See accompanying notes to unaudited condensed
consolidated financial statements
See accompanying notes to unaudited condensed
consolidated financial statements
See accompanying notes to unaudited condensed
consolidated financial statements
The following table provide a reconciliation of cash, cash equivalents
and restrict cash reported within the statement of financial position that sum to the total of the same amounts shown in the unaudited
condensed consolidated statements of cash flows:
See accompanying notes to unaudited condensed
consolidated financial statements
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., also known as Rebel Fighting Championship, its trade name, 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 talents. 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 by 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 in Shanghai, China in order to acquire Qingdao
Quanyao Sports Consulting Co., Ltd., a company organized under the laws of the PRC (“Qingdao Quanyao”) and to facilitate
the Company’s planned business expansion in the southern part of the PRC.
On October 1, 2017, the Company
entered into a Share Transfer Agreement (the “Share Transfer Agreement”) with Naixin Qi, who was the sole shareholder
of Qingdao Quanyao.
Pursuant to the Share Transfer Agreement,
Pure Heart, through a wholly foreign owned entity (the “WOFE”) agreed to acquire 100% of the outstanding equity interests
of Qingdao Quanyao from the Shareholder for a purchase price of $7,000,000 (the “Purchase Price”) including: (i) the
forgiveness of debt owed by Qingdao Quanyao Sports Consulting Co. Ltd, a company organized under the laws of PRC (“Quanyao),
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 (of common stock of the Company (“Common Stock”), par value $0.0001 per share (the “Shares”) (See
Note 3 to the consolidated financial statements for further details).
Qingdao Quanyao holds 50% of the
issued shares of Qingdao Leibo Sports Culture Co., Ltd. (“Leibo”) since January 8, 2015, the date of Leibo’s
incorporation.
REBEL GROUP, INC.
NOTES TO UNAUDITED CONDENSED 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 unaudited
condensed 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. The fiscal year end is December 31.
Liquidity and Going Conern
On March 31, 2019, the Company
had a working capital deficit of $4,172,957 (unaudited) and cash on hand of $184,358 (unaudited) as compared to working capital
deficit of $4,856,536 and cash on hand of $41,321 as of December 31, 2018.
Net cash used in operating activities
for the three months ended March 31, 2019 was $1,062,100 (unaudited) as compared to net cash used in operating activities of $954,511
(unaudited) for the three months ended March 31, 2018. The increase in net cash used in operating activities was primarily due
to an increased in trade and other payables.
Net cash provided by financing
activities for the three months ended March 31, 2019 was $1,193,076 (unaudited) as compared to $1,039,224 (unaudited) for the three
months ended March 31, 2018. The increase in net cash provided by financing activities was primarily due to the issuance of shares
of common stock.
As of March 31, 2019, our accumulated
deficit was $15,244,202 (unaudited). Our operating results for future periods are subject to numerous uncertainties and it is uncertain
if we will be able to achieve profitability and grow in the foreseeable future. If 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.
In order to improve the efficiency
of our operations, reduce costs and develop core cash-generating business, we may need to seek advances from major shareholders,
seek additional public and/or private issuance of securities, as well as look for strategic business partners to optimize our operations.
On July 12, July 23 and August
9, 2019, the Company entered into several Subscription Agreements (the “Subscription Agreements”) with four third-party
investors (the “Investors”), according to which the Investors will pay $1,210,000 in exchange for 806,667 shares of
the Company’s common stock. As of the date of this quarterly report on Form 10-Q, the Investors have received 806,667 shares of
the Company’s common stock and the Company has yet to receive any payments. The Company expects to receive the payments in
full by December 31, 2019.
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 interest of 8% per annum. The Investor may convert all of the principal
amount of the loan into 1,500,000 shares of Company’s common stock at any time through September 12, 2020. Pursuant to the
terms of the Investment Agreement, the Investor paid the Company $1,000,000 on September 23, 2019 and $500,000 on October 19, 2019.
The Company believes that available
cash and cash equivalents, together with the actions mentioned above, should enable the Company to meet presently anticipated cash
needs for at least the next 12 months after the date that the financial statements are issued. However, if the Company is unable
to obtain the necessary additional capital on a timely basis and on acceptable terms, it will be unable to implement its current
plans for expansion, repay debt obligations or respond to competitive pressures. Any of these factors would have a material adverse
effect on its business, prospects, financial condition and results of operations and raise substantial doubts about the ability
of the Company to continue as a going concern. The unaudited condensed consolidated financial statements for the three months ended
March 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 inability of the Company to continue as a going concern.
REBEL GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in US Dollars)
|
2.
|
Summary of principal accounting
policies (continued)
|
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. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606,
while prior period amounts have not been adjusted and continue to be reported in accordance with the Company’s historic accounting
under Topic 605. 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 plans to derive
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.
Use of estimates
The preparation of the combined
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 combined financial statements, and the reported amounts of revenues and expenses during the reporting period. Our significant
estimates and assumption include depreciation, allowance for trade receivables and prepayments, stock-based compensation, and the
valuation allowance relating to the Company’s deferred tax assets/liabilities. Actual results could differ from those estimates.
Cash and cash equivalents
Cash and cash equivalents consist
of bank deposits with original maturities of three months or less, which are unrestricted as to withdrawal and use the Company
maintained accounts at banks and have not experienced any losses from such concentrations.
Restricted cash
Restricted cash represents deposits
not readily available to the Company. Restricted cash as of March 31, 2019 represented cash frozen for a court decision.
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.
REBEL GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in US Dollars)
|
2.
|
Summary of principal accounting
policies (continued)
|
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, 2019 and December
31, 2018, financial instruments of the Company primarily comprise of cash, cash equivalents, restricted cash, other receivables,
accrued expenses, which the carrying amounts approximated their fair values because of their generally short maturities.
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 their respective local currency, the Singapore dollar (“SGD”)
and Renminbi (“RMB”), which are functional the primary currencies in Singapore and China.
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.
REBEL GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in US Dollars)
|
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 combined 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 statements of operations.
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.
Plant and equipment
Plant and equipment are 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 and other intangible assets, 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.
Impairment of long-lived
assets
The Company reviews its long-lived
assets, 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.
REBEL GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in US Dollars)
|
2.
|
Summary of principal accounting
policies (continued)
|
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’ 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 income, net of taxes in the unaudited 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.
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 depreciated slightly by 0.3% in the three months ended March 31, 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.
REBEL GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in US Dollars)
|
2.
|
Summary of principal accounting
policies (continued)
|
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
statements of cash flows will not necessarily agree with changes in the corresponding balances on the 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, this may not be indicative of future results.
Recently Issued Accounting
Guidance
The Company does not believe
any 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.
|
3.
|
Trade and other receivables
|
Trade
and other receivables, net consisted of the following:
|
|
As of
|
|
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
|
|
(Unaudited)
|
|
|
|
|
Trade and other receivables
|
|
$
|
373,202
|
|
|
$
|
307,166
|
|
Less: allowance for doubtful debts
|
|
|
(281,198
|
)
|
|
|
(271,464
|
)
|
Trade and other receivables, net
|
|
$
|
92,004
|
|
|
$
|
35,702
|
|
Movement of allowance for doubtful
accounts was as follows:
|
|
As of
|
|
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
|
|
(Unaudited)
|
|
|
|
|
Balance at beginning
|
|
$
|
271,464
|
|
|
$
|
-
|
|
Provision for doubtful accounts
|
|
|
2,963
|
|
|
|
282,356
|
|
Exchange rate effect
|
|
|
6,771
|
|
|
|
(10,892
|
)
|
Balance at end
|
|
$
|
281,198
|
|
|
$
|
271,464
|
|
REBEL GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in US Dollars)
|
4.
|
Property and equipment
|
Property and equipment are comprised
of:
|
|
As of
|
|
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
|
|
(Unaudited)
|
|
|
|
|
Equipment
|
|
$
|
135,774
|
|
|
$
|
135,010
|
|
Less: accumulated depreciation
|
|
|
(115,487
|
)
|
|
|
(111,164
|
)
|
Total property and equipment, net
|
|
$
|
20,287
|
|
|
$
|
23,846
|
|
Depreciation expense for the
three months ended March 31, 2019 and 2018 were $4,001 and $5,982, respectively.
Intangible assets are comprised
of:
|
|
As of
|
|
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
|
|
(Unaudited)
|
|
|
|
|
Trademark
|
|
$
|
16,615
|
|
|
$
|
16,663
|
|
Other intangible assets
|
|
|
131,116
|
|
|
|
131,487
|
|
|
|
$
|
147,731
|
|
|
$
|
148,150
|
|
Less: accumulated amortization
|
|
|
(75,288
|
)
|
|
|
(64,483
|
)
|
Total intangible assets, net
|
|
$
|
72,443
|
|
|
$
|
83,667
|
|
No significant residual value
is estimated for these intangible assets. Amortization expense for the three months ended March 31, 2019 and 2018, totaled $11,072
and $3,394, 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,
|
|
|
|
2020
|
|
$
|
14,885
|
|
2021
|
|
|
14,885
|
|
2022
|
|
|
14,885
|
|
2023
|
|
|
14,586
|
|
2024 and thereafter
|
|
|
13,202
|
|
|
|
$
|
72,443
|
|
REBEL GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in US Dollars)
On January 30, 2015, Moxian,
Inc. (“MOXC”) issued a convertible promissory note to the Company for $7,782,000 (the “MOXC Note”). The
MOXC Note was 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 shares of common stock of MOXC (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 had 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 being 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 balance of the MOXC Note was $3,891,000.
On September 28, 2015, MOXC
notified the Company that it elected to convert the outstanding balance of the MOXC Note, $3,891,000, into 3,891,000 shares of
the MOXC Common Stock (“September Conversion”). After the August Conversion and the September Conversion, the full
amount of the MOXC Note was converted into an aggregate of 7,782,000 shares of the MOXC Common Stock, and as a result no amount
under 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 March 31, 2019 and December 31,
2018, respectively.
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, the 3,891,000 shares of MOXC Common Stock held by the Company were converted into 778,200 shares
of the MOXC Common Stock as of April 22, 2019.
On May 1, 2019, MOXC has 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 will be distributed to the shareholders of the Company who were shareholders of
the Company as of January 29, 2015. As a result, the Company did not hold any shares of the MOXC Common Stock since June 25, 2019.
|
|
As of
|
|
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
|
|
(Unaudited)
|
|
|
|
|
Cost
|
|
$
|
7,782,000
|
|
|
$
|
7,782,000
|
|
Fair value adjustment
|
|
|
(5,766,462
|
)
|
|
|
(6,455,169
|
)
|
Total long-term investment
|
|
$
|
2,015,538
|
|
|
$
|
1,326,831
|
|
As of December 31, 2018,
the fair value of MOXC was $0.341 per share. The subsequent disposition of the investment had a material and direct effect on
the financial statements therefore the investment as of March 31, 2019 should be presented at the fair value as of June 21,
2019, the transaction date. On June 21, 2019, MOXC’s fair value was $2.59 per share. For the three months ended March
31, 2019 and 2018, the changes in fair value of $(5,766,462) and $(3,112,800) was recognized respectively. For the six months
ended March 31, 2019, $5,766,462 of loss was recognized upon the disposal of MOXC’s shares.
REBEL GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in US Dollars)
|
7.
|
Convertible and short-term
loans
|
|
|
As of
|
|
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
|
|
(Unaudited)
|
|
|
|
|
Convertible loans-repayable within one year
|
|
$
|
448,329
|
|
|
$
|
449,600
|
|
Short-term loans-repayable within one year
|
|
|
247,332
|
|
|
|
296,576
|
|
Total
|
|
$
|
695,661
|
|
|
$
|
746,176
|
|
The interest expense for convertible
loans for the three months ended March 31, 2019 and 2018 was $11,061and $10,488, respectively.
The interest expense for short-term
loans for the three months ended March 31, 2019 and 2018 was $24,235 and $nil, respectively.
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 that was repayable
on March 23, 2018 (“Maturity Date”), with an interest of 10% per annum. The unrelated third-party individual had 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 had the option to convert all of the principal amount, into shares of the Company’s common stock (“Conversion
Right”) at any time for the period commencing on March 24, 2017 and ending on March 23, 2019 (“Conversion Period”).
In the event that the Conversion Right were to be exercised within seven Business Days immediately following the Maturity Date,
the conversion was to be based on the share price of $0.50. In the event that the Conversion Right were to be exercised after the
Maturity Date but within seven Business Days immediately following the Extended Maturity Date, the conversion were to 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, 2019, the remaining outstanding
principal balance of S$100,000 ($73,197) plus interests were 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 that 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 had the option to convert
all of the principal amount, into shares of Company’s common stock (“Conversion Right”) at any time for the period
commencing on May 5, 2017 and ending on May 4, 2019 (“Conversion Period”). In the event that the Conversion Right were
to be exercised within seven Business Days immediately following the Maturity Date, the conversion was to be based on the share
price of $0.50. In the event that the Conversion Right were to be exercised after the Maturity Date but within seven Business Days
immediately following the Extended Maturity Date, the conversion was to be based on the share price of $0.60. As of March 31, 2019,
the full balance of the term loan was overdue.
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 had the
option to 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 were to be exercised within seven Business Days immediately following the Maturity Date,
the conversion was to be based on the share price of $1.00. As of March 31, 2019, the full balance of the term loan was overdue.
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 ($271,368) and S$100,000 ($75,380) 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 September 30, 2019, S$180,165($130,270) and S$28,403($20,537) were past due respectively
for the two short term loans.
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 ($24,800) and S$17,100 ($12,890) respectively.
The two short term loans of S$32,900 and S$17,100 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 September 30, 2019, S$60,032($43,407)
in aggregate was past due for the two short term loans.
All the above convertible loans
and short-term loans are non-collateral loans.
REBEL GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in US Dollars)
As of March 31, 2019 and December
31, 2018, the amounts due to certain shareholders are $2,735,930 (unaudited) and $2,849,410 respectively and are unsecured, interest
free.
For the three months ended March
31, 2018, the Company issued 753,000 shares of common stock for net cash consideration of $612,145 and 2,103,860 shares of common
stock for services with total value of $520,000, the consideration of which was determined based on recent cash transactions.
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 cancelled 100,000
shares of common stock on September 11, 2019. 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.
United States of
America
Rebel Group, Inc. is
incorporated under the laws of the State of Florida, 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, 2019, future net operating losses of
approximately $12.2 million are available to offset future operating income through 2037.
REBEL GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in US Dollars)
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 as of March 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 the 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 $80,000 and $60,000
of interest and penalties accrued at March 31, 2019 and December 31, 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 $5,302,343 and $3,867,226 as
of March 31, 2019 and December 31, 2018, respectively.
REBEL GROUP, INC.
NOTES TO UNAUDITED CONDENSED 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.
|
|
For the three months ended
|
|
|
|
March 31,
2019
|
|
|
March 31,
2018
|
|
Income tax expense is comprised of:
|
|
(Unaudited)
|
|
|
|
|
Current income tax
|
|
$
|
20,000
|
|
|
$
|
-
|
|
Deferred income tax expense (benefit)
|
|
|
-
|
|
|
|
-
|
|
Total income taxes expense
|
|
$
|
20,000
|
|
|
$
|
-
|
|
The Company’s effective
income tax rates were 0% for the three month ended March 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 as of March 31, 2019 and December 31, 2018.
|
|
As of
|
|
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
|
|
(Unaudited)
|
|
|
|
|
U.S. statutory rates
|
|
|
21
|
%
|
|
|
21
|
%
|
Foreign income not recognized in the U.S.
|
|
|
(21
|
)%
|
|
|
(21
|
)%
|
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 March 31, 2019, and December 31, 2018 are presented below:
|
|
As of
|
|
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
|
|
(Unaudited)
|
|
|
|
|
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
|
|
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
|
|
(Unaudited)
|
|
|
|
|
Net operating loss carryforwards in the PRC
|
|
$
|
1,719,139
|
|
|
$
|
1,663,913
|
|
Net operating loss carryforwards in Singapore
|
|
|
310,735
|
|
|
|
210,046
|
|
Net operating loss carryforwards in the US
|
|
|
3,272,469
|
|
|
|
1,993,267
|
|
Less: valuation allowance
|
|
|
(5,302,343
|
)
|
|
|
(3,867,226
|
)
|
End of period
|
|
$
|
-
|
|
|
$
|
-
|
|
REBEL GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in US Dollars)
|
11.
|
Related party transactions
|
As at March 31, 2019 and December
31, 2018, amounts due to shareholders were $2,735,930 and $2,849,410 respectively which are unsecured, interest free due on demand
and do 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,
2019
|
|
|
December 31,
2018
|
|
|
|
(Unaudited)
|
|
|
|
|
Beginning of period
|
|
$
|
1,956,390
|
|
|
$
|
1,028,719
|
|
(Repayment) Advances for the period, net
|
|
|
(65,764
|
)
|
|
|
927,671
|
|
End of period
|
|
$
|
1,890,626
|
|
|
$
|
1,956,390
|
|
A summary of changes in the
amount due to the CEO of the Company is as follows:
|
|
As of
|
|
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
|
|
(Unaudited)
|
|
|
|
|
Beginning of period
|
|
$
|
702,170
|
|
|
$
|
149,956
|
|
Advances for the period, net
|
|
|
47,979
|
|
|
|
552,214
|
|
End of period
|
|
$
|
750,149
|
|
|
$
|
702,170
|
|
A summary of changes in the
amount due to a director of the Company is as follows:
|
|
As of
|
|
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
|
|
(Unaudited)
|
|
|
|
|
Beginning of period
|
|
$
|
190,850
|
|
|
$
|
-
|
|
(Repayment) Advances for the period, net
|
|
|
(95,695
|
)
|
|
|
190,850
|
|
End of period
|
|
$
|
95,155
|
|
|
$
|
190,850
|
|
|
12.
|
Commitments and contingencies
|
Operating Lease
The Company’s subsidiaries
lease administrative office space under various operating leases. Rent expense amounted to $29,568 and $26,074 for the three months
ended March 31, 2019 and 2018, respectively.
Further minimum lease payment
under non-cancelable operating leases are as follows:
Twelve months ending March 31,
|
|
|
|
2020
|
|
$
|
22,127
|
|
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.
REBEL GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in US Dollars)
|
12.
|
Commitments and contingencies
(continued)
|
On November 5, 2018, the Company was served
a summon for a complaint filed by Ofsink, LLC (“Ofsink”). In its complaint against the Company filed on September 13,
2018, in the Supreme Court of the City of New York County of New York, Ofsink alleged, among other claims, that the Company failed
to pay for legal services provided by Ofsink in the amounts set forth on uncontested invoices for $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 such invoices. 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 its debt to
a third party. The third party to whom such debt was assigned may try to seek payment from the Company. As of the date of this
Report, the Company is not aware of any such request for payment.
On November 12, 2017, Rebel signed a lease
agreement with Shanghai Konghui Property Development Co., Ltd. (“Konghui”) for an office space at Room No.1, Grand
Gateway Tower, Hongqiao Rd., Xuhui District, Shanghai with a start date on November 15, 2017. The rental contract was terminated
on July 12, 2018. Due to lapses in rental payment, Konghui brought a lawsuit against Rebel in the Shanghai Xuhui District People’s
Court (the “Court”). On April 24, 2019, the Court ordered Rebel to pay a net amount of RMB 164,865.86, which included
late payment interests. On June 18, 2019, the Court ordered a legal proceeding to extract the payment amount from Rebel’s
bank account. On July 12, 2019, the Court unfroze Rebel’s bank account.
On October 12, 2019, a legal search for
outstanding litigation matters in the PRC indicated that a claim has been filed in a Shanghai court for a sum of RMB159,155. The
Company is presently trying to establish the details of the alleged claim and as of the date of this Report has not received any
summons or other documents in relation to such claim. The Company intends to thoroughly review those allegations and vigorously
defend such claim.
On April 1 2019, the Company
entered into a Subscription Agreement (the “Subscription Agreement”) with one individual third party investor (the
“Investor”) for the sale of 50,000 shares of the Company’s common stock in consideration of the sum of $50,0000.
As of April 4, 2019, the Company received $50,000 from this investor in full payment.
Effective May 7, 2019, the Board
of Directors of the Company appointed Mr. Benjamin Cher as a member of the Board of Directors. The Company and Mr. Cher entered
into a Board of Directors Services Agreement on May 7, 2019 (the “Services Agreement”) in connection with his appointment
as a member of the Board of Directors of the Company. Pursuant to the Services Agreement, Mr. Cher will be entitled to monthly
fees of SGD $6,000 and 480,000 shares of common stock the Company to be issued in two installments. Mr. Cher may be eligible for
an additional 720,000 shares of common stock the Company based upon certain conditions. On July 23, 2019, the first installment
of 240,000 shares of common stock was issued to Mr. Cher.
REBEL GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in US Dollars)
|
13.
|
Subsequent events
(continued)
|
On May 30, July 12, July 23
and August 9, 2019, the Company entered into several Subscription Agreements (the “2019 Subscription Agreements”) with
five third party investors (the “2019 Investors”). The 2019 Investors are expected to remit $1,287,000 in exchange
for 858,001 shares of the Company’s common stock as determined pursuant to the terms and conditions of the Subscription Agreements.
As of August 30, 2019, the Company received $1,287,000 from those five investors in full payment.
On July 23, July 25, August
9 and September 18, 2019, the Company issued 1,209,284 shares of common stock with a total value of $1,209,284 for employment benefit
and professional services pursuant to Service Agreements entered with consultants. The value of the 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.
On September 11, 2019, the Company
cancelled 100,000 shares of common stock.
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 interest of 8% per annum. The Investor may convert all of the principal
amount of the loan into 1,500,000 shares of the Company’s common stock at any time through September 12, 2020. Pursuant to
the terms of the Investment Agreement, the Investor paid the Company $1,000,000 on September 23, 2019 and $500,000 on October 19,
2019.
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 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 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 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 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 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 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
as satisfaction for the full amount of the loan.