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Summary of Significant Accounting Policies
12 Months Ended
Sep. 30, 2023
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

Note 2 – Summary of Significant Accounting Policies

 

Basis of Presentation and Consolidation

 

The accompanying consolidated financial statements herein contain the operations of VRVR and its wholly-owned subsidiaries AIG Inc and AIG Ltd (collectively, the “Company”) as of and for the years ended September 30, 2023 and 2022.

 

The financial statements include all adjustments and intercompany eliminations which are, in the opinion of management, necessary to present fairly the consolidated 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 consolidated results of operations and financial position have been included and all such adjustments are of a normal recurring nature.

 

The Company’s headquarters are located in Denver, Colorado and substantially all of its customers are outside the United States.

 

Fair Value of Financial Instruments

 

The Company accounts for fair value measurements in accordance with Accounting Standards Codification (“ASC”) 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, prepaid expenses, note receivable, interest receivable, accounts payable and accrued expenses, and notes payable. The carrying value of these financial instruments approximates fair value due to the stated face values and short-term nature of the instruments.

 

Cash and 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 no cash equivalents at September 30, 2023 or 2022.

 

Royalty Contracts and Research and Development Costs

 

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. Such agreements typically allow us to fully recover these payments, plus a profit, to the developers at an agreed-upon royalty rate earned on the subsequent sales of such software, net of any agreed-upon costs. Prior to establishing technological feasibility of a product, we record any costs incurred by third-party developers as research and development expenses. Subsequent to establishing technological feasibility of a product, we capitalize all development and production service payments to third-party developers as royalty contracts. The Company had no capitalizable research and development costs during the year ended September 30, 2023 or 2022.

 

 

Long-Lived Assets

 

The Company evaluates the recoverability of long-lived assets whenever events or changes in circumstances indicate that an asset’s carrying amount may not be recoverable. Such circumstances could include, but are not limited to, (1) a significant decrease in the market value of an asset, (2) a significant adverse change in the extent or manner in which an asset is used, or (3) an accumulation of costs significantly in excess of the amount originally expected for the acquisition of an asset. The Company compares the carrying amount of the asset against the estimated undiscounted future cash flows associated with it. Should the sum of the expected future net cash flows be less than the carrying value of the asset being evaluated, an impairment loss would be recognized. The impairment loss would be calculated as the amount by which the carrying value of the asset exceeds its estimated fair value. There was no impairment loss on long-lived assets for the years ended September 30, 2023 and 2022.

 

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 and (5) recognize revenue when or as the entity satisfies a performance obligation.

 

Revenue - Royalties

 

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 September 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 years ended September 30, 2023 and 2022, the Company recognized revenue from royalties of $130,400 and $144,716, respectively.

 

Royalties Receivable

 

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 $87,614 and $105,856 at September 30, 2023 and 2022, respectively, and has determined that no allowance is necessary.

 

 

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.

 

The Company has a Euro currency bank account located in Bermuda. This account is used for payments to vendors that bill the Company in a currency other than US dollars and for funds received from shareholders located outside the United States. As of September 30, 2023 and 2022, the Euro account had a balance of $250 and $20,495 Euros, respectively.

 

Foreign currency translation gains/losses are recorded in accumulated other 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 consolidated statements 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 years ended September 30, 2023 and 2022, as all consolidated financial statement items were denominated in the US dollar. Minimal gain (loss) from foreign currency transactions during the years ended September 30, 2023 and 2022 totaled $(1,193) and $(996), respectively.

 

Use of Estimates

 

The preparation of financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as revenues and expenses reported for the period presented. The most significant estimates relate to the useful life and impairment of intangible assets and allowance for doubtful accounts. The Company regularly will assess these estimates and, while actual results may differ, management believes that the estimates are reasonable.

 

Concentration of Credit Risk

 

Some of our US dollar balances are held in a Bermuda bank that is not insured. As of September 30, 2023 and 2022, uninsured deposits in the Bermuda bank totaled $250 and $20,495, respectively. Our management believes that the financial institution is financially sound, and the risk of loss is low. The Company is in the process of migrating its banking to the institutions in the United States, which are insured by the FDIC up to $250,000.

 

Income Taxes

 

The Company did not accrue corporate income taxes for AIG Ltd, as it is incorporated in the country of Bermuda where there is no corporate income tax. The Company has been subject to US Federal and state income taxes commencing during the year ended September 30, 2020, due to its business combinations with two US companies.

 

Deferred taxes for the VRVR (Nevada) and AIG Inc (Colorado) are provided on a liability method in accordance with ASC 740, “Income Taxes,” whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry-forwards, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company evaluates its tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax position will more likely than not be sustained by the applicable tax authority and has determined that there are no significant uncertain tax positions.

 

 

Net Income (Loss) Per Share

 

In accordance with ASC 260 “Earnings per Share,” the basic net income (loss) per share (“EPS”) is computed by dividing the net income (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 (for convertible preferred stock). During the year ended September 30, 2022, 325,000 shares of the Series B Convertible Preferred stock were converted into 325,000 shares of common stock. During the years ended September 30, 2023 and 2022, the Company had 270,612 shares of Series B Convertible Preferred stock issued and outstanding that are convertible into shares of common stock on a one-for-one basis. 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. 1,200,481 shares of Series C Preferred Stock were issued and outstanding as of September 30, 2023 and are convertible into shares of common stock on a one-for-one basis. In addition, during the year ended September 30, 2022, the Company issued warrants to purchase 900,000 shares of common stock to two groups for contract services. During the years ended September 30, 2023 and 2022, the Company had 900,000 and -0- warrants, respectively, issued and outstanding that are exercisable into shares of common stock. On June 5, 2023, the Company issued an option to purchase 1,000,000 shares of common stock. In March 2022, the Company issued two convertible notes to unrelated parties that were convertible into common shares at $1.25 per share which equaled potential dilution of 376,000 shares as of September 30, 2022. Because the Company issued common shares and options on June 5, 2023 at $0.15 per share, the conversion rate on the notes reset to $0.15, resulting in a potential dilution of 3,133,333 shares as of September 30, 2023. These potentially dilutive securities were excluded from the EPS computation due to their anti-dilutive effect resulting from the Company’s net losses during the years ended September 30, 2023 and 2022.

 

   September 30, 2023   September 30, 2022 
Basic weighted average shares outstanding   8,363,431    7,270,761 
If-converted shares, Series B preferred shares   270,612    270,612 
If-converted shares, Series C preferred shares   1,200,481    - 
If-converted shares, Warrants   -    900,000 
If-converted shares, Options   1,000,000    - 
If-converted shares, Convertible Notes   3,133,333    376,000 
Diluted weighted average common shares outstanding   13,967,857    8,817,373 

 

Stock-Based Compensation

 

The Company accounts for equity awards issued to employees and non-employees for services rendered in accordance with the provisions of ASC 718, “Compensation - Stock Compensation.” These transactions are accounted for based on the grant date fair value of the equity award issued. A resulting compensation expense is recorded over the requisite service period, which is typically the vesting period.

 

Recent Account 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.