OF THE FINANCIAL STATEMENTS

NOTE 1 - PRESENTATION OF THE FINANCIAL STATEMENTS

NOTE 1 – PRESENTATION OF THE FINANCIAL STATEMENTS        

The terms “Troika,” “the Company,” “we,” “our” and “us” each refer to Troika Media Group, Inc. and its subsidiaries, unless the context indicates otherwise. The accompanying unaudited condensed consolidated financial statements were prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP or GAAP, for interim financial information and Article 8 of Regulation S-X of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures have been condensed or omitted.

In our opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation, in all material respects, of the information contained herein. These unaudited condensed consolidated financial statements should be read in conjunction with our annual report on Form 10-K for the year ended June 30, 2021.

Risks & Uncertainties

Liquidity

The Company has incurred net losses since its inception and anticipates net losses and negative operating cash flows until fiscal year 2024.  For the three months ending September 30, 2021, the Company had a net loss of $2.1 million, which increased the accumulated deficit to $189.0 million at September 30, 2021 from $186.9 million at June 30, 2021.  At September 30, 2021, the Company had approximately $9.8 million in cash and cash equivalents and a total of $12.4 million in current assets in relation to $17.7 million in current liabilities.  While the Company continues to find efficiencies with its acquisitions of Troika Design Group, Inc. and  Mission Group as well as the assets of Redeeem LLC, the departure of Mission’s President and Founder in fiscal year 2019 together with the coronavirus (COVID-19) pandemic impacted revenue more than anticipated.

With the acquisition of Mission Group, the Company is attempting to increase Troika’s footprint in major media markets, such as NY and London.  The Company also continues to expand its consulting services and breadth of product offering with existing Mission and Troika clients and increase business development in NY and London as a result of the Mission acquisition.  Additionally, the Company intends to add to Mission business development due to Troika’s existing clientele.  As a result of these developments and the Company’s intent to save costs in overhead through rationalized headcount from synergies achieved in the acquisition of Mission, the consolidated fiscal year 2024 forecast for the combined entity is $1.7 million in adjusted EBITDA.

If the Company raises additional funds by issuing equity securities, its stockholders would experience dilution. Additional debt financing, if available, may involve covenants restricting its operations or its ability to incur additional debt. Any additional debt financing or additional equity that the Company raises may contain terms that are not favorable to it or its stockholders and require significant debt service payments, which diverts resources from other activities. The Company’s ability to raise additional capital will also be impacted by the outbreak of COVID-19, as well as market conditions and the price of the Company’s common stock.

Based on the recent acquisitions, Company-wide consolidation, and management’s plans, the Company believes that the current cash on hand of $9,752,000and anticipated cash from operations is sufficient to conduct planned operations for one year from the issuance of the consolidated financial statements.  In addition, Management believes they can raise additional capital, if necessary, given the Company has been successful at raising funding through both equity and debt financing.

Impact of COVID-19 

In March 2020, the World Health Organization categorized the coronavirus (COVID-19) as a pandemic, and it continues to spread throughout the United States and the rest of the world with different geographical locations impacted more than others. The outbreak of COVID-19 and the resulting public and private sector measures to reduce its transmission, such as the imposition of social distancing and orders to work-from-home, stay-at-home and shelter-in-place, have adversely impacted our business and those of our clients. Businesses have adjusted, reduced, or suspended operating activities, which has negatively impacted the clients we service. We continue to believe our focus on our strategic strengths, including talent, our differentiated market strategy and the relevance of our services, including the longevity of our relationships, will continue to assist our Company as we navigate a rapidly changing marketplace. The effects of the COVID-19 pandemic have negatively impacted our results of operations, cash flows and financial position; however, the continued extent of the impact will vary depending on the duration and severity of the economic and operational impacts of COVID-19.

We took steps to protect the safety of our employees, with a large majority of our worldwide workforce working from home, while developing creative ideas to protect the health and well-being of our communities and setting up our people to help them do their best work for our clients while working remotely. With respect to managing costs, we have implemented multiple initiatives to align our expenses with changes in revenue. The steps taken across our agencies and corporate group include deferred merit increases, freezes on hiring and temporary labor, major cuts in non-essential spending, staff reductions, furloughs in markets where that option is available and salary reductions, including voluntary salary deferment for our senior corporate management team. In addition, we remain committed to and have intensified our efforts around cash flow discipline, including the identification of significant capital expenditures that can be deferred, and working capital management. We began to see the effects of COVID-19 on client spending, notably in the UK and US markets with our Mission subsidiaries throughout the second quarter of calendar 2020 with much of the work force of the UK subsidiary on furlough, and with our Troika Design subsidiary furloughed as March 2020 progressed. Due to mandatory stay at home orders and social distancing, our experiential business has been particularly impacted by COVID-19. Promotional and experiential events with the Company’s assistance are particularly susceptible to external factors and were delayed by many of the Company’s Mission clients due to the effects of COVID-19. The Company had temporarily furloughed employees to reflect current reduced demands associated with those client sets. However, as of the first and second quarters of calendar 2021, we started to see business dramatically improve and expect greater improvement in our results in our next fiscal quarters. As cities have commenced openings with the improvement of vaccines distribution and infection rates declining, our client activities have doubled and there is a real optimism that the economic conditions are improving. Sports, Entertainment, Pharma clients are contracting our services across all entities at rates similar to 2019. 

In the current environment, a major priority for us is preserving liquidity. Our primary liquidity sources are operating cash flow, cash and cash equivalents and short-term investments. Although we expect to experience a decrease in our cash flow from operations as a result of the impact of COVID-19, we have obtained relief under the CARES Act in the form of a Small Business Administration backed loans. In aggregate we received $1.7 million in SBA stimulus “Payroll Protection Program” funding in April 2020 of which the majority of these funds were used for payroll. As per the US Government rules, the funds used for payroll, healthcare benefits, and other applicable operating expenses can be forgiven and the Company reported them as such in December 2020 considering the Company believes we have substantially met these conditions.  On August 14, 2020, the Company received an additional $500,000 in loans with 30 year terms under the SBA’s “Economic Injury Disaster Loan” program which the Company intends to use to address any cash shortfalls that resulted from the current pandemic.  In February 2021, the Company obtained additional relief under the CARES Act in the form of Small Business Administration backed loans and received an additional $1.7 million in SBA stimulus “Payroll Protection Program” funds which were used for payroll, healthcare benefits, and other applicable operating expenses.  In July 2021, the Company was notified that all of the stimulus funds were forgiven with the exception of approximately $8,000 which was returned in the three months ending September 30, 2021.

In the United Kingdom, as of April 1, 2020, Mission furloughed twenty-seven employees, saving £78,000 in April payroll, being made up of £55,000 of furlough monies from the government and £16,000 in associated payroll savings and applied for a 3-month rent holiday. In May 1, 2020, Mission put on furlough an additional 5 employees bringing the total to 32, alongside a 10% pay cut for all employees not furloughed, saving £111,000 in May payroll, being made up of £62,000 of furlough monies from the government, £33,000 of associated payroll savings and £16,000 in savings related to the pay cut. On April 1, 2020, Troika Design Group actioned a 15% salary reduction across the majority of the Los Angeles staff and furloughed one office manager for a total savings of $112,000 per month. Finally, certain members of the Company’s executive team deferred compensation temporarily. In August 2020, the Company received £50,000 in loans related to the COVID pandemic with an interest rate of 2.5% to be paid over five years beginning one year after receipt. The Company used these proceeds to address any cash shortfalls that resulted from the pandemic.

The extent to which the COVID-19 outbreak continues to impact the Company’s results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact. 

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of TMG, and its wholly-owned subsidiaries, Troika Design Group, Inc. (California), Troika Services Inc. (New York), Troika Analytics Inc. (New York), Troika Productions, LLC (California), Troika-Mission Holdings, Inc. (New York), Mission Culture LLC (Delaware), Mission-Media Holdings Limited (England and Wales), Mission Media USA, Inc. (New York), and Troika  IO, Inc. (f/k/a Redeeem Acquisition Corp) (California). All significant intercompany accounts and transactions have been eliminated in consolidation.

RECLASSIFICATION OF PRIOR YEAR FINANCIALS

In the three months ended September 30, 2020, the Company reported amortization of right-of-use assets of $320,000 in its Condensed Consolidated Statements of Cash Flows separately in net cash used in operating activities.  For purposes of consistency, this balance was reclassified to operating lease liability within the Condensed Consolidated Statements of Cash Flows resulting in a balance of $171,000 from $(149,000).  The reclassification did not change the net cash used in operating activities as it remains at $(1,182,000).

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods.

Significant estimates and assumptions made by management include, among others, the assessment of the collectability of accounts receivable and the determination of the allowance for doubtful accounts, the valuation and useful life of capitalized equipment costs and long-lived assets, valuation of warrants and options, the determination of the useful lives and any potential impairment of long-lived assets such as intangible assets and goodwill, the allocation of purchase consideration to assets and liabilities due to the Redeeem acquisition, stock-based compensation, and deferred tax assets.  Actual results could differ from those estimates.

FAIR VALUE MEASUREMENT

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. There are three levels of inputs that may be used to measure fair value:

Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Other inputs that are directly or indirectly observable in the marketplace.

Level 3 - Unobservable inputs which are supported by little or no market activity.

 Fair-value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2021 and June 30, 2021.  The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts receivable, accounts payable, accrued liabilities, and convertible notes payable. Fair values for these items were assumed to approximate carrying values because of their short term nature or they are payable on demand. The Company uses Level 3 inputs for its valuation methodology for the embedded conversion option liabilities as the fair values were determined by using the Black-Scholes option-pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. 

IMPAIRMENT OF LONG-LIVED ASSETS

The Company evaluates, on a periodic basis, long-lived assets to be held and used for impairment in accordance with the reporting requirements of ASC 360-10. The evaluation is based on certain impairment indicators, such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements, as well as other external market conditions or factors that may be present. If these impairment indicators are present or other factors exist that indicate that the carrying amount of the asset may not be recoverable, then an estimate of the undiscounted value of expected future operating cash flows is used to determine whether the asset is recoverable and the amount of any impairment is measured as the difference between the carrying amount of the asset and its estimated fair value. The fair value is estimated using valuation techniques such as market prices for similar assets or discounted future operating cash flows. 

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company maintains cash and cash equivalent account balances with financial institutions in the United States and United Kingdom which at times exceed federally insured limits for accounts in the United States. Considering deposits with these institutions can be redeemed on demand, the Company believes there is minimal risk. As of September 30, 2021 and  June 30, 2021, the Company had $8,357,000 and $10,125,000 in cash that was uninsured, respectively.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.  As of September 30, 2021 and June 30, 2021, the Company had no cash equivalents.

ACCOUNTS RECEIVABLE

Our accounts receivable are amounts due from our clients. The Company accounts for unbilled accounts receivable using the percentage-of-completion accounting method for revenue recognized and the customer has not been invoiced due to the terms of the contract or the timing of the account invoicing cycle.

For those clients to whom we extend credit, we perform periodic evaluations of accounts receivable and maintain allowances for potential credit losses as deemed necessary.

The Company periodically reviews the outstanding accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. When a customer’s account is deemed to be uncollectible the outstanding balance is charged to the allowance for doubtful accounts. As of September 30, 2021 and June 30, 2021, the Company had $452,000 and $521,000 in allowance for doubtful accounts, respectively.

PROPERTY AND EQUIPMENT, NET

Property and equipment are stated at cost less accumulated depreciation and amortization. Property and equipment consist of furniture and computer equipment. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets, generally ranging from three to seven years. Maintenance and repairs are charged to expense as incurred.  Expenditures that increase the value or productive capacity of assets are capitalized.  When assets are retired or otherwise disposed of, the cost and accumulated depreciation or amortization are removed from the accounts and any resulting gain or loss is reflected in the statements of income in the period realized.

GOODWILL AND INTANGIBLE ASSETS

As a result of acquisitions, the Company recorded goodwill and identifiable intangible assets as part of its allocation of the purchase consideration.

Goodwill 

Goodwill is the excess of the purchase price paid over the fair value of the net assets of the acquired business. Goodwill is tested annually at June 30 for impairment. The annual qualitative or quantitative assessments involve determining an estimate of the fair value of reporting units in order to evaluate whether an impairment of the current carrying amount of goodwill exists. A qualitative assessment evaluates whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two-step quantitative goodwill impairment test. The first step of a quantitative goodwill impairment test compares the fair value of the reporting unit to its carrying amount including goodwill. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss may be recognized. The amount of impairment loss is determined by comparing the implied fair value of the reporting unit’s goodwill with the carrying amount. If the carrying amount exceeds the implied fair value then an impairment loss is recognized equal to that excess.  There was no goodwill impairment recorded as a result of the Company’s annual impairment assessment on June 30, 2021. The Company has adopted the provisions of ASU 2017-04—Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 requires goodwill impairments to be measured on the basis of the fair value of a reporting unit relative to the reporting unit’s carrying amount rather than on the basis of the implied amount of goodwill relative to the goodwill balance of the reporting unit. Thus, ASU 2017-04 permits an entity to record a goodwill impairment that is entirely or partly due to a decline in the fair value of other assets that, under existing GAAP, would not be impaired or have a reduced carrying amount. Furthermore, the ASU removes “the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test.” Instead, all reporting units, even those with a zero or negative carrying amount will apply the same impairment test. Accordingly, the goodwill of reporting unit or entity with zero or negative carrying values will not be impaired, even when conditions underlying the reporting unit/entity may indicate that goodwill is impaired.

We test our goodwill for impairment annually, or, under certain circumstances, more frequently, such as when events or circumstances indicate there may be impairment. We are required to write down the value of goodwill only when our testing determines the recorded amount of goodwill exceeds the fair value. Our annual measurement date for testing goodwill impairment is June 30. 

None of the goodwill is deductible for income tax purposes.

Intangibles

Intangible assets with finite useful lives consist of tradenames, non-compete agreements, acquired workforce and customer relationships and are amortized on a straight-line basis over their estimated useful lives, which range from three to ten years. The estimated useful lives associated with finite-lived intangible assets are consistent with the estimated lives of the associated products and may be modified when circumstances warrant. Such assets are reviewed for impairment when events or circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset and its eventual disposition are less than its carrying amount. The amount of any impairment is measured as the difference between the carrying amount and the fair value of the impaired asset. There was no impairment recorded for intangibles in the three months ended September 30, 2021 and 2020.

LEASES

Right-of-use assets and lease liabilities are recorded in accordance with Leases (Topic 842).  The Company has recorded a lease liability because the Company has the obligation to make lease payments and a ROU asset for the right to use the underlying asset for the lease term. The lease liability is measured at the present value of the lease payments over the lease term. The right-of-use asset is measured at the lease liability amount, adjusted for lease prepayments, lease incentives received and the lessee’s initial direct costs. The Company uses the optional transitional method and elected to use the package of three practical expedients which allows the Company not to reassess whether contracts are or contain leases, lease classification and whether initial direct costs qualify for capitalization.

Income from subleased properties as well as non-lease items such as common-area maintenance and utilities are recognized as non-operating “other income” on the Consolidated Statements of Operations and Comprehensive Loss.

REVENUE RECOGNITION

The Company recognizes revenue in accordance with the Financial Accounting Standards Board’s (“FASB”), Accounting Standards Codification (“ASC”) ASC 606, Revenue from Contracts with Customers (“ASC 606”). Revenues are recognized when control is transferred to customers in amounts that reflect the consideration the Company expects to be entitled to receive in exchange for those goods. Revenue recognition is evaluated through the following five steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied.

The Company recognizes primarily four revenue streams and they are retainer fees, project fees, reimbursement income, and fee income.

Retainer fees are non-refundable fixed amounts being received from a client often on a recurring basis and the performance obligation is the staff being available to provide consultation services.  Consulting engagements do not incur a significant amount of direct costs however any costs are recognized as incurred.   Consulting fees are recognized evenly throughout the term of the agreement.

Project fees are associated with the delivery of services and/or goods to a client and the revenue includes both the anticipated costs to deliver the product as well as the Company’s margin.  As per ASC 606-10-25-31, the Company recognizes project fees over time by measuring the progress toward complete satisfaction of a performance obligation by measuring its performance in transferring control of the services contractually delivered to a client by applying the input method.   Revenue is recognized based on the extent of inputs expended toward satisfying a performance obligation and it was determined that the best judge of inputs is the costs consumed by a project in relation to its total anticipated costs.  As part of the close process the Company compiles a preliminary percentage of completion (POC) for each project which is the ratio of incurred costs to date in relation to the anticipated costs from the production team’s approved budgets.  The POC ratio is then applied to the contracted revenue and the pro-rated revenue is then recognized accordingly.

Reimbursement income represents compensation relating to the out-of-pocket costs associated with a staging of a live event.  As per 606-10-25-31, the Company recognizes reimbursement income over time by measuring the progress toward complete satisfaction of a performance obligation by measuring its performance in transferring control of the services contractually delivered to a client by applying the input method.   The revenue is recognized based on the extent of inputs expended toward satisfying a performance obligation and it was determined that the best judge of input is the costs incurred to date in relation to the anticipated costs.  As a result, unless an overage or saving is identified, the reimbursement income equates to the reimbursement costs incurred.   Given that the Company contracts directly with the majority of the vendors and is liable for any overages, the Company is deemed a principal in this revenue transaction as they have control over the asset and transfer the asset themselves.  As a result, this transaction is recorded gross rather than net.  

Fee income represents the Company’s margin on the staging of a live event, is negotiated with the client prior and fixed.  Based on ASC 606, the Company’s progress in satisfying the performance obligation in a contract is difficult to determine so as a result the fee income is only recognized at the conclusion of a project.  Only upon confirmation the Company has performed all its contractual obligations as per the contract does the Company record fee income.

Contract Assets

The Company does not have any contract assets such as work-in-process. All trade receivables on the Company’s consolidated balance sheet are from contracts with customers.

Contract Costs

Costs incurred to obtain a contract are capitalized unless short term in nature. As a practical expedient, costs to obtain a contract that are short term in nature are expensed as incurred. The Company does not have any contract costs capitalized as of September 30, 2021 and June 30, 2021.

Contract Liabilities - Deferred Revenue

The Company’s contract liabilities consist of advance customer payments and deferred revenue. Deferred revenue results from transactions in which the Company has been paid for products by customers, but for which all revenue recognition criteria have not yet been met. Once all revenue recognition criteria have been met, the deferred revenues are recognized.

ADVERTISING

The Company generally expenses marketing and advertising costs as incurred. During the three months ended September 30, 2021 and 2020, the Company incurred $18,000 and $0, respectively, on marketing, trade shows and advertising.

The Company received rebates on advertising from co-operative advertising agreements with several vendors and suppliers. These rebates have been recorded as a reduction to the related advertising and marketing expense.

BENEFICIAL CONVERSION FEATURE

The Company accounts for convertible notes payable in accordance with the guidelines established by the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 470-20, Debt with Conversion and Other Options, Emerging Issues Task Force (“EITF”) 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, and EITF 00-27, Application of Issue No 98-5 To Certain Convertible Instruments. The Beneficial Conversion Feature (“BCF”) of a convertible note is normally characterized as the convertible portion or feature of certain notes payable that provide a rate of conversion that is below market value or in-the-money when issued. The Company records a BCF related to the issuance of a convertible note when issued and also records the estimated fair value of any warrants issued with those convertible notes. Beneficial conversion features that are contingent upon the occurrence of a future event are recorded when the contingency is resolved.

 The BCF of a convertible note is measured by allocating a portion of the note’s proceeds to the warrants, if applicable, and as a reduction of the carrying amount of the convertible note equal to the intrinsic value of the conversion feature, both of which are credited to additional paid-in-capital. The value of the proceeds received from a convertible note is then allocated between the conversion features and warrants on an allocated fair value basis. The allocated fair value is recorded in the financial statements as a debt discount (premium) from the face amount of the note and such discount is amortized over the expected term of the convertible note (or to the conversion date of the note, if sooner) and is charged to interest expense using interest method.

DERIVATIVE LIABILITY

The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity” and ASC 815, “Derivatives and Hedging”. Derivative liabilities are adjusted to reflect their fair value at each period end with any increase or decrease in the fair value being recorded in results of operations.   The fair value of derivative instruments such as convertible note payables are valued using the Black-Scholes option-pricing model based on various assumptions.

STOCK-BASED COMPENSATION

The Company recognizes stock-based compensation in accordance with ASC Topic 718 “Stock Compensation”, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options and employee stock purchases related to an Employee Stock Purchase Plan based on the estimated fair values.

For non-employee stock-based compensation, the Company has adopted ASC 2018-07, Improvements to Nonemployee Share-Based Payment Accounting which expands on the scope of ASC 718 to include share-based payment transactions for acquiring services from non-employees and requires stock-based compensation related to non-employees to be accounted for based on the fair value of the related stock or the fair value of the services at the grant date, whichever is more readily determinable in accordance with ASC Topic 718.

FOREIGN CURRENCY TRANSLATION

The consolidated financial statements of the Company are presented in U.S. dollars. The functional currency for the Company is U.S. dollars for all entities other than Mission Media Limited whose operations are based in the United Kingdom and their functional currency is British Pound Sterling (GBP). Transactions in currencies other than the functional currencies are recorded using the appropriate exchange rate at the time of the transaction. All assets and liabilities are translated into U.S. Dollars at balance sheet date, shareholders’ equity is translated at historical rates and revenue and expense accounts are translated at the average exchange rate for the year or the reporting period. The translation adjustments are reported as a separate component of stockholders’ equity, captioned as accumulated other comprehensive (loss) income. Transaction gains and losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the statements of operations.

The relevant translation rates are as follows: for the three months ended September 30, 2021 closing rate at 1.34260 US$: GBP, average rate at 1.37167 US$: GBP, for the three months ended September 30, 2020 closing rate at 1.29180 US$: GBP, average rate at 1.31230 US$: GBP.

INCOME TAXES

The Company accounts for its income taxes in accordance with Income Taxes Topic of the FASB ASC 740, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.

Income tax expense is based on reported earnings before income taxes. Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for consolidated financial reporting purposes and such amounts recognized for tax purposes and are measured by applying enacted tax rates in effect in years in which the differences are expected to reverse.

The Company also follows the guidance related to accounting for income tax uncertainties. In accounting for uncertainty in income taxes, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority.

The Company has net operating losses for both their US and UK entities however a full valuation allowance was recorded due to uncertainties in realizing the deferred tax asset.

COMPREHENSIVE LOSS

Comprehensive loss is defined as a change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources and includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.  For the Company, comprehensive loss for the three months ended September 30, 2021 and 2020 included net loss and unrealized gains (losses) from foreign currency translation adjustments. 

EARNINGS PER COMMON SHARE

Net income (loss) per common share is calculated in accordance with ASC Topic: 260 Earnings per Share.  Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.  The computation of diluted net loss per share does not include dilutive common stock equivalents in the weighted average shares outstanding as they would be anti-dilutive.  In periods where the Company has a net loss, all dilutive securities are excluded.

The following are dilutive common stock equivalents as of September 30, 2021 and 2020, which were not included in the calculation of loss per share, since the Company had a net loss from continuing operations and net loss:

	September 30,
	2021		2020
Convertible preferred stock		48,000		16,280,397
Stock options		2,793,255		2,576,869
Stock warrants		7,403,569		6,997,518
Total		10,244,824		25,854,785

STIMULUS FUNDING

In accordance with IAS-20, Accounting for Government Grants and Disclosure of Government Assistance, the proceeds from government grants are to be recognized as a deferred income liability and reported as income as the related costs are expensed.   On September 30, 2021, the Company recorded deferred income liabilities of $0 within contract liabilities and $440,000 within stimulus loans, respectively.  On June 30, 2021, the Company recorded deferred income liabilities of $270,000 within contract liabilities and $569,000 within stimulus loans, respectively.  For the three months ending September 30, 2021 and 2020, the Company recognized $262,000 and $0 in income from government grants, respectively.  In the three months ending September 30, 2021, $8,000 of the stimulus funding was not forgiven and returned to the bank.

RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Pronouncements Not Yet Effective

In August 2020, FASB issued ASU 2020-06, “Debt—Debt with Conversion and Other and Derivatives and Hedging—Contracts in Entity’s Own Equity: Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” which simplifies the accounting for convertible instruments by removing the separation models for convertible debt with a cash conversion feature and convertible instruments with a beneficial conversion feature. As a result, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost. These changes will reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that was bifurcated according to previously existing rules. Also, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will be no longer available. The new guidance is effective for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020-06 however it is not believed that it will have a material impact to the financials.

In December 2019, the FASB issued amended guidance in the form of ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This ASU is intended to simplify various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for annual periods beginning after December 15, 2020 and interim periods within those annual periods, with early adoption permitted. An entity that elects early adoption must adopt all the amendments in the same period. Most amendments within this ASU are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company is in the initial stage of evaluating the impact of this new standard however it does not believe the guidance will have a material impact on its financial statements.

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PROPERTY AND EQUIPMENT

3 Months Ended

Sep. 30, 2021

PROPERTY AND EQUIPMENT

NOTE 2 - PROPERTY AND EQUIPMENT

NOTE 2 – PROPERTY AND EQUIPMENT

Property and equipment consist of the following as of September 30, 2021 and June 30, 2021:

	September 30, 2021			June 30, 2021
Computer equipment	$	728,000		$	697,000
Website design		6,000			6,000
Office machine & equipment		95,000			97,000
Furniture & fixtures		456,000			438,000
Leasehold improvements		144,000			135,000
Tenant incentives		145,000			145,000
		1,574,000			1,518,000
Accumulated depreciation		(1,195,000	)		(1,175,000	)
Net book value	$	379,000		$	343,000

During the three months ended September 30, 2021 and 2020, depreciation expense was $30,000 and $31,000, respectively.

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INTANGIBLE ASSETS

3 Months Ended

Sep. 30, 2021

INTANGIBLE ASSETS

NOTE 3 - INTANGIBLE ASSETS

NOTE 3 – INTANGIBLE ASSETS

Intangible assets consisted of the following as of September 30, 2021 and June 30, 2021:

	September 30, 2021			June 30, 2021
Customer relationship	$	4,960,000		$	4,960,000
Non-core customer relationships		760,000			760,000
Non-compete agreements		1,430,000			1,430,000
Technology		520,000			520,000
Tradename		470,000			470,000
Workforce acquired		2,125,000			2,125,000
		10,265,000			10,265,000
Less: accumulated amortization		(7,834,000	)		(7,662,000	)
Net book value	$	2,431,000		$	2,603,000

Purchased intangible assets with finite useful lives are amortized over their respective estimated useful lives (using an accelerated method for customer relationships and trade names) to their estimated residual values, if any. The Company’s finite-lived intangible assets consist of customer relationships, contractor and resume databases, trade names, and internal use software and are being amortized over periods ranging from two to nine years. Purchased intangible assets are reviewed annually to determine if facts and circumstances indicate that the useful life is shorter than originally estimated or that the carrying amount of assets may not be recoverable. If such facts and circumstances exist, recoverability is assessed by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Impairments, if any, are based on the excess of the carrying amount over the fair value of those assets. If the useful life is shorter than originally estimated, the rate of amortization is accelerated and the remaining carrying value is amortized over the new shorter useful life.   For the three months ended September 30, 2021, the Company had no impairments.  During the fiscal year ending June 30, 2021, the Company recorded $0 in impairment expense related to intangibles.

During the three months ended September 30, 2021 and 2020, amortization expense was $172,000 and $540,000, respectively.

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ACCOUNTS PAYABLE ACCRUED EXPENSES

3 Months Ended

Sep. 30, 2021

ACCOUNTS PAYABLE ACCRUED EXPENSES

NOTE 4 - ACCOUNTS PAYABLE & ACCRUED EXPENSES

NOTE 4 – ACCOUNTS PAYABLE & ACCRUED EXPENSES            

As of September 30, 2021 and June 30, 2021, the Company recorded $7,396,000 and $8,363,000 in accounts payable and accrued expenses respectively.  Both accounts payable and accrued expenses are treated as current liabilities however the difference is that a formal invoice has been received and entered to record an accounts payable.

	September 30, 2021		June 30, 2021
Accounts payable	$	2,135,000	$	2,362,000
Accrued expenses		4,195,000		4,819,000
Accrued payroll		361,000		294,000
Accrued taxes		705,000		888,000
	$	7,396,000	$	8,363,000

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CONVERTIBLE NOTES PAYABLE

3 Months Ended

Sep. 30, 2021

CONVERTIBLE NOTES PAYABLE

NOTE 5 - CONVERTIBLE NOTES PAYABLE

NOTE 5 – CONVERTIBLE NOTES PAYABLE

                In October 2020, the Company received gross proceeds of $50,000 representing a convertible note payable issued to an existing investor.   Terms include an interest rate of 10% and a maturity date the earlier of January 1, 2021 or five business days after the Company is listed on a US national securities exchange.  Upon mutual agreement, the outstanding balance can be converted to common stock at a conversion price 25% less the current market price.  In consideration for the loan, 6,667 warrants were issued at an exercise price of $2.25 per share vesting over three years.  The Company determined that the note’s conversion feature should be valued separately and bifurcated from the host instrument and accounted for as a separate derivative liability.   The fair market value of the embedded conversion feature was determined to be $1,000 and $13,000 using the Black-Scholes model as of September 30, 2021 and June 30, 2021, respectively.   The derivative liability was recorded as a short-term liability and interest expense of $1,000 was recorded for the three months ending September 30, 2021.  The assumptions used in the Black-Scholes valuation include a volatility of 64.49%, risk-free rate of 0.98% and a term of one. 

During the three months ended September 30, 2021 and 2020, the Company paid $0 towards the principal of the Promissory Notes.

As of September 30, 2021 and June 30, 2021, there was a total $50,000 in notes payable outstanding.  The Company recorded $1,000 in interest expense relating to convertible note payables during the three months ended September 30, 2021 and 2020.  The Company recorded $0 and $17,000 in amortization expense relating to the note payable discount during the three months ended September 30, 2021 and 2020, respectively.

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NOTE PAYABLE RELATED PARTY

3 Months Ended

Sep. 30, 2021

NOTE PAYABLE RELATED PARTY

NOTE 6 - NOTE PAYABLE RELATED PARTY

NOTE 6 – NOTE PAYABLE RELATED PARTY

As of September 30, 2021 and 2020, the Company owed the founder and CEO of Troika Design Group, Inc., Dan Pappalardo, approximately $180,000 and $217,000, respectively.  The loan was due and payable on demand and accrue interest at 10.0% per annum.  In the year ended June 30, 2021, the Company paid $17,000 to Dan Pappalardo representing miscellaneous expense reimbursements and in the three months ending September 30, 2021 paid $20,000 in principal.  Interest expense of $5,000 were recorded for this note for the three months ending September 30, 2021 and 2020.

As of September 30, 2021 and 2020, the Company owed the estate of his mother Sally Pappalardo $0 and $235,000, respectively.  The loan was due and payable on demand and accrued interest at 10.0% per annum.  Interest expense of $0 and $5,000 were recorded for this note for the three months ending September 30, 2021 and 2020, respectively.  In the year ended June 30, 2021, the Company paid $300,000 to the estate of Sally Pappalardo representing the outstanding principal of $235,000 and accrued interest of $65,000.  The holder provided the Company a signed release acknowledging all obligations under the note had been paid in full. 

During the year ended June 30, 2020, the Company issued a convertible promissory note of $1,300,000 to a related party with an interest rate of 5.0% and convertible into shares of the Company’s common stock at a rate of $0.75 per share. The holder elected to convert the debt into shares of the Company’s common stock in July 2019 at a rate of $0.75 per share for 1,733,334 shares.  This balance was recorded as stock payable on June 30, 2020 as the shares were not issued until July 2020.

Total interest expense on note payable related party was $5,000 and $10,000 for the three months ending September 30, 2021 and 2020, respectively.  Total imputed interest on note payable related party was $0 and $4,000 for the three months ending September 30, 2021 and 2020, respectively.

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LEASE LIABILITIES

3 Months Ended

Sep. 30, 2021

LEASE LIABILITIES

NOTE 7 - LEASE LIABILITIES

NOTE 7 – LEASE LIABILITIES

                The Company leases office space and as a result of our adoption of ASC 842, the operating leases are reflected on our balance sheet within operating lease right-of-use (ROU) assets and the related current and non-current operating lease liabilities. ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from lease agreement.  Lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectation regarding the terms. Variable lease costs such as common area maintenance, property taxes and insurance are expensed as incurred.

When the new accounting standard was adopted on July 1, 2019, the Company had current and long-term operating lease liabilities of $2,275,000 and $6,916,000, respectively, and right of use of assets of $8,348,000.  As of September 30, 2021, the Company had current and long-term operating lease liabilities of $3,115,000 and $5,785,000, respectively, and right of use of assets of $6,827,000. As of June 30, 2021, the Company had current and long-term operating lease liabilities of $3,344,000 and $5,835,000, respectively, and right of use of assets of $6,887,000.

Future minimum lease payments on a discounted and undiscounted basis under these leases are as follows:

	Troika  Gower			Troika LaBrea			Corporate Englewood			Mission US Brooklyn			Mission US Manhattan			Mission UK London			Undiscounted Cash Flows
Discount rate		5.50	%		5.50	%		5.50	%		5.50	%		5.50	%		5.50	%
Remainder of 2022	$	712,000		$	883,000		$	83,000		$	827,000		$	171,000		$	380,000		$	3,056,000
2023		558,000			-			103,000			497,000			-			631,000			1,789,000
2024		580,000			-			107,000			509,000			-			631,000			1,827,000
2025		346,000			-			110,000			522,000			-			631,000			1,609,000
2026		-			-			112,000			535,000			-			526,000			1,173,000
2027		-			-			9,000			455,000			-						464,000
Total undiscounted minimum future payments	$	2,196,000		$	883,000		$	524,000		$	3,345,000		$	171,000		$	2,799,000		$	9,918,000
Imputed interest		(134,000	)		-			(65,000	)		(415,000	)		(24,000	)		(380,000	)		(1,018,000	)
Total operating lease liabilities	$	2,062,000		$	883,000		$	459,000		$	2,930,000		$	147,000		$	2,419,000		$	8,900,000
Short-term lease liabilities	$	762,000		$	883,000		$	85,000		$	824,000		$	147,000		$	414,000		$	3,115,000
Long-term lease liabilities	$	1,300,000		$	-		$	374,000		$	2,106,000		$	-		$	2,005,000		$	5,785,000

Other information related to our operating leases is as follows:

	Three Months Ended September 30, 2021
Weighted average remaining lease term in years	3.7 years
Weighted average discount rate		10.3	%

LEASE AGREEMENTS

On February 8, 2013, our Troika Design Group, Inc. subsidiary entered into a lease agreement for office space in Los Angeles, CA. The lease commenced upon move in, December 15, 2013. As part of the lease agreement, Troika received a rent abatement in months two through six of the lease and partial rent abatement in months seven through nine. The lease also provides for an escalation clause where the Company will be subject to an annual rent increase of 3%, year over year. Initially the lease expired on May 31, 2021, however the Company surrendered the premises in January 2020.

On February 1, 2018, Troika Media Group entered into a five-year lease agreement for office space in Englewood Cliffs, NJ.  The beginning lease expense was $4,120 per month escalating annually at 3.5% and the lease expires on January 31, 2023.  In August 2021, the Company terminated the lease and Troika Services, Inc. entered into a new lease agreement for a larger office space within the same building.  The beginning lease expense was $8,390 per month escalating annually at 3.0% for a term of five years expiring July 2026.   As per accounting standard ASC 842, the Company is treating this lease as new agreement and recorded a loss of $3,000 from the early termination of the operating lease.  As a result of the new lease agreement, the Company acquired $467,000 in right-of-use assets. 

On January 9, 2014, Mission USA entered into a seven year and five-month lease agreement for office space in New York, NY.  The beginning lease expense was $19,230 per month escalating annually at 2.5%.  As part of the lease agreement, Mission USA received a rent abatement in months one through five of the lease. The lease expires January 2022.

On May 2, 2017, Mission USA entered into a ten-year lease agreement for office space in Brooklyn, NY. The beginning lease expense was $34,278 per month escalating annually at 2.5%. As part of the lease agreement, Mission USA received a rent abatement in months one through four of the lease. The lease expires on May 1, 2027.  In August 2021, the Company amended the lease agreement and lowered the base rent beginning in July 2021 to $24,750 for twelve months, escalating to $28,875 in July 2022 for twelve months, and then returning to the original lease agreement.  Contingent on the Company abiding by the payment terms stipulated in the amendment regarding the outstanding rent, the landlord agreed to abate $120,405 of this balance and the Company is planning on recording this abatement in August 2022 after fulfilling its obligations relating to the payment terms.

On April 6, 2016, Mission UK entered into a ten-year lease agreement for office space in London, UK. The beginning lease expense was £17,365 ($22,432) per month for the first twelve months and then escalated to £40,916 ($52,855) per month for the remainder of the lease which expires April 5, 2026.  As part of the lease agreement, Mission UK received a rent abatement in months sixty-one through sixty-six of the lease.   On September 8, 2020, Mission UK entered into an amendment to the current lease providing a discount for the period between March 25, 2020 and September 28, 2020 in acceptance of an increase in the monthly payments from £40,916 to £46,766 for the months of October 2020 through April 2021.  The amended lease was recorded in accordance ASC 842 and the lease expense was recognized on a straight-line basis over the new lease term.  In April 2021, Mission UK terminated the original lease agreement and has agreed with the landlord to occupy the first floor of the building through June 2021 at £8,858 per month.  In April 2021, Mission UK entered into a three-year lease agreement for office space in London, UK ending in April 2024. The lease expense is £39,173 ($54,016) per month throughout the life of the lease.

On February 1, 2020, Troika Production Group, LLC. entered into a five-year lease agreement for office space in Los Angeles, CA.  The beginning lease expense is $42,265 and the lease provides for an escalation clause where the Company will be subject to an annual rent increase of 3.5%, year over year.  The lease expires on January 31, 2025.

The Company accounts for leases based on the new accounting standard ASC 842 and recorded $345,000 and $782,000 in rent expense for the three months ended September 30, 2021 and 2020, respectively. 

SUBLEASE AGREEMENTS

On January 19, 2018, Mission Media USA, Inc. entered into a four-year sublease agreement pertaining to the aforementioned office space in New York, NY.  The sublease commenced on March 1, 2018 and ends January 2022.  The lease income was $22,496 per month escalating annually at 3.0%.

On April 19, 2018, Mission-Media Limited entered into a sublease agreement pertaining to a floor within the aforementioned office space in London, UK.  The sublease commenced in April 2018 and terminated in March 2021.  The lease income was £5,163 per month.

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LEGAL MATTERS

3 Months Ended

Sep. 30, 2021

LEGAL MATTERS

NOTE 8 - LEGAL MATTERS

NOTE 8 – LEGAL MATTERS

We may become a party to litigation in the normal course of business. In the opinion of management, there are no legal matters involving us that would have a material adverse effect upon our financial condition, results of operations or cash flows.

STEPHENSON SETTLEMENT

In July 2021, the Company entered into a settlement agreement regarding the Stephenson legal dispute which settled all matters between the Company and the former owners of the Mission entities.  The agreement provided for the full payment of all amounts due to the Company and allowed the Stephensons to sell the shares subject to a leak-out period.  The agreement was filed with the Court and a settlement payment of approximately $905,000 which was recognized in the three months ending September 30, 2021.  In addition to this cash settlement, the Company also reversed approximately $133,000 in accruals relating to the Stephensons which was recorded as other income.

Other than the foregoing, no material legal proceedings to which the Company (or any officer or director of the Company, or any affiliate, to management’s knowledge) is party to or to which the property of the Company is subject is pending, and no such material proceeding is known by management of the Company to be contemplated.

LA BREA LEASE AGREEMENT

The Company was contacted by counsel representing the landlord of Troika Design’s former La Brea office lease in Los Angeles regarding the amounts due under the lease.  The Company is reviewing the claims and assessing the amount due under the lease although an exact figure cannot be ascertained at this time due to potential mitigating factors.  It is management’s belief that the Company has reasonably accrued a corresponding liability and that a settlement will be entered into with payments over time sometime in the near future, but negotiations have not begun.

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STOCKHOLDERS EQUITY

3 Months Ended

Sep. 30, 2021

STOCKHOLDERS EQUITY

NOTE 9 - STOCKHOLDERS' EQUITY

NOTE 9 – STOCKHOLDERS’ EQUITY
 
REVERSE STOCK SPLIT

In June 2020, our Board of Directors and stockholders holding a majority of the outstanding shares of our voting securities  approved a resolution authorizing our Board of Directors to effect a reverse stock split of our common stock at a certain exchange ratios from 1:10 to 1:15 with our Board of Directors retaining the discretion as to whether to implement the reverse stock split and which exchange ratio to implement.  In September 2020, the Company amended its articles of incorporation and enacted a reverse stock split of one share for each fifteen shares and the accompanying financials reflect the reverse stock split retroactively.

                The reverse stock split resulted in a decrease in authorized shares of all classes of stock from 615,000,000 to 315,000,000 shares consisting of 300,000,000 shares of common stock at a par value of $0.001 and 15,000,000 shares of preferred stock at a par value of $0.01 per share.  Prior to the reverse stock split, the Company had 600,000,000 shares of common stock at a par value of $0.001, 15,000,000 shares of preferred stock at a par value of $0.20 per share.

COMMON STOCK

As of September 30, 2021 and June 30, 2021, the Company had 43,572,950 and 39,496,588 shares of common stock issued and outstanding, respectively. 

In the three months ending September 30, 2020, the holder of a convertible promissory note for $1,000,000 informed the Company that they had elected to convert the balance due to common shares at the agreed upon conversion price of $3.00 per share and 387,223 shares were issued representing the outstanding principal and accrued interest.

In the three months ending September 30, 2020, the holder of a convertible promissory note for $200,000 informed the Company that they had elected to convert the balance due to common shares at the agreed upon conversion price of $3.75 per share and 56,000 shares were issued representing the outstanding principal and loan fee.

In the three months ending September 30, 2020, the holder of a convertible promissory note for $200,000 informed the Company that they had elected to convert the balance due to common shares at the agreed upon conversion price of $3.75 per share and 56,000 shares were issued representing the outstanding principal and loan fee.

In July 2020, the holder of a related party convertible promissory note of $1,300,000 elected to convert the debt into shares of the Company’s common stock at a rate of $0.75 per share for 1,733,334 shares.

PREFERRED STOCK

The Company has authorized 15,000,000 shares as preferred stock, par value $0.01 series A, B, C and D, of which 5,000,000 shares have been designated as Series A preferred stock; 3,000,000 shares have been designated as Series B convertible preferred stock; 1,200,000 shares have been designated as Series C convertible preferred stock; and 2,500,000 shares have been designated as Series D convertible preferred stock.

As of September 30, 2021, 720,000 shares of Series A Preferred Stock were issued and outstanding; 0 shares of Series B Preferred Stock were issued and outstanding; 0 shares of Series C Preferred Stock were issued and outstanding; and 0 shares of Series D Preferred Stock were issued and outstanding. 

As of June 30, 2021, 720,000 shares of Series A Preferred Stock were issued and outstanding; 0 shares of Series B Preferred Stock were issued and outstanding; 0 shares of Series C Preferred Stock were issued and outstanding; and 0 shares of Series D Preferred Stock were issued and outstanding.  On May 10, 2021, the Company converted all Preferred Stock Series B, C, and D into Common Stock following its uplisting to the Nasdaq Capital Market.  At the time of the conversion the Company had 2,495,000 shares of Series B Convertible Preferred Stock that were convertible into 594,048 shares of common stock at a price of $4.20 per share; 911,149 shares of Series C Convertible Preferred Stock convertible into 12,287,386 shares of Common Stock at $0.074 per share; and 1,979,000 shares of Series D Convertible Preferred Stock convertible into 5,277,334 shares of Common Stock at $0.375 per share for a total of 18,158,768 shares of Common Stock.

STOCK PAYABLE

                In the fiscal year ended June 30, 2021, the Company recorded a stock payable of $1,210,000 relating to the acquisition of Redeeem, LLC.   As per the asset purchase agreement dated May 21, 2021, 452,929 shares of common stock valued at $2.6715 per share were due to be issued to Redeeem’s employees and these shares were issued in August 2021.

DEFERRED COMPENSATION

On May 21, 2021, the Company entered into an agreement to acquire the assets and specific liabilities of fintech platform Redeeem, LLC for $2.6 million consisting of $1.2 million in cash, $166,000 in specific liabilities, and $1.2 million of the Company’s common stock.  In addition, the Company agreed to provide equity to its employees to be vested over three years valued at $9,680,000 representing 3,623,433 shares of the Company’s common stock at conversion price of $2.6715 per share. Given the equity is contingent on the employees being employed and are vested over three years, the Company is treating this as deferred compensation and the expenses are recorded as the equity is vested.  The vested portion of the deferred compensation was charged to additional paid-in capital and the expenses are recorded as stock-based compensation

In August 2021, all 3,623,433 shares of the Company’s common stock was issued to Redeeem’s employees and held in an escrow account subject to the vesting schedule in the aforementioned escrow agreement.  Based on the vesting schedule summarized below, 3,186,606 shares of the Company’s common stock was issued as of September 30, 2021 but not vested.

The following table summarizes the deferred compensation recorded:

	Amount			Unvested Shares
Deferred compensation balance recorded at acquisition date	$	9,680,000			3,623,433
Vested portion of deferred compensation in fiscal year 2021		(362,000	)		(135,425	)
Unamortized deferred compensation at June 30, 2021		9,318,000			3,488,008
Vested portion of deferred compensation in three months ending September 30, 2021		(805,000	)		(301,402	)
Unamortized deferred compensation at September 30, 2021	$	8,513,000			3,186,606

WARRANTS

During the three months ended September 30, 2021, the Company did not issue warrants.

During the three months ended September 30, 2020, the Company issued warrants to certain directors and consultants to purchase 156,667 shares of the Company’s common stock between $0.75 and $3.00 per share which vested during various terms and were valued at $475,000.  The Company recorded compensation of $7,000 for the vested portion during the three months ended September 30, 2020.  The Company recorded compensation of $154,000 for the three months ended September 30, 2020 relating to the vested portion of warrants that were issued in previous periods.   The total compensation of the unvested warrants to be recognized in future periods is $143,000 and the weighted average remaining is 3.2 years.

During the three months ended September 30, 2020, the Company also issued warrants to purchase 400,000 shares of the Company’s common stock at $0.75 relating to the conversion of an aforementioned convertible note which is vested over three years and valued at $1,200,000. 

As of September 30, 2021 and 2020, respectively, the Company has outstanding warrant shares of 8,296,408 with an intrinsic value of $12,158,467 and 8,341,333 warrant shares with an intrinsic value of $11,023,795.

In February 2021, the Company decided to extend all warrants issued in association with its previous Series B Preferred Stock one year beyond their original expiration date. The Company considered recording the increase in the fair value associated with these new terms in the three months ending September 30, 2021 but determined that the change was not material and an adjustment was not necessary.

The Company uses the Black-Scholes Model to determine the fair value of warrants granted. Option-pricing models require the input of highly subjective assumptions, particularly for the expected stock price volatility and the expected term of options. Changes in the subjective input assumptions can materially affect the fair value estimate. The expected stock price volatility assumptions are based on the historical volatility of the Company’s common stock over periods that are similar to the expected terms of grants and other relevant factors. The Company derives the expected term based on an average of the contract term and the vesting period taking into consideration the vesting schedules and future employee behavior with regard to option exercise. The risk-free interest rate is based on U.S. Treasury yields for a maturity approximating the expected term calculated at the date of grant. The Company has never paid any cash dividends on its common stock and the Company has no intention to pay a dividend at this time; therefore, the Company assumes that no dividends will be paid over the expected terms of warrants awards.

The Company determines the assumptions used in the valuation of warrants awards as of the date of grant. Differences in the expected stock price volatility, expected term or risk-free interest rate may necessitate distinct valuation assumptions at those grant dates. As such, the Company may use different assumptions for warrants granted throughout the year.

                The Company has utilized the following assumptions in its Black-Scholes warrant valuation model to calculate the estimated grant date fair value of the warrants during the three months ended September 30, 2020:

	2020
Volatility - range	64.1% – 64.4%
Risk-free rate	0.2% - 0.3%
Contractual term	4.0 years
Exercise price	$0.75 - $3.00

A summary of the warrants granted, exercised, forfeited and expired for the three months ending September 30, 2021 are presented in the table below:

	Number of Warrant Shares		Weighted-Average Exercise Price		Weighted-Average Grant-Date Fair Value		Aggregate Intrinsic Value of Outstanding Warrant Shares		Weighted-Average Remaining Contractual Term (in years)
Outstanding July 1, 2021		8,296,408	$	1.05	$	1.90	$	12,158,467		2.2
Granted		-		-		-		-		-
Exercised		-		-		-		-		-
Forfeited		-		-		-		-		-
Expired		-		-		-		-		-
Outstanding September 30, 2021		8,296,408		1.05		1.90		12,158,467		1.9
Vested and exercisable September 30, 2021		7,407,440		1.02		1.78		9,961,656		2.0
Non-vested September 30, 2021		888,968	$	1.27	$	2.88	$	2,196,811		1.4

The following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable warrants under the Company’s warrant plans as of September 30, 2021.

		Outstanding Warrant Shares				Exercisable Warrant Shares
Exercise price range		Number of Warrant Shares		Weighted average remaining contractual life		Number of Warrant Shares		Weighted average remaining contractual life
$	0.75		4,106,667		2.0		4,106,667		2.2
$	2.84		20,000		4.6		11,110		1.9
$	3.75		4,051,223		2.0		3,171,145		2.3
$	5.10		33,333		0.1		33,333		0.1
$	27.00		85,185		0.1		85,185		0.1
			8,296,408		1.9		7,407,440		2.0

A summary of the warrants granted, exercised, forfeited and expired for the three months ending September 30, 2020 are presented in the table below:

	Number of Warrant Shares			Weighted-Average Exercise Price		Weighted-Average Grant-Date Fair Value		Aggregate Intrinsic Value of Outstanding Warrant Shares		Weighted-Average Remaining Contractual Term (in years)
Outstanding July 1, 2020		7,858,741		$	1.52	$	1.92	$	9,234,295		3.0
Granted		556,667			0.79		3.11		1,647,500		4.3
Exercised		-			-		-		-		-
Forfeited		-			-		-		-		-
Expired		(74,075	)		11.30		7.65		110,000		-
Outstanding September 30, 2020		8,341,333			1.24		1.86		11,023,795		2.9
Vested and exercisable September 30, 2020		7,094,851			1.21		1.69		8,064,350		2.8
Non-vested September 30, 2020		1,246,482		$	1.38	$	2.85	$	2,959,445		3.5

The following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable warrants under the Company’s warrant plans as of September 30, 2020.

		Outstanding Warrant Shares				Exercisable Warrant Shares
Exercise price range		Number of Warrant Shares		Weighted average remaining contractual life		Number of Warrant Shares		Weighted average remaining contractual life
$	0.75		7,096,482		3.1		6,328,333		2.9
$	1.50		400,000		2.3		133,333		3.5
$	3.00		76,667		0.6		3,333		4.8
$	3.75		368,333		4.1		230,000		4.2
$	6.00		381,333		0.5		381,333		0.5
$	27.00		18,518		0.9		18,519		0.9
			8,341,333		2.9		7,094,851		2.8

2017 EQUITY INCENTIVE PLAN 

On June 13, 2017, the Board adopted and approved an amendment to the Troika Media Group, Inc. 2015 Employee, Director and Consultant Equity Incentive Plan (the “Equity Plan”), to change the name from M2 nGage Group, Inc. to Troika Media Group, Inc., in order to attract, motivate, retain, and reward high-quality executives and other employees, officers, directors, consultants, and other persons who provide services to the Company by enabling such persons to acquire an equity interest in the Company. Under the Plan, the Board (or the compensation committee of the Board, if one is established) may award stock options, either stock grant of shares of the Company’s common stock, incentive stock option under IRS section 422 (“ISO’s”) or a non-qualified stock option (“Non-ISO’s”) (collectively “Options”). The Plan allocates 3,333,334 shares of the Company’s common stock (“Plan Shares”) for issuance of equity awards under the Plan. As of September 30, 2021, the Company has granted, under the Plan, awards in the form of NQSO’s

ISO’s Awards

During the three months ended September 30, 2021, the Company issued options to certain employees to purchase 385,167 shares of the Company’s common stock between $2.61 and $2.84 per share which vested during various terms and were valued at $503,000.  In regards to the options issued in the three months ending September 30, 2021, the Company recorded compensation of $0 for the vested portion of these options.  The Company recorded compensation of $107,000 relating to the vested portion of options that were issued in previous periods for the three months ended September 30, 2021.  The total compensation of the unvested options to be recognized in future periods is $1,672,000 and the weighted average remaining is 2.7 years.

During the three months ended September 30, 2020, the Company issued options to certain employees to purchase 76,667 shares of the Company’s common stock at $3.75 per share which vested during various terms and were valued at $123,000.  In regards to the options issued in the three months ending September 30, 2020, the Company recorded compensation of $0 for the vested portion of these options.  The Company recorded compensation of $166,000 relating to the vested portion of options that were issued in previous periods for the three months ended September 30, 2020.  The total compensation of the unvested options to be recognized in future periods is $719,000 and the weighted average remaining is 1.7 years.

The Company uses the Black-Scholes Model to determine the fair value of Options granted. Option-pricing models require the input of highly subjective assumptions, particularly for the expected stock price volatility and the expected term of options. Changes in the subjective input assumptions can materially affect the fair value estimate. The expected stock price volatility assumptions are based on the historical volatility of the Company’s common stock over periods that are similar to the expected terms of grants and other relevant factors. The Company derives the expected term based on an average of the contract term and the vesting period taking into consideration the vesting schedules and future employee behavior with regard to option exercise. The risk-free interest rate is based on U.S. Treasury yields for a maturity approximating the expected term calculated at the date of grant. The Company has never paid any cash dividends on its common stock and the Company has no intention to pay a dividend at this time; therefore, the Company assumes that no dividends will be paid over the expected terms of option awards.

The Company determines the assumptions used in the valuation of Option awards as of the date of grant. Differences in the expected stock price volatility, expected term or risk-free interest rate may necessitate distinct valuation assumptions at those grant dates. As such, the Company may use different assumptions for options granted throughout the year.

The Company has utilized the following assumptions in its Black-Scholes options valuation model to calculate the estimated grant date fair value of the options during the three months ended September 30, 2021 and 2020

	2021			2020
Volatility - range		65.3	%		64.8	%
Risk-free rate		0.9	%		0.3	%
Contractual term		3.0 years			3.0 years
Exercise price	$	2.61 - $2.84		$	3.75

A summary of the options granted, exercised, forfeited and expired for the three months ending September 30, 2021 are presented in the table below:

	Number of Option Shares		Weighted-Average Exercise Price		Weighted-Average Grant-Date Fair Value		Aggregate Intrinsic Value of Outstanding Option Shares		Weighted-Average Remaining Contractual Term (in years)
Outstanding July 1, 2021		3,088,333	$	1.13	$	1.06	$	1,829,999		0.4
Granted		385,167		2.61		1.31		88,205		3.8
Exercised		-		-		-		-		-
Forfeited		-		-		-		-		-
Expired		-		-		-		-		-
Outstanding September 30, 2021		3,473,500		1.29		1.09		1,918,204		0.4
Vested and exercisable September 30, 2021		2,812,439		0.93		1.04		1,672,318		0.2
Non-vested September 30, 2021		661,061	$	2.85	$	1.56	$	245,886		2.7

The following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable options under the Company’s warrant plans as of September 30, 2021.

		Outstanding Option Shares				Exercisable Option Shares
Exercise price range		Number of Option Shares		Weighted average remaining contractual life		Number of Option Shares		Weighted average remaining contractual life
$	0.75		2,546,667		0.2		2,494,106		0.2
$	1.50		200,000		0.3		200,000		0.3
$	2.61		383,500		3.0		-		-
$	2.84		1,666		3.0		-		-
$	3.75		341,667		1.7		118,333		1.2
			3,473,500		0.4		2,812,439		0.2

A summary of the options granted, exercised, forfeited and expired for the three months ending September 30, 2020 are presented in the table below:

	Number of Option Shares			Weighted-Average Exercise Price		Weighted-Average Grant-Date Fair Value		Aggregate Intrinsic Value of Outstanding Option Shares		Weighted-Average Remaining Contractual Term (in years)
Outstanding July 1, 2020		3,377,222		$	1.10	$	1.06	$	2,030,000		0.7
Granted		76,667			3.75		1.61		-		2.8
Exercised		-			-		-		-		-
Forfeited		-			-		-		-		-
Expired		(143,333	)		0.95		1.01		-		-
Outstanding September 30, 2020		3,310,556			1.10		1.01		1,830,000		0.6
Vested and exercisable September 30, 2020		2,589,106			0.80		0.83		1,110,651		0.3
Non-vested September 30, 2020		721,450		$	2.19	$	1.87	$	719,349		1.7

The following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable options under the Company’s warrant plans as of September 30, 2020.

		Outstanding Option Shares				Exercisable Option Shares
Exercise price range		Number of Option Shares		Weighted average remaining contractual life		Number of Option Shares		Weighted average remaining contractual life
$	0.75		2,768,889		0.4		2,417,995		0.2
$	1.50		200,000		1.0		166,667		1.0
$	3.75		341,667		2.5		4,444		1.6
			3,310,556		0.6		2,589,106		0.3

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DISAGGREGATION OF REVENUE LONG-LIVED ASSETS

3 Months Ended

Sep. 30, 2021

DISAGGREGATION OF REVENUE LONG-LIVED ASSETS

NOTE 10 - DISAGGREGATION OF REVENUE & LONG-LIVED ASSETS

NOTE 10 – DISAGGREGATION OF REVENUE & LONG-LIVED ASSETS

The following table presents the disaggregation of gross revenue between revenue types:

	Three Months Ended September 30,
	2021		2020
Project fees	$	4,871,000	$	2,153,000
Retainer fees		461,000		565,000
Fee income		1,276,000		729,000
Reimbursement income		1,736,000		685,000
Other revenue		5,000		-
	$	8,349,000	$	4,132,000

The following table presents the disaggregation of gross revenue between the United States and the United Kingdom for the three months ended:

	Three Months Ended September 30,
	2021		2020
Gross Revenue:
United States	$	6,079,000	$	3,303,000
United Kingdom		2,270,000		829,000
Total gross revenue	$	8,349,000	$	4,132,000

The following table presents the disaggregation of gross profit between the United States and the United Kingdom for the three months ended:

	Three Months Ended September 30,
	2021		2020
Gross profit:
United States	$	2,443,000	$	1,303,000
United Kingdom		1,069,000		549,000
Total gross profit	$	3,512,000	$	1,852,000

The following table presents the disaggregation of net loss between the United States and the United Kingdom for the three months ended:

	Three Months Ended September 30,
	2021			2020
Net loss;
United States	$	(1,787,000	)	$	(3,239,000	)
United Kingdom		(352,000	)		(682,000	)
Total net loss	$	(2,139,000	)	$	(3,921,000	)

The following table presents the disaggregation of fixed assets between the United States and the United Kingdom as of September 30, 2021:

	United States			United Kingdom			Total
Computer equipment	$	485,000		$	243,000		$	728,000
Website design		6,000			-			6,000
Office machine & equipment		51,000			44,000			95,000
Furniture & fixtures		373,000			83,000			456,000
Leasehold improvements		144,000			-			144,000
Tenant incentives		145,000			-			145,000
		1,204,000			370,000			1,574,000
Accumulated depreciation		(890,000	)		(305,000	)		(1,195,000	)
Net book value	$	314,000		$	65,000		$	379,000

The following table presents the disaggregation of fixed assets between the United States and the United Kingdom as of June 30, 2021:

	United States			United Kingdom			Total
Computer equipment	$	468,000		$	229,000		$	697,000
Website design		6,000			-			6,000
Office machine & equipment		51,000			46,000			97,000
Furniture & fixtures		352,000			86,000			438,000
Leasehold improvements		135,000			-			135,000
Tenant incentives		145,000			-			145,000
		1,157,000			361,000			1,518,000
Accumulated depreciation		(867,000	)		(308,000	)		(1,175,000	)
Net book value	$	290,000		$	53,000		$	343,000

The following table presents the disaggregation of intangible assets and goodwill between the United States and the United Kingdom as of September 30, 2021. 

Intangibles	US			UK		Total
Customer relationship	$	4,960,000		$	-	$	4,960,000
Non-core customer relationships		760,000			-		760,000
Non-compete agreements		1,430,000			-		1,430,000
Technology		520,000			-		520,000
Tradename		470,000			-		470,000
Workforce acquired		2,125,000			-		2,125,000
		10,265,000			-		10,265,000
Less: accumulated amortization		(7,834,000	)		-		(7,834,000	)
Net book value	$	2,431,000		$	-	$	2,431,000

The following table presents the disaggregation of intangible assets and goodwill between the United States and the United Kingdom as of June 30, 2021. 

Intangibles	US			UK		Total
Customer relationship	$	4,960,000		$	-	$	4,960,000
Non-core customer relationships		760,000			-		760,000
Non-compete agreements		1,430,000			-		1,430,000
Technology		520,000			-		520,000
Tradename		470,000			-		470,000
Workforce acquired		2,125,000			-		2,125,000
		10,265,000			-		10,265,000
Less: accumulated amortization		(7,662,000	)		-		(7,662,000	)
Net book value	$	2,603,000		$	-	$	2,603,000

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SUBSEQUENT EVENTS

3 Months Ended

Sep. 30, 2021

SUBSEQUENT EVENTS

NOTE 11 - SUBSEQUENT EVENTS

NOTE 11 – SUBSEQUENT EVENTS

EQUITY INCENTIVE PLAN

On October 28, 2021, the Board of Directors convened and voted to amend and adopt a revised equity incentive plan increasing the plan pool to as much as 12,000,000 shares.  The final amount of shares is subject to shareholder approval as well as approval by the compensation committee. 

WARRANTS ISSUED

In October 2021, the Company issued warrants to a member of the Board of Directors to purchase 150,000 shares of the Company’s common stock at an exercise price of $1.24 per share.  The warrants are valued at approximately $100,000 using Black-Scholes model.

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PRESENTATION OF THE FINANCIAL STATEMENTS (Policies)

3 Months Ended

Sep. 30, 2021

PRESENTATION OF THE FINANCIAL STATEMENTS

LIQUIDITY

The Company has incurred net losses since its inception and anticipates net losses and negative operating cash flows until fiscal year 2024.  For the three months ending September 30, 2021, the Company had a net loss of $2.1 million, which increased the accumulated deficit to $189.0 million at September 30, 2021 from $186.9 million at June 30, 2021.  At September 30, 2021, the Company had approximately $9.8 million in cash and cash equivalents and a total of $12.4 million in current assets in relation to $17.7 million in current liabilities.  While the Company continues to find efficiencies with its acquisitions of Troika Design Group, Inc. and  Mission Group as well as the assets of Redeeem LLC, the departure of Mission’s President and Founder in fiscal year 2019 together with the coronavirus (COVID-19) pandemic impacted revenue more than anticipated.

With the acquisition of Mission Group, the Company is attempting to increase Troika’s footprint in major media markets, such as NY and London.  The Company also continues to expand its consulting services and breadth of product offering with existing Mission and Troika clients and increase business development in NY and London as a result of the Mission acquisition.  Additionally, the Company intends to add to Mission business development due to Troika’s existing clientele.  As a result of these developments and the Company’s intent to save costs in overhead through rationalized headcount from synergies achieved in the acquisition of Mission, the consolidated fiscal year 2024 forecast for the combined entity is $1.7 million in adjusted EBITDA.

If the Company raises additional funds by issuing equity securities, its stockholders would experience dilution. Additional debt financing, if available, may involve covenants restricting its operations or its ability to incur additional debt. Any additional debt financing or additional equity that the Company raises may contain terms that are not favorable to it or its stockholders and require significant debt service payments, which diverts resources from other activities. The Company’s ability to raise additional capital will also be impacted by the outbreak of COVID-19, as well as market conditions and the price of the Company’s common stock.

Based on the recent acquisitions, Company-wide consolidation, and management’s plans, the Company believes that the current cash on hand of $9,752,000and anticipated cash from operations is sufficient to conduct planned operations for one year from the issuance of the consolidated financial statements.  In addition, Management believes they can raise additional capital, if necessary, given the Company has been successful at raising funding through both equity and debt financing.

Impact of COVID-19

In March 2020, the World Health Organization categorized the coronavirus (COVID-19) as a pandemic, and it continues to spread throughout the United States and the rest of the world with different geographical locations impacted more than others. The outbreak of COVID-19 and the resulting public and private sector measures to reduce its transmission, such as the imposition of social distancing and orders to work-from-home, stay-at-home and shelter-in-place, have adversely impacted our business and those of our clients. Businesses have adjusted, reduced, or suspended operating activities, which has negatively impacted the clients we service. We continue to believe our focus on our strategic strengths, including talent, our differentiated market strategy and the relevance of our services, including the longevity of our relationships, will continue to assist our Company as we navigate a rapidly changing marketplace. The effects of the COVID-19 pandemic have negatively impacted our results of operations, cash flows and financial position; however, the continued extent of the impact will vary depending on the duration and severity of the economic and operational impacts of COVID-19.

We took steps to protect the safety of our employees, with a large majority of our worldwide workforce working from home, while developing creative ideas to protect the health and well-being of our communities and setting up our people to help them do their best work for our clients while working remotely. With respect to managing costs, we have implemented multiple initiatives to align our expenses with changes in revenue. The steps taken across our agencies and corporate group include deferred merit increases, freezes on hiring and temporary labor, major cuts in non-essential spending, staff reductions, furloughs in markets where that option is available and salary reductions, including voluntary salary deferment for our senior corporate management team. In addition, we remain committed to and have intensified our efforts around cash flow discipline, including the identification of significant capital expenditures that can be deferred, and working capital management. We began to see the effects of COVID-19 on client spending, notably in the UK and US markets with our Mission subsidiaries throughout the second quarter of calendar 2020 with much of the work force of the UK subsidiary on furlough, and with our Troika Design subsidiary furloughed as March 2020 progressed. Due to mandatory stay at home orders and social distancing, our experiential business has been particularly impacted by COVID-19. Promotional and experiential events with the Company’s assistance are particularly susceptible to external factors and were delayed by many of the Company’s Mission clients due to the effects of COVID-19. The Company had temporarily furloughed employees to reflect current reduced demands associated with those client sets. However, as of the first and second quarters of calendar 2021, we started to see business dramatically improve and expect greater improvement in our results in our next fiscal quarters. As cities have commenced openings with the improvement of vaccines distribution and infection rates declining, our client activities have doubled and there is a real optimism that the economic conditions are improving. Sports, Entertainment, Pharma clients are contracting our services across all entities at rates similar to 2019. 

In the current environment, a major priority for us is preserving liquidity. Our primary liquidity sources are operating cash flow, cash and cash equivalents and short-term investments. Although we expect to experience a decrease in our cash flow from operations as a result of the impact of COVID-19, we have obtained relief under the CARES Act in the form of a Small Business Administration backed loans. In aggregate we received $1.7 million in SBA stimulus “Payroll Protection Program” funding in April 2020 of which the majority of these funds were used for payroll. As per the US Government rules, the funds used for payroll, healthcare benefits, and other applicable operating expenses can be forgiven and the Company reported them as such in December 2020 considering the Company believes we have substantially met these conditions.  On August 14, 2020, the Company received an additional $500,000 in loans with 30 year terms under the SBA’s “Economic Injury Disaster Loan” program which the Company intends to use to address any cash shortfalls that resulted from the current pandemic.  In February 2021, the Company obtained additional relief under the CARES Act in the form of Small Business Administration backed loans and received an additional $1.7 million in SBA stimulus “Payroll Protection Program” funds which were used for payroll, healthcare benefits, and other applicable operating expenses.  In July 2021, the Company was notified that all of the stimulus funds were forgiven with the exception of approximately $8,000 which was returned in the three months ending September 30, 2021.

In the United Kingdom, as of April 1, 2020, Mission furloughed twenty-seven employees, saving £78,000 in April payroll, being made up of £55,000 of furlough monies from the government and £16,000 in associated payroll savings and applied for a 3-month rent holiday. In May 1, 2020, Mission put on furlough an additional 5 employees bringing the total to 32, alongside a 10% pay cut for all employees not furloughed, saving £111,000 in May payroll, being made up of £62,000 of furlough monies from the government, £33,000 of associated payroll savings and £16,000 in savings related to the pay cut. On April 1, 2020, Troika Design Group actioned a 15% salary reduction across the majority of the Los Angeles staff and furloughed one office manager for a total savings of $112,000 per month. Finally, certain members of the Company’s executive team deferred compensation temporarily. In August 2020, the Company received £50,000 in loans related to the COVID pandemic with an interest rate of 2.5% to be paid over five years beginning one year after receipt. The Company used these proceeds to address any cash shortfalls that resulted from the pandemic.

The extent to which the COVID-19 outbreak continues to impact the Company’s results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact. 

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of TMG, and its wholly-owned subsidiaries, Troika Design Group, Inc. (California), Troika Services Inc. (New York), Troika Analytics Inc. (New York), Troika Productions, LLC (California), Troika-Mission Holdings, Inc. (New York), Mission Culture LLC (Delaware), Mission-Media Holdings Limited (England and Wales), Mission Media USA, Inc. (New York), and Troika  IO, Inc. (f/k/a Redeeem Acquisition Corp) (California). All significant intercompany accounts and transactions have been eliminated in consolidation.

RECLASSIFICATION OF PRIOR YEAR FINANCIALS

In the three months ended September 30, 2020, the Company reported amortization of right-of-use assets of $320,000 in its Condensed Consolidated Statements of Cash Flows separately in net cash used in operating activities.  For purposes of consistency, this balance was reclassified to operating lease liability within the Condensed Consolidated Statements of Cash Flows resulting in a balance of $171,000 from $(149,000).  The reclassification did not change the net cash used in operating activities as it remains at $(1,182,000).

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods.

Significant estimates and assumptions made by management include, among others, the assessment of the collectability of accounts receivable and the determination of the allowance for doubtful accounts, the valuation and useful life of capitalized equipment costs and long-lived assets, valuation of warrants and options, the determination of the useful lives and any potential impairment of long-lived assets such as intangible assets and goodwill, the allocation of purchase consideration to assets and liabilities due to the Redeeem acquisition, stock-based compensation, and deferred tax assets.  Actual results could differ from those estimates.

FAIR VALUE MEASUREMENT

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. There are three levels of inputs that may be used to measure fair value:

Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Other inputs that are directly or indirectly observable in the marketplace.

Level 3 - Unobservable inputs which are supported by little or no market activity.

 Fair-value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2021 and June 30, 2021.  The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts receivable, accounts payable, accrued liabilities, and convertible notes payable. Fair values for these items were assumed to approximate carrying values because of their short term nature or they are payable on demand. The Company uses Level 3 inputs for its valuation methodology for the embedded conversion option liabilities as the fair values were determined by using the Black-Scholes option-pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. 

IMPAIRMENT OF LONG-LIVED ASSETS

The Company evaluates, on a periodic basis, long-lived assets to be held and used for impairment in accordance with the reporting requirements of ASC 360-10. The evaluation is based on certain impairment indicators, such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements, as well as other external market conditions or factors that may be present. If these impairment indicators are present or other factors exist that indicate that the carrying amount of the asset may not be recoverable, then an estimate of the undiscounted value of expected future operating cash flows is used to determine whether the asset is recoverable and the amount of any impairment is measured as the difference between the carrying amount of the asset and its estimated fair value. The fair value is estimated using valuation techniques such as market prices for similar assets or discounted future operating cash flows. 

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company maintains cash and cash equivalent account balances with financial institutions in the United States and United Kingdom which at times exceed federally insured limits for accounts in the United States. Considering deposits with these institutions can be redeemed on demand, the Company believes there is minimal risk. As of September 30, 2021 and  June 30, 2021, the Company had $8,357,000 and $10,125,000 in cash that was uninsured, respectively.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.  As of September 30, 2021 and June 30, 2021, the Company had no cash equivalents.

ACCOUNTS RECEIVABLE

Our accounts receivable are amounts due from our clients. The Company accounts for unbilled accounts receivable using the percentage-of-completion accounting method for revenue recognized and the customer has not been invoiced due to the terms of the contract or the timing of the account invoicing cycle.

For those clients to whom we extend credit, we perform periodic evaluations of accounts receivable and maintain allowances for potential credit losses as deemed necessary.

The Company periodically reviews the outstanding accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. When a customer’s account is deemed to be uncollectible the outstanding balance is charged to the allowance for doubtful accounts. As of September 30, 2021 and June 30, 2021, the Company had $452,000 and $521,000 in allowance for doubtful accounts, respectively.

PROPERTY AND EQUIPMENT, NET

Property and equipment are stated at cost less accumulated depreciation and amortization. Property and equipment consist of furniture and computer equipment. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets, generally ranging from three to seven years. Maintenance and repairs are charged to expense as incurred.  Expenditures that increase the value or productive capacity of assets are capitalized.  When assets are retired or otherwise disposed of, the cost and accumulated depreciation or amortization are removed from the accounts and any resulting gain or loss is reflected in the statements of income in the period realized.

GOODWILL AND INTANGIBLE ASSETS

As a result of acquisitions, the Company recorded goodwill and identifiable intangible assets as part of its allocation of the purchase consideration.

Goodwill 

Goodwill is the excess of the purchase price paid over the fair value of the net assets of the acquired business. Goodwill is tested annually at June 30 for impairment. The annual qualitative or quantitative assessments involve determining an estimate of the fair value of reporting units in order to evaluate whether an impairment of the current carrying amount of goodwill exists. A qualitative assessment evaluates whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two-step quantitative goodwill impairment test. The first step of a quantitative goodwill impairment test compares the fair value of the reporting unit to its carrying amount including goodwill. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss may be recognized. The amount of impairment loss is determined by comparing the implied fair value of the reporting unit’s goodwill with the carrying amount. If the carrying amount exceeds the implied fair value then an impairment loss is recognized equal to that excess.  There was no goodwill impairment recorded as a result of the Company’s annual impairment assessment on June 30, 2021. The Company has adopted the provisions of ASU 2017-04—Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 requires goodwill impairments to be measured on the basis of the fair value of a reporting unit relative to the reporting unit’s carrying amount rather than on the basis of the implied amount of goodwill relative to the goodwill balance of the reporting unit. Thus, ASU 2017-04 permits an entity to record a goodwill impairment that is entirely or partly due to a decline in the fair value of other assets that, under existing GAAP, would not be impaired or have a reduced carrying amount. Furthermore, the ASU removes “the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test.” Instead, all reporting units, even those with a zero or negative carrying amount will apply the same impairment test. Accordingly, the goodwill of reporting unit or entity with zero or negative carrying values will not be impaired, even when conditions underlying the reporting unit/entity may indicate that goodwill is impaired.

We test our goodwill for impairment annually, or, under certain circumstances, more frequently, such as when events or circumstances indicate there may be impairment. We are required to write down the value of goodwill only when our testing determines the recorded amount of goodwill exceeds the fair value. Our annual measurement date for testing goodwill impairment is June 30. 

None of the goodwill is deductible for income tax purposes.

Intangibles

Intangible assets with finite useful lives consist of tradenames, non-compete agreements, acquired workforce and customer relationships and are amortized on a straight-line basis over their estimated useful lives, which range from three to ten years. The estimated useful lives associated with finite-lived intangible assets are consistent with the estimated lives of the associated products and may be modified when circumstances warrant. Such assets are reviewed for impairment when events or circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset and its eventual disposition are less than its carrying amount. The amount of any impairment is measured as the difference between the carrying amount and the fair value of the impaired asset. There was no impairment recorded for intangibles in the three months ended September 30, 2021 and 2020.

Leases

Right-of-use assets and lease liabilities are recorded in accordance with Leases (Topic 842).  The Company has recorded a lease liability because the Company has the obligation to make lease payments and a ROU asset for the right to use the underlying asset for the lease term. The lease liability is measured at the present value of the lease payments over the lease term. The right-of-use asset is measured at the lease liability amount, adjusted for lease prepayments, lease incentives received and the lessee’s initial direct costs. The Company uses the optional transitional method and elected to use the package of three practical expedients which allows the Company not to reassess whether contracts are or contain leases, lease classification and whether initial direct costs qualify for capitalization.

Income from subleased properties as well as non-lease items such as common-area maintenance and utilities are recognized as non-operating “other income” on the Consolidated Statements of Operations and Comprehensive Loss.

REVENUE RECOGNITION

The Company recognizes revenue in accordance with the Financial Accounting Standards Board’s (“FASB”), Accounting Standards Codification (“ASC”) ASC 606, Revenue from Contracts with Customers (“ASC 606”). Revenues are recognized when control is transferred to customers in amounts that reflect the consideration the Company expects to be entitled to receive in exchange for those goods. Revenue recognition is evaluated through the following five steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied.

The Company recognizes primarily four revenue streams and they are retainer fees, project fees, reimbursement income, and fee income.

Retainer fees are non-refundable fixed amounts being received from a client often on a recurring basis and the performance obligation is the staff being available to provide consultation services.  Consulting engagements do not incur a significant amount of direct costs however any costs are recognized as incurred.   Consulting fees are recognized evenly throughout the term of the agreement.

Project fees are associated with the delivery of services and/or goods to a client and the revenue includes both the anticipated costs to deliver the product as well as the Company’s margin.  As per ASC 606-10-25-31, the Company recognizes project fees over time by measuring the progress toward complete satisfaction of a performance obligation by measuring its performance in transferring control of the services contractually delivered to a client by applying the input method.   Revenue is recognized based on the extent of inputs expended toward satisfying a performance obligation and it was determined that the best judge of inputs is the costs consumed by a project in relation to its total anticipated costs.  As part of the close process the Company compiles a preliminary percentage of completion (POC) for each project which is the ratio of incurred costs to date in relation to the anticipated costs from the production team’s approved budgets.  The POC ratio is then applied to the contracted revenue and the pro-rated revenue is then recognized accordingly.

Reimbursement income represents compensation relating to the out-of-pocket costs associated with a staging of a live event.  As per 606-10-25-31, the Company recognizes reimbursement income over time by measuring the progress toward complete satisfaction of a performance obligation by measuring its performance in transferring control of the services contractually delivered to a client by applying the input method.   The revenue is recognized based on the extent of inputs expended toward satisfying a performance obligation and it was determined that the best judge of input is the costs incurred to date in relation to the anticipated costs.  As a result, unless an overage or saving is identified, the reimbursement income equates to the reimbursement costs incurred.   Given that the Company contracts directly with the majority of the vendors and is liable for any overages, the Company is deemed a principal in this revenue transaction as they have control over the asset and transfer the asset themselves.  As a result, this transaction is recorded gross rather than net.  

Fee income represents the Company’s margin on the staging of a live event, is negotiated with the client prior and fixed.  Based on ASC 606, the Company’s progress in satisfying the performance obligation in a contract is difficult to determine so as a result the fee income is only recognized at the conclusion of a project.  Only upon confirmation the Company has performed all its contractual obligations as per the contract does the Company record fee income.

Contract Assets

The Company does not have any contract assets such as work-in-process. All trade receivables on the Company’s consolidated balance sheet are from contracts with customers.

Contract Costs

Costs incurred to obtain a contract are capitalized unless short term in nature. As a practical expedient, costs to obtain a contract that are short term in nature are expensed as incurred. The Company does not have any contract costs capitalized as of September 30, 2021 and June 30, 2021.

Contract Liabilities - Deferred Revenue

The Company’s contract liabilities consist of advance customer payments and deferred revenue. Deferred revenue results from transactions in which the Company has been paid for products by customers, but for which all revenue recognition criteria have not yet been met. Once all revenue recognition criteria have been met, the deferred revenues are recognized.

ADVERTISING

The Company generally expenses marketing and advertising costs as incurred. During the three months ended September 30, 2021 and 2020, the Company incurred $18,000 and $0, respectively, on marketing, trade shows and advertising.

The Company received rebates on advertising from co-operative advertising agreements with several vendors and suppliers. These rebates have been recorded as a reduction to the related advertising and marketing expense.

BENEFICIAL CONVERSION FEATURE

The Company accounts for convertible notes payable in accordance with the guidelines established by the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 470-20, Debt with Conversion and Other Options, Emerging Issues Task Force (“EITF”) 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, and EITF 00-27, Application of Issue No 98-5 To Certain Convertible Instruments. The Beneficial Conversion Feature (“BCF”) of a convertible note is normally characterized as the convertible portion or feature of certain notes payable that provide a rate of conversion that is below market value or in-the-money when issued. The Company records a BCF related to the issuance of a convertible note when issued and also records the estimated fair value of any warrants issued with those convertible notes. Beneficial conversion features that are contingent upon the occurrence of a future event are recorded when the contingency is resolved.

 The BCF of a convertible note is measured by allocating a portion of the note’s proceeds to the warrants, if applicable, and as a reduction of the carrying amount of the convertible note equal to the intrinsic value of the conversion feature, both of which are credited to additional paid-in-capital. The value of the proceeds received from a convertible note is then allocated between the conversion features and warrants on an allocated fair value basis. The allocated fair value is recorded in the financial statements as a debt discount (premium) from the face amount of the note and such discount is amortized over the expected term of the convertible note (or to the conversion date of the note, if sooner) and is charged to interest expense using interest method.

DERIVATIVE LIABILITY

The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity” and ASC 815, “Derivatives and Hedging”. Derivative liabilities are adjusted to reflect their fair value at each period end with any increase or decrease in the fair value being recorded in results of operations.   The fair value of derivative instruments such as convertible note payables are valued using the Black-Scholes option-pricing model based on various assumptions.

STOCK-BASED COMPENSATION

The Company recognizes stock-based compensation in accordance with ASC Topic 718 “Stock Compensation”, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options and employee stock purchases related to an Employee Stock Purchase Plan based on the estimated fair values.

For non-employee stock-based compensation, the Company has adopted ASC 2018-07, Improvements to Nonemployee Share-Based Payment Accounting which expands on the scope of ASC 718 to include share-based payment transactions for acquiring services from non-employees and requires stock-based compensation related to non-employees to be accounted for based on the fair value of the related stock or the fair value of the services at the grant date, whichever is more readily determinable in accordance with ASC Topic 718.

FOREIGN CURRENCY TRANSLATION

The consolidated financial statements of the Company are presented in U.S. dollars. The functional currency for the Company is U.S. dollars for all entities other than Mission Media Limited whose operations are based in the United Kingdom and their functional currency is British Pound Sterling (GBP). Transactions in currencies other than the functional currencies are recorded using the appropriate exchange rate at the time of the transaction. All assets and liabilities are translated into U.S. Dollars at balance sheet date, shareholders’ equity is translated at historical rates and revenue and expense accounts are translated at the average exchange rate for the year or the reporting period. The translation adjustments are reported as a separate component of stockholders’ equity, captioned as accumulated other comprehensive (loss) income. Transaction gains and losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the statements of operations.

The relevant translation rates are as follows: for the three months ended September 30, 2021 closing rate at 1.34260 US$: GBP, average rate at 1.37167 US$: GBP, for the three months ended September 30, 2020 closing rate at 1.29180 US$: GBP, average rate at 1.31230 US$: GBP.

INCOME TAXES

The Company accounts for its income taxes in accordance with Income Taxes Topic of the FASB ASC 740, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.

Income tax expense is based on reported earnings before income taxes. Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for consolidated financial reporting purposes and such amounts recognized for tax purposes and are measured by applying enacted tax rates in effect in years in which the differences are expected to reverse.

The Company also follows the guidance related to accounting for income tax uncertainties. In accounting for uncertainty in income taxes, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority.

The Company has net operating losses for both their US and UK entities however a full valuation allowance was recorded due to uncertainties in realizing the deferred tax asset.

COMPREHENSIVE LOSS

Comprehensive loss is defined as a change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources and includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.  For the Company, comprehensive loss for the three months ended September 30, 2021 and 2020 included net loss and unrealized gains (losses) from foreign currency translation adjustments. 

EARNINGS PER COMMON SHARE

Net income (loss) per common share is calculated in accordance with ASC Topic: 260 Earnings per Share.  Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.  The computation of diluted net loss per share does not include dilutive common stock equivalents in the weighted average shares outstanding as they would be anti-dilutive.  In periods where the Company has a net loss, all dilutive securities are excluded.

The following are dilutive common stock equivalents as of September 30, 2021 and 2020, which were not included in the calculation of loss per share, since the Company had a net loss from continuing operations and net loss:

	September 30,
	2021		2020
Convertible preferred stock		48,000		16,280,397
Stock options		2,793,255		2,576,869
Stock warrants		7,403,569		6,997,518
Total		10,244,824		25,854,785

STIMULUS FUNDING

In accordance with IAS-20, Accounting for Government Grants and Disclosure of Government Assistance, the proceeds from government grants are to be recognized as a deferred income liability and reported as income as the related costs are expensed.   On September 30, 2021, the Company recorded deferred income liabilities of $0 within contract liabilities and $440,000 within stimulus loans, respectively.  On June 30, 2021, the Company recorded deferred income liabilities of $270,000 within contract liabilities and $569,000 within stimulus loans, respectively.  For the three months ending September 30, 2021 and 2020, the Company recognized $262,000 and $0 in income from government grants, respectively.  In the three months ending September 30, 2021, $8,000 of the stimulus funding was not forgiven and returned to the bank.

RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Pronouncements Not Yet Effective

In August 2020, FASB issued ASU 2020-06, “Debt—Debt with Conversion and Other and Derivatives and Hedging—Contracts in Entity’s Own Equity: Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” which simplifies the accounting for convertible instruments by removing the separation models for convertible debt with a cash conversion feature and convertible instruments with a beneficial conversion feature. As a result, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost. These changes will reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that was bifurcated according to previously existing rules. Also, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will be no longer available. The new guidance is effective for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020-06 however it is not believed that it will have a material impact to the financials.

In December 2019, the FASB issued amended guidance in the form of ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This ASU is intended to simplify various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for annual periods beginning after December 15, 2020 and interim periods within those annual periods, with early adoption permitted. An entity that elects early adoption must adopt all the amendments in the same period. Most amendments within this ASU are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company is in the initial stage of evaluating the impact of this new standard however it does not believe the guidance will have a material impact on its financial statements.

XML

PRESENTATION OF THE FINANCIAL STATEMENTS (Tables)

3 Months Ended

Sep. 30, 2021

PRESENTATION OF THE FINANCIAL STATEMENTS

Schedule of basic and diluted earnings per share

	September 30,
	2021		2020
Convertible preferred stock		48,000		16,280,397
Stock options		2,793,255		2,576,869
Stock warrants		7,403,569		6,997,518
Total		10,244,824		25,854,785

XML

PROPERTY AND EQUIPMENT (Tables)

3 Months Ended

Sep. 30, 2021

PROPERTY AND EQUIPMENT

Schedule of Property and equipment

	September 30, 2021			June 30, 2021
Computer equipment	$	728,000		$	697,000
Website design		6,000			6,000
Office machine & equipment		95,000			97,000
Furniture & fixtures		456,000			438,000
Leasehold improvements		144,000			135,000
Tenant incentives		145,000			145,000
		1,574,000			1,518,000
Accumulated depreciation		(1,195,000	)		(1,175,000	)
Net book value	$	379,000		$	343,000

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INTANGIBLE ASSETS (Tables)

3 Months Ended

Sep. 30, 2021

INTANGIBLE ASSETS

Schedule of intangible assets

	September 30, 2021			June 30, 2021
Customer relationship	$	4,960,000		$	4,960,000
Non-core customer relationships		760,000			760,000
Non-compete agreements		1,430,000			1,430,000
Technology		520,000			520,000
Tradename		470,000			470,000
Workforce acquired		2,125,000			2,125,000
		10,265,000			10,265,000
Less: accumulated amortization		(7,834,000	)		(7,662,000	)
Net book value	$	2,431,000		$	2,603,000

XML

ACCOUNTS PAYABLE ACCRUED EXPENSES (Tables)

3 Months Ended

Sep. 30, 2021

ACCOUNTS PAYABLE ACCRUED EXPENSES

Schedule of accounts payable

	September 30, 2021		June 30, 2021
Accounts payable	$	2,135,000	$	2,362,000
Accrued expenses		4,195,000		4,819,000
Accrued payroll		361,000		294,000
Accrued taxes		705,000		888,000
	$	7,396,000	$	8,363,000

XML

LEASE LIABILITIES (Tables)

3 Months Ended

Sep. 30, 2021

LEASE LIABILITIES

Schedule of Future minimum lease payments

	Troika  Gower			Troika LaBrea			Corporate Englewood			Mission US Brooklyn			Mission US Manhattan			Mission UK London			Undiscounted Cash Flows
Discount rate		5.50	%		5.50	%		5.50	%		5.50	%		5.50	%		5.50	%
Remainder of 2022	$	712,000		$	883,000		$	83,000		$	827,000		$	171,000		$	380,000		$	3,056,000
2023		558,000			-			103,000			497,000			-			631,000			1,789,000
2024		580,000			-			107,000			509,000			-			631,000			1,827,000
2025		346,000			-			110,000			522,000			-			631,000			1,609,000
2026		-			-			112,000			535,000			-			526,000			1,173,000
2027		-			-			9,000			455,000			-						464,000
Total undiscounted minimum future payments	$	2,196,000		$	883,000		$	524,000		$	3,345,000		$	171,000		$	2,799,000		$	9,918,000
Imputed interest		(134,000	)		-			(65,000	)		(415,000	)		(24,000	)		(380,000	)		(1,018,000	)
Total operating lease liabilities	$	2,062,000		$	883,000		$	459,000		$	2,930,000		$	147,000		$	2,419,000		$	8,900,000
Short-term lease liabilities	$	762,000		$	883,000		$	85,000		$	824,000		$	147,000		$	414,000		$	3,115,000
Long-term lease liabilities	$	1,300,000		$	-		$	374,000		$	2,106,000		$	-		$	2,005,000		$	5,785,000

Schedule of Operating Leases

	Three Months Ended September 30, 2021
Weighted average remaining lease term in years	3.7 years
Weighted average discount rate		10.3	%

XML

STOCKHOLDERS EQUITY (Tables)

3 Months Ended

Sep. 30, 2021

STOCKHOLDERS EQUITY

Schedule of Deferred compensation

	Amount			Unvested Shares
Deferred compensation balance recorded at acquisition date	$	9,680,000			3,623,433
Vested portion of deferred compensation in fiscal year 2021		(362,000	)		(135,425	)
Unamortized deferred compensation at June 30, 2021		9,318,000			3,488,008
Vested portion of deferred compensation in three months ending September 30, 2021		(805,000	)		(301,402	)
Unamortized deferred compensation at September 30, 2021	$	8,513,000			3,186,606

Schedule of Range of exercise prices and weighted average

	Number of Option Shares		Weighted-Average Exercise Price		Weighted-Average Grant-Date Fair Value		Aggregate Intrinsic Value of Outstanding Option Shares		Weighted-Average Remaining Contractual Term (in years)
Outstanding July 1, 2021		3,088,333	$	1.13	$	1.06	$	1,829,999		0.4
Granted		385,167		2.61		1.31		88,205		3.8
Exercised		-		-		-		-		-
Forfeited		-		-		-		-		-
Expired		-		-		-		-		-
Outstanding September 30, 2021		3,473,500		1.29		1.09		1,918,204		0.4
Vested and exercisable September 30, 2021		2,812,439		0.93		1.04		1,672,318		0.2
Non-vested September 30, 2021		661,061	$	2.85	$	1.56	$	245,886		2.7

	Number of Option Shares			Weighted-Average Exercise Price		Weighted-Average Grant-Date Fair Value		Aggregate Intrinsic Value of Outstanding Option Shares		Weighted-Average Remaining Contractual Term (in years)
Outstanding July 1, 2020		3,377,222		$	1.10	$	1.06	$	2,030,000		0.7
Granted		76,667			3.75		1.61		-		2.8
Exercised		-			-		-		-		-
Forfeited		-			-		-		-		-
Expired		(143,333	)		0.95		1.01		-		-
Outstanding September 30, 2020		3,310,556			1.10		1.01		1,830,000		0.6
Vested and exercisable September 30, 2020		2,589,106			0.80		0.83		1,110,651		0.3
Non-vested September 30, 2020		721,450		$	2.19	$	1.87	$	719,349		1.7

Schedule of the warrants granted

	2020
Volatility - range	64.1% – 64.4%
Risk-free rate	0.2% - 0.3%
Contractual term	4.0 years
Exercise price	$0.75 - $3.00

Schedule of the Warrants granted, exercised, forfeited and expired

	Number of Warrant Shares		Weighted-Average Exercise Price		Weighted-Average Grant-Date Fair Value		Aggregate Intrinsic Value of Outstanding Warrant Shares		Weighted-Average Remaining Contractual Term (in years)
Outstanding July 1, 2021		8,296,408	$	1.05	$	1.90	$	12,158,467		2.2
Granted		-		-		-		-		-
Exercised		-		-		-		-		-
Forfeited		-		-		-		-		-
Expired		-		-		-		-		-
Outstanding September 30, 2021		8,296,408		1.05		1.90		12,158,467		1.9
Vested and exercisable September 30, 2021		7,407,440		1.02		1.78		9,961,656		2.0
Non-vested September 30, 2021		888,968	$	1.27	$	2.88	$	2,196,811		1.4

	Number of Warrant Shares			Weighted-Average Exercise Price		Weighted-Average Grant-Date Fair Value		Aggregate Intrinsic Value of Outstanding Warrant Shares		Weighted-Average Remaining Contractual Term (in years)
Outstanding July 1, 2020		7,858,741		$	1.52	$	1.92	$	9,234,295		3.0
Granted		556,667			0.79		3.11		1,647,500		4.3
Exercised		-			-		-		-		-
Forfeited		-			-		-		-		-
Expired		(74,075	)		11.30		7.65		110,000		-
Outstanding September 30, 2020		8,341,333			1.24		1.86		11,023,795		2.9
Vested and exercisable September 30, 2020		7,094,851			1.21		1.69		8,064,350		2.8
Non-vested September 30, 2020		1,246,482		$	1.38	$	2.85	$	2,959,445		3.5

Schedule of range of exercise prices and weighted average remaining contractual life for outstanding and exercisable options

		Outstanding Warrant Shares				Exercisable Warrant Shares
Exercise price range		Number of Warrant Shares		Weighted average remaining contractual life		Number of Warrant Shares		Weighted average remaining contractual life
$	0.75		4,106,667		2.0		4,106,667		2.2
$	2.84		20,000		4.6		11,110		1.9
$	3.75		4,051,223		2.0		3,171,145		2.3
$	5.10		33,333		0.1		33,333		0.1
$	27.00		85,185		0.1		85,185		0.1
			8,296,408		1.9		7,407,440		2.0

		Outstanding Warrant Shares				Exercisable Warrant Shares
Exercise price range		Number of Warrant Shares		Weighted average remaining contractual life		Number of Warrant Shares		Weighted average remaining contractual life
$	0.75		7,096,482		3.1		6,328,333		2.9
$	1.50		400,000		2.3		133,333		3.5
$	3.00		76,667		0.6		3,333		4.8
$	3.75		368,333		4.1		230,000		4.2
$	6.00		381,333		0.5		381,333		0.5
$	27.00		18,518		0.9		18,519		0.9
			8,341,333		2.9		7,094,851		2.8

		Outstanding Option Shares				Exercisable Option Shares
Exercise price range		Number of Option Shares		Weighted average remaining contractual life		Number of Option Shares		Weighted average remaining contractual life
$	0.75		2,546,667		0.2		2,494,106		0.2
$	1.50		200,000		0.3		200,000		0.3
$	2.61		383,500		3.0		-		-
$	2.84		1,666		3.0		-		-
$	3.75		341,667		1.7		118,333		1.2
			3,473,500		0.4		2,812,439		0.2

		Outstanding Option Shares				Exercisable Option Shares
Exercise price range		Number of Option Shares		Weighted average remaining contractual life		Number of Option Shares		Weighted average remaining contractual life
$	0.75		2,768,889		0.4		2,417,995		0.2
$	1.50		200,000		1.0		166,667		1.0
$	3.75		341,667		2.5		4,444		1.6
			3,310,556		0.6		2,589,106		0.3

Schedule of fair value of the options

	2021			2020
Volatility - range		65.3	%		64.8	%
Risk-free rate		0.9	%		0.3	%
Contractual term		3.0 years			3.0 years
Exercise price	$	2.61 - $2.84		$	3.75

XML

DISAGGREGATION OF REVENUE LONG-LIVED ASSETS (Tables)

3 Months Ended

Sep. 30, 2021

DISAGGREGATION OF REVENUE LONG-LIVED ASSETS

Schedule of disaggregation of gross profit between the United States and the United Kingdom

	Three Months Ended September 30,
	2021		2020
Gross profit:
United States	$	2,443,000	$	1,303,000
United Kingdom		1,069,000		549,000
Total gross profit	$	3,512,000	$	1,852,000

Schedule of disaggregation of gross revenue

	Three Months Ended September 30,
	2021		2020
Project fees	$	4,871,000	$	2,153,000
Retainer fees		461,000		565,000
Fee income		1,276,000		729,000
Reimbursement income		1,736,000		685,000
Other revenue		5,000		-
	$	8,349,000	$	4,132,000

Schedule of disaggregation of gross revenue between the United States and the United Kingdom

	Three Months Ended September 30,
	2021		2020
Gross Revenue:
United States	$	6,079,000	$	3,303,000
United Kingdom		2,270,000		829,000
Total gross revenue	$	8,349,000	$	4,132,000

Schedule of Net loss

	Three Months Ended September 30,
	2021			2020
Net loss;
United States	$	(1,787,000	)	$	(3,239,000	)
United Kingdom		(352,000	)		(682,000	)
Total net loss	$	(2,139,000	)	$	(3,921,000	)

Schedule of the disaggregation of fixed assets

	United States			United Kingdom			Total
Computer equipment	$	485,000		$	243,000		$	728,000
Website design		6,000			-			6,000
Office machine & equipment		51,000			44,000			95,000
Furniture & fixtures		373,000			83,000			456,000
Leasehold improvements		144,000			-			144,000
Tenant incentives		145,000			-			145,000
		1,204,000			370,000			1,574,000
Accumulated depreciation		(890,000	)		(305,000	)		(1,195,000	)
Net book value	$	314,000		$	65,000		$	379,000

	United States			United Kingdom			Total
Computer equipment	$	468,000		$	229,000		$	697,000
Website design		6,000			-			6,000
Office machine & equipment		51,000			46,000			97,000
Furniture & fixtures		352,000			86,000			438,000
Leasehold improvements		135,000			-			135,000
Tenant incentives		145,000			-			145,000
		1,157,000			361,000			1,518,000
Accumulated depreciation		(867,000	)		(308,000	)		(1,175,000	)
Net book value	$	290,000		$	53,000		$	343,000

Schedule of Intangible assets and goodwi

Intangibles	US			UK		Total
Customer relationship	$	4,960,000		$	-	$	4,960,000
Non-core customer relationships		760,000			-		760,000
Non-compete agreements		1,430,000			-		1,430,000
Technology		520,000			-		520,000
Tradename		470,000			-		470,000
Workforce acquired		2,125,000			-		2,125,000
		10,265,000			-		10,265,000
Less: accumulated amortization		(7,834,000	)		-		(7,834,000	)
Net book value	$	2,431,000		$	-	$	2,431,000

Intangibles	US			UK		Total
Customer relationship	$	4,960,000		$	-	$	4,960,000
Non-core customer relationships		760,000			-		760,000
Non-compete agreements		1,430,000			-		1,430,000
Technology		520,000			-		520,000
Tradename		470,000			-		470,000
Workforce acquired		2,125,000			-		2,125,000
		10,265,000			-		10,265,000
Less: accumulated amortization		(7,662,000	)		-		(7,662,000	)
Net book value	$	2,603,000		$	-	$	2,603,000

XML

PRESENTATION OF THE FINANCIAL STATEMENTS (Details) - shares	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
PRESENTATION OF THE FINANCIAL STATEMENTS (Details)
Convertible preferred stock	48,000	16,280,397
Stock options	2,793,255	2,576,869
Stock warrants	7,403,569	6,997,518
Total	10,244,824	25,854,785

XML

PRESENTATION OF THE FINANCIAL STATEMENTS (Details Narrative) - USD ($)	1 Months Ended	3 Months Ended		12 Months Ended
	Apr. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Jun. 30, 2021
Stimulus loan		$ 440,000		$ 569,000
Income from government grants		262,000	$ 0
Stimulus funding not forgiven and returned		8,000
Net cash used in operating activities		(2,261,000)	(1,182,000)
Operating lease liability		(222,000)	(171,000)
Cash and cash equivalents		9,800,000.0
Deferred income liability		0		270,000
Accumulated deficit		(189,028,000)		(186,889,000)
Total current assets		12,400,000
Amortization of right of use assets			$ 320,000
Total current liabilities		17,700,000
EBITDA combined entity amount		1,700,000
Uninsured cash		$ 8,357,000		10,125,000
Closing rate US$: GBP		$ 1.342600	$ 1.29180
Average rate US$: GBP		$ 1.37167	$ 1.31230
Impairment intangible assets		$ 0	$ 0
Goodwill impairment expense		0	0
Marketing and advertising cost		18,000	0
Cash on hand				9,752,000
Allowance for doubtful accounts		452,000		521,000
Additional loan		500,000
Net loss		2,100,000.0
STIMULUS FUNDING [Member]
Deferred income liabilties				270,000
Contract liabilities				569,000
Stimulus fund				8,000
Payroll Protection Program[Member]
Deferred income liability				$ 270,000
Proceeds from SBA loan		1,700,000.0
Gain on PPP loan forgivness		262,000	$ 0
Total savings		$ 112,000
Payroll descriptions	In the United Kingdom, as of April 1, 2020, Mission furloughed twenty-seven employees, saving £78,000 in April payroll, being made up of £55,000 of furlough monies from the government and £16,000 in associated payroll savings and applied for a 3-month rent holiday. In May 1, 2020, Mission put on furlough an additional 5 employees bringing the total to 32, alongside a 10% pay cut for all employees not furloughed, saving £111,000 in May payroll, being made up of £62,000 of furlough monies from the government, £33,000 of associated payroll savings and £16,000 in savings related to the pay cut. On April 1, 2020, Troika Design Group actioned a 15% salary reduction across the majority of the Los Angeles staff and furloughed one office manager for a total savings of $112,000 per month. Finally, certain members of the Company’s executive team deferred compensation temporarily. In August 2020, the Company received £50,000 in loans related to the COVID pandemic with an interest rate of 2.5% to be paid over five years beginning one year after receipt

XML

PROPERTY AND EQUIPMENT (Details) - USD ($)	Sep. 30, 2021	Jun. 30, 2021
Accumulated depreciation	$ (1,195,000)	$ (1,175,000)
Net book value	379,000	343,000
Property plant and equipment	1,574,000	1,518,000
Website Design [Member]
Property plant and equipment	6,000	6,000
Tenant Incentives [Member]
Property plant and equipment	145,000	145,000
Computer Equipment [Member]
Property plant and equipment	728,000	697,000
Office Machine & Equipment [Member]
Property plant and equipment	95,000	97,000
Furniture & Fixtures [Member]
Property plant and equipment	456,000	438,000
Leasehold Improvements [Member]
Property plant and equipment	$ 144,000	$ 135,000

XML

PROPERTY AND EQUIPMENT (Details Narrative) - USD ($)	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
PROPERTY AND EQUIPMENT
Depereciation expense	$ 30,000	$ 31,000

XML

INTANGIBLE ASSETS (Details) - USD ($)	Sep. 30, 2021	Jun. 30, 2021
Intangible assets, net	$ 2,431,000	$ 2,603,000
Intangible assets, Gross	4,960,000	4,960,000
Accumulated amortization	(7,834,000)	(7,662,000)
Technology [Member]
Intangible assets, Gross	520,000	520,000
Workforce Acquired [Member]
Intangible assets, Gross	2,125,000	2,125,000
Non-Core Customer Relationships [Member]
Intangible assets, Gross	760,000	760,000
Non-Compete Agreements [Member]
Intangible assets, Gross	1,430,000	1,430,000
Tradename [Member]
Intangible assets, Gross	$ 470,000	$ 470,000

XML

INTANGIBLE ASSETS (Details Narrative) - USD ($)	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
INTANGIBLE ASSETS
Impairment intangible assets	$ 0	$ 0
Goodwill impairment charges	0
Amortization expense	$ 172,000	$ 540,000

XML

ACCOUNTS PAYABLE ACCRUED EXPENSES (Details) - USD ($)	Sep. 30, 2021	Jun. 30, 2021
Accounts payable and accrued expenses	$ 7,396,000	$ 8,363,000
Accounts Payable [Member]
Accounts payable	2,135,000	2,362,000
Accrued expenses	4,195,000	4,819,000
Accrued payroll	361,000	294,000
Accrued taxes	705,000	888,000
Accounts payable and accrued expenses	$ 7,396,000	$ 8,363,000

XML

ACCOUNTS PAYABLE ACCRUED EXPENSES (Details Narrative) - USD ($)	Sep. 30, 2021	Jun. 30, 2021
ACCOUNTS PAYABLE ACCRUED EXPENSES
Accounts payable and accrued expense	$ 7,396,000	$ 8,363,000

XML

CONVERTIBLE NOTES PAYABLE (Details Narrative) - USD ($)	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Jun. 30, 2021
Notes payable outstanding	$ 50,000		$ 50,000
Promissory note	0	$ 4,000
Interest expenses	(13,000)	(4,000)
Amortization expenses	0	17,000
Convertible note payables, interest expense	1,000	1,000
Interest expense	3,000	0
October 2020 [Member]
Fair market value of the embedded conversion feature	$ 1,000		$ 13,000
Interest rate	10.00%
Risk free rate	64.49%
Volality rate	0.98%
Term period	3 years
Interest expense	$ 1,000	$ 1,000
Warrants exercise price	$ 2.25
Gross proceeds	$ 50,000
Amortization of discount	$ 37,000
Issuance of warrants	6,667

XML

NOTES PAYABLE RELATED PARTY (Details Narrative) - USD ($)	1 Months Ended		3 Months Ended		12 Months Ended
	Jul. 31, 2020	Jun. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Jun. 30, 2021	Apr. 30, 2021
Miscellaneous expense			$ 1,354,000	$ 36,000
Total interest expenses			(13,000)	(4,000)
Promissory note			0	4,000
Convertible promissory note	$ 1,300,000
Common stock shares issued upon conversion of debt and equity	1,733,334
Notes payable - related party			180,000		$ 200,000
Estate Of Sally Pappalardo [Member]
Interest expense			0	5,000
Outstanding principal					235,000
Accrued interest			10	10	65,000
Note payable - related parties			0	235,000		$ 300,000
Notes payable - related party			0	235,000
Mr. Jankowski [Member]
Long term Notes payabe - related parties			1,373,000
Dan Pappalardo [Member]
Notes payable - related party			180,000	217,000
Notes Payable [Member]
Miscellaneous expense			20,000		$ 17,000
Total interest expenses			5,000	$ 10,000
Interest rate				10.00%	10.00%
Promissory note			0	$ 4,000
Convertible promissory note		$ 1,300,000
Common stock shares issued upon conversion of debt and equity		1,733,334
Interest expense			$ 5,000	$ 5,000

XML

LEASES LIABILITIES (Details)	3 Months Ended
	Sep. 30, 2021 USD ($)
Mission US Manhattan [Member]
Long-term lease liabilities	$ 0
Short-term lease liabilities	147,000
Total operating lease liabilities	147,000
2022	171,000
2023	0
2024	0
2025	0
2026	0
2027	$ 0
Discount rate	5.50%
Total undiscounted minimum future payments	$ 171,000
Imputed interest	(24,000)
Undiscounted Cash Flows [Member]
Long-term lease liabilities	5,785,000
Short-term lease liabilities	3,115,000
Total operating lease liabilities	8,900,000
2022	3,056,000
2023	1,789,000
2024	1,827,000
2025	1,609,000
2026	1,173,000
2027	464,000
Total undiscounted minimum future payments	9,918,000
Imputed interest	(1,018,000)
Mission UK London [Member]
Long-term lease liabilities	2,005,000
Short-term lease liabilities	414,000
Total operating lease liabilities	2,419,000
2022	380,000
2023	631,000
2024	631,000
2025	631,000
2026	$ 526,000
Discount rate	5.50%
Total undiscounted minimum future payments	$ 2,799,000
Imputed interest	(380,000)
Mission US Brooklyn [Member]
Long-term lease liabilities	2,106,000
Short-term lease liabilities	824,000
Total operating lease liabilities	2,930,000
2022	827,000
2023	497,000
2024	509,000
2025	522,000
2026	535,000
2027	$ 455,000
Discount rate	5.50%
Total undiscounted minimum future payments	$ 3,345,000
Imputed interest	(415,000)
Corporate Englewood [Member]
Long-term lease liabilities	374,000
Short-term lease liabilities	85,000
Total operating lease liabilities	459,000
2022	83,000
2023	103,000
2024	107,000
2025	110,000
2026	112,000
2027	$ 9,000
Discount rate	5.50%
Total undiscounted minimum future payments	$ 524,000
Imputed interest	(65,000)
Troika Gower [Member]
Long-term lease liabilities	1,300,000
Short-term lease liabilities	762,000
Total operating lease liabilities	2,062,000
2022	712,000
2023	558,000
2024	580,000
2025	346,000
2026	0
2027	$ 0
Discount rate	5.50%
Total undiscounted minimum future payments	$ 2,196,000
Imputed interest	(134,000)
Troika LaBrea[Member]
Long-term lease liabilities	0
Short-term lease liabilities	883,000
Total operating lease liabilities	883,000
2022	883,000
2023	0
2024	0
2025	0
2026	0
2027	$ 0
Discount rate	5.50%
Total undiscounted minimum future payments	$ 838,000
Imputed interest	$ 0

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LEASES LIABILITIES (Details 1)	3 Months Ended
	Sep. 30, 2021
LEASE LIABILITIES
Weighted average remaining lease term in years	3 years 8 months 12 days
Weighted average discount rate	10.30%

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LEASES LIABILITIES (Details Narrative) - USD ($)					1 Months Ended			3 Months Ended
	May 02, 2017	Apr. 06, 2016	Jan. 09, 2014	Feb. 08, 2013	Feb. 01, 2020	Feb. 01, 2018	Jan. 19, 2018	Sep. 30, 2021	Sep. 30, 2020	Jun. 30, 2021
Long term Operating lease liability								$ 5,785,000		$ 5,835,000
Operating lease Right of use assets								6,827,000		6,887,000
Lease Agreement [Member]
Lease expense	$ 34,278	$ 22,432	$ 19,230		$ 42,265	$ 4,120
Remainder of lease, monthly payment		$ 52,855
Annual rate increase	2.50%		2.50%	3.00%	3.50%	3.50%
Lease expiry date	May 01, 2027	Apr. 05, 2026	Jan. 31, 2022		Jan. 31, 2025	Jan. 31, 2023
Sublease Agreements [Member]
Annual rate increase							3.00%
Lease income			$ 5,163				$ 22,496
July 1, 2019 [Member]
Long term Operating lease liability								5,785,000
Current Operating lease liability								3,115,000
Lease expense								2,573,000	$ 1,983,000
Operating lease Right of use assets								6,827,000
Leases [Member]
Rent expenses								345,000	782,000
Long term Operating lease liability								6,916,000		5,835,000
Current Operating lease liability								2,275,000		3,344,000
Lease expense								2,573,000	$ 1,983,000
Operating lease Right of use assets								$ 8,348,000		$ 6,887,000

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LEGAL MATTERS (Details Narrative) - USD ($)	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Other income	$ 1,112,000	$ 127,000
Mission Culture LLC [Member]
Other income	133,000
Amount due for services	$ 905,000

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STOCKHOLDERS EQUITY (Details) - USD ($)	3 Months Ended	12 Months Ended
	Sep. 30, 2021	Jun. 30, 2021
STOCKHOLDERS EQUITY
Deferred compensation balance recorded at acquisition date	$ 9,318,000	$ 9,680,000
Vested portion of deferred compensation	(805,000)	(362,000)
Unamortized deferred compensation balance	$ 8,513,000	$ 9,318,000
Deferred compensation balance recorded at acquisition date unvested shares	3,488,008	3,623,433
Vested portion of deferred compensation unvested shares	(301,402)	(135,425)
Unamortized deferred compensation balance unvested shares	3,186,606	3,488,088

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STOCKHOLDERS EQUITY (Details 1) - Warrant [Member] - $ / shares	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Exercise price	$ 0.00	$ 0.79
Contractual term		4 years
Minimum [Member]
Volatility		64.10%
Risk-free rate		0.20%
Exercise price		$ 0.75
Maximum [Member]
Volatility		64.40%
Risk-free rate		0.30%
Exercise price		$ 3.00

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STOCKHOLDERS EQUITY (Details 2) - Warrant [Member] - USD ($)	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Number of Shares, Outstanding Beginning Balance	8,296,408	7,858,741
Number of Shares, Granted	0	556,667
Number of Shares, Exercised	0	0
Number of Shares, Forfeited	0	0
Number of Shares, Expired	0	(74,075)
Number of Shares, Outstanding Ending Balance	8,296,408	8,341,333
Number of Shares, Vested and exercisable Ending Balance	7,407,440	7,094,851
Number of Shares, Non-vested Ending Balance	888,968	1,246,482
Weighted-Average Exercise Price, Outstanding Beginning Balance	$ 1.05	$ 1.52
Weighted-Average Exercise Price, Granted	0.00	0.79
Weighted-Average Exercise Price, Exercised	0.00	0.00
Weighted-Average Exercise Price, Forfeited	0.00	0.00
Weighted-Average Exercise Price, Expired	0.00	11.30
Weighted-Average Exercise Price, Outstanding Ending Balance	1.05	1.24
Weighted-Average Exercise Price, Vested and exercisable Ending Balance	1.02	1.21
Weighted-Average Exercise Price, Non-vested Ending Balance	1.27	1.38
Weighted-Average Grant-Date Fair Value, Outstanding Beginning Balance	1.90	1.92
Weighted-Average Grant-Date Fair Value, Granted	0.00	3.11
Weighted-Average Grant-Date Fair Value, Exercised	0.00	0.00
Weighted-Average Grant-Date Fair Value, Forfeited	0.00	0.00
Weighted-Average Grant-Date Fair Value, Expired	0.00	7.65
Weighted-Average Grant-Date Fair Value, Outstanding Ending Balance	1.90	1.86
Weighted-Average Grant-Date Fair Value, Vested and exercisable Ending Balance	1.78	1.69
Weighted-Average Grant-Date Fair Value, Non-vested Ending Balance	$ 2.88	$ 2.85
Aggregate Intrinsic Value of Outstanding Warrant Shares, Outstanding Beginning Balance	$ 12,158,467	$ 9,234,295
Aggregate Intrinsic Value of Outstanding Warrant Shares, Granted	0	1,647,500
Aggregate Intrinsic Value of Outstanding Warrant Shares, Exercised	0	0
Aggregate Intrinsic Value of Outstanding Warrant Shares, Forfeited	0	0
Aggregate Intrinsic Value of Outstanding Warrant Shares, Expired	0	110,000
Aggregate Intrinsic Value of Outstanding Warrant Shares, Outstanding Ending Balance	12,158,467	11,023,795
Aggregate Intrinsic Value of Outstanding Warrant Shares, Vested and exercisable Ending Balance	9,961,656	8,064,350
Aggregate Intrinsic Value of Outstanding Warrant Shares, Non-vested Ending Balance	$ 2,196,811	$ 2,959,445
Weighted-Average Remaining Contractual Term (in years), Outstanding Beginning Balance	2 years 2 months 12 days	3 years
Weighted-Average Remaining Contractual Term (in years), Granted	0 years	4 years 3 months 18 days
Weighted-Average Remaining Contractual Term (in years), Outstanding Ending Balance	1 year 10 months 24 days	2 years 10 months 24 days
Weighted-Average Remaining Contractual Term (in years), Vested and exercisable Ending Balance	2 years	2 years 9 months 18 days
Weighted-Average Remaining Contractual Term (in years), Non-vested Ending Balance	1 year 4 months 24 days	3 years 6 months

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STOCKHOLDERS EQUITY (Details 3) - Warrant [Member] - shares	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Weighted average remaining contractual life, Outstanding	2 years 6 months	2 years 10 months 24 days
Number of Shares, Outstanding	8,296,408	8,341,333
Number of Shares, Exercisable	7,407,440	7,094,851
Weighted average remaining contractual life, Exercisable	2 years	2 years 9 months 18 days
5.1 Price [Member]
Weighted average remaining contractual life, Outstanding	1 month 6 days
Number of Shares, Outstanding	33,333
Number of Shares, Exercisable	33,333
Weighted average remaining contractual life, Exercisable	1 month 6 days
0.75 [Member]
Weighted average remaining contractual life, Outstanding	2 years 6 months	3 years 1 month 6 days
Number of Shares, Outstanding	4,106,667	7,096,482
Number of Shares, Exercisable	4,106,667	6,328,333
Weighted average remaining contractual life, Exercisable	2 years 2 months 12 days	2 years 10 months 24 days
2.84 [Member]
Weighted average remaining contractual life, Outstanding	3 years 2 months 12 days
Number of Shares, Outstanding	20,000
Number of Shares, Exercisable	11,110
Weighted average remaining contractual life, Exercisable	3 years 8 months 12 days
3.75 [Member]
Weighted average remaining contractual life, Outstanding	2 years	4 years 1 month 6 days
Number of Shares, Outstanding	4,051,223	368,333
Number of Shares, Exercisable	3,171,145	230,000
Weighted average remaining contractual life, Exercisable	2 years 3 months 18 days	4 years 2 months 12 days
27.00 [Member]
Weighted average remaining contractual life, Outstanding	1 month 6 days	10 months 24 days
Number of Shares, Outstanding	85,185	18,518
Number of Shares, Exercisable	85,185	18,519
Weighted average remaining contractual life, Exercisable	1 month 6 days	10 months 24 days
6.00 [Member]
Weighted average remaining contractual life, Outstanding		5 months 30 days
Number of Shares, Outstanding		381,333
Number of Shares, Exercisable		381,333
Weighted average remaining contractual life, Exercisable		5 months 30 days
3.00 [Member]
Weighted average remaining contractual life, Outstanding		7 months 6 days
Number of Shares, Outstanding		76,667
Number of Shares, Exercisable		3,333
Weighted average remaining contractual life, Exercisable		5 months 30 days

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STOCKHOLDERS EQUITY (Details 4) - Options [Member] - $ / shares	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Contractual term	3 years	3 years
Exercise price	$ 2.61	$ 3.75
Volatility	65.30%	64.80%
Risk-free rate	0.90%	0.30%
Minimum [Member]
Exercise price	$ 2.61
Maximun [Member]
Exercise price	$ 2.84

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STOCKHOLDERS EQUITY (Details 5) - Options [Member] - USD ($)	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Number of Shares, Outstanding Beginning Balance	3,088,333	3,377,222
Number of Shares, Granted	385,167	76,667
Number of Shares, Exercised	0	0
Number of Shares, Forfeited	0	0
Number of Shares, Expired	0	(143,333)
Number of Shares, Outstanding Ending Balance	3,473,500	3,310,556
Number of Shares, Vested and exercisable Ending Balance	2,812,439	2,589,106
Number of Shares, Non-vested Ending Balance	661,061	721,450
Weighted-Average Exercise Price, Outstanding Beginning Balance	$ 1.13	$ 1.10
Exercise price	2.61	3.75
Weighted-Average Exercise Price, Exercised	0.00	0.00
Weighted-Average Exercise Price, Forfeited	0.00	0.00
Weighted-Average Exercise Price, Expired	0.00	0.95
Weighted-Average Exercise Price, Outstanding Ending Balance	1.29	1.10
Weighted-Average Exercise Price, Vested and exercisable Ending Balance	0.93	0.80
Weighted-Average Exercise Price, Non-vested Ending Balance	2.85	2.19
Weighted-Average Grant-Date Fair Value, Outstanding Beginning Balance	1.06	1.06
Weighted-Average Grant-Date Fair Value, Granted	1.31	1.61
Weighted-Average Grant-Date Fair Value, Exercised	0.00	0.00
Weighted-Average Grant-Date Fair Value, Forfeited	0.00	0.00
Weighted-Average Grant-Date Fair Value, Expired	0.00	1.01
Weighted-Average Grant-Date Fair Value, Outstanding Ending Balance	1.09	1.01
Weighted-Average Grant-Date Fair Value, Vested and exercisable Ending Balance	1.04	0.83
Weighted-Average Grant-Date Fair Value, Non-vested Ending Balance	$ 1.56	$ 1.87
Aggregate Intrinsic Value of Outstanding Warrant Shares, Outstanding Beginning Balance	$ 1,829,999	$ 2,030,000
Aggregate Intrinsic Value of Outstanding Warrant Shares, Granted	88,205	0
Aggregate Intrinsic Value of Outstanding Warrant Shares, Exercised	0	0
Aggregate Intrinsic Value of Outstanding Warrant Shares, Forfeited	0	0
Aggregate Intrinsic Value of Outstanding Warrant Shares, Expired	0	0
Aggregate Intrinsic Value of Outstanding Warrant Shares, Outstanding Ending Balance	1,918,204	1,830,000
Aggregate Intrinsic Value of Outstanding Warrant Shares, Vested and exercisable Ending Balance	1,672,318	1,110,651
Aggregate Intrinsic Value of Outstanding Warrant Shares, Non-vested Ending Balance	$ 245,886	$ 719,349
Weighted-Average Remaining Contractual Term (in years), Outstanding Beginning Balance	4 months 24 days	8 months 12 days
Weighted-Average Remaining Contractual Terms (in years), Granted	3 years 9 months 18 days
Weighted-Average Remaining Contractual Term (in years), Outstanding Ending Balance	4 months 24 days	1 year 8 months 12 days
Weighted-Average Remaining Contractual Term (in years), Vested and exercisable Ending Balance	3 months 18 days	3 months 18 days
Weighted-Average Remaining Contractual Term (in years), Non-vested Ending Balance	1 year 5 months 30 days	1 year 8 months 12 days

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STOCKHOLDERS EQUITY (Details 6) - shares	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Options [Member]
Number of Shares, Outstanding Ending Balance	3,473,500	3,310,556
Weighted average remaining contractual life, Outstanding	6 months	7 months 6 days
Number of Shares, Vested and exercisable Ending Balance	2,812,439	2,589,106
Weighted average remaining contractual life, Exercisable	3 months 18 days	3 months 18 days
Options [Member] | 1.50 [Member]
Number of Shares, Outstanding Ending Balance	200,000	166,667
Weighted average remaining contractual life, Outstanding	3 months 18 days	1 year
Number of Shares, Vested and exercisable Ending Balance	200,000	200,000
Weighted average remaining contractual life, Exercisable	3 months 18 days	1 year
Option [Member] | 0.75 [Member]
Number of Shares, Outstanding Ending Balance	2,546,667	2,768,889
Weighted average remaining contractual life, Outstanding	2 years 6 months	4 months 24 days
Number of Shares, Vested and exercisable Ending Balance	2,494,106	2,417,995
Weighted average remaining contractual life, Exercisable	2 years 3 months 18 days
Option [Member] | 2.61 [Member]
Number of Shares, Outstanding Ending Balance	383,500
Weighted average remaining contractual life, Outstanding	3 years
Number of Shares, Vested and exercisable Ending Balance	0
Weighted average remaining contractual life, Exercisable	0 years
Option [Member] | 2.84 [Member]
Number of Shares, Outstanding Ending Balance	1,666
Weighted average remaining contractual life, Outstanding	3 years
Number of Shares, Vested and exercisable Ending Balance	0
Weighted average remaining contractual life, Exercisable	0 years
Option [Member] | 3.75 [Member]
Number of Shares, Outstanding Ending Balance	341,667	341,667
Weighted average remaining contractual life, Outstanding	2 years	7 months 6 days
Number of Shares, Vested and exercisable Ending Balance	118,333	4,444
Weighted average remaining contractual life, Exercisable	1 year 10 months 24 days	1 year 7 months 6 days

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STOCKHOLDERS EQUITY (Details Narrative) - USD ($)		1 Months Ended				3 Months Ended		12 Months Ended
	Jun. 13, 2017	Aug. 31, 2021	May 21, 2021	Jul. 31, 2020	Jun. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Jun. 30, 2021	May 31, 2020
Common stock, shares outstanding						43,572,950		39,496,588
Common stock, shares issued						43,572,950		39,496,588
Common stock, shares authorized						300,000,000		300,000,000
Common stock, shares par value						$ 0.001		$ 0.001
Decrease in authorized shares						315,000,000
Preferred stock, shares authorized						15,000,000		15,000,000
Common stock shares issued upon conversion of debt and equity				1,733,334
Shares issuable upon conversion of stock								18,158,768
Convertible promissory note				$ 1,300,000
Reverse stock split desciption					Board of Directors to effect a reverse stock split of our common stock at a certain exchange ratios from 1:10 to 1:15 with our Board of Directors retaining the discretion as to whether to implement the reverse stock split and which exchange ratio to implement
Preferred stock, shares par value						$ 0.01		$ 0.01
Price per share				$ 0.75
Class of warrants or rights outstanding						8,296,408	8,341,333
Class of warrants or rights outstanding, intrinsic value						$ 12,158,467	$ 11,023,795
Unamortized deferred compensation balance unvested shares						3,186,606		3,488,088
Convertible promissory note holder 1 [Member]
Common stock shares issued upon conversion of debt and equity							387,223
Conversion price per share							$ 3.00
Convertible promissory note elected to be converted							$ 1,000,000
Convertible promissory note holder 2 [Member]
Common stock shares issued upon conversion of debt and equity							56,000
Conversion price per share							$ 3.75
Convertible promissory note elected to be converted							$ 200,000
Convertible promissory note holder 3 [Member]
Common stock shares issued upon conversion of debt and equity							56,000
Conversion price per share							$ 3.75
Convertible promissory note elected to be converted							$ 200,000
Minimum [Member]
Price per share							$ 0.75
Maximum [Member]
Price per share							$ 3.00
ISO's Awards [Member]
Shares issuable upon conversion of stock						385,167	76,667
Price per share							$ 3.75
Compensation expenses related to vested warrants						$ 107,000	$ 166,000
Compensation expenses						0	0
Compensation expenses related to unvested warrants						1,672,000	719,000
Convertible note payables						$ 503,000	123,000
ISO's Awards [Member] | Minimum [Member]
Price per share						$ 2.61
ISO's Awards [Member] | Maximum [Member]
Price per share						$ 2.84
2017 Equity Incentive Plan [Member]
Public offering common stock and warrants	3,333,334
Directors and consultants [Member]
Compensation expenses related to vested warrants							154,000
Compensation expenses							7,000
Compensation expenses related to unvested warrants							143,000
Convertible note payables							$ 475,000
Warrants issued							156,667
Investors [Member]
Price per share							$ 0.75
Warrants issued							400,000
Fintech Patform Redeeem, LLC [Member]
Stock payable to related party			$ 1,210,000
Conversion price per share			$ 2.6715
Acquire of assets and liabilities			$ 2,600,000
cash			1,200,000
Specific liabilities			166,000
Common stock , vested, value			$ 9,680,000
Unamortized deferred compensation balance unvested shares						3,186,606
Common stock shares issued and held in ESCROW		3,623,433
Common stock vested , shares			3,623,433
Series B Convertible Preferred Stocks [Member]
Preferred stock, shares authorized						3,000,000		3,000,000
Shares issuable upon conversion of stock								594,048
Preferred stock, shares par value						$ 0.01		$ 0.01
Price per share								$ 4.20
Convertible preferred stock available at conversion								2,495,000
Preferred stock, shares outstanding						0		0
Preferred stock, shares issued						0		0
Series C Convertible Preferred Stocks [Member]
Preferred stock, shares authorized						1,200,000		1,200,000
Shares issuable upon conversion of stock								12,287,386
Preferred stock, shares par value						$ 0.01		$ 0.01
Price per share								$ 0.074
Convertible preferred stock available at conversion								911,149
Preferred stock, shares outstanding						0		0
Preferred stock, shares issued						0		0
Series D Convertible Preferred Stocks [Member]
Preferred stock, shares authorized						2,500,000		2,500,000
Shares issuable upon conversion of stock								5,277,334
Preferred stock, shares par value						$ 0.01		$ 0.01
Price per share								$ 0.375
Convertible preferred stock available at conversion								1,979,000
Preferred stock, shares outstanding						0		0
Preferred stock, shares issued						0		0
Series A Preferred Stock [Member]
Preferred stock, shares authorized						5,000,000		5,000,000
Preferred stock, shares par value						$ 0.01		$ 0.01
Preferred stock, shares outstanding						720,000		720,000
Preferred stock, shares issued						720,000		720,000
Reverse Stock Split [Member]
Common stock, shares authorized									600,000,000
Common stock, shares par value									$ 0.001
Preferred stock, shares authorized									15,000,000
Preferred stock, shares par value									$ 0.20

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DISAGGREGATION OF REVENUE LONGLIVED ASSETS (Details) - USD ($)	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Project revenues, net	$ 8,349,000	$ 4,132,000
Project fees [Member]
Project revenues, net	4,871,000	2,153,000
Other Revenue [Member]
Project revenues, net	5,000	0
Retainer Fees [Member]
Project revenues, net	461,000	565,000
Fee Income [Member]
Project revenues, net	1,276,000	729,000
Reimbursement Income [Member]
Project revenues, net	$ 1,736,000	$ 685,000

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DISAGGREGATION OF REVENUE LONGLIVED ASSETS (Details 1) - USD ($)	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Project revenues, net	$ 8,349,000	$ 4,132,000
United Kingdom [Member]
Project revenues, net	6,079,000	3,303,000
United States [Member]
Project revenues, net	$ 2,270,000	$ 829,000

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DISAGGREGATION OF REVENUE LONGLIVED ASSETS (Details 2) - USD ($)	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Gross profit	$ 3,512,000	$ 1,852,000
United States [Member]
Gross profit	2,443,000	1,303,000
United Kingdom [Member]
Gross profit	$ 1,069,000	$ 549,000

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DISAGGREGATION OF REVENUE LONGLIVED ASSETS (Details 3) - USD ($)	3 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Net loss	$ (2,139,000)	$ (3,921,000)
United States [Member]
Net loss	(1,787,000)	(3,239,000)
United Kingdom [Member]
Net loss	$ (352,000)	$ (682,000)

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DISAGGREGATION OF REVENUE LONGLIVED ASSETS (Details 4) - USD ($)	Sep. 30, 2021	Jun. 30, 2021
Property plant and equipment	$ 1,574,000	$ 1,518,000
Accumulated depreciation	(1,195,000)	(1,175,000)
Net book value	379,000	343,000
United Kingdom [Member]
Property plant and equipment	370,000	361,000
Accumulated depreciation	(305,000)	(308,000)
Net book value	65,000	53,000
United States [Member]
Property plant and equipment	1,204,000	1,157,000
Accumulated depreciation	(890,000)	(867,000)
Net book value	314,000	290,000
Tenant Incentives [Member]
Property plant and equipment	145,000	145,000
Website Design [Member]
Property plant and equipment	6,000	6,000
Computer Equipment [Member]
Property plant and equipment	728,000	697,000
Computer Equipment [Member] | United Kingdom [Member]
Property plant and equipment	243,000	229,000
Office Machine & Equipment [Member]
Property plant and equipment	95,000	97,000
Furniture & Fixtures [Member]
Property plant and equipment	456,000	438,000
Leasehold Improvements [Member]
Property plant and equipment	144,000	135,000
Computer Equipment [Member] | United States [Member]
Property plant and equipment	485,000	468,000
Website Design [Member] | United Kingdom [Member]
Property plant and equipment	0	0
Website Design [Member] | United States [Member]
Property plant and equipment	6,000	6,000
Office Machine & Equipment [Member] | United Kingdom [Member]
Property plant and equipment	44,000	46,000
Office Machine & Equipment [Member] | United States [Member]
Property plant and equipment	51,000	51,000
Furniture & Fixtures [Member] | United Kingdom [Member]
Property plant and equipment	83,000	86,000
Furniture & Fixtures [Member] | United States [Member]
Property plant and equipment	373,000	352,000
Leasehold Improvements [Member] | United Kingdom [Member]
Property plant and equipment	0	0
Leasehold Improvements [Member] | United States [Member]
Property plant and equipment	144,000	135,000
Tenant Incentives[Member] | United Kingdom [Member]
Property plant and equipment	0	0
Tenant Incentives[Member] | United States [Member]
Property plant and equipment	$ 145,000	$ 145,000

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DISAGGREGATION OF REVENUE LONGLIVED ASSETS (Details 5) - USD ($)	Sep. 30, 2021	Jun. 30, 2021
Intangible assets, gross	$ 4,960,000	$ 4,960,000
Accumulated amortization	(7,834,000)	(7,662,000)
Net book value	2,431,000	2,603,000
United States [Member]
Intangible assets, gross	10,265,000	10,265,000
Accumulated amortization	(7,834,000)	(7,662,000)
Net book value	2,431,000	2,603,000
United Kingdom [Member]
Intangible assets, gross	0	0
Accumulated amortization	0	0
Net book value	0	0
Technology [Member]
Intangible assets, gross	520,000	520,000
Technology [Member] | United States [Member]
Intangible assets, gross	520,000	520,000
Technology [Member] | United Kingdom [Member]
Intangible assets, gross	0	0
Workforce Acquired [Member]
Intangible assets, gross	2,125,000	2,125,000
Non-Core Customer Relationships [Member]
Intangible assets, gross	760,000	760,000
Non-Compete Agreements [Member]
Intangible assets, gross	1,430,000	1,430,000
Non-Compete Agreements [Member] | United States [Member]
Intangible assets, gross	1,430,000	1,430,000
Non-Compete Agreements [Member] | United Kingdom [Member]
Intangible assets, gross	0	0
Tradename [Member]
Intangible assets, gross	470,000	470,000
Tradename [Member] | United States [Member]
Intangible assets, gross	470,000	470,000
Tradename [Member] | United Kingdom [Member]
Intangible assets, gross	0	0
Customer Relationship [Member] | United States [Member]
Intangible assets, gross	4,960,000	4,960,000
Customer Relationship [Member] | United Kingdom [Member]
Intangible assets, gross	0	0
Non-Core Customer Relationships [Member] | United States [Member]
Intangible assets, gross	760,000	760,000
Non-Core Customer Relationships [Member] | United Kingdom [Member]
Intangible assets, gross	0	0
Workforce Acquired [Member] | United States [Member]
Intangible assets, gross	2,125,000	2,125,000
Workforce Acquired [Member] | United Kingdom [Member]
Intangible assets, gross	$ 0	$ 0

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SUBSEQUENT EVENTS (Details Narrative) - USD ($)	Oct. 31, 2021	Oct. 28, 2021	Sep. 30, 2021	Jun. 30, 2021	Sep. 30, 2020
Warrants issued			8,296,408		8,341,333
Equity incentive plan, shares			43,572,950	39,496,588
Subsequent Event [Member]
Warrants issued	150,000
Equity incentive plan, shares		12,000,000
Exercise price	$ 1.24
Warrants issued, amount	$ 100,000