UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act Of 1934 |
For
the quarterly period end
| Transition Report Under Section 13 or 15(d) of the Securities Exchange Act Of 1934 |
For the transition period from __________ to __________
Commission File Number: None
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices, including Zip Code)
(Issuer’s telephone number, including area code)
Check
whether the issuer (1) has filed all reports required to be filed by section 13 or 15(d) of the Exchange Act during the past 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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a small reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by checkmark 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 ☐
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | N/A | N/A |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: shares of common stock as of August 17, 2023.
EXPLANATORY NOTE
Except for the foregoing, this Amended Report speaks as of the filing date of the Original 10-Q and does not update or discuss any other developments after the date of the Original 10-Q. This Amended Report restates only those portions of the Original 10-Q affected by the above changes.
Virtual Interactive Technologies Corp.
Index
| 2 |
Virtual Interactive Technologies Corp.
Condensed Consolidated Balance Sheets
As of June 30, 2023 and September 30, 2022 (Restated)
(UNAUDITED)
June 30, 2023 | September 30, 2022 | |||||||
| (Restated) | (Restated) | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Royalties receivable | ||||||||
| Interest receivable | ||||||||
| Note receivable | ||||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Interest payable, related party | ||||||||
| Interest payable | ||||||||
| Notes payable, related party | ||||||||
| Notes payable | ||||||||
| Convertible notes payable, net of discounts | ||||||||
| Total current liabilities | ||||||||
| LONG-TERM LIABILITIES: | ||||||||
| Notes payable | ||||||||
| Interest payable | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Series A Preferred Stock, $ par value; authorized; shares issued and outstanding | ||||||||
| Series B Convertible Preferred Stock $ par value; authorized; shares issued and outstanding | ||||||||
| Common stock, $ par value; shares authorized, shares issued and shares outstanding at June 30, 2023, and shares issued and outstanding as of September 30, 2022 | ||||||||
| Additional paid-in-capital | ||||||||
| Treasury stock (
and
shares at June 30, 2023 and September 30, 2022, respectively, $ | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity (deficit) | ( | ) | ||||||
| Total liabilities and stockholders’ equity (deficit) | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
Virtual Interactive Technologies Corp.
Condensed Consolidated Statements of Operations
For the three and nine months ended June 30, 2023 and 2022 (Restated)
(UNAUDITED)
| For the three months ended, | For the nine months ended, | |||||||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| (Restated) | (Restated) | (Restated) | ||||||||||||||
| Revenue – royalties | $ | $ | $ | $ | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Marketing and advertising | ||||||||||||||||
| Research and development | ||||||||||||||||
| General, administrative and selling | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Income (loss) from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Other income | ||||||||||||||||
| Amortization of debt discount | ( | ) | ( | ) | ( | ) | ||||||||||
| Interest expense, related party | ( | ) | ( | ) | ( | ) | ||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss from foreign currency transactions | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Income (loss) per share - | ||||||||||||||||
| Basic and Diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average number of shares outstanding – | ||||||||||||||||
| Basic and Diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
Virtual Interactive Technologies Corp.
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
For the three and nine months ended June 30, 2023 and 2022 (Restated)
(UNAUDITED)
For the three months ended June 30, 2023 (Restated)
| Preferred Stock | Additional | Total | ||||||||||||||||||||||||||||||||||||||||||
| Series A | Series B Convertible | Common Stock |
Paid In | Treasury Stock | Accumulated | Stockholders’ | ||||||||||||||||||||||||||||||||||||||
| Shares | Par Value | Shares | Par Value | Shares | Par Value | Capital | Shares | Cost | Deficit | Deficit | ||||||||||||||||||||||||||||||||||
| Balance March 31,2023 (Restated) | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Stock issued for services | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Redemption of stock issued for prepaid services | - | - | ) | ( | ) | ( | ) | 650,000 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Redemption of warrants issued for prepaid services | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Options issued for services | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2023 (Restated) | $ | $ | $ | $ | $ | ( | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||
For the three months ended June 30, 2022
| Preferred Stock | Additional | Total | ||||||||||||||||||||||||||||||||||||||||||
| Series A | Series B Convertible | Common Stock | Paid In | Treasury Stock | Accumulated | Stockholders’ | ||||||||||||||||||||||||||||||||||||||
| Shares | Par Value | Shares | Par Value | Shares | Par Value | Capital | Shares | Cost | Deficit | Deficit | ||||||||||||||||||||||||||||||||||
| Balance March 31,2022 (Restated) | $ | $ | | $ | | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||
| Stock issued for commitment fee debt discount on note payable | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Stock issued for cash | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Conversion of preferred B stock to common stock | - | ( | ) | ( | ) | - | ||||||||||||||||||||||||||||||||||||||
| Stock issued for services | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2022 (Restated) | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| 5 |
For the nine months ended June 30, 2023 (Restated)
| Preferred Stock | Additional | Total | ||||||||||||||||||||||||||||||||||||||||||
| Series A | Series B Convertible | Common Stock | Paid-In | Treasury Stock | Accumulated | Stockholders’ | ||||||||||||||||||||||||||||||||||||||
| Shares | Par Value | Shares | Par Value | Shares | Par Value | Capital | Shares | Cost | Deficit | Deficit | ||||||||||||||||||||||||||||||||||
| Balance September 30, 2022 (Restated) | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||
| Stock issued for services | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Options issued for services | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Common stock issued for prepaid services | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Redemption of stock issued for prepaid services | - | - | ) | ( | ) | ( | ) | 650,000 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Redemption of warrants issued for prepaid services | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Warrants issued for prepaid services | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2023 (Restated) | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||
For the nine months ended June 30, 2022
| Preferred Stock | Additional | Total | ||||||||||||||||||||||||||||||||||||||||||
| Series A | Series B Convertible | Common Stock | Paid-In | Treasury Stock | Accumulated | Stockholders’ | ||||||||||||||||||||||||||||||||||||||
| Shares | Par Value | Shares | Par Value | Shares | Par Value | Capital | Shares | Cost | Deficit | Deficit | ||||||||||||||||||||||||||||||||||
| Balance September 30, 2021 (Restated) | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Stock issued for services | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Stock issued for cash | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Stock issued for commitment fee debt discount on note payable | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Redemption of previously issued commitment shares | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Conversion of preferred B stock to common stock | - | ( | ) | ( | ) | - | ||||||||||||||||||||||||||||||||||||||
| Net loss (Restated) | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2022 (Restated) | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 6 |
Virtual Interactive Technologies Corp.
Condensed Consolidated Statements of Cash flows
For the Nine Months Ended June 30, 2023 and 2022 (Restated)
(UNAUDITED)
| For the nine months ended, | ||||||||
| June 30, 2023 | June 30, 2022 |
|||||||
(Restated) | (Restated) | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock issued for services | ||||||||
| Amortization of debt discount | ||||||||
| Net reversal of amortization of prepaid stock-based compensation | ||||||||
| Options issued for services | ||||||||
| Changes in operating assets and operating liabilities: | ||||||||
| Interest receivable | ( | ) | ( | ) | ||||
| Royalties receivable | ||||||||
| Accounts payable and accrued liabilities | ( | ) | ||||||
| Accounts payable, related party | ||||||||
| Accrued interest payable, related party | ||||||||
| Accrued interest payable | ||||||||
| Net cash used in operating activities | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | - | - | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from notes payable | ||||||||
| Proceeds from sale of common stock | ||||||||
| Payment on notes payable, related parties | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
| Non-cash Investing and Financing Activities: | ||||||||
| Debt discount on notes payable | $ | $ | ||||||
| Stock issued for commitment fee debt discount on note payable | $ | $ | ||||||
| Common stock issued for prepaid services | $ | $ | ||||||
| Redemption of common stock and warrants issued for prepaid services | $ | |||||||
| Warrants issued for prepaid services | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 7 |
VIRTUAL INTERACTIVE TECHNOLOGIES CORP.
Notes to Unaudited Condensed Consolidated Financial Statements
For the Nine Months Ended (Restated)
June 30, 2023
Note 1. Basis of Presentation
While the information presented in the accompanying June 30, 2023 financial statements is unaudited and condensed, it includes all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the periods presented in accordance with the accounting principles generally accepted in the United States of America (“US GAAP”). In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted. These financial statements should be read in conjunction with the Company’s September 30, 2022 audited financial statements (and notes thereto). Operating results for the three and nine months ended June 30, 2023 are not necessarily indicative of the results that can be expected for the year ending September 30, 2023.
The accompanying unaudited condensed consolidated financial statements herein contain the operations of Virtual Interactive Technologies Corp. (OTCPINK: VRVR), and its wholly-owned subsidiaries Advanced Interactive Gaming Inc. (“AIG Inc.”) and Advanced Interactive Gaming Ltd. (“AIG Ltd”) (collectively, the “Company” or “VIT”). All significant intercompany amounts have been eliminated.
Note 2. Business (Restated)
Nature of Operations
The Company is a next generation game and metaverse developer that creates immersion experiences by harnessing the latest technologies, including Blockchain and digital assets. The Company’s newly launched brand, Extrosive, is building a metaverse that replaces traditional boring financial experiences with a new paradigm, “global Prosperity space” (gPs). This new asset class dynamically augments global and local realities and builds communities of aligned financial values, virtuous economies, and a trusted network. The result would be a metaverse game for the glamourous world of Wall Street, High-Speed trading involving community building, quantified self, and NFTs – a pure adrenal rush! In addition, the Company continues to build on its successful catalog that includes Carmageddon Max Damage, Carmageddon Crashers, Interplanetary: Enhanced Edition, Catch & Release, and Worbitol. The Company also entered into a joint development partnership with Duane Lee “Dog” Chapman, of the “Dog The Bounty Hunter” fame, to develop and promote multiple games across several platforms.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimated.
Cash Equivalents
The
Company considers all highly liquid instruments purchased with original maturities of three months or less to be cash equivalents. The
Company had
| 8 |
Fair Value of Financial Instruments
The Company accounts for fair value measurements in accordance with accounting standard ASC 820-10-50, “Fair Value Measurements.” ASC 820 defines fair value and establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows:
| - | Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. | |
| - | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. | |
| - | Level 3 inputs to valuation methodology are unobservable and significant to the fair measurement. |
The Company’s financial instruments consist of cash, royalties receivable, notes receivable and related accrued interest receivable, accounts payable and accrued expenses, and notes payable and related accrued interest payable. The carrying value of these financial instruments approximates fair value due to the short-term nature of the instruments.
In
accordance with ASC 260 “Earnings per Share,” the basic net income (loss) per share (“EPS”) is
computed by dividing the net loss available to common stockholders by the weighted average number of common shares outstanding
during the period, excluding the effects of any potentially dilutive securities. Diluted EPS is computed by dividing the net loss
available to common stockholders by the weighted average number of common shares outstanding adjusted on an
“if-converted” basis. During the three and nine months ended June 30, 2023 and 2022, the Company had and shares,
respectively, of Series B Convertible Preferred stock issued and outstanding that are convertible into shares of common stock on a
one-for-one basis. During the three and nine month ended June 30, 2023 and 2022, the Company had and
--
vested options outstanding respectively. Applying the treasury method, the dilutive effect on the options was
shares on June 30, 2023. In addition, in March 2022 the Company issued two $
Stock Based Compensation
We follow ASC Topic 718, Compensation–Stock Compensation, which prescribes accounting and reporting standards for all share-based payment transactions in which employee and non-employee services are acquired. Share-based payments to employees and non-employees, including grants of stock warrants, are recognized as compensation expense in the financial statements based on the stock awards’ fair values on the grant date. That expense is recognized over the period required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). Upon repurchase of the award, any unrecognized compensation, net of cash payments are expensed immediately. Awards forfeited due to unfulfillment of obligations, such as termination of employment prior to the award being fully vested, for no cash or other consideration, are not recognized as an expense and any previously recognized costs are reversed in the period of forfeiture.
Foreign Currency
The Company’s functional currency is the US dollar. With the exception of stockholders’ equity (deficit), all transactions that are originally denominated in foreign currency are translated to US dollars by our international customers, on a monthly basis, when recognized by them and prior to paying royalties to the Company. All royalty revenues that are received and recognized by the Company are recorded in US dollars.
Foreign
currency translation gains/losses are recorded in other accumulated comprehensive income (“AOCI”) based on exchange rates
prevalent on reporting dates for balance sheet items, and at weighted average exchange rates during the reporting period for the statement
of operations. Foreign currency transaction gains/losses are recorded as other income (expense) in the period of settlement. No AOCI
items were present during the three and nine months ended June 30, 2023 and 2022, as all financial statement items were denominated in
the US dollar. Losses from foreign currency transactions during the three months ended June 30, 2023 and 2022 totaled $
| 9 |
Concentration of Credit Risk
Some
of our US dollar balances are held in a Bermuda bank that is not insured. As of June 30, 2023 and September 30, 2022, uninsured deposits
in the Bermuda bank totaled $
Revenue Recognition
The Company follows the guidance contained in ASC 606, “Revenue Recognition.” The core principle of ASC 606 is that an entity should recognize revenue to depict the transfer of goods of services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606 outlines the following five-step revenue recognition model (along with other guidance impacted by this standard): (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations; (5) recognize revenue when or as the entity satisfies a performance obligation.
Revenue – Royalties (Restated)
The Company enters into agreements with third-party developers that require us to make payments for game development and production services. In exchange for our payments, we receive the exclusive publishing and distribution rights to the finished game titles as well as, in some cases, the underlying intellectual property rights. The Company has several contracts with video game developers that entitle us to royalty streams as a percentage of revenues generated by the game sales, which vary from contract to contract. As of June 30, 2023, the Company has four royalty contracts with three developers that are generating royalty revenue.
Once a game has been developed and has met the terms of the underlying royalty agreement, the game is released for commercial sales. Per each contract, the Company will receive reports on a regular basis from the game developers’ sales platforms that identify the amount of game sales, from which consideration expected to be collected from the commercial customers is computed based on the applicable royalty percentages. Royalty revenue is based on a percentage of net receipts as defined in each customer agreement and is recognized in accordance with the sale-based royalty provisions of ASC 606, which requires revenue recognition after the subsequent sales occur. The Company’s performance obligation under each royalty contract as an investor in the game is complete once funds are advanced to the gaming developer. Subsequent consideration is then received by the Company from the developers in the amount of the Company’s percentage fee of royalty income (net receipts) received by the customer. Net receipts include all gross revenues received by the customer as a result of sales of the games or related exploitation less certain taxes, refunds, manufacturing costs, freight, and other items specified in the underlying contract.
During
the three months ended June 30, 2023 and 2022, the Company recognized revenue from royalties of $
Allowance for Credit Losses
The
Company provides an allowance for doubtful accounts equal to the estimated uncollectible royalties. The Company’s estimate is based
on historical collection experience and a review of the current status of royalties receivable. It is reasonably possible that the Company’s
estimate of the allowance for doubtful accounts will change and that losses ultimately incurred could differ materially from the amounts
estimated in determining the allowance. The Company had royalties receivable of $
Going Concern
The accompanying consolidated financial statements have been prepared in conformity with US GAAP, which contemplates the Company’s continuation as a going concern. The Company has not established profitable operations and has incurred significant losses since its inception. The Company’s plan is to grow significantly over the next few years through strategic game development partnerships, through internal game development and through the acquisition of independent game development companies globally.
The Company has taken much of the cash flow from its first royalty agreement and has invested in royalty agreements for the development of several other video games. By continuing to reinvest these royalties into agreements to develop new games, along with actively managing corporate overhead, management’s plan is to substantially increase its video game royalty portfolio and cash flow over the next several years. The Company intends to continue to grow its game portfolio over the next several years, focusing on console games, virtual reality games and mobile games.
There are no assurances that the Company will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placement, public offerings and/or debt financing necessary to support its working capital requirements. To the extent that funds generated from operations and any private placements, public offerings and/or debt financing are insufficient, the Company will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company. If adequate working capital is not available to the Company, it may be required to curtail or cease its operations.
Due to uncertainties related to these matters, there exists a substantial doubt about the ability of the Company to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.
New Accounting Pronouncements
The Company has evaluated all recently issued or enacted accounting pronouncements, and has determined that all such pronouncements either do not apply or their impact is insignificant to the financial statements.
Note 3. Restatement
Restatement Effect on Previously Issued Financial Statements
The Company determined that there was an error with respect to recording the redemption of previously issued shares and warrants for services. In addition, the Company determined that there was an error with respect to recognizing 2022 and 2021 revenue in the correct fiscal period. Accordingly, the Company restated its unaudited condensed consolidated financial statements for the three and nine months ended June 30, 2023 and 2022 as shown in the tables below.
| 10 |
| As of June 30, 2023 | ||||||||||||
| Consolidated Balance Sheets | As Reported | Adjustment | Restated | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||||||
| Additional paid-in-capital | ||||||||||||
| Treasury
stock ( and shares at June 30, 2023 ; $ | ( | ) | ( | ) | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ( | ) | ||||||
| 11 |
| For the Three Months Ended | ||||||||||||
| June 30, 2023 | ||||||||||||
| Consolidated Statement of Operations | As Reported | Adjustment | Restated | |||||||||
| Professional fees | $ | ( | ) | $ | $ | |||||||
| Marketing and advertising | ( | ) | ||||||||||
| Total operating expenses | ( | ) | ||||||||||
| Income (loss) from operations | ( | ) | ( | ) | ||||||||
| Net income (loss) | ( | ) | ( | ) | ||||||||
| For the Nine Months Ended | ||||||||||||
| June 30, 2023 | ||||||||||||
| Consolidated Statement of Operations | As Reported | Adjustment | Restated | |||||||||
| Professional fees | $ | ( | ) | $ | $ | |||||||
| Marketing and advertising | ( | ) | ||||||||||
| Total operating expenses | ||||||||||||
| Income (loss) from operations | ( | ) | ( | ) | ||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||
Loss per share, basic and fully diluted | ) | ) | ) | |||||||||
| For the Nine Months Ended | ||||||||||||
| June 30, 2022 | ||||||||||||
| Consolidated Statement of Operations | As Reported | Adjustment | Restated | |||||||||
| Revenue - royalties | $ | $ | ( | ) | $ | |||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||
| Loss per share, basic and fully diluted | ) | ) | ) | |||||||||
| 12 |
| For the Nine months ended, | ||||||||||||
| June 30, | June 30, | June 30, | ||||||||||
| 2023 | 2023 | 2023 | ||||||||||
| Consolidated Statements of Cash Flows | Reported | Adjustment | Restated | |||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||||||
| Net reversal of amortization of prepaid stock-based compensation | ( | ) | ||||||||||
| Royalties receivable | ||||||||||||
| Accounts payable and accrued liabilities | ( | ) | ||||||||||
| Redemption of common stock and warrants issued for prepaid services | $ | $ | $ | |||||||||
| For the Nine Months Ended June 30, 2022 | ||||||||||||
| Consolidated Statement of Cash Flows | Reported | Adjustment | Restated | |||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||
| Royalties receivable | ||||||||||||
| 13 |
Note 4. Stockholders’ Equity (Deficit)
The Company’s common stock is quoted under the symbol “VRVR” on the OTC Pink tier operated by OTC Markets Group, Inc. To date, an active trading market for the Company’s common stock has not developed.
Treasury Stock
The
Company accounts for treasury stock using the cost method. During the three months ended June 30, 2022, the Company acquired shares
at $
During
the three months ended June 30, 2023, the Company acquired
shares at a $
At June 30, 2023 and September 30, 2022, the Company held and
shares in treasury at $
Common Stock
The Company is authorized to issue shares of common stock at par value of $. On June 30, 2023, the Company had shares issued and shares outstanding, with shares held as treasury stock. On September 30, 2022, the Company had shares issued and shares outstanding, with shares held as treasury stock.
On
August 16, 2022, the Company entered into a one-year agreement with two groups to assist the Company with creating interactive
gaming and entertainment experiences, including metaverse, utilizing blockchain and Non-Fungible Tokens, as well as assisting the
Company with investor and public relations. As part of the agreement, each group received shares
which were valued at $per
share and a total expense of $
On
October 26, 2022, the Company entered into a one-year agreement with a group to assist the Company with creating a customized
positive investment image and communicate that image to the investment community. As part of the agreement, they received shares
which were valued at $per
share and a total of $
On
November 28, 2022, the Company entered into a four-month agreement with a group to assist the Company with product awareness program
and to conduct customer lead generation activities. Under the agreement the Company agreed to issue the group shares during each
month of the agreement. During the three months ended December 31, 2022, the Company issued shares of common stock, which were
valued at $ per share. The total expense recognized for the three months ended December 31, 2022 was $
On
June 5, 2023, the Company’s Board of Directors approved the grant of
shares of common stock in total to three contractors and to three directors. The shares were valued at $
per share, which was the closing price of the Company’s stock on the grant date. An expense of $
| 14 |
Preferred Stock
The Company is authorized to issue each of Series A and B preferred shares at a par value of $. Series A preferred shares are not convertible, whereas Series B preferred shares are convertible into common stock on a one-for-one basis at the option of the holder and there is no redemption feature.
At June 30, 2023 and September 30, 2022, the Company had shares of Series A preferred stock and shares of Series B convertible preferred stock issued and outstanding.
Warrants
In
connection with the August 16, 2022 agreements under “Common Stock” above, the Company issued one-year warrant to purchase
common shares at $and a two-year warrant to purchase common shares at $.
On the date of the grant, the Company elected to treat the warrants as a single award, and valued the warrants of 1 and 2 years, expected
volatility of
In
connection with the October 26, 2022 agreement under “Common Stock” above, the Company issued a one-year warrant to purchase
common shares at $and a two-year warrant to purchase common shares at $.
On the date of the grant, the Company elected to treat the warrants as a single award, and valued the warrants at $
The following table reflects a summary of Common Stock warrants outstanding and warrant activity during the nine months ended June 30, 2023:
Underlying Shares | Weighted Average Exercise Price | Weighted Average Term (Years) | ||||||||||
| Warrants outstanding at September 30, 2022 | ||||||||||||
| Granted | ||||||||||||
| Exercised | - | |||||||||||
| Forfeited | ( | ) | - | |||||||||
| Warrants outstanding and exercisable at June 30, 2023 | $ | - | ||||||||||
The intrinsic value of warrants outstanding as of June 30, 2023 was $--, as the exercise price exceeded the Company’s stock price.
Options
In
connection with a consulting agreement with the Company’s new Director dated June 5, 2023, the Company issued a ten-year
option to purchase
common shares at $
per share. The option to purchase
shares vested immediately and the option to purchase an additional
will vest on the anniversary date of the agreement in each of the following three years. On the date of the grant, the Company
valued the option at $
using the Black-Scholes option pricing model with the following assumptions: expected life of the options of
years, expected volatility of %,
risk-free rate of %
and no dividend yield. The options are being expensed over the vesting period and an expense of $
Underlying Shares | Weighted Average Exercise Price | Weighted Average Term (Years) | ||||||||||
| Options outstanding at September 30, 2022 | - | |||||||||||
| Granted | ||||||||||||
| Exercised | - | |||||||||||
| Forfeited | - | |||||||||||
| Options outstanding at June 30, 2023 | ||||||||||||
| Options exercisable at June 30, 2023 | $ | |||||||||||
The intrinsic value of options outstanding as of June 30, 2023 was $.
| 15 |
Note 5. Notes and Convertible Notes Payable
On March 20, 2019, an unrelated individual loaned VRVR $. The note carries a % interest rate and was initially payable March 20, 2020, and then amended on July 27, 2022 to mature on March 20, 2024. The maturity date has been extended to March 20, 2025. As of June 30, 2023 and September 30, 2022, the note balance was $, and accrued interest on the note totaled $ and $, respectively.
On September 23, 2021, an unrelated third party loaned VRVR $ that consisted of cash received by the Company in the amount of $ and an original issue discount of $. This discount was amortized over the life of the note commencing October 1, 2021. The note carried a % annual interest rate and matured on . Under the terms of the agreement, the Company paid any accrued interest on a monthly basis. In addition, under the terms of the agreement, the Company issued commitment shares to the holder at $ per share and an expense of $ was applied as an additional discount to the note and amortized over the life of the note. The Company had the right to redeem of the commitment shares if the note was repaid on or before the maturity date. On September 30, 2021, principal and accrued interest totaled $ and $, respectively. On March 23, 2022, the note payable balance of $ and unpaid interest of $ were repaid in full in the amount of $. During the period of October 1, 2021 through March 23, 2022, interest payments totaling $ were made, resulting in $ total interest payments during the nine months ended June 30, 2022, and $ principal and interest balances at June 30, 2022. As a result of this repayment, of the commitment shares were redeemed at $ cost and are being held in treasury.
On March 15, 2022, an unrelated third party loaned VRVR $ that consisted of cash received by the Company in the amount of $ and an original issue discount of $. This discount was amortized over the life of the note commencing March 15, 2022. The note carries a % annual interest rate and matured on March 15, 2023. As of June 30, 2023 and September 30, 2022, the note balance was $ and $, respectively, and the accrued interest was $ and $, respectively. The note is convertible at a price of $ per share. As of March 15, 2023, the note was in default. On March 28, 2023, June 9, 2023 and July 13, 2023, the Company paid a total of $ to extend the maturity date to . These fees are included in interest expense on the statements of operations.
On March 21, 2022, an unrelated third party loaned VRVR $ that consisted of cash received by the Company, on April 4, 2022, in the amount of $ and an original issue discount of $. This discount was amortized over the life of the note commencing March 15, 2022. The note carries a % annual interest rate and matures on March 21, 2023. As of June 30, 2023 and September 30, 2022, the note balance was $ and $, respectively, and the accrued interest was $ and $, respectively. The note is convertible at a price of $ per share. As of March 15, 2023, the note was in default. On March 29, 2023 and July 13, 2023, the Company paid a total of $ to extend the maturity date to . These fees are included in interest expense on the statements of operations.
Debt discount amortization on the above notes totaled $ and $ during the three months ended June 30, 2023 and 2022, respectively. Debt discount amortization on the above notes totaled $ and $ during the nine months ended June 30, 2023 and 2022, respectively. Total unamortized debt discount totaled $ and $ at June 30, 2023 and September 31, 2022, respectively.
| 16 |
Note 6. Related Party Transactions
Note Payable, Related Party
On
March 29, 2018, the Company issued a $
Note 7. Note Receivable
On
December 11, 2019, the Company issued a $
Note 8. Subsequent Events
The Company evaluated events occurring subsequent to June 30, 2023 through the date the financial statements were issued and noted the following events requiring disclosure:
Termination of Previous Agreement:
On
August 16, 2022, the Company had entered into a one-year agreement with two groups to assist the Company with creating interactive
gaming and entertainment experiences, including metaverse, utilizing blockchain and Non-Fungible Tokens, as well as assisting the
Company with investor and public relations. As part of the agreement, each group received
shares which were valued at $
per share and a total expense of $
On
July 5, 2023, the parties agreed to terminate the agreement in an agreement and mutual release, the shares were returned to the Company’s treasury
and the warrants were cancelled. The Company paid each group a fee for services of $
Unregistered Sales of Equity Securities:
On
July 14, 2023 the Company sold shares of its Series C Preferred Stock to a private investor for $ per share, raising
an aggregate amount of $
Each Series C preferred share:
| ● | is entitled to an annual dividend of $ per share when, as and if declared by the Company’s directors, | |
| ● | does not have any voting rights, | |
| ● | is entitled to $ per share upon any liquidation, distribution or winding up of the Company, and | |
| ● | is convertible into one share of the Company’s common stock. |
The Company has evaluated other events subsequent to the balance sheet date through the date these financial statements were issued and determined that there are no events requiring disclosure.
| 17 |
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Cautionary Statement about Forward-Looking Statements
This Form 10-Q/A contains forward-looking statements regarding future events and the Company’s future results that are subject to the safe harbors created under the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based on current expectations, estimates, forecasts, and projections about the industry in which the Company operates and the beliefs and assumptions of the Company’s management. Words such as “hopes,” “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “may,” variations of such words, and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of the Company’s future financial performance, and other characterizations of future events or circumstances are forward-looking statements.
The Company is under no duty to update any of these forward-looking statements after the date of this report. You should not place undue reliance on these forward-looking statements.
EXECUTIVE OVERVIEW
Virtual Interactive Technologies Corp. (OTCPINK: VRVR) (“VIT”) or (“the Company”) is a next generation game and metaverse developer that creates immersion experiences by harnessing the latest technologies, including Blockchain and digital assets. The Company’s newly launched brand, Extrosive, is building a metaverse that replaces traditional boring financial experiences with a new paradigm, “global Prosperity space” (gPs). This new asset class dynamically augments global and local realities and builds communities of aligned financial values, virtuous economies, and a trusted network. The result would be a metaverse game for the glamourous world of Wall Street, High-Speed trading involving community building, quantified self, and NFTs – a pure adrenal rush! In addition, the Company continues to build on its successful catalog that includes Carmageddon Max Damage, Carmageddon Crashers, Interplanetary: Enhanced Edition, Catch & Release, and Worbitol. The Company also entered into a joint development partnership with Duane Lee “Dog” Chapman, of the “Dog The Bounty Hunter” fame, to develop and promote multiple games across several platforms. For more information, please visit www.vrvrcorp.com.
Results of Operations
The following discussion involves the results of operations for the three and nine months ended June 30, 2023 and June 30, 2022.
For the Three Months Ended June 30, 2023 and 2022
Revenue increased slightly from $20,689 for the three months ended June 30, 2022 to $35,136 for the three months ended June 30, 2023. Revenue was derived from royalty interests in five games, Carmageddon Max Damage, Carmageddon Crashers, Catch & Release, Interplanetary: Enhanced Edition and Worbital.
Operating expense for the three months ended June 30, 2023 and 2022 was 907,006 and $539,821, respectively. This increase was primarily due to stocks and warrants issued for services under contracts that were terminated due to non-performance during the three months ended June 30, 2023.
Other income (expense) for the three months ended June 30, 2023 and 2022 was ($36,196) and ($148,219), respectively. This decrease in expense was mainly due to non-cash transactions associated with the amortization of debt discount in the amount of $117,764 for the three months ended June 30, 2022. The discount was fully amortized at March 31, 2023, resulting in $0 amortization during the three months ended June 30, 2023.
For the three months ended June 30, 2023 we recorded a net loss of $908,066. For the three months ended June 30, 2022, we recorded a net loss of $667,351. The increase in loss of $240,715 was mainly associated with the expense of stock and warrants that were issued for services, offset by non-cash transactions associated with the amortization of debt discount in the amount of $117,764 for the three months ended June 30, 2022.
For the Nine Months Ended June 30, 2023 and 2022
Revenue increased from $72,597 for the nine months ended June 30, 2022 to $88,521 for the nine months ended June 30, 2023. Revenue was derived from royalty interests in five games, Carmageddon Max Damage, Carmageddon Crashers, Catch & Release, Interplanetary: Enhanced Edition and Worbital.
| 18 |
Operating expense for the nine months ended June 30, 2023 and 2022 was $2,412,629 and $853,418, respectively. This increase was primarily due to the expense of stock and warrants issued for services as explained above.
Other income (expense) for the nine months ended June 30, 2023 and 2022 was ($312,320) and ($384,663), respectively. This decrease in expense was mainly due to amortization of debt discount of $207,314 during the nine months ended June 30, 2023 compared to $310,203, offset by an increase in interest expense in the current period to $62,906 versus $32,784 for the nine-month period ended June 30, 2022.
For the nine months ended June 30, 2023 we recorded a net loss of $2,636,428. For the nine months ended June 30, 2022, we recorded a net loss of $1,165,484. The increase in loss of $1,470,944 was mainly associated with the increase in revenue, general and administrative expenses identified above, and the impacts of debt discount amortization and interest expense associated with our notes payable.
Liquidity and Capital Resources
As of June 30, 2023 and September 30, 2022, we had cash and cash equivalents of $1,832 and $36,378, respectively. Working capital was $(1,557,648) as of June 30, 2023 compared to $831,659 at September 30, 2022. The decrease in working capital of $2,389,307 was primarily the result of the redemption and reversal of $501,080 in prepaid expenses, $92,774 in interest accrued on notes payable, and $207,314 in debt discount amortization during the nine months ended June 30, 2023.
Cash Flows from Operating Activities:
Net cash used in operating activities for the nine months ended June 30, 2023 was $34,546. Net cash used in operating activities for the nine months ended June 30, 2022 was $415,630. The change over the two periods presented was $381,084.
Changes in operating activities for the nine months ended June 30, 2023 included increases in accounts payable of $20,438, interest receivable of $1,122, accounts payable, related party of $10,500 and interest payable of $93,222 offset by a decrease in royalties receivable of $23,642. The Company also had non-cash expenses of $37,170 in options issued for services, stock issued for services of 94,375, debt discount amortization of $207,314, and $2,116,343 amortization of stock and warrants issued for prepaid services.
Changes in operating activities for the nine months ended June 30, 2022 included increases in interest receivable of $1,347, interest payable, related party of $42,372, and interest payable of $18,016, as well as a decrease in royalty receivable of $34,324 and accounts payable and accrued liabilities of $34,714. The Company also had non-cash expenses of $381,000 for stock issued for services and $310,203 in amortization of stock issued for prepaid services.
Cash Flows from Investing Activities:
The Company had no cash flows from investing activities during the nine months ended June 30, 2023 or 2022.
Cash Flows from Financing Activities:
Net cash provided by financing activities for the nine months ended June 30, 2023 and 2022 was $0 and $237,250, respectively. The change over the two periods presented is due to repayments on notes payable, related parties totaling $235,000 offset by proceeds from notes payable of $434,750, proceeds from the sale of common stock of $37,500 during the nine months ended June 30, 2022.
| ITEM 4. | CONTROLS AND PROCEDURES |
Disclosure Controls and Procedures
We carried out an evaluation of the effectiveness of our disclosure controls and procedures as of June 30, 2023. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive and Financial Officer.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Based upon that evaluation, our Chief Executive and Financial Officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the three months ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 19 |
PART II
Item 1. Legal Proceedings
We are not involved in any pending legal proceeding or litigation, and, to the best of our knowledge, no governmental authority is contemplating any proceeding to which we are a party, and which would reasonably be likely to have a material adverse effect on our company.
Item 1A. Risk Factors
As a “smaller reporting company,” we are not required to provide the information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On July 14, 2023 the Company sold 1,200,481 shares of its Series C Preferred Stock to a private investor for $0.1666 per share, raising an aggregate amount of $200,000. The proceeds are for general and administrative expenses. (See Note 7).
Each Series C preferred share:
| ● | is entitled to an annual dividend of $0.01 per share when, as and if declared by the Company’s directors, | |
| ● | does not have any voting rights, | |
| ● | is entitled to $0.10 per share upon any liquidation, distribution or winding up of the Company, and | |
| ● | is convertible into one share of the Company’s common stock. |
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None
Item 6. Exhibits
Exhibits
| 3.1 | Articles of Incorporation (1) | |
| 3.2 | Amended Articles of Incorporation (1) | |
| 3.3 | Bylaws (1) | |
| 31.1* | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act | |
| 31.2* | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act | |
| 32.1* | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act | |
| 32.2* | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
(1) Incorporated by reference to the same exhibit filed with the Company’s registration statement on Form S-1 (File #333-190265).
* Provided herewith
| 20 |
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on the 15th day of April 2024.
| VIRTUAL INTERACTIVE TECHNOLGIES CORP. | ||
| By: | /s/ Jason D. Garber | |
| Jason D. Garber | ||
| Principal Executive Officer | ||
| By: | /s/ James W. Creamer III | |
| James W. Creamer III | ||
| Principal Financial and Accounting Officer | ||
| 21 |