Item 1A. Risk Factors 12
Item 1B. Unresolved Staff Comments 25
Item 2. Properties 25
Item 3. Legal Proceedings 25
Item 4. Mine Safety Disclosures 25
Item 6. [Reserved] 27
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 39
Item 8. Financial Statements and Supplementary Data 39
Item 9A. Controls and Procedures 40
Item 9B. Other Information 40
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 40
PART III 41
Item 10. Directors, Executive Officers and Corporate Governance 41
Item 11. Executive Compensation 47
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”): QReal, LLC (dba QReal), Immersive Health Group, LLC (dba IHG), Foretell Studios, LLC (dba Foretell Reality),
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 Brightline Interactive, LLC (“BLI”) and a legal entity in Israel.
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.
COMPANY
OVERVIEW
We
are an Immersive technology (Virtual Reality (“VR”), Augmented Reality (“AR”), Spatial Computing, Artificial
Intelligence (“AI”)) platform company, comprised of a diversified group of wholly-owned and operated Immersive technology
companies, providing enterprise-focused software, services and solutions. We believe that we offer significant exposure to the rapidly
growing and potentially transformative Immersive technology markets, while mitigating downside risk via our diversified model and ecosystem.
Our
platform of Immersive technology subsidiary companies, collaborative environment and diversified business model aims to simplify the
challenges faced by companies in the emerging Immersive technology industry, potentially improving each subsidiary company’s ability
to succeed, while simultaneously providing investors an opportunity to invest directly via a diversified infrastructure.
By
leveraging our platform, we strive to cultivate and manage the business operations of our Immersive technology 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
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, Government & Defense, Branding/Marketing/Advertising, Retail, Financial Services, Food & Hospitality, Media
& Entertainment, Architecture/Engineering/Construction (“AEC”), Corporate Events and Presentations, Beauty and Cosmetics,
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 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 Immersive technology 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
Immersive technology 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 Immersive technology companies, (2) diversification
and (3) profitable growth.
(1)
Our ecosystem of Immersive technology 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 Immersive technology 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 initial equity ownership in Glimpse, may also have an economic interest
that 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.
We
currently own and operate numerous subsidiary companies (“Subsidiary Companies”, “Subsidiaries”) operating under
the following business names as represented in the organizational chart below:
Active
Glimpse Subsidiary Companies
6. Sector 5 Digital, LLC (S5D): Corporate immersive experiences and events
Key
Business Developments During Fiscal Year 2023
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.
The
aggregate consideration to the members of BLI per the Agreement consisted of: (a) $568,046 cash paid (net of working capital adjustments,
as defined, of $505,787) at the August 1, 2022 closing (the “Closing”); (b) $1,926,167 of cash paid at the Closing to extinguish
BLI’s outstanding debt and pay down other obligations; (c) 714,286 shares of the Company’s common stock fair valued at the
Closing; and (d) future purchase price considerations payable to the members of BLI, up to a residual of $24,500,000. The $24,500,000
is based and payable on BLI’s achievement of certain revenue growth milestones at points in time and cumulatively during the three
years post-Closing Date, the payment of which shall be made up to $12,000,000 in cash and the remainder in common shares of the Company,
priced at the dates of the future potential share issuance subject to a common stock price floor of $7.00 per share.
The
fair value allocation for the purchase price consideration paid at Closing was recorded as follows:
Purchase price consideration:
Cash paid to members at Closing $ 2,494,213
Company common stock fair value at Closing 2,846,144
Fair value of contingent consideration to be achieved 7,325,000
Fair value allocation of purchase price:
Cash and cash equivalents $ 15,560
Deferred costs/contract assets 552,625
Accounts payable and accrued expenses (848,079 )
Deferred revenue/contract liabilities (2,037,070 )
Intangible assets - customer relationships 3,310,000
Intangible assets - technology 880,000
Total fair value allocation of purchase price $ 12,665,357
For
more details please refer to Note 4 of the Company’s enclosed Financial Statements.
The
Immersive Technology 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 Immersive technologies and solutions have
the potential to fundamentally transform how people and businesses interact, further enabling remote work, education and commerce. Immersive
technologies are also expected to increasingly interconnect with other emerging technologies such as artificial intelligence, spatial
computing, 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, ByteDance (Pico),
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, such as the recently announced Apple Vision Pro, 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.
Bain
& Company, Citibank and Goldman Sachs research have recently estimated the potential market size of commercial Immersive technology
in excess of $1 trillion by 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 Immersive technology needs and an expert in this emerging 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 Immersive technology industry are focused on two primary segments: VR/AR Hardware (headsets) and
Software.
Immersive
Technology 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 Immersive technology 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, ByteDance (Pico), HTC, HP, Lenovo,
Sony and Epson) and some much smaller (for example: Magic Leap, XREAL, 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 Immersive technology
solutions.
Immersive
Technology Software (“Software”):
In
contrast to Immersive Technology Hardware, Software is highly fragmented with hundreds of Immersive Technology Software companies targeting
different segments and solutions. Many are consumer oriented, whereas we are entirely enterprise focused (B2B, B2B2C). We believe that
the Immersive Technology 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, 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 Immersive technology space. By owning and operating
a diverse set of Immersive technology 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 Immersive Technology and could
be viewed as potential competitors. In addition, several of the larger technology players provide general infrastructure Immersive Technology
Software. In particular: ARCore from Google and ARKit from Apple, which enable AR functionality on smartphones and tablets; and Unity
and Unreal from Epic, 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 Immersive Technology 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 may continue to add to our platform both companies, technologies and other
appropriate targets, subject to the availability of capital, at attractive deal terms. 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. We currently have multiple locations in the US, offices in several locations in Turkey and an international
presence in the UK 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 (e.g., 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 5 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:
Audio Processing In a Virtual Environment Adept Reality 06-22-2022
AI Controlled Non-Human Conversation Flow in VR Foretell Reality 06-12-2023
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
Immersive technology 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 Immersive technology space and prior experience.
Economic
Dependence
For
the year ended June 30, 2023, one customer accounted for approximately 26% of our revenues and another for approximately 21% of our revenues.
No other customer accounted for more than 10% of our revenues for the year ended June 30, 2023. One of these same customers and a different
customer accounted for approximately 40% and 14% of revenues, respectively, for the year ended June 30, 2022. For the fiscal year ended
June 30, 2022, 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 Immersive technology solutions and acting as early
adopters of these 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 additions of S5D and 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 a lease in Ashburn, Virginia for the operations of Brightline
Digital.
We
also lease four offices in Turkey, for the operations of Glimpse Turkey and PulpoAR.
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.
Human
Capital
At
June 30, 2023, we had 186 full time employees, primarily software developers, engineers and 3D artists. Of these, 86 are based in the
US and 100 internationally 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 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 had generally lengthened and some
customers delayed purchase decisions.
Our
business and operations could be adversely affected by health epidemics, including reemergence of the COVID-19 pandemic, impacting
the markets and communities in which we, our partners and customers operate. The COVID-19 pandemic caused significant business and
financial markets disruption worldwide and, if there is a reemergence of it or other epidemics they could cause disruptions on both
a nationwide and global level, as well as the ongoing effects on our business.
For
example, as a result of the COVID-19 pandemic, we saw the length of our sale cycles generally increase and some of our customers delayed
purchase decisions. A decline in revenue or the collectability of our receivables 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. There is doubt about our ability to continue as a going concern.
Since
inception, we have incurred significant net losses. As of June 30, 2023 and June 30, 2022, we had an accumulated deficit of
approximately $56.6 million and $28.1 million respectively. The net loss for the fiscal year ended June 30, 2023 was approximately
$28.6 million and fiscal year ended June 30, 2022 was approximately $6.0 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. We expect to continue to incur significant expenses and potential operating losses for the foreseeable future.
We believe that the cash and cash equivalents balance of $5.6 million at June 30, 2023 may not be sufficient to
fund our operating expenses and capital requirements for one year after the date this filing is made. 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 creates an uncertainty about the Company’s ability to continue as a
going concern. If we cannot continue as a going concern, our stockholders would likely lose most or all of their investment in us.
We
may not be successful in raising additional capital necessary to meet expected funding 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 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
Immersive technology 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 Immersive technology markets are increasingly competitive. A number of companies developing Immersive technology 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 2023 revenues.
For
the years ended June 30, 2023 and 2022, our five largest customers, accounted for approximately 59% and 66% 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
make it difficult to coordinate procedures across our operations and presents certain risks, including the risk that we may be slower
or less effective in our attempts to identify or react to problems affecting an important business issue, or that we would be slower
to identify a misalignment between a subsidiary’s and our overall business strategy. Inconsistent implementation of corporate strategy
and policies at the subsidiary level could materially and adversely affect our financial position, results of operations and cash flows
and prospects.
The
operating results of an individual subsidiary may differ from those of another subsidiary for a variety of reasons, including market
size, customer base, competitive landscape, regulatory requirements and economic conditions affecting a particular industry vertical.
As a result, certain of our subsidiaries may experience higher or lower levels of profitability and growth than other subsidiaries.
The
failure to attract, hire, retain and motivate key personnel could have a significant adverse impact on our operations.
Our
success depends on the retention and maintenance of key personnel, including members of senior management and our technical, sales and
marketing teams. Achieving this objective may be difficult due to many factors, including competition for such highly skilled personnel;
fluctuations in global economic and industry conditions; changes in our management or leadership; competitors’ hiring practices;
and the effectiveness of our compensation programs. The loss of any of these key persons could have a material adverse effect on our
business, financial condition or results of operations. Competition for qualified employees is particularly intense in the technology
industry. Our failure to attract and to retain the necessary qualified personnel could seriously harm our operating results and financial
condition. Competition for such personnel can be intense, and no assurance can be provided that we will be able to attract or retain
highly qualified technical and managerial personnel in the future, which may have a material adverse effect on our future growth and
profitability.
Our
financial results may fluctuate substantially for many reasons, and past results should not be relied on as indications of future performance.
Our
revenues and operating results may fluctuate from quarter to quarter and from year to year due to a combination of factors, including,
but not limited to:
● market acceptance of our products and services;
● the length and variability of the sales cycles for our products;
● timing of product development and new product initiatives;
● changes in customer mix;
● increases in the cost of, or limitations on, the availability of materials;
● changes in product mix; and
Further,
the markets that we serve are volatile and subject to market shifts that we may be unable to anticipate. A slowdown in the demand for
AR or VR products and services can have a significant adverse effect on the demand for our products and services in any given period.
Our customers may cancel or delay purchase orders for a variety of reasons, including, but not limited to, the rescheduling of new product
introductions, changes in our customers’ inventory practices or forecasted demand, general economic conditions affecting our customers’
markets, changes in our pricing or the pricing of our competitors, new product announcements by us or others, quality or reliability
problems related to our products, or selection of competitive products as alternate sources of supply.
Thus,
there can be no assurance that we will be able to reach profitability on a quarterly or annual basis. We believe that our revenue and
operating results will continue to fluctuate, and that period-to-period comparisons are not necessarily indications of future performance.
Our revenue and operating results may fail to meet the expectations of public market analysts or investors, which could have a material
adverse effect on the price of our common stock. In addition, portions of our expenses are fixed and difficult to reduce if our revenues
do not meet our expectations. These fixed expenses magnify the adverse effect of any revenue shortfall.
Our
plans for implementing our business strategy and achieving profitability are based upon the experience, judgment and assumptions of our
key management personnel, and available information concerning the communications and technology industries. If management’s assumptions
prove to be incorrect, it could have a material adverse effect on our business, financial condition or results of operations.
Our
centralized management will have significant discretion over directing our resources and if management does not allocate resources effectively,
our business, financial condition or result of operations could be harmed.
Our
centralized management has significant discretion over directing our resources to any and all of our subsidiary companies. As a consequence,
it is possible that one or more of our subsidiary companies will not receive adequate capital or management resources. If a subsidiary
company does not receive adequate capital or resources, it may not be able to commercialize its products and services, or if its products
and services are already commercialized, it may not be able to keep such products and services competitive. Therefore, if we don’t
allocate resources effectively, our business, financial condition or result of operations could be harmed.
Competitive
pricing pressure may reduce our gross profits and adversely affect our financial results.
If
we are unable to maintain our pricing due to competitive pressures or other factors, our margins will be reduced and our gross profits,
business, results of operations, and financial condition would be adversely affected. The subscription prices for our software platforms,
cloud modules, and professional services may decline for a variety of reasons, including competitive pricing pressures, discounts, anticipation
of the introduction of new solutions by our competitors, or promotional programs offered by us or our competitors. Competition continues
to increase in the market segments in which we operate, and we expect competition to further increase in the future.
Our
future growth depends on our ability to attract, retain customers, and the loss of existing customers, or failure to attract new ones,
could adversely impact our business and future prospects.
Once
the platform is further developed, the size of our community of customers on our platforms is critical to our success. Our ability to
achieve profitability in the future will depend, in large part, on our ability to add new customers, while retaining and even expanding
offerings to existing customers. Our customers can generally decide to cease using our solutions at any time. While we have experienced
customer growth, this growth may not continue at the same pace in the future or at all. In addition, it is possible that a recurrence
of COVID-19 or a like kind pandemic occurrence may have a deleterious effect on our customer growth in the future. Achieving growth in
our customer base may require us to engage in increasingly sophisticated and costly sales and marketing efforts that may not result in
additional customers. We may also need to modify our pricing model to attract and retain such customers. If we fail to attract new customers
or fail to maintain or expand existing relationships in a cost-effective manner, our business and future prospects may be materially
and adversely impacted.
The
continued operation of our business depends on the performance and reliability of the Internet, mobile networks, and other infrastructure
that is not under our control.
Our
business depends on the performance and reliability of the Internet, mobile networks, and other infrastructure that is not under our
control. Disruptions in such infrastructure, including as the result of power outages, telecommunications delay or failure, security
breach, or computer virus, as well as failure by telecommunications network operators to provide us with the bandwidth we need to provide
our products and offerings, could cause delays or interruptions to our products, offerings, and platforms. Any of these events could
damage our reputation, resulting in fewer users actively using our platforms, disrupt our operations, and subject us to liability, which
could adversely affect our business, financial condition, and operating results.
If
we do not make our platforms, including new versions or technology advancements, easier to use or properly train customers on how to
use our platforms, our ability to broaden the appeal of our products and services and to increase our revenue could suffer.
In
order to get full use of our platforms, users generally need training. We provide a variety of training and support services to our customers,
and we believe we will need to continue to maintain and enhance the breadth and effectiveness of our training and support services as
the scope and complexity of our platforms increase. If we do not provide effective training and support resources for our customers on
how to efficiently and effectively use our platforms, our ability to grow our business will suffer, and our business and results of operations
may be adversely affected. Additionally, when we announce or release new versions of our platforms or advancements in our technology,
we could fail to sufficiently explain or train our customers on how to use such new versions or advancements or we may announce or release
such versions prematurely. These failures on our part may lead to our customers being confused about use of our products or expected
technology releases, and our ability to grow our business, results of operations, brand and reputation may be adversely affected.
Interruptions,
performance problems or defects associated with our platforms may adversely affect our business, financial condition and results of operations.
Our
reputation and ability to attract and retain customers and grow our business depends in part on our ability to operate our platforms
at high levels of reliability, scalability and performance, including the ability of our existing and potential customers to access our
platforms at any time and within an acceptable amount of time. Interruptions in the performance of our platforms, whether due to system
failures, computer viruses or physical or electronic break-ins, could affect the availability of our platforms. We have experienced,
and may in the future experience, disruptions, outages and other performance problems due to a variety of factors, including infrastructure