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 Annual Report on Form 10-K.
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 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.
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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 December 31, 2019, our accumulated deficit was $(19,201,492); our
stockholders' deficit was $(4,024,723).
Results of Operations
For the year ended December 31, 2019 compared with the year ended December 31,
2018
Gross Revenues
The Company had revenues from operations of $138,908 in the year ended December
31, 2019 compared to $223,783 in the year ended December 31, 2018. The Company's
revenue of $138,908 in the year ended December 31, 2019 primarily came from
sponsorship revenues received by Quanyao for holding the event, Return of the
Champion, in China. The decrease in revenue is mainly due to the decreased
number of events held from two events in 2018 to one event in 2019.
The Company's cost of revenue was $769,167 in the year ended December 31, 2019,
compared to $1,878,123 in the year ended December 31, 2018. The cost of revenue
mainly consisted of venue rental and related expenses of $388,890, direct costs
of $226,246, and fighter and official expenses of $154,031. The decrease in cost
of revenue is mainly due to the decreased number of events held from two events
in 2018 to one event in 2019.
Operating Expenses
Operating expenses for the years ended December 31, 2019 and 2018 were
$4,445,725 and $5,226,522, respectively. For the year ended December 31, 2019,
the operating expenses mainly consisted of payroll expenses of $779,404, legal
and professional fees of $565,892, director fee of $240,000, rental expenses of
$75,570, allowance for account receivables and prepayments of $44,368,
depreciation and amortization expenses of $36,498, and expenses of new share
issuance for services and compensations of $1,953,146. 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 $39,876, allowance for account receivables and prepayments of
$558,158, and expenses of new share issuance for services and compensations of
$1,190,378. The decrease in operating expenses was largely due to the decreased
payroll expenses as a result of decreased headcount, allowance expenses due to
improved receivables control, and rental expenses as the Company moved to a an
economical office in China, such decrease was partially offset by the increase
in expenses related to new share issuance for services and compensations.
Net Loss
Net loss for the year ended December 31, 2019 was $10,830,963 as compared to
$13,654,013 for the year ended December 31, 2018. Basic and diluted net loss per
share amounted $0.21 and $0.29 respectively for the years ended December 31,
2019 and 2018, respectively.
The decrease of net loss for the year ended December 31, 2019 compared to the
year ended December 31, 2018 was mainly due to decreased events held in 2019.
Liquidity and Capital Resources
The Company's financial statements for the year ended December 31, 2019 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.
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As of December 31, 2019, we had working capital deficiency of $4,159,067 as
compared to working capital deficiency of $4,856,536 as of December 31, 2018.
Net cash used in operating activities for the year ended December 31, 2019 was
$3,156,242 as compared to $4,480,190 for the year ended December 31, 2018. The
cash used in operating activities for the financial year ended December 31, 2019
was primarily due to a decreased net loss generated in the year.
Net cash used in investing activities for the year ended December 31, 2019 was
$17,585 as compared to $20,100 for the year ended December 31, 2018. 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, 2019
was $3,151,118 as compared to $4,537,729 for the year ended December 31, 2018.
The cash provided by financing activities for the year ended December 31, 2019
are mainly from issuing of common shares and convertible loans, such cash inflow
was partially offset by the repayment to related parties.
As of December 31, 2019, our cash balance was $18,820 and our current
liabilities exceed current assets by $4,159,067 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 finances 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 $10,830,963 net loss attributable to the our
stockholders for the year ended December 31, 2019, (2) our accumulated deficit
of approximately $19,201,492 as of December 31, 2019 and (3) the fact that we
had negative operating cash flows of approximately $3,156,242 for the year ended
December 31, 2019.
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 December 31, 2019 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 2019 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.
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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, 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
Consolidated 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, 2019, we did not have any off-balance sheet arrangements.
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REBEL GROUP, INC. 
