UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-K
(Mark
One)
For
the fiscal year ended June 30, 2024
or
For
the transition period from _______ to _______
Commission
file number 001-40556
THE
GLIMPSE GROUP, INC.
(Exact
name of registrant as specified in its charter)
(Address of principal executive offices) (Zip Code)
Registrant’s
telephone number, including area code: (917)292-2685
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class Ticker symbol Name of each exchange on which registered
Common Stock, $0.001 par value per share VRAR The Nasdaq Stock Market LLC
Securities
registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
☐
Yes ☒ No
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
☒
Yes ☐ No
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
☒
Yes ☐ No
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☒
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No
As December 29, 2023, the aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates
of the registrant was $16,034,185 based on the closing sale price as reported on the Nasdaq Capital Market of $1.13 per share.
As
of September 27, 2024, 18,166,217shares of the registrant’s common stock were issued and
outstanding.
TABLE
OF CONTENTS
THE
GLIMPSE GROUP, INC.
ANNUAL
REPORT ON FORM 10-K
FOR
THE YEAR ENDED JUNE 30, 2024
Page
PART I 4
Item 1. Business 4
Item 1A. Risk Factors 10
Item 1B. Unresolved Staff Comments 24
Item 1C. Cybersecurity 24
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 38
Item 8. Financial Statements and Supplementary Data 38
Item 9A. Controls and Procedures 39
Item 9B. Other Information 39
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 39
PART III 40
Item 10. Directors, Executive Officers and Corporate Governance 40
Item 11. Executive Compensation 45
Item 14. Principal Accountant Fees and Services 51
Item 15. Exhibits and Financial Statement Schedules 52
Signatures 54
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This
Annual Report on Form 10-K (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 (the “Securities
Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). It is important for
an investor to understand that these statements involve risks and uncertainties, some of which are beyond our control. 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 sometimes use words such as “anticipate,” “believe,” “continue,” “could,”
“estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,”
“project,” “seek,” “should,” “think,” “will,” “would,” or the
negative of these words or other similar or comparable terms and phrases, including references to assumptions, in this Report to identify
forward-looking statements, although not all forward-looking statements contain these words. 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, uncertainties and other factors also include those listed in the section titled “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. 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 Report, the terms the “Company,” “Glimpse Group,” “Glimpse,” “we,” “us,”
“ours,” and similar terms refer to The Glimpse Group, Inc.
PART
I
ITEM
1. BUSINESS
History
The
Glimpse Group, Inc. was incorporated in June 2016 under the laws of the State of Nevada, and is headquartered in New York, New York.
Company
Overview
The
Glimpse Group, Inc. (“Glimpse”, the “Company”) is an Immersive technology company, providing enterprise focused
Virtual Reality (VR), Augmented Reality (AR) and Spatial Computing software and services. Glimpse’s operating entities are located
primarily in the United States, with a development and modeling center in Turkey. 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
ecosystem of Immersive technology entities, collaborative environment and diversified business model aims to simplify the challenges
faced by companies in the emerging Immersive technology industry, create scale, build operational efficiencies, reduce time to market
and enhance go-to-market synergies, while simultaneously providing investors an opportunity to invest directly via a diversified infrastructure.
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 ecosystem create important competitive advantages.
We 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,
Corporate Events and Presentations and Social VR support groups and therapy. We focus primarily on the business-to-business (“B2B”)
and business-to-business-to-consumer (“B2B2C”) segments industry and we are hardware agnostic.
In
fiscal year 2024, we shifted our businesses focus to providing immersive technology solutions software and services that are primarily
driven by Spatial Computing, Cloud and Artificial Intelligence (“AI”), which we refer to as “Spatial Core”. While
this transition is still ongoing, we believe that Spatial Core is a key differentiator, growth driver and competitive advantage for us.
The
Glimpse Ecosystem
We
develop, commercialize and market innovative and proprietary Immersive technology software products, solutions and intellectual property
(“IP”). Our ecosystem is comprised of several entities, each targeting different industry segments in a non-competitive,
collaborative manner. Our experienced management and dynamic Immersive technology entrepreneurs and employees have deep domain expertise,
providing the foundation for value-add-collaborations throughout our ecosystem.
Each
of our ecosystem entities 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
the Company. We believe that our collaborative ecosystem 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 single entity,
technology or industry segment.
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. All employees, no matter
which entity they are allocated to, are Glimpse employees.
Additionally,
aligned economic incentives encourage cross-company collaboration. Substantially all of our employees own equity in our Company. The
leadership team of each entity, in addition to their initial equity ownership in Glimpse, may also have an economic interest that typically
takes form of either: (i) a 5-10% economic interest in the total net sale proceeds of the entity upon a divestiture event or (ii) additional
Glimpse equity issuances based on revenue milestones achieved by the entity over a period of several years (typically three years). We
believe that this ownership mechanism is a strong driver of cross-pollination of ideas and fosters collaboration. While each entity owns
its own IP, our parent company currently owns 100% of each entity.
Organizational
Chart:
Glimpse
Ecosystem Entities
2. Sector 5 Digital, LLC (“S5D”): Corporate immersive experiences and events.
3. Glimpse Learning, LLC: Immersive education, training and upskilling.
Key
Business Developments During Fiscal Year 2024
Securities
Purchase Agreement (“SPA”)
On
September 28, 2023, the Company entered into a SPA with certain institutional investors to sell 1,885,715 shares of common stock for
approximately $3.30 million (at $1.75 per share). The Company received the subscription receivable on October 3, 2023 which resulted
in net proceeds (after placement agent fees, professional fees and listing expenses) of $2.98 million.
The
SPA shares were issued on October 3, 2023. Simultaneously, the exercise price on warrants to purchase 750,000 shares of common stock
originally issued pursuant to a SPA entered into in November 2021 were repriced from $14.63 per share to $1.75 per share.
Nasdaq
Listing Qualification Notice
On
September 3, 2024, the Company received a notification letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC
(“Nasdaq”) notifying the Company that, because the closing bid price for the Company’s common stock listed on Nasdaq
was below $1.00 for the prior 30 consecutive business days, the Company no longer meets the minimum bid price requirement for continued
listing on the Nasdaq Capital Market. In accordance with Nasdaq Marketplace rules, the Company has a period of 180 calendar days from
September 3, 2024, or until March 3, 2025, to regain compliance with the Minimum Bid Price Requirement. If at any time before March 3,
2025, the bid price of the Company’s common stock closes at or above $1.00 per share for a minimum of 10 consecutive business days,
Nasdaq will provide written notification that the Company has achieved compliance with the Minimum Bid Price Requirement.
The
Company’s receipt of the notification letter has no immediate effect on the listing of the Company’s shares, which will continue
to trade uninterrupted on Nasdaq under the ticker “VRAR”. In addition, it does not affect the Company’s business, operations
or reporting requirements with the Securities and Exchange Commission. In order to regain compliance with the Minimum Bid Price Requirements,
the Company and its Board of Directors are reviewing various potential measures. The Company is not considering a reverse stock split
at this time.
See
8-K filed on September 9, 2024 for additional information.
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. Spatial Computing are
the computer processes and tools used to capture, process to blend 3D data into real physical space, often by utilizing VR and AR HMDs.
While distinct, VR, AR and Spatial Computing are related, utilize some similar underlying technologies and are expected to become increasingly
interconnected - combined they are often referred to as Immersive technology.
Immersive
technologies 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 AI, cloud computing, computer
vision, big data, and blockchain. 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 (formerly, Facebook), Apple, Microsoft, Google, ByteDance (Pico), Samsung, Sony, HTC 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
Meta 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 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. Advances in AI technologies are expanding the Immersive technology space, enabling capabilities in massive
data computing, digital twin creation, complex simulations, life like and intelligent interfaces and experiences and more.
Business
Development and Sales
Each
of our entities has its own business development and sales team to better focus on specific industry segments, with input and coordination
from Glimpse’s management team.
Our
management takes an active role in the business development activities of each entity 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 entity’s general
manager is very familiar with the product offerings of the other entities and leverages those into his or her own efforts when appropriate.
On
occasion, we enter into distribution partnerships for our products with third parties.
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 (formerly, 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.
We
also believe that while the core computing is done on the headset, the size of the headset will remain relatively large/heavy and the
level of applications limited. Therefore, in order to reach mass adoption, it is imperative in our view that the core computing move
from the headset to the cloud and then transmitted back to the headset via 5G/broadband, allowing for a smaller/lighter form factor of
the headset and more impactful applications. As part of our strategic shift to Spatial Core, Glimpse is focuses on providing the middleware
enabling this transition.
Immersive
Technology Software (“Software”):
In
contrast to Hardware, Software is highly fragmented with hundreds of Software companies targeting different segments and solutions. Many
are consumer oriented, whereas we are entirely enterprise focused (B2B and B2B2C). We believe that the 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 Immersive technology Software segment. We believe that
we have the potential to become a leader in the this software space, led by our Spatial Core offerings.
As
previously described, we believe that our structure, ecosystem and integrated capabilities create significant competitive advantages,
not available to other Software companies in the Immersive technology space and significantly improving our ability to succeed in an
emerging space.
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 Software, such
as, 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 our customers). 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.
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 ecosystem both companies and technologies,
subject to the availability of capital and 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.
Strategic
Divestitures
Each
one of our entities has the potential to be divested or spun off. Although our intent is to grow and develop the ecosystem, each of our
entities targets a specific industry vertical (e.g., Healthcare, Education, Corporate Training, Military, etc.) and as such has a distinct
set of potential acquirers or investors. If an entity is divested and the proceeds are substantive, then our intent is to distribute
the majority of the net proceeds to our stockholder base, if such distribution would not jeopardize our growth and operations. We have,
and may continue, to divest entities due to lower than expected performance or a shift in our strategic focus.
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 we conduct business.
As
of the date of the filing of this Report, and as summarized in the table below, we have been issued 10 patents by the United States Patent
and Trademark Office (“USPTO”) and have an additional 5 filed patent applications in process.
Issued
Patents
Name Entity Filing Date*Patent # US Patent #
SIMULATED REALITY ADAPTIVE USER SPACE Foretell Studios, LLC 7/27/2020 16/939,504
*
Each of the patents listed above expires 20 years from its filing date.
Filed
Patents
Name Entity Filing Date US Patent #
We
may continue to file for patents regarding various aspects of our products, services and technologies in the future 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 United States. 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 three 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, 2024, one customer accounted for approximately 23% of our revenues and another for approximately 15% of our revenues.
No other customer accounted for more than 10% of our revenues for the year ended June 30, 2024. 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.
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. A customer that may account
for a higher concentration of revenue in one period may not account for any revenue in subsequent periods. 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 days’ written notice (depending on the size and complexity
of the contract). In such an event, the customer would owe us 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 uncommon that a signed contract is canceled.
Human
Capital
At
June 30, 2024, we had 112 full time employees, primarily software developers, engineers and 3D artists. Of these, 56 are based in the
United States and 56 are based in Turkey.
Corporate
Information
Our
website is www.theglimpsegroup.com. Information contained on, or accessible through our website, is not and shall not be deemed
to be part of, or incorporated or deemed incorporated by reference into, this Report, and should not be relied upon by prospective investors
for the purposes of determining whether to invest in us or our securities. We have included our website address in this Report solely
as an inactive textual reference.
ITEM
1A. RISK FACTORS
Investing
in us involves a high degree of risk. You should carefully consider the following risks and uncertainties, together with all other information
in this Report, including our consolidated financial statements and related notes and the “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” section, before investing in us. Any of the risks and uncertainties we describe
below could adversely affect our business, financial condition, results of operations, prospects or the trading price of our securities.
The risks described below are not the only ones we face and additional risks that we currently do not know about or that we currently
believe to be immaterial may also impair our business, financial condition, operating results, prospects and the trading price of our
securities.
Risks
Related to Our Business
We
are an early stage technology company.
We
were incorporated in June 2016 and are an early stage technology development company, comprised of a wholly-owned group of early stage
entities in Immersive technology 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.
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 also doubt about our ability to continue as a going concern.
We
have incurred significant net losses since inception. For the fiscal years ended June 30, 2024 and 2023, we incurred a net loss of $6.39
million and $28.6 million, respectively. As of June 30, 2024, we had an accumulated deficit of $63 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. While the Company’s cash flow has improved in recent months, we may continue to generate
negative cash flow for the foreseeable future. While the Company intends to generate positive cash flow in the coming 12 months, its
cash and cash equivalents as of June 30, 2024 may not be sufficient to fund operations for at least the next twelve months from the date
of issuance of these consolidated financial statements. We will need to generate significant additional revenue to achieve and sustain
profitability, and we cannot assure that we will be able to do so.
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 our 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 continue in order to maintain and expand 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 a reasonable cost and at the required times, or at all. Further
equity financings may have a dilutive effect on stockholders 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.
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
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 revenues.
For
the fiscal years ended June 30, 2024 and 2023, our five largest customers accounted for approximately 53% and 59% 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.
Our
future growth depends on our ability to attract and retain customers, and the loss of existing customers, or failure to attract new ones,
could adversely impact our business and future prospects.
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. 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.
We
anticipate our products and technologies will require ongoing research and development 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
research and development (“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 raise capital in an offering of our common stock, preferred stock or securities convertible into our common stock,
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 underlying entities’ management, which presents certain risks that may cause
the operating results of individual entities to vary.
We
believe that our practice of placing significant decision making powers with each of our entities’ 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 an entity’s and our overall business strategy. Inconsistent implementation of corporate strategy and policies
at the entity level could materially and adversely affect our financial position, results of operations and cash flows and prospects.
The
operating results of an underlying entity may differ from those of another entity 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 entities may experience higher or lower levels of profitability and growth than other entities.
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 entities. As a consequence, it is
possible that one or more of our entities will not receive adequate capital or management resources. If an entity 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.
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.
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 may require 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
changes, introductions of new functionality, human or software errors, capacity constraints due to an overwhelming number of customers
accessing our platforms simultaneously, denial of service attacks or other security-related incidents.
It
may become increasingly difficult to maintain and improve our performance, especially during peak usage times and as our customer base
grows and our platforms becomes more complex. If our platforms are unavailable or if our customers are unable to access our platforms
within a reasonable amount of time or at all, we may experience a loss of customers, lost or delayed market acceptance of our platforms,
delays in payment to us by customers, injury to our reputation and brand, legal claims against us, significant cost of remedying these
problems and the diversion of our resources. In addition, to the extent that we do not effectively address capacity constraints, upgrade
our systems as needed and continually develop our technology and network architecture to accommodate actual and anticipated changes in