UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2018

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____________ to _____________

 

US VR GLOBAL.COM INC.

 

(Name of Registrant As Specified In Its Charter)

 

Delaware   000-50413   98-0407797

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

Lot A-2-10, Galeria Hartamas

Jalan 26A/70A, Desa Sri Hartamas

50480 Kuala Lumpur, Malaysia

  50480
(Address of principal executive offices)   (Zip Code)

 

603 6201 0069

 

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ] Accelerated filer [  ]
       
Non-accelerated filer [  ] Smaller reporting company [X]
(Do not check if a smaller reporting company)      
       
Emerging growth company [  ]    

 

If an emerging growth company, indicate by check mark 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. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

As of November 19, 2018, there were 126,325,792 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

 

 

 

   
 

 

TABLE OF CONTENTS

 

    Page  
     
PART I. FINANCIAL INFORMATION  
     
ITEM 1. FINANCIAL STATEMENTS F-1
  Condensed Consolidated Balance Sheets at September 30, 2018 (unaudited) and December 31, 2017 F-1
     
  Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended September 30, 2018 and 2017, the Nine Months Ended September 30, 2018, and for the period from February 27, 2017 (inception) to September 30, 2017 (unaudited) F-2
     
  Condensed Consolidated Statement of Changes in Stockholders’ Deficit for the Nine Months Ended September 30, 2018 (unaudited) F-3
     
  Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2018 and for the period from February 27, 2017 (inception) to September 30, 2017 (unaudited) F-4
     
  Notes to the Condensed Consolidated Financial Statement (unaudited) F-5
     
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 4
     
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 7
     
ITEM 4. CONTROLS AND PROCEDURES 8
     
PART II. OTHER INFORMATION 8
     
ITEM 1 LEGAL PROCEEDINGS 8
     
ITEM 1A. RISK FACTORS 8
     
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 8
     
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 8
     
ITEM 4. MINE SAFETY DISCLOSURES 8
     
ITEM 5. OTHER INFORMATION 8
     
ITEM 6. EXHIBITS 9
     
SIGNATURES 10

 

 2 
 

 

FORWARD-LOOKING STATEMENTS

 

Except for any historical information contained herein, the matters discussed in this quarterly report on Form 10-Q contain certain “forward-looking statements’’ within the meaning of the federal securities laws. This includes statements regarding our future financial position, economic performance, results of operations, business strategy, budgets, projected costs, plans and objectives of management for future operations, and the information referred to under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

These forward-looking statements generally can be identified by the use of forward-looking terminology, such as “may,’’ “will,’’ “expect,’’ “intend,’’ “estimate,’’ “anticipate,’’ “believe,’’ “continue’’ or similar terminology, although not all forward-looking statements contain these words. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, you are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Although we believe that the expectations reflected in such forward-looking statements are reasonable as of the date made, expectations may prove to have been materially different from the results expressed or implied by such forward-looking statements. Important factors that may cause actual results to differ from projections include, for example:

 

  the success or failure of management’s efforts to implement our business plan;
     
  our ability to fund our operating expenses;
     
  our ability to compete with other companies that have a similar business plan;
     
  the effect of changing economic conditions impacting our plan of operation; and
     
  our ability to meet the other risks as may be described in future filings with the Securities and Exchange Commission (the “SEC”).

 

Unless otherwise required by law, we also disclaim any obligation to update our view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made in this quarterly report on Form 10-Q.

 

When considering these forward-looking statements, you should keep in mind the cautionary statements in this quarterly report on Form 10-Q and in our other filings with the SEC. We cannot assure you that the forward-looking statements in this quarterly report on Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may prove to be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time-frame, or at all. Any of the factors described above or elsewhere in this report could cause our financial results, including our net income or loss or growth in net income or loss to differ materially from prior results, which in turn could, among other things, cause the price of our common stock to fluctuate substantially.

 

 3 
 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

US VR Global.com Inc

Condensed Consolidated Balance Sheets

(Expressed in U.S. dollars)

 

    September 30, 2018     December 31, 2017  
    (Unaudited)        
ASSETS                
CURRENT ASSETS:                
Cash   $ 103,000     $ 587,000  
Prepaid expenses and deposits     126,000       290,000  
                 
Total Current Assets     229,000       877,000  
NON-CURRENT ASSETS:                
Property and equipment, net     238,000       443,000  
Total Non-Current Assets     238,000       443,000  
                 
TOTAL ASSETS   $ 467,000     $ 1,320,000  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
CURRENT LIABILITIES:                
Accounts payable and accrued expenses   $ 358,000     $ 261,000  
Due to related party     980,000       874,000  
Advances from shareholders     144,000       -  
Dividend payable     700,000       -  
Deposits from potential investors     270,000       -  
Deposits for shares to be issued     -       2,075,000  
                 
Total Current Liabilities     2,452,000       3,210,000  
                 
Commitments and contingencies                
                 
STOCKHOLDERS’ EQUITY:                
Preferred stock at $0.0001 par value: 500,000,000 shares authorized; 121,058,863 shares issued and outstanding     12,000       12,000  
Common stock par value $0.0001: 2,000,000,000 shares authorized; 126,325,792 and 119,529,803 shares issued and outstanding, respectively     12,000       12,000  
Additional paid-in capital     2,686,000       63,000  
Accumulated other comprehensive income     6,000       -  
Accumulated deficit     (4,701,000 )     (1,977,000 )
Total Stockholders’ equity     (1,985,000 )     (1,890,000 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 467,000     $ 1,320,000  

 

See accompanying notes to the condensed consolidated financial statements.

 

 F-1 
 

 

US VR Global.com Inc

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Expressed in U.S. dollars, except share and per share data)

(Unaudited)

 

    For the
Three Months
Ended
    For the
Three Months
Ended
    For the
Nine Months
Ended
    For the Period from
February 27, 2017
(Inception) to
 
    September 30, 2018     September 30, 2017     September 30, 2018     September 30, 2017  
                         
Net revenues   $ -     $ -     $ -     $ -  
                                 
Operating expenses                                
Professional and consulting     19,000       143,000       653,000       300,000  
General and administrative     160,000       485,000       1,064,000       816,000  
Management fee to related party     36,000       -       204,000       154,000  
Impairment of property and equipment     470,000       -       470,000       -  
Write off of lease deposit     236,000       -       236,000       -  
Reverse merger expenses     -       -       97,000       -  
                                 
Total operating expenses     921,000       628,000       2,724,000       1,270,000  
                                 
Net loss     (921,000 )     (628,000 )     (2,724,000 )     (1,270,000 )
                                 
Dividend payable on Series A Preferred Stock     (410,000 )     -       (700,000 )     -  
Net loss attributable to common shareholders     (1,331,000 )     (628,000 )     (3,424,000 )     (1,270,000 )
Other Comprehensive Income:                                
Foreign currency translation income     (45,000 )     -       6,000       -  
Total Comprehensive loss for the period     (1,376,000 )     (628,000 )     (3,418,000 )     (1,270,000 )
                                 
Net loss attributable to common stockholders per share - Basic and diluted:   $ (0.01 )     (0.00 )     (0.03 )     (0.01 )
                                 
Weighted average common shares outstanding - basic and diluted     126,325,792       119,529,803       126,325,792       119,529,803  

 

 

See accompanying notes to the condensed consolidated financial statements.

 

 F-2 
 

 

US VR Global.com Inc

Condensed Consolidated Statements of Changes in Stockholders’ Deficit

For the nine months ended September 30, 2018

(Expressed in U.S. dollars, except share data)

(unaudited)

 

    Series A Preferred Stock
Par Value $ 0.0001
    Common Stock,
Par Value $0.0001
    Additional           Other        
    Number of Shares     Amount     Number of Shares     Amount     Paid-in Capital     Accumulated Deficit     Comprehensive loss     Total Equity  
Balance, December 31, 2017     121,058,863     $ 12,000       119,529,803     $ 12,000     $ 63,000     $ (1,977,000 )   $ -     $ (1,890,000 )
Issuance of common shares previously reflected as deposits     -       -       4,389,721       -       2,075,000       -       -       2,075,000  
Shares issued for cash     -       -       415,000       -       249,000                       249,000  
Fair value of shares issued for services     -       -       112,184       -       67,000       -       -       67,000  
Fair value of shares issued to settle due to related party     -       -       1,333,333       -       800,000       -       -       800,000  
Fair value of shares issued under severance agreement                     220,000       -       132,000       -       -       132,000  
Effect of reverse merger transactions                     325,751       -       -       -       -       -  
                                                                 
Dividend payable on Series A Preferred Stock     -       -       -       -       (700,000 )             -       (700,000 )
                                                                 
Foreign currency translation income     -       -       -       -       -       -       6,000       6,000  
Net loss     -       -       -       -       -       (2,724,000 )     -     $ (2,724,000 )
                                                                 
Balance, September 30, 2018 (Unaudited)     121,058,863     $ 12,000       126,325,792     $ 12,000     $ 2,686,000     $ (4,701,000 )   $ 6,000     $ (1,985,000 )

 

  

See accompanying notes to the condensed consolidated financial statements.

 

 F-3 
 

 

US VR Global.com Inc

Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2018 and for the

Period from February 27, 2017 (inception) to September 30, 2017

(Expressed in U.S. dollars)

(Unaudited)

 

   For the
Nine Months
Ended
   For the
Period from
February 27, 2017
(inception) to
 
   September 30, 2018   September 30, 2017 
         
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net Loss  $(2,724,000)  $(1,270,000)
           
Adjustments to reconcile net loss to net cash used in operating activities          
Depreciation and amortization   51,000    30,000 
Fair value of shares issued for services   67,000    - 
Fair value of shares issued for severance agreement   132,000    - 
Impairment of property and equipment   470,000    - 
Write off of lease deposit   236,000    - 
Reverse merger expenses   97,000    - 
Accrual of management fee due to related party   204,000    154,000 
Changes in operating assets and liabilities:          
Prepaid expenses and deposits   (72,000)   (208,000)
Accounts payable and accrued expenses   97,000    23,000 
           
NET CASH USED IN OPERATING ACTIVITIES   (1,442,000)   (1,271,000)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchase of property and equipment   (316,000)   (298,000)
NET CASH USED IN INVESTING ACTIVITIES:   (316,000)   (298,000)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from sale of common shares   249,000    87,000 
Deposits from potential investors   270,000    1,653,000 
Advances from shareholder   49,000    - 
Advances from related party   963,000    1,064,000 
Repayment of advances from related party   (261,000)   - 
           
NET CASH PROVIDED BY FINANCING ACTIVITIES   1,270,000    2,804,000 
           
Effect of exchange rate changes in cash   4,000    - 
NET CHANGE IN CASH   (484,000)   1,235,000 
           
Cash at beginning of period   587,000    - 
           
Cash at end of period  $103,000   $1,235,000 
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:          
Interest paid  $-   $- 
Income tax paid  $-   $- 
           
NON-CASH INVESTING AND FINANCING ACTIVITIES          
Common shares issued for settlement of advances from related party  $800,000   $- 
Dividend payable on Series A Preferred Stock   700,000    - 
Issuance of common shares previously reflected as deposits   2,075,000    - 

 

See accompanying notes to the condensed consolidated financial statements.

 

 F-4 
 

 

US VR Global.com Inc

Notes to the Condensed Consolidated Financial Statements

(unaudited)

 

Note 1 - Organization and Summary of Significant Accounting Policies

 

US VR Global Inc (the “US VR Sub”) was incorporated on February 27, 2017 under the laws of the State of Delaware. The main focus of our business is to develop facilities that use virtual reality (“VR”) and augmented reality (“AR”) technologies to provide interactive and immersive rides, games and attractions.

 

At September 30, 2018, the Company does not have any AR or VR parks in place and no construction has started on any such parks at this time. In May 2018, the Company deposited $236,000 (HKD 1,844,072) with a landlord for a proposed lease space located in Macau. The lease has not closed as scheduled and at September 30, 2018, the Company determined that the deposit should be written off (see Note 2). In addition, the Company’s plans for a VR facility in Malaysia has been delayed because construction of the site has not yet been completed. At September 30, 2018, the Company assessed the recoverability of the carrying value of the property and equipment related to its planned facilities and determined that the costs were impaired and recorded an impairment of $470,000 (see Note 3).

 

Recapitalization

 

On February 6, 2018, the Company signed a share exchange agreement in which the Company agreed to merge with US VR Global.com Inc., a Delaware corporation (“US VR.com”). Pursuant to the merger agreement, on February 6, 2018 the issued and outstanding common shares of the Company were exchanged on a three-for-one basis for 126,000,041 shares of common stock. On April 26, 2018, 121,058,863 shares of Series A Preferred Stock of US VR.com were issued to complete the merger with US VR Sub. The issuance of the common shares and Series A Preferred shares is shown on the accompanying financial statements as if the merger was completed as of February 27, 2017 (Inception). After the merger was completed, the US VR Sub’s shareholders own 100% of the outstanding shares of preferred stock of US VR.com and 99.7% of the outstanding shares of common stock of US VR.com and the original shareholders of US VR.com own approximately 0.03% of the outstanding shares of common stock of US VR.com. The transaction was accounted for as a reverse merger (recapitalization) with US VR Sub deemed to be the accounting acquirer and US VR.com deemed to be the legal acquirer. The financial statements presented herein are those of the accounting acquirer given the effect of the issuance of 325,751 shares of common stock upon completion of the transaction and reflecting the net liabilities assumed of US VR.com of $97,000 as a cost of the reverse merger. As a result of the merger, US VR.com holds a 100% interest in US VR Sub (US VR Global.com and US VR Sub, collectively, after the merger, the “Company”).

 

On June 28, 2018, Mr. Ramelle Ashram Bin Ramli resigned from his position as the chief executive officer of the Company and also resigned as chairman of and a member of the Company’s board of directors and from all positions with the Company’s subsidiaries effective as of June 28, 2018. Effective July 4, 2018, Gary Chaw Cheng Fei was appointed to act as the Company’s principal executive officer in the interim while the Company searches for a suitable candidate to fill this position.

 

Basis of Presentation of Unaudited Financial Information

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods have been included. The results of operations for the nine months ended September 30, 2018 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2018. The condensed consolidated balance sheet information as of December 31, 2017 was derived from the audited financial statements included in US VR Global Inc.’s financial statements as of and for the period from February 27, 2017 (inception) to December 31, 2017 included in Form 8-K filed with the SEC on February 6, 2018. These interim financial statements should be read in conjunction with that report.

 

 F-5 
 

 

Going Concern

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, for the nine months ended September 30, 2018, the Company incurred a net loss of $2,724,000 and used cash in operating activities of $1,442,000, and at September 30, 2018, the Company had a working capital deficit of $2,223,000. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s December 31, 2017 financial statements, has expressed substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

The Company intends to raise funds through public offerings to finance operations until the Company achieves profitable operations. If we do not raise all of the money we need from public offerings, we will have to find alternative sources, such as a private placement of securities or loans or advances from our officers, directors or others. Such additional financing may not become available on acceptable terms and there can be no assurance that any additional financing that the Company does obtain will be sufficient to meet its needs in the long term. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing; or cause substantial dilution for our stockholders, in the case of equity financing. If adequate funds are not available to satisfy either medium or long-term capital requirements, the Company’s operations and liquidity could be materially adversely affected and the Company could be forced to cut back its operations.

 

Basis of consolidation

 

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary VR Global Limited and Hero Central Dot Com Sdn Bhd. All inter-company accounts and transactions have been eliminated in consolidation.

 

Use of estimates

 

Management uses estimates and assumptions in preparing these financial statements in accordance with US GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities in the balance sheets, and the reported revenue and expenses during the periods reported. Significant estimates include those related to accounting for potential liabilities, depreciable lives of property and equipment, analysis of impairments of recorded long-term assets, assumptions used in valuing stock instruments issued for services, and the valuation allowance for deferred income taxes. Actual results could differ from those estimates. Actual results may differ from these estimates.

 

Revenue Recognition

 

The Company derived no revenue during the periods ending September 30, 2018 and 2017. The Company will recognize revenue under the guidance of ASC 606, Revenue with contracts with customers that requires the Company to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identify the Company’s performance obligations in the contract or agreement, (3) determine the transaction price, (4) allocate the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company will apply the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients.

 

 F-6 
 

 

Property and equipment

 

Property and equipment are stated at cost less accumulated depreciation. Depreciation of property and equipment are calculated on the straight-line method over their estimated useful lives or lease terms generally as follows:

 

Classification

 

Estimated useful lives

Computers and equipment - Office   3 years
Furniture & Fixtures   5 years
Theme park equipment and improvements   3 to 10 years
Leasehold Improvements   Shorter of lease term or estimated useful life

 

Expenditures for maintenance and repairs are expensed as incurred.

 

Net Income (Loss) per Common Share

 

Basic earnings (loss) per share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding during the year. Diluted earnings (loss) per share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method. Potential common shares are excluded from the computation if their effect is anti-dilutive.

 

There were no potentially outstanding dilutive common shares for the reporting periods ended September 30, 2018 and 2017.

 

Foreign currencies translation

 

The reporting currency of the Company is the United States Dollars (“US$”) and the accompanying financial statements have been expressed in US$. The Company’s subsidiary in Malaysia maintains its books and records in its functional currency, the Malaysia Ringgits (“MYR”).

 

In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$ using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income within the statements of stockholders’ equity.

 

Translation of amounts from MYR and HKD into US$ has been made at the following exchange rates for the respective periods:

 

   As of and for the period ended 
   September 30, 2018 
     
Period-end RM : US$1 exchange rate   4.14 
Period-average RM : US$1 exchange rate   4.14 
      
Period-end HKD : US$1 exchange rate   7.84 
Period-average HKD : US$1 exchange rate   7.83 

 

 F-7 
 

 

Recently Issued Accounting Pronouncements

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This update will require the recognition of a right-of-use asset and a corresponding lease liability, initially measured at the present value of the lease payments, for all leases with terms longer than 12 months. For operating leases, the asset and liability will be expensed over the lease term on a straight-line basis, with all cash flows included in the operating section of the statement of cash flows. For finance leases, interest on the lease liability will be recognized separately from the amortization of the right-of-use asset in the statement of comprehensive income and the repayment of the principal portion of the lease liability will be classified as a financing activity while the interest component will be included in the operating section of the statement of cash flows. ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018. Early adoption is permitted. Upon adoption, leases will be recognized and measured at the beginning of the earliest period presented using a modified retrospective approach. Early adoption is permitted. In July 2018, the FASB issued ASU 2018-11, Targeted Improvements, which allows for a cumulative-effect adjustment in the period the new lease standard is adopted and will not require restatement of prior periods. The Company is in the process of evaluating the impact of ASU 2016-02 and ASU 2018-11 on the Company’s financial statements and disclosures.

 

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.

 

Note 2-Deposits

 

On April 23, 2018, we entered into a heads of terms (similar to a letter of intent) for an operating lease agreement in Macau (Peoples Republic of China, “PRC”) and paid a lease deposit of $236,000 (HKD 1,844,072) with the potential landlord. The head of terms was breached as no full agreement was entered into within the stipulated time frame. We are currently in the process of negotiating with the potential landlord for an alternative site, however we cannot confirm or predict whether the potential landlord will be agreeable to such negotiations. Accordingly, at September 30, 2018, the Company determined that the lease deposit should be written off.

 

Note 3 – Property and Equipment

 

Property and equipment consists of the following at:

 

   

September 30,

2018

   

December 31,

2017

 
Theme Park project-under construction   $ 470,000     $ 250,000  
Computers and equipment     277,000       184,000  
Furniture and fixtures     26,000       24,000  
Leasehold improvement     31,000       30,000  
Total property and equipment     804,000       488,000  
Accumulated depreciation     (96,000 )     (45,000 )
Impairment     (470,000 )     -  
Property and equipment, net   $ 238,000     $ 443,000  

 

At September 30, 2018 and December 31, 2017, the Company had incurred $470,000 and $250,000, respectively, related to the development and construction of equipment and improvements for its planned facility (referred to as a “Theme Park”). The Theme Park will use virtual reality and augmented reality technologies to provide interactive and immersive rides, games and attractions.

 

At September 30, 2018, the Company assessed the recoverability of the carrying value of the Theme Park by estimating the future net cash flows expected to result from the asset, including eventual disposition and determined the future net cash flows are less than the carrying value of the asset and recorded an impairment loss of $350,000. At September 30, 2018, the Company assessed the recoverability of the carrying value of its computers and equipment by estimating the future net cash flows expected to result from the asset, including eventual disposition and determined the future net cash flows are less than the carrying value of the asset and recorded an impairment loss of $120,000. At September 30, 2018, the Company determined that there was no impairment for its furniture and equipment or leasehold improvement.

 

Depreciation expense for the nine months ended September 30, 2018 was $51,000.

 

 F-8 
 

 

Note 4 -Advances from Potential Investors

 

In July 2018, the Company received advances of $270,000 from three potential investors. The Company and investors are currently in negotiations for the issuance of shares of the Company’s common stock to the investors but share purchase agreements have not been finalized. The advances are unsecured, non-interest bearing, and is due on demand.

 

Note 5 -Stockholders’ Equity

 

The Company was capitalized on August 24, 2017 when it issued 121,058,863 shares of Series A Preferred stock and 119,529,803 shares of common stock to its founding shareholders for total proceeds of $88,000. The issuance of the shares of Series A Preferred Stock and common stock is presented on the accompanying financial statements as if the shares were issued February 27, 2017 (inception).

 

Each share of the Company’s Series A Preferred Stock (i) has a stated value of $2.79 per share; (ii) is entitled to be paid cash dividends of 1% of the stated value on the second anniversary of issuance and 2% of the stated value on the third through fifth anniversaries of issuance; and (iii) is convertible into shares of the Company’s common stock on a one-for-one basis at the election of the holder prior to the five year anniversary of issuance, and will automatically convert into shares of the Company’s common stock on the fifth anniversary of issuance. For the period ended September 30, 2018, the Board of Directors of the Company had not declared a dividend for the Series A Preferred Stock and the Company accrued $700,000 for dividends at September 30, 2018.

 

On February 6, 2018, the Company issued 4,389,721 shares of common stock. These shares were sold for $0.45 to $0.60 per share and $2,075,000 had been received in 2017 for the 4,389,721 shares.

 

During the nine months ended September 30, 2018, the Company issued 415,000 shares of common stock from the sale of shares at $0.60 per share for aggregate proceeds of $249,000.

 

During the nine months ended September 30, 2018, the Company issued 1,333,333 shares of common stock valued at $800,000 to settle advances due to a related party (see Note 4). The shares issued for the settlement of the advance were valued at $0.60 per share based on the contemporaneous sale of the Company’s common stock.

 

During the nine months ended September 30, 2018, the Company issued 112,184 shares of common stock with a total fair value of $67,000 to two third party consultants for consulting services provided. The shares issued are non-refundable and deemed earned upon issuance. As a result, the Company expensed the entire $67,000 upon issuance. The shares issued for services were valued at $0.60 per share based on the contemporaneous sale of the Company’s common stock.

 

During the nine months ended September 30, 2018, the Company issued 220,000 shares of common stock with a total fair value of $132,000 as part of a severance agreement with a former officer. The Company recognized the full amount of the fair value of the common stock issued in general and administrative expense on the accompanying financial statements. The shares issued for the settlement of the severance were valued at $0.60 per share based on the contemporaneous sale of the Company’s common stock.

 

On April 25, 2018, the Company’s Board of Directors approved to increase the Company’s authorized common shares to 2,000,000,000 common shares, and to increase the Company’s authorized shares of preferred stock to 500,000,000 preferred shares, and revise the common share and preferred share par value to $0.0001 per share, and filed the requisite documentation with the State of Delaware on April 25, 2018.

 

Note 6 – Related Party Transactions

 

VR Global SDN. BHD. (“VR Global”) is one of the founding shareholders of the Company and is its majority shareholder. VR Global has advanced funds to the Company for working capital and other business purposes. These advances are unsecured, non-interest bearing and due on demand. A t December 31, 2017, the Company owed VR Global $874,000. During the nine months ended September 30, 2018, VR Global made advances to the Company of $963,000. In addition, a management fee of $204,000 due to VR Global based on 3% of total expenses of the Company, as defined, was accrued. On February 6, 2018, the Company issued 1,333,333 shares of common stock valued at $800,000 as a payment to VR Global. During the nine months ended September 30, 2018, the Company also repaid $261,000 to VR Global. At September 30, 2018, the Company owed VR Global $980,000.

 

In connection with the Company’s merger with US VR Global.com Inc., the Company assumed a payable of $95,000 due to a shareholder of the Company. At September 30, 2018, the amount due to the shareholder was $95,000. The amount due to the shareholder is unsecured, non-interest bearing, and are due on demand.

 

In July 2018, the Company received advances totaling $49,000 from another shareholder of the Company. The advances are unsecured, non-interest bearing, and are due on demand.

 

Note 7 – Commitments and contingencies

 

At September 30, 2018, the Company had signed contracts totaling $12,924,000 related to the development and construction of its planned Theme Park.

 

 F-9 
 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

You should read the following discussion together with our financial statements and the related notes included elsewhere in this annual report on Form 10-Q. This discussion contains forward-looking statements that are based on our current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements.

 

Overview

 

The Company was incorporated in the State of Delaware in 2003. On December 15, 2017, the Company entered into an Investment Agreement with Ramelle Ashram Bin Ramli and two previous shareholders of the Company, After the closing of the Investment Agreement on December 19, 2017, Mr. Ramli owned at such time approximately 68.5% of the Company’s then issued and outstanding shares of common stock, and Mr. Ramli was appointed as Chairman of the Board, a director, and as the Company’s Chief Executive Officer, and Mr. Jaime Alexander Louis Terauds and Lai Chee Mei (Amanda) were appointed as directors, and Gary Chaw was appointed as the Company’s Chief Financial Officer.

 

On February 6, 2018, US VR Global Inc. (“US VR Sub”), and the shareholders of US VR Sub entered into the Exchange Agreement. Pursuant to the terms of the Exchange Agreement, (i) the Company agreed to acquire from the US VR Sub shareholders all of the shares of common stock of US VR Sub in exchange for the issuance by the Company to the US VR Sub shareholders of shares of the Company’s common stock and shares of the Company’s Series A preferred stock, and (ii) US VR Sub will become a wholly owned subsidiary of the Company.

 

Pursuant to the terms of the Exchange Agreement, the first closing (the “First Closing”) occurred on February 6, 2018 and the US VR Sub shareholders exchanged 51% of US VR Sub’s common stock for 126,000,041 shares of Company common stock, representing 99.7% of the Company’s common stock, and US VR Sub became a majority owned subsidiary of the Company.

 

Pursuant to the terms of the Exchange Agreement, at the second closing (the “Second Closing”), the US VR Sub shareholders agreed to exchange the 49% balance of US VR Sub for shares of Company Series A preferred stock. The Second Closing occurred on April 27, 2018 and the Company issued 121,058,863 shares of Series A Preferred Stock to the US VR Sub stockholders. As a result of the Second Closing, US VR Sub became a wholly owned subsidiary of the Company.

 

The Company was a shell company immediately prior to the Share Exchange. The Company had no assets or operations prior to the Share Exchange. US VR Sub was incorporated in the State of Delaware on February 27, 2017 and commenced operations at that time.

 

 4 
 

 

Following the First Closing, the Company held a 51% interest in US VR Sub. Following the Second Closing, the Company holds a 100% interest in US VR Sub. US VR Sub has three subsidiaries, one of which (Hero Central Dot Com Sdn Bhd) is an operating subsidiary.

 

Since the Share Exchange, we seek to engage in the development and operation of AR and VR amusement parks and entertainment venues in Malaysia. We believe our success primarily will be dependent on (i) our ability to raise sufficient capital to fund our development plans for US VR Sub, (ii) our ability to identify and execute on other AR and VR theme park development sites and projects; and (iii) numerous other factors. There are also numerous other factors that will affect our success, such as competitive products, our ability to maintain a proprietary position, and the relative resources of others.

 

We have no revenues, and we will need to complete additional development and raise capital for the Company before we commence operations. Accordingly, our liquidity and results of operations are dependent on our ability to obtain additional funds for our development activities.

 

Recent Developments

 

As of todays’ date the Company does not have any AR or VR parks in place and no construction has started on any such parks at this time. As a result of the recent developments discussed below, the Company has decided to refocus its strategy into looking for smaller sites for our planned AR and VR parks, as the funding required to construct our AR and VR parks is quite less substantial for a smaller site than it would be for a bigger site. The Company is currently seeking to identify sites as well as obtain funding for its AR and VR parks in order to be able to construct same, however there can be no assurance that this can occur as planned or at all.

 

On April 23, 2018, we entered into a heads of terms (similar to a letter of intent) (“Heads of Terms”) for an operating agreement with Studio City Retail Services Limited (“Studio City Retail”), an affiliate of Melco Resorts and Entertainment Limited (“Melco”). Melco, a company with American depositary shares listed on the NASDAQ Global Select Market, is a developer, owner and operator of casino gaming and entertainment casino resort facilities in Asia. Pursuant to the Heads of Terms, we agreed to enter into an operating agreement with Studio City Retail regarding the lease by us of approximately 48,000 square feet of retail space at Melco’s Studio City, Macau (China) location for the first of our Hero Central Park flagships. Studio City, which opened in October 2015, is a cinematically-themed integrated entertainment, retail and gaming resort in Cotai, Macau. Macau is a resort city in Southern China, known for its casinos and luxury hotels. The Head of Terms was breached as no full agreement was entered into within the stipulated time frame.

 

We are currently in the process of negotiating with Studio City Retail for a smaller site in Studio City to construct our Hero Central Park, however we cannot confirm or predict whether Studio City will be agreeable to such negotiations. If Studio City Retails is amenable to entering into an agreement with us for a smaller site at Studio City, the Company would still have to raise funds in order to be able to proceed with the construction of its Hero Central Park on such site, and there can be no assurance that the Company would be able to convince Studio City Retail to enter into such agreement or that the Company would be able to raise the necessary funds.

 

Additionally, the Company’s planned Hero Central Park at the Empire site in Malaysia has been delayed because construction of the Empire site has not yet been completed. The Company plans to postpone the Empire project as a result of the foregoing and is in the process of seeking to identify another smaller site in Malaysia for its planned Hero Central Park. However there can be no assurance that the Company will be able to identify such site, or even it if did so, that it would be able to raise the necessary funds for the construction of its planned Hero Central Park on such site.

 

Use of Estimates

 

The Company uses estimates and assumptions in preparing the financial statements in accordance with U.S. generally accepted accounting policies (“GAAP”). Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities in the balance sheets, and the reported revenue and expenses during the periods reported. Actual results may differ from the estimates and assumptions used.

 

 5 
 

 

Critical Accounting Policies

 

Our significant accounting policies are described in more details in the notes to our financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. We believe the following accounting policies to be most critical to the judgement and estimates used in the preparation of our financial statements.

 

Concentration of risk. We derive risk from our uncertainty about our ability to raise additional capital; our entry into a new consumer entertainment markets and our dependence upon consumer acceptance of our AR & VR theme park products; our substantial and well-funded competition in a variety of entertainment venues; and a variety of other significant risk. See Risk Factors.

 

Results of Operations

 

We are in the early stage of development our VR and AR park and entertainment business. To date, we have not generated any revenues from such operations. While we may in the future generate revenue from a variety of sources, the Company expects to continue to incur substantial losses from operations for the foreseeable future and there can be no assurance that we will ever generate significant revenues or achieve profitability.

 

The Company is currently in pre-operation stage and has no revenue from operations. The investing operation expenses of the Company for the nine month period ended September 30, 2018, consisted mainly of general and administration expenses of $1,064,000 and professional and consulting fees of $653,000. General and administrative expenses are mainly paid for general office expenses, employee cost, and travelling costs. Consulting fees consist of fees paid to various consultants and advisors of the company for financial management, business development, legal opinions, fees associate with Edgar agent and transfer agent.

 

In May 2018, the Company deposited $236,000 (HKD 1,844,072) with a landlord for a proposed lease space located in Macau. The lease has not closed as scheduled and at September 30, 2018, the Company determined that the deposit should be written off. At September 30, 2018, the Company assessed the recoverability of the carrying value of the property and equipment related to its planned facilities and determined that the costs were impaired and recorded an impairment of $470,000.

 

Liquidity and Capital Resources

 

As of September 30, 2018, we had cash of approximately $103,000. In addition, we have liabilities to third parties and related parties totaling approximately $2,480,000, as of September 30, 2018.

 

For the nine months ended September 30, 2018, the Company incurred a net loss of $2,724,000 and used cash in operating activities of $1,442,000, and at September 30, 2018, the Company had a working capital deficit of $2,223,000. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s December 31, 2017 financial statements, has expressed substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

The Company intends to raise funds through public offerings to finance operations until the Company achieves profitable operations. If we do not raise all of the money we need from public offerings, we will have to find alternative sources, such as a private placement of securities or loans or advances from our officers, directors or others. Such additional financing may not become available on acceptable terms and there can be no assurance that any additional financing that the Company does obtain will be sufficient to meet its needs in the long term. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing; or cause substantial dilution for our stockholders, in the case of equity financing. If adequate funds are not available to satisfy either medium or long-term capital requirements, the Company’s operations and liquidity could be materially adversely affected and the Company could be forced to cut back its operations

 

 6 
 

 

We are an AR and VR park developer focused on the development and commercialization of AR and VR entertainment venues. As a result of the recent developments discussed above, the Company has decided to refocus its strategy into looking for smaller sites for our planned AR and VR parks, as the funding required to construct our AR and VR parks is quite less substantial for a smaller site than it would be for a bigger site. The Company is currently seeking to identify sites as well as obtain funding for its AR and VR parks in order to be able to construct same, however there can be no assurance that this can occur as planned or at all. The Company believes that it has sufficient cash on hand to fund its operations into end 2018. The exact duration that our liquidity will be sufficient to fund operations depends upon many factors, some of which are outside the control of the Company and are difficult to predict. We expect our licensing, development and operational expenses to increase in connection with our ongoing activities. Accordingly, we will need to raise additional capital to fund future operations and we expect to finance future cash needs through public or private equity offerings, debt financings or corporate collaboration and licensing arrangements. Such funding may not be available on favorable terms, if at all. Failure to raise additional capital could cause us to curtail operations and result in the loss of an investment in our common stock.

 

If adequate funds are not available, we may be required to delay, reduce the scope of, or eliminate one or more of our contemplated development theme park projects. To the extent we raise additional funds by issuing equity securities, our stockholders may experience additional significant dilution, and debt financing, if available, may involve restrictive covenants. We may seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.

 

Our forecast of the period of time through which our current capital will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.

 

From time to time, VR Global provides certain operations, finance and human resource services to the Company. VR Global has also advanced funds to the Company for working capital and other business purposes. No specific term is stated for the advance. Those advances are unsecured, non-interest bearing and due on demand. On February 2, 2018, US VR Sub cancelled indebtedness in the aggregate amount of $800,000 advanced to it for early stage working capital purposes by VR Global in consideration of the issuance of 4,000,000 shares of restricted stock of US VR Sub. As of September 30, 2018, the total amount owed to VR Global is $ 980,000.

 

We expect to incur substantial expenditures in the foreseeable future for the lease expenses, operational development and sales and marketing of US VR Sub. We will require additional financing to develop, our theme parks, fund operations, license third party intellectual property, invest in equipment, and manage potential operating losses

 

Accordingly, our continued operations are dependent on our ability to raise additional capital through the sale of equity or debt securities and through our ability to make our theme park projects operational and profitable. There can be no assurances that we will be able to obtain funding, or that any such funding arrangements will be on terms attractive to us. In the event we are unable to raise sufficient funds, we would have to substantially alter our business plans.

 

Off-Balance Sheet Arrangements

 

The Company does not have any off-balance sheet arrangements at this time.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not required for smaller reporting companies.

 

 7 
 

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Our management, under the supervision and with the participation of our Chief Financial Officer, who is both our principal accounting and financial officer and our principal executive officer, has reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2018. Based on such review and evaluation, our Chief Financial Officer concluded that, as of September 30, 2018, the disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act (a) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (b) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

On June 28, 2018, Mr. Ramelle Ashram Bin Ramli resigned from his position as the chief executive officer of the Company and also resigned as chairman of and a member of the Company’s board of directors and from all positions with the Company’s subsidiaries effective as of June 28, 2018. Effective July 4, 2018, Gary Chaw Cheng Fei was appointed to act as the Company’s principal executive officer in the interim while the Company searches for a suitable candidate to fill this position.

 

Other than the foregoing, there were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 of the Exchange Act that occurred during the fiscal quarter ended September30, 2018, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not a party to any material litigation, nor, to the knowledge of management, is any litigation threatened against us that may materially affect us.

 

Item 1A. Risk Factors

 

We are a Smaller Reporting Company and are not required to provide the information under this item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

(a) Not applicable.

 

(b) During the quarter ended September 30, 2018, there have not been any material changes to the procedures by which security holders may recommend nominees to the Board of Directors.

 

 8 
 

 

Item 6. Exhibits

 

Exhibit
Number
  Description of Exhibit
     
31.1   Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
31.2   Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1   Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
32.2   Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
101.INS   XBRL Instance
     
101.SCH   XBRL Taxonomy Extension Schema
     
101.CAL   XBRL Taxonomy Extension Calculation
     
101.DEF   XBRL Taxonomy Extension Definition
     
101.LAB   XBRL Taxonomy Extension Labels
     
101.PRE   XBRL Taxonomy Extension Presentation

 

 9 
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  US VR GLOBAL.COM INC.
     
   By: /s/ Gary Chaw Cheng Fei
Date: November 19, 2018  

Gary Chaw Cheng Fei

Chief Financial Officer (principal financial officer

and principal accounting officer and principal executive officer)

 

 10