Stockholders’ Equity (Deficit)

6 Months Ended

Mar. 31, 2023

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 41,250 shares at $0 cost of its then-issued and outstanding common stock pursuant to a claw-back provision in one of its notes payable (Note 4). At March 31, 2023 and September 30, 2022, the Company held these shares in treasury.

Common Stock

The Company is authorized to issue 90,000,000 shares of common stock at par value of $0.001. At March 31, 2023, the Company had 8,312,784 shares issued and 8,271,534 shares outstanding, with 41,250 shares held as treasury stock. At September 30, 2022, the Company had 8,100,284 shares issued and 8,059,034 shares outstanding, with 41,250 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 225,000 shares which were valued at $2.10 per share and a total expense of $945,000 was recorded as prepaid expense and will be amortized over the life of the contract. Total expense recognized for the three months ended March 31, 2023 was $233,014. Total expense recognized for the six months ended March 31, 2023 was $471,205. As of March 31, 2023, total prepaid stock expense amortized was $587,712, resulting in $357,288 remaining prepaid expense.

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 200,000 shares which were valued at $1.49 per share and a total of $298,000 was recorded as prepaid expense and will be amortized over the life of the contract. The total expense recognized for the three months ended March 31, 2023 was $73,479. Total expense recognized for the six months ended March 31, 2023 was $127,364 resulting in $170,636 remaining prepaid expense.

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 12,500 shares during each month of the agreement. During the three months ended December 31, 2022, the Company issued 12,500 shares of common stock, which were valued at $1.19 per share. The total expense recognized for the three months ended December 31, 2022 was $14,875. Work on this contract was temporarily paused after one month so no further payments were made, and the Company is currently renegotiating the contract with the vendor.

Preferred Stock

The Company is authorized to issue 10,000,000 each of Series A and B preferred shares at a par value of $0.01. 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 March 31, 2023 and September 30, 2022, the Company had 270,612 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 225,000 common shares at $1.00 and a two-year warrant to purchase 225,000 common shares at $1.00. 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 109.88%, risk-free rate of 3.28% and no dividend yield. The total expense of $1,127,722 is being amortized over the life of the contract and a total of $317,172 was recognized for the three months ended March 31, 2023.A total of $641,392 was recognized for the six months ended March 31, 2023 resulting in $486,330 remaining as prepaid expense at March 31, 2023.

In connection with the October 26, 2022 agreement under “Common Stock” above, the Company issued a one-year warrant to purchase 200,000 common shares at $1.00 and a two-year warrant to purchase 200,000 common shares at $1.00. On the date of the grant, the Company elected to treat the warrants as a single award, and valued the warrants at $363,209 using the Black-Scholes option pricing model with the following assumptions: expected life of the options of 1 and 2 years, expected volatility of 111.16%, risk-free rate of 4.75% and no dividend yield. The total expense of $363,209 is being amortized over the life of the contract and a total of $89,559 was recognized for the three months ended March 31, 2023. A total of $155,234 was recognized for the six months ended March 31, 2023, resulting in $207,975 remaining as prepaid expense at March 31, 2023.

The following table reflects a summary of Common Stock warrants outstanding and warrant activity during the year ended March 31, 2023:

	Underlying Shares		Weighted Average Exercise Price		Weighted Average Term (Years)
Warrants outstanding at September 30, 2022		900,000		1.00		1.38
Granted		400,000		1.00		1.07
Exercised		-		-		-
Forfeited		-		-		-
Warrants outstanding and exercisable at March 31, 2023		1,300,000	$	1.00		0.94

The intrinsic value of warrants outstanding as of March 31, 2023 was $-0-, as the exercise price exceeded the Company’s stock price.

- Definition

The entire disclosure for equity.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

VIRTUAL INTERACTIVE TECHNOLOGIES CORP. 10-Q/A