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." We assume no obligation to update any of these forward-looking statements.

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 athletic talents 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 quality matches, live TV broadcast and inspiring reality series that attract talented fighters from all over the world. MMA is unarmed combat involving combinations of techniques from different disciplines of martial arts, including, without limitation, grappling, submission holds, kicking and boxing. 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. While boxers can strike only with their fists and target only above the belt, MMA fighters 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, a 96 percent increase from the average viewership of its two events in 2018.





Results of Operations

For the three months ended September 30, 2019 and September 30, 2018





Gross Revenues

The Company generated revenues of $139,834 (unaudited) during the three months ended September 30, 2019 and that of $0 (unaudited) during the three months ended September 30, 2018.





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The Company's cost of revenue was $587,143 (unaudited) for the three months ended September 30, 2019, compared to that of $40,352 (unaudited) for the three months ended September 30, 2018. The Company held an MMA event during the three months ended September 30, 2019, which explains the increase in the Company's cost of revenue.





Operating Expenses

Operating expenses for the three months ended September 30, 2019 and 2018 were $2,509,020 (unaudited) and $1,226,029 (unaudited), respectively. The operating expenses include filing fees, professional service fees, payroll and benefits, and other general expenses. The Company held an MMA event during the three months ended September 30, 2019, which explains the increase in the Company's operating expenses.





Net Loss

Net loss for the three months ended September 30, 2019 and 2018 were $2,343,340 (unaudited) and $1,294,684 (unaudited), respectively. Basic and diluted net loss per share for the three months ended September 30, 2019 and 2018 were $0.045 (unaudited) and $0.027 (unaudited), respectively.

For the nine months ended September 30, 2019 and September 30, 2018





Gross Revenues

The Company generated revenues of $139,834 (unaudited) during the nine months ended September 30, 2019, compared to that of $223,783 (unaudited) during the nine months ended September 30, 2018.

The Company's cost of revenue was $608,909 (unaudited) during the nine months ended September 30, 2019, compared to that of $1,902,667 (unaudited) during the nine months ended September 30, 2018. The decrease in our cost of revenue was mainly due to the Company's effective cost control over the MMA event held during the nine months ended September 30, 2019.





Operating Expenses

Operating expenses for the nine months ended September 30, 2019 and 2018 were $3,971,484 (unaudited) and $5,524,035 (unaudited), respectively. The operating expenses include filing fees, professional fees, payroll and benefits, and other general expenses. The decrease in our operating expenses was mainly due to the Company's effective cost control over the MMA event held during the nine months ended September 30, 2019.





Net Loss

Net loss for the nine months ended September 30, 2019 and 2018 were $9,707,897 (unaudited) and $5,395,817 (unaudited), respectively. Basic and diluted net loss per share were $0.193 (unaudited) and $0.117 (unaudited) for the nine months ended September 30, 2019 and 2018, respectively.

Liquidity and Capital Resources

On September 30, 2019, the Company had a working capital deficit of $4,307,383 (unaudited) and cash on hand of $395,456 (unaudited), as compared to the working capital deficit of $4,856,536 and cash on hand of $41,321 as of December 31, 2018.

Net cash used in operating activities for the nine months ended September 30, 2019 was $2,784,151 (unaudited), as compared to the net cash used in operating activities of $4,114,646 (unaudited) for the nine months ended September 30, 2018. The decrease in net cash used in operating activities was primarily due to the Company's decreased loss from operations.





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Net cash provided by financing activities for the nine months ended September 30, 2019 was $3,155,750 (unaudited), as compared to that of $3,958,181 (unaudited) for the nine months ended September 30, 2018. The decrease in net cash provided by financing activities was primarily due to decreased advances from related parties.

On September 13, 2019, the CEO of the Company and a third-party investor entered into an investment agreement, extending $3 million to the Company for the Rebel 10 event to be held in December 2019. Based on the agreement, the fund extended is a 1-year convertible loan totaled $1.5 million 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. The Company received $1,000,000 on September 23, 2019 and $500,000 on October 19, 2019 from the investor under the investment agreement.

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-Q is 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. This 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 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 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 September 30, 2019, we did not have any off-balance sheet arrangements.


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