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Non-NDA Virzoom Business Description Q&A March 2017 “Within Five Years No One Will Be Able to Sell an Exercise Bike Withou

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Non-NDA Virzoom Business Description Q&A March 2017 “Within Five Years No One Will Be Able to Sell an Exercise Bike Withou Non-NDA VirZOOM Business Description Q&A March 2017 “Within five years no one will be able to sell an exercise bike without VR. The power of VR to motivate exercise is just too compelling. VR will quickly shift from a nice-to-have exercise bike feature to a requirement. Bikes without VR will be like clam shell mobile phones of yesterday compared to iOS and Android smartphones today. VirZOOM’s enabling exercise game content and controller technology is light years ahead of the others we’ve reviewed.” - May 2016 - Product Management Director for one of three publically traded fitness equipment companies engaged with VirZOOM Business Summary VirZOOM’s mission is to make the world a healthier place one virtual kilometer of fun at a time by harnessing the power of VR to motivate exercise with virtual reality exercise games. Starting in April 2015 VirZOOM created the world’s first Virtual Reality Exercise Game (VREG) platform comprised of game content, game controller, licensed controller technology, web services application, software development kit (SDK), and IP. Sales of first generation VirZOOM June 2016 product included 7 innovative experiences that combine game and exercise to give players a workout without realizing it. The development team has a proven history of making AAA gaming hits with novel controllers, and built VirZOOM games and hardware for VR from the ground up to motivate and excite. Unique technology that moves players comfortably though VR worlds is freely licensed to other developers for use with VirZOOM. Game content is distributed via the two largest online game stores Steam for PC and PlayStation Network (PSN) for PS4. To bring the VREG platform concept to market the company developed and incorporated proprietary controller sensors, Bluetooth circuits and firmware into an exercise bike based controller that the company sells as a VZ Controller product direct from its website and via retailers including Amazon.com, BestBuy.com, Target.com, and ABT. The VirZOOM platform has since 2016 been available for the three major PC and console-based VR systems including Sony PlayStation VR (PSVR), HTC Vive, and Oculus Rift. In Q2 2017 company plans to ship its first commercial VREG content for major mobile VR platforms Google Daydream, Samsung S8, and Snapdragon VR. The company entered the VR fitness market in 2016 via the narrow audience of consumers who are hardcore gamers, gaming PC and gaming consoles users, and early adopters of expensive (approximately $700 - $2,000) tethered VR systems. The total combined VirZOOM and tethered VR system cost ranges from approximately $1,100 to $2,400. The company intends to expand its VR fitness market reach via the broad consumer audience of mobile devices users in 2017 with a second generation product by making its mature VREG platform content and technology available for inexpensive (approximately $50 - $300) mobile VR systems. The company plans to ship in 2017 a low cost VZ Sensor that can attach to the majority of stationary exercise bikes in use and in production to provide an entry level VirZOOM system for mobile. The total VirZOOM plus mobile VR entry-level system cost is expected to range from approximately $150 to $400. Exit opportunities for VirZOOM range from acquisition by one of its fitness equipment partners to digital health partners to major game studios engaged in VR game content creation to sports industry players to an IPO. Q: How do you measure your success at achieving your mission? A: One of our measures is aggregate product use data. As of March 19, 2017 the numbers are: Total calories burned by all VirZOOM users: 1,224,213 in 102,612 plays Total virtual kilometers (vKm) covered by all VirZOOM users: 90,811 Q: Today VirZOOM sells a VR exercise bike and VR exercise games. Is VirZOOM primarily a virtual reality exercise bike company or a virtual reality game studio? A: VirZOOM employs a game development team that is regarded as AAA meaning the team has developed AAA titles in the past. The majority of the company’s spending is on content creation. In addition the company has developed its own hardware product with a single full time engineering team member and several consultants. From a spending standpoint the company has been primarily a game development business and will continue to create the highest value 1st party content to lead the market in VREG development. Third party developers are supplying and will increasingly supply VREG platform content using the VZ SDK. With respect to hardware, the company intends to license its exercise bike controller technology to fitness equipment companies and is in discussions with several to do so. At maturity VirZOOM is neither a virtual reality exercise bike company nor a virtual reality game studio but rather a Virtual Reality Exercise Game (VREG) platform. Q: The VR exercise bike then is not your main product? A: To bring the VREG concept to market the company developed and incorporated proprietary VREG controller sensors, Bluetooth circuits and firmware into an exercise bike based VREG controller that the company today sells as the VZ Controller. This allowed the company to develop and identify several kinds of VREGs since July 2015 that appeal to a range of VR fitness consumer audiences for the platform, among them: Arcade (classic arcade-style games), Track & Trail (self, group, and team based timed races), and Tour & Exploration (non-competitive, non-goal based long distance touring and exploration experiences). The company is discovering other audiences as well through partnership opportunities that frequently come our way such as with major hotel chains asking for branded VirZOOM experiences and health institutions asking for head injury, seasonal depression, and other health treatment solutions. Q: Define the two concepts "Virtual Reality Exercise Game" and "Virtual Reality Exercise Game Platform" starting with the former. What is a VREG? A: A VREG is any VR content that is engaged by anyone on a pedal-based VR game controller to cause the user to move and get exercise. Our AAA development team has created six VREGs so far. These are packaged in a single suite of VREGs – mini-games in video game parlance – called VZ Arcade. VZ Arcade is a collection of continuously improving titles unified by my.virzoom services including leaderboards. The team has also developed a Track & Trail style VREG called Cycle and a level called Le Tour within it. Q: Does VirZOOM hold a patent on VREGs? A: VirZOOM filed a "Virtual Reality Exercise Games" provisional patent February 2015 and a patent application February 2016 with several provisional add-on filings since. The application covers any system comprised of a device with pedals including stationary bikes and regular bikes on trainers along with any number of steering inputs to cause the user’s motion to move an avatar in the virtual world with reduced locomotion discomfort. Includes: 1) the way we interpret steering input, in combination with direction you are looking, to either induce turning or strafing (turning only happens when your head is also turned to keep your visuals in sync with inner ear), 2) the way we move your avatar to prompt you to turn your head to go around curves, 3) includes the way we simulate feeling of hills going up and down, 4) the way we soften virtual landings, 5) the way we keep your virtual body vertical to experience gravity correctly even as your virtual avatar is rotated non-vertically, and 6) how we convert leaning, as measured by head position sensing, into a steering input. Q: What makes VREGs different from other VR games? A: VREGs are designed to motivate interval exercise. We will explain by example. Cycle (Le Tour) is a VREG for cycle competition in VR that can be played only with a valid VirZOOM VREG controller. You can compete with multiple AI players, other real players either in real time or asynchronously, or against yourself. You sprint and rest, sprint and rest between gates in a coached gate race with multiple challenges. The experience is modeled on riding a bike in a race in the real world. Advantages over real- world bike riding are that you are safely off the street in the comfort of a dry, temperature controlled, and well lit indoor environment. If played while wearing headphones the experience on the VZ Controller is virtually silent, allowing you can play at any time without disturbing others. Q: Do all VirZOOM VREGs imitate in VR such real-world exercise activities as riding a bike? A: While literal games are easier for consumers to conceptualize to sell we believe that consumers will prefer VREGs that are not literal but fantastical activities that cannot be carried out in the real world. These fantastical VREGs extend and amplify the player rather than imitate real world experience. For example, one of our VREGS has you flying a Pegasus through a canyon by pedaling. As you fly you collect apples from the treetops for points. Another VZ Arcade VREG is an online multiplayer Tank (Winterstan) battle game. You pedal a tank in battle. The sensation of powering a vehicle that weighs 40 tons in the real world is empowering. Regardless of the type of VREG the effect and benefit is the same. The player is so engaged in virtual activity that they do not notice that they are exercising. The more fantastical and imaginative the VREG the better this concept works. Q: The point of VirZOOM is to motivate the consumer to exercise without the consumer realizing that they are getting exercise? A: Yes. We harness the power of VR to cause our customers to react to our VREGS by pedaling and leaning.
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