UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549	OMB APPROVAL
	OMB Number: 3235-0070 Expires: July 31, 2022 Estimated average burden hours per response....... 186.82

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 March 31, 2022

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 May 20, 2022
Common Stock, $.001 par value	64,109,616

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Balance Sheets as of March 31, 2022 (Unaudited) and June 30, 2021	3
	Statements of Operations and Comprehensive Loss for the Three and Nine Months ended March 31, 2022 and 2021 (Unaudited)	4
	Statements of Stockholders’ Equity (Deficit) for the Three Months Ended March 31, 2022 and 2021 (Unaudited)	5
	Statements of Cash Flows for the Nine Months Ended March 31, 2022 and 2021 (Unaudited)	6
	Notes to Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion & Analysis of Financial Condition and Results of Operations.	38
Item 3.	Quantitative and Qualitative Disclosures about Market Risk.	42
Item 4.	Controls and Procedures.	43
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	44
Item 3.	Defaults Upon Senior Securities	44
Item 4.	Mine Safety Disclosure	44
Item 5.	Other Information	44
Item 6.	Exhibits	45
SIGNATURES		46

-2-

Troika Media Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

	March 31, 2022			June 30, 2021
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	42,396,000		$	12,066,000
Accounts receivable, net		32,461,000			1,327,000
Prepaid expenses		221,000			670,000
Other assets – short term portion		150,000			1,000
Total current assets		75,228,000			14,064,000
Other assets -long term portion		1,447,000			626,000
Property and equipment, net		642,000			343,000
Operating lease right-of-use assets		9,543,000			6,887,000
Intangible assets, net		72,864,000			2,603,000
Goodwill		60,896,000			19,368,000
Total assets	$	220,620,000		$	43,891,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	40,808,000		$	8,363,000
Convertible notes payable		50,000			50,000
Note payable - related party - short term portion		120,000			200,000
Due to related parties		-			41,000
Contract liabilities		21,057,000			5,973,000
Operating lease liability - short term portion		3,781,000			3,344,000
Bank loan net of debt discount – short term portion		1,461,000			-
Derivative liabilities		1,000			13,000
Taxes payable		100,000			62,000
Stimulus loan programs- short term portion		-			22,000
Total current liabilities		67,378,000			18,068,000
Long term liabilities:
Operating lease liability - long term portion		10,514,000			5,835,000
Preferred stock liability		15,998,000			-
Warrant liability		30,639,000			-
Bank loan net of debt discount – long term portion		65,824,000			-
Acquisition liability		5,000,000			-
Stimulus loan programs - long term portion		-			547,000
Rental deposits		124,000			119,000
Other long-term liabilities		-			477,000
Liabilities of discontinued operations - long term portion		107,000			107,000
Total liabilities		195,584,000			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 March 31, 2022 and June 30, 2021)		7,000			7,000
Series E Preferred Stock ($0.01 par value: 500,000 shares authorized, 500,000 shares issued and outstanding as of March 31, 2022 and June 30, 2021, respectively)		5,000			-
Common stock, ($0.001 par value: 800,000,000 shares authorized; 64,159,616 and 39,496,588 shares issued and outstanding as of March 31, 2022 and June 30, 2021, respectively)		64,000			40,000
Additional paid-in-capital		232,836,000			204,788,000
Stock payable		-			1,210,000
Accumulated deficit		(207,526,000	)		(186,889,000	)
Other Comprehensive Loss		(350,000	)		(418,000	)
Total stockholders’ equity		25,036,000			18,738,000
Total liabilities and stockholders’ equity	$	220,620,000		$	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 March 31,						Nine Months Ended March 31,
	2022			2021			2022			2021
Project revenues, net	$	15,685,000		$	3,854,000		$	31,028,000		$	12,437,000
Cost of revenues		11,738,000			1,941,000			20,158,000			6,360,000
Gross profit		3,947,000			1,913,000			10,870,000			6,077,000
Operating expenses:
Selling, general and administrative expenses		14,606,000			6,813,000			27,835,000			14,864,000
Professional fees		2,577,000			136,000			3,445,000			1,274,000
Depreciation expense		33,000			34,000			91,000			95,000
Amortization expense of intangibles		396,000			540,000			739,000			1,619,000
Total operating expenses		17,612,000			7,523,000			32,110,000			17,852,000
Loss from operations		(13,665,000	)		(5,610,000	)		(21,240,000	)		(11,775,000	)
Other income (expense):
Business acquisition costs		(827,000	)		-			(827,000	)		-
Income from government grants		-			831,000			262,000			2,535,000
Amortization expense of note payable discount		-			-			-			(409,000	)
Interest expense		(100,000	)		11,000			(147,000	)		(35,000	)
Foreign exchange gain		1,000			(11,000	)		(25,000	)		(48,000	)
Gain on early termination of operating lease		-			-			(3,000	)		-
Gain in derivative liabilities		201,000			-			213,000			-
Other income		35,000			122,000			1,220,000			378,000
Other expenses		-			1,000			-			154,000
Total other income (expense)		(690,000	)		954,000			693,000			2,575,000
Net loss from continuing operations before income tax		(14,355,000	)		(4,656,000	)		(20,547,000	)		(9,200,000	)
Provision for income tax		(33,000	)		(23,000	)		(90,000	)		(23,000	)
Net loss attributable to common stockholders	$	(14,388,000	)	$	(4,679,000	)	$	(20,637,000	)	$	(9,223,000	)
Foreign currency translation adjustment		36,000			(130,000	)		68,000			(629,000	)
Comprehensive loss	$	(14,352,000	)	$	(4,809,000	)	$	(20,569,000	)	$	(9,852,000	)
Basic earnings (loss) per share
Net loss attributable to common stockholders	$	(0.30	)	$	(0.31	)	$	(0.47	)	$	(0.55	)
Weighted average basic shares		48,051,751			15,110,400			44,325,690			16,784,773

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

-4-

Troika Media Group, Inc. and Subsidiaries 

Condensed Consolidated Statement of Stockholders’ Equity (Deficit) 

For the Three Months Ending March 31, 2022 and 2021 

	Preferred Stock - Series A				Preferred Stock -Series B				Preferred Stock - Series C				Preferred Stock - Series D				Preferred Stock -  Series E				Common Stock						Additional												Stockholders’
	$ 0.01 Par Value				$ 0.01 Par Value				$ 0.01 Par Value				$ 0.01 Par Value				$ 0.01 Par Value				$ 0.001 Par Value						Paid In			Stock			Accumulated			Comprehensive			Equity
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Shares			Amount			Capital			Payable			Deficit			Income (Loss)			(Deficit)
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
Sale of preferred stock - series D																																								-
Retirement of common stock																																								-
Issuance of common stock related to convertible note payables																						499,222			-			1,400,000			-									1,400,000
Issuance of common stock related to stock payable														-				-				1,733,334			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 loss																																					(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
Stock-based compensation on options																												263,000												263,000
Stock-based compensation on warrants																												301,000												301,000
Imputed interest on convertible note payable																												3,000												3,000
Beneficial conversion features on convertible promissory notes																												144,000												144,000
Warrants granted for convertible promissory note																												12,000												12,000
Shares to be issued for convertible promissory note																															156,000									156,000
Foreign currency translation gain																																					(406,000	)		(406,000	)
Net loss																																		(623,000	)					(623,000	)
																																								-
BALANCE — December 31, 2020		720,000	$	7,000		2,495,000	$	25,000		911,149	$	9,000		1,979,000	$	20,000		-	$	-		17,687,179		$	18,000			180,007,000		$	156,000		$	(175,436,000	)	$	(246,000	)	$	4,560,000
Retirement of common stock																						(2,666,667	)		(3,000	)		3,000												-
Stock-based compensation on options																												271,000												271,000
Stock-based compensation on warrants																												2,427,000												2,427,000
Imputed interest on convertible note payable																												9,000												9,000
Beneficial conversion features on convertible promissory notes																												-												-
Warrants granted for convertible promissory note																												-												-
Foreign currency translation gain																																					(130,000	)		(130,000	)
Net loss																																		(4,679,000	)					(4,679,000	)
BALANCE — March 31, 2021		720,000	$	7,000		2,495,000	$	25,000		911,149	$	9,000		1,979,000	$	20,000		-	$	-		15,020,512		$	15,000		$	182,717,000		$	156,000		$	(180,115,000	)	$	(376,000	)	$	2,458,000
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
Beneficial conversion features on convertible promissory notes																																								-
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
Record vested deferred compensation relating to Redeeem employees																												805,000												805,000
Stock-based compensation on options																												106,000												106,000
Stock-based compensation on warrants																												57,000												57,000
Issuance of common stock related to employees																						66,666			-			104,000												104,000
Issuance of common stock to contractors for services																						20,000			-			40,000												40,000
Foreign currency translation gain																																					1,000			1,000
Net loss																																		(4,110,000	)					(4,110,000	)
BALANCE — December 31, 2021		720,000	$	7,000		-	$	-		-	$	-		-	$	-		-		-		43,659,616		$	44,000		$	208,085,000			-		$	(193,138,000	)	$	(386,000	)	$	14,612,000
Record vested deferred compensation relating to Redeeem employees																												805,000												805,000
Issuance of common stock related to Converge acquisition																						12,500,000			12,000			14,863,000												14,875,000
Record preferred stock issued for PIPE																		500,000		5,000								(5,000	)											-
Stock-based compensation on options																												256,000												256,000
Stock-based compensation on warrants																												730,000												730,000
Stock-based compensation on restricted stock units																						8,000,000			8,000			8,102,000												8,110,000
Foreign currency translation gain																																					36,000			36,000
Net loss																																		(14,388,000	)					(14,388,000	)
BALANCE — March 31, 2022		720,000	$	7,000		-	$	-		-	$	-		-	$	-		500,000	$	5,000		64,159,616		$	64,000		$	232,836,000			-		$	(207,526,000	)	$	(350,000	)	$	25,036,000

-5-

Troika Media Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended March 31,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(20,637,000	)	$	(9,223,000	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation		91,000			95,000
Amortization of intangibles		739,000			1,619,000
Amortization of right-of-use assets		732,000			893,000
Amortization of discount on convertible note payables		-			409,000
Stock-based compensation on options		509,000			700,000
Stock-based compensation on warrants		854,000			2,882,000
Stock-based compensation relating to Redeeem acquisition		2,415,000			-
Issuance of common stock related to employees		104,000			-
Issuance of common stock to contractors for services		8,110,000			-
Imputed interest for note payable		-			16,000
Recognition of stimulus of contribution revenue from stimulus funding		-			(2,535,000	)
Gain on derivative liabilities		(213,000	)		-
Recovery of bad debt		(5,000	)		(202,000	)
Change in operating assets and liabilities:
Accounts receivable		(9,772,000	)		(2,205,000	)
Prepaid expenses		552,000			21,000
Accounts payable and accrued expenses		3,925,000			2,418,000
Deferred expenses		775,000			-
Other assets		-			63,000
Rental deposits		5,000			(11,000	)
Operating lease liability		(889,000	)		(10,000	)
Taxes payable		(103,000	)		-
Contract liabilities		13,166,000			2,462,000
Net cash provided by (used in) operating activities		358,000			(2,608,000	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in other assets		(75,000	)		-
Cash paid for acquisition of Converge, net of cash received		(82,730,000	)		-
Purchase of fixed assets		(161,000	)		(24,000	)
Net cash used in investing activities		(82,966,000	)		(24,000	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of preferred stock, net of offering costs		44,405,000			-
Proceeds from stimulus loan programs					2,258,000
Repayment of other longer-term liabilities		(477,000	)		-
Repayment of amount due to related party		(41,000	)		-
Payment of stimulus loan program		(566,000	)		-
Payments to note payable of related party		(80,000	)		-
Proceeds from bank loan, met of debt issuance cost		69,718,000			-
Proceeds from convertible note payable		-			500,000
Net cash provided by financing activities		112,959,000			2,758,000
Effect of exchange rate on cash		(21,000	)		(406,000	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	$	30,330,000		$	(280,000	)
CASH AND CASH EQUIVALENTS — beginning of period		12,066,000			1,706,000
CASH AND CASH EQUIVALENTS — end of period	$	42,396,000		$	1,426,000
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes	$	-		$	-
Interest expense	$	3,000		$	-
Noncash investing and financing activities:
Beneficial conversion features on convertible promissory notes	$	-		$	144,000
Record derivative liability on convertible notes	$	-		$	98,000
Fair value of common stock issued relating to the Converge acquisition		14,875,000			-
Warrants issued for convertible promissory note	$	-		$	12,000
Warrants issued relating to debt financing	$	2,232,000		$	-
Warrants issued relating to equity financing	$	28,407,000		$	-
Record acquisition liability relating to Converge acquisition	$	5,000,000		$	-
Capitalized fee on initial term loan	$	1,500,000		$	-
Original issue discount on amount held in escrow	$	900,000		$	-
Shares to be issued for convertible promissory note	$	-		$	156,000
Issuance of common stock related to stock payable	$	-		$	1,300,000
Issuance of common stock related to stock payable	$	104,000		$	-
Issuance of common stock to contractors for services	$	40,000		$	-
Conversion of convertible note payable	$	-		$	1,400,000
Right-of-use assets acquired through adoption of ASC 842	$	-		$	8,931,000
Right-of-use assets acquired through operating leases	$	467,000		$	2,398,000

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 and Nine Months Ended March 31, 2022 and 2021

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

For the nine months ending March 31, 2022, the Company had a net loss of $20.6 million, which increased the accumulated deficit to $207.5 million at March 31, 2022 from $186.9 million at June 30, 2021.  At March 31, 2022, the Company had approximately $42.4 million in cash and cash equivalents and a total of $75.2 million in current assets in relation to $67.4 million in current liabilities. 

With the most recent acquisition of Converge Direct, the Company believes that on a consolidated basis it will achieve positive operating cash flow in the fiscal year 2023. Converge is an independent performance marketing and managed service business. Converge provides to its customer acquisition services utilizing a broad range of engagement channels in the digital, off-line and emerging media sectors. Along with the added end-to-end solutions integrating Converge and Troika clients in major media markets, such as NY, Los Angeles and London, the Company expects to achieve improved profitability year over year through these integrated solutions and synergies.

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, equity raises, Company-wide consolidation, and management’s plans, the Company believes that the cash on hand of $42,396,000 as of March 31, 2022 and 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.

-7-

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 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.  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.

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 experienced a decrease in our cash flow from operations as a result of the impact of COVID-19, we 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 believed it had 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 used 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 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 Production Group, 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), Troika IO, Inc. (f/k/a Redeeem Acquisition Corp) (California), Converge Direct, LLC (Delaware), Converge Direct Interactive, LLC (Delaware), Converge Marketing Services (to the extent of 40%), LLC (Delaware) and Lacuna Ventures, LLC (Delaware). All significant intercompany accounts and transactions have been eliminated in consolidation.

-8-

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, the allocation of purchase consideration to assets and liabilities due to the Converge Direct 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 March 31, 2022 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. 

-9-

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 March 31, 2022 and June 30, 2021, the Company had $39,766,000 and $10,125,000 in cash that was uninsured, respectively.

CASH AND CASH EQUIVALENTS

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, and highly liquid debt instruments with original maturities of less than three months. At various times during the year, the Company has maintained cash balances in excess of federally insured limits. The Company believes it mitigates its risk by banking with major financial institutions.

The Company invests all excess cash primarily in government bonds, corporate debt securities, mortgage-backed and asset-backed securities, time deposits, and money market funds.

We classify all marketable debt securities that have stated maturities of three months or less from the date of purchase as cash equivalents and those with stated maturities of greater than three months as marketable securities on our Consolidated Balance Sheet

We determine the appropriate classification of our investments in marketable debt securities at the time of purchase and reevaluate such designation at each balance sheet date. We have classified and accounted for our marketable debt securities as available-for-sale. After consideration of our risk versus reward objectives, as well as our liquidity requirements, we may sell these debt securities prior to their stated maturities. As we view these securities as available to support current operations, we classify highly liquid securities with maturities beyond 12 months as current assets under the caption marketable securities on the Combined Balance Sheet. We carry these securities at fair value, and have elected the fair value option, for which changes in fair value are recorded in other income (expense), net. We determine any realized gains or losses on the sale of marketable debt securities on a specific identification method, and we record such gains and losses as a component of other income (expense), net.

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 March 31, 2022 and June 30, 2021, the Company had $517,000 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.

-10-

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.

The Company is currently working with its tax partners to assess whether 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 and nine months ended March 31, 2022 and 2021.

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.

-11-

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.

Troika/Mission

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.

-12-

Converge Direct

Advertising Revenues

The Company offers advertising and services by delivering both performance and brand advertising. The Company recognizes revenues for performance advertising when a user engages with the advertisement, such as a click, a view, or a purchase.

Generally, advertising revenues are reported on a gross basis, that is, the amounts billed to our customers are recorded as revenues, and amounts paid to suppliers are recorded as cost of revenues. Where we are the principal, we control the advertising and services before it is transferred to our customers. Our control is evidenced by our being primarily responsible to our customers and having a level of discretion in establishing pricing.

Arrangements with Multiple Performance Obligations

Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenues to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the prices charged to customers or using expected cost-plus margin.

The Company has the two distinct contractual services

Managed Services

Company provides a service (such as, but not limited to, media planning, media buying, media ROI measurement and media or marketing performance reporting). The Company is compensated for delivering such services by means of a (i) predetermined retainer amount or (ii) a pre-determined commission percentage based on the total media spend executed by Company on a client’s behalf.

Reimbursements

Our customers reimburse for expenses relating to the out-of-pocket costs associated with the provision of Managed Services engagements. This includes third party expenses such as media costs and administrative fees (Google, Facebook, TheTradeDesk, etc), technology fees (TheTradeDesk, Invoca, LiveRamp etc), production expenses (printing, logistics, etc), data costs and other third-party expenses that Company incurs on behalf of a client that is needed to deliver the services.

Performance Marketing (“Pay Per Event”)

Company provides to its clients the ability to pay for a marketing or sales event rather than incurring the media and services expense in a managed service engagement. The Company utilizes the same functions that it delivers in its managed services offering but only charges a client for a pre-determined marketing or sales outcome. The fees in this situation will typically be tied to a (i) cost per phone call, (ii) cost per web form lead, (iii) cost per consumer appointment, (iv) cost per qualified lead, and (v) cost per sale.

There is a premium that is charged to the client for the Performance Marketing service due to the fact that the Company is taking on the cost risk associated with the services and media that it is executing without knowing that revenue will be generated. The risk is mitigated by the fact that the client has agreed to purchase the “work product’” (lead, call, etc.) at a predetermined cost and the Company charges higher margins associated with the service.

Sales Commissions

We expense sales commissions when incurred when the amortization period is one year or less. We recognize an asset for certain sales commissions if we expect the period of benefit of these costs to exceed one year and amortize it over the period of expected benefit. These costs are recorded within sales and marketing expenses.

-13-

Deferred Revenues and Remaining Performance Obligations

We record deferred revenues when cash payments are received or due in advance of our performance, including amounts which are refundable. Additionally, we have performance obligations associated with commitments in customer contracts for future services that have not yet been recognized as revenues, also referred to as remaining performance obligations. Remaining performance obligations include related deferred revenue currently recorded as well as amounts that will be invoiced in future periods and excludes (i) contracts with an original expected term of one year or less, (ii) cancellable contracts, and (iii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

As of March 31, 2022, the amount not yet recognized as revenues from these commitments for Converge Direct is $13,618,000 which we expect to recognize entirely over the next six months. However, the amount and timing of revenue recognition is largely driven by when the customer utilizes the services and our ability to deliver in accordance with relevant contract terms, which could impact our estimate of the remaining performance obligations and when we expect to recognize such as revenues.

Cost of Revenues

Cost of revenues consists of the payments made to third parties, such as media costs and administrative fees (Google, Facebook, TheTradeDesk, etc), technology fees (TheTradeDesk, Invoca, LiveRamp etc), production expenses (printing, logistics, etc), data costs, and other third-party expenses that Company incurs on behalf of a client that is needed to deliver the services.

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 March 31, 2022 and June 30, 2021.

ADVERTISING

The Company generally expenses marketing and advertising costs as incurred. During the nine months ended March 31, 2022 and 2021, the Company incurred $117,000 and $0, respectively, on marketing, trade shows and advertising.  During the three months ended March 31, 2022 and 2021, the Company incurred $58,000 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.

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.

-14-

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 nine months ended March 31, 2022 closing rate at 1.313900 US$: GBP, average rate at 1.351989 US$: GBP, for the nine months ended March 31, 2021 closing rate at 1.378900 US$: GBP, average rate at 1.342278 US$: 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 and nine months ended March 31, 2022 and 2021 included net loss and unrealized gains (losses) from foreign currency translation adjustments.

-15-

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 the three and nine months ending March 31, 2022 and 2021, which were not included in the calculation of loss per share, since the Company had a net loss from continuing operations and net loss:

	Three Months Ending March 31,
	2022		2021
Convertible preferred stock		42,048,000		18,068,034
Stock options		3,080,016		2,342,660
Stock warrants		58,538,006		7,622,411
Total		103,666,022		28,033,105

	Nine Months Ending March 31,
	2022		2021
Convertible preferred stock		42,048,000		18,068,034
Stock options		3,155,233		2,127,915
Stock warrants		58,557,984		6,443,472
Total		103,761,217		26,639,421

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 March 31, 2022, the Company recorded deferred income liabilities of $0 within contract liabilities and $0 of stimulus loans. On June 30, 2021, the Company recorded deferred income liabilities of $270,000 within contract liabilities and $569,000 within stimulus loans. For the three months ending March 31, 2022 and 2021, the Company recognized $0 and $831,000 in income from government grants, respectively. For the nine months ending March 31, 2022 and 2021, the Company recognized $262,000 and $2,535,000 in income from government grants, respectively. In the nine months ending March 31, 2022, $8,000 of the stimulus funding was not forgiven and returned to the bank.

RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Pronouncements Adopted

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 has adopted the guidance effective July 1, 2021.

-16-

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 has adopted the guidance effective July 1, 2021.

NOTE  2 – CONVERGE DIRECT ACQUISITION
 

On March 22, 2022 (the “Closing Date”), the Company completed the acquisition of Converge Direct, LLC and affiliates (the “Converge Acquisition”) and the total purchase price was $125,000,000 valued at $114,875,000. The purchase price for accounting purposes consists of sixty-five million dollars ($65,000,000) in cash paid on the date of the acquisition, thirty million dollars ($30,000,000) currently held in escrow payable upon completion of its annual audits, another five million dollars ($5,000,000) payable twelve months after the acquisition date contingent on the Company satisfying its bank covenants, and the remaining fourteen million eight hundred and seventy-five thousand ($14,875,000) dollars was paid in the Company’s restricted common stock valued at $1.19 per share.  All 12,500,000 shares are subject to a nine (9) month lock-up. Pursuant to the provisions of the Membership Interest Purchase Agreement (the “MIPA”) dated as of November 22, 2021, as amended, an aggregate of $2,500,000 (10%) or 1,250,000 shares of the common stock issued to the Sellers are held in escrow to secure against claims for indemnification. The escrowed shares shall be held until the later of (a) one year from the Closing Date, or (b) the resolution of indemnification claims. The Company is accounting for the transaction under the purchase method of accounting in accordance with the provisions of ASC Topic 805 Business Combinations (ASC 805).

PURCHASE PRICE

The Company has estimated the fair value of the consideration due as follows:

Cash paid at closing	$	65,000,000
Cash held in escrow		30,000,000
Cash payable after a year if bank covenants satisfied		5,000,000
Fair value of common stock issued at Closing		14,875,000
Total purchase price	$	114,875,000

The fair value of the 12,500,000 shares was calculated to be $14,875,000 based on a closing price of the Company’s common stock at $1.19 per share on March 22, 2022.

The Company is recording the $5,000,000 payable twelve months after the acquisition date contingent on the Company satisfying its bank covenants as a long-term liability as the cash would be distributed subsequent to the March 31, 2023 reporting period. The Company will also reevaluate this balance during the June 30, 2022 close.

PURCHASE PRICE ALLOCATION

The Company negotiated the purchase price based on the expected cash flows to be derived from their operations after integration into the Company’s existing distribution, production and service networks.  The acquisition purchase price is allocated based on the fair values of the assets acquired and liabilities assumed, which are based on management estimates and third-party appraisals. The Company engaged a valuation expert to provide guidance to management which was considered and in part relied upon in completing its purchase price allocation. The excess of the purchase price over the aggregate estimated fair value of net assets acquired was allocated to goodwill. The purchase price allocation is preliminary and the entire allocation is subject to a final review, including but not limited to the accounts receivable, accounts payable, deferred revenue, intangible assets and accruals.

-17-

Subject to final review, the following table summarizes the preliminary allocation of the purchase price of the fair value of the assets acquired and liabilities assumed at the date of the acquisition:

Current assets	$	33,856,000
Fixed assets		233,000
Other non-current assets		4,340,000
Intangible assets		71,000,000
Goodwill		41,528,000
Current liabilities		(30,576,000	)
Other non-current liabilities		(5,506,000	)
Consideration	$	114,875,000

INTANGIBLE ASSETS

                The estimated fair values of the identifiable intangible assets acquired were calculated using an income valuation approach which requires a forecast of expected future cash flows either through the use of relief-from-royalty method or multi-period excess earnings methods (MPEEM). The estimated useful lives are based on the Company’s experience and expectations as to the duration of the time the Company expects to realize benefits of the assets.

The estimated fair values of the identifiable intangible assets acquired, estimated useful lives and related valuation methodology are as follows:

Intangible Assets:	Preliminary Fair Value		Life in Years		Discount Rate			Valuation Method
Customer relationships	$	56,900,000		10		17.5	%	Income (MPEEM)
Technology		10,500,000		5		17.5	%	Income (Relief-from-Royalty)
Tradename		3,600,000		10		18.5	%	Income (Relief-from-Royalty)
	$	71,000,000

Customer relationships, technology and tradename will be amortized on a straight-line basis over their estimated useful lives.

Unaudited Pro Forma Financial Information

The following unaudited pro forma information presents the combined results of operations as if the acquisition of Converge Direct, LLC by the Company had been completed on July 1. The unaudited proforma results include amortization associated with preliminary estimates for the acquired intangible assets, amortization of debt discounts, and interest expense on the debt issued to complete the acquisition on these unaudited pro forma adjustments. 

	For the Nine Months Ended March 31,
	2022			2021
Gross revenue	$	216,685,000		$	194,587,000
Cost of revenue		(183,890,000	)		(167,680,000	)
Gross profit		32,795,000			26,907,000
Operating expenses		(59,825,000	)		(44,611,000	)
Net gain/(loss)	$	(27,030,000	)	$	(17,704,000	)

-18-

NOTE 3 – PROPERTY AND EQUIPMENT

Property and equipment consist of the following as of March 31, 2022 and June 30, 2021:

	March 31, 2022			June 30, 2021
Computer equipment	$	990,000		$	697,000
Website design		6,000			6,000
Office machine & equipment		95,000			97,000
Furniture & fixtures		975,000			438,000
Leasehold improvements		235,000			135,000
Tenant incentives		145,000			145,000
		2,446,000			1,518,000
Accumulated depreciation		(1,804,000	)		(1,175,000	)
Net book value	$	642,000		$	343,000

During the three months ended March 31, 2022 and 2021, depreciation expense was $33,000 and $34,000, respectively. During the nine months ended March 31, 2022 and 2021, depreciation expense was $91,000 and $95,000, respectively.

NOTE 4 – INTANGIBLE ASSETS

Intangible assets consisted of the following as of March 31, 2022 and June 30, 2021:

	March 31,  2022			June 30, 2021
Customer relationship	$	61,860,000		$	4,960,000
Non-core customer relationships		760,000			760,000
Non-compete agreements		1,430,000			1,430,000
Technology		11,020,000			520,000
Tradename		4,070,000			470,000
Workforce acquired		2,125,000			2,125,000
		81,265,000			10,265,000
Less: accumulated amortization		(8,401,000	)		(7,662,000	)
Net book value	$	72,864,000		$	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 ten 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 and nine months ended March 31, 2022, the Company had no impairments. For the three and nine months ended March 31, 2021, the Company had no impairments. During the fiscal year ending June 30, 2021, the Company recorded $0 in impairment expense related to intangibles.

-19-

During the three months ended March 31, 2022 and 2021, amortization expense was $396,000 and $540,000, respectively. During the nine months ended March 31, 2022 and 2021, amortization expense was $739,000 and $1,619,000, respectively.

As of March 31, 2022, the future amortization expense related to intangible assets will be recognized in the periods below:

Fiscal year ending June 30:
Remaining 2022	$	2,949,000
2023		8,837,000
2024		8,549,000
2025		8,527,000
2026		8,427,000
2027		7,742,000
2028		6,050,000
2029		6,050,000
2030 and thereafter		15,733,000
	$	72,864,000

 NOTE 5 – ACCOUNTS PAYABLE & ACCRUED EXPENSES

As of March 31, 2022 and June 30, 2021, the Company recorded $40,808,000 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.

	March 31, 2022		June 30, 2021
Accounts payable	$	10,491,000	$	2,362,000
Accrued expenses		29,083,000		4,819,000
Accrued payroll		700,000		294,000
Accrued taxes		534,000		888,000
	$	40,808,000	$	8,363,000

NOTE 6 – 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 March 31, 2022 and June 30, 2021, respectively. The derivative liability was recorded as a short-term liability and interest expense of $1,000 and $4,000 were recorded for the three and nine months ending March 31, 2022, respectively. The assumptions used in the Black-Scholes valuation include a volatility of 63.62%, risk-free rate of 2.42% and a term of one year.

-20-

During the three months ended March 31, 2022 and 2021, the Company paid $0 towards the principal of the Promissory Notes. During the nine months ended March 31, 2022 and 2021, the Company paid $0 towards the principal of the Promissory Notes.

As of March 31, 2022 and June 30, 2021, there was a total $50,000 in notes payable outstanding. The Company recorded $1,000 and $12,000 in interest expense relating to convertible note payables during the three months ended March 31, 2022 and 2021. The Company recorded $4,000 and $24,000 in interest expense relating to convertible note payables during the nine months ended March 31, 2022 and 2021. The Company recorded $0 and $0 in amortization expense relating to the note payable discount during the three months ended March 31, 2022 and 2021, respectively. The Company recorded $0 and $409,000 in amortization expense relating to the note payable discount during the nine months ended March 31, 2022 and 2021, respectively.

NOTE 7 – NOTE PAYABLE

On March 21, 2022, the Company entered into a Financing Agreement with Blue Torch Finance LLC (“Blue Torch”), as Administrative Agent and Collateral Agent.

This $75,000,000 First Lien Term Loan (the “Credit Facility”) formed the majority of the purchase price of the CD Acquisition, as well as for working capital and general corporate purposes.

The Credit Facility provides for: (i) a Term Loan in the amount of $75,000,000; (ii) an interest rate of the Libor Rate Loan of three (3) months; (iii) a four-year maturity, amortized 5.0% per year, payable quarterly; (iv) a 1.0% commitment fee and an upfront fee of 2.0% of the Credit Facility paid at closing, plus an administrative agency fee of $250,000 per year; (v) a first priority perfected lien on all property and assets including all outstanding equity of the Company’s subsidiaries; (vi) 1.5% fully-diluted penny warrant coverage in the combined entity; (vii) mandatory prepayment for 50% of excess cash flow and 100% of proceeds from various transactions; (viii) customary affirmative, negative and financial covenants; (ix) delivery of audited financial statements of Converge; and (x) customary closing conditions. The Company agreed to customary restrictive covenants in the Credit Facility and leverage ratios, fixed charge coverage ratios, and maintaining liquidity of at least $6,000,000 at all times.

The Company and each of its subsidiary Guarantors entered into a Pledge and Security Agreement (the “Security Agreement”) dated as of March 21, 2022, as a requirement with the Credit Facility. Each Guarantor pledged and assigned to the Collateral Agreement and granted the Collateral Agent with a continuing security interest in all personal property and fixtures of the Guarantors (the “Collateral”) and all proceeds of the Collateral. All equity of the Guarantors was pledged by the Borrower.

On March 21, 2022, each of the Company’s Subsidiaries, as Guarantors, entered into an Intercompany Subordination Agreement (the “ISA”) with the Collateral Agent. Under the ISA, each obligor agreed to the subordination of such indebtedness of each other obligor to such other obligations.

On March 21, 2022, the Company entered into an Escrow Agreement with Blue Torch Finance LLC and Alter Domus (US) LLC, as Escrow Agent. The Escrow Agreement provides for the escrow of $30,000,000 of the $75,000,000 proceeds, under the Credit Facility to be held until the audited financial statements of Converge Direct LLC and affiliates for the years ended December 31, 2019 and 2020 are delivered to Blue Torch Finance LLC.

-21-

The outstanding balance of the note is as follows:

Principal balance	$	76,500,000
Fair value of the warrants		(2,433,000	)
Original issue discount		(1,500,000	)
Debt issuance costs		(5,282,000	)
Outstanding balance, net		67,285,000
Current portion		(1,461,000	)
Long-term portion	$	65,824,000

In connection with the aforementioned note, the Company recorded debt discount and issuance costs totaling $9,215,000.  The discount and issuance costs will be amortized over the life of the note using the effective interest rate method.  The company recognized $0 in amortization of debt discount for the three months ended March 31, 2022 as no payments were made on the note.

The payment of principal to be made are as follows:

FY 2022	$	956,250
2023		3,825,000
2024		3,825,000
2025		3,825,000
2026		64,068,750
	$	76,500,000

At any time on or after March 21, 2022 and on or prior to March 21, 2026, the lender has the right to subscribe for and purchase from Troika Media Group, Inc., up to 1,929,439 shares of Common Stock, subject to adjustment. The exercise price per share of Common Stock under this Warrant shall be $.01 per share. If at any time when this Warrant becomes exercisable and the Registration Statement is not in effect this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise”. 

Using the Black-Scholes model, the fair market value was determined to be $2,433,000 and $2,232,000 on March 22, 2022 and March 31, 2022, respectively, as a warrant liability and a $201,000 gain on derivative liabilities as recorded in the three months ending March 31, 2022.

NOTE 8 – NOTE PAYABLE RELATED PARTY

As of March 31, 2022 and June 30, 2021, the Company owed the founder and former CEO of Troika Design Group, Inc., Dan Pappalardo, approximately $120,000 and $200,000, respectively.  The loan was due and payable on demand and accrued interest at 10.0% per annum.  In the three and nine months ending March 31, 2022, the Company made payments of $30,000 and $80,000 in principal, respectively.  Interest expense of $4,000 and $13,000 were recorded for this note for the three and nine months ending March 31, 2022, respectively.  Interest expense of $5,000 and $15,000 were recorded for this note for the three and nine months ending March 31, 2021, respectively.

As of March 31, 2022 and 2021, 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 $5,000 and $15,000 were recorded for this note for the three and nine months ending March 31, 2021, 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.

-22-

Total interest expense on note payable related party was $4,000 and $13,000 for these notes for the three and nine months ending March 31, 2022, respectively. Total interest expense on note payable related party was $10,000 and $30,000 for these notes for the three and nine months ending March 31, 2021, respectively.

NOTE 9 – 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 March 31, 2022, the Company had current and long-term operating lease liabilities of $3,781,000 and $10,514,000, respectively, and right of use of assets of $9,543,000. 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:

	Undiscounted Cash Flows
Discount rate		5.50	%
Remainder of 2022	$	2,383,000
2023		2,728,000
2024		2,724,000
2025		2,434,000
2026		2,063,000
2027		1,388,000
2028		947,000
2029		970,000
2030		909,000
Total undiscounted minimum future payments		16,546,000
Imputed interest		(2,251,000	)
Total operating lease liabilities	$	14,295,000
Short-term lease liabilities	$	3,781,000
Long-term lease liabilities	$	10,514,000

Other information related to our operating leases is as follows:

	March 31, 2022
Weighted average remaining lease term in years	3.9 years
Weighted average discount rate		13.6	%

-23-

LEASE AGREEMENTS

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 lease expired in January 2022 and was not renewed.

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 plans to record 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. 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 ($52,875) 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.

On April 19, 2019, Converge Direct LLC entered into a ten-year lease agreement for office space in New York, NY.  The beginning lease expense is $62,848 and the lease provides for an escalation clause where the Company will be subject to an annual rent increase of 2.5%, year over year.  The lease expires on October 15, 2029.

On October 20, 2021, Converge Direct LLC entered into a three-year lease agreement for office space in Bedford Hills, NY.  The beginning lease expense is $11,000 and the lease provides for an escalation clause where the Company will be subject to an annual rent increase of 4.0%, year over year.  The lease expires on February 29, 2024.

In May 2021, Converge Direct LLC renewed an existing lease and entered into a two-year lease agreement for office space in San Diego, CA.  The beginning lease expense is $1,800 and the lease provides for an escalation clause where the Company will be subject to an annual rent increase of 3.0%, year over year.  The lease expires on May 31, 2023.

The Company accounts for leases based on the new accounting standard ASC 842 and recorded $1,440,000 and $1,283,000 in rent expense for the nine months ended March 31, 2022 and 2021 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, ended in January 2022, and was not renewed. The lease income was $22,496 per month escalating annually at 3.0%.

-24-

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 10 – 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.

MVRK SETTLEMENT

Mission Culture, LLC recently settled a claim from a former vendor, Maverick, LLC (“MVRK”) associated with certain services purportedly provided. Mission Culture, LLC and MVRK counsel have agreed to settle the claim for $110,000 with an upfront payment of $70,000 paid at signature and the remainder paid in four monthly installments of $10,000. The parties are in the process of drafting the settlement documents and the Company has fully accrued the settlement in the nine months ending March 31, 2022.

NOTE 11 – STOCKHOLDERS’ EQUITY

On March 21, 2022, the Company filed with the Nevada Secretary of State a Certificate of Designation of Preferences, Rights and Limitations of Series E Convertible Preferred Stock, pursuant to NRS 78.1955 of the Nevada Revised Statutes (the “CoD”).

Pursuant to the CoD, the Company authorized 500,000 shares of Series E Preferred Stock, $.01 par value, with a Stated Value of $100 per share.

As of March 18, 2022, pursuant to the Nevada Revised Statutes (the “NRS”), we received a written consent in lieu of a meeting of Stockholders from 20 principal stockholders, representing approximately 57% of the total possible votes outstanding (the “Majority Stockholders”), authorizing the following:

The sale of $50 million of shares of Series E Convertible Preferred Stock, par value $0.01 per share (the Series E Preferred Stock”), with accompanying, 100% warrant coverage (the “Warrants”), with certain purchasers’ signatory thereto (the “Purchasers”). The Series E Preferred Stock and Warrants include certain reset and anti-dilution provisions that could reduce the conversion prices and exercise prices thereof down to $0.25 (the “Floor Price”) which is a significant discount to the current market price. For purposes of complying with Rule 5635(d) of the Nasdaq Stock Market rules, the shareholders approved the issuance of more than 19.99% of the current total issued and outstanding shares of Common Stock upon conversion of the Series E Preferred Stock and exercise of the Warrants, including, but not limited to, reducing the Floor Price.

In addition, the Majority Stockholders approved the amendment to Article Three of the Articles of Incorporation to reflect an increase in the number of authorized shares of all classes of stock which the Company shall have the authority to issue from 315,000,000 shares to 825,000,000 shares, such shares being designated as follows: (i) 800,000,000 shares of Common Stock, and (ii) 25,000,000 shares of preferred stock, par value $.01 per share.

-25-

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 March 31, 2022 and June 30, 2021, the Company had 64,159,616 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 387,222 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 the three months ending September 30, 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.

In the three months ending December 31, 2021, the Company issued 66,666 shares of common stock to a former employee as per their employment agreement. The common stock was distributed in two separate issuances at an average closing price of $1.56 per share and $104,000 in stock-based compensation was recorded.

In the three months ending December 31, 2021, the Company issued 20,000 shares of common stock to a contractor providing marketing services as per their vendor agreement. The common stock was issued at a price of $2.01 per share and $40,000 in expenses relating to professional fees was recorded.

In the three months ending March 31, 2022, the Company issued 12,500,000 shares of common stock relating to its acquisition of Converge Direct, LLC. The common stock was issued at a price of $2.00 per share totaling $25,000,000 representing the equity portion of the acquisition price. The fair value of these shares was calculated at $14,875,000 based on the closing price of $1.19 per share on March 22, 2022.

In the three months ending March 31, 2022, the Company awarded a total of 8,600,000 restricted stock units (RSU’s) as incentive compensation to executive officers, directors and employees. As of March 31, 2022, only 8,000,000 of those restricted stock units were vested and only 5,800,000 of those vested were distributed.  For presentation purposes, the Company is reporting the 2,200,000 restricted stock units as issued as they are vested and simply not distributed by the transfer agent.

-26-

PREFERRED STOCK

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

As of March 31, 2022, 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; 0 shares of Series D Preferred Stock were issued and outstanding; and 500,000 shares of Series E 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 $0.75 per share; and 1,979,000 shares of Series D Convertible Preferred Stock convertible into 5,277,334 shares of Common Stock at $3.75 per share for a total of 18,158,768 shares of Common Stock.

In the three months ending March 31, 2022, the Company entered into a Securities Purchase Agreement with certain institutional investors to issue and sell in a private offering an aggregate of $50,000,000 of securities, consisting of shares of Series E convertible preferred stock of the Company, par value $.01 per share and warrants to purchase (100% coverage) shares of common.  Under the terms of the Purchase Agreement, the Company agreed to sell 500,000 shares of its Series E Preferred Stock and Warrants to purchase up to 33,333,333 shares of the Company’s common stock. Each share of the Series E Preferred Stock has a stated value of $100 per share and is convertible into shares of common stock at a conversion price of $1.50 per share subject to adjustment. The Preferred Stock is perpetual and has no maturity date. The Preferred Stock will not be subject to any mandatory redemption or other similar provisions. All future shares of Preferred Stock shall rank junior to the Series E Preferred Stock, except if at least a majority of the Series E Preferred Stock expressly consent, to the creation of the Parity Stock of Senior Preferred Stock.

The Conversion Price of the Series E Preferred Stock and the Exercise Price of the Warrants is subject to adjustment for: (a) stock dividends and stock distributions; (b) subsequent rights offerings; (c) pro rata distributions; and (d) Fundamental Transactions (as defined).

The Conversion Price shall be downwardly adjusted (the “Registration Reset Price”) to the greater of (i) eighty (80%) percent of the average of the ten (10) lowest daily VWAPs during the forty (40) trading day period beginning on and including the Trading Day immediately follow the Effective Date of the initial Registration Statement in July 2022, and (ii) the Floor Price of $0.25 per share.

The Company issued accompanying Common Stock Purchase Warrants (the “Warrants”) exercisable for five (5) years at $2.00 per share, to purchase an aggregate of 33,333,333 shares of Common Stock. The exercise price is subject to the same Registration Reset Price, as described above.  The Floor Price is $0.25 per share.

Using the Black-Scholes model, the Company recorded a market value of $28,407,000 on both March 22, 2022 and March 31, 2022.  The fair market value of these warrants on March 31, 2022 was recorded as a warrant liability and a no gain on derivative liabilities was recorded in the three months ending March 31, 2022. 

A roll-forward of the warrant liability follows:

Balance upon issuance
Loan warrants	$	2,433,000
Preferred stock warrants		28,407,000
		30,840,000
Change in fair value		(201,000	)
Balance on March 31, 2022	$	30,639,000

If at any time there is no effective registration statement, the Warrants are exercisable on a cashless basis.

-27-

The Company has reserved up to 200,000,000 shares of Common Stock issuable upon full conversion of a Series E Preferred Stock at a Floor Price of $0.25 per share.

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 the three months ending September 30, 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, 2,583,801 shares of the Company’s common stock was issued as of March 31, 2022 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 nine months ending March 31, 2022		(2,415,000	)		(904,207	)
Unamortized deferred compensation at March 31, 2022	$	6,903,000			2,583,801

In the three and nine months ended March 31, 2022, the Company recorded $805,000 and $2,415,000 in stock-based compensation associated with the vested portion of the deferred compensation.

WARRANTS

As of March 31, 2022 and 2021, respectively, the Company has outstanding warrant shares of 59,470,897 with an intrinsic value of $12,498,000 and 8,550,852 warrant shares with an intrinsic value of $12,039,000

-28-

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 nine months ended March 31, 2022 and 2021:

	2022	2021
Volatility - range	63.6% - 64.0%	63.5% - 66.5
Risk-free rate	0.87% - 2.42%	0.2% - 0.5%
Contractual term	4.0 – 5.0 years	4.0 - 5.0 years
Exercise price	$0.84 - $1.24	$0.75 - $3.75

A summary of the warrants granted, exercised, forfeited and expired for the nine months ended March 31, 2022 are presented in the table below:

	Number of Warrants			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		51,366,341			1.13		0.78		2,289,988			4.0
Exercised		-			-		-		-			-
Expired/Forfeited		(191,852	)		0.75		0.70		(1,950,000	)		-
Outstanding March 31, 2022		59,470,897			1.12		0.75		12,498,455			3.7
Vested and exercisable March 31, 2022		58,505,968			1.11		0.88		10,976,530			3.6
Non-vested March 31, 2022		964,929			1.47		2.29		1,521,925			2.3

-29-

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 March 31, 2022.

		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
$	0.01		2,179,439	4.0 years			2,179,439	4.0 years
$	0.75		7,109,555	2.1 years			6,535,182	2.0 years
$	0.84		25,000		-		-		-
$	1.05		49,011,902	4.0 years			49,011,902	4.0 years
$	1.24		150,000		-		-		-
$	1.50		400,000	2.2 years			400,000	2.2 years
$	1.95		26,667	3.8 years			8,889	3.8 years
$	3.00		66,667	2.9 years			66,667	2.9 years
$	3.75		501,667	2.9 years			303,889	3.3 years
			59,470,897	3.7 years			58,505,968	3.6 years

A summary of the warrants granted, exercised, forfeited and expired for the nine months ending March 31, 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, 2020		7,858,741		$	1.52	$	1.92	$	9,234,295			3.0
Granted		1,256,667			0.93		3.04		3,845,945			4.7
Exercised		-			-		-		-			-
Forfeited		-			-		-		-			-
Expired		(564,556	)		3.16		3.13		(733,295	)		-
Outstanding March 31, 2021		8,550,852			1.12		1.88		12,039,000			2.5
Vested and exercisable March 31, 2021		7,598,630			1.10		1.73		9,644,333			2.4
Non-vested March 31, 2021		952,222		$	1.24	$	3.02	$	2,394,667			3.4

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 March 31, 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		7,440,667	2.5 years		6,658,445	2.3 years
$	1.50		400,000	3.2 years		400,000	3.2 years
$	1.50		26,667	0.0 years		-	0.0 years
$	3.00		66,667	3.9 years		66,667	3.9 years
$	3.75		435,000	3.2 years		291,667	3.7 years
$	6.00		163,333	0.2 years		163,333	0.2 years
$	27.00		18,518	0.4 years		18,518	0.4 years
			8,550,852	2.5 years		7,598,630	2.4 years

-30-

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 March 31, 2022, the Company has granted, under the Plan, awards in the form of NQSO’s for all 3,333,334 shares.

2021 EQUITY INCENTIVE PLAN

On October 28, 2021, the Board adopted, and a majority of outstanding shares subsequently approved, the 2021 Employee, Director & Consultant Equity Incentive Plan (the “2021 Plan”). The prior Equity Plan did not have any remaining authorized shares. The 2021 Plan is intended to attract and retain employees, directors and consultants, to involve them to work for the benefit of the Company or its affiliated entities, and to provide additional incentive for them to promote the Company’s success. The 2021 Plan provides for the award of stock options, either incentive stock options (ISOs) or non-qualified stock options (NQSOs), restricted shares and restricted stock units (RSUs). The 2021 Plan authorized 12,000,000 shares of Common Stock for the issuance of awards under the 2021 Plan. As of the date of this report, an aggregate of 4,400,000 RSUs had been awarded to executive officers and directors and 4,200,000 RSUs had been awarded to employees.

ISO’s Awards

During the three months ended March 31, 2022, the Company did not issue additional options. In the three months ended March 31, 2022, the Company recorded compensation of $256,000 relating to the vested portion of options that were issued in previous periods. The total compensation of the unvested options to be recognized in future periods is $748,000 and the weighted average remaining is 2.6 years.

During the three months ended March 31, 2021, the Company did not issue additional options. In the three months ended March 31, 2021, the Company recorded compensation of $271,000 relating to the vested portion of options that were issued in previous periods. The total compensation of the unvested options to be recognized in future periods is $360,000 and the weighted average remaining is 1.5 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.

-31-

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 nine months ended March 31, 2022 and 2021:

		2022	2021
Volatility - range		64.20%–65.22%		64.8	%
Risk-free rate		0.7% – 1.2%		0.3	%
Contractual term		3.0 years	3.0 years
Exercise price	$	1.49 - $3.75	$	3.75

A summary of the options granted, exercised, forfeited and expired for the nine months ended March 31, 2022 are presented in the table below:

	Number of Options		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		720,169		2.51		1.18		273,207		3.0
Exercised		-		-		-		-		-
Expired/Forfeited		-		-		-		-		-
Outstanding March 31, 2022		3,808,502		1.39		1.13		2,103,206		0.7
Vested and exercisable March 31, 2022		3,056,125		1.02		1.14		2,054,017		0.2
Non vested March 31, 2022		752,377	$	2.91	$	1.29	$	49,189		2.6

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 March 31, 2022.

		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	0.1 years	2,618,889	0.1 years
$	1.49	10,000	2.7 years	-	0.0 years
$	1.50	200,000	0.0 years	200,000	0.0 years
$	2.08	258,334	2.1 years	2,917	1.8 years
$	2.61	383,500	3.3 years	31,958	3.3 years
$	2.84	1,667	0.9 years	139	3.3 years
$	3.75	408,334	1.2 years	202,222	0.9 years
		3,808,502	0.7 years	3,056,125	0.2 years

-32-

A summary of the options granted, exercised, forfeited and expired for the nine months ending March 31, 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, 2020		3,377,222		$	1.10	$	1.06	$	2,030,000			0.7
Granted		76,667			3.75		-		-			2.8
Exercised		-			-		-		-			-
Forfeited		-			-		-		-			-
Expired		(143,333	)		-		-		(200,000	)		-
Outstanding March 31, 2021		3,310,556			1.10		1.01		1,830,000			0.5
Vested and exercisable March 31, 2021		2,883,458			0.89		0.93		1,469,818			0.3
Non-vested March 31, 2021		427,098		$	2.59	$	1.90	$	360,182			1.5

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 March 31, 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		2,768,889	0.3 years		2,628,458	0.2 years
$	1.50		200,000	0.5 years		166,667	0.5 years
$	3.75		341,667	2.0 years		88,333	1.9 years
			3,310,556	0.5 years		2,883,458	0.3 years

NOTE 12 – DISAGGREGATION OF REVENUE & LONG-LIVED ASSETS

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

	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021
Project fees	$	2,045,000	$	1,627,000	$	10,045,000	$	5,268,000
Retainer fees		5,148,000		560,000		6,059,000		1,648,000
Fee income		1,184,000		676,000		3,777,000		2,435,000
Reimbursement income		1,927,000		991,000		5,743,000		3,086,000
Performance marketing		3,827,000		-		3,827,000		-
Managed services		1,543,000		-		1,543,000		-
Other revenue		11,000		-		34,000		-
	$	15,685,000	$	3,854,000	$	31,028,000	$	12,437,000

-33-

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

	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021
Gross Revenue:
United States	$	13,963,000	$	2,309,000	$	24,481,000	$	7,940,000
United Kingdom		1,722,000		1,545,000		6,547,000		4,497,000
Total gross revenue	$	15,685,000	$	3,854,000	$	31,028,000	$	12,437,000

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

	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021
Gross profit:
United States	$	2,911,000	$	1,078,000	$	7,293,000	$	3,770,000
United Kingdom		1,036,000		835,000		3,577,000		2,307,000
Total gross profit	$	3,947,000	$	1,913,000	$	10,870,000	$	6,077,000

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

	Three Months Ended March 31,						Nine Months Ended March 31,
	2022			2021			2022			2021
Net Loss
United States	$	(13,993,000	)	$	(4,188,000	)	$	(19,954,000	)	$	(8,147,000	)
United Kingdom		(395,000	)		(491,000	)		(683,000	)		(1,076,000	)
Total net loss	$	(14,388,000	)	$	(4,679,000	)	$	(20,637,000	)	$	(9,223,000	)

-34-

The following table presents the disaggregation of fixed assets between the United States and the United Kingdom as of March 31, 2022:

	United States			United Kingdom			Total
Computer equipment	$	748,000		$	242,000		$	990,000
Website design		6,000			-			6,000
Office machine & equipment		53,000			42,000			95,000
Furniture & fixtures		893,000			82,000			975,000
Leasehold improvements		223,000			12,000			235,000
Tenant incentives		145,000			-			145,000
		2,068,000			378,000			2,446,000
Accumulated depreciation		(1,492,000	)		(312,000	)		(1,804,000	)
Net book value	$	576,000		$	66,000		$	642,000

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 March 31, 2022:

Intangibles	US			UK		Total
Customer relationship	$	61,860,000		$	-	$	61,860,000
Non-core customer relationships		760,000			-		760,000
Non-compete agreements		1,430,000			-		1,430,000
Technology		11,020,000			-		11,020,000
Tradename		4,070,000			-		4,070,000
Workforce acquired		2,125,000			-	2,125,000
		81,265,000			-		81,265,000
Less: accumulated amortization		(8,401,000	)		-		(8,401,000	)
Net book value	$	72,864,000		$	-	$	72,864,000

-35-

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 13 – SUBSEQUENT EVENTS

EQUITY INCENTIVES

Relating to the aforementioned incentive compensation plan, in April 2022 the Company distributed an additional 2,000,000 restricted stock units consisting of 1,300,000 RSUs to executive officers and directors and 700,000 RSUs to employees. A total 8,600,000 RSUs were previously awarded with 5,800,000 RSUs distributed in the three months ending March 31, 2022 and an additional 2,000,000 in April 2022 for a total of 7,800,000 RSUs distributed. Of the 800,000 RSUs remaining to be distributed, 200,000 RSUs are vested with 600,000 RSUs remain unvested.

BOARD APPOINTMENTS

On April 27, 2002, the Company appointed three (3) new members to the Board of Directors of the Company:

Sabrina Yang, age 42, joined the Company’s Board of Directors (the “Board”) and will serve as a member of the Audit Committee. Sabrina is a seasoned finance executive with over 17 years of experience in accounting, financial planning and analysis (“FP&A”), M&A advisory, and corporate finance. Since 2021, Sabrina has served as CFO of Final Bell Holdings, Inc. (“Final Bell”), an industry leader in providing end-to-end product development and supply chain solutions to leading cannabis brands in the United States and Canada. During her tenure at Final Bell, she led the reverse take-over transaction process, establishing a path for Final Bell to become a publicly traded company on the Canadian Stock Exchange. In conjunction with the reverse takeover, she also integrated and managed all of Final Bell’s administrative functions, including accounting, finance, legal, HR and IT operations.

Prior to joining Final Bell, since 2018, Sabrina has served as CFO, on a part-time basis, of Apollo Program, a data-driven advertising technology company, where she ran all administrative and operating functions. She also served as deputy CFO for a private school with operations in both the United States and China. She has held prior roles in strategy, analytics and FP&A, at the Topps Company and Undertone, a digital advertising company. Sabrina started her career with five years at KPMG LLP in its transaction services team, in which she advised clients on strategy, corporate finance, valuation and financial modeling. Ms. Yang is a Certified Public Accountant with Masters of Science in Accounting and Applied Statistics from Louisiana State University.

John Belniak, age 45, joined the Board and will serve on the Company’s Audit Committee. Mr. Belniak’s background brings to the Board extensive financial, operational and transactional experience across a range of investment banking, private equity, niche consumer businesses and large corporate businesses. Since April 2020, John has served as Managing Director of Hagerty Garage + Social overseeing the indemnification, development and operation of Hagerty’s collector enthusiast center. From July 2008 to 2020, he was a founder and partner of Propel Equity Partners (and its predecessor firm) focused on identifying niche, branded consumer products for acquisition, recapitalization or strategic partnership. Mr. Belniak serves on the Board of Directors of NEMO Equipment since 2006 and Veto Pro Pac since 2012. Mr. Belniak obtained his B.A. in English from Hamilton College.

-36-

Wendy Parker, age 56, joined the Board as an independent director. Since 2002, Ms. Parker has been a member of Gatehouse Chambers’ Commercial, Property and Insurance Groups in London, England and undertakes most areas of work within those fields. She has developed a strong practice both as an adviser and advocate and has experience of appearing in the specialist commercial and property forums as well as Tribunals and the Court of Appeal.

Ms. Parker has been involved in many technically complex cases. She has a strong academic background which she combines with a practical and common sense approach in order to assist clients in achieving their objectives. Ms. Parker is a member of the United Kingdom Chancery Bar Association and the COMBAR (the Specialist Bar Association for Commercial Barristers advising the international business community).

INCREASE OF AUTHORIZED SHARES

On April 21, 2022 (as amended on April 25, 2022), Troika Media Group Inc. (the “Corporation”) filed a Certificate of Amendment (the “Amendment”) to its Articles of Incorporation to reflect an increase in the number of authorized shares of all classes of stock which the Corporation shall have the authority to issue from 315,000,000 shares to 825,000,000 shares, such shares being designated as follows: (i) 800,000,000 shares of common stock, par value of $.001 per share of the Corporation; and (ii) 25,000,000 shares of preferred stock, par value $0.01 per share.

RESIGNATION OF DANIEL PAPPALARDO

On April 15, 2022, Daniel Pappalardo, President of Troika Design Group and a member of the Troika Media Group, Inc.’s (the “Company”) Board of Directors, resigned for personal reasons. He had maintained those positions since the Company’s June 13, 2017 merger with Troika Design Group, which he founded some twenty-one (21) years ago. His departure follows the Company’s recent acquisition of Converge Direct. The Company will fulfill the remainder of Mr. Pappalardo’s employment agreement dated June 9, 2017, which was set to expire on June 17, 2022. Pursuant to his employment agreement, the Company will pay Mr. Pappalardo a severance payment equal to one (1) year of his current base salary of $347,288 in semi-annual installments unless he chooses to continue to be paid bi-monthly. All other terms of his contract will be honored.

LA BREA LEASE SETTLEMENT

On May 3, 2022, the Company entered into a settlement agreement with the landlord of the Company’s former Los Angeles offices. The Landlord has accepted a full and final settlement of $660,577 which is substantially less than the Company had accrued. The terms provide that the Company will pay a lump sum of $312,000. The remaining amount of $348,577 to be paid in monthly installments of $29,048, commencing with on June 1, 2022, and ending on May 1, 2023. 

APPOINTMENT OF SID TOAMA

On May 19, 2022, Sid Toama was appointed as the Company’s Chief Executive Officer upon the resignation of Robert Machinist.  Sid Toama will hold both positions of Chief Executive Officer and President as well as serve on the Board of Directors.  Robert Machinist will remain the Company’s Chairman of the Board.  

-37-

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 “Form 10-K”). 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.  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. On March 22, 2022, we completed the acquisition of Converge Direct, LLC and affiliates, a leading independent performance marketing and managed services business providing to customer acquisition services utilizing a broad range of engagement channels in the digital, offline and emerging media sectors. 

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.

-38-

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 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.  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. 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 experienced a decrease in our cash flow from operations as a result of the impact of COVID-19, we 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 believed it had 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 used 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 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. 

See, Risk Factors Related to the COVID-19 Virus and Pandemic Response in General

RESULTS OF OPERATIONS

For the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

Our revenues for the three months ended March 31, 2022 and 2021 were $15,685,000 and $3,854,000 respectively, an increase of approximately $11,831,000 or 307.0%. This increase is overwhelming attributable to the acquisition of Converge Direct LLC and affiliates on March 22, 2022 who recognized a total of $10,053,000 in revenue.  The other $1,778,000 increase in revenue is the result of the generation of new business at the US subsidiary of Mission-Media Holdings Limited ($1,172,000) and Troika Design ($325,000). 

The costs of revenue exclusive of operating expenses for the three months ended March 31, 2022 and 2021 were $11,738,000 and $1,941,000 respectively, an increase of $9,797,000, or 504.7%.  This increase is also attributable to the acquisition of Converge Direct LLC and affiliates who recognized a total of $9,232,000 in costs of revenue.  The remaining $565,000 increase in costs of revenue is due to the US subsidiary of Mission-Media Holdings Limited which experienced an increase of $496,000 in costs of revenue directly correlated to servicing the aforementioned increase in revenue for the period.  The gross profit margin for the three months ended March 31, 2022 and 2021 decreased to 25.2% from 49.6% as a result of the acquisition of Converge Direct LLC and affiliates which, as anticipated, recognized a gross profit margin of 8.2%.  Excluding Converge Direct LLC and affiliates, the gross profit margin increased slightly to 55.5% from 49.6% from the prior period.

-39-

The operating costs for the three months ended March 31, 2022 and 2021 were $17,612,000 and $7,523,000 respectively, an increase of $10,089,000 or 134.1%. The driver of this increase was the recognition of $8,110,000 in stock-based compensation related to the vested share of restricted stock units issued as incentive compensation to executive officers, directors and employees not recognized in the prior period.   Additional drivers of this increase was an increase of $2,441,000 in professional fees and an increase of $204,000 in office expenses.

The Company recognized a $201,000 gain in derivative liabilities resulting from the change in value of warrants liabilities associated with the debt and equity financing related to the Converge acquisition in the three months ending March 31, 2022.  The Company also incurred $827,000 in business acquisition costs associated with the purchase of Converge in the three months ending March 31, 2022.  The Company recognized a $831,000 reduction in gains from the extinguishment of stimulus loans in other expenses in the three months ending March 31, 2022 in relation to the three months ending March 31, 2021.   The loans were awarded as a result of the pandemic and the funds were recognized in the prior period as expensed.

As a result of the foregoing, our net loss for the three months ended March 31, 2022 increased to $14,388,000 from $4,679,000 for the three months ended March 31, 2021.

For the nine months ended March 31, 2022 compared to the three months ended March 31, 2021.

Our revenues for the nine months ended March 31, 2022 and 2021 were $31,028,000 and $12,437,000, respectively, an increase of approximately $18,591,000 or 149.5%.  This increase is attributable to the acquisition of Converge Direct LLC and affiliates on March 22, 2022 who recognized a total of $10,053,000 in revenue.  The other $8,538,000 increase in revenue is the result of the generation of new business at Troika Design of $4,516,000 as well as the UK and US subsidiaries of Mission-Media Holdings Limited which recognized increases of $2,051,000 and $1,826,000, respectively.

The costs of revenue exclusive of operating expenses for the nine months ended March 31, 2022 and 2021 were $20,158,000 and $6,360,000, respectively, an increase of $13,798,000, or 216.9%.  This increase is also attributable to the acquisition of Converge Direct LLC and affiliates who recognized a total of $9,232,000 in costs of revenue.  This increase is also correlated to the aforementioned increases in revenue at Troika Design and the UK and US subsidiaries of Mission-Media Holdings Limited as these costs relate to the staging and production of the additional revenue being generated.  The gross profit margin for the nine months ended March 31, 2022 and 2021 decreased to 35.0% from 48.9% as a result of the acquisition of Converge Direct LLC and affiliates which, as anticipated, recognized a gross profit margin of 8.2%.  Excluding Converge Direct LLC and affiliates, the gross profit margin decreased slightly to 47.9% from 48.9% from the prior period.

The operating costs for the nine months ended March 31, 2022 and 2021 were $32,110,000 and $17,852,000, respectively, an increase of $14,258,000, or 79.9%.  The primary driver of this increase was an increase of $8,369,000 in stock-based compensation consisting of $2,416,000 in deferred compensation relating to the Troika IO (aka Redeeem) acquisition in May 2021 and an additional $5,953,000 relating to the vesting of restricted stock units, warrants and options awarded as incentive compensation to executive officers, directors and employees.  Also contributing to the increase in operating costs is increases in salary costs at Troika Labs ($465,000), Troika IO ($421,000) and the UK subsidiary of Mission-Media Holdings Limited ($549,000).  An additional driver of the increase in operating costs was an increase of $2,171,000 in professional fees.

The Company recognized a $213,000 gain in derivative liabilities primarily resulting from the change in value of warrants liabilities associated with the debt and equity financing related to the Converge acquisition in the nine months ending March 31, 2022.  The Company also incurred $827,000 in business acquisition costs associated with the purchase of Converge in the nine months ending March 31, 2022.  The Company recognized a $2,273,000 reduction in gains from the extinguishment of stimulus loans in the nine months ending March 31, 2022 in relation to the nine months ending March 31, 2021.   The loans were awarded as a result of the pandemic and the funds were recognized in the prior period as expensed.

-40-

As a result of the foregoing, our net loss for the nine months ended March 31, 2022 increased to $20,637,000 from $9,223,000 for the nine months ended March 31, 2021.

LIQUIDITY & CAPITAL RESOURCES

As of March 31, 2022 compared with June 30, 2021:

As of March 31, 2022, the Company has a working capital surplus of $7,850,000 compared with a deficit of $(4,004,000) at June 30, 2021. The increase in working capital was primarily the result of a $50,000,000 private investment in public entity exclusive of costs relating to the Converge acquisition during the nine months ended March 31, 2022 of which approximately $15,000,000 was retained for working capital.  Another increase in working capital was the acquisition of Converge Direct LLC which had an approximate $3,279,000 capital surplus at the date of acquisition and $3,969,000 capital surplus on March 31, 2022.

As of March 31, 2022 compared with March 31, 2021:

Net cash used in operating activities was $2,608,000 for the nine months ended March 31, 2021 and net cash provided by operating activities was $358,000 for the nine months ended March 31, 2022 which is a difference of $2,966,000. The difference was the result of an increase of $8,110,000 in stock-based compensation relating to the issuance of restricted stock units, $10,704,000 increase contract liabilities, and $1,507,000 increase in accounts payable and accrued expenses.  This was offset by a reduction of $7,567,000 in accounts receivable and an increase in $11,414,000 in net loss for the period.

Net cash used in investing activities increased by $82,942,000 primarily as a result of the acquisition of Converge Direct ($82,730,000) in the nine months ended March 31, 2022.

Net cash provided by financing activities increased by $110,201,000 from $2,758,000 to $112,959,000 for the nine months ended March 31, 2021 and 2022, respectively. The increase was the result of a $69,718,000 increase in net proceeds from obtaining a bank loan and a $44,405,000 increase in proceeds from the issuance of preferred stock net of offering costs.   Both transactions related to the acquisition of Converge Direct, LLC and affiliates in the nine months ending March 31, 2022.

As a result of the forgoing, the Company had an increase in cash of $30,330,000 for the nine months ended March 31, 2022 in comparison to a decrease in cash of $280,000 for the nine months ended March 31, 2021.

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

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

We recognize that Adjusted EBITDA calculated off Net Loss has 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;

-41-

∙	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

Non-GAAP Financial Measures

	Three Months Ended March 31,
	2022			2021
Non-GAAP Measures (Un-Audited)	Un-Audited			Un-Audited
NET LOSS	$	(14,388,000	)	$	(4,679,000	)
Related Acquisition & Related Professional costs		2,658,000			-
Non-cash expenses (depreciation, amortization)		429,000			574,000
Interest expenses		100,000			-
Bad Debt Expense - One Time		85,000			-
Stock-based compensation non-cash expense		9,901,000			2,698,000
Legal Settlement One Time		59,000			47,000
Adjusted EBITDA	$	(1,156,000	)	$	(1,360,000	)

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.

-42-

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 March 31, 2022. They have concluded that, as of March 31, 2022, 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 March 31, 2022 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.

-43-

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 EF Hutton (f/k/a 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 Registration Statements through March 31, 2022, the amount of net proceeds were used for: the acquisition of Redeeem LLC ($1,380,000; repayment of indebtedness (approximately $5,329,780), working capital (approximately $4,500,000) 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 $1,153,780 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.  Diligence and other prepayment costs related to the Converge acquisition of (approximately $2.3MM).  As of March 31, 2022, the net proceeds of the offering had been expended.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosure

Not Applicable.

Item 5. Other Information

None.

-44-

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.

-45-

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: May 23, 2022	Name:	Christopher Broderick
	Title:	Chief Financial Officer
		(Principal Financial Officer)

-46-