Item 1A. Risk Factors 13
Item 1B. Unresolved Staff Comments 26
Item 2. Properties 26
Item 3. Legal Proceedings 26
Item 4. Mine Safety Disclosures 26
Item 6. [Reserved] 28
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 39
Item 8. Financial Statements and Supplementary Data 39
Item 9A. Controls and Procedures 39
Item 9B. Other Information 40
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 40
PART III 40
Item 10. Directors, Executive Officers and Corporate Governance 40
Item 11. Executive Compensation 46
Item 14. Principal Accountant Fees and Services 52
Item 15. Exhibits and Financial Statement Schedules 53
Signatures 57
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This
report includes statements of our expectations, intentions, plans, and beliefs that constitute “forward-looking statements”
within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Nonetheless, it is important for an investor to understand that these statements involve risks and uncertainties. These statements
relate to the discussion of our business strategies and our expectations concerning future operations, margins, profitability, liquidity,
and capital resources and to analyses and other information that are based on forecasts of future results and estimates of amounts not
yet determinable. We have used words such as “may,” “will,” “should,” “expect,” “intend,”
“plan,” “anticipate,” “believe,” “think,” “estimate,” “seek,”
“expect,” “predict,” “could,” “project,” “potential,” and other similar terms
and phrases, including references to assumptions, in this report to identify forward-looking statements. These forward-looking statements
are made based on expectations and beliefs concerning future events affecting us and are subject to uncertainties, risks and factors
relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control,
that could cause our actual results to differ materially from those matters expressed or implied by these forward-looking statements.
Such
risks and other factors also include those listed in Item 1A. “Risk Factors” and elsewhere in this report and our other filings
with the Securities and Exchange Commission (“SEC”). When considering these forward-looking statements, you should keep in
mind the cautionary statements in this report and the documents incorporated by reference. New risks and uncertainties arise from time
to time, and we cannot predict those events or how they may affect us. We assume no obligation to update any forward-looking statements
after the date of this report as a result of new information, future events or developments, except as required by applicable laws and
regulations.
When
used in this annual report, the terms the “Company,” “Glimpse Group,”, “Glimpse,” “we,”
“us,” “ours,” and similar terms refer to The Glimpse Group, Inc., a Nevada corporation, and its subsidiaries.
As
of the date of this annual report, we currently own and operate numerous wholly-owned subsidiary companies (“Subsidiary Companies”,
“Subsidiaries”): Adept Reality, LLC (dba Adept XR Learning), QReal, LLC, KreatAR, LLC (dba Post Reality), D6 VR, LLC, Immersive
Health Group, LLC (dba IHG), Foretell Studios, LLC (dba Foretell Reality), Number 9, LLC (dba Pagoni VR), Early Adopter, LLC, MotionZone,
LLC (dba AUGGD), Glimpse Group Yazilim ve ARGE Ticaret Anonim Sirketi (Glimpse Turkey), XR Terra, LLC, Sector 5 Digital, LLC (“S5D”),
PuploAR, LLC (a subsidiary company of QReal) and, as of August 1, 2022, Brightline Interactive, LLC (“BLI”). In addition,
we own one inactive subsidiary company, In-It VR, LLC (dba Mezmos), which may be reactivated based on need and market conditions and
a legal entity in Australia - Glimpse Group Australia Pty Ltd.
PART
I
ITEM
1. BUSINESS
History
The
Glimpse Group, Inc. was incorporated on June 15, 2016, under the laws of the State of Nevada and is headquartered in New York, New York.
On
July 6, 2021, the Company completed its initial public offering (“IPO”). In connection with the IPO, the Company’s
common stock began trading on the Nasdaq Capital Market on and as of July 1, 2021. In conjunction with its IPO, the Company sold approximately
1.91 million shares of its common stock at $7.00 per share, raising approximately $11.82 million in net proceeds after fees and expenses.
COMPANY
OVERVIEW
We
are a Virtual (“VR”) and Augmented (“AR”) Reality platform company, comprised of a diversified group of wholly-owned
and operated VR and AR companies, providing enterprise-focused software, services and solutions. We believe that we offer significant
exposure to the rapidly growing and potentially transformative VR, AR and immersive technology markets, while mitigating downside risk
via our diversified model and ecosystem.
Our
platform of VR/AR subsidiary companies, collaborative environment and diversified business model aims to simplify the challenges faced
by companies in the emerging VR/AR industry, potentially improving each subsidiary company’s ability to succeed, while simultaneously
providing investors an opportunity to invest directly into the emerging VR/AR industry via a diversified infrastructure.
By
leveraging our platform, we strive to cultivate and manage the business operations of our VR/AR subsidiary companies, with the goal of
allowing each underlying company to better focus on mission-critical endeavors, collaborate with the other subsidiary companies, reduce
time to market, optimize costs, improve product quality and leverage joint go-to-market strategies. Subject to operational, market and
financial developments and conditions, we intend to carefully add to our current portfolio of subsidiary companies via a combination
of organic expansion and/or outside acquisition.
The
VR/AR immersive technology industry is an early-stage technology industry with nascent markets. We believe that this industry has significant
growth potential across verticals, may be transformative and that our diversified platform and ecosystem create important competitive
advantages. Our subsidiary companies currently target a wide array of industry verticals, including but not limited to: Corporate Training,
Education, Healthcare, Branding/Marketing/Advertising, Retail, Financial Services, Food & Hospitality, Media & Entertainment,
Architecture/Engineering/Construction (“AEC”), Corporate Events and Presentations, Beauty and Cosmetics, Government &
Defense and Social VR support groups and therapy. We do not currently target direct-to-consumer (“B2C’) customers, we focus
primarily on the business-to-business (“B2B”) and business-to-business-to-consumer (“B2B2C”) segments. In addition,
we are hardware agnostic.
The
Glimpse Platform
We
develop, commercialize and market innovative and proprietary VR/AR immersive technology software products, solutions and intellectual
property (“IP”). Our platform is currently comprised of numerous active wholly-owned subsidiary companies, each targeting
different industry segments in a non-competitive, collaborative manner. Our experienced management and dynamic VR/AR entrepreneurs have
deep domain expertise, providing the foundation for value-add-collaborations throughout our ecosystem.
Each
of our subsidiary companies share operational, financial and IP infrastructure, facilitating shorter time-to-market, higher quality products,
reduced development costs, fewer redundancies, significant go-to-market synergies and, ultimately, a higher potential for success for
each subsidiary company. We believe that our collaborative platform is unique and necessary, especially given the early nature of the
VR/AR industry. By offering technologies and solutions in various industry segments, we aim to reduce dependency on any one single subsidiary
company, technology or industry segment.
We
believe that three core tenets enhance our probability of success: (1) our ecosystem of VR/AR companies, (2) diversification and (3)
profitable growth.
(1)
Our ecosystem of VR/AR software and service companies provides significant benefits to each subsidiary company and our group as a whole.
We believe that the most notable benefits are: (a) economies of scale, cost efficiencies and reduced redundancies; (b) cross company
collaboration, deep domain expertise, IP and knowledge transfer; (c) superior product offerings; (d) faster time to market; (e) enhanced
business development and sales synergies; and (f) multiple monetization paths. In an emerging industry that is lacking in infrastructure,
we believe that our ecosystem provides a distinct competitive advantage relative to a single, standalone company in the industry.
(2)
By design, we incorporate multiple aspects of diversity to reduce the risks associated with an early stage industry, create multiple
monetization venues and improve the probabilities of success. There is no single point of failure or dependency. This is created through:
(a) ownership of numerous wholly-owned subsidiary companies operating in different industry segments; (b) targeting large industries
with clear VR/AR use-cases; (c) developing and utilizing various technologies and IP; (d) expanding to different geographic technology
centers in a hub model under our umbrella; and (e) across industries, having a wide array of customers and potential acquirers/investors.
(3)
From our inception, we have balanced minimizing operational cash burn with capturing the growth opportunities in front of us. This remains
an important factor driving our strategy to: (a) focus on enterprise software and services, only onboarding companies that are generating
revenues or clearly could in the short term; (b) target solutions that are based on use cases that have a clear return on investment
(“ROI”) and can be effectively developed from existing technologies and hardware; and (c) centralize costs to reduce inefficiencies.
By striving to balance cash burn and growth, our goal is to lower dilution and support greater independence from capital markets, thereby
increasing resiliency and maximizing upside potential.
As
part of our platform, we provide a centralized corporate structure, which significantly reduces general and administrative costs (financial,
operational, legal & IP), streamlines capital allocation and helps in coordinating business strategies. This allows our subsidiary
company general managers to focus their time and effort almost exclusively on the core software, product and business development activities
relating to their subsidiary.
Additionally,
aligned economic incentives encourage cross-Company collaboration. Substantially all of our employees own equity in our Company. The
leadership team of each subsidiary company, in addition to their equity ownership in Glimpse, often also have an economic interest in
their particular subsidiary company. This economic interest is negotiated with lead management of a subsidiary company upon their joining
our Company, and typically takes form in either: i) a 5-10% economic interest in the total net sale proceeds of the subsidiary upon a
divestiture event or ii) additional Glimpse equity issuances based on revenue milestones achieved by the subsidiary company over a period
of several years (typically three years). Thus, there is benefit to them not only when their subsidiary company succeeds but also when
any of the other subsidiaries succeeds, and when Glimpse as a whole succeeds. We believe that this ownership mechanism is a strong driver
of cross-pollination of ideas and fosters collaboration. While each subsidiary company owns its own IP, our parent company currently
owns 100% of each subsidiary company. In addition, there will be perpetual licensing agreements between our subsidiary companies, so
that if a subsidiary company is divested, then the remaining subsidiaries, if utilizing the IP of a divested subsidiary company, will
continue to retain usage rights post-divestiture.
Active
Glimpse Subsidiary Companies
8. Early Adopter, LLC (EA): AR/VR solutions for K-12 education
12. Sector 5 Digital, LLC (S5D): Corporate immersive experiences and events
Key
Business Developments During Fiscal Year 2022
Initial
Public Offering (“IPO”)
On
July 1, 2021, the Company completed an IPO of common stock on the NASDAQ under the symbol “VRAR”, at a price of $7.00 per
share.
The
Company sold approximately 1.91 million shares of common stock and realized net proceeds (after underwriting, professional fees and listing
expenses) of $11.82 million.
In
connection with the IPO, the underwriter was issued a warrant to purchase 87,500 shares of common stock at $7.00 per share. The warrant
cannot be exercised prior to December 30, 2021, and expires in June 2026.
In
conjunction with the IPO, the outstanding convertible promissory notes (the “March 2021 Notes” and the “December 2019
Notes”) were converted and satisfied in full through issuance of 0.324 million shares of common stock. The Company has no other
convertible promissory notes outstanding after the IPO.
Securities
Purchase Agreement (“SPA”)
In
November 2021, the Company sold $15.0 million worth of its common stock and warrants to certain institutional investors in a private
placement pursuant to a SPA. The Company realized net proceeds (after underwriting, professional fees and listing expenses) of $13.58
million.
Under
the terms of the SPA, the Company sold 1.50 million shares of its common stock and warrants to purchase 0.75 million shares of common
stock. The purchase price for one share of common stock and half a corresponding warrant was $10.00. The warrants have an exercise price
of $14.63 per share. Warrants to purchase 0.56 million shares could be exercised immediately and expire in November 2026, and warrants
to purchase 0.19 million shares were not exercisable prior to May 2022 and expire in May 2027.
AUGGD
Asset Acquisition
In
August 2021, the Company, through its wholly owned subsidiary company, MotionZone, LLC (dba AUGGD), completed an acquisition of certain
assets, as defined, from Augmented Reality Investments Pty Ltd (“ARI”), an Australia based company providing augmented reality
software and services. AUGGD targets the Architecture, Engineering and Construction market segments.
In
conjunction with this acquisition, the Company established a new legal entity - “Glimpse Australia” - which may, in time,
become a fully operational subsidiary company focused on facilitating the potential introduction of our products and services to the
Australian markets and, in addition to AUGGD, potentially adding other Australian VR/AR companies to Glimpse Australia over time.
Initial
consideration for the asset purchase was $0.75 million payable in Company common stock. In August 2021, the Company issued 77,264 shares
of common stock to satisfy the purchase price. The acquisition agreement provides for additional contingent consideration in the form
of Company common stock if certain future revenue targets are achieved through June 2024, priced at the time of issuance and with a floor
issuance price of $7.00 per share. No liabilities were assumed as part of the acquisition and the primary assets acquired included employees,
customer relationships and technology.
In
June 2022, AUGGD achieved its initial Year 1 revenue milestone, and in July 2022 ARI was issued common shares of Company equating to
approximately $0.57 million.
XR
Terra Asset Acquisition
In
October 2021, the Company, through its wholly owned subsidiary company, XR Terra, LLC, completed an acquisition of certain assets from
XR Terra, Inc., a developer of teaching platforms utilized in coding software used in VR and AR programming.
Initial
consideration for the purchase was $0.60 million payable 50% in Company common stock and 50% in cash. In October 2021, the Company paid
$0.30 million cash and issued 33,877 shares of common stock to satisfy the purchase price. The acquisition agreement provides for additional
contingent consideration in the form of Company common stock if certain future revenue targets are achieved through September 2024, priced
at the time of issuance and with a floor issuance price of $7.00 per share. No liabilities were assumed as part of the acquisition and
the primary assets acquired included employees and technology.
Sector
5 Digital Acquisition
On
December 2, 2021, the Company entered into a Membership Interest Sale Agreement (the “Agreement”), with Sector 5 Digital
(S5D) and each of the equity holders of S5D named therein (collectively, the “Members”). S5D is an enterprise focused, immersive
technology company that combines innovative storytelling with emerging technologies for industry leading organizations.
On
February 1, 2022, the Company consummated the transaction and S5D became a wholly-owned subsidiary of the Company. The aggregate consideration
consisted of: (a) $4.0 million cash paid at the February 1, 2022 closing (the “Closing”); (b) 277,201 shares of the Company’s
common stock valued at the date of acquisition, valued at $4.0 million at the time the Agreement was entered and released from escrow
to the Members at Closing; and (c) future purchase price considerations (“contingent consideration”) payable to the Members,
up to a residual of $19.0 million ($2.0 million in cash which was escrowed at Closing). The $19.0 million is based and payable on S5D
and the Company’s achievement of certain revenue growth milestones during the three years post-Closing, the payment of which shall
be made up to $2.0 million in cash and the remainder in common stock of the Company, priced at the dates of the future potential share
issuance subject to a common stock price floor of $7.00/share.
S5D
had revenue for calendar year 2021 (prior to acquisition) of approximately $4 million.
PulpoAR
Asset Acquisition
In
May 2022, the Company, through its wholly owned subsidiary companies, QReal, LLC and PulpoAR, LLC, completed an acquisition of certain
assets, as defined, from PulpoAR Pulpoar Bilisim Anonim Sirketi, a Turkey based AR technology e-commerce company providing virtual try-on
solutions primarily for the Beauty and Retail markets.
Initial
consideration for the purchase was $2.0 million, payable 75% in shares of the Company’s common stock (subject to a common stock
floor price of $7.00/share) and 25% in cash. In May and June 2022, the Company collectively paid $0.50 million cash and will issue in
September 2022 214,286 shares of common stock to satisfy the purchase price. The asset acquisition agreement provides for additional
contingent consideration in the form of Company common stock and cash if certain future revenue targets are achieved through December
2024, priced at the time of issuance and with a floor issuance price of $7.00 per share. No liabilities were assumed as part of the acquisition
and the primary assets acquired included employees and technology.
Brightline
Interactive, LLC Acquisition
In
May 2022, the Company entered into an Agreement and Plan of Merger (the “BLI Agreement”) to purchase all of the membership
interests of Brightline Interactive, LLC (“BLI”), an immersive technology company that provides VR and AR based training
scenarios and simulations for commercial and government customers. The transaction’s total potential purchase price is $32.5 million,
with an initial payment of $8.0 million upon closing, consisting of $3.0 million in cash and approximately 0.71 million shares of the
Company’s common stock valued at $5.0 million at the time the Agreement was entered (and issued at Closing based on a common stock
floor price of $7.00/share). Future potential purchase price considerations, up to $24.5 million, are based on BLI’s achievement
of revenue growth milestones in the three years post-closing, the payment of which shall be made up to $12 million in cash and the remainder
in common shares of the Company, priced at the date of the future potential share issuance subject to a common stock price floor of $7.00/share.
In
August 2022, the BLI transaction closed and BLI became a wholly-owned subsidiary of the Company. $3 million in cash was paid and approximately
0.71 million shares of Company stock was issued to the sellers.
The
Company is currently determining its potential contingent liability for the purchase, as well as allocation of the purchase price amongst
the assets purchased, intangible assets, goodwill and liabilities assumed.
BLI
had revenue for calendar year 2021 of approximately $5 million.
The
VR and AR (XR) Markets
Virtual
Reality (VR) fully immerses the user in a digital environment via a head mounted display (“HMD”), where the user is blocked
out of their immediate physical environment. Augmented Reality (AR) is a less immersive experience, where the user views their immediate
physical environment with digital images overlaid, via a phone, tablet or a dedicated HMD such as smart glasses. While distinct, VR and
AR are related, utilize some similar underlying technologies and are expected to become increasingly interconnected - combined they are
often referred to as Immersive Technology (XR).
VR
and AR are emerging technologies, and the markets for them are still nascent. We believe that XR technologies and solutions have the
potential to fundamentally transform how people and businesses interact, further enabling remote work, education and commerce. XR is
also expected to increasingly interconnect with other emerging technologies such as artificial intelligence, computer vision, big data,
NFT and crypto currencies. Additionally, HMD and telecommunication (5G) advancements have been driving vast improvements in capabilities
and ease of use, while significantly reducing headset cost. As a result, market adoption has accelerated and is expected to continue.
Leading technology companies such as Meta/Facebook, Apple, Microsoft, Google, Samsung, Sony and HP have been at the forefront of VR/AR
hardware development and software infrastructure, while also increasing integration of their products with AR and VR capabilities.
Since
Facebook released its first VR headset as a consumer product in 2016 (after its $2B+ acquisition of Oculus), successive iterations of
it, as well as others, have become significantly lighter, more comfortable, lower priced, with higher resolution and increasingly wireless/mobile.
With a standalone mobile headset, users no longer need an expensive gaming computer to power the headset and they also do not have a
wire tethered to that computer restricting movement. These advances have facilitated easier corporate procurement and integration. The
accelerating rollout of 5G should enable further improvement in user experience since with 5G, remote processing and heavier, real time
applications become possible without noticeable visual lag, allowing for lighter, smaller, more comfortable HMDs with longer battery
life.
Based
on Artillery Intelligence’s market forecasts, the VR and AR markets are forecasted to grow by approximately 50% in 2022 to over
$25 billion and expected to exceed $35 billion by 2023. In particular, VR and AR enterprise software – the segment we are focused
on – is projected to grow by approximately 50% in 2022 to over $7 billion and expand to more than $10 billion in 2023.
Business
Development and Sales
We
utilize a hybrid approach to the sales and distribution of our software products and services.
At
our subsidiary company level, each company has its own business development and sales team, the size of which depends on its stage of
development. Each subsidiary company’s general manager is responsible for business development, and as the subsidiary gains market
traction, its business development and sales team are expanded as needed.
Our
subsidiary companies’ business development and sales teams are enhanced by the shared resources and influence of our ecosystem.
Our management takes an active role in the business development activities of each subsidiary company and in the overall development
and integration of sale strategies, goals and budgets. As an integral part of the business development and sales processes, each subsidiary
company’s general manager is very familiar with the product offerings of other subsidiary companies and leverages those into his
or her own efforts when appropriate. This leads to substantial cross marketing collaboration.
We
believe that a subsidiary company’s ability to demonstrate to potential customers scale as part of our ecosystem of companies,
combined with our subsidiary’s ability to offer its products and solutions as well as those of our other subsidiary companies in
an integrated manner, represents a key competitive advantage. We believe our customers often view us as a “one-stop-shop”
for all their VR/AR needs and an expert in the emerging VR/AR space.
We
and our subsidiary companies continue to develop a shared partner ecosystem to further scale business and expand our solutions into new
and existing target markets.
Competitive
Environment
We
believe that our competitors in the VR/AR industry are focused on two primary segments: VR/AR Hardware (headsets) and Software.
VR/AR
Hardware (Headsets) (“Hardware”):
We
do not develop any Hardware, and our software and service solutions are mostly compatible with any Hardware. We believe that Hardware
development, commercialization and distribution are highly capital intensive and there is not yet large enough scale or mass adoption
in the VR/AR industry to justify such expenditures for a smaller company. As such, there are relatively few participants on the Hardware
side, some very large (for example: Meta/Facebook, Microsoft, Samsung, Google, Apple, HTC, HP, Lenovo, Sony and Epson) and some much
smaller (for example: Magic Leap, Pico, Valve, Varjo and Vuzix). In general, Hardware cycles have been accelerating and performance improving,
with simplified usability and reduced end-user costs. The more advanced, easier to use and cheaper the Hardware becomes, the higher the
potential for the development of robust software applications and increased market adoption of VR/AR solutions.
VR/AR
Software (“Software”):
In
contrast to VR/AR Hardware, Software is highly fragmented with hundreds of VR/AR Software companies targeting different segments and
solutions. Many are consumer oriented, whereas we are entirely enterprise focused (B2B, B2B2C). We believe that the AR/VR Software segment
is currently far less competitive than traditional software markets, as most companies in the space tend to be early stage and often
underfunded.
While
competition is evolving and increasing, there is currently no dominant player in any particular VR/AR Software segment. We believe that
we have the potential to become a leader in the VR/AR Software space in general and that each of our subsidiary companies has the potential
to become a significant player in their particular industry sector.
As
previously described, we believe that our structure, ecosystem and integrated capabilities create significant competitive advantages
for each of our subsidiary companies, not available to other Software companies in the VR/AR space. By owning and operating a diverse
set of VR/AR companies, we believe that we significantly improve each of our subsidiary company’s ability to succeed by addressing
many of the challenges early stage companies face and expanding each’s opportunity set and capabilities.
We
believe that there are a select number of earlier stage companies of approximately our size that provide VR/AR Software and could be
viewed as potential competitors. In addition, several of the larger technology players provide general infrastructure VR/AR Software.
In particular: ARCore from Google and ARKit from Apple, which enable AR functionality on smartphones and tablets; and Unity and Epic
Unreal, which enable software languages used in VR and AR programing. We do not view these larger companies as competition, but rather
as complementary to our business (indeed, some of these are customers of ours). We believe infrastructure software benefits us, and the
industry at large, as they are not industry specific and enable companies like us to more effectively build industry specific solutions,
thereby saving significant costs and development efforts.
Platform
Expansion and Diversification Strategy
As
described above in “Competitive Environment,” the VR/AR software and services industries are highly fragmented. There are
numerous potential acquisition targets that, while having established a niche market position, product or technology, have limited resources
and ability to pursue growth initiatives. We intend to leverage our position and relative scale in the industry in order to continue
to add to our platform both earlier stage companies and technologies and, subject to the availability of capital and appropriate targets,
more mature companies. Beyond the expected financial impact of each such potential addition, these could also enhance our ecosystem,
technology, scale and competitive position. These potential acquisitions may be domestic or international. If there is sufficient scale
in a certain geographic location (beyond our current NYC headquarters), then a new hub may be established in such location, with several
subsidiary companies operating in that hub, under the overall Glimpse umbrella. We currently have multiple locations in the US, offices
in several locations in Turkey and an international presence in the UK, Australia and Israel.
Strategic
Divestitures
Each
one of our subsidiary companies has the potential to be divested or spun off. Although the purpose of our platform is to grow and develop
the ecosystem on which each of our subsidiaries can mature by benefitting from collaboration, each subsidiary company targets a specific
industry vertical (i.e. Healthcare, Education, Corporate Training, etc.) and as such has a distinct set of potential acquirers or investors.
If a subsidiary company is divested and the proceeds are substantive, then our intent is to distribute the majority of the net proceeds
to our shareholder base, if such distribution would not jeopardize our growth and operations.
Intellectual
Property
Our
intellectual property is an integral part of our business strategy and practice. In accordance with industry practice, we protect our
proprietary products, technology and competitive advantage through a combination of contractual provisions and trade secrets, patents,
copyright and trademark laws in the United States and other jurisdictions where business is conducted.
As
of the date of this disclosure and summarized in the table below, we have been issued 10 patents by the United States Patent and Trademark
Office (the “USPTO”) and have an additional 4 filed patent applications in process.
Title of Invention Subsidiary Initial Filing Date Issuance Date Patent Number
Interactive Mixed Reality System for a Real World Event
Filed Patents:
Presentation Interface and Immersion Platform Pagoni VR 04-30-2019
Simulated Reality Risks Mitigation System IHG 07-19-2019
Real-Time Visualization of Head Mounted Display User Reactions D6 04-06-2022
Audio Processing In a Virtual Environment Adept Reality 06-22-2022
We
may continue to file for patents regarding various aspects of our products, services and technologies at a later date depending on the
costs and timing associated with such filings. We may make investments to further strengthen our copyright protection going forward,
although no assurances can be given that we will be successful in such patent and trademark protection endeavors. We seek to limit disclosure
of our intellectual property by requiring employees, consultants, and partners with access to our proprietary information to execute
confidentiality agreements and non-competition agreements (when applicable) and by restricting access to our proprietary information.
Due to rapid technological change, we believe that establishing and maintaining an industry and technology advantage in factors such
as the expertise and technological and creative skills of our personnel, as well as new services and enhancements to our existing services,
are more important to our business and profitability than other available legal protections. Despite our efforts to protect our proprietary
rights, unauthorized parties may attempt to copy aspects of our services or to obtain and use information that we regard as proprietary.
The laws of many countries do not protect proprietary rights to the same extent as the laws of the U.S. Litigation may be necessary in
the future to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary
rights of others or to defend against claims of infringement. Any such litigation could result in substantial costs and diversion of
resources and could have a material adverse effect on our business, operating results and financial condition. There can be no assurance
that our means of protecting our proprietary rights will be adequate or that our competitors will not independently develop similar services
or products. Any failure by us to adequately protect our intellectual property could have a material adverse effect on our business,
operating results and financial condition. See “Risk Factors—Risks Related to our Business.”
Business
Cycles
Based
on our history and information available to date, we have not been able to identify any seasonality of cycles within our business. Since
VR/AR is an emerging industry, market and customer education are material and therefore the length of the typical sales cycle can be
between 3 and 18 months, depending on the size and complexity of the proposed solution and the customer’s level of understanding
of the VR/AR space and prior experience.
Economic
Dependence
For
the year ended June 30, 2022, one customer accounted for approximately 40% of our revenues and another for approximately 14% of our revenues.
These same customers accounted for approximately 26% and 0% of revenues, respectively, for the year ended June 30, 2021. No other customer
accounted for more than 10% of our revenues for the year ended June 30, 2022. A customer that did not account for material revenues in
the year ended June 30, 2022, accounted for 23% of our revenues for the fiscal year ended June 30, 2021. For the fiscal year ended June
30, 2021, no other customer accounted for 10% or more of our revenues.
We
operate in an early stage industry, and customers are exploring various options for AR and VR solutions and acting as early adopters
of VR and AR solutions. As such, there has been a high degree of variance on our source of revenues while customers are on-boarded and
our software product and solutions are integrated, measured and digested. A customer that may account for a higher concentration of revenue
in one period may not account for any revenue in subsequent periods.
With
the recent addition of S5D and subsequent addition of Brightline Interactive, we have significantly increased our scale and are approaching
a point with less variability in customer concentration and less dependency on any one customer in the aggregate. That being said, we
continue to have a handful of customers that comprise the majority of our revenues. A significant reduction in revenue from our larger
customers could have a material negative impact on our operations.
Typically,
customer contracts can be canceled at any time by the customer upon 30-90 day written notice (depending on the size and complexity of
the contract). In such an event, the customer would owe the Company unpaid amounts up until the point of cancelation. For most customers
we charge 25-50% of the contract value upfront and the amounts are usually not refundable, mitigating some of the contract cancellation
risk. While it does happen on occasion, it is rare that a signed contract is canceled.
Facilities
We
are based in New York, New York, with a lease through 2024.
We
have a lease in Fort Worth, Texas for the operations of S5D, and with the subsequent acquisition of Brightline Digital, we have a lease
in Ashburn, VA.
Our
current facilities are leased and adequate to meet our ongoing needs. If we require additional space or expand geographically, we may
seek additional facilities on commercially reasonable terms at such time.
We
also lease four offices in Turkey, for the operations of Glimpse Turkey and PulpoAR.
Human
Capital
We
currently have approximately 200 full time employees, primarily software developers, engineers and 3D artists. Of these, approximately
100 are based in the US and 100 internationally (primarily in Turkey).
Corporate
Information
Information
contained on our websites, including www.theglimpsegroup.com, shall not be deemed to be part of this filing or incorporated herein
by reference and should not be relied upon by prospective investors for the purposes of determining whether to invest in the Company.
ITEM
1A. RISK FACTORS
RISKS
RELATED TO OUR BUSINESS
The
Company is an early stage technology company
We
were incorporated on June 15, 2016 and are an early stage technology development company, comprised of a wholly-owned group of early
stage companies in the VR and AR space. As such, we are subject to the risks associated with being an early stage company operating in
an emerging industry, including, but not limited to, the risks set forth herein.
Health
epidemics, including the current COVID-19 pandemic, have had, and could in the future have, an adverse impact on our business, operations,
and the markets and communities in which we, our partners and customers operate. For example, sales cycles have generally lengthened
and some customers have delayed purchase decisions.
Our
business and operations could be adversely affected by health epidemics, including the current COVID-19 pandemic, impacting the markets
and communities in which we, our partners and customers operate. The COVID-19 pandemic has caused significant business and financial
markets disruption worldwide and there remains uncertainty around the duration of this disruption on both a nationwide and global level,
as well as the ongoing effects on our business.
The
full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition
will depend on future developments that are uncertain and unpredictable. As a result of the COVID-19 pandemic, we have seen the length
of our sale cycles generally increase and some of our customers have delayed purchase decisions. A decline in revenue or the collectability
of our receivables could harm our business.
We
continue to monitor the COVID-19 situation and the potential effects on our business and operations. While the spread and impact of
COVID-19 has stabilized, there is no guarantee that a future outbreak of this or any other widespread epidemics will not occur, or
that the global economy will recover, either of which could harm our business.
We
have incurred significant net losses since inception and anticipate that we will continue to incur net losses for the foreseeable future
and may never achieve or maintain profitability.
Since
inception, we have incurred significant net losses. As of June 30, 2022 and June 30, 2021, we had an accumulated deficit of approximately
$28 million and $22 million respectively. The net loss for the fiscal year ended June 30, 2022 was approximately $5.97 million and
fiscal year ended June 30, 2021 was approximately $6.09 million. To date, we have devoted our efforts towards securing financing, building
and evolving our technology platform and creating an infrastructure that allows for the growth of such technology platform. In the past,
the combination of operating losses, cash expected to be used to continue operating activities and uncertain conditions relating to additional
capital raises and continued revenue growth created an uncertainty about the Company’s ability to continue as a going concern.
Doubt about the Company’s ability to continue as a going concern was alleviated on our financial statements for the year ended
June 30, 2022 and for the year ended June 30, 2021. We expect to continue to incur significant expenses and potential operating losses
for the foreseeable future. While our cash balance is currently well above our annual net cash expenses, we do anticipate that our expenses
will increase if, and as, we continue to:
● build out our product pipeline;
● maintain, expand, protect and enforce our intellectual property portfolio.
To
become profitable, we must continue to grow our revenue base and control expenditures. This will require us to be successful in a range
of challenging activities, and our expenses will increase as we continue to develop and bring our current products, as well as new ones,
to market. We may never succeed in any or all of these activities and, even if we do, we may never generate revenue that is significant
or sufficient to achieve profitability. If we do achieve profitability, we may not be able to sustain or increase profitability on a
quarterly or annual basis. Our failure to become and remain profitable or to sufficiently fund our operations through financing activity
could potentially, again, create an uncertainty about the Company’s ability to continue as a going concern.
Based
on our recent financing activity we believe that our existing cash and cash equivalents will enable us to fund our operating expenses
and capital expenditure requirements for more than one year.
Based
on our financing activities in fiscal year 2022, which included our IPO and a private placement, and revenue growth during the fiscal
year, we believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements
for more than one year. Consequently, our financial statements have been prepared under the assumption that we will continue as a going
concern. However, we have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources
sooner than we expect. In the future, if we are unable to obtain sufficient funding to support our operations, we could be forced to
delay, reduce or eliminate some or all of our development and growth initiatives, and our financial condition and results of operations
will be materially and adversely affected and we may be unable to continue as a going concern. In the future, reports from our independent
registered public accounting firm may also contain statements expressing substantial doubt about our ability to continue as a going concern.
If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to
continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially
reasonable terms or at all.
We
may not be successful in raising additional capital necessary to meet expected increases in working capital needs. If we need additional
funding for operations and we are unable to raise it, we may not be able to continue our business operations.
We
expect our working capital needs to increase in the future as we continue to expand and enhance our operations. Our ability to raise
additional funds through equity or debt financings or other sources will depend on the financial success of our current business and
successful implementation of our key strategic initiatives, financial, economic and market conditions and other factors, some of which
are beyond our control. No assurance can be given that we will be successful in raising the required capital at reasonable cost and at
the required times, or at all. Further equity financings may have a dilutive effect on shareholders and any debt financing, if available,
may require restrictions to be placed on our future financing and operating activities. If we require additional capital and are unsuccessful
in raising that capital, we may not be able to continue our business operations and advance our growth initiatives, which could adversely
impact our business, financial condition and results of operations.
Our
market is competitive and dynamic. New competing products and services could be introduced at any time that could result in reduced profit
margins and loss of market share.
The
AR and VR industries are very dynamic, with new technology and services being introduced by a range of players, from larger established
companies to start-ups, on a frequent basis. Our competitors may announce new products, services, or enhancements that better meet the
needs of end-users or changing industry standards. Further, new competitors or alliances among competitors could emerge. Increased competition
may cause price reductions, reduced gross margins and loss of market share, any of which could have a material adverse effect on our
business, financial condition and results of operations.
Furthermore,
the worldwide AR and VR markets are increasingly competitive. A number of companies developing AR and VR products and services compete
for a limited number of customers. Some of our competitors in this market have substantially greater financial and other resources, larger
research and development staffs, and more experience and capabilities in developing, marketing and distributing products. Potential pricing
pressure could result in significant price erosion, reduced profit margins and loss of market share, any of which could have a material
adverse effect on our business, results of operations, financial position and liquidity.
Our
plans for growth will place significant demands upon our resources. If we are unsuccessful in achieving our plan for growth, our business
could be harmed.
We
are actively marketing our products domestically and internationally. The plan places significant demands upon managerial, financial,
and human resources. Our ability to manage future growth will depend in large part upon several factors, including our ability to rapidly:
Our
inability to achieve any of these objectives could harm our business, financial condition and results of operations.
We
have material customer concentration, with a limited number of customers accounting for a material portion of our 2022 revenues.
For
the years ended June 30, 2022 and 2021, our five largest customers, accounted for approximately 66% and 64% of our revenues, respectively.
There are inherent risks whenever a large percentage of total revenues are concentrated with a limited number of customers. It is not
possible for us to predict the future level of demand for our services that will be generated by these customers or the future demand
for the products and services of these customers in the end-user marketplace. In addition, revenues from these customers may fluctuate
from time to time based on the commencement and completion of projects, the timing of which may be affected by market conditions or other
facts, some of which may be outside of our control. Further, some of our contracts with these customers permit them to terminate our
services at any time (subject to notice and certain other provisions). If any of these customers experience declining or delayed sales
due to market, economic or competitive conditions, we could be pressured to reduce the prices we charge for our services or we could
lose a major customer. Any such development could have an adverse effect on our margins and financial position, and would negatively
affect our revenues and results of operations and/or trading price of our common stock.
We
anticipate our products and technologies will require ongoing research and development (“R&D”) and we may experience
technical problems or delays and may not have the funds necessary to continue their development, which could lead our business to fail.
Our
R&D efforts are subject to the risks typically associated with the development of new products and technologies based on emerging
and innovative technologies, including, for example, unexpected technical problems or the possible insufficiency of funds for completing
development of these products or technologies. If we experience technical problems or delays, further improvements in our products or
technologies and the introduction of future products or technologies could be delayed, and we could incur significant additional expenses
and our business may fail.
We
anticipate that we may require additional funds to increase or sustain our current levels of expenditure for the R&D of new products
and technologies, and to obtain and maintain patents and other intellectual property rights in these technologies, the timing and amount
of which are difficult to forecast. Any funds we need may not be available on commercially reasonable terms or at all. If we cannot obtain
the necessary additional capital when needed, we might be forced to reduce our R&D efforts which would materially and adversely affect
our business. If we attempt to raise capital in an offering of shares of our common stock, preferred stock, convertible securities or
warrants, our then-existing stockholders’ interests will be diluted.
Our
success depends on our ability to anticipate technological changes and develop new and enhanced products and services.
The
markets for our products and services are characterized by rapidly changing technology, evolving industry standards and increasingly
sophisticated customer requirements. The introduction of products embodying new technology and the emergence of new industry standards
can negatively impact the marketability of our existing products and can exert price pressures on existing products. It is critical to
our success that we are able to anticipate and react quickly to changes in technology or in industry standards and to successfully develop,
introduce, and achieve market acceptance of new, enhanced and competitive products and services on a timely basis and cost-effective
basis. We invest substantial resources towards continued innovation; however, there can be no assurance that we will successfully develop
new products and services or enhance and improve our existing products and services, that new products and services and enhanced and
improved existing products and services will achieve market acceptance or that the introduction of new products and services or enhanced
existing products and services by others will not negatively impact us. Our inability to develop products and services that are competitive
in technology and price and that meet end-user needs could have a material adverse effect on our business, financial condition or results
of operations.
Development
schedules for technology products and services are inherently uncertain. We may not meet our products and/or services development schedules,
and development costs could exceed budgeted amounts. Our business, results of operations, financial position and liquidity may be materially
and adversely affected if the products or product enhancements that we develop are delayed or not delivered due to developmental problems,
quality issues or component shortage problems, or if our products or product enhancements do not achieve market acceptance or are unreliable.
We or our competitors will continue to introduce products embodying new technologies. In addition, new industry standards may emerge.
Such events could render our existing products obsolete or not marketable, which would have a material adverse effect on our business,
results of operations, financial position and liquidity.
We
place significant decision making powers with our subsidiaries’ management, which presents certain risks that may cause the operating
results of individual subsidiaries to vary.
We
believe that our practice of placing significant decision making powers with each of our subsidiaries’ management is important
to our successful growth and allows us to be responsive to opportunities and to our customers’ needs. However, this practice could