Item 1A. Risk Factors 11
Item 1B. Unresolved Staff Comments 25
Item 1C. Cybersecurity 25
Item 2. Properties 26
Item 3. Legal Proceedings 26
Item 4. Mine Safety Disclosures 26
Item 6. [Reserved] 28
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 39
Item 8. Financial Statements and Supplementary Data 39
Item 9A. Controls and Procedures 39
Item 9B. Other Information 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 50
Item 15. Exhibits and Financial Statement Schedules 51
Signatures 53
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
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
We are an Immersive technology company, providing
enterprise focused Virtual Reality (VR), Augmented Reality (AR) and Spatial Computing software and services (Immersive technologies).
Glimpse’s operating entities are located in the United States. We believe that we offer significant exposure to the 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 with 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 creates 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, Media
& Entertainment, Corporate Events and Social VR support groups and therapy. We focus primarily on the business-to-business (“B2B”)
and business-to-business-to-consumer (“B2B2C”) segments, and we are hardware agnostic.
In
fiscal year 2024, we shifted our businesses (“Strategic Shift”) to focus on providing immersive technology solutions software
and services that are primarily driven by Spatial Computing, Cloud and Artificial Intelligence (“AI”), including our product
“Spatial Core,” led by our entity Brightline Interactive, LLC (“BLI”).
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. 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 intellectual property (“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, further driving cross-pollination of ideas and fostering collaboration. While each entity owns its own IP, our parent
company currently owns 100% of each entity.
Organizational
Chart:
Glimpse
Ecosystem Entities
4. Glimpse Lenses, LLC: life-like 3D modeling and Augment Reality lens creation.
Key
Business Developments During Fiscal Year 2025
Divestiture
As part of our strategic realignment around Spatial
Core and divestiture of non-core assets, on October 7, 2024, we announced that, we had entered into an agreement, effective on October
1, 2024, to divest the business of our then wholly owned subsidiary company QReal, LLC (“QReal”) and its related operating
entity, GLIMPSE GROUP YAZILIM VE ARGE TİCARET ANONİM ŞİRKET, in a management buyout by the then General Manager
of QReal (the “Divestiture”).
Pursuant
to the Divestiture, we retain the contract and resulting revenues from QReal’s largest customer in full until such time that we
have collected and retained $1.35 million net cash in the aggregate, after taking into account all related operating expenses and fees
(the “Milestone”). After satisfaction of the Milestone, we will receive a monthly cash revenue share for a period of 18 months
in relation to any revenues generated from this same customer. In connection with the Divestiture, we were also issued (i) a $1.56 million
senior secured convertible note in the new independent entity and (ii) a minority equity stake in the new independent entity. Principal
payback on the senior secured convertible note is tied directly to revenue collected by the new entity (separate from the Milestone).
Securities
Purchase Agreement
On December 23, 2024, we closed a registered direct
offering pursuant to a securities purchase agreement pursuant to which we sold to an institutional investor, 1,990,000 shares of our common
stock and pre-funded warrants to purchase up to 760,000 shares of our common stock.
The purchase price for each share of common stock was $2.65 per share and the purchase price for each pre-funded warrant was $2.649 (which
was equal to the purchase price per share of common stock, less $0.001).
The
pre-funded warrants had an exercise price of $0.001 per share of common stock, became immediately exercisable upon issuance, and were
fully exercised in January 2025.
We
realized net proceeds (after placement agent fees and other offering expenses) of $6.79 million from the offering.
At-The-Market
Offering
On July 11, 2025, we entered into a Sales Agreement with WestPark Capital, Inc., as sales agent, pursuant to which we may offer and sell,
from time to time through WestPark Capital, Inc., up to $3,081,340 of our common stock, by any method permitted by law and deemed to
be an “at the market offering” as defined in Rule 415(a)(4) under the Securities Act. We refer to the foregoing transaction
in this Report as the “ATM Facility.” No shares under the ATM Facility have been sold to date.
SpatialCore
Contract
On
August 13, 2025 we entered into a $2+ million SpatialCore contract to be delivered over a 12 month period.
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
and incorporating AI technologies. 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, 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 and
Meta Ray-Ban smart glasses, 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. These have not yet led to material revenues.
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, 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, we are focused 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 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” above, 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, the value of our equity
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. 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 13 filed patent applications in process.
Issued
Patents
Name Entity Filing Date* 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 (in process, Provisional and Non-Provisional)
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. Longer sales cycles often apply to DoD type customers, where product evaluation, contracting and budgeting can be
lengthy.
Economic
Dependence
For
the year ended June 30, 2025, two customers accounted for approximately 61% (40%, and 21%, respectively) of our total
gross revenues. No other customer accounted for more than 10% of our revenues for the year ended June 30, 2025. One of the same customers
and another customer accounted for approximately 38% (23% and 15%, respectively) of our total gross revenues during the
year ended June 30, 2024. No other customer accounted for more than 10% of our revenues for the year ended June 30, 2024.
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, 2025, we had approximately 40 full time employees, primarily software developers, engineers and 3D artists.
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 may continue to incur net losses for the foreseeable future and may never maintain
profitability.
We
have incurred significant net losses since inception. For the fiscal years ended June 30, 2025 and 2024, we incurred a net loss of approximately $2.6 million and approximately $6.4 million, respectively. As of June 30, 2025, we had an accumulated deficit of approximately $65.6
million. We continue to devote efforts towards building and evolving our technology platform and perusing growth opportunities. Our cash
flow has significantly improved in recent quarters and we expect our current cash balance to
be sufficient in funding operations for at least the next 12 months from the date of issuance of these consolidated financial statements.
However, we may continue to generate negative cash flow in future periods which may eventually require us to raise capital in order to
maintain our operations.
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, 2025 and 2024, our five largest customers accounted for approximately 76% and 53% 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
technology, our business, financial condition and results of operations, as well as our reputation, may be adversely affected.
Further,
the software technologies underlying our platforms are inherently complex and may contain material defects or errors, particularly when
new products are first introduced or when new features or capabilities are released. We have from time to time found defects or errors
in our platforms, and new defects or errors in our existing platforms or new products may be detected in the future by us or our users.
We cannot assure you that our existing platforms and new products will not contain defects. Any real or perceived errors, failures, vulnerabilities,
or bugs in our platforms could result in negative publicity or lead to data security, access, retention or other performance issues,
all of which could harm our business. The costs incurred in correcting such defects or errors may be substantial and could harm our business.
Moreover, the harm to our reputation and legal liability related to such defects or errors may be substantial and could significantly
harm our business.
If
we fail to timely release updates and new features to our platforms and adapt and respond effectively to rapidly changing technology,
evolving industry standards, changing regulations, or changing customer needs, requirements or preferences, our platforms may become
less competitive.
The
markets in which we compete are subject to rapid technological change, evolving industry standards, and changing regulations, as well
as changing customer needs, requirements and preferences. The success of our business will depend, in part, on our ability to adapt and
respond effectively to these changes on a timely basis. Accordingly, our ability to increase our revenue depends in large part on our
ability to maintain, improve and differentiate our existing platforms and introduce new functionality.
We
must continue to improve existing features and add new features and functionality to our platforms in order to retain our existing customers
and attract new ones. If the technology underlying our platforms become obsolete or do not address the needs of our customers, our business
would suffer.
Revenue
growth from our products depends on our ability to continue to develop and offer effective features and functionality for our customers
and to respond to frequently changing data protection regulations, policies and end-user demands and expectations, which will require
us to incur additional costs to implement. If we do not continue to improve our platforms with additional features and functionality
in a timely fashion, or if improvements to our platforms are not well received by customers, our revenue could be adversely affected.
If
we fail to deliver timely releases of our products that are ready for commercial use, release a new version, service, tool or update
with material errors, or are unable to enhance our platforms to keep pace with rapid technological and regulatory changes or respond
to new offerings by our competitors, or if new technologies emerge that are able to deliver competitive solutions at lower prices, more
efficiently, more conveniently or more securely than our solutions, or if new operating systems, gaming platforms or devices are developed
and we are unable to support our customers’ deployment of games and other applications onto those systems, platforms or devices,
our business, financial condition and results of operations could be adversely affected.
A
failure in our information technology systems could cause interruptions in our services, undermine the responsiveness of our services,
disrupt our business, damage our reputation and cause losses.
Our
information technology systems support all phases of our operations, including finance, marketing, customer development and the business
of customer support services. If our systems fail to perform, we could experience disruptions in operations, slower response time or
decreased customer satisfaction. System interruptions, errors or downtime can result from a variety of causes, including changes in customer
usage patterns, technological failures, changes to our systems, linkages with third-party systems and power failures. Our systems may
be vulnerable to disruptions from human error, execution errors, errors in models, employee misconduct, unauthorized trading, external
fraud, computer viruses, distributed denial of service attacks, computer viruses or cyberattacks, terrorist attacks, natural disaster,
power outage, capacity constraints, software flaws, events impacting key business partners and vendors, and similar events.
It
could take an extended period of time to restore full functionality to our technology or other operating systems in the event of an unforeseen
occurrence. Instances of fraud or other misconduct might also negatively impact our reputation and customer confidence in us, in addition
to any direct losses that might result from such instances. Despite our efforts to identify areas of risk, oversee operational areas
involving risks, and implement policies and procedures designed to manage these risks, there can be no assurance that we will not suffer
unexpected losses, reputational damage or regulatory actions due to technology or other operational failures or errors, including those
of our vendors or other third parties.
If
we fail to prevent security breaches, improper access to or disclosure of our data or user data, or other hacking and attacks, we may
lose users, and our business, reputation, financial condition and results of operations may be materially and adversely affected.
Our
business can include the hosting and/or transmission of proprietary information and sensitive or confidential data. In connection with
our services business, some of our employees also have access to its customers’ confidential data and other information, which
could be compromised, whether intentionally or unintentionally, by our employees, consultants or vendors.
We
have privacy and data security policies in place that are designed to prevent security breaches and we have employed significant resources
to develop our security measures against breaches. However, as technologies evolve, and the portfolio of the service providers with which
we share confidential information with grows, we could be exposed to increased risk of breaches in security and other illegal or fraudulent
acts, including cyberattacks. The evolving nature of such threats, in light of new and sophisticated methods used by criminals and cyberterrorists,
including computer viruses, malware, phishing, misrepresentation, social engineering and forgery, is making it increasingly challenging
to anticipate and adequately mitigate these risks.
We
may be subject to these types of attacks. If we are unable to avert these attacks and security breaches, we could be subject to significant
legal and financial liabilities, our reputation would be harmed and we could sustain substantial revenue loss from lost sales and customer
dissatisfaction. We may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyberattacks.
Cyberattacks may target us, our suppliers, customers or other participants, or the internet infrastructure on which we depend. Actual
or anticipated attacks and risks may cause us to incur significantly higher costs, including costs to deploy additional personnel and
network protection technologies, train employees, and engage third-party experts and consultants. While we do carry cybersecurity insurance,
we may not be able to mitigate such risks to any third party. Cybersecurity breaches would not only harm our reputation and business,
but also could materially decrease our revenue and net income.
A
compromise of the security of our information technology systems leading to theft or misuse of our own or our clients’ proprietary
or confidential information, or the public disclosure or use of such information by others, could result in losses, third-party claims
against us and reputational harm, including the loss of clients. The theft or compromise of our or our clients’ information could
negatively impact our reputation, financial results and prospects. In addition, if our reputation is damaged due to a data security breach,
our ability to attract new engagements and clients may be impaired or we may be subjected to damages or penalties, which could negatively
impact our businesses, financial results or financial condition.
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