Rebel Group, Inc. - Annual Report: 2018 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

(Mark One)

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2018

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File No. 333-177786

REBEL GROUP, INC.

(Exact Name of Registrant as Specified in its Charter)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act: None

Securities registered pursuant to Section 12(g) of the Securities Exchange Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of June 30, 2019, the registrant’s most recently completed second fiscal quarter, the aggregate market value of the common stock held by non-affiliates of the registrant was approximately $111,026,372, based upon the closing price of the registrant’s common stock as reported on the OTC Pink Market on such date. Because there is no active trading market for the Company’s common stock, the Company does not believe that the quoted price of its common stock is indicative of the actual value of such stock.

As of September 3, 2019, the number of shares of the registrant’s common stock outstanding was 52,313,151.

FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2018

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements. These forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections. We may use words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “foresee,” “estimate” and variations of these words and similar expressions to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. These risks and uncertainties include the following:

This Annual Report on Form 10-K should be read completely and with the understanding that actual future results may be materially different from what we expect. The forward-looking statements included in this Annual Report on Form 10-K are made as of the date of this Annual Report on Form 10-K and should be evaluated with consideration of any changes occurring after the date of this Annual Report on Form 10-K. We will not update forward-looking statements even though our situation may change in the future and we assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Use of Defined Terms

Except as otherwise indicated by the context hereof, references in this report to “Company,” “REBL,” “we,” “us” and “our” are references to Rebel Group, Inc. All references to “USD” or United States Dollars refer to the legal currency of the United States of America.

PART I

ITEM 1. BUSINESS

Overview

Rebel Group, Inc., through its subsidiaries, organizes, promotes and hosts mixed martial arts (“MMA”) events featuring MMA talents. It delivers MMA events centered on Chinese fighters and martial art fans. With assistance from contracted production crews, the Company produces and distributes videos of its MMA events through the Internet and social media. It also generates revenues from the exploitation of its film television rights.

Our operations focus on three business components:

The Company seeks to promote MMA in China by hosting live high-profile matches that features talented fighters from around the world. MMA is a full contact sport that permits fighters to use techniques from various martial art disciplines such as Boxing, Wrestling, Taekwondo, Karate, Brazilian Jiu-jitsu, Muay Thai, and Judo. Unlike boxing, where athletes can only strike with their fists and target areas above the belt, the fighters in MMA can use punches, kicks, elbows, knee strikes, takedowns and submissions to win a contest.

Producing MMA events include various business operations such as securing event venues, signing up fighters and performers, obtaining sponsorships, producing event videos, marketing, and hosting pre-event shows which consist of music performances, fighters’ interviews and documentaries. The Company’s events are broadcast through top sporting entertainment stations such as Guangdong TV sports channel, Beijing TV Sports Channel and Qinghai satellite. We also utilize major Chinese internet platforms such as PP Sports, YY.com and Youku (Alisports) for online streaming in order to reach more audiences.

The Company has successfully hosted eight MMA events. The most recent MMA event was held in May 2018, with its total online digital viewership exceeding eight million and total broadcast TV viewership reaching approximately five million according to CSM Media Research, a China-based media ratings research company.

Our Events

The Company hosts live events in which highly skilled fighters from different martial arts backgrounds compete at different weight classes. We introduce fighters’ background information and training stories into the broadcasting of fighting events.

The Company selects fighters with track records of distinguished careers. After a careful selection process assessing each fighters’ amateur and professional records, age, experience and fame, we market our MMA events through social media such as Facebook, Twitter, Chinese Weibo and WeChat, TV channels such as Guangdong TV sports channel, Beijing TV Sports Channel and Qinghai Satellite TV, as well as video and interviews covered by major Chinese media outlets such as Guangzhou TV news channel, Guangzhou Daily and Pudong TV.

We held two MMA events in 2018. The first event in 2018 was held on April 29, 2018 at Kerry Hotel in Shanghai. The event was broadcast live by major Chinese TV channels such as Guangdong Sports TV, Tianjin Sports TV, Fujian TV, Beijing TV Sports and Shenzhen TV and major digital platforms such as Weibo and Youku. The viewership for the first event were 4.06 million from television and 8.33 million from digital platforms. The second event took place at Tianhe Stadium in Guangzhou on May 30, 2018. The event was broadcast live by major Chinese TV channels such as Guangdong Sports TV, Tianjin Sports, Qinghai Satellite TV and major digital platforms such as Youku, PP Sports and YY.com. The viewership for the second event were 4.99 million from television and 8.15 million from digital platforms.

Corporate History and Background

Rebel Group, Inc. was incorporated in the State of Florida on September 13, 2011. Effective April 16, 2013, the Company changed its name from “First Social Networx Corp.” to “Moxian Group Holdings, Inc.” with “MOXG” as its trading symbol. Also, effective April 16, 2013, the Company increased the number of shares that it is authorized to issue to a total of 600,000,000 shares, including 500,000,000 shares of common stock, par value $.0001 per share (the “Common Stock”) and 100,000,000 shares of preferred stock, par value $.0001 per share. In addition, effective April 16, 2013, the Company effected a 20-for-1 forward stock split of its Common Stock, without changing the par value or the number of authorized shares of the Common Stock (the “Forward Split”).

On April 25, 2013, pursuant to a share exchange agreement, the Company completed a reverse acquisition of Moxian Group Limited (“Moxian BVI”) and its wholly-owned subsidiaries, including Moxian (Hong Kong) Limited (“Moxian HK”), Moxian Technologies (Shenzhen) Co., Ltd. (“Moxian Shenzhen”) and Moxian Malaysia SDN BHD (“Moxian Malaysia”) (the “Share Exchange Transaction”). The Company acquired the operating business of Moxian BVI and its subsidiaries and the Company ceased being a shell company as such term is defined under Rule 12b-2 under the Exchange Act. After the incorporation of the business of Moxian BVI, the Company changed its business to developing a social network platform that sought to integrate social media and business into one single platform.

On February 17, 2014, the Company incorporated a new wholly-owned subsidiary, Moxian Intellectual Property Limited, under the laws of Samoa (“Moxian IP”). On February 19, 2014, Moxian HK and Moxian Shenzhen entered into an assignment and assumption agreement with Moxian IP, where Moxian HK and Moxian Shenzhen assigned and transferred all of the intellectual property rights that they respectively owned in connection with the Moxian business (the “IP Rights”) to Moxian IP in consideration of $1,000,000. As a result, the Company then owned and controlled such IP Rights through Moxian IP.

On February 19, 2014, the shareholders then holding a majority of the outstanding shares of the Company approved and authorized the Company to enter into a License and Acquisition Agreement (the “License and Acquisition Agreement”) with MOXC, pursuant to which the Company sold 100% of the equity interests of Moxian BVI together with its subsidiaries to Moxian CN Group Limited, a wholly-owned subsidiary of MOXC (“Moxian CN Samoa”) for $1,000,000. The License and Acquisition Agreement closed on February 21, 2014. As a result, Moxian BVI, together with its subsidiaries, Moxian HK, Moxian Shenzhen, and Moxian Malaysia, became the subsidiaries of MOXC.

Under the License and Acquisition Agreement, the Company also agreed to grant MOXC the exclusive right to use the Company’s then held IP Rights in Mainland China, Hong Kong, Taiwan, Malaysia, and other countries and regions where the Company conduct business (the “Licensed Territory”) as well as the exclusive right to solicit, promote, distribute and sell Moxian products and services in the Licensed Territory for five years (the “License”). In exchange for such license, MOXC agreed to pay to the Company: (i) $1,000,000 as a license maintenance royalty each year commencing on the first anniversary of the date of the License and Acquisition Agreement and (ii) 3% of the gross profit resulting from distribution and sale of our products and services on behalf of the Company as an earned royalty. In addition, MOXC had the right to acquire the new IP Rights that are developed by the Company and sub-license such rights to a third party. MOXC was also under the obligation to develop the social media market of our products and services in the Licensed Territory. Immediately prior to the execution of the Equity Transfer Agreement, the Moxian BVI Transfer Price was not paid and no license maintenance royalty or earned royalty under the License and Acquisition Agreement had accrued.

Therefore, under the Equity Transfer Agreement, discussed below, the Company and MOXC agreed to terminate the License and Acquisition Agreement so that the liabilities of MOXC and the rights of the Company thereunder, other than the Moxian BVI Transfer Price, were terminated.

The Company sought to acquire a new business in the technology area and as a result, on July 23, 2014, the Company changed its name from “Moxian Group Holdings, Inc.” to “Inception Technology Group, Inc.” Also, effective July 23, 2014, the Company effected a 1-for-5 reverse split of its issued and outstanding Common Stock. However, no acquisition of a technology business was closed or consummated.

On December 5, 2014, the Company amended its Articles of Incorporation to change its corporate name from “Inception Technology Group, Inc.” to “Rebel Group, Inc.” and effectuated a 1-for-20 reverse stock split of its Common Stock, without changing the par value or the number of authorized shares of the Common Stock (the “Reverse Split”). The business plan of the Company was originally to utilize a social network platform that integrated social media and business into one single platform to promote businesses of merchants and assist the targeted clients to find consumers online and bring them into real-world stores.

On January 30, 2015, the Board of Directors of the Company approved and submitted for approval of the Company’s shareholders with a majority of voting rights, a Plan of Disposition (“Plan of Disposition”). Under the Plan of Disposition, the Company proposed to distribute the proceeds resulting from the Equity Transfer Transaction and Sale of Moxian BVI, within one year from the date of the Equity Transfer Transaction, to the shareholders as of January 29, 2015, on a pro-rata basis except for Rebel FC Stockholder, who agreed to waive such proceeds. On January 30, 2015, the Company’s shareholders with a majority of voting rights approved the Plan of Disposition. No additional vote of the Company’s shareholders was required or sought in connection with the Plan of Disposition, and the Company’s record shareholders had no appraisal rights in connection with the proposed transactions under the Plan of Disposition. The Plan of Disposition was not completed within the planned one year period, and was delayed due to MOXC’s then proposed underwritten offering and exchange listing. On May 24, 2016, due to the MOXC Reverse Stock Split, effective on June 20, 2016, the Company’s shares in MOXC were reduced from 7,782,000 shares to 3,891,000 shares. The Company is in the process of preparing and approving a revised Plan of Disposition, which takes into account that the Company currently holds 3,891,000 shares of MOXC which are currently valued at $11,634,090 and pursuant to which the Company plans to distribute, as a dividend, the 3,891,000 MOXC shares to the Company’s shareholders as of January 29, 2015, on a pro-rata basis, that would have been entitled to share in the proceeds of the sale of the MOXC shares by the Company under the original Plan of Disposition, if the Company had consummated such sale.

Also on January 30, 2015, REBL, Rebel FC and the sole stockholder of Rebel FC (the “Rebel FC Stockholder”) entered into and consummated transactions pursuant to a Share Exchange Agreement (the “Share Exchange Agreement,” such transaction referred to as the “Share Exchange Transaction”), whereby the Company issued to the Rebel FC Stockholder 20,700,000 shares of its Common Stock, par value $0.0001 per share, in exchange for 100% of the equity interests of Rebel FC held by the Rebel FC Stockholder. The shares of our Common Stock received by the Rebel FC Stockholder in the Share Exchange Transaction then constituted approximately 90% of our issued and outstanding Common Stock. As a result of the Share Exchange Transaction, Rebel FC, together with its subsidiaries, Pure Heart and SCA Capital, became REBL’s wholly-owned subsidiaries.

The Share Exchange Agreement contained representations and warranties by us, Rebel FC and the Rebel FC Stockholder which are customary for transactions of this type such as, with respect to the Company: organization, good standing and qualification to do business; capitalization; subsidiaries; authorization and validity of the transaction and transaction documents; consents being obtained or not required to consummate the transaction; no conflict or violation of Articles of Incorporation; with respect to Rebel FC: authorization; capitalization; and title to Rebel FC’s shares of common stock being exchanged, and with respect to Rebel FC Stockholder: authorization; no conflict or violation of law; investment purpose; reliance on exemption on the Company’s Common Stock to be exchanged; and transfer or resale pursuant to the Securities Act.

Our acquisition of Rebel FC and its subsidiaries pursuant to the Share Exchange Agreement was accounted for as a reverse merger and recapitalization effected by a share exchange. Rebel FC was considered the acquirer for accounting and financial reporting purposes.

Simultaneously with the consummation of the Share Exchange Transaction, the Company entered into an Equity Transfer Agreement (the “Equity Transfer Agreement,” such transaction, the “Equity Transfer Transaction”) with MOXC, to sell, transfer, and convey 50,000 ordinary shares of Moxian IP, constituting 100% equity interests of Moxian IP for $6,782,000 (the “Moxian IP Transfer Price”). The Moxian IP Transfer Price for Moxian IP is based on an appraisal report, dated November 15, 2014, prepared by Grant Sherman Appraisal Limited, an independent appraiser.

Pursuant to the Equity Transfer Agreement, MOXC agreed to repay the Moxian IP Transfer Price and the Moxian BVI Transfer Price in the aggregate of $7,782,000 in the form of a convertible promissory note (the “Note”) issued by MOXC. The maturity date for the Note was October 30, 2015 with 1% interest per annum, and all sums due under this Note could be converted at the conversion price of $1.00 per share (“Conversion Price”) at the option of MOXC, if the volume weighted average price (“VWAP”) of MOXC’s common stock for a period of thirty (30) trading days immediately prior to the date of conversion was higher than the Conversion Price. Under the Note, MOXC had a right of first refusal to purchase the shares issuable upon conversion at the price of 80% of the VWAP for 30 trading days immediately prior to the date of the proposed repurchase by MOXC.

On August 14, 2015, due to the VWAP of the MOXC common stock for 30 trading day prior to August 14, 2015 was higher than $1.00, which triggered the clause of conversion under the MOXC Note, MOXC notified us 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 (the “August Conversion”). As a result of the August Conversion, the remainder amount of the MOXC Note was $3,891,000.

On September 30, 2015, MOXC notified us that it elected to convert the remainder of the MOXC Note, of $3,891,000 into 3,891,000 shares of the MOXC common stock (the “September Conversion”). After the August Conversion and the September Conversion, consequently, all of the MOXC Note was converted in to the total of 7,782,000 shares of the MOXC common stock with no amount of the MOXC Note outstanding. On May 24, 2016, MOXC’s board of directors approved a reverse stock split of MOXC’s issued and outstanding shares of common stock, at a ratio of 1-for-2 (the “MOXC Reverse Stock Split”). The MOXC Reverse Stock Split was effective on June 20, 2016, and pursuant to the MOXC Reverse Stock Split, the Company’s shares in MOXC were reduced from 7,782,000 shares to 3,891,000 shares.

Immediately after the completion of the Share Exchange Transaction and the Equity Transfer Transaction, the Company discontinued its social media business and changed its business to producing dynamic Mixed Martial Arts (“MMA”) fighting events and promoting MMA fighting in China and Singapore.

Rebel Holdings Limited (Rebel FC), which utilizes the trade name of Rebel Fighting Championship, was incorporated on October 28, 2014 in the British Virgin Islands and engages in the business of hosting and promoting MMA events. On January 30, 2015, we completed the acquisition of Rebel FC pursuant to the Share Exchange Agreement. The acquisition was accounted for as a reverse merger and recapitalization effected by a Share Exchange Transaction. Rebel FC was considered the acquirer for accounting and financial reporting purposes.

Pure Heart was incorporated under the laws of Singapore on August 24, 2000 under the name “Soo Kee Coffeeshop Pte. Ltd.” Effective November 27, 2002, it changed its name to “Asia Pacific Export International Pte Ltd.” It later changed its name from “Asia Pacific Export International Pte Ltd.” to “Pure Heart Entertainment Pte Ltd.” on June 7, 2013. As of October 30, 2014, it became a wholly owned subsidiary of Rebel FC. Pure Heart is an operating subsidiary of Rebel FC and is dedicated to hosting and promoting MMA events.

SCA Capital Limited, a British Virgin Islands company, was incorporated on January 7, 2011 and holds the intellectual property rights relating to the Rebel FC business. On October 28, 2014, SCA Capital became a wholly-owned subsidiary of Rebel FC.

On October 1, 2017, the Company and Pure Heart Entertainment Pte Ltd., a wholly owned subsidiary of the Company and a company incorporated under the laws of Singapore (“Pure Heart”) entered into a share transfer agreement (the “Share Transfer”) with Naixin Qi, an individual (the “Shareholder”), the sole shareholder of Qingdao Quanyao Sports Consulting Co. Ltd, a company organized under the laws of PRC (the “Quanyao”).

Pursuant to the Share Transfer, Pure Heart, through a wholly foreign owned entity (the “WOFE”) Rebel Shanghai Limited (“Rebel Shanghai”), incorporated under the laws of PRC on June 21, 2017, agreed to acquire 100% of the outstanding equity interests (the “Equity Stake”) of 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 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 (the “Shares”) of the common stock of the Company, par value $.0001 per share (the “Common Stock”) (together the “Purchase Price”). The purchase price was based on valuation report by an independent appraisal firm.

As disclosed in the Form 8-K filed with the Securities and Exchange Commission on August 20, 2019, on June 20, 2019, the Board of Directors of the Company approved a distribution of 778,200 shares of Moxian Inc.’s common stock, $0.001 par value per share held by the Company. The Moxian Inc.’s common stock will be distributed to the shareholders of the Company who were shareholders of the Company as of January 29, 2015.

The Share Transfer was executed on November 21, 2017 and Quanyao officially became wholly-owned subsidiary of Rebel Shanghai.

Quanyao is a company which was established under the laws of PRC on December 4, 2014. It organizes, promotes and hosts MMA events in China. Quanyao holds 50% equity of Qingdao Leibo Sports Culture Co. Ltd. (“Leibo”), a company incorporated under the laws of PRC on January 8, 2015 which also organizes, promotes and hosts MMA events.

Quanyao and Leibo together held 4 events in China between 2015 to 2017 under the Rebel brand in accordance with Cooperation Agreement with Pure Heart. Quanyao held 2 events in China in 2018. One event, Rebel FC 7 - Fight for Honor, is held at Kerry Hotel Pudong in Shanghai on April 29, 2018. The other event, Rebel FC 8- A Warrior’s Return, is held at Tianhe Sports Stadium in Guangzhou on May 30 2018.

The following diagram sets forth the structure of the Company as of the date of this Report:

Our Strategy

Our objective is to become the most recognized MMA sports and media brand in China. To achieve this objective, we intend to employ the following strategies:

Hosting Successful Events in China. We have hosted eight MMA events so far. Our two most recent events were held on April 29^th 2018 and May 30^th 2018, obtaining average viewership of over four million on television and eight million on digital and social media platforms. We intend to leverage the success of our most recent events to increase our ticket sales, sponsorship deals, television distribution and media rights. We plan to achieve the following business revenue projection: Up to US$400,000 in ticket sales and US$9.9 million in sponsorship deals from our currently planned four events in the second half of 2019.

Identifying and Signing Top Chinese Prospects. Rebel will focus its tournament setting strategy on featuring competition between top professional Chinese athletes against highly ranked professional athletes from around the world. In order to achieve that, Rebel will implement a comprehensive scouting program throughout China to identify promising Chinese athletes to join Rebel in multi-fight agreements. This strategy will ensure Rebel to develop and retain top Chinese athletes, which will enhance our positioning in the MMA market and enable Rebel to host high quality tournaments. Rebel’s differential in understanding the Chinese martial arts tradition will enable Rebel to attract the best Chinese fighters to compete on our events. Currently, we have secured three exclusive engagement contract with Wenbo Liu, who is a Chinese middleweight champion of Legend Fighting Championship, a well-known Hong Kong-based MMA promoter. We plan to sign more exclusive engagement contract with more top professional Chinese athletes like Wenbo Liu.

Distributing our Original Content. We intend to leverage our past successes to produce, distribute and monetize our original MMA contents through domestic and international distribution arrangements. We intend to establish live television arrangements with various distribution channels in China and Singapore such as Starhub TV, Guangdong Sports TV, Beijing Sports TV and Qinghai Satellite TV. In addition to television broadcasting, the Company plans to build pay-per-view (“PPV”) viewership model to attract more audiences. PPV is a type of live broadcast service by which a viewer can purchase events to view via private channel at the same time with everyone else ordering it. The Company believes that the PPV model will be deployed in China in 2019 through selected live streaming service providers to enable PPV subscription service for the Company’s MMA events. We plan to distribute our live MMA events through PPV viewership model in 2019 and charge between $5 to $10 for each PPV MMA event.

Securing Key Venues. We intend to produce MMA events at key venues in four major Chinese cities-- Shanghai, Shenzhen, Guangzhou and Beijing. This strategy will allow us to build up our brand name in China’s affluent coastal cities and grow our brand and fan base in mid-class Chinese families.

Obtaining Sponsorships. Our initial business plan was to obtain sponsorships sufficient to cover our event production costs. However, we desire to increase our revenues through expanding our sponsorships. Currently, we rely on local and regional sponsors for our live events, although we plan to establish sponsorship and advertising arrangements with larger organizations such as Venom and Thomas Cook. For every event moving forward, we target to obtain at least 10 sponsors.

*Average cost of one MMA event produced by the Company (USD)

Development of a Reality Television Show. We plan to produce a 12-episode reality show which will be distributed across major Chinese internet platforms. The show will feature Chinese professional MMA fighters training and competing against each other to win a prize of 1,000,000 RMB. We believe that the show will provide us with an independent revenue stream and a good marketing tool to establish a better brand name recognition in China.

Establishment of Adjacent Revenue Streams. The major companies in our industry have utilized their brand to derive revenue by establishing gyms and selling merchandise. For example, UFC derived $19,000,000 (3.5% of their total revenue) from the sale of merchandise in 2015. Thus, we intend to establish our Rebel brand name gyms and produce our own exclusive merchandise in the near future.

Competition

The market for live and televised MMA events content is extremely competitive.

The main competitors in our industry, specifically in China, which include but are not limited to:

The principal competitive factors in our industry include:

Our Competitive Strengths

Despite the competition we face, we believe that our approach of delivering high quality content concentrating on the untapped combat sports market in China, centered around Chinese fighters and fans, where we believe we have the resources and experience to penetrate the market and grow our business, enables us to address the competitive factors more effectively and thrive in this competitive market. The major MMA promotors, UFC, Bellator, OFC, provide high quality content, however, they mainly focus on promotion in the United States, Latin America, Europe and South-East Asia, and not China. At the same time, the major Chinese promoters focus more on kickboxing and do not provide the same high quality MMA focuses content as Rebel.

Based upon Weibo followers, we have signed contracts with three of the nine most popular MMA fighters from China, Wenbo Liu, Ning Guangyou and Yao Honggang. We plan to utilize this local popularity to establish a prominent fan base in MMA crazed China by marketing these up and coming Chinese fighters to the Chinese market.

Government Regulation 

In order to organize and host a live event in China, we need to obtain a license from the local Police Department. We also need to comply with the rules and regulations required by the State of Administration Radio Film and Television.

Rebel counts with the services of a company specialized in handling the documentation and end-to-end process required by the various Chinese departments, such as the police and fire departments, in order to acquire the license to host the events.

Intellectual Property

The PRC has domestic laws for the protection of rights in copyrights, trademarks and trade secrets. The PRC is also a signatory to all of the world’s major intellectual property conventions, including:

The PRC Trademark Law, adopted in 1982 and revised in 2013, with its implementation rules adopted in 2014, protects registered trademarks. The Trademark Office of the State Administration of Industry and Commerce of the PRC, handles trademark registrations and grants trademark registrations for a term of ten years.

Our primary trademark portfolio consists of 11 registered trademarks. Our trademarks are valuable assets that reinforce the brand and our consumers’ favorable perception of our products. The current registrations of these trademarks are effective for varying periods of time and may be renewed periodically, provided that we, as the registered owner, comply with all applicable renewal requirements including, where necessary, the continued use of the trademarks in connection with similar goods. In addition to trademark protection, we own the URL designation and domain name, www.rebelfightingchampionship.com.

We have registered the following trademarks:

Trademark		Country of Registration		Application Number		Class		Duration		Current Owner
		Singapore		T131264IZ		41		Set to expire in 2023		SCA Capital Limited
		China		16036465		28		Set to expire in 2026		SCA Capital Limited
		China		16036464		32		Set to expire in 2026		SCA Capital Limited
		China		16036461		41		Set to expire in 2026		SCA Capital Limited
		China		16036463		35		Set to expire in 2026		SCA Capital Limited
		China		18720895		41		Set to expire in 2027		SCA Capital Limited
		China		18720894		41		Set to expire in 2027		SCA Capital Limited
		China		18951853		25		Set to expire in 2027		SCA Capital Limited
		China		18720893		28		Set to expire in 2027		SCA Capital Limited
		China		16036466		41		Set to expire in 2026		SCA Capital Limited
		China		16036467		41		Set to expire in 2026		SCA Capital Limited

Employees

As of September 3, 2019, Rebel FC was composed of around 20 employees based in China and Singapore, which teams are organized in the following departments:

Additionally, Rebel contracts external companies to provide specialized services for the organization of the events. The typical services outsourced to external companies are:

Facilities

We do not own any real property. Our principal executive and administrative offices are located in Singapore at 7500A Beach Road, Unit 13-313, The Plaza, Singapore. We pay our landlord SGD 3,317 (USD $2,480) as rent per month. We are renting the property on a month to month basis as the Company plans to move to bigger premises. The Company’s new operation headquarters are located in Shanghai at the Unit C02, 5/F (Mixpace), Building T2 (CES West Bund Center), NO.277 Longlan Road, Xuhui District, Shanghai 200030 pursuant to a lease agreement with a monthly rent of RMB 13,500 (USD $2,009). The lease will expire on March 18, 2020.

ITEM 1A. RISK FACTORS

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item.

ITEM 1B. UNRESOLVED STAFF COMMENTS

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item.

ITEM 2. PROPERTIES

Our headquarters is located in the heart of downtown Singapore at 7500A Beach Road, Unit 13-313, The Plaza, Singapore. We pay our landlord SGD 3,317 (USD $2,480) as rent per month. We are renting the property on a month to month basis, the Company plans to move to bigger premises. The Company’s new operation headquarters is located in Shanghai at the Unit C02, 5/F (Mixpace), Building T2 (CES West Bund Center), No.277 Longlan Road, Xuhui District, Shanghai 200030 pursuant to a lease agreement with a monthly rent of RMB 13,500 (USD $2,009). The lease will expire on March 18, 2020.

ITEM 3. LEGAL PROCEEDINGS

From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

On November 5, 2018, the Company was served a summon for a complaint filed by Ofsink, LLC (“Ofsink”) on September 13, 2018, in the Supreme Court of the City of New York County of New York against the Company. By filing the complaint, Ofsink alleged, among other claims, that the Company failed to pay for its legal services rendered in the amounts set forth on uncontested invoices in the amount of $252,822, and that it sustained damages in the sum of $252,822 plus interest and attorney’s fees as a result of the non-payment of the invoices rendered. The complaint seek, among other relief, compensatory damages and plaintiff’s counsel’s fees. On December 18, 2019, Ofsink voluntarily dismissed its lawsuit against the Company without prejudice. Ofsink informed the Company that it had planned to sell a promissory note approximately the amount Company owed to a third party. The Company may expect the third party entitled to receive payment of such an instrument to enforce the promissory note.

On November 12, 2017, Rebel signed a tenancy contract with Shanghai Konghui Property Development Co., Ltd. for the rooms in Grand Gateway Tower 1, NO.1 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, the latter froze the bank account of Rebel and brought Rebel to court. On April 24, 2019, the Court ruled Rebel to pay a net amount of RMB 164,865.86 (net of deposit RMB 268,957.47), inclusive of 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.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

There is limited public trading market for our Common Stock, which is quoted on the OTC Markets OTCQB under the symbol “REBL.” The OTCQB marketplace is a quotation service that displays real-time quotes, last-sale prices, and volume information in over-the-counter (“OTC”) equity securities. An OTCQB security generally is any equity that is not listed or traded on a national securities exchange.

OTCQB securities are not listed or traded on the floor of an organized national or regional stock exchange. Instead, OTCQB securities transactions are conducted through a telephone and computer network connecting dealers in stocks.

For the periods indicated, the following table sets forth the high and low bid prices per share of common stock for each quarter within the two most recent fiscal years. The following quotations reflect the high and low bids for our shares of common stock based on inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

Price Range of Common Stock

The following table shows, for the periods indicated, the high and low bid prices per share of our common stock as reported by the OTCQB quotation service. These bid prices represent prices quoted by broker-dealers on the OTC Pink quotation service. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions, and may not represent actual transactions.

There is no “public market” for shares of common stock of the Company. Although the Company’s shares are quoted on the OTCQB marketplace, the Company is aware of only a few transactions that have taken place in the previous ten years. In any event, no assurance can be given that any market for the Company’s common stock will develop or be maintained.

Common Stock

Our authorized capital stock consists of 500,000,000 shares of common stock, with a par value of $0.0001 per share, and 100,000,000 shares of preferred stock, par value $0.0001 per share. Our common stock is entitled to one vote per share on all matters submitted to a vote of the stockholders, including the election of directors. Except as otherwise required by law or provided in any resolution adopted by our board of directors with respect to any series of preferred stock, the holders of our common stock will possess all voting power. Generally, all matters to be voted on by stockholders must be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast by all shares of our common stock that are present in person or represented by proxy, subject to any voting rights granted to holders of any preferred stock. Holders of our common stock representing fifty percent (50%) of our capital stock issued, outstanding and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of our stockholders. A vote by the holders of a majority of our outstanding shares is required to effectuate certain fundamental corporate changes such as liquidation, merger or an amendment to our Articles of Incorporation. Our Articles of Incorporation do not provide for cumulative voting in the election of directors.

Subject to any preferential rights of any outstanding series of preferred stock created by our board of directors from time to time, the holders of shares of our common stock will be entitled to such dividends (cash, stock, or otherwise) as may be declared from time to time by our board of directors from funds available therefore.

Subject to any preferential rights of any outstanding series of preferred stock created from time to time by our board of directors, upon liquidation, dissolution or winding up, the holders of shares of our common stock will be entitled to receive pro rata all assets available for distribution to such holders.

In the event of any merger or consolidation with or into another company in connection with which shares of our common stock are converted into or exchangeable for shares of stock, other securities or property (including cash), all holders of our common stock will be entitled to receive the same kind and amount of shares of stock and other securities and property (including cash). Holders of our common stock have no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to our common stock.

As of September 3, 2019, there were 52,313,151 shares of common stock issued and outstanding.

Preferred Stock

The Company’s Board of Directors is authorized by its Articles of Incorporation to issue Preferred Stock from time to time in one or more series with such designations, preferences and relative participating, optional or other special rights and qualifications, limitations or restrictions, thereof, as shall be stated in the resolutions adopted by the Company’s Board of Directors providing for the issuance of the Preferred Stock. The Company’s Board of Directors is authorized, within any limitations prescribed by law and the Company’s Articles of Incorporation, to fix and determine the designations, rights, qualifications, preferences, limitations and terms of the shares of any series of Preferred Stock. There is no preferred stock issued or outstanding at the date of this Current Report.

Warrants

There are currently no outstanding warrants.

Options

There are currently no outstanding options.

Stockholders of Record

As of December 31, 2018, we had 48,319,986 shares of our common stock par value, $.0001, issued and outstanding. As of September 3, 2019, we had 52,313,151 shares of our common stock with par value $0.0001 issued and outstanding. There were approximately 512 stockholders of record as of September 3, 2019.

Transfer Agent and Registrar

The Transfer Agent for our capital stock is Island Stock Transfer with an address at 15500 Roosevelt Boulevard, Suite 301, Clearwater, Florida 33760. Their telephone number is Office phone: 727-289-0010.

For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s prior written consent to the transaction. Additionally, for any transaction, other than exempt transactions, involving a penny stock, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the Securities and Exchange Commission relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Consequently, the “penny stock” rules may restrict the ability of broker-dealers to sell our Common Stock and may affect the ability of investors to sell their Common Stock in the secondary market.

In addition to the “penny stock” rules promulgated by the Securities and Exchange Commission, the Financial Industry Regulatory Authority (“FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit the investors’ ability to buy and sell our stock.

Dividends

The Company has not declared any cash dividends with respect to its common stock and does not intend to declare dividends in the foreseeable future. There are no material restrictions limiting, or that are likely to limit, the Company’s ability to pay dividends on its common stock.

Securities authorized for issuance under equity compensation plans

Currently, there is no equity compensation plan in place for the Company.

Recent Sales of Unregistered Securities

During January to December 2018, the Company issued 2,622,609 shares of common stock to 27 individuals for net cash consideration of $2,609,331. The Company issued 1,433,460 shares of common stock with total value of $1,130,448  to two placement agents, pursuant to a Consultancy Mandate Agreement entered on August 18, 2017, in connection with fund raising for the Company (the “Consultancy Agreement”). The Company issued 146,531 shares of common stock with total value of $142,451 to one agent pursuant to a Service Agreement entered on January 14, 2018, for consultancy services provided to the Company (the “Service Agreement”). The Company also issued 1,320,378 shares of common stock with total value of $1,190,378 to nine individuals as payments for professional services related to public relations and marketing, director fees, and employment benefits. The value of shares of common stock issued for consideration other than cash was determined by referring to the value of shares of common stock issued for cash consideration.

All of the transactions listed above were made pursuant to the exemption from the Section 5 registration requirements of the Securities Act of 1933, for offerings made outside the United States by a United States issuer. The securities issued have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

Purchase of Equity Securities By the Issuer and Affiliated Purchasers.

We have not repurchased any shares of our common stock during the fiscal year ended December 31, 2018.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable to a smaller reporting company.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Current Report on Form 10-K contains forward-looking statements within the meaning of the federal securities laws. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as “anticipate,” “expect,” “intend,” “plan,” “will,” “we believe,” “management believes” and similar language. Except for the historical information contained herein, the matters discussed in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Current Report are forward-looking statements that involve risks and uncertainties. The cautionary language in this Current Report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from those projected. Except as may be required by law, we undertake no obligation to update any forward-looking statement to reflect events after the date of this Current Report on Form 10-K.

The “Company”, “we,” “us,” and “our,” in this Management’s Discussion and Analysis of Financial Condition and Plan of Operation refer to the combined business of (i) Rebel FC;(ii) Pure Heart; (iii) SCA Capital; (iv) Rebel Shanghai; and (v) Quanyao

Overview

The Company, through Rebel FC, organizes, promotes and hosts Mixed Martial Arts events featuring top level athletic talent with assistance from contracted production crews. The Company also seeks to produce and distribute videos of its MMA events, through the internet, social media, and selling the rights to such videos to distribute to television stations.

The Company seeks to promote MMA in China through hosting top quality matches, live TV broadcast and inspiring reality series that attract talented fighters from all over the world. MMA is unarmed combat involving the use of a combination of techniques from different disciplines of martial arts, including, without limitation, grappling, submission holds, kicking and striking. The styles of martial arts range from Brazilian Jiu-Jitsu, Judo, Karate, Boxing, Muay Thai, Wrestling, Jeet Kune Do, Taekwondo, Sanshou and various other forms of martial arts. Unlike boxing, where athletes can only strike with their fists and only above the belt, the fighters in MMA can use punches, kicks, elbows, knee strikes, takedowns and submissions to win a contest. 

The Company held two events in 2018 with one in Shanghai and one in Guangzhou.

The first event titled Fight for Honor was held on April 29, 2018 at Kerry Hotel in Shanghai. The event was broadcast live by Guangdong Sports TV, other satellite TV stations and major social media platforms. The viewership for the event from television and social media, respectively, were 4.06 million and 8.33 million.

The second event titled A Warrior’s Return took place in at Guangzhou Tianhe Stadium in Guangzhou on May 30, 2018. The event was broadcast live by Guangdong Sports TV, major satellite TV stations such as Tianjin Sports and Qinghai Satellite TV as well as major digital streaming platforms such as Youku, PP Sports and YY.com. The viewership for the event from television and social media, respectively, were 4.99 million and 8.15 million.  

As of December 31, 2018, our accumulated deficits were $8,370,529. Our stockholders’ deficit was $3,700,826.

Results of Operations

For the year ended December 31, 2018 compared with the year ended December 31, 2017

Gross Revenues

The Company made sales revenues from operations of $223,783 in the year ended December 31, 2018 compared to $393,185 being generated in the year ended December 31, 2017.

The Company’s sales revenue of $223,783 in the year ended December 31, 2018 primarily came from fees received by Quanyao for holding two events in China, Fight for Honor and A Warrior’s Return, and for our Chinese associate for which we received management fees.

The Company’s cost of revenue was $1,878,123 in the year ended December 31, 2018, compared to nil in the year ended December 31, 2017. The cost of revenue mainly consisted of direct costs of $598,530, fighter expenses of $439,681, marketing expenses of $415,654, venue rental and related expenses of $164,500, and logistic expenses of $267,613. The cost of revenue for 2017 was $1,381,218 and it was adjusted to nil to offset part of the goodwill and pre-acquisition loss.

Operating Expenses

Operating expenses for the years ended December 31, 2018 and 2017 were $5,226,522 and $2,515,465, respectively. For the year ended December 31, 2018, the operating expenses mainly consisted of payroll expenses of $1,390,766 rental expenses of $240,290, depreciation and amortization expenses of $558,158, allowance for account receivables and prepayments of $558,158, and expenses of new share issuance for services and compensations of $1,190,378. The increase in payroll and rental expenses was largely due to operational expansion in China to support the planned growth of our business.

Net Loss

Net loss for the year ended December 31, 2018 was $13,654,013 as compared to $2,195,366 for the year ended December 31, 2017. Basic and diluted net loss per share amounted $0.29 and $0.08 respectively for the years ended December 31, 2018 and 2017, respectively.

The increase of net loss for the year ended December 31, 2018 compared to the year ended December 31, 2017 was mainly due to goodwill impairment, and the operational expansion in China.

Liquidity and Capital Resources

As of December 31, 2018 we had working capital deficiency of $4,856,536 as compared to working capital deficiency of $1,739,033 as of December 31, 2017.

Net cash used in operating activities for the year ended December 31, 2018 was $4,480,190 as compared to $3,498,642 for the year ended December 31, 2017. The cash used in operating activities for the financial year ended December 31, 2018 was primarily due to an increased net loss net of impairment of goodwill.

Net cash used in investing activities for the year ended December 31, 2018 was $20,100 as compared to $16,993 for the year ended December 31, 2017. The cash used in investing activities are mainly due to purchase of fixed assets.

Net cash provided by financing activities for the year ended December 31, 2018 was $4,537,729 as compared to $3,484,711 for the year ended December 31, 2017. The cash provided by financing activities for the year ended December 31, 2018 are mainly from issuing of common shares and increased advances from related parties. Our operating results for future periods are subject to numerous uncertainties and it is uncertain if we will be able to maintain profitability and continue growth for 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 maintain profitability.

We will require additional capital to continue to operate and expand our business and we are currently raising capital through the sale of equity. Sources of additional capital through various financing transactions or arrangements with third parties may include equity or debt financing, bank loans or revolving credit facilities. We may not be successful in locating suitable financing transactions in the time period required or at all, and we may not obtain the capital we require by other means. Our inability to raise additional funds when required may have a negative impact on our operations, business development and financial results.

On March 16, 2018, the Company entered into a subscription agreement with a third-party investor. The investor is expected to remit three installment payments in the amount of $1 million each ($3 million in total) in exchange for such numbers of the Company’s common stock as determined pursuant to the terms and conditions of the Subscription Agreement. As of the date of this report, the Company has not received any installment payment from the investor and there is no guarantee that the Company will receive any of them in the near future, if ever. 

On August 16, 2018, the Company entered into another subscription agreement with another third-party investor. Such investor is expected to remit two equal installment payments in the amount of $1 million each ($2 million in total) in exchange for such numbers of the Company’s common stock as determined pursuant to the terms and conditions of the subscription agreement. On August 17, 2018, the Company received a first installment payment of $1 million. The Company expected to receive a second installment in 2019.     

The Company also received financial support commitments from the Company’s related parties.

We believe that available cash and cash equivalents, together with actions as mentioned above, should enable us to meet anticipated cash needs for at least the next 12 months after the date that the financial statements of this Form 10-K are issued. However, if we are unable to obtain the necessary additional capital on a timely basis and on acceptable terms, we will be unable to implement our current plans for expansion, repay debt obligations or respond to competitive market pressures, which will have negative influence upon our business, prospects, financial condition and results of operations and may raise substantial doubts about our ability to continue as a going concern.

Critical Accounting Policies and Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at dates of the financial statements and the reported amounts of revenue and expenses during the periods. Actual results could differ from these estimates. Our significant estimates and assumptions include depreciation, allowance for trade receivables and prepayments, and the fair value of our stock, stock-based compensation, debt discount, goodwill and the valuation allowance relating to the Company’s deferred tax assets.

Recently Issued Accounting Pronouncements

Reference is made to the “Recent Accounting Pronouncements” in Note 2 to the Financial Statements included in this Report for information related to new accounting pronouncement, none of which had a material impact on our consolidated financial statements, and the future adoption of recently issued accounting pronouncements, which we do not expect will have a material impact on our consolidated financial statements.

Off-Balance Sheet Arrangements

As of December 31, 2018, we did not have any off-balance sheet arrangements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements of the Company are included in this Annual Report on Form 10-K beginning on page F-1, which are incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

During the fiscal years ended December 31, 2018 and 2017, there have been no reportable events as defined under Item 304(a)(1)(v) of Regulation S-K adopted by the Securities and Exchange Commission.

Prior to Friedman’s engagement by the Company, neither the Company, nor anyone on the Company’s behalf, previously consulted with Friedman regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s consolidated financial statements or (ii) any matter that was either the subject of a disagreement as defined in Item 304(a)(1)(iv) of or this Regulation S-K and its related instructions or a reportable event as defined in Item 304(a)(1)(v) of Regulation S-K. Further, there was no written report or oral advice provided by the Company or anyone on the Company’s behalf to Friedman prior to Friedman’s engagement by the Company.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosures Control and Procedures

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

As of December 31, 2018, our CEO evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Annual Report on Form 10-K. Disclosure controls and procedure include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure. Our Management is responsible for monitoring the process pursuant to which information is gathered and analyze such information to determine the extent to which such information requires disclosure in the reports filed with the Securities and Exchange Commission. Based on such evaluation, our CEO has concluded that as of December 31, 2018, the Company’s disclosure controls and procedures were ineffective due to the Company’s lacks of formal documented controls and procedures applicable to all officers and directors. The Company is in the process of adopting formal documented controls.

As of December 31, 2018, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in by the Committee of Sponsoring Organizations of the Treadway Commission’s 2013 Internal Control - Integrated Framework and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.

The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were:

(1) lack of a functioning audit committee due to a lack of a majority of independent members resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures;

(2) inadequate segregation of duties consistent with control objectives;

(3) ineffective controls over period end financial disclosure and reporting processes; and

(4) do not have any full-time accounting personnel who have U.S. GAAP experience.

The aforementioned material weaknesses were identified by our Chief Executive Officer in connection with the review of our financial statements as of December 31, 2018.

Management believes that the material weaknesses set forth in items (1), (2), (3) and (4) above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

Management’s Remediation Initiatives

In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:

We plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management when funds are available to us.   

Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, may remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board.   

We anticipate that these initiatives may be at least partially, if not fully, implemented by August 31, 2019. Additionally, we plan to test our updated controls and remediate our deficiencies by August 31, 2019.

Changes in Internal Controls Over Financial Reporting

As reported on the Form 8-K filed by the Company on June 1, 2018, Mr. Tomas Urbanec notified the Company of his resignation as a member of the board of directors of the Company, effective immediately on May 25, 2018.

As reported on the Form 8-K filed by the Company on October 9, 2018, Mr. Chow Hong Ong notified the Company of his resignation as a member of the board of directors of the Company, effective immediately on September 28, 2018.

Other than the foregoing, there was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. However, since the end of the last completed fiscal year, we have appointed Mr. Benjamin Cher as a member of the Board of Directors, effective May 7, 2019, as reported on the Form 8-K filed by the Company on May 14, 2019.

Attestation Report of Registered Public Accounting Firm

This annual report does not include an attestation report of the Company’s registered independent public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered independent public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report on Form 10-K.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The name, age and titles of our executive officer and director is as follows:

(1) Mr. Chow Hong Ong resigned from his position as Director on September 28, 2018

(2) Mr. Tomas Urbanec resigned from his position as Director on May 25, 2018. 

(3) Mr. Cher was appointed as a member of the Board of Directors on May 7, 2019.

Mr. Aan Yee Leong, age 34, has managerial experience in project management, financial management, financial reporting, and budgeting. He has the passion and enthusiasm for mixed martial arts and is the founder of Rebel FC. From October 2013, he serves as an executive director in SCA Capital Limited and Rebel FC. From May 2013, he started to work as an executive director of Pure Heart. From March 2007 to October 2008, he worked as a finance and administrative executive in KKL Management Consultants Pte Ltd. From January 2012 to December 2012, he was a manager of KK Leong & Partners. Mr. Justin Leong graduated from University of London with a Bachelor of Science (Hons) in Banking and Finance in 2007. The Board of Directors reached a conclusion that Mr. Justin Leong should serve as a Director of the Company based on his experience in financial management.

Mr. Khian Kiee Leong, age 69, has over 30 years professional experience in advisory and consultant business, serving both multinational and regional companies across a wide range of industries. He provides advice and support for the Company on its strategic planning. From October 2014, he serves as director in Rebel FC and SCA Capital. From June, 2013, he acts as a director of Pure Heart. Since March 1994, he serves as the managing partner of KK Leong & Partners and CEO of KKL Consultancy Services Pte. Ltd. Mr. Leong graduated from Nanyang University majored in Accounting in Singapore in 1972 and he is chartered accountant of the Institute of Chartered Accountants in England and Wales. The Board of Directors reached a conclusion that Mr. Leong should serve as a Chairman of the Company based on his extensive experience in management.

Mr. Chow Hong Ong, age 79, has held the positions of Chief Accountant, Chief Internal Auditor and Director (Audit & Systems) in the Port of Singapore Authority (“PSA”) for 15 years. He was the General Manager of SPECS Consultants Pte Ltd, the consulting agency of the PSA. Previously he worked in the Internal Audit Department of ESSO Berhad in Kuala Lumpur, Malaysia and in a public accountants firm in Perth, Australia. He had also held the position of CEO of Superior Multi-Packaging Ltd, Singapore. Mr. Ong served as a director and Chairman of Audit Committee of the public-listed companies of Vicom Ltd from 1980 to 2008. He also held position as a director in Superior Multi-Packaging Ltd and Airocean Ltd. in Singapore. He was a director of Cisco Recall Pte Ltd, a joint venture of Cisco Pte Ltd, Singapore and Bramble Ltd of Australia from 1998 to 2004. He was also a director of Hoover Stainless Pte Ltd, Singapore from 1997 to 2003. Mr. Ong served as a Councilor and Chairman of Audit Committee of Aljunied Town Council, Singapore. He served as a member of Audit Committee of National Council of Social Service, Singapore. He was also the Chairman of Audit Committee of Orchid Country Club, Singapore. Mr. Ong was conferred the National Public Administration Medal (Bronze) for his service in the Port Singapore Authority and the Friend of Labour Award by Singapore Labour Foundation (SLF) for his contributions in Vicom Ltd. Mr. Ong held a diploma in Accountancy from the Perth Technical College, Australia. He was a Fellow of Certified Public Accountants (Australia). Mr. Chow Hong Ong resigned from his position as Director on September 28, 2018 due to personal reasons.

Mr. Tomas Urbanec, age 52, is an accomplished international executive, with over 17 years of experience in global consumer financial services. Mr. Urbanec has held leadership positions with businesses in some of the major financial capitals of the world, with regional assignments in Hong Kong, Athens, Tokyo, Shanghai and Singapore. His most recent role was as the Chief Executive Officer and Executive Director of Prudential Assurance Company Singapore, which is of one of the largest life insurance companies in Singapore and is part of the Prudential UK group. Prior to his appointment as Chief Executive Officer of Prudential Assurance Company Singapore, Mr. Urbanec was the Chief Marketing and Partnerships Distribution Officer for Prudential Singapore from 2009 to 2013. Mr. Urbanec also served as Regional Strategic Marketing Officer for Prudential Corporation Asia from 2008 to 2009. Before joining Prudential, Mr. Urbanec was the Executive Vice President of Personal Lines for ACE Insurance Group (now known as Chubb Insurance) from 2004 to 2008. Mr. Urbanec holds a Masters of Business Administration from the Weatherhead School of Management at Case Western Reserve University in Cleveland Ohio and a Bachelor’s of Science in Finance from Indiana University in Bloomington Indiana. Mr. Tomas Urbanec resigned from his position as Director on May 25, 2018 due to personal reasons.

Mr. Chee Keong Teng, age 45, is a trader and manager, with over 18 years of experience in the oil and gas industry. Over the years, Mr. Teng has held key management positions with various companies. Key appointments include Managing Director of Singapore based G-Fuel, as well as the role of General Manager with SGX listed company Chemoil, one of the world’s leading independent oil traders. Mr. Teng was the team leader overseeing Chemoil’s trading operations for the Asia Pacific and Middle East regions. Prior to his appointment in Chemoil, Mr. Keong was the trading manager of one of Saudi Arabia’s largest independent oil trading firms, Bakri Trading Co. Mr. Teng also served as an analyst in global energy markets with Platts specializing in fuel oil, middle distillates and freight. He has a strong background in risk management, business development and managing partnerships. Mr. Teng holds a Bachelor’s degree in Mathematics and Psychology from the National University of Singapore. 

Mr. Benjamin Cher, age 41, is a seasoned professional with more than 15 years of experience in banking, private equity, strategic planning and general management. From May 2014 to March 2016, Mr. Cher served as a senior private banker for Credit Suisse AG. Mr. Cher founded Aetius Capital in 2016 and has been serving as its CEO since then. Mr. Cher received his Master’s degree in Management Science & Engineering from Stanford University in 2001. He received his Bachelor of Engineering degree in Electrical & Electronic Engineering from Imperial College London in 2000.

Significant Employees

We do not have significant employees who are not our executive officers or directors.

Director Independence

We are not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the board of directors be “independent” and, as a result, we are not at this time required to have our Board of Directors comprised of a majority of “independent directors.” None of our directors are independent directors under the applicable standards.

Family Relationships

The Chairman, Mr Khian Kiee Leong is the father of the Chief Executive Officer, Mr Aan Yee Leong.

Involvement in Certain Legal Proceedings

During the past 10 years, to our knowledge, except as described below, none of our present or former directors, executive officers or persons nominated to become directors or executive officers has been the subject of any of the following:

(1) A petition under the federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two (2) years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two (2) years before the time of such filing;

(2) Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

(3) Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him or her from, or otherwise limiting, the following activities:

(i) Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

(ii) Engaging in any type of business practice; or

(iii) Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;

(4) Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than sixty (60) days the right of such person to engage in any activity described in paragraph (3)(i) above, or to be associated with persons engaged in any such activity;

(5) Such person was found by a court of competent jurisdiction in a civil action or by the SEC to have violated any federal or state securities law, and the judgment in such civil action or finding by the SEC has not been subsequently reversed, suspended, or vacated;

(6) Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;

(7) Such person was the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:

(i) Any federal or state securities or commodities law or regulation; or

(ii) Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or

(iii) Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

(8) Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26)), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29)), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Except as disclosed herein, we are not a party to any pending legal proceeding. To the knowledge of our management, except as disclosed herein, no federal, state or local governmental agency is presently contemplating any proceeding against us.

Compliance with Section 16(a) of the Exchange Act

We do not yet have a class of equity securities registered under the Securities Exchange Act of 1934, as amended. Hence, compliance with Section 16(a) thereof by our officers and directors is not required.

Board Committees

The Company currently has not established any committees of the Board of Directors. Our Board of Directors may designate from among its members an executive committee and one or more other committees in the future. We do not have a nominating committee or a nominating committee charter. Further, we do not have a policy with regard to the consideration of any director candidates recommended by security holders. To date, other than as described above, no security holders have made any such recommendations. The entire Board of Directors performs all functions that would otherwise be performed by committees. Given the present size of our board, it is not practical for us to have committees. If we are able to grow our business and increase our operations, we intend to expand the size of our board and allocate responsibilities accordingly.

Audit Committee Financial Expert

We have no separate audit committee at this time. The entire Board of Directors oversees our audits and auditing procedures. Neither of our directors is an “audit committee financial expert” within the meaning of Item 407(d)(5) of SEC Regulation S-K.

Compensation Committee

We have no separate compensation committee at this time. The entire Board of Directors oversees the functions which would be performed by a compensation committee.

Code of Ethics

We have adopted a code of ethics that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer. The code addresses, among other things, honesty and ethical conduct, conflicts of interest, compliance with laws, regulations and policies, including disclosure requirements under the federal securities laws, confidentiality, trading on inside information, and reporting of violations of the code.    

ITEM 11. EXECUTIVE COMPENSATION

The following is a summary of the compensation we paid to our executive officers, for the two fiscal years ended December 31, 2018 and 2017.

Summary Compensation Table

Director Compensation

The following table sets forth the compensation paid to our directors during the years ended December 31, 2018 and 2017.

Aggregated Option Exercises and Fiscal Year-End Option Value Table

There were no stock options exercised since the date of inception of the Company through the date of this Report by the executive officers named in the Summary Compensation of REBL.

Long-Term Incentive Plan (“LTIP”) Awards Table

There were no awards made to any named executive officers in the last completed fiscal year under any LTIP.

Employment Agreements

We currently do not have any employment agreements with our directors or executive officers.

Compensation of Directors

For the fiscal year ended December 31, 2018, two of the directors received compensation for their service as a director of the Company. Mr. Chow Hong Ong received 60,000 shares of the Company’s common stock and Mr. Tomas Urbanec received $29,658 in cash and 416,000 shares of the Company’s common stock. We do not currently have an established policy to provide compensation to members of our Board of Directors for their services in that capacity.

Option Plan

We currently do not have any stock option plan. However, we may issue stock options pursuant to a stock option plan in the future. Such stock options may be awarded to management, employees, members of the Company’s Board of Directors and consultants of the Company.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth certain information regarding the beneficial ownership of the Company’s Common Stock as of the date herein by (i) each stockholder known by the Company to be the beneficial owner of more than 5% of the Company’s Common Stock and (ii) by the directors and executive officers of the Company. The person or company named in the table has sole voting and investment power with respect to the shares beneficially owned.

Changes in Control

None.

Securities Authorized for Issuance under Equity Compensation Plans

None.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, DIRECTOR INDEPENDENCE

Our policy is that a contract or transaction either between the Company and a director, or between a director and another company in which he is financially interested is not necessarily void or void-able if the relationship or interest is disclosed or known to the board of directors and the stockholders are entitled to vote on the issue, or if it is fair and reasonable to our company.

As of December 31, 2018, our Chairman, Mr. Leong Khian Kiee has made loans totaling $1,956,390 to the Company. The loans have no fixed terms of repayment due on demand and bear no interest. The loans were used by the Company in connection with preparations for events in China and the planned reality show. The amount due to Mr. Leong was mainly the unpaid salary and business related expenses, and has no fixed terms of repayment due on demand and bear no interest.

As of December 31, 2018, amount due to our CEO, Mr. Leong Justin Aan Yee was totaling $702,170. The amount due to Mr. Leong was mainly the unpaid salary and business related expenses, and has no fixed terms of repayment due on demand and bear no interest.

Except the above transactions or as otherwise set forth in this report or in any reports filed by the Company with the SEC, the Company was not a party to any transaction (where the amount involved exceeded the lesser of $120,000 or 1% of the average of our assets for the last two fiscal years) in which a director, executive officer, holder of more than five percent of our common stock, or any member of the immediate family of any such person have or will have a direct or indirect material interest and no such transactions are currently proposed. The Company is currently not a subsidiary of any company.

The Company’s Board conducts an appropriate review of and oversees all related party transactions on a continuing basis and reviews potential conflict of interest situations where appropriate. The Board has not adopted formal standards to apply when it reviews, approves or ratifies any related party transaction. However, the Board believes that the related party transactions are fair and reasonable to the Company and on terms comparable to those reasonably expected to be agreed to with independent third parties for the same goods and/or services at the time they are authorized by the Board.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The following table shows the fees that were billed for the audit and other services for the fiscal years of 2018 and 2017.

Audit Fees — This category includes the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the independent registered public accounting firm in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.

Audit-Related Fees — This category consists of assurance and related services by the independent registered public accounting firm that is reasonably related to the performance of the audit or review of our financial statements and is not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the Securities and Exchange Commission and other accounting consulting.

Tax Fees — This category consists of professional services rendered by our independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.

All Other Fees — This category consists of fees for other miscellaneous items.

Our Board of Directors has adopted a procedure for pre-approval of all fees charged by our independent registered public accounting firm. Under the procedure, the Board approves the engagement letter with respect to audit and review services. Other fees are subject to pre-approval by the Board, or, in the period between meetings, by a designated member of Board. Any such approval by the designated member is disclosed to the entire Board at the next meeting. The audit fees that were paid to the auditors with respect to 2018 were pre-approved by the entire Board of Directors.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

All financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto included in this Annual Report on Form 10-K.

Item 16. Form 10–K Summary

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

REBEL GROUP, INC.

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

(Stated in US Dollars)

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

Rebel Group Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Rebel Group Inc. (the “Company”) as of December 31, 2018 and 2017, and the related consolidated statements of operations and comprehensive loss, changes in shareholders’ equity and cash flows for each of the years in the two-year period ended December 31, 2018, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Rebel Group Inc. as of December 31, 2018 and 2017, and the results of their operations and their cash flow for each of the years in the two-year period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

Consideration of the Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has an accumulated deficit, has incurred continuing losses from operations, negative cash flows from operations and working capital deficiency. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 2. These financial statements do not include any adjustments that might result from the outcome of these uncertainties. If the Company is unable to successfully obtain the alternative forms of financing specified in Note 2 and/or achieve operating profitability, there could be a material adverse effect on the Company.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ Friedman LLP

We have served as the Company’s auditor since 2018.

New York, New York

September 3, 2019

REBEL GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars)

See accompanying notes to consolidated financial statements

REBEL GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Stated in US Dollars)

See accompanying notes to consolidated financial statements

REBEL GROUP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’EQUITY

(Stated in US Dollars)

See accompanying notes to consolidated financial statements

REBEL GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Stated in US Dollars)

See accompanying notes to consolidated financial statements

REBEL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

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 January 30, 2015, the Company completed the acquisition of Rebel Holdings Limited (“Rebel FC”) pursuant to a Share Exchange Agreement. (“Share Exchange Agreement,” such transaction, the “Share Exchange Transaction”), whereby the Company issued to the Rebel FC Stockholder an aggregate of 20,700,000 shares of its Common Stock, in exchange for 100% of the equity interests of Rebel FC held by the Rebel FC Stockholder. The shares of Common Stock received by the Rebel FC Stockholder in the Share Exchange Transaction constitute approximately 90% of our issued and outstanding Common Stock giving effect to the issuance of shares pursuant to the Share Exchange Agreement. As a result of the Share Exchange Transaction, Rebel FC, together with its subsidiaries, Pure Heart Entertainment Pte Ltd. (“Pure Heart”) and SCA Capital Limited (“SCA Capital”), became the Company’s wholly-owned subsidiaries. The acquisition was accounted for as a reverse merger and recapitalization effected by the Share Exchange Transaction. Rebel FC is considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of the acquired entity have been brought forward at their historical value and no goodwill has been recognized.

The exchange transaction was accounted for as a reverse acquisition in accordance with generally accepted accounting principles of America. For financial reporting purposes, this transaction is classified as a recapitalization of the Company and Pure Heart. The accompanying audited consolidated financial statements were retroactively adjusted to reflect the effects of the recapitalization of the financial statements of the Company and the historical financial statements of Pure Heart.

Also on January 30, 2015, the Company transferred 100% equity interests of Moxian Intellectual Property Limited (“Moxian IP), the Company’s subsidiary, to Moxian, Inc. (“MOXC”) pursuant to the Equity Transfer Agreement. As a result of the Equity Transfer Transaction, Moxian IP ceased to be a subsidiary of the Company.

Rebel FC, which utilizes the trade name of Rebel Fighting Championship, was incorporated on October 28, 2014 in British Virgin Islands and engages in hosting and promoting MMA events since its corporation.

Pure Heart was incorporated under the laws of the Singapore on August 24, 2000 under the name “Soo Kee Coffeeshop Pte. Ltd.” Effective on November 27, 2002, it changed its name to “Asia Pacific Export International Pte Ltd.” It later changed its name from “Asia Pacific Export International Pte Ltd.” to “Pure Heart Entertainment Pte Ltd.” on June 7, 2013. As of October 30, 2014, it became a wholly owned subsidiary of Rebel FC. Pure Heart is an operating subsidiary of the Company and is dedicated to hosting and promoting MMA events.

SCA Capital, a British Virgin Islands company, was incorporated on January 7, 2011 and holds the intellectual property rights relating to the Rebel FC business. On October 28, 2014, SCA Capital became the wholly-owned subsidiary of Rebel FC.

On June 21, 2017, Pure Heart formed Rebel Shanghai Limited, which was incorporated in Shanghai China in order to acquire Qingdao Quanyao Sports Consulting Co. Ltd. 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 Sports Consulting Co. Ltd, a company organized under the laws of PRC (the “Qingdao Quanyao”).

Pursuant to the Transfer Agreement, Pure Heart, through a wholly foreign owned entity (the “WOFE”) agreed to acquire 100% share of the outstanding equity interests (the “Equity Stake”) of the Qingdao Quanyao from the Shareholder with the purchase price valued at approximately $7,000,000 consisting of the following: (i) the forgiveness of debt owed by the Target Company to Pure Heart as of October 1, 2017, in the amount of approximately $2,825,000 (the “Forgiven Debts”) and (ii) 12,000,000 shares (the “Shares”) of the common stock of the Company, par value $0.0001 per share (the “Common Stock”) (together the “Purchase Price”) (See Note 3 to the consolidated financial statements for detail).

Qingdao Quanyao holds 50% shares of Qingdao Leibo Sports Culture Co Ltd since January 8, 2015 (date of incorporation).

REBEL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

Basis of presentation and consolidation

The consolidated financial statements of the Company and its subsidiaries are prepared and presented in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).

All significant inter-company transactions and balances have been eliminated upon consolidation.

The Company’s audited consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The fiscal year end is December 31.

Liquidity and capital resource 

As of December 31, 2018, the Company had working capital deficiency of $4,856,536 as compared to working capital deficiency of $1,739,033 as of December 31, 2017.

Net cash used in operating activities for the year ended December 31, 2018 was $4,480,190 as compared to $3,498,642 for the year ended December 31, 2017. The cash used in operating activities for the financial year ended December 31, 2018 was primarily due to an increased net loss net of impairment of goodwill.

Net cash provided by financing activities for the year ended December 31, 2018 was $4,537,729 as compared to $3,484,711 for the year ended December 31, 2017. The cash provided by financing activities for the year ended December 31, 2018 are mainly from issuing of common shares and increased advances from related parties.

As of December 31, 2018, our accumulated deficits were $8,370,529. Our operating results for future periods are subject to numerous uncertainties and it is uncertain if we will be able to maintain profitability and continue growth for 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 maintain profitability.

The Company will focus on improving operation efficiency and cost reduction, developing core cash-generating business. Actions include extent the advances from the major shareholders, seeking additional public and/or private issuance of securities, as well as look for strategic business partners to optimize our operations. On March 16, 2018, the Company entered into a Subscription Agreement (the “Subscription Agreement”) with Shaw Chai Li Howard, a third party investor (the “Investor”). The Investor is expected to remit three equal instalments in the amount of $1 million each, and $3 million in the aggregate, in exchange for such numbers of the Company’s common stock as determined pursuant to the terms and conditions of the Subscription Agreement. As of the date of this report, the Company has not received any of the installments and there is no guarantee that the Company will receive them in the near future, if ever.  

On August 16, 2018, the Company entered into a subscription agreement with another third-party investor. The investor is expected to remit two equal installments in the amount of $1 million each, and $2 million in the aggregate, in exchange for such numbers of the Company’s common stock as determined pursuant to the terms and conditions of the subscription agreement. On August 17, 2018, the Company received the first installment in the amount of $1 million. The Company expected to receive the second installment in December 2018 or January 2019. The Company also received financial support commitments from the Company’s major shareholder. 

The Company also received financial support commitments from the Company’s related parties.

The Company believes that available cash and cash equivalents, together with actions as 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 consolidated financial statements for the years ended December 31, 2018 and 2017 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 CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

Advertising and marketing expenditure

Advertising and marketing expenditure is expensed when incurred and is included in “cost of sales” in the consolidated statements of operations. Advertising and marketing expenses were US$466,752 and US$301,605 for the years ended December 31, 2018 and 2017, respectively.

Revenue recognition

The Company adopted Accounting Standards Codification 606, Revenue from Contracts with Customers (“Topic 606”), as of January 1, 2018 using the modified retrospective transition method. 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 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:

REBEL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

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. 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.

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 CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

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.

As of December 31, 2018 and 2017, financial instruments of the Company primarily comprise of cash, of cash, cash equivalents, other receivables, accrued expenses, 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 (“SGD”) and Renminbi dollar (“RMB”), which are their functional currencies as being the primary currency of the economic environment in which these entities operate.

Transactions in foreign currencies other than functional currencies are initially recorded at the functional currency rate ruling at the date of transaction. Any differences between the initially recorded amount and the settlement amount are recorded as a gain or loss on foreign currency transaction in the statements of income. Monetary assets and liabilities denominated in foreign currency are translated at the functional currency rate of exchange ruling at the balance sheet date. Any differences are taken to profit or loss as a gain or loss on foreign currency translation in the statements of income.

The Company translated the assets and liabilities into US dollars using the rate of exchange prevailing at the applicable balance sheet date and the statements of income and cash flows are translated at an average rate during the reporting period.  Adjustments resulting from the translation are recorded in investors’ equity as part of accumulated other comprehensive income.

REBEL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

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 (refer to the header “Tax Cuts and Jobs Act” in Note 12 to the consolidated financial statements for further discussion on the impact to the enacted tax laws in 2017). Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

Entities should recognize in the audited 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.

In January 2018, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) to provide guidance for companies that have not completed their accounting for the income tax effects of the 2017 Tax Act in the period of enactment. Specifically, SAB 118 states that companies that have not completed accounting for the effects of the 2017 Tax Act by financial reporting deadlines may report provisional amounts based on reasonable estimates for items for which the accounting is incomplete. Those provisional amounts will be subject to adjustment during a measurement period that begins in the reporting period that includes the 2017 Tax Act’s enactment date and ends when a company has obtained, prepared and analyzed the information needed to complete the accounting requirements under ASC 740 Income Taxes. The measurement period should not extend beyond one year from the enactment date. Furthermore, SAB 118 states that if a company cannot make a reasonable estimate for an income tax effect, it should not account for that effect until it can make such an estimate.

One-time transitional tax. As part of the 2017 Tax Act, total foreign earnings and profits (“E&P”) after 1986, that were previously deferred from U.S. federal taxation, are subject to a one-time tax on the mandatory deemed repatriation of foreign earnings. The Company’s provisional analysis of the one-time transition tax resulted in no additional taxes being owed due to the overall accumulated E&P deficit for the income tax purpose. 

The Company has determined that we cannot make a reasonable estimate of the income tax effect with respect to global intangible low-taxed income (GILTI) provisions of the 2017 Tax Act. The GILTI provisions allow companies to make an accounting policy election to either (i) account for GILTI as a component of tax expense in the period in which the entity is subject to the rules or (ii) account for GILTI in the entity’s measurement of deferred taxes. Our ultimate accounting policy election will depend on our estimates of future taxable income related to GILTI. Refer to the Note 12 - “Income Taxes” for further discussion on the impact of tax laws enacted during 2017.

REBEL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

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.

Goodwill

Goodwill represents the excess of the consideration over the fair value of the net assets acquired at the date of acquisition. Goodwill is not amortized but rather tested for impairment at least annually at the reporting until level by applying a fair-value based test in accordance with accounting and disclosure requirements for goodwill and other indefinite-lived intangible assets. This test is performed by management annually or more frequently if the Company believes impairment indicators are present.

Impairment of long-lived assets

The Company reviews its long-lived assets, other than goodwill, including property and equipment and intangible assets with definite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. When these events occur, the Company measures impairment by comparing the carrying values of the long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amounts of the assets, the Company would recognize an impairment loss based on the excess of the carrying value over the assessed discounted cash flow amount.

REBEL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

Impairment of goodwill 

The Company reviews the carrying value of intangible assets with indefinite lives not subject to amortization, including goodwill, to determine whether impairment may exist annually or more frequently if events and circumstances indicate that it is more likely than not that an impairment has occurred. The Company has the option to assess qualitative factors to determine whether it is necessary to perform the two-step assessment. If the Company believes, as a result of the qualitative assessment, that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the two-step quantities impairment test described below is required. The first step compares the fair values of each reporting unit to its carrying amount, including goodwill. If the fair value of each reporting unit exceeds its carrying amount, the assets are not considered to be impaired and the second step will not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying value of a reporting unit’s goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business acquisition with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. An impairment loss is recognized for any excess in the carrying value of goodwill over the implied fair value of goodwill. Estimating fair value is performed by utilizing various valuation techniques, with the primary technique being a discounted cash flow.

The Company performed its annual goodwill impairment review for the year ended December 31, 2018 and determined to fully impair the goodwill arising from acquisition of Quanyao of $6,719,542 as of December 31, 2018.

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 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.

REBEL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

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 by 7.6% in fiscal year 2017. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the RMB and the U.S. dollar in the future. The change in the value of the RMB relative to the U.S. dollar may affect our financial results reported in the U.S. dollar terms without giving effect to any underlying changes in our business or results of operations. Currently, our assets, liabilities, revenues and costs are denominated in RMB.

To the extent that the Company needs to convert U.S. dollars into RMB for capital expenditures and working capital and other business purposes, appreciation of RMB against U.S. dollar would have an adverse effect on the RMB amount the Company would receive from the conversion. Conversely, if the Company decides to convert RMB into U.S. dollar for the purpose of making payments for dividends, strategic acquisition or investments or other business purposes, appreciation of U.S. dollar against RMB would have a negative effect on the U.S. dollar amount available to the Company.

For the years ended December 31, 2018 and 2017, one customer accounted for 100% and 99.9% of the Company’s total revenues, respectively.

Statement of Cash Flows

Cash flows from the Company’s operations are formulated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statements of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.

REBEL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

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.

Recently Issued Accounting Guidance 

In February 2016, the FASB issued ASU 2016-02, Amendments to the Accounting Standards Codification (“ASC”) 842 Leases. This update requires lessee to recognize the assets and liability (the lease liability) arising from operating leases on the balance sheet for the lease term. When measuring assets and liabilities arising from a lease, a lessee (and a lessor) should include payments to be made in optional periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. Twelve months or less lease term, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities. If a lessee makes this election, it should recognize lease expense on a straight-line basis over the lease term. In transition, this update will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases. In March 2019, the FASB issued ASU 2019-01, Codification Improvements to Topic 842, Leases. Management have adopted an accounting policy to not recognize an asset for leases with a term of twelve months or less, therefore does not believe the adoption of these ASUs would have a material effect on the Company’s unaudited condensed consolidated financial statements.

On June 20, 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting, which aligns the accounting for share-based payment awards issued to employees and nonemployees. Under ASU No. 2018-07, the existing employee guidance will apply to nonemployee share-based transactions (as long as the transaction is not effectively a form of financing), with the exception of specific guidance related to the attribution of compensation cost. The cost of nonemployee awards will continue to be recorded as if the grantor had paid cash for the goods or services. In addition, the contractual term will be able to be used in lieu of an expected term in the option-pricing model for nonemployee awards. The new standard is effective for us on January 1, 2019. Early adoption is permitted, including in interim periods, and should be applied to all new awards granted after the date of adoption. The Company does not believe this guidance will have a material impact on its unaudited condensed consolidated financial statements.

In August 2018, the FASB Accounting Standards Board issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 modifies the disclosure requirements on fair value measurements. ASU 2018-13 is effective for public entities for fiscal years beginning after December 15, 2019, with early adoption permitted for any removed or modified disclosures. The removed and modified disclosures will be adopted on a retrospective basis and the new disclosures will be adopted on a prospective basis. The Company does not expect this guidance will have a material impact on its condensed consolidated financial statements.

In May 2019, the FASB Accounting Standards Board issued ASU No. 2019-06, “Intangibles-Goodwill and Other (Topic 350), Business Combinations (Topic 805), and Not-for-Profit Entities (Topic 958): Extending the Private Company Accounting Alternatives on Goodwill and Certain Identifiable Intangible Assets to Not-for-Profit Entities” (“ASU 2019-06”). ASU 2019-06 extended the goodwill accounting alternative that allows an eligible entity to amortize goodwill acquired in a business combination and test that goodwill for impairment upon a triggering event. Management will not adopt the alternative goodwill accounting policy and does not expect this guidance would have a material effect on the Company’s 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

Certain prior year amounts have been reclassified to conform to the current year presentation. These reclassifications have no effect on the accompanying consolidated financial statements.

REBEL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

On October 1, 2017, Rebel Group, Inc., a Florida corporation (the “Company”) entered into a Share Transfer Agreement (the “Share Transfer”) with Naixin Qi, an individual (the “Shareholder”), the sole shareholder of Qingdao Quanyao Sports Consulting Ltd, a company organized under the laws of PRC (the “Qingdao Quanyao”). The Company believes that the acquisition will allow it to better manage opportunities.

Pursuant to the Transfer Agreement, Pure Heart, through a wholly foreign owned entity (the “WOFE”) agreed to acquire 100% 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 Qingdao 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 (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”) since January 8, 2015 (date of incorporation).

The goodwill of $6,719,542 arising from the acquisition consists largely of synergies and economies of scale expected from combining the operations of Qingdao Quanyao. None of the goodwill recognized is expected to be deductible for income tax purpose.

There is no revenue and earnings of Qingdao Quanyao since the acquisition date, which would be included in the condensed consolidated statements of operations and comprehensive income (loss).  

The Company performed its annual goodwill impairment review for the year ended December 31, 2018 and determined to fully impair the goodwill arising from acquisition of Quanyao of $6,719,542 as of December 31, 2018.

REBEL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

Trade and other receivables, net consisted of the following:

Movement of allowance for doubtful accounts was as follows:

Property and equipment are comprised of:

Depreciation expense for the years ended December 31, 2018 and 2017 were $26,595 and $18,304, respectively.

Intangible assets are comprised of:

No significant residual value is estimated for these intangible assets. Amortization expense for the years ended December 31, 2018 and 2017, totaled $13,281 and $12,974, respectively. The following table represents the total estimated amortization of intangible assets for the five succeeding years:

REBEL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

The changes in the carrying amount of goodwill were as follows:

The Company performed its annual goodwill impairment review for the year ended December 31, 2018 based on Quaoyan’s current financial performance and management’s projection, and determined to fully impair the goodwill arising from acquisition of Quanyao of $6,719,542 as of December 31, 2018.

On January 30, 2015, MOXC issued a convertible promissory note to the Company for $7,782,000 (the “MOXC Note”). The MOXC Note would become due and payable on October 30, 2015. Under the MOXC Note, MOXC has the option to convert any and all amounts due under the MOXC Note into the shares of MOXC’s shares of common stock (the “MOXC Common Stock”) at the conversion price of $1.00 per share (“Conversion Price”), if the volume weighted average price (“VWAP”) of MOXC Common Stock for 30 trading days immediately prior to the date of conversion is higher than the Conversion Price. MOXC also has a right of first refusal to purchase the shares issuable upon conversion of the MOXC Note at the price of 80% of the VWAP of MOXC Common Stock for 30 trading days immediately prior to the date of the proposed repurchase by MOXC.

On August 14, 2015, due to the VWAP of the MOXC Common Stock for 30 trading day prior to August 14, 2015 is higher than $1.00, which triggered the clause of conversion under the MOXC Note, MOXC notified the Company that it elected to convert the amount of $3,891,000 under the MOXC Note into 3,891,000 shares of the MOXC Common Stock at the conversion price of $1.00 (“August Conversion”). As a result of the August Conversion, the remainder amount of the MOXC Note is $3,891,000.

On September 28, 2015, MOXC notified the Company that it elected to convert the remainder of the MOXC Note, of $3,891,000 into 3,891,000 shares of the MOXC Common Stock (“September Conversion”). After the August Conversion and September Conversion, consequently, all of the MOXC Note was converted into the total of 7,782,000 shares of the MOXC Common Stock with no amount of the MOXC Note is outstanding as of December 31, 2015.

On June 20, 2016, MOXC has approved a reverse stock split of the Company’s issued and outstanding shares of common stock at a ratio of 1-for-2 (the “Reverse Stock Split”). As a result, 3,891,000 shares of the MOXC Common Stock are outstanding as of December 31, 2018 and 2017 respectively.

As of December 31, 2018 and 2017, the fair value of MOXC was $0.341 and $3.85, respectively. For the years ended December 31, 2018 and 2017, the fair value gain (loss) of ($13,653,519) and $2,606,970 was recognized respectively. The Company has no intention to sell the investment in the near future.

On April 22, 2019, MOXC has approved a reverse stock split of the Company’s issued and outstanding shares of common stock at a ratio of 1-for-5 (the “Reverse Stock Split”). As a result, 778,200 and 778,200 shares of the MOXC Common Stock are outstanding as of April 22, 2019 and May 12, 2019, respectively.

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 has been notified by Nasdaq that its bid price deficiency had been cured, and that MOXC is 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 held nil shares of the MOXC’s common stock since June 25, 2019.

REBEL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

The interest expense for convertible loans for the years ended December 31, 2018 and 2017 were $50,492 and $29,258, respectively.

The interest expense for short-term loans for the years ended December 31, 2018 and 2017 were $141,393 and $263, respectively.

On March 15, 2017, the Company, the Chairman of the Board of Directors, and one unrelated third-party individual entered into an agreement to document the loan of Singapore Dollars (“S$”) 50,000 ($35,715) that the unrelated third-party individual advanced to the Company on March 15, 2017, and was repayable on March 14, 2018 (“Repayment Date”), with an interest of 10% per annum. The unrelated third-party individual may convert all of the principal amount into 71,430 shares of Company’s common stock after the Repayment Date. The loan was fully repaid on August 20, 2018.

On March 24, 2017, the Company, the Chairman of the Board of Directors, and one unrelated third-party individual entered into an agreement to document the loan of S$200,000 ($142,856) that the unrelated third-party individual advanced to the Company on March 24, 2017, and was repayable on March 23, 2018 (“Maturity Date”), with an interest of 10% per annum. The unrelated third-party individual shall have the option to extend the term of the loan from the Maturity Date to March 23, 2019 (“Extended Maturity Date”). The unrelated third-party individual may convert all of the principal amount, into shares of Company’s common stock (“Conversion Right”) at any time for the period commencing on the date hereof and ending on March 23, 2019 (“Conversion Period”). In the event that the Conversion Right is exercised within seven Business Days immediately following the Maturity Date, the conversion will be based on the share price of $0.50. In the event that the Conversion Right is exercised after the Maturity Date but within seven Business Days immediately following the Extended Maturity Date, the conversion will be based on the share price of $0.60. The Company repaid S$100,000 ($73,404) on August 23, 2018.

On May 5, 2017, the Company, the Chairman of the Board of Directors, and one independent director of the Company entered into an agreement to document the loan of $300,000 that the independent director advanced to the Company on May 5, 2017, and was repayable on May 4, 2018 (“Maturity Date”), with an interest of 10% per annum. The independent director shall have the option to extend the term of the loan from the Maturity Date to May 4, 2019 (“Extended Maturity Date”). The independent director may convert all of the principal amount, into shares of Company’s common stock (“Conversion Right”) at any time for the period commencing on the date hereof and ending on May 4, 2019 (“Conversion Period”). In the event that the Conversion Right is exercised within seven Business Days immediately following the Maturity Date, the conversion will be based on the share price of $0.50. In the event that the Conversion Right is exercised after the Maturity Date but within seven Business Days immediately following the Extended Maturity Date, the conversion will be based on the share price of $0.60. As of December 31, 2018, the term loan was overdue, and was extended to May 2019.

On April 11, 2018, the Company, the Chairman of the Board of Directors, and one independent director of the Company entered into an agreement to document the loan of Singapore Dollars (“S$”) 100,000 ($73,404) that the unrelated third-party individual advanced to the Company on April 11, 2018, and was repayable on April 18, 2019 (“Repayment Date”), with an interest of 10% per annum. The unrelated third-party individual may convert all of the principal amount into 75,750 shares of Company’s common stock after the Repayment Date.  In the event that the Conversion Right is exercised within seven Business Days immediately following the Maturity Date, the conversion will be based on the share price of $1.00.

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 August 30, 2019, S$101,718 and S$8,200 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 August 30, 2019, S$51,430 in total were 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 CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

As of December 31, 2018 and 2017, the due to shareholders is $2,849,411 and $1,178,675 respectively. The amount is unsecured, interest free due on demand and has no fixed terms of repayment.

During January to December 2018, the Company issued 4,202,600 shares of common stock for net cash consideration of $2,609,331. The Company also issued 1,320,378 shares of common stock with total value of $1,190,378 to nine individuals as payments for professional services related to public relations and marketing, director fees, and employment benefits. The value of shares of common stock issued for consideration other than cash was determined by referring to the fair value of shares of common stock issued for cash consideration.

The Company and its subsidiaries file separate income tax returns.

The United States of America

Rebel Group, Inc. is incorporated under the laws of the State of Florida in the U.S., and is subject to U.S. federal corporate income tax. The State of Florida imposes corporate state income tax at 5.5%. As of December 31, 2018, future net operating losses of approximately $11.2 million are available to offset future operating income through 2037. 

Recent U.S. federal tax legislation, commonly referred to as the Tax Cuts and Jobs Act (the “U.S. Tax Reform”), was signed into law on December 22, 2017 and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate to a flat rate of 21% for periods after December 31, 2017 and (2) requiring a one-time transition tax on certain un-repatriated earnings of foreign subsidiaries that is payable over eight years. As a result of the reduction of the corporate tax rate to 21%, U.S. GAAP require companies to re-value their deferred tax assets and liabilities as of the date of enactment, with resulting tax effects accounted for in the reporting period of enactment. As a result of this revaluation, the Company reduced its pre-valuation allowance deferred tax asset by nil in the year ended December 31, 2017, with a corresponding decrease in the valuation allowance on its net deferred tax assets. The Company has no unrepatriated earnings in any of its foreign subsidiaries as they incurred losses since inception. 

REBEL GROUP, INC.

NOTES TO 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 during the year ended December 31, 2018. 

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 and 2017 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 $40,000 of interest and penalties accrued at December 31, 2018 and 2017, 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 $3,867,226 and $904,000 as of December 31, 2018 and 2017, respectively. 

REBEL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

The Company does not anticipate any significant increase to its liability for unrecognized tax benefit within the next 12 months. The Company will classify interest and penalties related to income tax matters, if any, in income tax expense.

The Company’s effective income tax rates were 0% and 2% for the years ended December 31, 2018 and 2017, respectively. Income tax mainly consists of foreign income tax at statutory rates and the effects of permanent and temporary differences. 

The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the years ended December 31, 2018 and 2017.

Deferred income taxes are recognized for tax consequences in future years of differences between the tax bases of assets and liabilities and their reported amounts in the financial statements at each year-end and tax loss carry forwards. Deferred income tax was measured using the enacted income tax rates for the periods in which they are expected to be reversed. The tax effects of temporary differences that give rise to the following approximate deferred tax liabilities as of December 31, 2018 and 2017 are presented below:

The tax effects of temporary differences from continuing operations that give rise to the Company’s deferred tax assets are as follows: 

REBEL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

As at December 31, 2018 and 2017, amounts due to shareholders were $2,849,410 and $1,178,675 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:

A summary of changes in the amount due to the CEO of the Company is as follows: