Rebel Group, Inc. - Quarter Report: 2020 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2020

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

For the transition period from __________ to __________

Commission File number 333-177786

REBEL GROUP, INC.

(Exact name of registrant as specified in charter)

+6562941531

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See 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 July 14, 2020, there were 55,714,267 shares of common stock issued and outstanding.

SPECIAL NOTE REGARDING RELIANCE ON RELIEF ORDER

As previously disclosed in its Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on May 15, 2020, Rebel Group, Inc. (the “Company”) relied on the SEC’s Order Under Section 36 of the Securities Exchange Act of 1934 Modifying Exemptions From the Reporting and Proxy Delivery Requirements for Public Companies, dated March 25, 2020 (Release No. 34-88465), to delay the filing of this Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (the “Quarterly Report”) due to circumstances related to the coronavirus disease 2019 (COVID-19) pandemic, which have limited the ability of the Company’s employees to conduct normal business activities, including the preparation and review of the Quarterly Report. In particular, the effects of the COVID-19 pandemic and related precautionary responses caused the Company’s employees to have limited access to the Company’s facilities and disrupted normal interactions among accounting personnel and other persons involved in the completion of the Company’s quarterly review and preparation of the Quarterly Report. These restrictions slowed the completion of the Company’s internal quarterly review, including evaluating the various impacts of COVID-19 on its financial statements and preparing and completing the Quarterly Report in a timely manner.

INDEX

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

REBEL GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(Stated in US Dollars)

See accompanying notes to unaudited condensed consolidated financial statements  

REBEL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Stated in US Dollars)

See accompanying notes to unaudited condensed consolidated financial statements

REBEL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited)

(Stated in US Dollars)

See accompanying notes to unaudited condensed consolidated financial statements

REBEL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Stated in US Dollars)

The following table provide a reconciliation of cash and restricted cash reported within the statement of financial position that sum to the total of the same amounts shown in the unaudited condensed consolidated statements of cash flows:

See accompanying notes to unaudited condensed consolidated financial statements

REBEL GROUP, INC.

NOTES TO UNAUDITED CONDENSED 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 June 21, 2017, Pure Heart Entertainment Pte Ltd. (“Pure Heart”) formed Rebel Shanghai Limited, which was incorporated in Shanghai China in order to acquire Qingdao Quanyao Sports Consulting Co. Ltd.(the “Qingdao Quanyao”) and the business expansion in the southern part of PRC.

On October 1, 2017, the Company entered into a Share Transfer Agreement (the “Share Transfer”) with Naixin Qi, an individual (the “Shareholder”), the sole shareholder of “Qingdao Quanyao”.

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

Qingdao Quanyao holds 50% shares of Qingdao Leibo Sports Culture Co Ltd (“Leibo”).

Basis of presentation and consolidation

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

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

The unaudited interim financial information as of March 31, 2020 and for the three months ended March 31, 2020 and 2019 have been prepared without audit, pursuant to the rules and regulations of the SEC and pursuant to Regulation S-X. Certain information and footnote disclosures, which are normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP, have been omitted pursuant to those rules and regulations. The unaudited condensed interim financial information should be read in conjunction with the audited consolidated financial statements and the notes thereto, included in the Form 10-K for the fiscal year ended December 31, 2019, which was filed with the SEC on May 14, 2020.

In the opinion of management, all adjustments (including normal recurring adjustments) necessary to present a fair statement of the Company's unaudited financial position as of March 31, 2020, its unaudited results of operations for the three months ended March 31, 2020 and 2019, its unaudited cash flows for the three months ended March 31, 2020 and 2019 and its unaudited statement of stockholders’ deficit for the three months ended March 31, 2020 and 2019, as applicable, have been made. The unaudited interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.

Basis of presentation and consolidation (continued)

The Company’s unaudited interim financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Use of estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The Company’s significant estimates and assumption include depreciation, impairment for long-lived assets, allowance for trade receivables and prepayments, the discount rate for lease, stock-based compensation, and the valuation allowance relating to the Company’s deferred tax assets. Actual results could differ from those estimates.

Liquidity and capital resources

As of March 31, 2020, the Company had a working capital deficiency of $3,826,271 as compared to a working capital deficiency of $4,159,067 as of December 31, 2019.

Net cash used in operating activities for the three months ended March 31, 2020 was $540,642 as compared to $1,062,100 for the three months ended March 31, 2019. The decrease in net cash used in operating activities for the three months ended March 31, 2020 was primarily due to a decreased net loss generated in the period.

Net cash provided by financing activities for the three months ended March 31, 2020 was $574,062 as compared to $1,193,076 for the three months ended March 31, 2019. The cash provided by financing activities for the three months ended March 31, 2020 are mainly from issuing of common stocks and advances from related parties.

As of March 31, 2020, the Company’s cash balance was $48,262 and the Company’s current liabilities exceed current assets by $3,826,271 which together with continued losses from operations raises substantial doubt about its ability to continue as a going concern. The Company’s operating results for future periods are subject to uncertainties and it is uncertain if the management will be able to attain profitability and continued growth for the foreseeable future. If the management is not able to increase revenue and manage operating expenses in line with revenue forecasts, the Company may not be able to achieve profitability.

Historically, the Company finances its operations through loans from investors and stockholders. The Company’s actions to improve operation efficiency, cost reduction, and develop core cash-generating business include the following: seeking advances from the major shareholders, pursuing additional public and/or private issuance of securities, and looking for strategic business partners to optimize the Company’s operations.

The Company has considered whether there is substantial doubt about the Company’s ability to continue as a going concern due to (1) the Company’s recurring losses from operations, including approximately $1,818,081 net loss attributable to the Company’s stockholders for the three months ended March 31, 2020, (2) the Company’s accumulated deficit of approximately $21,019,573 as of March 31, 2020 and (3) the fact that the Company had negative operating cash flows of approximately $540,642 for the three months ended March 31, 2020.

In evaluating if there is substantial doubt about the Company’s ability to continue as a going concern, the Company is trying to alleviate the going concern risk through (1) increasing cash generated from operations by controlling operating expenses and increasing more live events, (2) financing from domestic banks and other financial institutions, and (3) equity or debt financing. The Company has certain plans to mitigate these adverse conditions and to increase the liquidity of the Company.

On an on-going basis, the Company also received and will continue to receive financial support commitments from the Company’s related parties.

Liquidity and capital resources (continued)

The Company’s cash balance as of March 31, 2020 will not be sufficient to support the Company’s operations for the next 12 months after the date that the unaudited condensed consolidated financial statements issued. The Company has several actions to implement as mentioned above. However, if the Company is unable to obtain the necessary additional capital on a timely basis and on acceptable terms, the Company will be unable to implement its current plans for expansion, repay debt obligations or respond to competitive market pressures, which will have negative influence upon the Company’s business, prospects, financial condition and results of operations.

The negative operating results of cash flow and working capital in the period raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s continued operations are highly dependent upon its ability to increase revenues and if needed complete equity and/or debt financing. 

The Company believes if it is unable to obtain resources to fund operations, the Company may be required to delay, scale back or eliminate some or all of its planned operations, which may have a material adverse effect on our business, results of operations and ability to operate as a going concern.

The unaudited condensed consolidated financial statements for the three months ended March 31, 2020 and 2019 have been prepared on a going concern basis and do not include any adjustments to reflect the possible future effects on the recoverability and classifications of assets or the amounts and classifications of liabilities that may result from the Company’s inability to continue as a going concern.

Impact of COVID-19 Pandemic

In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, have adversely affected workforces, customers, economies, and financial markets globally. Affected by the global outbreak of COVID-19 virus, as of June 2020, most of international sports games have been postponed or cancelled. The Company’s MMA business is bound to be affected by the current epidemic. The Company continues to coordinate with infectious disease and public health experts along with government officials to determine the timing to resume the events. It is currently infeasible to estimate the number of events to be impacted. However, the Company cannot predict the impact of the COVID-19 pandemic, and the longer the duration of the event and the more widespread in geographic locations, the more likely it is that it could have an adverse impact on the Company’s financial condition, results of operations, and/or cash flows in the future. The Company expects that both the revenues and costs, generated from its normal daily operations, will be lower than planned.

Advertising and marketing expenditure

Advertising and marketing expenditure is expensed when incurred and is included in “general and administrative expenses” in the unaudited condensed consolidated statements of operations. Advertising and marketing expenses were $20,251 and $25,779 for the three months ended March 31, 2020 and 2019, respectively.

Revenue recognition

The Company recognizes revenue following Accounting Standards Codification 606, Revenue from Contracts with Customers (“Topic 606”). Topic 606 prescribes a five-step model for recognizing revenue which includes (i) identifying contracts with customers; (ii) identifying performance obligations; (iii) determining the transaction price; (iv) allocating the transaction price and (v) recognizing revenue.

Revenue recognition (continued)

The Company derives revenues principally from the following sources: (i) advertising and sponsorship sales, (ii) live event ticket sales, and (iii) direct-to-consumer sales of merchandise at the live event venues. The below describes the revenue recognition policies in further detail for each major revenue source of the Company.

Advertising and sponsorships: through the advertising and sponsorship agreements with customers, the Company offers a full range of the promotional vehicles, including online and print advertising, on-air announcements and special appearances by our fighters. The Company allocates the transaction price to all performance obligations contained within a sponsorship and advertising arrangement based upon their relative standalone selling price. Revenues are recognized as each performance obligation is satisfied, which generally occurs when the sponsorship and advertising is aired, exhibited, performed or played on the applicable media platform.

Live event ticket sales: revenues from the live event ticket sales are recognized upon the occurrence of the related live event.

Direct-to-consumer venue merchandise sales: direct-to-consumer merchandise sales consist of sales of merchandise at the live events. Revenues are recognized at the point of sale, as control is transferred to the customer.

Substantially all revenue was from sponsorships in the Company.

Currently, the Company’s revenues come from the following sources:

Cash

Cash consist of bank deposits, which are unrestricted as to the Company’s withdrawal and use. The Company maintains relevant accounts at banks, which have original maturities of three months or less.

Allowance for doubtful accounts

An allowance for doubtful accounts is recorded in the period in which a loss is determined to be probable based on an assessment of specific evidence indicating doubtful collection, historical experience, account balance aging and prevailing economic conditions. Allowance is reversed when the underlying balance of doubtful accounts are subsequently collected. Accounts receivable balances are written off after all collection efforts have been exhausted.

Fair value of financial instruments

Fair value information of financial instruments requires disclosure, whether or not recognized in the balance sheets, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. Certain financial instruments and all nonfinancial assets and liabilities are excluded from fair value disclosure requirements. Accordingly, the aggregate fair value amounts do not represent the underlying value of the Company.

As of March 31, 2020, and December 31, 2019, financial instruments of the Company primarily comprise of cash, trade and other receivables, trade and other payables, which the carrying amounts approximated their fair values because of their generally short maturities.

The Company uses quoted prices in active markets to measure the fair value of the long-term investment and is classified as a level 1 investment.

Foreign currency translation and transactions

The reporting currency of the Company is United States Dollars (“US$”), which is also the Company’s functional currency. The Singapore and PRC subsidiaries maintain their books and records in its local currency, the Singapore dollar (“S$”) and Renminbi dollar (“RMB”), which are their functional currencies as being the primary currency of the economic environment in which these entities operate.

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

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

Income taxes

Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the unaudited condensed consolidated financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

Entities should recognize in the unaudited condensed consolidated financial statements the impact of a tax position, if that position is more likely than not of being sustained upon examination, based on the technical merits of the position. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company has elected to classify interest and penalties related to unrecognized tax benefits, if and when required, as part of income tax expense in the consolidated statements of operations. 

Loss per share

Basic loss per share is based on the weighted average number of common shares outstanding during the period while the effects of potential common shares outstanding during the period are included in diluted earnings per share.  The average market price during the year is used to compute equivalent shares.

Employee equity share options, non-vested shares and similar equity instruments granted to employees are treated as potential common shares in computing diluted earnings per share. Diluted earnings per share should be based on the actual number of options or shares granted and not yet forfeited, unless doing so would be anti-dilutive. The Company uses the “treasury stock” method for equity instruments granted in share-based payment transactions.

Equipment

Equipment is recorded at cost. Significant additions or improvements extending useful lives of assets are capitalized. Maintenance and repairs are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful lives as follows:

Intangible assets

Intangible assets, comprising trade mark, television production and television content, which are separable from the fixed assets, are stated at cost less accumulated amortization. Amortization is computed using the straight-line method over the estimated useful lives of 10 years.

Leases

Effective January 1, 2019, the Company adopted ASC 842. The Company recognizes a lease liability for future fixed lease payments and a right-of-use (“ROU”) asset representing the right to use the underlying asset during the lease term. Additionally, the Company elected not to recognize leases with terms of twelve months or less at the commencement date in the unaudited condensed consolidated balance sheets.

Impairment of long-lived assets

The Company reviews its long-lived assets, other than goodwill, including property and equipment and intangible assets with definite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. When these events occur, the Company measures impairment by comparing the carrying values of the long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amounts of the assets, the Company would recognize an impairment loss based on the excess of the carrying value over the assessed discounted cash flow amount. For the three months ended March 31, 2020 and 2019, no impairment has been recorded by the Company.

Long-term investment

Investments comprise marketable securities which are classified as available-for-sale securities and are carried at fair value with unrealized gains and losses, net of taxes, reported as a separate component of shareholders’ equity (deficit). The Company determines any realized gains or losses on the sale of marketable securities on a specific identification method and records such gains and losses as a component of other comprehensive loss, net of taxes in the consolidated statement of operations. For the three months ended March 31, 2020 and 2019, recognized loss from changes in fair value as a result of investment disposition were $nil and $(5,766,462), respectively.

Comprehensive income (loss)

The Company has adopted FASB Accounting Standard Codification Topic 220 (“ASC 220”) “Comprehensive income”, which establishes standards for reporting and the presentation of comprehensive income (loss), its components and accumulated balances. Accumulated other comprehensive income represents the unrealized fair value (loss) gain on long-term investment and the accumulated balance of foreign currency translation adjustments of the Company.

Concentrations and risks 

A majority of the Company’s expense transactions are denominated in RMB and a significant portion of the Company and its subsidiaries’ assets and liabilities are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (“PBOC”). Remittances in currencies other than RMB by the Company in China must be processed through the PBOC or other China foreign exchange regulatory bodies which require certain supporting documentation in order to affect the remittance.

the Company’s functional currency is the RMB and Singapore dollars in subsidiaries in China and Singapore, respectively, and our financial statements are presented in U.S. dollars. The Singapore dollars remained stable to U.S. dollar in the three months ended March 31, 2020. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the RMB and the U.S. dollar in the future. The change in the value of the RMB relative to the U.S. dollar may affect our financial results reported in the U.S. dollar terms without giving effect to any underlying changes in the Company’s business or results of operations. Currently, the Company’s assets, liabilities, revenues and costs are denominated in RMB.

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

For the three months ended March 31, 2020, one customer accounted for 100% of the Company’s total revenues. For the three months ended March 31, 2019, total revenues of Company was nil.

Statement of Cash Flows

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

Risks and Uncertainties

The significant operations of the Company are located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. The Company’s results may be adversely affected by changes in the political, regulatory and social conditions in the PRC. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations including its organization and structure disclosed in Note 1, may not be indicative of future results.

Recently Issued Accounting Guidance 

In May 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-05, “Financial Instruments – Credit losses (Topic 326). The standard significantly changes how entities will measure credit losses for most financial assets, including accounts and notes receivables. The standard requires to recognize allowances based on expected rather than incurred losses. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The standard is effective for interim and annual reporting periods beginning after December 15, 2022. The Company is currently assessing the impact of adopting this standard on the Company’s unaudited condensed consolidated financial statements and related disclosures.

In December 2019, FASB issued ASU No. 2019-12, which reduces the complexity of FASB ASC Topic 740, “Income Taxes” as part of the FASB’s Simplification Initiative. The amendments in this guidance simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This guidance is effective for annual reporting periods ending after December 15, 2020, with early adoption permitted, and should be applied on either a retrospective basis for all periods presented or a modified retrospective basis. Management is still assessing the impact this might have on the Company’s unaudited condensed consolidated financial statements.

Aside from the above, the Company does not believe other recently issued but not yet effective accounting statements, would have a material effect on the Company’s financial position or on the results of operations.

Reclassification

The prior year amounts of proceeds and repayments of the related parties have been reclassified to conform to the current year presentation. These reclassifications have no effect on the accompanying unaudited condensed consolidated financial statements.

Trade and other receivables, net consisted of the following:

Movement of allowance for doubtful accounts was as follows:

Equipment is comprised of:

Depreciation expense for the three months ended March 31, 2020 and 2019 were $3,895 and $4,001, respectively.

Intangible assets are comprised of:

No significant residual value is estimated for these intangible assets. Amortization expense for the three months ended March 31, 2020 and 2019, totaled $3,645 and $11,072, respectively. The following table represents the total estimated amortization of intangible assets for the five succeeding years:

The Company has operating leases for offices and warehouses. As of January 1, 2019, the Company’s operating leases were with terms with twelve months or less. The Company elected not to recognize leases with terms of twelve months or less in the consolidated balance sheets. At the lease commencement date, the Company recognized ROU assets and corresponding liabilities of $93,005. As of March 31, 2020, the Company recognized ROU assets of $70,749 and current operating lease liabilities of $44,132, and long-term operating lease liabilities of $27,357. The average remaining lease term was approximately 1.58 years as of March 31, 2020. The discount rate was 8% for the three months ended March 31, 2020.

Lease expenses were $19,679 and $29,568 for the three months ended March 31, 2020 and 2019, respectively. The maturities of lease liabilities in accordance with Lease (Topic 842) in the next year as of March 31, 2020 were as follows:

Future minimum lease payment as of March 31, 2020 were as follows:

The interest expense for convertible loans for the three months ended March 31, 2020 and 2019 were $40,754 and $11,061, respectively.

The interest expense for short-term loans for the three months ended March 31, 2020 and 2019 were $2,566 and $24,235, respectively.

Convertible loans

On March 24, 2017, the Company, the Chairman of the Board of Directors, and one unrelated third-party individual entered into an agreement to document the loan of S$200,000 ($142,856) that the unrelated third-party individual advanced to the Company on March 24, 2017, and was repayable on March 23, 2018 (“Maturity Date”), with an interest of 10% per annum. The unrelated third-party individual shall have the option to extend the term of the loan from the Maturity Date to March 23, 2019 (“Extended Maturity Date”). The unrelated third-party individual may convert all of the principal amount, into shares of Company’s common stock (“Conversion Right”) at any time for the period commencing on the date hereof and ending on March 23, 2019 (“Conversion Period”). In the event that the Conversion Right is exercised within seven Business Days immediately following the Maturity Date, the conversion will be based on the share price of $0.50. In the event that the Conversion Right is exercised after the Maturity Date but within seven Business Days immediately following the Extended Maturity Date, the conversion will be based on the share price of $0.60. The Company repaid S$100,000 ($73,404) on August 23, 2018. As of March 31, 2020, the S$100,000 ($70,335) was past due.

On May 5, 2017, the Company, the Chairman of the Board of Directors, and one independent director of the Company entered into an agreement to document the loan of $300,000 that the independent director advanced to the Company on May 5, 2017, and was repayable on May 4, 2018 (“Maturity Date”), with an interest of 10% per annum. The independent director shall have the option to extend the term of the loan from the Maturity Date to May 4, 2019 (“Extended Maturity Date”). The independent director may convert all of the principal amount, into shares of Company’s common stock (“Conversion Right”) at any time for the period commencing on the date hereof and ending on May 4, 2019 (“Conversion Period”). In the event that the Conversion Right is exercised within seven Business Days immediately following the Maturity Date, the conversion will be based on the share price of $0.50. In the event that the Conversion Right is exercised after the Maturity Date but within seven Business Days immediately following the Extended Maturity Date, the conversion will be based on the share price of $0.60. As of March 31, 2020, the $300,000 was past due.

Convertible loans (continued)

On September 13, 2019, the CEO of the Company and one third-party investor (“the Investor”) entered into an investment agreement to extend $3 million to the Company for hosting Rebel 10 event (“Rebel 10 event”) in December 2019. Based on the agreement, the funding is comprised of a $1.5 million 1-year convertible loan with an interest rate of 8% per annum. The investor may convert the entire principal amount into 1,500,000 shares of Company’s common stock at any time for the period commencing September 13, 2019 and ending on September 12, 2020. Another $1.5 million will be extended to the Company by subscription of the Company’s new common shares at $1.00 per share upon the approval of Company’s SEC S1 application. In addition, the Investor is entitled to the following additional rights: (1) The Investor shall receive a 50% share of the net profit after tax arising from the Rebel 10 Event; (2) The Investor shall be entitled to subscribe for an equity stake up to a maximum of a 75% share in a separate Rebel-brand gym line of business, such business to be fully funded by the Investor and/or their respective nominated co-founders and/or new investors; (3) The Investor shall be entitled to receive a 10% share of the net profits generated from the Company’s upcoming reality television show series “The People’s Champion”, including the series’ subsequent seasons, global and local spin-offs. The Company received the Investor’s payments of $1,000,000 on September 23, 2019 and $500,000 on October 18, 2019. On January 11, 2020, the Company hosted the Event 10 in Europe with a result of operating loss. The Company concludes that no contingent liability shall be recognized or accrued for the three months ended March 31, 2020. As of March 31, 2020, the total outstanding balance to the Investor is $1,500,000.

On April 11, 2018, the Company, the Chairman of the Board of Directors, and one independent director of the Company entered into an agreement to document the loan of S$ 100,000 ($73,404) that the unrelated third-party individual advanced to the Company on April 11, 2018, and was repayable on April 18, 2019 (“Repayment Date”), with an interest of 10% per annum. The unrelated third-party individual may convert all of the principal amount into 75,750 shares of Company’s common stock after the Repayment Date.  In the event that the Conversion Right is exercised within seven Business Days immediately following the Maturity Date, the conversion will be based on the share price of $1.00. As of March 31, 2020, the total outstanding balance to the director is S$100,000($70,340).

Short-term loans

On April 25, 2018, the Company, the Chairman of the Board of Directors and the Company’s CEO and two financial institutions entered into agreements to advance to the Company two short term loans of S$360,000 ($267,717) and S$100,000 ($74,366) respectively. The two short term loans of S$360,000 and S$100,000 are guaranteed by two directors of the Company and bear an effective interest rate of 1.25% and 4% per month, respectively, with 12 equal monthly repayment terms. The Company has paid S$319,282 ($239,076) of principal and fully repaid the short term loan with the principal of S$100,000 ($74,366) when due. As of March 31, 2020, S$59,718 ($42,005) was past due for the short term loan and late fee occurred with the principal of S$360,000 ($267,716).

On October 24, 2018 and November 7, 2018, the Company, the Chairman of the Board of Directors and the Company’s CEO and another financial institution entered into two separate agreements to advance to the Company two short term loans of S$32,900 ($24,466) and S$17,100 ($12,717) respectively. The two short term loans of S$32,900 ($24,466) and S$17,100 ($12,717) are guaranteed by a director of the Company and bear an effective interest rate of 2% and 2% per month, with 12 and 6 equal monthly repayment terms, respectively. As of March 31, 2020, S$44,742 ($31,472) in total were past due for the two short term loans.

All the above convertible loans and short-term loans are non-collateral loans.

For the three months ended March 31, 2020, the Company issued 41,600 shares of common stock at $1.53 per share for cash consideration of $70,721 net with issuance cost of $7,072. The Company also issued 637,398 shares of common stock to two individuals at $1.23 per share with total value of $784,000 to settle their outstanding balances due from the Company.

The Company also issued 987,762 shares of common stock at $1.23 per share with total value of $1,209,828 to five individuals and a third party company as payments for professional services, public relations and marketing, and employment benefits. The value of shares of common stock issued for consideration other than cash was determined by referring to the fair value of shares of common stock recently issued for cash consideration.

For the three months ended March 31, 2019, the Company issued 1,560,000 shares of common stock for net cash consideration of $1,462,900. The Company also issued 340,000 shares of common stock with total value of $340,000 to three individuals as payments for professional services related to public relations and marketing, director fees, and employment benefits. The value of shares of common stock issued for consideration other than cash was determined by referring to the fair value of shares of common stock recently issued for cash consideration.

The Company and its subsidiaries file separate income tax returns.

The United States of America

Rebel Group, Inc. is incorporated under the laws of the State of Florida in the U.S., and is subject to U.S. federal corporate income tax. The State of Florida imposes corporate state income tax at 5.5%. As of March 31, 2020, future net operating losses of approximately $21.0 million are available to offset future operating income through 2038.    

British Virgin Islands

Rebel FC and SCA Capital are incorporated in the British Virgin Islands and are not subject to income taxes under the current laws of the British Virgin Islands.

Singapore

Pure Heart was incorporated in Singapore and is subject to Singapore corporate income tax at 17%.

People of Republic China (“PRC”)

Rebel Shanghai and Qingdao Quanyao were incorporated in PRC and are subject to statutory Enterprise Income Tax rate of the PRC at 25%.

The Company has a number of open tax years which include the tax years ended December 31, 2014, 2015, 2016, 2017, 2018 and 2019 that have not been filed. While it is often difficult to predict the final outcome or the timing of uncertain tax position, the Company believes that the accruals for the income taxes reflect the most likely outcome for the unfiled tax years. The Company had approximately $20,000 and $20,000 of interest and penalties accrued at March 31, 2020 and 2019, respectively.

Based upon management’s assessment of all available evidence, the Company believes that it is more-likely-than-not that the deferred tax assets, primarily for certain of the subsidiaries net operating loss carry-forwards will not be realizable; and therefore, a full valuation allowance is established for net operating loss carry-forwards. The valuation allowance for deferred tax assets was $6,543,782 and $6,164,895 as of March 31,2020 and December 31, 2019, respectively. 

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

The Company’s effective income tax rates were 2% and 0% for the three months ended March 31, 2020 and 2019, respectively. Income tax mainly consists of foreign income tax at statutory rates and the effects of permanent and temporary differences. 

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

As of March 31, 2020 and December 31, 2019, amounts due to stockholders were $894,507 and $1,226,963 respectively. The amounts are unsecured, interest free due on demand and does not have a fixed repayment date.

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

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

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

Legal Proceeding

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

On November 5, 2018, the Company was served a summon for a complaint filed by Ofsink, LLC (“Ofsink”) on September 13, 2018, in the Supreme Court of the City of New York County of New York against the Company. By filing the complaint, Ofsink alleged, among other claims, that the Company failed to pay for its legal services rendered in the amounts set forth on uncontested invoices in the amount of $252,822, and that it sustained damages in the sum of $252,822 plus interest and attorney’s fees as a result of the non-payment of the invoices rendered. The complaint seeks, among other relief, compensatory damages and plaintiff’s counsel’s fees. On December 18, 2018, Ofsink voluntarily dismissed its lawsuit against the Company without prejudice. Ofsink informed the Company that it had planned to sell a promissory note to a third party. On April 16, 2020, the Company has entered into a Settlement Agreement with Ofsink to resolve the legal dispute. Both the Company and Ofsink agreed to settle the balance in accordance with the terms of the promissory note. The matter is therefore settled. 

Target Acquisition

On December 28, 2019, the Company entered into a Sale and Purchase Agreement (the “Agreement”) with Rodrigues Gerard Anthony and Zuzarte Desmond Gerard, (each a “Seller”, and collectively referred to as the “Sellers”). Prior to the transactions contemplated by the Agreement, the Sellers, collectively, own 100% of the outstanding share capital in EXPO AV-Insync Pre. Ltd., a private liability company incorporated in and under the laws of Singapore (the “Target Company”). Affected by the global outbreak of COVID-19 virus, the process of due diligence, which originally was expected to be completed in April 2020, has been postponed. The timeline of completion will be dependent upon the economic recovery from the pandemic which remains uncertain.

On April 24, 2020 and May 27, 2020, the Company entered into two Subscription Agreements (the “Subscription Agreement”) with an individual third party investor (the "Investor"), respectively. On April 24, 2020, the Investor remitted $280,289 in exchange for 186,860 shares of the Company’s common stock as determined pursuant to the terms and conditions of the Subscription Agreement. On May 27, 2020, the Investor remitted $210,940 in exchange for 140,627 shares of the Company’s common stock as determined pursuant to the terms and conditions of the Subscription Agreement.

​On April 24, 2020 and May 27, 2020, the Company issued 18,686 shares and 14,063 shares of common stock, respectively, with total value of $40,281 for professional services pursuant to Service Agreements entered with consultants. The value of shares of common stock issued for consideration other than cash was determined by referring to the fair value of common stocks issued for cash consideration.

ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

This discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Factors that could cause such differences are discussed in “Special Note Regarding Forward-Looking Statements” and “Risk Factors.”

Our forward-looking statements reflect our current views about future events, are based on assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements.

Forward-looking statements include, but are not limited to, statements about:

We undertake no obligation to publicly update or revise any forward-looking statements, including any changes that might result from any facts, events, or circumstances after the date hereof that may bear upon forward-looking statements. Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements.

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) Qingdao Quanyao.

Business Overview

The Company, through Rebel FC, organizes, promotes and hosts Mixed Martial Arts (MMA) 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 has successfully hosted the most recent MMA event, Return of the Champion, on September 7, 2019 at Hongkou Indoor Stadium, Shanghai, China, with its online digital viewership of 21.75 million exceeding the average viewership of REBEL FC’s two events in 2018 of 13 million (digital and broadcast viewership combined). In addition to the 21.75 million viewership from major online platforms such as Yizhibo, PP Sports, QiE Live, iQiyi, Gedoumi and Baidu Sports, the company also garnered a viewership of 3.7 million on TV stations such as Qinghai Satellite TV and Shenzhen TV 5 (Sports Health Channel). In all, Return of the Champion gathered 25.45 million viewership from both TV and digital platforms, an exponential increase from the average viewership of its two events in 2018.

On January 11, 2020, the Company successfully co-hosted Rebel FC X - The New Order with the First Southeast Asian MA promotion in Europe, at the Wings of Soviet Sports Hall near the iconic Red Square in Moscow, Russia. ​

 The viewership of REBEL FC X - The New Order reached a grand total of 30.62 million, including 4.6 million on from Russia’s Boxing TV and ACB TV and another 26.02 million from digital platforms such as China’s Yizhibo Live, PP Sports, QiE Live, iQiyi and Weibo Combat. This is a noteworthy increase from the 25.45 million viewership amassed for REBEL FC 9 – Return of the Champion in China last year.

As of March 31, 2020, our accumulated deficit was $(21,019,573); our stockholders’ deficit was $(3,705,275).

Results of Operations

For the three months ended March 31, 2020 and March 31, 2019

Gross Revenues 

The Company had revenues from operations of $326,313 in the three months ended March 31, 2020 compared to $nil in the three months ended March 31, 2019. The Company’s revenue of $326,313 in the three months ended March 31, 2020 primarily came from sponsorship revenues generated by Quanyao for holding the event, Rebel FC X - The New Order with the First Southeast Asian MA promotion in Europe.

The Company’s cost of revenue was $471,927 in the three months ended March 31, 2020, compared to $779 in the three months ended March 31, 2019. The cost of revenue mainly consisted of venue rental and related expenses, direct costs and fighter and official expenses.

Operating Expenses

Operating expenses for the three months ended March 31, 2020 and 2019 were $1,608,097 and $1,016,933, respectively. For the three months ended March 31, 2020, the operating expenses mainly consisted of payroll expenses of $152,208, legal and professional fees of $142,309, rental expenses of $19,679, depreciation and amortization expenses of $7,540, and expenses for professional services and compensations of $1,209,828. For the three months ended March 31, 2019, the operating expenses mainly consisted of payroll expenses of $274,880, legal and professional fees of $288,897, rental expenses of $29,568, depreciation and amortization expenses of $15,073, and expenses of new share issuance for services and compensations of $340,000. The increase in operating expenses was largely due to the increased expenses for professional services and compensations.

Net Loss

Net loss for the three months ended March 31, 2020 and 2019 were $1,818,081 and $6,873,673, respectively. Basic and diluted net loss per share for the three months ended March 31, 2020 and 2019 were $0.03 and $0.14, respectively.

The decrease of net loss for the three months ended March 31, 2020 compared to the three months ended March 31, 2019 was mainly due to the decreased of recognized loss from changes in fair value as a result of investment disposition.

Liquidity and Capital Resources

The Company’s financial statements for the three months ended March 31, 2020 have been prepared on a going concern basis, which assumes that the Company will be able to meet its financial obligation, working capital and capital expenditures need as and when they fall due.

As of March 31, 2020, we had working capital deficiency of $3,826,271 as compared to working capital deficiency of $4,159,067 as of December 31, 2019.

Net cash used in operating activities for the three months ended March 31, 2020 was $540,642 as compared to $1,062,100 for the three months ended March 31, 2019. The decrease in net cash used in operating activities for the three months ended March 31, 2020 was primarily due to a decreased net loss generated in the period.

Net cash provided by financing activities for the three months ended March 31, 2020 was $574,062 as compared to $1,193,076 for the three months ended March 31, 2019. The cash provided by financing activities for the three months ended March 31, 2020 are mainly from issuing of common shares and advances from related parties.

As of March 31, 2020, our cash balance was $48,262 and our current liabilities exceed current assets by $3,826,271 which together with continued losses from operations raises substantial doubt about its ability to continue as a going concern. The Company’s operating results for future periods are subject to uncertainties and it is uncertain if the management will be able to achieve profitability and continued growth for the foreseeable future. If the management is not able to increase revenue and manage operating expenses in line with revenue forecasts, the Company may not be able to achieve profitability.

Historically, the Company financed its operations through loans from investors and shareholders. The Company’s actions to improve operation efficiency, cost reduction, and develop core cash-generating business include the following: seeking advances from the major shareholders, pursuing additional public and/or private issuance of securities, and looking for strategic business partners to optimize our operations.

We have considered whether there is substantial doubt about our ability to continue as a going concern due to (1) our recurring losses from operations, including approximately $1,818,081 net loss attributable to the our stockholders for the period ended March 31, 2020, (2) our accumulated deficit of approximately $21,019,573 as of March 31, 2020 and (3) the fact that we had negative operating cash flows of approximately $540,642 for the period ended March 31, 2020.

In evaluating if there is substantial doubt about our ability to continue as a going concern, we are trying to alleviate the going concern risk through (1) increasing cash generated from operations by controlling operating expenses and increasing more live events, (2) financing from domestic banks and other financial institutions, and (3) equity or debt financing. We have certain plans to mitigate these adverse conditions and to increase the liquidity of the Company.

On an on-going basis, the Company also received and will continue to receive financial support commitments from the Company’s related parties.

Our cash balance as of March 31, 2020 will not be sufficient to support our operations for the next 12 months after the date that the financial statements issued. We have several actions to implement as mentioned above. 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. 

The negative operating results of cash flow and working capital in the three months ended March 31, 2020 raise substantial doubt about our ability to continue as a going concern. Our continued operations are highly dependent upon our ability to increase revenues and if needed complete equity and/or debt financing.

We believe if we are unable to obtain our resources to fund operations, we may be required to delay, scale back or eliminate some or all of our planned operations, which may have a material adverse effect on our business, results of operations and ability to operate 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, the discount rate for lease, stock-based compensation, debt discount and the valuation allowance relating to the Company’s deferred tax assets/liabilities.

Recently Issued Accounting Pronouncements

Reference is made to the “Recent Accounting Pronouncements” in Note 2 to the unaudited condensed consolidated financial statements included in this Report for information related to new accounting pronouncement, none of which had a material impact on the company’s unaudited condensed 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 March 31, 2020, we did not have any off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Control and Procedures. 

We have evaluated, under the supervision of our Chief Executive Officer and our Chief Financial Officer (the “Certifying Officers”), the effectiveness of disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”) as of March 31, 2020. 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, the Certifying Officers have concluded that as of March 31, 2020 the Company’s disclosure controls and procedures were not effective due to the Company’s lack of formal documented controls and procedures applicable to all officers and directors.

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 March 31, 2020, 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:

Management believes that the material weaknesses set forth 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.

In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, the Company intends to:

We believe that the completion of these steps will allow us to conclude that our disclosure controls and procedures are effective to ensure that material information is recorded, processed, summarized and reported by our management on a timely basis in order to comply with our disclosure obligations under the Exchange Act and the rules and regulations thereunder.

Changes in Internal Controls Over Financial Reporting

There was no change in our internal controls over financial reporting that occurred during the fiscal quarter in question, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART 2 - OTHER INFORMATION

ITEM 1. 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 seeks, 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 to a third party. On April 16, 2020, the Company has entered into a Settlement Agreement with Ofsink to resolve the legal dispute. Both the Company and Ofsink agreed to settle the balance in accordance with the terms of the promissory note. The matter is therefore settled.

ITEM 1A. RISK FACTORS.

For information regarding factors that could affect our results of operations, financial condition and liquidity, refer to the section entitled “Risk Factors” in Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2019. Except as updated below, there have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the SEC.

The COVID-19 pandemic could have a material adverse effect on our business, financial condition and results of operations.

Our business will be materially adversely affected by the recent coronavirus (COVID-19) outbreak. In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout China and other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern.” On January 31, 2020, a public health emergency for the United States was declared to aid the U.S. healthcare community in responding to COVID-19. The COVID-19 pandemic resulted in a widespread health crisis and have had adverse impact on the economies and financial markets worldwide, including our business. For instance, we may be unable to organize and/or host events, allow attendance at such events, or carry out other business expansion if continued concerns relating to COVID-19 restrict travel, limit the ability to have meetings with vendors and service providers and would be unavailable to negotiate and complete transactions in a timely manner. The extent to which COVID-19 impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. Any and all of the foregoing could have a material adverse impact on its business, operating results and financial condition. Further, there can be no assurance that we would be able to secure commercial financing in the future in the event that we require additional capital. Due to the COVID-19 situation, the Company has not been able to host any planned events. Our planned Australia event which was supposed to be hosted in April 2020 was cancelled. As long as any country is not able to allow for any hosting of an event in any scale, we will not be able to penetrate into the markets as planned. As a result, this may result in no ticket sales, sponsorship or any distribution revenues. Many countries have also implemented a Work From Home (WFM) measures. In Singapore, a circuit breaker measure was introduced on April 7, 2020, amongst all things, the government requires for all the Company to have their employees to stay and work from home. As most of our operational team is based in Singapore, these measures could adversely affect our event hosting abilities and thus our ability to generate revenues and operate our business. From January 2020, countries have begun to shut its borders to foreigners. The lack of the ability to travel and conduct meetings with service providers and vendors to organize any events or planned events in the future will be affected, as a result, our business and operating results and financial condition may be materially affected by the introduced travel ban. It is possible that the outbreak will cause additional disruptions to the Company’s operations and prospects. The Company may incur additional delays, reductions in revenue and increases in expenses relating to such events outside of its control. We currently believe that our financial resources and support commitments, will be adequate to see the Company through the outbreak. However, there is no assurance the Company will be able to continue raising capital in the future, which in turn could adversely affect the Company and its operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

For the three months ended March 31, 2020, the Company issued 41,600 shares of common stock at $1.53 per share for cash consideration of $70,721 net with issuance cost of $7,072. The Company also issued 637,398 shares of common stock to two individuals at $1.23 per share with total value of $784,000 to settle their outstanding balances due from the Company.

The Company also issued 987,762 shares of common stock at $1.23 per share with total value of $1,209,828 to five individuals and a third party company as payments for professional services, public relations and marketing, and employment benefits. The value of shares of common stock issued for consideration other than cash was determined by referring to the fair value of shares of common stock recently issued for cash consideration. In each case, the securities were sold in reliance upon an exemption from registration contained in Section 4(2) and rules and regulations promulgated thereunder.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS 

(a) Exhibits

SIGNATURES

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

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