NOTES
TO UNAUDITED CONDENSED 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”).
Qingdao
Quanyao holds 50% shares of Qingdao Leibo Sports Culture Co Ltd (“Leibo”).
2.
|
Summary
of principal accounting policies
|
Basis
of presentation and consolidation
The
unaudited condensed 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
unaudited interim financial information as of March 31, 2020 and for the three months ended March 31, 2020 and 2019 have been
prepared without audit, pursuant to the rules and regulations of the SEC and pursuant to Regulation S-X. Certain information and
footnote disclosures, which are normally included in annual consolidated financial statements prepared in accordance with U.S.
GAAP, have been omitted pursuant to those rules and regulations. The unaudited condensed interim financial information should
be read in conjunction with the audited consolidated financial statements and the notes thereto, included in the Form 10-K for
the fiscal year ended December 31, 2019, which was filed with the SEC on May 14, 2020.
In
the opinion of management, all adjustments (including normal
recurring adjustments) necessary to present a fair statement of the Company's unaudited financial position as of March 31, 2020,
its unaudited results of operations for the three months ended March 31, 2020 and 2019, its unaudited cash flows for the three
months ended March 31, 2020 and 2019 and its unaudited statement of stockholders’ deficit for the three months ended March
31, 2020 and 2019, as applicable, have been made. The unaudited interim results of operations are not necessarily indicative of
the operating results for the full fiscal year or any future periods.
2.
|
Summary
of principal accounting policies (continued)
|
Basis
of presentation and consolidation (continued)
The Company’s unaudited
interim 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.
Use of estimates
The preparation of the unaudited
condensed 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 unaudited condensed consolidated financial statements, and the reported amounts of revenues
and expenses during the reporting period. The Company’s significant estimates and assumption include depreciation, impairment
for long-lived assets, allowance for trade receivables and prepayments, the discount rate for lease, stock-based compensation,
and the valuation allowance relating to the Company’s deferred tax assets. Actual results could differ from those estimates.
Liquidity and capital resources
As of March 31, 2020, the Company
had a working capital deficiency of $3,826,271 as compared to a working capital deficiency of $4,159,067 as of December 31, 2019.
Net cash used in operating activities
for the three months ended March 31, 2020 was $540,642 as compared to $1,062,100 for the three months ended March 31, 2019. The
decrease in net cash used in operating activities for the three months ended March 31, 2020 was primarily due to a decreased net
loss generated in the period.
Net cash provided by financing
activities for the three months ended March 31, 2020 was $574,062 as compared to $1,193,076 for the three months ended March 31,
2019. The cash provided by financing activities for the three months ended March 31, 2020 are mainly from issuing of common stocks
and advances from related parties.
As of March 31, 2020, the Company’s
cash balance was $48,262 and the Company’s current liabilities exceed current assets by $3,826,271 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 stockholders. 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 the Company’s ability to continue as a going concern due to (1) the Company’s
recurring losses from operations, including approximately $1,818,081 net loss attributable to the Company’s stockholders
for the three months ended March 31, 2020, (2) the Company’s accumulated deficit of approximately $21,019,573 as of March
31, 2020 and (3) the fact that the Company had negative operating cash flows of approximately $540,642 for the three months ended
March 31, 2020.
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.
2.
|
Summary
of principal accounting policies (continued)
|
Liquidity
and capital resources (continued)
The
Company’s cash balance as of March 31, 2020 will not be sufficient to support the Company’s operations for the next
12 months after the date that the unaudited condensed consolidated 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 the period 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.
The
Company believes if it is unable to obtain 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
unaudited condensed consolidated financial statements for the three months ended March 31, 2020 and 2019 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.
Impact
of COVID-19 Pandemic
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 June 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 the Company’s financial condition, results of operations, and/or cash flows in the future. The Company expects that both
the revenues and costs, generated from its normal daily operations, will be lower than planned.
Advertising
and marketing expenditure
Advertising
and marketing expenditure is expensed when incurred and is included in “general and administrative expenses” in the
unaudited condensed consolidated statements of operations. Advertising and marketing expenses were $20,251 and $25,779 for the
three months ended March 31, 2020 and 2019, respectively.
Revenue
recognition
The
Company recognizes revenue following Accounting Standards Codification
606, Revenue from Contracts with Customers (“Topic 606”). 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.
2.
|
Summary
of principal accounting policies (continued)
|
Revenue
recognition (continued)
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:
|
|
Three months ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Sponsorships
|
|
$
|
326,313
|
|
|
$
|
-
|
|
Total
|
|
$
|
326,313
|
|
|
$
|
-
|
|
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.
2.
|
Summary
of principal accounting policies (continued)
|
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 March 31, 2020, and December 31, 2019, financial instruments of the Company primarily comprise of cash, trade and other receivables,
trade and other payables, which the carrying amounts approximated their fair values because of their generally short maturities.
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$”), which is also the Company’s functional currency.
The Singapore and PRC subsidiaries maintain their books and records in its local currency, the Singapore dollar (“S$”)
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.
2.
|
Summary
of principal accounting policies (continued)
|
Income
taxes
Deferred
tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the unaudited
condensed 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 unaudited condensed 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.
Loss per share
Basic 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.
2.
|
Summary
of principal accounting policies (continued)
|
Leases
Effective 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 unaudited condensed consolidated balance sheets.
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. For the three months ended March 31, 2020 and 2019, no impairment has been recorded by 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. For the three
months ended March 31, 2020 and 2019, recognized loss from changes in fair value as a result of investment disposition were $nil
and $(5,766,462), respectively.
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.
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.
the
Company’s 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 the three months
ended March 31, 2020. 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 the Company’s business
or results of operations. Currently, the Company’s 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 three months ended March 31, 2020, one customer accounted for 100% of the Company’s total revenues. For the three months
ended March 31, 2019, total revenues of Company was nil.
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.
2.
|
Summary
of principal accounting policies (continued)
|
Recently
Issued Accounting Guidance
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 unaudited condensed consolidated financial
statements and related disclosures.
In December 2019, FASB issued
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 unaudited condensed 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 the related parties have been reclassified to conform to the current year presentation. These reclassifications
have no effect on the accompanying unaudited condensed consolidated financial statements.
3.
|
Trade
and other receivables
|
Trade
and other receivables, net consisted of the following:
|
|
As of
|
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
|
|
(Unaudited)
|
|
|
|
|
Trade and other receivables
|
|
$
|
10,111
|
|
|
$
|
58,070
|
|
Less: allowance for doubtful debts
|
|
|
(4,445
|
)
|
|
|
(4,522
|
)
|
Trade and other receivables, net
|
|
$
|
5,666
|
|
|
$
|
53,548
|
|
Movement
of allowance for doubtful accounts was as follows:
|
|
As of
|
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
|
|
(Unaudited)
|
|
|
|
|
Balance at beginning
|
|
$
|
4,522
|
|
|
$
|
271,464
|
|
Provision for doubtful accounts
|
|
|
-
|
|
|
|
4,558
|
|
Write-off of bad debts
|
|
|
-
|
|
|
|
(271,464
|
)
|
Exchange rate effect
|
|
|
(77
|
)
|
|
|
(36
|
)
|
Balance at end
|
|
$
|
4,445
|
|
|
$
|
4,522
|
|
Equipment
is comprised of:
|
|
As of
|
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
|
|
(Unaudited)
|
|
|
|
|
Equipment
|
|
$
|
146,799
|
|
|
$
|
153,575
|
|
Less: accumulated depreciation
|
|
|
(124,614
|
)
|
|
|
(126,437
|
)
|
Total equipment, net
|
|
$
|
22,185
|
|
|
$
|
27,138
|
|
Depreciation
expense for the three months ended March 31, 2020 and 2019 were $3,895 and $4,001, respectively.
Intangible
assets are comprised of:
|
|
As of
|
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
|
|
(Unaudited)
|
|
|
|
|
Trademark
|
|
$
|
15,966
|
|
|
$
|
16,881
|
|
Television production
|
|
|
91,442
|
|
|
|
96,675
|
|
Television content
|
|
|
34,557
|
|
|
|
36,535
|
|
|
|
$
|
141,965
|
|
|
$
|
150,091
|
|
Less: accumulated amortization
|
|
|
(86,546
|
)
|
|
|
(87,748
|
)
|
Total intangible assets, net
|
|
$
|
55,419
|
|
|
$
|
62,343
|
|
No
significant residual value is estimated for these intangible assets. Amortization expense for the three months ended March 31,
2020 and 2019, totaled $3,645 and $11,072, respectively. The following table represents the total estimated amortization of intangible
assets for the five succeeding years:
|
|
Estimated Amortization Expense
|
|
Twelve months ending March 31,
|
|
|
|
2021
|
|
$
|
14,197
|
|
2022
|
|
|
14,197
|
|
2023
|
|
|
14,197
|
|
2024
|
|
|
12,828
|
|
|
|
$
|
55,419
|
|
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 March 31, 2020, the Company recognized ROU assets of $70,749 and current operating lease liabilities of $44,132, and long-term
operating lease liabilities of $27,357. The average remaining lease term was approximately 1.58 years as of March 31, 2020. The
discount rate was 8% for the three months ended March 31, 2020.
Lease
expenses were $19,679 and $29,568 for the three months ended March 31, 2020 and 2019, respectively. The maturities of lease liabilities
in accordance with Lease (Topic 842) in the next year as of March 31, 2020 were as follows:
Maturity of Lease liabilities
Twelve months ending March 31,
|
|
|
|
2020
|
|
|
48,111
|
|
2021
|
|
|
28,065
|
|
Total lease payments
|
|
|
76,176
|
|
Less: imputed interest
|
|
|
(4,687
|
)
|
Present value of minimum operating lease payments
|
|
$
|
71,489
|
|
Future
minimum lease payment as of March 31, 2020 were as follows:
Twelve months ending March 31,
|
|
|
|
2020
|
|
|
51,734
|
|
2021
|
|
|
28,065
|
|
Total lease payments
|
|
$
|
79,799
|
|
7.
|
Convertible
and short-term loans
|
|
|
As of
|
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
|
|
(Unaudited)
|
|
|
|
|
Convertible loans
|
|
$
|
1,940,675
|
|
|
$
|
1,948,731
|
|
Short-term loans
|
|
|
73,477
|
|
|
|
74,236
|
|
Total
|
|
$
|
2,014,152
|
|
|
$
|
2,022,967
|
|
The
interest expense for convertible loans for the three months ended March 31, 2020 and 2019 were $40,754 and $11,061, respectively.
The
interest expense for short-term loans for the three months ended March 31, 2020 and 2019 were $2,566 and $24,235, respectively.
Convertible
loans
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 March 31, 2020, the
S$100,000 ($70,335) was past due.
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 March 31,
2020, the $300,000 was past due.
|
7.
|
Convertible
and short-term loans (continued)
|
Convertible
loans (continued)
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. 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 three months ended March 31, 2020.
As of March 31, 2020, the total outstanding balance to the Investor is $1,500,000.
On April 11, 2018, the Company, the Chairman of the Board of
Directors, and one independent director of the Company entered into an agreement to document the loan of S$ 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 March 31, 2020, the total outstanding balance to the director is S$100,000($70,340).
Short-term
loans
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. The Company has paid S$319,282 ($239,076) of principal and fully repaid the short term
loan with the principal of S$100,000 ($74,366) when due. As of March 31, 2020, S$59,718 ($42,005) was past due for the short
term loan and late fee occurred with the principal of S$360,000 ($267,716).
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$44,742 ($31,472) in total were past due for the two short term loans.
All
the above convertible loans and short-term loans are non-collateral loans.
For the three months ended March
31, 2020, the Company issued 41,600 shares of common stock at $1.53 per share for cash consideration of $70,721 net with issuance
cost of $7,072. The Company also issued 637,398 shares of common stock to two individuals at $1.23 per share with total value of
$784,000 to settle their outstanding balances due from the Company.
The Company also issued 987,762
shares of common stock at $1.23 per share with total value of $1,209,828 to five individuals and a third party company as payments
for professional services, 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.
For the three months ended March
31, 2019, the Company issued 1,560,000 shares of common stock for net cash consideration of $1,462,900. The Company also issued
340,000 shares of common stock with total value of $340,000 to three 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 recently 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 March 31, 2020, future net operating losses of approximately
$21.0 million are available to offset future operating income through 2038.
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, 2018 and 2019 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 March 31, 2020 and 2019, 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 $6,543,782 and $6,164,895 as of March
31,2020 and December 31, 2019, respectively.
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.
|
|
For the three months ended
|
|
|
|
March 31,
2020
|
|
|
March 31,
2019
|
|
Income tax expense is comprised of:
|
|
(Unaudited)
|
|
|
|
|
Current income tax
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
Deferred income tax expense (benefit)
|
|
|
-
|
|
|
|
-
|
|
Total income taxes expense
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
The
Company’s effective income tax rates were 2% and 0% for the three months ended March 31, 2020 and 2019, respectively. Income
tax mainly consists of foreign income tax at statutory rates and the effects of permanent and temporary differences.
The
tax effects of temporary differences from continuing operations that give rise to the Company’s deferred tax assets are
as follows:
|
|
As of
|
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
|
|
(Unaudited)
|
|
|
|
|
Net operating loss carryforwards in the PRC
|
|
$
|
2,085,841
|
|
|
$
|
2,014,901
|
|
Net operating loss carryforwards in Singapore
|
|
|
375,167
|
|
|
|
332,407
|
|
Net operating loss carryforwards in the US
|
|
|
4,082,774
|
|
|
|
3,817,587
|
|
Less: valuation allowance
|
|
|
(6,543,782
|
)
|
|
|
(6,164,895
|
)
|
End of period
|
|
$
|
-
|
|
|
$
|
-
|
|
10.
|
Stockholder
transactions
|
As
of March 31, 2020 and December 31, 2019, amounts due to stockholders were $894,507 and $1,226,963 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
|
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
|
|
(Unaudited)
|
|
|
|
|
Beginning of period
|
|
$
|
630,675
|
|
|
$
|
1,956,390
|
|
Issuance of shares to settle outstanding balance due from the Company
|
|
|
(544,000
|
)
|
|
|
-
|
|
Advances (Repayment) for the period, net
|
|
|
123,216
|
|
|
|
(1,325,715
|
)
|
End of period
|
|
$
|
209,891
|
|
|
$
|
630,675
|
|
A
summary of changes in the amount due to the CEO of the Company is as follows:
|
|
As of
|
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
|
|
(Unaudited)
|
|
|
|
|
Beginning of period
|
|
$
|
353,416
|
|
|
$
|
702,170
|
|
Advances (Repayment) for the period, net
|
|
|
328,328
|
|
|
|
(348,754
|
)
|
End of period
|
|
$
|
681,744
|
|
|
$
|
353,416
|
|
A
summary of changes in the amount due to other directors of the Company is as follows:
|
|
As of
|
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
|
|
(Unaudited)
|
|
|
|
|
Beginning of period
|
|
$
|
242,872
|
|
|
$
|
190,850
|
|
Shares issued to settle outstanding balance due from the Company
|
|
|
(240,000
|
)
|
|
|
-
|
|
Advances (Repayment) for the period, net
|
|
|
-
|
|
|
|
52,022
|
|
End of period
|
|
$
|
2,872
|
|
|
$
|
242,872
|
|
11.
|
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 seeks, 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 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.
Target Acquisition
On December 28, 2019, the Company
entered into a Sale and Purchase Agreement (the “Agreement”) with Rodrigues Gerard Anthony and Zuzarte Desmond Gerard,
(each a “Seller”, and collectively referred to as the “Sellers”). Prior to the transactions contemplated
by the Agreement, the Sellers, collectively, own 100% of the outstanding share capital in EXPO AV-Insync Pre. Ltd., a private
liability company incorporated in and under the laws of Singapore (the “Target Company”). Affected by the global outbreak
of COVID-19 virus, the process of due diligence, which originally was expected to be completed in April 2020, has been postponed.
The timeline of completion will be dependent upon the economic recovery from the pandemic which remains uncertain.
On
April 24, 2020 and May 27, 2020, the Company entered into two Subscription Agreements (the “Subscription Agreement”)
with an individual third party investor (the "Investor"), respectively. On April 24, 2020, the Investor remitted $280,289
in exchange for 186,860 shares of the Company’s common stock as determined pursuant to the terms and conditions of the Subscription
Agreement. On May 27, 2020, the Investor remitted $210,940 in exchange for 140,627 shares of the Company’s common stock
as determined pursuant to the terms and conditions of the Subscription Agreement.
On
April 24, 2020 and May 27, 2020, the Company issued 18,686 shares and 14,063 shares of common stock, respectively, with total
value of $40,281 for professional services pursuant to Service Agreements entered with consultants. 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.