10-Q/A: Virtual Interactive Technologies Corp. Amends Quarterly Report Due to XBRL Filing Requirement

Virtual Interactive Technologies Corp. filed an amendment to its quarterly report for the period ended December 31, 2022, solely to include XBRL documents.

Summary

• Virtual Interactive Technologies Corp. has amended its original quarterly report for the period ending December 31, 2022, to include XBRL documents.
• The amendment does not change any of the financial results or other information from the original report.
• The company's financials show a net loss of $887,616 for the three months ended December 31, 2022, compared to a net loss of $294,174 for the same period in 2021.
• Revenue from royalties decreased to $20,012 in Q1 2023 from $22,270 in Q1 2022.
• Operating expenses significantly increased to $765,003 in Q1 2023 from $197,809 in Q1 2022, primarily due to professional fees related to stock and warrant issuances.
• The company's cash and cash equivalents decreased to $8,860 as of December 31, 2022, from $36,378 as of September 30, 2022.
• The company has restated its financials due to errors in revenue recognition and reporting of related party payables.

Sentiment

Score: 3

Explanation: The document reveals significant financial losses, declining revenue, and a decrease in cash reserves, coupled with a restatement of financials and ineffective disclosure controls. While there are some positive aspects like ongoing game development and partnerships, the overall financial health and operational effectiveness raise serious concerns.

Positives

• The company continues to develop its game portfolio, including console, virtual reality, and mobile games.
• The company has a joint development partnership with Duane Lee Dog Chapman to develop and promote multiple games.

Negatives

• The company experienced a significant increase in net loss, from $294,174 to $887,616 year-over-year.
• The company's revenue from royalties decreased year-over-year.
• Operating expenses increased substantially due to professional fees related to stock and warrant issuances.
• The company's cash position has significantly decreased.
• The company has restated its financials due to errors in revenue recognition and reporting of related party payables.
• The company's disclosure controls and procedures were deemed not effective as of the end of the period.

Risks

• The company has not established profitable operations and has incurred significant losses since its inception.
• There is substantial doubt about the company's ability to continue as a going concern.
• The company may not be able to achieve adequate revenue or obtain additional financing to support its working capital requirements.
• The company's reliance on royalty agreements for revenue generation exposes it to risks associated with game development and sales.
• The company's uninsured deposits in a Bermuda bank pose a credit risk.
• The company's disclosure controls and procedures were not effective as of the end of the period.

Future Outlook

The company plans to grow significantly through strategic game development partnerships, internal game development, and acquisitions of independent game development companies globally. Management intends to increase its video game royalty portfolio and cash flow over the next several years by reinvesting royalties into new game development agreements.

Management Comments

• Management believes that the financial institution in Bermuda is financially sound, and the risk of loss is low.
• Management's plan is to substantially increase its video game royalty portfolio and cash flow over the next several years.
• Management intends to continue to grow its game portfolio over the next several years, focusing on console games, virtual reality games and mobile games.

Industry Context

The company operates in the competitive video game and metaverse development industry, which is characterized by rapid technological advancements and evolving consumer preferences. The company's focus on blockchain and digital assets aligns with current industry trends, but it faces competition from established and emerging players in the space.

Comparison to Industry Standards

• The company's significant net loss and declining revenue are concerning when compared to industry leaders in game development and metaverse platforms.
• Companies like Unity Technologies and Epic Games, which provide game development engines, typically have much higher revenue and lower losses due to their established market positions and diverse revenue streams.
• Metaverse platforms like Roblox and Decentraland, while not directly comparable, have significantly larger user bases and revenue streams, indicating a need for VRVR to scale its operations and user engagement.
• The company's reliance on royalty agreements is a common practice in the industry, but its ability to generate consistent revenue from these agreements is crucial for its long-term viability.
• The company's high operating expenses, particularly related to stock and warrant issuances, are not typical for established companies in the industry and suggest a need for more efficient capital management.

Related Party Transactions

• The company has a note payable to its CEO with a balance of $741,030 and accrued interest of $237,910 as of December 31, 2022.

Stakeholder Impact

• Shareholders are negatively impacted by the significant net loss and declining revenue.
• Employees may be concerned about the company's financial stability and future prospects.
• Customers may be impacted by the company's ability to continue developing and supporting its games.
• Suppliers and creditors may be concerned about the company's ability to meet its financial obligations.

Next Steps

• 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.
• The company plans to continue to reinvest royalties into agreements to develop new games.

Key Dates

Keywords

XBRL, quarterly report, financial statements, game development, metaverse, royalties, net loss, operating expenses, stock issuance, warrants, restatement, going concern