NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
|
1.
|
Organization and nature
of operations
|
Rebel Group, Inc. (f/k/a Inception
Technology Group, Inc. and utilizes the trade name of Rebel Fighting Championship, the “Company”) was incorporated
under the laws of the State of Florida on September 13, 2011. The Company organizes, promotes and hosts mixed martial arts (“MMA”)
events featuring top level athletic talent. With assistance from contracted production crews, the Company also produces and distributes,
through the internet and social media, and sells the rights to distribute to television stations, videos of its MMA events. The
Company seeks to promote MMA in Asian countries through hosting events that attract talented fighters from all over the world.
On June 21, 2017, Pure Heart
Entertainment Pte Ltd. (“Pure Heart”) formed Rebel Shanghai Limited, which was incorporated in Shanghai China in order
to acquire Qingdao Quanyao Sports Consulting Co. Ltd.(the “Qingdao Quanyao”) and the business expansion in the southern
part of PRC.
On October 1, 2017, the Company
entered into a Share Transfer Agreement (the “Share Transfer”) with Naixin Qi, an individual (the “Shareholder”),
the sole shareholder of “Qingdao Quanyao”.
Pursuant to the Transfer Agreement,
Pure Heart, through a wholly foreign owned entity (the “WOFE”) agreed to acquire 100% share of the outstanding equity
interests (the “Equity Stake”) of the Qingdao Quanyao from the Shareholder with the purchase price valued at approximately
$7,000,000 consisting of the following: (i) the forgiveness of debt owed by the Target Company to Pure Heart as of October 1, 2017,
in the amount of approximately $2,825,000 (the “Forgiven Debts”) and (ii) 12,000,000 shares (the “Shares”)
of the common stock of the Company, par value $0.0001 per share (the “Common Stock”) (together the “Purchase
Price”) (See Note 3 to the consolidated financial statements for detail).
Qingdao Quanyao holds 50% shares
of Qingdao Leibo Sports Culture Co Ltd (“Leibo”).
REBEL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
|
2.
|
Summary of principal
accounting policies
|
Basis of presentation and
consolidation
The consolidated
financial statements of the Company and its subsidiaries are prepared and presented in accordance with accounting principles generally
accepted in the United States (“U.S. GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange
Commission (“SEC”).
All significant inter-company
transactions and balances have been eliminated upon consolidation.
The Company’s audited
consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business.
Liquidity and capital resources
The Company’s financial
statements for the year ended December 31, 2019 have been prepared on a going concern basis, which assumes that the Company will
be able to meet its financial obligation, working capital and capital expenditures need as and when they fall due.
As of December 31, 2019,
the Company had a working capital deficiency of $4,159,067 as compared to a working capital deficiency of $4,856,536 as
of December 31, 2018.
Net cash used in operating activities
for the year ended December 31, 2019 was $3,156,242 as compared to $4,480,190 for the year ended December 31, 2018. The cash used
in operating activities for the financial year ended December 31, 2019 was primarily due to a decreased net loss generated in the
year.
Net cash used in investing activities
for the year ended December 31, 2019 was $17,585 as compared to $20,100 for the year ended December 31, 2018. The cash used in
investing activities are mainly due to purchase of fixed assets.
Net cash provided by financing
activities for the year ended December 31, 2019 was $3,151,118 as compared to $4,537,729 for the year ended December 31, 2018.
The cash provided by financing activities for the year ended December 31, 2019 are mainly from issuing of common shares and convertible
loans, such cash inflow was partially offset by the repayment to related parties.
As
of December 31, 2019, the Company’s cash balance was $18,820 and the Company’s current liabilities exceed current
assets by $4,159,067 which together with continued losses from operations raises substantial doubt about its ability to
continue as a going concern. The Company’s operating results for future periods are subject to uncertainties and it is
uncertain if the management will be able to attain profitability and continued growth for the foreseeable future. If the
management is not able to increase revenue and manage operating expenses in line with revenue forecasts, the Company may not
be able to achieve profitability.
Historically, the Company finances
its operations through loans from investors and shareholders. The Company’s actions to improve operation efficiency, cost
reduction, and develop core cash-generating business include the following: seeking advances from the major shareholders, pursuing
additional public and/or private issuance of securities, and looking for strategic business partners to optimize the Company’s
operations.
The
Company has considered whether there is substantial doubt about our ability to continue as a going concern due to (1) the
Company’s recurring losses from operations, including approximately $10,830,963 net loss attributable to the our
stockholders for the year ended December 31, 2019, (2) the Company’s accumulated deficit of approximately $19,201,492
as of December 31, 2019 and (3) the fact that the Company had negative operating cash flows of approximately $3,156,242 for
the year ended December 31, 2019.
In evaluating if there is substantial
doubt about the Company’s ability to continue as a going concern, the Company is trying to alleviate the going concern risk
through (1) increasing cash generated from operations by controlling operating expenses and increasing more live events, (2) financing
from domestic banks and other financial institutions, and (3) equity or debt financing. The Company has certain plans to mitigate
these adverse conditions and to increase the liquidity of the Company.
On an on-going basis, the Company
also received and will continue to receive financial support commitments from the Company’s related parties.
The Company’s cash balance
as of December 31, 2019 will not be sufficient to support the Company’s operations for the next 12 months after the date
that the financial statements issued. The Company has several actions to implement as mentioned above. However, if the Company
is unable to obtain the necessary additional capital on a timely basis and on acceptable terms, the Company will be unable to implement
its current plans for expansion, repay debt obligations or respond to competitive market pressures, which will have negative influence
upon the Company’s business, prospects, financial condition and results of operations.
The negative operating results
of cash flow and working capital in 2019 raise substantial doubt about the Company’s ability to continue as a going concern.
The Company’s continued operations are highly dependent upon its ability to increase revenues and if needed complete equity
and/or debt financing.
REBEL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
|
2.
|
Summary of principal
accounting policies (continued)
|
Liquidity and capital resources (continued)
The Company believe if it is
unable to obtain our resources to fund operations, the Company may be required to delay, scale back or eliminate some or all of
its planned operations, which may have a material adverse effect on our business, results of operations and ability to operate
as a going concern.
The audited consolidated financial
statements for the year ended December 31, 2019 and 2018 have been prepared on a going concern basis and do not include any adjustments
to reflect the possible future effects on the recoverability and classifications of assets or the amounts and classifications
of liabilities that may result from the Company’s inability to continue as a going concern.
Advertising and marketing
expenditure
Advertising and marketing expenditure
is expensed when incurred and is included in “general and administrative expenses” in the consolidated statements of
operations. Advertising and marketing expenses were $40,596 and $466,752 for the years ended December 31, 2019 and 2018, respectively.
Revenue recognition
The Company adopted Accounting
Standards Codification 606, Revenue from Contracts with Customers (“Topic 606”), as of January 1, 2018 using the modified
retrospective transition method. Topic 606 prescribes a five-step model for recognizing revenue which includes (i) identifying
contracts with customers; (ii) identifying performance obligations; (iii) determining the transaction price; (iv) allocating the
transaction price and (v) recognizing revenue.
The Company derives revenues
principally from the following sources: (i) advertising and sponsorship sales, (ii) live event ticket sales, and (iii) direct-to-consumer
sales of merchandise at the live event venues. The below describes the revenue recognition policies in further detail for each
major revenue source of the Company.
Advertising and sponsorships:
through the advertising and sponsorship agreements with customers, the Company offers a full range of the promotional vehicles,
including online and print advertising, on-air announcements and special appearances by our fighters. The Company allocates the
transaction price to all performance obligations contained within a sponsorship and advertising arrangement based upon their relative
standalone selling price. Revenues are recognized as each performance obligation is satisfied, which generally occurs when the
sponsorship and advertising is aired, exhibited, performed or played on the applicable media platform.
Live event ticket sales: revenues
from the live event ticket sales are recognized upon the occurrence of the related live event.
Direct-to-consumer venue merchandise
sales: direct-to-consumer merchandise sales consist of sales of merchandise at the live events. Revenues are recognized at the
point of sale, as control is transferred to the customer.
Substantially all revenue was
from sponsorships in the Company.
Currently, the Company’s
revenues come from the following sources:
|
|
Years ended
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Sponsorships
|
|
$
|
138,682
|
|
|
$
|
222,271
|
|
Other
|
|
|
226
|
|
|
|
1,512
|
|
Total
|
|
$
|
138,908
|
|
|
$
|
223,783
|
|
REBEL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
|
2.
|
Summary of principal
accounting policies (continued)
|
Use of estimates
The preparation of the consolidated
financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of
the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Our significant
estimates and assumption include depreciation, impairment for long-lived assets and goodwill, allowance for trade receivables and
prepayments, stock-based compensation, and the valuation allowance relating to the Company’s deferred tax assets. Actual
results could differ from those estimates.
Cash
Cash consist of bank deposits,
which are unrestricted as to the Company’s withdrawal and use. The Company maintains relevant accounts at banks, which have
original maturities of three months or less.
Allowance for doubtful accounts
An allowance for doubtful accounts
is recorded in the period in which a loss is determined to be probable based on an assessment of specific evidence indicating doubtful
collection, historical experience, account balance aging and prevailing economic conditions. Allowance is reversed when the underlying
balance of doubtful accounts are subsequently collected. Accounts receivable balances are written off after all collection efforts
have been exhausted.
Fair value of financial instruments
Fair value information of financial
instruments requires disclosure, whether or not recognized in the balance sheets, for which it is practicable to estimate that
value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future
cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and,
in many cases, could not be realized in immediate settlement of the instruments. Certain financial instruments and all nonfinancial
assets and liabilities are excluded from fair value disclosure requirements. Accordingly, the aggregate fair value amounts do not
represent the underlying value of the Company.
|
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 assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
|
|
Level 3
|
inputs to the valuation methodology are unobservable and significant to the fair value.
|
As of December 31, 2019, and
2018, financial instruments of the Company primarily comprise of cash, trade and other receivables, trade and other payables, accrued
expenses, which the carrying amounts approximated their fair values because of their generally short maturities.
REBEL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
|
2.
|
Summary of principal
accounting policies (continued)
|
Fair value of financial instruments
(continued)
The Company uses quoted prices
in active markets to measure the fair value of the long-term investment and is classified as a level 1 investment.
Foreign currency translation
and transactions
The reporting currency of the
Company is United States Dollars (“US$”), which is also the Company’s functional currency. The Singapore and
PRC subsidiaries maintain their books and records in its local currency, the Singapore dollar (“SGD”) and Renminbi
dollar (“RMB”), which are their functional currencies as being the primary currency of the economic environment in
which these entities operate.
Transactions in foreign currencies
other than functional currencies are initially recorded at the functional currency rate ruling at the date of transaction. Any
differences between the initially recorded amount and the settlement amount are recorded as a gain or loss on foreign currency
transaction in the statements of income. Monetary assets and liabilities denominated in foreign currency are translated at the
functional currency rate of exchange ruling at the balance sheet date. Any differences are taken to profit or loss as a gain or
loss on foreign currency translation in the statements of income.
The Company translated the
assets and liabilities into US dollars using the rate of exchange prevailing at the applicable balance sheet date and the
statements of income and cash flows are translated at an average rate during the reporting period. Adjustments resulting
from the translation are recorded in investors’ equity as part of accumulated other comprehensive income.
Income taxes
Deferred tax assets and liabilities
are recognized for the expected future tax consequences of events that have been included in the consolidated financial statements
or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences
between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws
and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances
are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
Entities should recognize in
the consolidated financial statements the impact of a tax position, if that position is more likely than not of being sustained
upon examination, based on the technical merits of the position. Recognized income tax positions are measured at the largest amount
that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which
the change in judgment occurs. The Company has elected to classify interest and penalties related to unrecognized tax benefits,
if and when required, as part of income tax expense in the consolidated statements of operations.
REBEL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
|
2.
|
Summary of principal
accounting policies (continued)
|
Earnings (loss) per share
Basic earnings (loss) per share
is based on the weighted average number of common shares outstanding during the period while the effects of potential common shares
outstanding during the period are included in diluted earnings per share. The average market price during the year is
used to compute equivalent shares.
Employee equity share options,
non-vested shares and similar equity instruments granted to employees are treated as potential common shares in computing diluted
earnings per share. Diluted earnings per share should be based on the actual number of options or shares granted and not yet forfeited,
unless doing so would be anti-dilutive. The Company uses the “treasury stock” method for equity instruments granted
in share-based payment transactions.
Equipment
Equipment is recorded at cost.
Significant additions or improvements extending useful lives of assets are capitalized. Maintenance and repairs are charged to
expense as incurred. Depreciation is computed using the straight-line method over the estimated useful lives as follows:
Intangible assets
Intangible assets, comprising
trade mark, television production and television content, which are separable from the fixed assets, are stated at cost less accumulated
amortization. Amortization is computed using the straight-line method over the estimated useful lives of 10 years.
Goodwill
Goodwill represents the excess
of the consideration over the fair value of the net assets acquired at the date of acquisition. Goodwill is not amortized but rather
tested for impairment at least annually at the reporting until level by applying a fair-value based test in accordance with accounting
and disclosure requirements for goodwill and other indefinite-lived intangible assets. This test is performed by management annually
or more frequently if the Company believes impairment indicators are present.
Impairment of long-lived
assets
The Company reviews its long-lived
assets, other than goodwill, including property and equipment and intangible assets with definite lives for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. When these events
occur, the Company measures impairment by comparing the carrying values of the long-lived assets to the estimated undiscounted
future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted
cash flows is less than the carrying amounts of the assets, the Company would recognize an impairment loss based on the excess
of the carrying value over the assessed discounted cash flow amount. The Company performed its annual goodwill impairment review
for the year ended December 31, 2018 and determined to fully impair the goodwill arising from acquisition of Quanyao of $6,509,942
for the year ended December 31, 2018. For the year ended December 31, 2019, there is no impairment needed to be accrued after
the annual-assessment of the Company.
Long-term investment
Investments comprise marketable
securities which are classified as available-for-sale securities and are carried at fair value with unrealized gains and losses,
net of taxes, reported as a separate component of shareholders’ equity (deficit). The Company determines any realized gains
or losses on the sale of marketable securities on a specific identification method and records such gains and losses as a component
of other comprehensive loss, net of taxes in the consolidated statement of operations.
Comprehensive income (loss)
The Company has adopted FASB
Accounting Standard Codification Topic 220 (“ASC 220”) “Comprehensive income”, which establishes standards
for reporting and the presentation of comprehensive income (loss), its components and accumulated balances. Accumulated other comprehensive
income represents the unrealized fair value (loss) gain on long-term investment and the accumulated balance of foreign currency
translation adjustments of the Company.
REBEL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
|
2.
|
Summary of principal
accounting policies (continued)
|
Concentrations and risks
A majority of the Company’s
expense transactions are denominated in RMB and a significant portion of the Company and its subsidiaries’ assets and liabilities
are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions
are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank
of China (“PBOC”). Remittances in currencies other than RMB by the Company in China must be processed through the PBOC
or other China foreign exchange regulatory bodies which require certain supporting documentation in order to affect the remittance.
Our functional currency is the
RMB and Singapore dollars in subsidiaries in China and Singapore, respectively, and our financial statements are presented in U.S.
dollars. The Singapore dollars remained stable to U.S. dollar in fiscal year 2019. It is difficult to predict how market forces
or PRC or U.S. government policy may impact the exchange rate between the RMB and the U.S. dollar in the future. The change in
the value of the RMB relative to the U.S. dollar may affect our financial results reported in the U.S. dollar terms without giving
effect to any underlying changes in our business or results of operations. Currently, our assets, liabilities, revenues and costs
are denominated in RMB.
To the extent that the Company
needs to convert U.S. dollars into RMB for capital expenditures and working capital and other business purposes, appreciation of
RMB against U.S. dollar would have an adverse effect on the RMB amount the Company would receive from the conversion. Conversely,
if the Company decides to convert RMB into U.S. dollar for the purpose of making payments for dividends, strategic acquisition
or investments or other business purposes, appreciation of U.S. dollar against RMB would have a negative effect on the U.S. dollar
amount available to the Company.
For the years ended December
31, 2019 and 2018, one customer accounted for 98% and 99.9% of the Company’s total revenues, respectively.
Statement of Cash Flows
Cash flows from the Company’s
operations are formulated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the
consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated
balance sheets.
Risks and Uncertainties
The significant operations of
the Company are located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may
be influenced by political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. The
Company’s results may be adversely affected by changes in the political, regulatory and social conditions in the PRC. Although
the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations
including its organization and structure disclosed in Note 1, may not be indicative of future results.
REBEL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
|
2.
|
Summary of principal
accounting policies (continued)
|
Recently Issued Accounting
Guidance
In February 2016, the FASB issued
ASU 2016-02, Amendments to the Accounting Standards Codification 842 Leases (“ASC 842”). This update requires lessee
to recognize the assets and liability (the lease liability) arising from operating leases on the balance sheet for the lease term.
When measuring assets and liabilities arising from a lease, a lessee (and a lessor) should include payments to be made in optional
periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate
the lease. Twelve months or less lease term, a lessee is permitted to make an accounting policy election not to recognize lease
assets and liabilities. If a lessee makes this election, it should recognize lease expense on a straight-line basis over the lease
term. In transition, this update will be effective for fiscal years beginning after December 15, 2018, including interim periods
within those fiscal years. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases. In March
2019, the FASB issued ASU 2019-01, Codification Improvements to Topic 842, Leases. Before January 1, 2019, the Company adopted
the ASC Topic 840, Leases, each lease is classified at the inception date as either as a capital lease or an operating lease. All
the Company’s leases were classified as operating lease under ASC Topic 840. The Company’s reporting for periods prior
to January 1, 2019 continued to be reported in accordance with Leases (ASC 840). After January 1, 2019, the Company adopted ASC
842. The Company recognizes a lease liability for future fixed lease payments and a right-of-use (“ROU”) asset representing
the right to use the underlying asset during the lease term. Additionally, the Company elected not to recognize leases with terms
of twelve months or less at the commencement date in the consolidated balance sheets. Other than the disclosure in Note 8, the
Company does not believe the adoption of these ASUs would have a material effect on the Company’s consolidated financial
statements.
On June 20, 2018, the FASB issued
ASU No. 2018-07, Compensation—Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting,
which aligns the accounting for share-based payment awards issued to employees and nonemployees. Under ASU No. 2018-07, the existing
employee guidance will apply to nonemployee share-based transactions (as long as the transaction is not effectively a form of financing),
with the exception of specific guidance related to the attribution of compensation cost. The cost of nonemployee awards will continue
to be recorded as if the grantor had paid cash for the goods or services. In addition, the contractual term will be able to be
used in lieu of an expected term in the option-pricing model for nonemployee awards. The new standard is effective for us on January
1, 2019. The Company has adopted this new standard and does not believe this guidance will have a material impact on its consolidated
financial statements.
In August 2018, the FASB Accounting
Standards Board issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework Changes to the Disclosure
Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 modifies the disclosure requirements on
fair value measurements. ASU 2018-13 is effective for public entities for fiscal years beginning after December 15, 2019, with
early adoption permitted for any removed or modified disclosures. The removed and modified disclosures will be adopted on a retrospective
basis and the new disclosures will be adopted on a prospective basis. The Company does not expect this guidance will have a material
impact on its consolidated financial statements.
In May 2019, the FASB Accounting
Standards Board issued ASU No. 2019-06, “Intangibles-Goodwill and Other (Topic 350), Business Combinations (Topic 805), and
Not-for-Profit Entities (Topic 958): Extending the Private Company Accounting Alternatives on Goodwill and Certain Identifiable
Intangible Assets to Not-for-Profit Entities” (“ASU 2019-06”). ASU 2019-06 extended the goodwill accounting alternative
that allows an eligible entity to amortize goodwill acquired in a business combination and test that goodwill for impairment upon
a triggering event. Management will not adopt the alternative goodwill accounting policy and does not expect this guidance would
have a material effect on the Company’s consolidated financial statements.
In May 2019, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-05, “Financial Instruments
– Credit losses (Topic 326). The standard significantly changes how entities will measure credit losses for most financial
assets, including accounts and notes receivables. The standard requires to recognize allowances based on expected rather than incurred
losses. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning
of the first reporting period in which the guidance is effective. The standard is effective for interim and annual reporting periods
beginning after December 15, 2022. The Company is currently assessing the impact of adopting this standard on the Company’s
consolidated financial statements and related disclosures.
In December 2019, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, which reduces
the complexity of FASB ASC Topic 740, “Income Taxes” as part of the FASB’s Simplification Initiative. The amendments
in this guidance simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.
The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending
existing guidance. This guidance is effective for annual reporting periods ending after December 15, 2020, with early adoption
permitted, and should be applied on either a retrospective basis for all periods presented or a modified retrospective basis. Management
is still assessing the impact this might have on the Company’s consolidated financial statements.
Aside from the above, the Company
does not believe other recently issued but not yet effective accounting statements, would have a material effect on the Company’s
financial position or on the results of operations.
Reclassification
The prior year amounts of proceeds
and repayments of convertible loans, term loans and the related parties have been reclassified to conform to the current year
presentation. These reclassifications have no effect on the accompanying consolidated financial statements.
REBEL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
|
3.
|
Trade and other receivables
|
Trade
and other receivables, net consisted of the following:
|
|
As of December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Trade and other receivables
|
|
$
|
58,070
|
|
|
$
|
307,166
|
|
Less: allowance for doubtful debts
|
|
|
(4,522
|
)
|
|
|
(271,464
|
)
|
Trade and other receivables, net
|
|
$
|
53,548
|
|
|
$
|
35,702
|
|
Movement of allowance for doubtful
accounts was as follows:
|
|
As of December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Balance at beginning of the year
|
|
$
|
271,464
|
|
|
$
|
-
|
|
Provision for doubtful accounts
|
|
|
4,558
|
|
|
|
282,356
|
|
Write-off of bad debts
|
|
|
(271,464
|
)
|
|
|
-
|
|
Exchange rate effect
|
|
|
(36
|
)
|
|
|
(10,892
|
)
|
Balance at end of the year
|
|
$
|
4,522
|
|
|
$
|
271,464
|
|
Equipment is comprised of:
|
|
As of December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Equipment
|
|
$
|
153,575
|
|
|
$
|
135,010
|
|
Less: accumulated depreciation
|
|
|
(126,437
|
)
|
|
|
(111,164
|
)
|
Total equipment, net
|
|
$
|
27,138
|
|
|
$
|
23,846
|
|
Depreciation expense for the
years ended December 31, 2019 and 2018 were $14,400 and $26,595, respectively.
Intangible assets are
comprised of:
|
|
As of December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Trademark
|
|
$
|
16,881
|
|
|
$
|
16,663
|
|
Television Production
|
|
|
96,675
|
|
|
|
95,425
|
|
Television Content
|
|
|
36,535
|
|
|
|
36,062
|
|
|
|
|
150,091
|
|
|
|
148,150
|
|
Less: accumulated amortization
|
|
|
(87,748
|
)
|
|
|
(64,483
|
)
|
Total intangible assets, net
|
|
$
|
62,343
|
|
|
$
|
83,667
|
|
No significant residual value
is estimated for these intangible assets. Amortization expense for the years ended December 31, 2019 and 2018, totaled $22,098
and $13,281, respectively. The following table represents the total estimated amortization of intangible assets for the five succeeding
years:
|
|
Estimated Amortization Expense
|
|
|
|
|
|
2020
|
|
$
|
13,129
|
|
2021
|
|
|
13,129
|
|
2022
|
|
|
13,129
|
|
2023
|
|
|
13,129
|
|
2024
|
|
|
9,827
|
|
|
|
$
|
62,343
|
|
REBEL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
The changes in the carrying
amount of goodwill were as follows:
|
|
As of December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Balance at the beginning of the year
|
|
$
|
-
|
|
|
$
|
6,719,542
|
|
Goodwill arising from acquisition of Quanyao
|
|
|
-
|
|
|
|
-
|
|
Impairment of goodwill
|
|
|
-
|
|
|
|
(6,509,942
|
)
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
(209,600
|
)
|
Balance at the end of the year
|
|
$
|
-
|
|
|
$
|
-
|
|
The Company performed its annual
goodwill impairment review for the year ended December 31, 2018 based on Quaoyao’s current financial performance and management’s
projection, and determined to fully impair the goodwill arising from acquisition of Quanyao of $6,509,942 for the year ended December
31, 2018.
On January 30, 2015, MOXC issued
a convertible promissory note to the Company for $7,782,000 (the “MOXC Note”). The MOXC Note would become due and payable
on October 30, 2015. Under the MOXC Note, MOXC had the option to convert any and all amounts due under the MOXC Note into the shares
of MOXC’s shares of common stock (the “MOXC Common Stock”) at the conversion price of $1.00 per share (“Conversion
Price”), if the volume weighted average price (“VWAP”) of MOXC Common Stock for 30 trading days immediately prior
to the date of conversion was higher than the Conversion Price. MOXC also has a right of first refusal to purchase the shares issuable
upon conversion of the MOXC Note at the price of 80% of the VWAP of MOXC Common Stock for 30 trading days immediately prior to
the date of the proposed repurchase by MOXC.
On August 14, 2015, due to the
VWAP of the MOXC Common Stock for 30 trading day prior to August 14, 2015 was higher than $1.00, which triggered the clause of
conversion under the MOXC Note, MOXC notified the Company that it elected to convert the amount of $3,891,000 under the MOXC Note
into 3,891,000 shares of the MOXC Common Stock at the conversion price of $1.00 (“August Conversion”). As a result
of the August Conversion, the remainder amount of the MOXC Note was $3,891,000.
On September 28, 2015, MOXC
notified the Company that it elected to convert the remainder of the MOXC Note, of $3,891,000 into 3,891,000 shares of the MOXC
Common Stock (“September Conversion”). After the August Conversion and September Conversion, consequently, all of the
MOXC Note was converted into the total of 7,782,000 shares of the MOXC Common Stock with no amount of the MOXC Note was outstanding
as of December 31, 2015.
On June 20, 2016, MOXC has approved
a reverse stock split of the Company’s issued and outstanding shares of common stock at a ratio of 1-for-2 (the “Reverse
Stock Split”). As a result, 3,891,000 shares of the MOXC Common Stock are outstanding as of December 31, 2018.
On April 22, 2019, MOXC approved
a reverse stock split of the Company’s issued and outstanding shares of common stock at a ratio of 1-for-5 (the “Reverse
Stock Split”). As a result, 778,200 shares of the MOXC Common Stock were outstanding as of April 22, 2019.
On May 1, 2019, MOXC requested
an oral hearing to appeal the decision of the Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”)
to delist MOXC’s securities from Nasdaq. The hearing was scheduled for June 6, 2019. On May 22, 2019, MOXC announced that
it had been notified by Nasdaq that its bid price deficiency had been cured, and that MOXC was now in compliance with all applicable
listing standards.
On June 20, 2019, the Board
of Directors of the Company approved a distribution of 778,200 shares of MOXC’s common stock, $0.001 par value per share
held by the Company. MOXC’s common stock was distributed to the shareholders of the Company who were shareholders of the
Company as of January 29, 2015. As a result, the Company have not held any shares of the MOXC’s common stock since June 25,
2019.
|
|
As of December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Cost
|
|
$
|
7,782,000
|
|
|
$
|
7,782,000
|
|
Fair value adjustment
|
|
|
(5,766,462
|
)
|
|
|
(6,455,169
|
)
|
Distribution to certain shareholders
|
|
|
(2,015,538
|
)
|
|
|
-
|
|
Total long-term investment
|
|
$
|
-
|
|
|
$
|
1,326,831
|
|
As of December 31, 2018, the
fair value of MOXC was $0.341. For the year ended December 31, 2018, the fair value adjustment of ($10,786,280) was recorded in
the accumulated other comprehensive loss.
For the year ended December
31, 2019, the realized loss on the disposal of MOXC’s common stock was $5,766,462.
REBEL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
The Company has operating leases
for offices and warehouses. As of January 1, 2019, the Company’s operating leases were with terms with twelve months or
less. The Company elected not to recognize leases with terms of twelve months or less in the consolidated balance sheets. At the
lease commencement date, the Company recognized ROU assets and corresponding liabilities of $93,005. As of December 31, 2019,
the Company recognized ROU assets of $85,789 and current operating lease liabilities of $45,770, and long-term operating lease
liabilities of $40,926. The average remaining lease term was approximately 1.83 years as of December 31, 2019. The discount rate
was 8% for the year ended December 31, 2019.
Lease expenses were $75,569 and $240,290 for the year ended
December 31, 2019 and 2018, respectively. The maturities of lease liabilities in accordance with Lease (Topic 842) in each
of the next two yeas as of December 31, 2019 were as follows:
Maturity of Lease liabilities
Twelve months ending December 31,
|
|
|
|
2020
|
|
$
|
50,866
|
|
2021
|
|
|
42,388
|
|
Total lease payments
|
|
|
93,254
|
|
Less: imputed interest
|
|
|
(6,558
|
)
|
Present value of minimum operating lease payments
|
|
$
|
86,696
|
|
Cash paid for amounts included in the measurement of operating
lease liabilities for the year ended December 31, 2019 was $6,219. The amortization of operating lease right-of-use assets for
the year ended December 31, 2019 was $7,112.
Future minimum lease payment as
of December 31, 2019 were as follows:
Twelve months ending December 31,
|
|
|
|
2020
|
|
$
|
76,701
|
|
2021
|
|
|
46,653
|
|
Total lease payments
|
|
$
|
123,354
|
|
|
9.
|
Convertible and short-term
loans
|
|
|
As of December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Convertible loans-repayable within one year
|
|
$
|
1,948,731
|
|
|
$
|
449,600
|
|
Short-term loans-repayable within one year
|
|
|
74,236
|
|
|
|
296,576
|
|
Total
|
|
$
|
2,022,967
|
|
|
$
|
746,176
|
|
The interest expense for convertible
loans for the years ended December 31, 2019 and 2018 were $74,661 and $50,492, respectively.
The interest expense for short-term
loans for the years ended December 31, 2019 and 2018 were $13,108 and $141,393, respectively.
On March 15, 2017, the Company,
the Chairman of the Board of Directors, and one unrelated third-party individual entered into an agreement to document the loan
of Singapore Dollars (“S$”) 50,000 ($35,715) that the unrelated third-party individual advanced to the Company on March
15, 2017, and was repayable on March 14, 2018 (“Repayment Date”), with an interest of 10% per annum. The unrelated
third-party individual may convert all of the principal amount into 71,430 shares of Company’s common stock after the Repayment
Date. The loan was fully repaid on August 20, 2018.
On March 24, 2017, the Company,
the Chairman of the Board of Directors, and one unrelated third-party individual entered into an agreement to document the loan
of S$200,000 ($142,856) that the unrelated third-party individual advanced to the Company on March 24, 2017, and was repayable
on March 23, 2018 (“Maturity Date”), with an interest of 10% per annum. The unrelated third-party individual shall
have the option to extend the term of the loan from the Maturity Date to March 23, 2019 (“Extended Maturity Date”).
The unrelated third-party individual may convert all of the principal amount, into shares of Company’s common stock (“Conversion
Right”) at any time for the period commencing on the date hereof and ending on March 23, 2019 (“Conversion Period”).
In the event that the Conversion Right is exercised within seven Business Days immediately following the Maturity Date, the conversion
will be based on the share price of $0.50. In the event that the Conversion Right is exercised after the Maturity Date but within
seven Business Days immediately following the Extended Maturity Date, the conversion will be based on the share price of $0.60.
The Company repaid S$100,000 ($73,404) on August 23, 2018. As of December 31, 2019, the S$100,000 ($74,365) was past due.
REBEL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
|
9.
|
Convertible and short-term
loans (continued)
|
On May 5, 2017, the Company,
the Chairman of the Board of Directors, and one independent director of the Company entered into an agreement to document the loan
of $300,000 that the independent director advanced to the Company on May 5, 2017, and was repayable on May 4, 2018 (“Maturity
Date”), with an interest of 10% per annum. The independent director shall have the option to extend the term of the loan
from the Maturity Date to May 4, 2019 (“Extended Maturity Date”). The independent director may convert all of the principal
amount, into shares of Company’s common stock (“Conversion Right”) at any time for the period commencing on the
date hereof and ending on May 4, 2019 (“Conversion Period”). In the event that the Conversion Right is exercised within
seven Business Days immediately following the Maturity Date, the conversion will be based on the share price of $0.50. In the event
that the Conversion Right is exercised after the Maturity Date but within seven Business Days immediately following the Extended
Maturity Date, the conversion will be based on the share price of $0.60. As of December 31, 2019, the $300,000 was overdue.
On September 13, 2019, the CEO of the Company
and one third-party investor (“the Investor”) entered into an investment agreement to extend $3 million to the Company
for hosting Rebel 10 event (“Rebel 10 event”) in December 2019. Based on the agreement, the funding is comprised of
a $1.5 million 1-year convertible loan with an interest rate of 8% per annum. The investor may convert the entire principal amount
into 1,500,000 shares of Company’s common stock at any time for the period commencing September 13, 2019 and ending on September
12, 2020. Another $1.5 million will be extended to the Company by subscription of the Company’s new common shares at $1.00
per share upon the approval of Company’s SEC S1 application. In addition, the Investor is entitled to the following additional
rights: (1) The Investor shall receive a 50% share of the net profit after tax arising from the Rebel 10 Event; (2) The Investor
shall be entitled to subscribe for an equity stake up to a maximum of a 75% share in a separate Rebel-brand gym line of business,
such business to be fully funded by the Investor and/or their respective nominated co-founders and/or new investors; (3) The Investor
shall be entitled to receive a 10% share of the net profits generated from the Company’s upcoming reality television show
series “The People’s Champion”, including the series’ subsequent seasons, global and local spin-offs. The
Company received the Investor’s payments of $1,000,000 on September 23, 2019 and $500,000 on October 18, 2019. As of December
31, 2019, the total outstanding balance to the Investor is $1,500,000. On January 11, 2020, the Company hosted the Event 10 in
Europe with a result of operating loss. The Company concludes that no contingent liability shall be recognized or accrued for the
year ended December 31, 2019.
On April 11, 2018, the Company,
the Chairman of the Board of Directors, and one independent director of the Company entered into an agreement to document the loan
of Singapore Dollars (“S$”) 100,000 ($73,404) that the unrelated third-party individual advanced to the Company on
April 11, 2018, and was repayable on April 18, 2019 (“Repayment Date”), with an interest of 10% per annum. The unrelated
third-party individual may convert all of the principal amount into 75,750 shares of Company’s common stock after the Repayment
Date. In the event that the Conversion Right is exercised within seven Business Days immediately following the Maturity Date,
the conversion will be based on the share price of $1.00. As of December 31, 2019, the total outstanding balance to the director
is S$100,000($74,365).
On April 25, 2018, the Company,
the Chairman of the Board of Directors and the Company’s CEO and two financial institutions entered into agreements to advance
to the Company two short term loans of S$360,000 ($267,717) and S$100,000 ($74,366) respectively. The two short term loans of S$360,000
and S$100,000 are guaranteed by two directors of the Company and bear an effective interest rate of 1.25% and 4% per month, respectively,
with 12 equal monthly repayment terms. As of March 31, 2020, S$40,718 ($30,280) was past due for the short term loan
with the principal of S$360,000 ($267,716); and the Company has fully repaid the other short term loan with the principal of S$100,000
($74,366).
On October 24, 2018 and November
7, 2018, the Company, the Chairman of the Board of Directors and the Company’s CEO and another financial institution entered
into two separate agreements to advance to the Company two short term loans of S$32,900 ($24,466) and S$17,100 ($12,717) respectively.
The two short term loans of S$32,900 ($24,466) and S$17,100 ($12,717) are guaranteed by a director of the Company and bear an effective
interest rate of 2% and 2% per month, with 12 and 6 equal monthly repayment terms, respectively. As of March 31, 2020, S$49,555
($36,852) in total were past due for the two short term loans.
On September 5, 2019, the Chairman
of the Company, the CEO of the Company, and the Company entered into an agreement to advance S$70,000 ($52,056) to the Company
as a loan, with such amount repayable on October 4, 2019 and bearing no interest rate. On October 5, 2019, the Company repaid the
full amount of the loan.
On September 6, 2019, the Company
and one third-party individual entered into an agreement to advance S$50,000 ($37,183) to the Company as a loan, with such amount
repayable on September 17, 2019 (the “Maturity Date”) with an interest of 12%. On September 23, 2019, the Company repaid
the principal and interest in total of S$56,000 ($41,645) as satisfaction for the full amount of the loan.
On September 6, 2019, the Company
and another third-party individual entered into an agreement to advance S$60,000 ($44,619) to the Company as a loan, with such
amount repayable on October 6, 2019, with an interest of 5% per month. On October 4, 2019, the Company repaid the principal and
interest in total of S$63,000 ($46,850) as satisfaction for the full amount of the loan.
On September 7, 2019, the Company
and one third-party individual entered into an agreement to advance S$30,000 ($22,310) to the Company as a loan, with such amount
repayable on October 7, 2019 with an interest of 5% per month. On September 23, 2019, the Company repaid the principal and interest
of S$30,125 ($22,403) as satisfaction for the full amount of the loan.
All the above convertible loans
and short-term loans are non-collateral loans.
REBEL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
During January to December
2019, the Company issued 3,618,001 shares of common stock for net cash consideration of $3,799,900. The Company also issued 1,749,284
shares of common stock with total value of $1,953,146 to eight individuals as payments for professional services related to commission
of fund raising, public relations and marketing, and employment benefits. The value of shares of common stock issued for consideration
other than cash was determined by referring to the fair value of shares of common stock recently issued for cash consideration.
During January to December 2018,
the Company issued 4,202,600 shares of common stock for net cash consideration of $2,609,331. The Company also issued 1,320,378
shares of common stock with total value of $1,190,378 to nine individuals as payments for professional services related to public
relations and marketing, director fees, and employment benefits. The value of shares of common stock issued for consideration other
than cash was determined by referring to the fair value of shares of common stock issued for cash consideration.
The Company and its subsidiaries
file separate income tax returns.
The United States of America
Rebel Group, Inc. is incorporated
under the laws of the State of Florida in the U.S., and is subject to U.S. federal corporate income tax. The State of Florida
imposes corporate state income tax at 5.5%. As of December 31, 2019, future net operating losses of approximately $19.2 million
are available to offset future operating income through 2038.
The 2017 Tax Act also created
a new requirement that, for the periods beginning after January 1, 2018, certain income (referred to as global intangible low taxed
income or “GILTI”) earned by foreign subsidiaries in excess of a deemed return on tangible assets of foreign corporations
must be included in U.S. taxable income.
The GILTI income is eligible
for a deduction, which lowers the effective tax rate to 10.5% for calendar years 2018 through 2025 and 13.125% after 2025. Under
U.S. GAAP, companies are allowed to make an accounting policy election to either (i) account for GILTI as a component of tax expense
in the period in which a company is subject to the rules – the period cost method, or (ii) account for GILTI in a company’s
measurement of deferred taxes – the deferred method. The Company elected to account for GILTI in the period the tax is incurred.
The Company did not generate any GILTI during the year ended December 31, 2019.
British Virgin Islands
Rebel FC and SCA Capital are
incorporated in the British Virgin Islands and are not subject to income taxes under the current laws of the British Virgin Islands.
Singapore
Pure Heart was incorporated
in Singapore and is subject to Singapore corporate income tax at 17%.
People of Republic China
(“PRC”)
Rebel Shanghai and Qingdao Quanyao
were incorporated in PRC and are subject to statutory Enterprise Income Tax rate of the PRC at 25%.
The Company has a number of
open tax years which include the tax years ended December 31, 2014, 2015, 2016, 2017 and 2018 that have not been filed. While it
is often difficult to predict the final outcome or the timing of uncertain tax position, the Company believes that the accruals
for the income taxes reflect the most likely outcome for the unfiled tax years. The Company had approximately $20,000 and $20,000
of interest and penalties accrued at December 31, 2019 and 2018, respectively.
Based upon management’s
assessment of all available evidence, the Company believes that it is more-likely-than-not that the deferred tax assets, primarily
for certain of the subsidiaries net operating loss carry-forwards will not be realizable; and therefore, a full valuation allowance
is established for net operating loss carry-forwards. The valuation allowance for deferred tax assets was $6,164,895 and $3,867,226 as
of December 31, 2019 and 2018, respectively.
REBEL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
The Company does not anticipate
any significant increase to its liability for unrecognized tax benefit within the next 12 months. The Company will classify interest
and penalties related to income tax matters, if any, in income tax expense.
|
|
As of December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Income tax expense is comprised of:
|
|
|
|
|
|
|
Current income tax
|
|
$
|
20,000
|
|
|
$
|
20,015
|
|
Deferred income tax expense (benefit)
|
|
|
-
|
|
|
|
-
|
|
Total income taxes expense
|
|
$
|
20,000
|
|
|
$
|
20,015
|
|
The Company’s effective
income tax rates were 0% and 0% for the years ended December 31, 2019 and 2018, respectively. Income tax mainly consists of foreign
income tax at statutory rates and the effects of permanent and temporary differences.
The following table reconciles
the U.S. statutory rates to the Company’s effective tax rate for the years ended December 31, 2019 and 2018.
|
|
As of December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
U.S. statutory rates
|
|
|
21
|
%
|
|
|
21
|
%
|
Foreign income not recognized in the U.S.
|
|
|
(21
|
%)
|
|
|
(21
|
%)
|
Effect of permanent difference
|
|
|
-
|
|
|
|
-
|
|
Effective income tax rates
|
|
|
0
|
%
|
|
|
0
|
%
|
Deferred income taxes are recognized
for tax consequences in future years of differences between the tax bases of assets and liabilities and their reported amounts
in the financial statements at each year-end and tax loss carry forwards. Deferred income tax was measured using the enacted income
tax rates for the periods in which they are expected to be reversed. The tax effects of temporary differences that give rise
to the following approximate deferred tax liabilities as of December 31, 2019 and 2018 are presented below:
|
|
As of December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Unrealized fair value gains on long-term investment
|
|
$
|
-
|
|
|
$
|
278,634
|
|
The tax effects of temporary
differences from continuing operations that give rise to the Company’s deferred tax assets are as follows:
|
|
As of December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards in the PRC
|
|
$
|
2,014,901
|
|
|
$
|
1,663,913
|
|
Net operating loss carryforwards in Singapore
|
|
|
332,407
|
|
|
|
210,046
|
|
Net operating loss carryforwards in the US
|
|
|
3,817,587
|
|
|
|
1,993,267
|
|
Less: valuation allowance
|
|
|
(6,164,895
|
)
|
|
|
(3,867,226
|
)
|
End of year
|
|
|
-
|
|
|
|
-
|
|
REBEL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
|
12.
|
Shareholder transactions
|
As at December 31, 2019 and 2018,
amounts due to shareholders were $1,226,963 and $2,849,410 respectively. The amounts are unsecured, interest free due on demand
and does not have a fixed repayment date.
A summary of changes in the
amount due to the chairman of the Company is as follows:
|
|
As of December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
$
|
1,956,390
|
|
|
$
|
1,028,719
|
|
Advances (Repayment) for the year, net
|
|
|
(1,325,715
|
)
|
|
|
927,671
|
|
End of year
|
|
$
|
630,675
|
|
|
$
|
1,956,390
|
|
A summary of changes in the
amount due to the CEO of the Company is as follows:
|
|
As of December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
$
|
702,170
|
|
|
$
|
149,956
|
|
Advances (Repayment) for the year, net
|
|
|
(348,754
|
)
|
|
|
552,214
|
|
End of year
|
|
$
|
353,416
|
|
|
$
|
702,170
|
|
A summary of changes in
the amount due to other directors of the Company is as follows:
|
|
As of December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
$
|
190,850
|
|
|
$
|
-
|
|
Advances (Repayment) for the year, net
|
|
|
52,022
|
|
|
|
190,850
|
|
End of year
|
|
$
|
242,872
|
|
|
$
|
190,850
|
|
REBEL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
|
13.
|
Commitments
and contingencies
|
Legal Proceeding
From time to time, the Company
may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject
to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
On November 5, 2018, the Company
was served a summon for a complaint filed by Ofsink, LLC (“Ofsink”) on September 13, 2018, in the Supreme Court of
the City of New York County of New York against the Company. By filing the complaint, Ofsink alleged, among other claims, that
the Company failed to pay for its legal services rendered in the amounts set forth on uncontested invoices in the amount of $252,822,
and that it sustained damages in the sum of $252,822 plus interest and attorney’s fees as a result of the non-payment of
the invoices rendered. The complaint seek, among other relief, compensatory damages and plaintiff’s counsel’s fees.
On December 18, 2018, Ofsink voluntarily dismissed its lawsuit against the Company without prejudice. Ofsink informed the Company
that it had planned to sell a promissory note approximately the amount Company owed to a third party. On April 16, 2020, the Company
has entered into a Settlement Agreement with Ofsink to resolve the legal dispute. Both the Company and Ofsink agreed to settle
the balance in accordance with the terms of the promissory note. The matter is therefore settled.
On January 15, 2020, the Company
entered into a Subscription Agreement (the “Subscription Agreement I”) with an individual third party investor(the
“Investor”). On January 15, 2020, the Investor remitted $70,721 in exchange for 41,600 shares of the Company’s
common stock as determined pursuant to the terms and conditions of the Subscription Agreement.
On March 27, 2020, the Company
entered into a Subscription Agreement (the “Subscription Agreement II”) with Mr. Khian Kiee Leong, the chairman of
the Company. On March 27, 2020, Mr. Leong received 680,000 shares by offsetting $544,000 off his outstanding balances due from
the Company as determined pursuant to the terms and conditions of the Subscription Agreement II.
On January 7, January
28, February 6, March 27, 2020, the Company issued 945,160 shares of common stock with total value of $1,055,309 for professional
services pursuant to Service Agreements entered with consultants and directors. The value of shares of common stock issued for
consideration other than cash was determined by referring to the fair value of common stocks issued for cash consideration.
In March 2020, the World Health
Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread,
and any related adverse public health developments, have adversely affected workforces, customers, economies, and financial markets
globally. Affected by the global outbreak of COVID-19 virus, as of March, 2020, most of international sports games have been postponed
or cancelled. The Company’s MMA business is bound to be affected by the current epidemic. The Company continues to coordinate
with infectious disease and public health experts along with government officials to determine the timing to resume the events.
It is currently infeasible to estimate the number of events to be impacted. However, the Company cannot predict the impact of the
COVID-19 pandemic, and the longer the duration of the event and the more widespread in geographic locations, the more likely it
is that it could have an adverse impact on our financial condition, results of operations, and/or cash flows in the future. The
Company assessed that both the revenues and costs, generated from its normal daily operations, will be lower than expected.
Except of the above, there
were no events or transactions other than those disclosed in this report, if any, that would require recognition or disclosure
in our consolidated financial statements for the year ended December 31, 2019.
F-22