VRVR.OTC.PinkVirtual Interactive Technologies CORP
10-K: Virtual Interactive Technologies Corp. Reports Fiscal Year 2023 Results, Cites Ongoing Metaverse Development
Sentiment:
Annual Results
Virtual Interactive Technologies Corp. reports a net loss of $2.8 million for fiscal year 2023, alongside a 10% decrease in revenue, while continuing to develop its metaverse platform and gaming portfolio.
Capital raiseThe company sold 1,200,480 shares of its Series C preferred stock to a private investor for $200,000.The company may need to raise additional capital to fund its operations and address its working capital deficit.The company's ability to obtain additional financing is uncertain.
Worse than expectedThe company's net loss increased significantly from $1.6 million to $2.8 million year-over-year.Revenue decreased by 10% compared to the previous year.Operating expenses more than doubled, indicating a significant increase in costs.The company's working capital decreased to a negative value, indicating financial strain.
Summary
- Virtual Interactive Technologies Corp. (VRVR) reported a net loss of $2,817,340 for the fiscal year ended September 30, 2023, compared to a loss of $1,656,019 in the previous year.
- The company's revenue decreased by 10% to $130,400 in 2023 from $144,716 in 2022, primarily derived from royalty interests in five games.
- Operating expenses increased significantly by 102% to $2,552,976 in 2023, driven by the amortization of prepaid expenses related to service contracts.
- The company's working capital decreased to ($1,529,115) as of September 30, 2023, compared to $831,659 in the previous year.
- VRVR launched its new brand, Extrosive, focused on building a metaverse called global Prosperity space (gPs).
- The company continues to develop its existing game catalog and has entered a joint development partnership with Duane Lee 'Dog' Chapman.
- The video game industry is projected to grow to $300 billion in global revenue by 2025, with mobile gaming leading the growth.
Sentiment
Score: 3
Explanation: The document highlights significant financial losses, decreased revenue, and increased operating expenses, along with material weaknesses in internal controls and a going concern warning. While there are some positive aspects like the metaverse development and partnerships, the overall financial health and operational challenges overshadow these, resulting in a low sentiment score.
Positives
- The company launched its new brand, Extrosive, and is developing a metaverse platform.
- VRVR has a joint development partnership with Duane Lee 'Dog' Chapman, which could lead to new game releases.
- The company continues to build on its existing catalog of games.
- The video game industry is experiencing significant growth, which could provide opportunities for VRVR.
Negatives
- The company experienced a significant net loss of $2.8 million for fiscal year 2023.
- Revenue decreased by 10% year-over-year.
- Operating expenses more than doubled, increasing by 102% in 2023.
- The company's working capital decreased significantly to a negative value.
- The company has no full-time or part-time employees, relying on contractors.
Risks
- The company has a history of recurring losses and has not achieved profitable operations, raising substantial doubt about its ability to continue as a going concern.
- The company's ability to obtain additional financing is uncertain, and if not available, it may be required to curtail or cease operations.
- The video game industry is extremely competitive, with competitors ranging from small independent developers to large companies with significant resources.
- The company's disclosure controls and procedures were deemed ineffective as of September 30, 2023.
- The company identified material weaknesses in its internal control over financial reporting.
Future Outlook
The company plans to grow significantly through strategic game development partnerships, internal game development, and acquisitions of independent game development companies. They intend to reinvest royalty revenues into the development of additional video games to enhance their portfolio and increase revenues.
Management Comments
- Management plans to substantially increase its video game royalty portfolio and cash flow over the next several years by reinvesting royalties into new game development agreements.
- Management believes that the financial institution where some of their US dollar balances are held is financially sound, and the risk of loss is low.
- Management has assessed the effectiveness of the company's internal control over financial reporting and concluded that it was not effective as of September 30, 2023.
Industry Context
The video game industry is experiencing significant growth, with global revenues projected to reach $300 billion by 2025. Mobile gaming is the fastest-growing segment, driven by the affordability of devices and availability of content. The industry is highly competitive, with a mix of small independent developers and large companies.
Comparison to Industry Standards
- The company's revenue of $130,400 is significantly lower than the revenue of major players in the video game industry, such as Take-Two Interactive Software, Inc., Activision Blizzard, Inc., Electronic Arts, Inc., and Ubisoft Entertainment, S.A.
- The company's reliance on royalty agreements is a common practice in the industry, but its ability to generate substantial revenue from these agreements is still uncertain.
- The company's focus on metaverse development aligns with current industry trends, but its ability to compete with larger companies in this space is yet to be determined.
- The company's lack of full-time employees is unusual compared to industry standards, where most companies have a significant number of employees dedicated to game development and operations.
Management Changes
| Role | Previous Person | New Person | Effective Date | Reason |
|---|---|---|---|---|
| Chief Financial Officer | Janelle Gladstone | James W. Creamer III | 2023-07-15 | Janelle Gladstone resigned as Chief Financial Officer. |
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Internal Control Weaknesses | The company identified material weaknesses in its internal control over financial reporting, including inadequate segregation of duties and insufficient written policies and procedures. | 2023-09-30 | The company's internal control over financial reporting was deemed ineffective as of September 30, 2023. |
Related Party Transactions
- The company had a $750,000 unsecured promissory note with its CEO, which was later purchased by a non-related entity.
- The company owed its Chief Financial Officer $12,000 for past services as of September 30, 2023.
- The company issued common stock for services to officers and directors during the years ended September 30, 2023 and 2022.
Stakeholder Impact
- Shareholders may be concerned about the company's significant net loss and decreased revenue.
- Employees, contractors, and suppliers may be impacted by the company's financial challenges.
- Customers may be affected by the company's ability to develop and release new games.
- Creditors may be concerned about the company's ability to repay its debts.
Next Steps
- The company plans to enhance and improve the design of its internal control over financial reporting.
- The company hopes to appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management.
- The company intends to adopt sufficient written policies and procedures for accounting and financial reporting.
- The company will continue to develop its game portfolio, focusing on console, virtual reality, and mobile games.
Key Dates
| Date | Description |
|---|---|
| 2018-03-29 | The company issued a $750,000 unsecured promissory note to the CEO. |
| 2019-03-20 | An unrelated individual loaned VRVR $10,000. |
| 2020-11-20 | The company invested $7,500 in a convertible note receivable. |
| 2021-09-23 | An unrelated third party loaned VRVR $235,000. |
| 2022-03-15 | An unrelated third party loaned VRVR $235,000. |
| 2022-03-21 | An unrelated third party loaned VRVR $235,000. |
| 2022-07-26 | The company received $12,500 in cash and issued 10,000 shares of common stock. |
| 2022-08-16 | The company entered into a one-year agreement with two groups, issuing shares and warrants. |
| 2022-10-26 | The company entered into an agreement with a group, issuing shares and warrants. |
| 2022-11-28 | The company entered into a four-month agreement, issuing shares monthly. |
| 2023-05-17 | The company entered into a termination agreement, returning 200,000 shares to treasury. |
| 2023-06-05 | The company's board approved the grant of 530,000 shares of common stock and an option to purchase 1,000,000 shares. |
| 2023-07-05 | The company entered into a termination agreement, returning 450,000 shares to treasury. |
| 2023-07-14 | The company sold 1,200,480 shares of Series C preferred stock for $200,000. |
| 2023-09-30 | End of the fiscal year. |
| 2024-04-12 | Date of the report, with 8,251,276 shares of common stock outstanding. |
Keywords
metaverse, video games, blockchain, NFTs, game development, virtual reality, royalty agreements, financial results, Extrosive, gaming
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