UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
| 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:
(Exact name of registrant as specified in its charter)
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) (zip code)
+
(Registrant’s telephone number, including area code)
Blow & Drive Interlock Corp
1427 S. Robertson Blvd.
Los Angeles, CA 90035
(Former name or former address, if changed since last report.)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | None | None |
Securities registered pursuant to Section 12(g) of the Act:
Common Stock Par value, $0.0001
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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☐ | Smaller reporting company | ||
| (Do not check if a smaller reporting company) | |||
| Emerging growth company | |
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 ☐
Applicable only to issuers involved in bankruptcy proceedings during the preceding five years:
Indicate by check mark whether the registrant
filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act of 1934 subsequent to the distribution
of securities under a plan confirmed by a court.
Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. As of November 1st , 2021, there were shares of common stock, $0.0001 par value, issued and outstanding, and 1,000,000 issues of preferred stock issued and outstanding, par value $0.001.
CAUTIONARY STATEMENT
All statements included or incorporated by reference in this Quarterly Report on Form 10-Q (this “Form 10-Q”), other than statements or characterizations of historical fact, are “forward-looking statements” within the meaning of the Securities Exchange Act of 1934 as amended (the “Exchange Act”). Examples of forward-looking statements include, but are not limited to, statements concerning projected sales, costs, expenses and gross margins; our accounting estimates, assumptions and judgments; the prospective demand for our products; the projected growth in our industry; the competitive nature of and anticipated growth in our industry; and our prospective needs for, and the availability of, additional capital. These forward-looking statements are based on our current expectations, estimates, approximations and projections about our industry and business, management’s beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by such words as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “may,” “will,” “should,” “would,” “could,” “potential,” “continue,” “ongoing,” similar expressions and variations or negatives of these words. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors, some of which are set forth in the “Risk Factors” section of our Report on Form 10-K for the year ended December 31, 2019, filed on March 30, 2020, and this Report, which could cause our financial results, including our net income or loss or growth in net income or loss to differ materially from prior results, which in turn could, among other things, cause the price of our common stock to fluctuate substantially. These forward-looking statements speak only as of the date of this report. We undertake no obligation to revise or update publicly any forward-looking statement for any reason, except as otherwise required by law.
| 2 |
LEET TECHNOLOGY INC.
TABLE OF CONTENTS
| Page | ||
| PART I – FINANCIAL INFORMATION | 4 | |
| ITEM 1 | Financial Statements | 4 |
| ITEM 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 26 |
| ITEM 3 | Quantitative and Qualitative Disclosures About Market Risk | 37 |
| ITEM 4 | Controls and Procedures | 37 |
| PART II – OTHER INFORMATION | 38 | |
| ITEM 1 | Legal Proceedings | 38 |
| ITEM 1A | Risk Factors | 38 |
| ITEM 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 38 |
| ITEM 3 | Defaults Upon Senior Securities | 38 |
| ITEM 4 | Mine Safety Disclosures | 38 |
| ITEM 5 | Other Information | 38 |
| ITEM 6 | Exhibits | 39 |
| 3 |
PART I – FINANCIAL INFORMATION
ITEM 1 Financial Statements
LEET TECHNOLOGY INC.
(Formerly Blow & Drive Interlock Corporation)
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| 4 |
LEET TECHNOLOGY INC.
(Formerly Blow & Drive Interlock Corporation)
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| September 30, 2021 | December 31, 2020 | |||||||
| (Audited) | ||||||||
| ASSETS | ||||||||
| Current asset: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Deposit and other receivables | ||||||||
| Right of use assets | ||||||||
| Total current assets | ||||||||
| Non-current asset: | ||||||||
| Plant and equipment, net | ||||||||
| Intangible assets | ||||||||
| Right of use assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities and other payables | ||||||||
| Amounts due to related parties | ||||||||
| Operating lease liabilities | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Operating lease liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and contingencies | ||||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Preferred stock, Series A, $ par value, shares authorized, issued and outstanding as of September 30, 2021 and December 31, 2020 | ||||||||
| Common stock, $ par value; shares authorized; and shares issued and outstanding as of September 30, 2021 and December 31, 2020 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
| 5 |
LEET TECHNOLOGY INC.
(Formerly Blow & Drive Interlock Corporation)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| Three Months Ended September 30 ended September 30, | Nine Months Ended September 30 ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenue, net | $ | $ | $ | $ | ||||||||||||
| Operating expenses: | ||||||||||||||||
| IT operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Research and development | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Stock based compensation | ( | ) | ( | ) | ||||||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income: | ||||||||||||||||
| Sundry income | ||||||||||||||||
| LOSS BEFORE INCOME TAXES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ||||||||||||||||
| NET LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other comprehensive loss: | ||||||||||||||||
| Foreign currency translation income (loss) | ( | ) | ( | ) | ||||||||||||
| COMPREHENSIVE LOSS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per share | ||||||||||||||||
| - Basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares outstanding | ||||||||||||||||
| - Basic | ||||||||||||||||
| - Diluted | ||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
| 6 |
LEET TECHNOLOGY INC.
(Formerly Blow & Drive Interlock Corporation)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Currency expressed in United States Dollars (“US$”))
| Nine months ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Depreciation and amortization | ||||||||
| Stock based compensation | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Deposit and other receivables | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued liabilities and other payables | ||||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of plant and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Advances from related parties | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate on cash and cash equivalents | ( | ) | ||||||
| Net change in cash and cash equivalents | ( | ) | ( | ) | ||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | ||||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid for tax | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
| 7 |
LEET TECHNOLOGY INC.
(Formerly Blow & Drive Interlock Corporation)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| For the Three and Nine Months ended September 30, 2020 and 2021 | ||||||||||||||||||||||||||||||||
| Preferred stock | Common stock | Additional paid-in | Accumulated other comprehensive | Accumulated | Total stockholders’ | |||||||||||||||||||||||||||
| Amount | No. of shares | Amount | No. of shares | capital | loss | losses | deficit | |||||||||||||||||||||||||
| Balance as of January 1, 2020 (Audited) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Foreign currency translation adjustment | – | – | ||||||||||||||||||||||||||||||
| Net loss for the period | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance as of March 31, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Foreign currency translation adjustment | – | – | ||||||||||||||||||||||||||||||
| Net loss for the period | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance as of June 30, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Foreign currency translation adjustment | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net loss for the period | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance as of September 30, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Balance as of January 1, 2021 (Audited) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Foreign currency translation adjustment | – | – | ||||||||||||||||||||||||||||||
| Net loss for the period | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance as of March 31, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Foreign currency translation adjustment | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net loss for the period | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance as of June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Shares issued for services | – | |||||||||||||||||||||||||||||||
| Shares issued for employees compensation | ||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | – | |||||||||||||||||||||||||||||||
| Net loss for the period | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance as of September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
| 8 |
LEET TECHNOLOGY INC.
(Formerly Blow & Drive Interlock Corporation)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| 1. | DESCRIPTION OF BUSINESS AND ORGANIZATION |
Leet Technology Inc. (Formerly Blow & Drive Interlock Corporation, “the Company” or “LTES”) was incorporated on July 2, 2013 under the laws of the State of Delaware. The Company currently operates an eSports platform in Malaysia.
On August 23, 2021, the Company was approved to change its current name to Leet Technology Inc. and the trading symbol of LTES.
Description of subsidiaries
| Name | Place of incorporation and kind of legal entity | Principal activities | Particulars of registered/ paid up share capital | Effective interest held | ||||
The Company and its subsidiaries are hereinafter referred to as (the “Company”).
| 2. | GOING CONCERN UNCERTAINTIES |
The accompanying condensed consolidated financial statements have been prepared using the going concern basis of accounting, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
The Company has suffered from a working capital
deficit and accumulated deficit of $
The continuation of the Company as a going concern through the next twelve months is dependent upon the continued financial support from its stockholders. Management believes the Company is currently pursuing additional financing for its operations. However, there is no assurance that the Company will be successful in securing sufficient funds to sustain the operations.
| 9 |
LEET TECHNOLOGY INC.
(Formerly Blow & Drive Interlock Corporation)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. These condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result in the Company not being able to continue as a going concern.
| 3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
The accompanying condensed consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying condensed consolidated financial statements and notes.
| l | Basis of presentation |
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial reporting, and in accordance with instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the unaudited consolidated financial statements contained in this report reflect all adjustments that are normal and recurring in nature and considered necessary for a fair presentation of the financial position and the results of operations for the interim periods presented. The year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. The results of operations for the interim period are not necessarily indicative of the results expected for the full year. These unaudited consolidated financial statements, footnote disclosures and other information should be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
These accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).
| l | Use of estimates and assumptions |
In preparing these condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the years reported. Actual results may differ from these estimates.
| l | Basis of consolidation |
The condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.
| 10 |
LEET TECHNOLOGY INC.
(Formerly Blow & Drive Interlock Corporation)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| l | Cash and cash equivalents |
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.
| l | Accounts receivable |
Accounts receivable are recorded at the invoiced
amount and do not bear interest, which are due within contractual payment terms, generally 30 to 90 days from completion of service. Credit
is extended based on evaluation of a customer's financial condition, the customer credit-worthiness and their payment history. Accounts
receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified
amount are reviewed individually for collectability. At the end of fiscal year, the Company specifically evaluates individual customer’s
financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables.
The Company will consider the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to
make required payments. For the receivables that are past due or not being paid according to payment terms, the appropriate actions are
taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against
the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does
not have any off-balance-sheet credit exposure related to its customers. As of September 30, 2021 and December 31, 2020, there were
| l | Plant and equipment |
Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:
| Expected useful lives | ||
| Computer equipment | ||
| Furniture and fixtures | ||
| Leasehold improvements |
Expenditures for repairs and maintenance are expensed as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.
| l | Software costs |
In accordance with the relevant FASB accounting guidance regarding the development of software to be sold, leased, or marketed, the Company expenses such costs as they are incurred until technological feasibility has been established, at and after which time these costs are capitalized until the product is available for general release to customers. Once the technological feasibility is established per ASC 985-20, the Company capitalizes costs associated with the acquisition or development of major software for internal and external use in the balance sheet. Costs incurred to enhance the Company’s software products, after general market release of the services using the products, is expensed in the period they are incurred. The Company only capitalizes subsequent additions, modifications or upgrades to internally developed software to the extent that such changes allow the software to perform a task it previously did not perform. The Company also expenses website costs as incurred.
| 11 |
LEET TECHNOLOGY INC.
(Formerly Blow & Drive Interlock Corporation)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
Research and development expenditures in the development of its own software are charged to operations as incurred. Based on the software development process, technological feasibility is established upon completion of a working model, which also requires certification and extensive testing. Costs incurred by the Company between completion of the working model and the point at which the product is ready for general release are immaterial.
| l | Impairment of long-lived assets |
In accordance with the provisions of ASC Topic
360, “Impairment or Disposal of Long-Lived Assets”, all long-lived assets such as plant and equipment and intangible assets
held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of
an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets.
There has been
| l | Revenue recognition |
The Company adopted Accounting Standards Codification (“ASC”) 606 – Revenue from Contracts with Customers” (“ASC 606”). Under ASC 606, a performance obligation is a promise within a contract to transfer a distinct good or service, or a series of distinct goods and services, to a customer. Revenue is recognized when performance obligations are satisfied and the customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for goods or services. Under the standard, a contract’s transaction price is allocated to each distinct performance obligation. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:
| • | identify the contract with a customer; | |
| • | identify the performance obligations in the contract; | |
| • | determine the transaction price; | |
| • | allocate the transaction price to performance obligations in the contract; and | |
| • | recognize revenue as the performance obligation is satisfied. |
Revenue of the Company is derived from the organization of competitions using video games. Most commonly, esports takes the form of organized, single player and multiplayer video game competitions. Revenues are recognized when the competition is completed, and prize money is awarded. Revenues are earned through sponsorship fees on a per tournament basis.
| l | Income taxes |
The Company adopted the ASC 740 Income tax provisions of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the condensed consolidated financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the condensed consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.
| 12 |
LEET TECHNOLOGY INC.
(Formerly Blow & Drive Interlock Corporation)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
| l | Foreign currencies translation |
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the condensed consolidated statement of operations.
The reporting currency of the Company is United States Dollar ("US$") and the accompanying condensed consolidated financial statements have been expressed in US$. In addition, the Company’s subsidiaries are operating in Hong Kong and Malaysia and maintain their books and record in its local currency, Hong Kong Dollars (“HKD”) and Malaysian Ringgit (“MYR”), which are their functional currencies, being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and liabilities of the subsidiaries whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the year. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statements of changes in stockholder’s equity.
Translation of amounts from HKD into US$ and MYR into US$ have been made at the following exchange rates for the period ended September 30, 2021 and 2020:
| September 30, 2021 | September 30, 2020 | |||||||
| Period-end HKD:US$ exchange rate | ||||||||
| Period average HKD:US$ exchange rate | ||||||||
| Period-end MYR:US$ exchange rate | ||||||||
| Period average MYR:US$ exchange rate | ||||||||
| l | Comprehensive income |
ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying condensed consolidated statements of changes in stockholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.
| 13 |
LEET TECHNOLOGY INC.
(Formerly Blow & Drive Interlock Corporation)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| l | Leases |
The Company adopted Topic 842, “Leases” (“ASC 842”) and determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities in our condensed consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in our condensed consolidated balance sheets.
ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company generally use the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
In accordance with the guidance in ASC 842, components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). Subsequently, the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on the respective relative fair values to the lease components and non-lease components.
| l | Net loss per share |
The Company calculates net income or loss per share in accordance with ASC Topic 260, “Earnings per Share.” Basic income or loss per share is computed by dividing the net income or loss by the weighted-average number of common shares outstanding during the year. Diluted income per share is computed similar to basic income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.
| l | Related parties |
The Company follows the ASC 850-10, Related Party for the identification of related parties and disclosure of related party transactions.
Pursuant to section 850-10-20 the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
| 14 |
LEET TECHNOLOGY INC.
(Formerly Blow & Drive Interlock Corporation)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
The condensed consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
| l | Commitments and contingencies |
The Company follows the ASC 450-20, Commitments to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s condensed consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
| l | Fair value of financial instruments |
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:
| Level 1 | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. | |
| Level 2 | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. | |
| Level 3 | Pricing inputs that are generally observable inputs and not corroborated by market data. |
| 15 |
LEET TECHNOLOGY INC.
(Formerly Blow & Drive Interlock Corporation)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, deposits, other receivables and amount due from a director approximate their fair values because of the short maturity of these instruments.
| l | Recent accounting pronouncements |
From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
Accounting Standards Adopted
In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”) in order to increase transparency and comparability among organizations by recognizing right-of-use assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous generally accepted accounting principles. ASU 2016-02 requires a lessee to recognize a lease liability for future lease payments and a right-of-use asset representing the right to use the underlying asset for the lease term on the balance sheet for most lease arrangements. The new standard also changes many key definitions, including the definition of a lease. The new standard includes a short-term lease exception for leases with a term of 12 months or less, as part of which a lessee can make an accounting policy election not to recognize right-of-use assets and lease liabilities. Lessees will continue to differentiate between finance leases (previously referred to as capital leases) and operating leases using classification criteria that are substantially similar to the previous guidance in ASC 840.
ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) and early adoption is permitted. In August 2018, the FASB issued ASU 2018-11, Leases, Targeted Improvements, which provides a new transition option in which an entity initially applies ASU 2016-02 at the adoption date and recognizes a cumulative-effect adjustment in the period of adoption. Prior period comparative balances will not be adjusted. The Company used the new transition option and was also utilizing the package of practical expedients that allows it to not reassess: (1) whether any expired or existing contracts are or contain leases, (2) lease classification for any expired or existing leases, and (3) initial direct costs for any existing leases. We also used the short-term lease exception for leases with a term of 12 months or less. Additionally, the Company used the practical expedient that allowed each separate lease component of a contract and the associated non-lease components to be treated as a single lease component. The exercise of lease renewal options is at our discretion and the renewal to extend the lease terms are not included in the Company’s Right-Of-Use assets and lease liabilities as they are not reasonably certain of exercise. The Company will evaluate the renewal options and when they are reasonably certain of exercise, the Company will include the renewal period in its lease term. As of January 1, 2020, effective date the Company identified one finance lease arrangement in which it is a lessee.
In calculating the present value of the lease payments, the Company applied an individual discount rate for each of its leases, and determined the appropriate discount rate based on the remaining lease terms at the date of adoption. As the lessee to several lease agreements, the Company did not have insight into the relevant information that would be required to arrive at the rate implicit in the lease. Therefore, the Company utilized its outstanding borrowings as a benchmark to determine the incremental borrowing rate for its leases. The benchmark rate was adjusted to arrive at an appropriate discount rate for each lease.
| 16 |
LEET TECHNOLOGY INC.
(Formerly Blow & Drive Interlock Corporation)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This ASU requires measurement and recognition of expected credit losses for financial assets. ASU 2016-13 also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities. ASU 2016-13 is effective for interim and fiscal periods within those fiscal years beginning after December 15, 2019. 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 adopted. Adopting the standard did not have a material impact on the condensed consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (“ASU 2018-13”), which eliminates, adds and modifies certain disclosure requirements for fair value measurements. The amendment is effective for interim and annual reporting periods beginning after December 15, 2020. Adopting the standard did not have a material impact on the condensed consolidated financial statements.
In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (“ASU 2018-18”), which clarifies the interaction between ASC 808, Collaborative Arrangements and ASC 606, Revenue from Contracts with Customers. Certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer. In addition, ASU 2018-18 precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue if the counterparty is not a customer for that transaction. ASU 2018-18 should be applied retrospectively to the date of initial application of ASC 606. This guidance is effective for interim and fiscal periods beginning after December 15, 2020. Adopting the standard did not have a material impact on the condensed consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes (“ASU 2020-12”), which eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020, with early adoption permitted. Adoption of the standard requires certain changes to be made prospectively, with some changes to be made retrospectively. Adopting the standard did not have a material impact on the condensed consolidated financial statements.
Accounting Standards Issued, Not Adopted
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform – Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848), which provides temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates such as the Secured Overnight Financing Rate (SOFR). This guidance is effective upon issuance and generally can be applied through the end of calendar year 2022. The Company is currently evaluating the impact and applicability of this new standard.
| 17 |
LEET TECHNOLOGY INC.
(Formerly Blow & Drive Interlock Corporation)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| 4. | PLANT AND EQUIPMENT |
Plant and equipment consisted of the following:
| As of | ||||||||
| September 30, 2021 | December 31, 2020 | |||||||
| (Audited) | ||||||||
| Computer equipment | $ | $ | ||||||
| Furniture and fixtures | ||||||||
| Leasehold improvements | ||||||||
| Foreign translation difference | ( | ) | ||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Less: foreign translation difference | ( | ) | ||||||
| $ | $ | |||||||
Depreciation expense for the three months ended
September 30, 2021 and 2020 were $
Depreciation expense for the nine months ended
September 30, 2021 and 2020 were $
| 5. | INTANGIBLE ASSETS |
Intangible assets consisted of the following:
| Useful life | September 30, 2021 | December 31, 2020 | ||||||||
| (Audited) | ||||||||||
| At cost: | ||||||||||
| Software platform | $ | $ | ||||||||
| Foreign translation difference | ( | ) | ||||||||
| Less: accumulated amortization | ( | ) | ||||||||
| Less: foreign translation difference | ||||||||||
| $ | $ | |||||||||
| 18 |
LEET TECHNOLOGY INC.
(Formerly Blow & Drive Interlock Corporation)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
Amortization of intangible assets attributable to the future periods is as follows:
| Year ending September 30: | ||||
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| Total | $ |
Amortization for the three months ended September
30, 2021 and 2020 were $
Amortization for the nine months ended September
30, 2021 and 2020 were $
| 6. | LEASE LIABILITY |
The Company entered into operating leases primarily
for office premises. The renewed lease terms are generally
The Company excludes short-term leases (those with lease terms of less than one year at inception) from the measurement of lease liabilities or right-of-use assets.
As of September 30, 2021 and December 31, 2020,
right-of-use assets were $
For the three months ended September 30, 2021
and 2020, the Company charged its lease expenses of $
For the nine months ended September 30, 2021 and
2020, the Company charged its lease expenses of $
The maturity of the Company’s lease obligations is presented below:
| Operating lease amount | ||||
| Period ended September 30, | ||||
| 2022 | $ | |||
| 2023 | ||||
| Total lease | ||||
| Less: interest | ( | ) | ||
| Present value of lease liabilities | $ | |||
| 19 |
LEET TECHNOLOGY INC.
(Formerly Blow & Drive Interlock Corporation)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| 7. | AMOUNTS DUE TO RELATED PARTIES |
As of September 30, 2021 and December 31, 2020, the Company’s director and major shareholder, Mr. Song Dai and companies under his control, made temporary advances to the Company for its working capital, which is unsecured, interest-free and has no fixed terms of repayment.
| 8. | STOCKHOLDERS’ DEFICIT |
Preferred Stock
The Company’s articles of incorporation authorize the Company to issue up to preferred shares of $ par value.
Series A Preferred Stock
The Company has been authorized to issue
shares of Series A Preferred Stock. The Series A shares have the following preferences: no dividend rights; no liquidation preference
over the Company’s common stock; no conversion rights; no redemption rights; no call rights by the Company; each share of
As of September 30, 2021 and December 31, 2020, the total number of preferred shares issued or issuable was shares.
Common Stock
The Company has authorized shares of $ par value. Holders of common stock are entitled to one vote for each share held. There are no restrictions that limit the Company’s ability to pay dividends on its common stock, subject to the requirements of the Delaware Revised Statutes. The Company has not declared any dividends since incorporation.
On August 6, 2021, the Company issued 3,095,000 shares of common stock to four employees for incentive compensation at the current market value of $0.22 per share, and charged $680,900 as stock-based compensation expense.
On August 23, 2021, the Company issued 1,403,973 shares of common stock to an independent advisory company for advisory service rendered at the current market value of $0.28 per share, and charged $393,112 as stock-based compensation expense.
On September 3, 2021, the Company issued 7,000,000 shares of common stock to four employees for incentive compensation at the current market value of $0.24 per share, and charged $1,680,000 as stock-based compensation expense.
As of September 30, 2021 and December 31, 2020, the Company had and shares of its common stock issued and outstanding, respectively.
| 20 |
LEET TECHNOLOGY INC.
(Formerly Blow & Drive Interlock Corporation)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| 9. | WARRANTS |
The Company issued warrants in individual
sales and in connection with common stock purchase agreements. The warrants have expiration dates ranging from three to four
years from the date of grant and exercise prices ranging from $
A summary of warrant activity for the periods presented is as follows:
| Weighted average | ||||||||||||||||
| Warrants for common shares | Exercise price | Remaining contractual life (in years) | Aggregate intrinsic value | |||||||||||||
| Outstanding as of December 31, 2020 | $ | $ | ||||||||||||||
| Forfeited, cancelled, expired | ( | ) | ( | ) | ||||||||||||
| Outstanding as of September 30, 2021 | $ | $ | ||||||||||||||
| 10. | INCOME TAX |
The Company is subject to taxes in the governing jurisdictions in which its subsidiaries operate. The effective tax rate in the period presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rate, as follows:
United States
The Company is registered in the State of Delaware and is subject to the tax laws of United States.
As of September 30, 2021, the operation in the
United States incurred $
| Labuan |
Under the current laws of the Labuan, LTL is governed under the Labuan Business Activity Act, 1990 (“LBATA”) and being an investment company is not subject to tax if the Labuan Substance Requirement Rules are met, failing which, it will be taxed at 24% of the audited net profit under the LBATA with no carry forward of losses to offset any future income.
| 21 |
LEET TECHNOLOGY INC.
(Formerly Blow & Drive Interlock Corporation)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
Hong Kong
The Company’s subsidiary operating in Hong
Kong is subject to the Hong Kong Profits Tax at the two-tiered profits tax rates from
As of September 30, 2021, the operation in Hong
Kong incurred $
Malaysia
The Company’s subsidiary operating in Malaysia
is subject to the Malaysia Corporate Tax Laws at a progressive income tax rate of
The reconciliation of income tax rate to the effective income tax rate for the nine months ended September 30, 2021 and 2020 is as follows:
| Nine months ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Loss before income taxes | $ | ( | ) | $ | ( | ) | ||
| Statutory income tax rate | ||||||||
| Income tax expense at statutory rate | ( | ) | ( | ) | ||||
| Tax effect of non-deductible items | ||||||||
| Timing differences and net operating loss | ||||||||
| Income tax expense | $ | $ | ||||||
As of September 30, 2021, the operation in Malaysia
incurred $
The Company has provided for a full valuation allowance against the deferred tax assets of $380,693 on the expected future tax benefits as the management believes it is more likely than not that these assets will not be realized in the future.
| 22 |
LEET TECHNOLOGY INC.
(Formerly Blow & Drive Interlock Corporation)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
The following table sets forth the significant components of the deferred tax assets and liabilities of the Company as of September 30, 2021 and December 31, 2020:
| September 30, 2021 | December 31, 2020 | |||||||
| (Audited) | ||||||||
| Deferred tax assets: | ||||||||
| Net operating loss carryforwards | ||||||||
| - United States | $ | $ | ||||||
| - Hong Kong | ||||||||
| - Malaysia | ||||||||
| Less: valuation allowance | ( | ) | ( | ) | ||||
| Deferred tax assets, net | $ | $ | ||||||
| 11. | RELATED PARTY TRANSACTIONS |
From time to time, the director of the Company and his related companies under his control advanced funds to the Company for working capital purpose. Those advances are unsecured, non-interest bearing and have no fixed terms of repayment.
For the three months ended September 30, 2021
and 2020, the Company paid $
For the nine months ended September 30, 2021 and
2020, the Company paid $
For the three months ended September 30, 2021
and 2020, the Company paid $
For the nine months ended September 30, 2021 and
2020, the Company paid $
For the nine months ended September 30, 2021 and
2020, the Company received $
For the three months ended September 30, 2021
and 2020, one of the Company’s directors and executive officers received remuneration in aggregate of $
| 23 |
LEET TECHNOLOGY INC.
(Formerly Blow & Drive Interlock Corporation)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
For the nine months ended September 30, 2021 and
2020, one of the Company’s directors and executive officers received remuneration in aggregate of $
Apart from the transactions and balances detailed elsewhere in these accompanying condensed consolidated financial statements, the Company has no other significant or material related party transactions during the periods presented.
| 12. | CONCENTRATIONS OF RISK |
The Company is exposed to the following concentrations of risk:
| (a) | Major customers |
For the three and nine months ended September
30, 2021, there was one customer (Customer C) who accounts for more than 10% of the Company’s revenues and its outstanding receivable
balances as at period-end dates was $
For the three and nine months ended September 30, 2020, the individual customer who accounts for 10% or more of the Company’s revenues and its outstanding receivable balances as at period-end dates, are presented as follows:
| Three months ended September 30, 2020 | September 30, 2020 | |||||||||||
Customers | Revenues | Percentage of revenues | Accounts receivable | |||||||||
| Customer A | $ | $ | ||||||||||
| Customer B | ||||||||||||
| Total: | $ | Total: | $ | |||||||||
| Nine months ended September 30, 2020 | September 30, 2020 | |||||||||||
Customers | Revenues | Percentage of revenues | Accounts receivable | |||||||||
| Customer A | $ | $ | ||||||||||
| Customer B | ||||||||||||
| Customer C | ||||||||||||
| Total: | $ | Total: | $ | |||||||||
| 24 |
LEET TECHNOLOGY INC.
(Formerly Blow & Drive Interlock Corporation)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| (b) | Economic and political risk |
The Company’s major operations are conducted in Hong Kong and Malaysia. Accordingly, the political, economic, and legal environments in Hong Kong and Malaysia, as well as the general state of Hong Kong and Malaysia’s economy may influence the Company’s business, financial condition, and results of operations.
| (c) | Exchange rate risk |
The Company cannot guarantee that the current exchange rate will remain steady; therefore, there is a possibility that the Company could post the same amount of profit for two comparable periods and because of the fluctuating exchange rate actually post higher or lower profit depending on exchange rate of HKD and MYR converted to US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice.
| 13. | COMMITMENTS AND CONTINGENCIES |
As of September 30, 2021, the Company has neither material commitments nor contingencies.
| 14. | SUBSEQUENT EVENTS |
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before condensed consolidated financial statements are issued, the Company has evaluated all events or transactions that occurred after September 30, 2021, up through the date the Company issued the audited condensed consolidated financial statements. The Company determined that there are no further events to disclose.
On October 6, 2021, the Company entered into an agreement with Lincoln Park Capital Fund, LLC (“Lincoln Park”), in which the Company has the right, but not the obligation, to direct Lincoln Park to purchase up to $15,000,000 of common stock, with 100,000 shares of Common Stock on such business day, at a purchase price per share that will be determined and fixed in accordance with the Purchase Agreement at the time we deliver such written notice to Lincoln Park (each, a “Regular Purchase”), provided, however, that the maximum number of shares we may sell to Lincoln Park in a Regular Purchase may be increased to (i) up to 150,000 shares, provided that the closing sale price of the Common Stock on the applicable purchase date is not below $0.50, (ii) up to 200,000 shares, provided that the closing sale price of the Common Stock on the applicable purchase date is not below $0.75, and (iii) up to 250,000 shares, provided that the closing sale price of the Common Stock on the applicable purchase date is not below $1.00, in each case, subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction as provided in the Purchase Agreement; provided, however, that Lincoln Park’s maximum purchase commitment in any single Regular Purchase may not exceed $25,000, unless the daily median dollar volume of the Common Stock for the 20 trading-day period preceding the applicable purchase date exceeds $50,000, at which time Lincoln Park’s maximum purchase commitment in any single Regular Purchase may not exceed $500,000. The purchase price per share of Common Stock sold in each such Regular Purchase, if any, will be based on prevailing market prices of the Common Stock immediately preceding the time of sale as computed under the Purchase Agreement. As consideration for Lincoln Park’s irrevocable commitment to purchase shares of the Company’s Common Stock upon the terms of and subject to satisfaction of the conditions set forth in the Purchase Agreement, the Company agreed to issue 1,003,378 shares of its Common Stock to Lincoln Park as commitment shares, and up to 1,003,378 additional shares of Common Stock on a pro rata basis as Lincoln Park purchases up to its $15,000,000 total aggregate dollar amount purchase commitment under the Purchase Agreement.
| 25 |
ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Disclaimer Regarding Forward Looking Statements
Our Management’s Discussion and Analysis or Plan of Operations contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national and local general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.
Although the forward-looking statements in this Quarterly Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.
COVID-19
As discussed in more detail throughout this Quarterly Report on Form 10-Q for the nine months ended September 30, 2021 (this “Quarterly Report”), we have experienced business disruptions resulting from efforts to contain the rapid spread of the novel coronavirus (“COVID-19”), including the vast mandated self-quarantines of customers and closures of non-essential business throughout the United States and internationally.
The COVID-19 pandemic has adversely impacted global commercial activity, disrupted supply chains and contributed to significant volatility in financial markets. From March 2020, the Malaysian Prime Minister has issued a number of Movement Control Orders (MCO), which reduced movement within Malaysia and cancelled to various extents all non-essential travel and limited travel from outsiders deemed as non-essential. The MCO remains in place to date.
In the THIRD quarter of 2021, the COVID-19 pandemic continues to adversely impact many different industries. The ongoing COVID-19 pandemic could have a continued material adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the extent and the duration of the impact of COVID-19. The COVID-19 pandemic therefore presents material uncertainty and risk with respect to us and our performance and could materially affect our financial results in an adverse way.
We expect the evolving COVID-19 pandemic to continue to have an adverse impact on our business and results of operations, as the ongoing pandemic is likely to continue to depress economic activity and reduce the demand for our products and services, as well as disrupt supply chains. Although the duration and severity of the COVID-19 pandemic, and resulting economic impacts, remain uncertain, we expect that our business operations and results of operations, will be adversely impacted through 2021, and possibly longer.
In these challenging and unprecedented times, management is taking all necessary and appropriate action to maximize liquidity as the Company navigates the current landscape. These actions include significantly reducing operating expenses and the elimination of all non-essential spending and capital expenditures.
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Overview and Outlook
The following comparative analysis on results of operations was based primarily on the comparative condensed consolidated financial statements, footnotes and related information for the periods identified below and should be read in conjunction with the consolidated financial statements and the notes to those statements that are included elsewhere in this report.
Three months ended September 30, 2021, compared to the three months ended September 30, 2020
During the three months ended September 30, 2021 and 2020, the following customers accounted for 10% or more of our total net revenues:
| Three months ended September 30, 2021 | September 30, 2021 | |||||||||||
Customers | Revenues | Percentage of revenues | Accounts receivable | |||||||||
| Smart Communications Inc. | $ | 60,071 | 80% | $ | 159,684 | |||||||
| Three months ended September 30, 2020 | September 30, 2020 | |||||||||||
Customers | Revenues | Percentage of revenues | Accounts receivable | |||||||||
| Gogopass Asia Sdn Bhd | $ | 18,039 | 59% | $ | 1,724 | |||||||
| PayTM First Games Private Limited | 12,064 | 39% | 15,257 | |||||||||
| Total: | $ | 30,103 | 98% | Total: | $ | 16,981 | ||||||
All of our major customers are located in Malaysia, India and Philippines
Revenue increased by 331.6% to $75,051 for the three months ended September 30, 2021, from $17,388 for the three months ended September 30, 2020. The increase in revenue is mainly due to a new white lable project which commenced in June 2021.
IT operating expenses increased by 514.0% to $161,001 for the three months ended September 30, 2021, from $26,221 for the three months ended September 30, 2020. The increase in IT operating expenses is due to the increase in network bandwidth expenses, direct labor costs to white label project, and Matchroom online event costs in tournament streaming as there were more subscribers during the three months ended September 30, 2021.
Stock based compensation increased to $2,754,012 for the three months ended September 30, 2021, from $0 for the three months ended September 30, 2020. The increase is attributable to the issuance of common stocks as employee incentives to staff and payment for consultancy services rendered during the three months ended September 30, 2021.
General and administrative expenses increased by 337.1% to $358,698 for the three months ended September 30, 2021, from $82,059 for the three months ended September 30, 2020. The increase in general and administrative expenses is in anticipation of revenue growth in third half of 2021 where staff strength has been increased.
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Net loss increased 2,746.9% to $3,207,183 for the three months ended September 30, 2021, from net loss of $112,657 for the three months ended September 30, 2020. The increase in net loss is mainly attributed from the increase in stock based compensation.
Nine months ended September 30, 2021 compared to the nine months ended September 30, 2020
During the nine months ended September 30, 2021 and 2020, the following customers accounted for 10% or more of our total net revenues:
| Nine months ended September 30, 2021 | September 30, 2021 | |||||||||||
Customers | Revenues | Percentage of revenues | Accounts receivable | |||||||||
| Smart Communications Inc. | $ | 160,093 | 79% | $ | 159,684 | |||||||
| Nine months ended September 30, 2020 | September 30, 2020 | |||||||||||
Customers | Revenues | Percentage of revenues | Accounts receivable | |||||||||
| Gogopass Asia Sdn Bhd | $ | 48,596 | 63% | $ | 1,724 | |||||||
| PayTM First Games Private Limited | 15,101 | 19% | 15,257 | |||||||||
| Smart Communications Inc. | 9,991 | 13% | – | |||||||||
| Total: | $ | 73,688 | 95% | Total: | $ | 16,981 | ||||||
All of our major customers are located in Malaysia, India and Philippines
Revenue increased by 215.7% to $203,539 for the nine months ended September 30, 2021, from $64,465 for the nine months ended September 30, 2020. The increase in revenue is mainly due to revenue from new whitelable projects and sale of merchandise in the newly established Maroo Mall platform.
IT operating expenses increased by 256.7% to $365,551 for the nine months ended September 30, 2021, from $102,472 for the nine months ended September 30, 2020. The increase in IT operating expenses is due to the increase in network bandwidth expenses, direct labor costs for white label project, and Matchroom online event costs in tournament streaming as there are more subscribers during the nine months ended September 30, 2021.
Stock based compensation increased to $2,754,012 for the nine months ended September 30, 2021, from $0 for the nine months ended September 30, 2020. The increase is attributable to the issuance of common stocks as employee incentives to staff and payment for consultancy services rendered during the nine months ended September 30, 2021
General and administrative expenses increased by 212.5% to $869,291 for the nine months ended September 30, 2021, from $278,158 for the nine months ended September 30, 2020. The increase in general and administrative expenses is in anticipation of revenue growth in third half of 2021 where staff strength has been increased and the amortization of platform development cost from January 2021.
Net loss increased 1,062.4% to $3,811,438 for the nine months ended September 30, 2021, from net loss of $327,884 for the nine months ended September 30, 2020. The increase in net loss is mainly attributed from the increase in stock-based compensation.
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Liquidity and Capital Resources
As of September 30, 2021, we had cash and cash equivalents of $18,958, accounts receivable of $171,769, deposit and other receivables of $11,051. Such cash amount and other sources of liquidity are not sufficient to support our operation in the next twelve months. The Company is currently pursuing additional financing for its operations. However, there is no assurance that the Company will be successful in securing sufficient funds to sustain the operations. In the absence of such financing, our business will likely fail.
| Nine Months Ended September 30 | ||||||||
| 2021 | 2020 | |||||||
| Net cash used in operating activities | $ | (968,027 | ) | $ | (190,074 | ) | ||
| Net cash used in investing activities | (153,760 | ) | (2,286 | ) | ||||
| Net cash provided by financing activities | 1,093,456 | 252,234 | ||||||
Net Cash Used In Operating Activities.
For the nine months ended September 30, 2021, net cash used in operating activities was $968,027, which consisted primarily of a net loss of $3,811,438, an increase in accounts receivable of $152,081, an increase in deposit and other receivables of $8,364, a decrease in operating lease liabilities of $71, and offset by depreciation and amortization of $148,637, stock based compensation of $2,754,012, and an increase in accrued liabilities and other payables of $101,308, and a decrease in accounts payable of $30.
For the nine months ended September 30, 2020, net cash used in operating activities was $190,074, which consisted primarily of a net loss of $327,884, a decrease in account receivables of $65,749, a decrease in deposit and other receivables of $26,831, an increase in accounts payable of $33,289, an increase in accrued liabilities and other payables of $8,873, and offset by a decrease in operating lease liabilities of $32.
We expect to continue to rely on cash generated through financing from our existing shareholders and private placements of our securities, to finance our operations and future acquisitions.
Net Cash Used In Investing Activities.
For the nine months ended September 30, 2021 and 2020, net cash used in investing activities was $153,760 and $2,286, respectively which consisted primarily of purchase of plant and equipment.
Net Cash Provided by Financing Activities.
For the nine months ended September 30, 2021 and 2020, net cash provided by financing activities was $1,093,456 and $252,234, respectively which consisted primarily of advance from related parties.
Off-Balance Sheet Arrangements
We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts that are indexed to our own shares and classified as shareholders’ equity, or that are not reflected in our financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.
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Critical Accounting Policies and Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operations. Critical accounting policies are those that are most important to the presentation of our financial condition and results of operations and require management's subjective or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management's current judgments. We believe the following accounting policies are critical in the preparation of our financial statements.
Basis of presentation
These accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).
Use of estimates and assumptions
In preparing these consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the periods reported. Actual results may differ from these estimates.
Revenue recognition
The Company adopted Accounting Standards Codification (“ASC”) 606 – Revenue from Contracts with Customers” (“ASC 606”). Under ASC 606, a performance obligation is a promise within a contract to transfer a distinct good or service, or a series of distinct goods and services, to a customer. Revenue is recognized when performance obligations are satisfied and the customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for goods or services. Under the standard, a contract’s transaction price is allocated to each distinct performance obligation. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:
| • | identify the contract with a customer; | |
| • | identify the performance obligations in the contract; | |
| • | determine the transaction price; | |
| • | allocate the transaction price to performance obligations in the contract; and | |
| • | recognize revenue as the performance obligation is satisfied. |
Revenue of the Company is derived from the organization of competitions using video games. Most commonly, esports takes the form of organized, single player and multiplayer video game competitions. Revenues are recognized when the competition is completed, and prize money is awarded. Revenues are earned through sponsorship fees on a per tournament basis.
Related parties
The Company follows the ASC 850-10, Related Party for the identification of related parties and disclosure of related party transactions.
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Pursuant to section 850-10-20 the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Fair value of financial instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into six (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The six (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:
| Level 1 | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. | |
| Level 2 | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. | |
| Level 3 | Pricing inputs that are generally observable inputs and not corroborated by market data. |
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, deposits, other receivables and amount due from a director approximate their fair values because of the short maturity of these instruments.
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Recent accounting pronouncement
Accounting Standards Adopted
In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”) in order to increase transparency and comparability among organizations by recognizing right-of-use assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous generally accepted accounting principles. ASU 2016-02 requires a lessee to recognize a lease liability for future lease payments and a right-of-use asset representing the right to use the underlying asset for the lease term on the balance sheet for most lease arrangements. The new standard also changes many key definitions, including the definition of a lease. The new standard includes a short-term lease exception for leases with a term of 12 months or less, as part of which a lessee can make an accounting policy election not to recognize right-of-use assets and lease liabilities. Lessees will continue to differentiate between finance leases (previously referred to as capital leases) and operating leases using classification criteria that are substantially similar to the previous guidance in ASC 840.
ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) and early adoption is permitted. In August 2018, the FASB issued ASU 2018-11, Leases, Targeted Improvements, which provides a new transition option in which an entity initially applies ASU 2016-02 at the adoption date and recognizes a cumulative-effect adjustment in the period of adoption. Prior period comparative balances will not be adjusted. The Company used the new transition option and was also utilizing the package of practical expedients that allows it to not reassess: (1) whether any expired or existing contracts are or contain leases, (2) lease classification for any expired or existing leases, and (3) initial direct costs for any existing leases. We also used the short-term lease exception for leases with a term of 12 months or less. Additionally, the Company used the practical expedient that allowed each separate lease component of a contract and the associated non-lease components to be treated as a single lease component. The exercise of lease renewal options is at our discretion and the renewal to extend the lease terms are not included in the Company’s Right-Of-Use assets and lease liabilities as they are not reasonably certain of exercise. The Company will evaluate the renewal options and when they are reasonably certain of exercise, the Company will include the renewal period in its lease term. As of January 1, 2020, effective date the Company identified one finance lease arrangement in which it is a lessee.
In calculating the present value of the lease payments, the Company applied an individual discount rate for each of its leases, and determined the appropriate discount rate based on the remaining lease terms at the date of adoption. As the lessee to several lease agreements, the Company did not have insight into the relevant information that would be required to arrive at the rate implicit in the lease. Therefore, the Company utilized its outstanding borrowings as a benchmark to determine the incremental borrowing rate for its leases. The benchmark rate was adjusted to arrive at an appropriate discount rate for each lease.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This ASU requires measurement and recognition of expected credit losses for financial assets. ASU 2016-13 also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities. ASU 2016-13 is effective for interim and fiscal periods within those fiscal years beginning after December 15, 2019. 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 adopted. Adopting the standard is not expected to have a material impact on the condensed consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (“ASU 2018-13”), which eliminates, adds and modifies certain disclosure requirements for fair value measurements. The amendment is effective for interim and annual reporting periods beginning after December 15, 2020. Adopting the standard did not have a material impact on the condensed consolidated financial statements.
In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (“ASU 2018-18”), which clarifies the interaction between ASC 808, Collaborative Arrangements and ASC 606, Revenue from Contracts with Customers. Certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer. In addition, ASU 2018-18 precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue if the counterparty is not a customer for that transaction. ASU 2018-18 should be applied retrospectively to the date of initial application of ASC 606. This guidance is effective for interim and fiscal periods beginning after December 15, 2020. Adopting the standard did not have a material impact on the condensed consolidated financial statements.
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In December 2019, the FASB issued ASU No. 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes (“ASU 2020-12”), which eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020, with early adoption permitted. Adoption of the standard requires certain changes to be made prospectively, with some changes to be made retrospectively. Adopting the standard is not expected to have a material impact on the condensed consolidated financial statements.
Accounting Standards Issued, Not Adopted
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform – Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848), which provides temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates such as the Secured Overnight Financing Rate (SOFR). This guidance is effective upon issuance and generally can be applied through the end of calendar year 2022. The Company is currently evaluating the impact and applicability of this new standard.
Corporate History
Prior to the acquisition of our wholly-owned subsidiary as described below, our main business consisted of the manufacture and sale of a Breath Alcohol Ignition Interlock Device (BAIID) which we had developed and is known as the BDI-747 Ignition Interlock Device (the “BDI-747/1”), a mechanism that is installed on the steering column of an automobile and into which a driver exhales prior to starting his vehicle.
Current Business
Shortly after changing our business focus towards the eSports industry, which we regard as a potentially high growth and profitable industry, we identified certain opportunities to engage in the business related to e-sports in South East Asia, which has seen high growth over the last 3 years, and determined that we should pursue that business opportunity. We entered into negotiations with LTL, and have closed that acquisition as of November 18, 2020.
Currently, the Company is a holding company and has no principal business other than LTL’s business. LTL is a wholly-owned subsidiary of the Company which operates an eSports platform in Malaysia. All references to Company herein include its operating subsidiary LTL unless otherwise noted.
Esports Industry and Segment
Definition of eSports:
“Esports (also known as electronic sports, e-sports, or eSports) is a form of sport competition using video games. Esports often takes the form of organized, multiplayer video game competitions, particularly between professional players, individually or as teams. Although organized competitions have long been a part of video game culture, these were largely between amateurs until the late 2000s, when participation by professional gamers and spectatorship in these events through live streaming saw a large surge in popularity. By the 2010s, esports was a significant factor in the video game industry, with many game developers actively designing and providing funding for tournaments and other events.” (Source: Wikipedia)
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Growth of eSports
In 2020, the global eSports market was valued at just over US$950 million. According to the source's estimates, global eSports market revenue will reach almost US$1.6 billion in 2023. The eSports industry is expected to grow rapidly in the coming years. The majority of these revenues come from sponsorships and advertising, and the rest from media rights, publisher fees, merchandise and tickets, digital and streaming. In terms of revenues, Asia and North America represent the two largest eSports markets, with China alone accounting for almost one fifth of the market. (Source: Statistica)
In 2016, ASEAN decided to enter the market by hosting its very own eSports tournament. Malaysia, in collaboration with eSports Malaysia hosted the first ever ASEAN Games for eSports (AGES) with a prize pool of around US$256,000.
Most recently, the 2018 Asian Games, held in Jakarta and Palembang simultaneously, had – for the first time – six demonstration games as part of its eSports event. The games were Arena of Valor, Hearthstone, Pro Evolution Soccer, League of Legends, Clash Royale and StarCraft 2. (Source: Newzoo)
Other reasons why the eSports market is increasing in the region are due to growing regional incomes. According to a Newzoo report from 2015, the “Big Six” countries in Southeast Asia for eSports are Vietnam, Thailand, Philippines, Indonesia, Malaysia and Singapore. The report stated that these countries account for 99 percent of the region’s eSports revenue. The “Big Six” countries mentioned in the report have flourishing economies and a growing middle-class population. As populations grow, more disposable income is spent on hobbies and leisure activities which includes video games.
Our Product Portfolio
Our current product is an e-sports platform which is www.Matchroom.net. Matchroom features an integrated e-sports tournament site that allows tournament organizers, brands, players and game developers to organize e-sports tournaments on our platform utilizing our platform tools. Matchroom tools includes user registrations, payments, communications, livestream link ups, wallet system and many other community features.
Market, Customer and Distribution Methods
Our focus in regards of target markets encompasses the emerging markets (South East Asia, Middle East, and South Asia) in terms of geography, and users between the ages of 17 – 35. As most of these markets are mobile centric, our focus is mainly towards mobile e-sport tournaments. As such, we also focus on working with mobile network operators in our target markets, as they have direct access to their mobile subscribers, which are our target audience as well.
Sales and Marketing
Our sales strategy is geared towards a subscription model, at which users subscribe to a tournament pass that allows them to participate in a series of tournaments which has prize pools and benefits. Our partnerships with mobile network operators extend our payment reach through direct carrier billings with the mobile network operators in the respective countries in which we work.
By building up the community of e-sports players, brands can sponsor some of these prize pools by offering product ad placements, sampling and giveaways. This will be further amplified by offerings of ecommerce opportunities for brands to sell their product on our platform.
Our marketing strategy revolves around digital marketing through social media, brand marketing, influencer marketing and working with mobile carriers to co-promote our tournaments.
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Government Regulation
We will be required to comply with all regulations, rules and directives of governmental authorities and agencies in any jurisdiction in which we conduct our current business. As of now, there are no additional required government approvals which we must obtain.
Competition
There has been increased competition on eSports providers in this region over the last 2 years. E-sports platforms such as ESPL, Mogul.gg, Yamisok, ESL, and several others are constantly expanding their reach across the South East Asian and South Asian markets.
Our key competitors include some of the following:
ESPL (E-Sport Player League) – A new esports platform that has recently emerged out of Malaysia and has been aggressively focused on professional esports management and platform. It has expanded its reach towards India as well as in South East Asia
Mogul.gg – An Australian-based esports platform that has seen its expansion in Australia and Philippines. It focuses on community esports as opposed to Professional Esports
Yamisok – An Indonesian-based esports platform that also focuses on community esports and works with brands and mobile carriers, primarily in Indonesia to carry out community tournaments in Indonesia
ESL (Electronic Sports League) – A German-based esports company that has operated many international tournaments with major partnership with Valve. ESL also has an esports platform but mainly focuses on Europe and US markets.
Business Plan
The year 2020 saw most countries and economies deal with the Covid-19 pandemic, as it was still spreading across continents. While responding to the pandemic has led to many innovations and digitization in many sectors, eSports has also been affected. Esports has traditionally been offline-based, due to its competitive factor and focus on fair play. With on-ground events largely restricted, there has been a growth in online tournaments. More gamers are getting online to compete with others, as well as the growth of online viewers watching livestreams. This has also led to higher data consumption usage of the internet, mainly mobile data consumption.
In 2021, the Company focused on working with mobile network operators within South East Asia to extend our platform’s (Matchroom) product offerings via a subscription model, whereby mobile subscribers will subscribe to a data package that offers a tournament pass, which enables users to compete in a series of tournaments that is offered.
Matchroom will focus on delivering eSports content to the market through the following:
1) White label solutions with mobile network operators to cater to their users
2) Launch of Matchroom’s Regional Tournaments and working with mobile network operators in each country to promote and provide a direct carrier billing subscription method for their users to subscribe.
3) Brand partnerships to carry out online eSports tournaments and livestream content for brand exposure and engagement.
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Our current roadmap is to cover South East Asia, namely Malaysia, Philippines, Indonesia, Thailand, Singapore and Cambodia within the next 18 months. The following 18 months in 2022-2023 will see us incorporating Vietnam, South Asia, Middle East and African markets into our platform.
To cater to our expansion, our platform roadmap also focuses on several priorities:-
1) Enhancement of our current platform to enable deep linking with mobile carriers
2) Launch of a redemption and ecommerce platform
3) Enhancements of our current esports tools and services
4) Gamifications and User Experience enhancements
5) Multi language and geographical-led content management.
6) Software development kits (SDK) for better onboarding of game developers and tournament operators.
7) Customer Engagement and Community management tools for better customer experience.
We will also need to recruit computer gaming employees and consultants, and executives that will lead localized teams across the region, especially in Philippines, Indonesia and Thailand where there is a distinct local culture that calls for localization of content in that particular country. We also expect to expand our development and operations team to cater to more tournaments including automations, data mining, customer retentions & userbase including monetization strategies.
We expect our revenues to continue growing in 2021 onwards, especially through our mobile carrier partnerships, as well as our subscription model, which is expected to in line with our user growth and platform deliverables.
Employees
As of September 30, 2021, we have approximately 21 full time employees based in Malaysia, 2 full time employees based in the Philippines, 1 full time employee based in Vietnam, and 2 full time employees based in Indonesia. We have never experienced a work stoppage.
Description of Properties
Our principal executive offices are located at 805, 8th Floor, Menara Mutiara Majestic, Jalan Othman, Petaling Jaya 46000, Selangor, Malaysia. Our telephone number is 603 7783 1636. We have no present intention of acquiring other facilities during our development stage.
We do not currently have any investment or interests in any real estate, nor do we have investments or an interest in any real estate mortgages or securities of persons engaged in real estate activities.
We were incorporated under the name Jam Run Acquisition Corporation on July 2, 2013, in the State of Delaware. From inception through early February 2014, we were a blank check company and qualified as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act which became law in April 2012, with a business plan of entering into a transaction with a foreign or domestic private company for that company to become a reporting company as part of the process toward the public trading of its stock. We ceased being a shell company upon the filing of our Form 8-K on November 18, 2020. On August 23, 2021, the Financial Industry Regulatory Authority (FINRA) approved the change of name of the Company from Blow & Drive Interlock Corp to Leet Technology Inc, and the trading symbol of the Company from BDIC to LTES.
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Available Information
We are a fully reporting issuer, subject to the Securities Exchange Act of 1934. Our Quarterly Reports, Annual Reports, and other filings can be obtained from the SEC’s Public Reference Room at 100 F Street, NE., Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m. You may also obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission at http://www.sec.gov.
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to provide the information required by this Item.
ITEM 4 Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2021. Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective.
Changes in Internal Controls over Financial Reporting
There have been no changes in the Company's internal control over financial reporting during the last quarterly period covered by this report that have materially affected, and therefore has no significant impact on the company’s financial report nor internal control. Under the new ownership and management, accounting officer will provide monthly, quarterly, semi-annually, annually financial statements to our shareholders, CPA, and corporate management to ensure accurate financial activities recorded.
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PART II – OTHER INFORMATION
ITEM 1 Legal Proceedings
In the ordinary course of business, we are from time to time involved in various pending or threatened legal actions. The litigation process is inherently uncertain, and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. However, in the opinion of our management, other than as set forth herein, matters currently pending or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.
ITEM 1A Risk Factors
As a smaller reporting company, we are not required to provide the information required by this Item.
ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds
During the nine months ended September 30, 2021, we did not issue any unregistered securities:
ITEM 3 Defaults Upon Senior Securities
There have been no events which are required to be reported under this Item.
ITEM 4 Mine Safety Disclosures
There have been no events which are required to be reported under this Item.
ITEM 5 Other Information
On August 23, 2021, the Financial Industry Regulatory Authority (FINRA) approved the change of name of the Company from Blow & Drive Interlock Corp to Leet Technology Inc, and the trading symbol of the Company from BDIC to LTES.
On October 6, 2021, the Company entered into an agreement with Lincoln Park Capital Fund, LLC (“Lincoln Park”), in which the Company has the right, but not the obligation, to direct Lincoln Park to purchase up to $15,000,000 of common stock, with 100,000 shares of Common Stock on such business day, at a purchase price per share that will be determined and fixed in accordance with the Purchase Agreement at the time we deliver such written notice to Lincoln Park (each, a “Regular Purchase”), provided, however, that the maximum number of shares we may sell to Lincoln Park in a Regular Purchase may be increased to (i) up to 150,000 shares, provided that the closing sale price of the Common Stock on the applicable purchase date is not below $0.50, (ii) up to 200,000 shares, provided that the closing sale price of the Common Stock on the applicable purchase date is not below $0.75, and (iii) up to 250,000 shares, provided that the closing sale price of the Common Stock on the applicable purchase date is not below $1.00, in each case, subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction as provided in the Purchase Agreement; provided, however, that Lincoln Park’s maximum purchase commitment in any single Regular Purchase may not exceed $25,000, unless the daily median dollar volume of the Common Stock for the 20 trading-day period preceding the applicable purchase date exceeds $50,000, at which time Lincoln Park’s maximum purchase commitment in any single Regular Purchase may not exceed $500,000. The purchase price per share of Common Stock sold in each such Regular Purchase, if any, will be based on prevailing market prices of the Common Stock immediately preceding the time of sale as computed under the Purchase Agreement. As consideration for Lincoln Park’s irrevocable commitment to purchase shares of the Company’s Common Stock upon the terms of and subject to satisfaction of the conditions set forth in the Purchase Agreement, the Company agreed to issue 1,003,378 shares of its Common Stock to Lincoln Park as commitment shares, and up to 1,003,378 additional shares of Common Stock on a pro rata basis as Lincoln Park purchases up to its $15,000,000 total aggregate dollar amount purchase commitment under the Purchase Agreement.
| 38 |
ITEM 6 Exhibits
| 31.1* | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. | |
| 31.2* | Rule 13a-14(a)/15d-14(a) Certification of Chief Accounting Officer. | |
| 32.1* | Section 1350 Certification of Chief Executive Officer. | |
| 32.2* | Section 1350 Certification of Chief Accounting Officer. | |
| 101.INS* | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104* | Cover Page Interactive Data File (formatted in IXBRL, and included in exhibit 101). |
*filed herewith
| 1 |
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.
| Leet Technology Inc. | ||
| Dated: November 12, 2021 | /s/ Ding Jung LONG | |
| Chief Executive Officer | ||
| Dated: November 12, 2021 | /s/ Kamal Hamidon | |
| Chief Financial Officer and Principal Accounting Officer | ||
| 2 |