Item 9.01 Financial Statements and
Exhibits
|
(a)
|
Financial statements of business acquired.
|
In accordance with Item 9.01(a), Leet Technology
Limited audited financial statements as of, and for the fiscal years ended, December 31, 2019 and 2018, and Leet Technology Limited’s
unaudited condensed financial statements as of, and for the nine months ended September 30, 2020 and 2019, and the accompanying
notes, are included in this Current Report beginning on Page F-2.
|
(b)
|
Pro forma financial information
|
In accordance with Item 9.01(b), unaudited condensed financial
statements as of, and for the nine months ended September 30, 2020, and the accompanying notes, are included in this Current Report
beginning on Page F-35
Exhibit 10.1 Share Exchange Agreement
FINANCIAL STATEMENTS
LEET TECHNOLOGY LIMITED
LEET TECHNOLOGY LIMITED
CONDENSED COMBINED AND CONSOLIDATED BALANCE
SHEETS
AS OF SEPTEMBER 30, 2020 AND DECEMBER
31, 2019
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
|
|
September 30,
2020
|
|
|
December 31, 2019
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current asset:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
5,582
|
|
|
$
|
42,526
|
|
Accounts receivable
|
|
|
16,981
|
|
|
|
877
|
|
Deposit and other receivables
|
|
|
890
|
|
|
|
4,061
|
|
Right of use assets
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
23,453
|
|
|
|
47,464
|
|
|
|
|
|
|
|
|
|
|
Non-current asset:
|
|
|
|
|
|
|
|
|
Plant and equipment
|
|
|
8,546
|
|
|
|
9,537
|
|
Right of use assets
|
|
|
4,179
|
|
|
|
8,077
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
36,178
|
|
|
$
|
65,078
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accrued liabilities and other payables
|
|
$
|
268,816
|
|
|
$
|
215,555
|
|
Amounts due to related parties
|
|
|
1,726,785
|
|
|
|
1,470,298
|
|
Operating lease liabilities
|
|
|
4,245
|
|
|
|
5,145
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,999,846
|
|
|
|
1,690,998
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
Operating lease liabilities
|
|
|
–
|
|
|
|
3,032
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
1,998,846
|
|
|
|
1,694,030
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
Ordinary share, $1 par value; 50,000 shares authorized; 10,000 shares issued and outstanding
|
|
|
10,000
|
|
|
|
10,000
|
|
Accumulated other comprehensive loss
|
|
|
(27,945
|
)
|
|
|
(21,113
|
)
|
Accumulated losses
|
|
|
(1,945,723
|
)
|
|
|
(1,617,839
|
)
|
|
|
|
|
|
|
|
|
|
Stockholders’ deficit
|
|
|
(1,963,668
|
)
|
|
|
(1,628,952
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
$
|
36,178
|
|
|
$
|
65,078
|
|
See accompanying notes to condensed combined
and consolidated financial statements.
LEET TECHNOLOGY LIMITED
CONDENSED COMBINED AND CONSOLIDATED STATEMENTS
OF OPERATIONS
AND COMPREHENSIVE LOSS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2020 AND 2019
(Currency expressed in United States
Dollars (“US$”))
(Unaudited)
|
|
Nine months ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Revenue, net
|
|
$
|
79,721
|
|
|
$
|
39,453
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
IT operating expenses
|
|
|
(102,472
|
)
|
|
|
(114,820
|
)
|
Research and development
|
|
|
(26,975
|
)
|
|
|
(64,760
|
)
|
General and administrative expenses
|
|
|
(278,158
|
)
|
|
|
(368,528
|
)
|
Total operating expenses
|
|
|
(407,605
|
)
|
|
|
(548,108
|
)
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAXES
|
|
|
(327,884
|
)
|
|
|
(508,655
|
)
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
|
(327,884
|
)
|
|
|
(508,655
|
)
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
Foreign currency translation (loss) gain
|
|
|
(6,832
|
)
|
|
|
57
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE LOSS
|
|
$
|
(334,716
|
)
|
|
$
|
(508,598
|
)
|
See accompanying notes to condensed combined
and consolidated financial statements.
LEET TECHNOLOGY LIMITED
CONDENSED COMBINED AND CONSOLIDATED STATEMENTS
OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2020 AND 2019
(Currency expressed in United States
Dollars (“US$”))
(Unaudited)
|
|
Nine months ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Cash flow from operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(327,884
|
)
|
|
$
|
(508,655
|
)
|
Adjustments to reconcile net income to net cash used in operating activities
|
|
|
|
|
|
|
|
|
Depreciation of plant and equipment
|
|
|
3,100
|
|
|
|
3,174
|
|
|
|
|
|
|
|
|
|
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Account receivables
|
|
|
65,749
|
|
|
|
(29,901
|
)
|
Deposit and other receivables
|
|
|
26,831
|
|
|
|
(47
|
)
|
Accounts payable
|
|
|
33,289
|
|
|
|
–
|
|
Accrued liabilities and other payables
|
|
|
8,873
|
|
|
|
155,506
|
|
Operating lease liabilities
|
|
|
(32
|
)
|
|
|
33
|
|
Net cash used in operating activities
|
|
|
(190,074
|
)
|
|
|
(379,890
|
)
|
|
|
|
|
|
|
|
|
|
Cash flow from investing activities:
|
|
|
|
|
|
|
|
|
Purchases of plant and equipment
|
|
|
(2,286
|
)
|
|
|
(2,117
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(2,286
|
)
|
|
|
(2,117
|
)
|
|
|
|
|
|
|
|
|
|
Cash flow from financing activities:
|
|
|
|
|
|
|
|
|
Advances from related parties
|
|
|
252,234
|
|
|
|
392,936
|
|
|
|
|
|
|
|
|
|
|
Net cash generated from financing activities
|
|
|
252,234
|
|
|
|
392,936
|
|
|
|
|
|
|
|
|
|
|
Effect on exchange rate change on cash and cash equivalents
|
|
|
(96,818
|
)
|
|
|
(3,985
|
)
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
(36,944
|
)
|
|
|
6,944
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
42,526
|
|
|
|
4,887
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, END OF PERIOD
|
|
$
|
5,582
|
|
|
$
|
11,831
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
Cash paid for tax
|
|
$
|
–
|
|
|
$
|
–
|
|
Cash paid for interest
|
|
$
|
–
|
|
|
$
|
–
|
|
See accompanying notes to condensed combined
and consolidated financial statements.
LEET TECHNOLOGY LIMITED
CONDENSED COMBINED AND CONSOLIDATED STATEMENTS
OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2020 AND 2019
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
|
|
Ordinary share
|
|
|
Accumulated other comprehensive (loss)
|
|
|
Accumulated
|
|
|
Total stockholders’
|
|
|
|
No. of shares
|
|
|
Amount
|
|
|
income
|
|
|
losses
|
|
|
deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at January 1, 2019 (Audited)
|
|
|
10,000
|
|
|
$
|
10,000
|
|
|
$
|
(4,299
|
)
|
|
$
|
(924,615
|
)
|
|
$
|
(918,914
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
–
|
|
|
|
–
|
|
|
|
57
|
|
|
|
–
|
|
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(508,655
|
)
|
|
|
(508,655
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at September 30, 2019
|
|
|
10,000
|
|
|
$
|
10,000
|
|
|
$
|
(4,242
|
)
|
|
$
|
(1,433,270
|
)
|
|
$
|
(1,427,512
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at January 1, 2020 (Audited)
|
|
|
10,000
|
|
|
$
|
10,000
|
|
|
$
|
(21,113
|
)
|
|
$
|
(1,617,839
|
)
|
|
$
|
(1,628,952
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
–
|
|
|
|
–
|
|
|
|
(6,832
|
)
|
|
|
–
|
|
|
|
(6,832
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(327,884
|
)
|
|
|
(327,884
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at September 30, 2020
|
|
|
10,000
|
|
|
$
|
10,000
|
|
|
$
|
(27,945
|
)
|
|
$
|
(1,945,723
|
)
|
|
$
|
(1,963,668
|
)
|
See accompanying notes to condensed combined
and consolidated financial statements.
LEET TECHNOLOGY LIMITED
NOTES TO CONDENSED COMBINED AND CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2020
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
NOTE-1. DESCRIPTION
OF BUSINESS AND ORGANIZATION
Leet Technology Limited (the “Company”
or “LTL”) is incorporated as a limited liability company under the Labuan Companies Act 1990 on September 15, 2020
in the Federal Territory of Labuan, Malaysia (the “Labuan”). The Company through its subsidiaries, mainly provides
the integrated business-to-business digital entertainment solutions to the customers by offering a wide range of self-developed
game contents with innovative marketing and distribution strategies in Asian region.
Pursuant to its Memorandom of Association,
the authorized capital is amounted to US$50,000 representing 50,000 ordinary shares with a par value of $1 at its inception. As
of September 30, 2020, the Company had 10,000 ordinary shares issued and outstanding.
On October 30, 2020, the Company consummated
the Share Exchange Transaction among Leet Entertainment Group Limited (“LEGL”) and its shareholders. Both the Company
and LEGL are controlled by the same management team and the controlling person. Upon completion of the Share Exchange Transaction,
LEGL became a 100% owned subsidiary of the Company.
Because the Company is a shell company,
LEGL will comprise the ongoing operations of the combined entity and its senior management will serve as the senior management
of the combined entity, LEGL is deemed to be the accounting acquirer for accounting purposes. The transaction will be treated as
a recapitalization of the Company. Accordingly, the consolidated assets, liabilities and results of operations of the Company will
become the historical financial statements of LEGL, and the Company’s assets, liabilities and results of operations will
be consolidated with LEGL beginning on the acquisition date. LEGL was the legal acquiree but deemed to be the accounting acquirer.
The Company was the legal acquirer but deemed to be the accounting acquiree in the reverse merger. The historical financial statements
prior to the acquisition are those of the accounting acquirer (LEGL). After completion of the Share Exchange Transaction, the Company’s
consolidated financial statements include the assets and liabilities, the operations and cash flow of the accounting acquirer.
Description of subsidiaries
Name
|
|
Place of incorporation
and kind of
legal entity
|
|
Principal activities
|
|
Particulars of registered/ paid up share
capital
|
|
Effective interest
held
|
|
|
|
|
|
|
|
|
|
Leet Entertainment Group Limited
|
|
Hong Kong
|
|
Provision of information technology and mobile application development and digital content publishing service
|
|
1 ordinary share for HK$1
|
|
100%
|
|
|
|
|
|
|
|
|
|
Leet Entertainment Sdn. Bhd.
|
|
Malaysia
|
|
Provision of information technology and mobile application development and digital content publishing service
|
|
1,000 ordinary shares at par value of MYR$1
|
|
100%
|
The Company and its subsidiaries are hereinafter
referred to as (the “Company”).
LEET TECHNOLOGY LIMITED
NOTES TO CONDENSED COMBINED AND CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2020
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
NOTE-2. GOING
CONCERN UNCERTAINTIES
The accompanying condensed combined and
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 continuing
loss from its inception, with an accumulated deficit of $1,945,643 and working capital deficit of $1,971,961, at September 30,
2020. In addition, with respect to the ongoing and evolving coronavirus (COVID-19) outbreak, which was designated as a pandemic
by the World Health Organization on March 11, 2020, the outbreak has caused substantial disruption in international economies and
global trades and if repercussions of the outbreak are prolonged, could have a significant adverse impact on the Company’s
business.
The continuation of the Company as a going
concern through September 30, 2021 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.
These and other factors raise substantial
doubt about the Company’s ability to continue as a going concern. These 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.
NOTE-3. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying condensed combined and consolidated financial
statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying
consolidated financial statements and notes.
These accompanying condensed combined and
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 condensed combined and
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.
The condensed combined and 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.
·
|
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.
LEET TECHNOLOGY LIMITED
NOTES TO CONDENSED COMBINED AND CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2020
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
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 collectibility. 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, 2020 and December 31, 2019, there was no allowance for doubtful accounts.
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
|
|
5 years
|
|
Furniture and fixtures
|
|
5 years
|
|
Leasehold improvements
|
|
5 years or over the shorter of the remaining term of the lease
|
|
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.
The Company adopted Accounting Standards
Codification (“ASC”) 606 – Revenue from Contracts with Customers” (“ASC 606”) as of
January 1, 2019 using the modified retrospective method. This method allows the Company to apply ASC 606 to new contracts entered
into after January 1, 2019, and to its existing contracts for which revenue earned through December 31, 2018 has been recognized
under the guidance in effect prior to the effective date of ASC 606. The revenue recognition processes the Company applied prior
to adoption of ASC 606 align with the recognition and measurement guidance of the new standard, therefore adoption of ASC 606 did
not require a cumulative adjustment to opening equity.
LEET TECHNOLOGY LIMITED
NOTES TO CONDENSED COMBINED AND CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2020
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
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 is a form of competition 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.
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 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 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.
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.
·
|
Uncertain tax positions
|
The Company did not take any uncertain
tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the ASC 740 provisions of Section 740-10-25
for the nine months ended September 30, 2020 and 2019.
LEET TECHNOLOGY LIMITED
NOTES TO CONDENSED COMBINED AND CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2020
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
|
·
|
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 consolidated statement of operations.
The reporting currency of the Company is
United States Dollar ("US$") and the accompanying consolidated financial statements have been expressed in US$. 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 functional currencies as being the primary
currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and
liabilities of its subsidiary whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30,
“ Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses
are translated at average rates prevailing during the year. The gains and losses resulting from translation of financial statements
of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income within the statements of changes
in stockholder’s equity.
Translation of amounts from HKD into US$
and MYR into US$ have been made at the following exchange rates for the period ended September 30, 2020 and 2019:
|
|
2020
|
|
|
2019
|
|
Period-end HKD:US$ exchange rate
|
|
|
0.12903
|
|
|
|
0.12756
|
|
Period average HKD:US$ exchange rate
|
|
|
0.12891
|
|
|
|
0.12758
|
|
Period-end MYR:US$ exchange rate
|
|
|
0.24067
|
|
|
|
0.23892
|
|
Period average MYR:US$ exchange rate
|
|
|
0.23631
|
|
|
|
0.24198
|
|
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 combined and 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.
The Company adopted Topic 842, Leases
(“ASC 842”), using the modified retrospective approach through a cumulative-effect adjustment and utilizing the effective
date of January 1, 2017 as its date of initial application.
The Company 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 consolidated balance sheets. Finance leases are included in property and equipment,
other current liabilities, and other long-term liabilities in our consolidated balance sheets.
LEET TECHNOLOGY LIMITED
NOTES TO CONDENSED COMBINED AND CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2020
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
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.
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.
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.
LEET TECHNOLOGY LIMITED
NOTES TO CONDENSED COMBINED AND CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2020
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
·
|
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 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.
·
|
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.
|
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.
LEET TECHNOLOGY LIMITED
NOTES TO CONDENSED COMBINED AND CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2020
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
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, prepayment and other receivables,
amount due from a director and operating lease right-of-use assets, approximate their fair values because of the short maturity
of these instruments.
·
|
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 the January 1, 2019, effective date the Company identified one finance lease arrangement in which it is a lessee.
LEET TECHNOLOGY LIMITED
NOTES TO CONDENSED COMBINED AND CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2020
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
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 2018, the FASB issued ASU No. 2018-07, Compensation-Stock
Compensation: Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), which expands the
scope of Compensation – Stock Compensation (“Topic 718”) to include share-based payment transactions
for acquiring goods and services from nonemployees. This amendment applies to all share-based payment transactions in which a grantor
acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The
Company adopted ASU 2018-07 on January 1, 2019. The impact was immaterial to the financial statements.
In June 2018, the FASB issued ASU No. 2018-08, Not-For-Profit
Entities – Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made (“ASU
2018-08”). ASU 2018-08 clarifies how an entity determines whether a resource provider is participating in an exchange
transaction by evaluating whether the resource provider is receiving commensurate value in return for the resources transferred.
The guidance is effective for annual periods beginning after June 15, 2018, including interim periods within those annual periods,
and has been adopted on a modified prospective basis. The modified prospective adoption is applied to agreements that are not completed
as of the effective date, or entered into after the effective date. Under the modified prospective adoption approach, prior period
results have not been restated and no cumulative-effect adjustment has been recorded. The Company does not expect this standard
to have a material impact on its financial statements.
Accounting Standards Issued, Not Adopted
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 the
Company beginning January 1, 2023. 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. The Company is currently evaluating
the potential effect of this standard on its financial statements. The Company does not expect this standard to have a material
impact on its 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, 2019. The Company is currently assessing the impact this will have on the 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, 2019. The Company is currently assessing the impact this will have on the financial
statements.
LEET TECHNOLOGY LIMITED
NOTES TO CONDENSED COMBINED AND CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2020
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
In December 2019, the FASB issued ASU No.
2019-12, Income Taxes: Simplifying the Accounting for Income Taxes (“ASU 2019-12”), 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. The Company does not expect the adoption of this standard to
have a material impact on its financial position, results of operations or cash flows.
NOTE-4. PLANT AND EQUIPMENT
Plant and equipment consisted of the following:
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
|
|
|
|
|
(Audited)
|
|
Computer equipment
|
|
$
|
10,309
|
|
|
$
|
8,023
|
|
Furniture and fixtures
|
|
|
992
|
|
|
|
992
|
|
Leasehold improvements
|
|
|
12,618
|
|
|
|
12,618
|
|
Foreign translation difference
|
|
|
(400
|
)
|
|
|
(78
|
)
|
|
|
|
23,519
|
|
|
|
21,555
|
|
Less: accumulated depreciation
|
|
|
(15,132
|
)
|
|
|
(12,032
|
)
|
Less: foreign translation difference
|
|
|
159
|
|
|
|
14
|
|
|
|
$
|
8,546
|
|
|
$
|
9,537
|
|
Depreciation expense for the nine months
ended September 30, 2020 and 2019 were $3,100 and $3,174 respectively.
NOTE-5. LEASE
LIABILITY
The Company enters into operating leases
primarily for office premises. Lease terms generally 4 years. The Company adopted Topic 842, using the modified-retrospective approach
as discussed in Note 2, and as a result, recognized a right-of-use asset and a lease liability. The Company uses a 1.75% rate to
determine the present value of the lease payments.
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, 2020, right-of-use
assets were $4,179 and lease liabilities were $4,245. For the nine months ended September 30, 2020, the Company did not enter
into any new lease arrangements, and did not have any arrangements that had not yet commenced.
LEET TECHNOLOGY LIMITED
NOTES TO CONDENSED COMBINED AND CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2020
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
For the nine months ended September 30,
2020 and 2019, the Company charged its lease expenses of $3,828 and $3,920, respectively.
The maturity of the Company’s lease
obligations is presented below:
Year ending September 30,
|
|
Operating lease amount
|
|
|
|
|
|
2021
|
|
$
|
4,349
|
|
Less: interest
|
|
|
(104
|
)
|
Present value of lease liabilities
|
|
$
|
4,245
|
|
NOTE-6. AMOUNTS
DUE TO RELATED PARTIES
As of September 30, 2020 and December 31,
2019, the Company’s director and major shareholder, Mr. Dai SONG and the related 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.
NOTE-7. STOCKHOLDERS’
DEFICIT
Authorized shares
At September 30, 2020 and December 31,
2019, the Company’s authorized shares were 50,000 ordinary shares, with a par value of $1.
Issued and outstanding shares
At September 30, 2020 and December 31,
2019, the Company had 10,000 ordinary shares issued and outstanding.
NOTE-8. INCOME TAX
The Company is subject to taxes in the
governing jurisdictions in which its subsidiary operates. The effective tax rate in the period presented is the result of the mix
of income earned in various tax jurisdictions that apply a broad range of income tax rate, as follows:
Labuan
Under the current laws of the Labuan, LTL
is governed under the Labuan Business Activity Act, 1990. The tax charge for such company is based on 3% of net audited profit.
Due to LTL is a holding company, it did not generate any income nor incurred any income tax. In addition, its related expenses
incurred cannot be carried forward to offset any future operation income.
LEET TECHNOLOGY LIMITED
NOTES TO CONDENSED COMBINED AND CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2020
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
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 8.25% to 16.5% on the estimated assessable
profits arising in Hong Kong during the current year, after deducting a tax concession for the tax year. The reconciliation of
income tax rate to the effective income tax rate for the nine months ended September 30, 2020 and 2019 is as follows:
|
|
Nine months ended September 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
$
|
66,604
|
|
|
|
(122,678
|
)
|
Statutory income tax rate
|
|
|
16.5
|
%
|
|
|
16.5
|
%
|
Income tax expense at statutory rate
|
|
|
10.989
|
|
|
|
(20,242
|
)
|
Net operation loss
|
|
|
(10,989
|
)
|
|
|
20,242
|
|
Income tax expense
|
|
$
|
–
|
|
|
$
|
–
|
|
The Company’s subsidiary operating
in Malaysia is subject to the Malaysia Corporate Tax Laws at a progressive income tax rate of 17% (2019: 17%) (for Company with
paid up capital not more than MYR2.5 million and on the first MYR 500,000 assessable income) and 24% (2019: 24%) on the remaining
assessable income for its tax year.
The reconciliation of income tax rate to
the effective income tax rate for the nine months ended September 30, 2020 and 2019 is as follows:
|
|
Nine months ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
$
|
(395,519
|
)
|
|
|
(386,298
|
)
|
Statutory income tax rate
|
|
|
17
|
%
|
|
|
17
|
%
|
Income tax expense at statutory rate
|
|
|
(67,238
|
)
|
|
|
(65,670
|
))
|
Tax effect of non-deductible items
|
|
|
1,172
|
|
|
|
1,211
|
|
Net operating loss
|
|
|
66,066
|
|
|
|
(64,459
|
)
|
Income tax expense
|
|
$
|
–
|
|
|
$
|
–
|
|
LEET TECHNOLOGY LIMITED
NOTES TO CONDENSED COMBINED AND CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2020
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
As of September 30, 2020, the operation
in Malaysia incurred $1,733,204 of cumulative net operating losses which can be carried forward to offset future taxable income.
The net operating loss carryforwards will expire in 2025. The Company has provided for a full valuation allowance against the deferred
tax assets of $300,966 on the expected future tax benefits from the net operating loss carryforwards as the management believes
it is more likely than not that these assets will not be realized in the future.
The following table sets forth the significant
components of the deferred tax assets and liabilities of the Company as of September 30, 2020 and December 31, 2019:
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
|
|
|
|
|
(Audited)
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
|
|
|
|
|
|
|
- Hong Kong
|
|
$
|
–
|
|
|
$
|
46,148
|
|
- Malaysia
|
|
|
300,966
|
|
|
|
234,900
|
|
|
|
|
300,966
|
|
|
|
281,048
|
|
Less: valuation allowance
|
|
|
(300,966
|
)
|
|
|
(281,048
|
)
|
Deferred tax assets, net
|
|
$
|
–
|
|
|
$
|
–
|
|
NOTE-9. RELATED
PARTY TRANSACTIONS
From time to time, the director of the
Company and his related company under his control advanced funds to the Company for working capital purpose. Those advances are
unsecured, non-interest bearing and had no fixed terms of repayment.
For the nine months ended September 30,
2020, the Company paid $26,975 and $59,214 consulting fee and IT operating expense to Porta Capital Limited, a company which is
controlled by the director of the Company.
For the nine months ended September 30,
2019, the Company paid $99,673 and $64,862 consulting fee and IT operating expense to Porta Capital Limited, a company which is
controlled by the director of the Company.
NOTE-10. CONCENTRATIONS
OF RISK
The Company is exposed to the following concentrations of risk:
LEET TECHNOLOGY LIMITED
NOTES TO CONDENSED COMBINED AND CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2020
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
(a) Major
customers
For the nine months ended September 30,
2020 and 2019, the individual customer who accounts for 10% or more of the Company’s revenues and its outstanding receivable
balances as at year-end dates, are presented as follows:
|
|
Nine months ended September 30, 2020
|
|
|
|
|
September 30, 2020
|
|
Customers
|
|
Revenues
|
|
|
Percentage
of revenues
|
|
|
|
|
Accounts
receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer A
|
|
$
|
48,596
|
|
|
|
63
|
%
|
|
|
|
$
|
1,724
|
|
Customer B
|
|
|
15,101
|
|
|
|
19
|
%
|
|
|
|
|
15,257
|
|
Customer C
|
|
|
9,991
|
|
|
|
13
|
%
|
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
73,688
|
|
|
|
95
|
%
|
|
Total:
|
|
$
|
16,981
|
|
|
|
Nine months ended September 30, 2019
|
|
|
|
|
September 30, 2019
|
|
Customers
|
|
Revenues
|
|
|
Percentage
of revenues
|
|
|
|
|
Accounts
receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer C
|
|
$
|
23,731
|
|
|
|
60
|
%
|
|
|
|
$
|
–
|
|
Customer D
|
|
|
7,889
|
|
|
|
20
|
%
|
|
|
|
|
–
|
|
Customer E
|
|
|
7,259
|
|
|
|
18
|
%
|
|
|
|
|
6,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
38,879
|
|
|
|
98
|
%
|
|
Total:
|
|
$
|
6,092
|
|
|
(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.
LEET TECHNOLOGY LIMITED
NOTES TO CONDENSED COMBINED AND CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2020
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
The Company cannot guarantee that the current
exchange rate will remain steady; therefore there is a possibility that the Company could post the same amount of profit for two
comparable periods and because of the fluctuating exchange rate actually post higher or lower profit depending on exchange rate
of HKD and MYR converted to US$ on that date. The exchange rate could fluctuate depending on changes in political and economic
environments without notice.
NOTE-11. COMMITMENTS
AND CONTINGENCIES
As of September 30, 2020, the Company has
no material commitments or contingencies.
NOTE-12. SUBSEQUENT
EVENTS
On October 30, 2020, the Company consummated
the Share Exchange Transaction among Leet Entertainment Group Limited (“LEGL”) and its shareholders. Both the Company
and LEGL are controlled by the same management team and the controlling person. Upon completion of the Share Exchange Transaction,
LEGL became a 100% owned subsidiary of the Company.
On November 18, the Company and its shareholders
executed a Share Exchange Agreement (“the “Share Exchange Agreement”) with Blow & Drive Interlock Corporation.,
a limited company organized under the laws of the State of Delaware (“BDIC”). Pursuant to the Share Exchange Agreement,
the Company agreed to sell its aggregate of 10,000 ordinary shares representing 100% of the issued and outstanding ordinary shares
of the Company. As consideration, the Company’s Shareholders were received 10,000,000 shares of BDIC’s common stock,
at a value of $0.10 per share, for an aggregate value of $1,000,000 (the “Shares”). The parties are entitled to terminate
the Share Exchange Agreement if closing has not occurred on or prior to November 30, 2020. The consummation of the transactions
contemplated in the Share Exchange Agreement is subject to normal and customary conditions precedent including, without limitation,
satisfactory due diligence of the Company by BDCI.
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 consolidated financial statements are issued, the Company has evaluated all events or transactions that occurred
after September 30, 2020, up through the date the Company issued the audited combined and consolidated financial statements. The
Company determined that there are no further events to disclose.
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Opinion on the
Financial Statements
We have audited the accompanying
consolidated balance sheets of Leet Technology Limited and its subsidiaries (the ‘Company’) as of December 31, 2019
and 2018, and the related consolidated statements of operations and comprehensive income, changes in stockholders’ equity
and cash flows for the years ended December 31, 2019 and 2018, and the related notes (collectively referred to as the “financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for the years ended
December 31, 2019 and 2018, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying combined and
consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in
Note 2, the Company suffered an accumulated deficit of $1,628,952 and net loss of $693,224. These matters raise substantial doubt
about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also
described in Note 2 to the financial statements. These financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based
on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance
with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required
to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are
required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide
a reasonable basis for our opinion.
/s/ Audit Alliance
LLP
We have served as
the Company’s auditor since 2020.
Singapore
Date: November
18, 2020
LEET TECHNOLOGY LIMITED
COMBINED AND CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2019 AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
|
|
As of December 31,
|
|
|
|
2019
|
|
|
2018
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current asset:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
42,526
|
|
|
$
|
4,887
|
|
Accounts receivable
|
|
|
877
|
|
|
|
–
|
|
Deposit and other receivables
|
|
|
4,061
|
|
|
|
1,961
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
47,464
|
|
|
|
6,848
|
|
|
|
|
|
|
|
|
|
|
Non-current asset:
|
|
|
|
|
|
|
|
|
Plant and equipment
|
|
|
9,537
|
|
|
|
11,424
|
|
Right of use assets
|
|
|
8,077
|
|
|
|
13,023
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
65,078
|
|
|
$
|
31,295
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accrued liabilities and other payables
|
|
$
|
215,555
|
|
|
|
36,152
|
|
Amounts due to related parties
|
|
|
1,470,298
|
|
|
|
900,981
|
|
Operating lease liabilities
|
|
|
5,145
|
|
|
|
2,001
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,690,998
|
|
|
|
939,134
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
Operating lease liabilities
|
|
|
3,032
|
|
|
|
11,075
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
1,694,030
|
|
|
|
950,209
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
Ordinary shares, $1 par value; 50,000 shares authorized; 10,000 shares issued and outstanding
|
|
|
10,000
|
|
|
|
10,000
|
|
Accumulated other comprehensive loss
|
|
|
(21,113
|
)
|
|
|
(4,299
|
)
|
Accumulated losses
|
|
|
(1,617,839
|
)
|
|
|
(924,615
|
)
|
|
|
|
|
|
|
|
|
|
Stockholders’ deficit
|
|
|
(1,628,952
|
)
|
|
|
(918,914
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
$
|
65,078
|
|
|
$
|
31,295
|
|
See accompanying notes to combined and consolidated
financial statements.
LEET TECHNOLOGY LIMITED
COMBINED AND CONSOLIDATED STATEMENTS
OF OPERATIONS
AND COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 2019
AND 2018
(Currency expressed in United States
Dollars (“US$”))
|
|
Years ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Revenue, net
|
|
$
|
52,386
|
|
|
$
|
3,462
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
IT operating expenses
|
|
|
(179,723
|
)
|
|
|
(126,608
|
)
|
Research and development
|
|
|
(103,376
|
)
|
|
|
(76,053
|
)
|
General and administrative expenses
|
|
|
(462,511
|
)
|
|
|
(358,578
|
)
|
Total operating expenses
|
|
|
(745,610
|
)
|
|
|
(561,239
|
)
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAXES
|
|
|
(693,224
|
)
|
|
|
(557,777
|
)
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
|
(693,224
|
)
|
|
|
(557,777
|
)
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
Foreign currency translation (loss) gain
|
|
|
(16,814
|
)
|
|
|
507
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE LOSS
|
|
$
|
(710,038
|
)
|
|
$
|
(557,270
|
)
|
See accompanying notes to combined and consolidated
financial statements.
LEET TECHNOLOGY LIMITED
COMBINED AND CONSOLIDATED STATEMENTS
OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2019
AND 2018
(Currency expressed in United States
Dollars (“US$”))
|
|
Years ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Cash flow from operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(693,224
|
)
|
|
$
|
(557,777
|
)
|
Adjustments to reconcile net income to net cash used in operating activities
|
|
|
|
|
|
|
|
|
Depreciation of plant and equipment
|
|
|
4,254
|
|
|
|
3,902
|
|
|
|
|
|
|
|
|
|
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Account receivables
|
|
|
(865
|
)
|
|
|
|
|
Deposit and other receivables
|
|
|
(26,362
|
)
|
|
|
2,045
|
|
Accrued liabilities and other payables
|
|
|
199,851
|
|
|
|
35,483
|
|
Operating lease liabilities
|
|
|
44
|
|
|
|
134
|
|
Net cash used in operating activities
|
|
|
(516,302
|
)
|
|
|
(516,213
|
)
|
|
|
|
|
|
|
|
|
|
Cash flow from investing activities:
|
|
|
|
|
|
|
|
|
Purchases of plant and equipment
|
|
|
(2,256
|
)
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(2,256
|
)
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Cash flow from financing activities:
|
|
|
|
|
|
|
|
|
Advances from related parties
|
|
|
559,468
|
|
|
|
387,331
|
|
|
|
|
|
|
|
|
|
|
Net cash generated from financing activities
|
|
|
559,468
|
|
|
|
387,331
|
|
|
|
|
|
|
|
|
|
|
Effect on exchange rate change on cash and cash equivalents
|
|
|
(3,271
|
)
|
|
|
(3,716
|
)
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
37,639
|
|
|
|
(132,598
|
)
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
|
|
|
4,887
|
|
|
|
137,485
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, END OF YEAR
|
|
$
|
42,526
|
|
|
$
|
4,887
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
Cash paid for tax
|
|
$
|
–
|
|
|
$
|
–
|
|
Cash paid for interest
|
|
$
|
–
|
|
|
$
|
–
|
|
See accompanying notes to combined and consolidated
financial statements.
LEET TECHNOLOGY LIMITED
COMBINED AND CONSOLIDATED STATEMENTS
OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2019
AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
|
|
Ordinary share
|
|
|
Accumulated other comprehensive (loss)
|
|
|
Accumulated
|
|
|
Total stockholders’
|
|
|
|
No. of shares
|
|
|
Amount
|
|
|
income
|
|
|
losses
|
|
|
deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at January 1, 2018
|
|
|
10,000
|
|
|
$
|
10,000
|
|
|
$
|
(4,806
|
)
|
|
$
|
(366,838
|
)
|
|
$
|
(361,644
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
–
|
|
|
|
–
|
|
|
|
507
|
|
|
|
–
|
|
|
|
507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(557,777
|
)
|
|
|
(557,777
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at December 31, 2018
|
|
|
10,000
|
|
|
$
|
10,000
|
|
|
$
|
(4,299
|
)
|
|
$
|
(924,615
|
)
|
|
$
|
(918,914
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at January 1, 2019
|
|
|
10,000
|
|
|
$
|
10,000
|
|
|
$
|
(4,299
|
)
|
|
$
|
(924,615
|
)
|
|
$
|
(918,914
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
–
|
|
|
|
–
|
|
|
|
(16,814
|
)
|
|
|
–
|
|
|
|
(16,814
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(693,224
|
)
|
|
|
(693,224
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at December 31, 2019
|
|
|
10,000
|
|
|
$
|
10,000
|
|
|
$
|
(21,113
|
)
|
|
$
|
(1,617,839
|
)
|
|
$
|
(1,628,952
|
)
|
See accompanying notes to combined and consolidated
financial statements.
LEET TECHNOLOGY LIMITED
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019
AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
NOTE-1 DESCRIPTION OF BUSINESS AND
ORGANIZATION
Leet Technology Limited (the “Company”
or “LTL”) is incorporated as a limited liability company under the Labuan Companies Act 1990 on September 15, 2020,
in the Federal Territory of Labuan, Malaysia (the “Labuan”). The Company through its subsidiaries, mainly provides
the integrated business-to-business digital entertainment solutions to customers by offering a wide range of self-developed game
contents with innovative marketing and distribution strategies in Asian region.
Pursuant to its Memorandum of Association,
the authorized capital is amounted to US$50,000 representing 50,000 ordinary shares with a par value of $1 at its inception.
On October 30, 2020, the Company consummated
the Share Exchange Transaction among Leet Entertainment Group Limited (“LEGL”) and its shareholders. Both the Company
and LEGL are controlled by the same management team and the controlling person. Upon completion of the Share Exchange Transaction,
LEGL became a 100% owned subsidiary of the Company.
Because the Company is a shell company,
LEGL will comprise the ongoing operations of the combined entity and its senior management will serve as the senior management
of the combined entity, LEGL is deemed to be the accounting acquirer for accounting purposes. The transaction will be treated as
a recapitalization of the Company. Accordingly, the consolidated assets, liabilities and results of operations of the Company will
become the historical financial statements of LEGL, and the Company’s assets, liabilities and results of operations will
be consolidated with LEGL beginning on the acquisition date. LEGL was the legal acquiree but deemed to be the accounting acquirer.
The Company was the legal acquirer but deemed to be the accounting acquiree in the reverse merger. The historical financial statements
prior to the acquisition are those of the accounting acquirer (LEGL). After completion of the Share Exchange Transaction, the Company’s
consolidated financial statements include the assets and liabilities, the operations and cash flow of the accounting acquirer.
Description of subsidiaries
Name
|
|
Place of incorporation
and kind of
legal entity
|
|
Principal activities
|
|
Particulars of registered/ paid up share
capital
|
|
Effective interest
held
|
|
|
|
|
|
|
|
|
|
Leet Entertainment Group Limited
|
|
Hong Kong
|
|
Provision of information technology and mobile application development and digital content publishing service
|
|
1 ordinary share for HK$1
|
|
100%
|
|
|
|
|
|
|
|
|
|
Leet Entertainment Sdn. Bhd.
|
|
Malaysia
|
|
Provision of information technology and mobile application development and digital content publishing service
|
|
1,000 ordinary shares at par value of MYR$1
|
|
100%
|
The Company and its subsidiaries are hereinafter
referred to as (the “Company”).
LEET TECHNOLOGY LIMITED
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019
AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
NOTE-2 GOING
CONCERN UNCERTAINTIES
The accompanying combined and 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 continuing
loss from its inception, with an accumulated deficit of $1,628,952 and working capital deficit of $1,643,534 at December 31, 2019.
In addition, with respect to the ongoing and evolving coronavirus (COVID-19) outbreak, which was designated as a pandemic by the
World Health Organization on March 11, 2020, the outbreak has caused substantial disruption in international economies and global
trades and if repercussions of the outbreak are prolonged, could have a significant adverse impact on the Company’s business.
The continuation of the Company as a going
concern through December 31, 2020 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.
These and other factors raise substantial
doubt about the Company’s ability to continue as a going concern. These 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.
NOTE-3. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
The accompanying combined and consolidated financial statements
reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying
consolidated financial statements and notes.
These accompanying combined and 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 combined and 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.
The combined and 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.
LEET TECHNOLOGY LIMITED
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019
AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
·
|
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.
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 collectibility. 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 December 31, 2019 and 2018, there was no allowance for doubtful accounts.
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
|
|
5 years
|
|
|
Furniture and fixtures
|
|
5 years
|
|
|
Leasehold improvements
|
|
5 years or over the shorter of the remaining term of the lease
|
|
|
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.
LEET TECHNOLOGY LIMITED
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019
AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
The Company adopted Accounting Standards
Codification (“ASC”) 606 – Revenue from Contracts with Customers” (“ASC 606”) as of
January 1, 2019 using the modified retrospective method. This method allows the Company to apply ASC 606 to new contracts entered
into after January 1, 2019, and to its existing contracts for which revenue earned through December 31, 2018 has been recognized
under the guidance in effect prior to the effective date of ASC 606. The revenue recognition processes the Company applied prior
to adoption of ASC 606 align with the recognition and measurement guidance of the new standard, therefore adoption of ASC 606 did
not require a cumulative adjustment to opening equity.
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 is a form of competition 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.
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 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 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.
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.
LEET TECHNOLOGY LIMITED
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019
AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
·
|
Uncertain tax positions
|
The Company did not take any uncertain
tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the ASC 740 provisions of Section 740-10-25
for the years ended December 31, 2019 and 2018.
·
|
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 consolidated statement of operations.
The reporting currency of the Company is
United States Dollar ("US$") and the accompanying consolidated financial statements have been expressed in US$. 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 functional currencies as being the primary
currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and
liabilities of its subsidiary whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30,
“ Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses
are translated at average rates prevailing during the year. The gains and losses resulting from translation of financial statements
of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income within the statements of changes
in stockholder’s equity.
Translation of amounts from HKD into US$
and MYR into US$ have been made at the following exchange rates for the years ended December 31, 2019 and 2018:
|
|
December 31,2019
|
|
December 31,2018
|
Year-end HKD:US$ exchange rate
|
|
0.12842
|
|
0.12769
|
Annual average HKD:US$ exchange rate
|
|
0.12764
|
|
0.12760
|
Year-end MYR:US$ exchange rate
|
|
0.24482
|
|
0.24191
|
Annual average MYR:US$ exchange rate
|
|
0.24156
|
|
0.24790
|
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 combined and 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.
Contributions to retirement plans (which
are defined contribution plans) are charged to general and administrative expenses in the accompanying statements of operation
as the related employee service is provided.
LEET TECHNOLOGY LIMITED
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019
AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
The Company adopted Topic 842, Leases
(“ASC 842”), using the modified retrospective approach through a cumulative-effect adjustment and utilizing the effective
date of January 1, 2017 as its date of initial application.
The Company 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 consolidated balance sheets. Finance leases are included in property and equipment,
other current liabilities, and other long-term liabilities in our 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.
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.
LEET TECHNOLOGY LIMITED
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019
AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
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.
·
|
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 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.
·
|
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:
LEET TECHNOLOGY LIMITED
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019
AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
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, prepayment and other receivables,
amount due from a director and operating lease right-of-use assets, approximate their fair values because of the short maturity
of these instruments.
·
|
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.
LEET TECHNOLOGY LIMITED
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019
AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
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 the January 1, 2019, 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 2018, the FASB issued ASU No. 2018-07, Compensation-Stock
Compensation: Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), which expands the
scope of Compensation – Stock Compensation (“Topic 718”) to include share-based payment transactions
for acquiring goods and services from nonemployees. This amendment applies to all share-based payment transactions in which a grantor
acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The
Company adopted ASU 2018-07 on January 1, 2019. The impact was immaterial to the financial statements.
In June 2018, the FASB issued ASU No. 2018-08, Not-For-Profit
Entities – Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made (“ASU
2018-08”). ASU 2018-08 clarifies how an entity determines whether a resource provider is participating in an exchange
transaction by evaluating whether the resource provider is receiving commensurate value in return for the resources transferred.
The guidance is effective for annual periods beginning after June 15, 2018, including interim periods within those annual periods,
and has been adopted on a modified prospective basis. The modified prospective adoption is applied to agreements that are not completed
as of the effective date, or entered into after the effective date. Under the modified prospective adoption approach, prior period
results have not been restated and no cumulative-effect adjustment has been recorded. The Company does not expect this standard
to have a material impact on its financial statements.
Accounting Standards Issued, Not Adopted
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 the
Company beginning January 1, 2023. 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. The Company is currently evaluating
the potential effect of this standard on its financial statements. The Company does not expect this standard to have a material
impact on its financial statements.
LEET TECHNOLOGY LIMITED
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019
AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
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, 2019. The Company is currently assessing the impact this will have on the 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, 2019. The Company is currently assessing the impact this will have on the financial
statements.
In December 2019, the FASB issued ASU No.
2019-12, Income Taxes: Simplifying the Accounting for Income Taxes (“ASU 2019-12”), 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. The Company does not expect the adoption of this standard to
have a material impact on its financial position, results of operations or cash flows.
NOTE-4 PLANT AND
EQUIPMENT
Plant and equipment consisted of the following:
|
|
As of December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Computer equipment
|
|
$
|
8,023
|
|
|
$
|
5,767
|
|
Furniture and fixtures
|
|
|
992
|
|
|
|
992
|
|
Leasehold improvements
|
|
|
12,618
|
|
|
|
12,618
|
|
Foreign translation difference
|
|
|
(78
|
)
|
|
|
(337
|
)
|
|
|
|
21,555
|
|
|
|
19,040
|
|
Less: accumulated depreciation
|
|
|
(12,032
|
)
|
|
|
(7,778
|
)
|
Less: foreign translation difference
|
|
|
14
|
|
|
|
162
|
|
|
|
$
|
9,537
|
|
|
$
|
11,424
|
|
Depreciation expense for the years ended
December 31, 2019 and 2018 were $4,254 and $3,902, respectively.
LEET TECHNOLOGY LIMITED
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019
AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
NOTE-5 LEASE LIABILITY
The Company enters into operating leases
primarily for office premises. Lease terms generally 4 years. The Company adopted Topic 842, using the modified-retrospective approach
as discussed in Note 2, and as a result, recognized a right-of-use asset and a lease liability. The Company uses a 1.75% rate to
determine the present value of the lease payments.
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 December 31, 2019, right-of-use assets
were $8,077 and lease liabilities were $8,177. For the year ended December 31, 2019, the Company did not enter into any new lease
arrangements, and did not have any arrangements that had not yet commenced.
For the years ended December 31, 2019 and
2018, the Company charged its lease expenses of $5,218 and $5,355, respectively.
The maturity of the Company’s lease
obligations is presented below:
Year Ended December 31,
|
|
Operating lease amount
|
|
|
|
|
|
2020
|
|
$
|
5,374
|
|
2021
|
|
|
3,032
|
|
|
|
|
|
|
Total lease
|
|
|
8,406
|
|
Less: interest
|
|
|
(229
|
)
|
Present value of lease liabilities
|
|
$
|
8,177
|
|
NOTE-6 AMOUNTS DUE TO RELATED PARTIES
As of December 31, 2019 and 2018, the Company’s
director and major shareholder, Mr. Dai SONG and the related company 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.
NOTE-7 STOCKHOLDER’S
DEFICIT
Authorized shares
At inception, the Company’s authorized
shares were 50,000 ordinary shares, with a par value of $1.
LEET TECHNOLOGY LIMITED
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019
AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
Issued and outstanding shares
At inception, the Company had 10,000 ordinary
shares issued and outstanding.
NOTE-8 INCOME
TAX
The Company is subject to taxes in the
governing jurisdictions in which its subsidiary operates. 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:
Labuan
Under the current laws of the Labuan, LTL
is governed under the Labuan Business Activity Act, 1990. The tax charge for such company is based on 3% of net audited profit.
Due to LTL is a holding company, it did not generate any income nor incurred any income tax. In addition, its related expenses
incurred cannot be carried forward to offset any future operation income.
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 8.25% to 16.5% on the estimated assessable
profits arising in Hong Kong during the current year, after deducting a tax concession for the tax year. The reconciliation of
income tax rate to the effective income tax rate for the years ended December 31, 2019 and 2018 is as follows:
|
|
Years ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
$
|
(104,473
|
)
|
|
$
|
(119,676
|
)
|
Statutory income tax rate
|
|
|
16.5
|
%
|
|
|
16.5
|
%
|
Income tax expense at statutory rate
|
|
|
(17,238
|
)
|
|
|
(19,746
|
)
|
Tax effect of non-deductible items
|
|
|
–
|
|
|
|
19,746
|
|
Net operating loss
|
|
|
17,238
|
|
|
|
–
|
|
Income tax expense
|
|
$
|
–
|
|
|
$
|
–
|
|
As of December 31, 2019, the operation
in Hong Kong incurred $279,690 of cumulative net operating losses which can be carried forward to offset future taxable income.
The net operating loss carryforwards has no expiration. The Company has provided for a full valuation allowance against the deferred
tax assets of $46,148 on the expected future tax benefits from the net operating loss carryforwards as the management believes
it is more likely than not that these assets will not be realized in the future.
LEET TECHNOLOGY LIMITED
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019
AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
The Company’s subsidiary operating
in Malaysia is subject to the Malaysia Corporate Tax Laws at a progressive income tax rate of 17% (2018: 18%) (for Company with
paid up capital not more than MYR2.5 million and on the first MYR 500,000 assessable income) and 24% (2018: 24%) on the remaining
assessable income for its tax year.
The reconciliation of income tax rate to
the effective income tax rate for the years ended December 31, 2019 and 2018 is as follows:
|
|
Years ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
$
|
(588,240
|
)
|
|
$
|
(437,968
|
)
|
Statutory income tax rate
|
|
|
17
|
%
|
|
|
18
|
%
|
Income tax expense at statutory rate
|
|
|
(100,001
|
)
|
|
|
(78,834
|
)
|
Tax effect of non-deductible items
|
|
|
3,011
|
|
|
|
3,002
|
|
Net operating loss
|
|
|
96,990
|
|
|
|
75,832
|
|
Income tax expense
|
|
$
|
–
|
|
|
$
|
–
|
|
As of December 31, 2019, the operation
in Malaysia incurred $1,337,685 of cumulative net operating losses which can be carried forward to offset future taxable income.
The net operating loss carryforwards will expire in 2025. The Company has provided for a full valuation allowance against the deferred
tax assets of $234,900 on the expected future tax benefits from the net operating loss carryforwards as the management believes
it is more likely than not that these assets will not be realized in the future.
The following table sets forth the significant
components of the deferred tax assets and liabilities of the Company as of December 31, 2019 and 2018:
|
|
As of December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
|
|
|
|
|
|
|
- Hong Kong
|
|
$
|
46,148
|
|
|
$
|
28,910
|
|
- Malaysia
|
|
|
234,900
|
|
|
|
134,892
|
|
|
|
|
281,048
|
|
|
|
163,802
|
|
Less: valuation allowance
|
|
|
(281,048
|
)
|
|
|
(163,802
|
)
|
Deferred tax assets, net
|
|
$
|
–
|
|
|
$
|
–
|
|
LEET TECHNOLOGY LIMITED
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019
AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
NOTE-9 RELATED PARTY TRANSACTIONS
From time to time, the director of the
Company and his related company under his control advanced funds to the Company for working capital purpose. Those advances are
unsecured, non-interest bearing and had no fixed terms of repayment.
For the year ended December 31, 2019, the
Company paid $163,219 and $78,732 consulting fee and IT operating expense to Porta Capital Limited, a company which is controlled
by the director of the Company.
For the year ended December 31, 2018, the
Company paid $0 and $91,815 consulting fee and IT operating expense to Porta Capital Limited, a company which is controlled by
the director of the Company.
NOTE-10 CONCENTRATIONS OF RISK
The Company is exposed to the following concentrations of risk:
(a) Major
customers
For the years ended December 31, 2019 and
2018, the individual customer who accounts for 10% or more of the Company’s revenues and its outstanding receivable balances
as at year-end dates, are presented as follows:
|
|
Year ended December 31, 2019
|
|
|
|
|
December 31, 2019
|
|
Customers
|
|
Revenues
|
|
|
Percentage
of revenues
|
|
|
|
|
Accounts
receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer A
|
|
$
|
23,741
|
|
|
|
45
|
%
|
|
|
|
$
|
–
|
|
Customer B
|
|
|
11,837
|
|
|
|
23
|
%
|
|
|
|
|
–
|
|
Customer C
|
|
|
7,875
|
|
|
|
15
|
%
|
|
|
|
|
–
|
|
Customer D
|
|
|
7,247
|
|
|
|
14
|
%
|
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
50,700
|
|
|
|
97
|
%
|
|
Total:
|
|
$
|
–
|
|
|
|
Year ended December 31, 2018
|
|
|
|
|
December 31, 2018
|
|
Customers
|
|
Revenues
|
|
|
Percentage
of revenues
|
|
|
|
|
Accounts
receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer E
|
|
$
|
1,735
|
|
|
|
50
|
%
|
|
|
|
$
|
–
|
|
Customer F
|
|
|
1,727
|
|
|
|
50
|
%
|
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
3,462
|
|
|
|
100
|
%
|
|
Total:
|
|
$
|
–
|
|
LEET TECHNOLOGY LIMITED
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019
AND 2018
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
|
(b)
|
Economic and political risk
|
The Company’s major operations are
conducted in Hong Kong and Malaysia. Accordingly, the political, economic, and legal environments in Hong Kong and Malaysia, as
well as the general state of Hong Kong and Malaysia’s economy may influence the Company’s business, financial condition,
and results of operations.
The Company cannot guarantee that the current
exchange rate will remain steady; therefore there is a possibility that the Company could post the same amount of profit for two
comparable periods and because of the fluctuating exchange rate actually post higher or lower profit depending on exchange rate
of HKD and MYR converted to US$ on that date. The exchange rate could fluctuate depending on changes in political and economic
environments without notice.
NOTE-11 COMMITMENTS AND CONTINGENCIES
As of December 31, 2019, the Company has
no material commitments or contingencies.
NOTE-12 SUBSEQUENT EVENTS
On October 30, 2020, the Company consummated
the Share Exchange Transaction among Leet Entertainment Group Limited (“LEGL”) and its shareholders. Both the Company
and LEGL are controlled by the same management team and the controlling person. Upon completion of the Share Exchange Transaction,
LEGL became a 100% owned subsidiary of the Company.
On November 18, 2020, the Company and
its shareholders executed a Share Exchange Agreement (“the “Share Exchange Agreement”) with Blow & Drive
Interlock Corporation, a corporation organized under the laws of the State of Delaware (“BDIC”). Pursuant to the Share
Exchange Agreement, the Company agreed to sell its aggregate of 10,000 ordinary shares representing 100% of the issued and outstanding
ordinary shares of the Company. As consideration, the Company’s Shareholder received 10,000,000 shares of BDIC’s common
stock, at a value of $0.10 per share, for an aggregate value of $1,000,000 (the “Shares”). The parties are entitled
to terminate the Share Exchange Agreement if closing has not occurred on or prior to November 30, 2020. The consummation of the
transactions contemplated in the Share Exchange Agreement is subject to normal and customary conditions precedent including, without
limitation, satisfactory due diligence of the Company by BDIC.
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 consolidated financial statements are issued, the Company has evaluated all events or transactions that occurred
after December 31, 2019, up through the date the Company issued the audited combined and consolidated financial statements. The
Company determined that there are no further subsequent events to disclose.
BLOW & DRIVE INTERLOCK CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE
SHEET
AS OF SEPTEMBER 30, 2020
(Unaudited)
|
|
Historical
|
|
|
Historical
|
|
|
|
|
|
|
|
|
|
|
|
BDIC
|
|
|
LEET
|
|
|
Pro Forma Adjustments
|
|
|
Note
|
|
Pro Forma Condensed Combined
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
5,694
|
|
|
$
|
5,582
|
|
|
|
|
|
|
|
|
$
|
11,276
|
|
Accounts receivable
|
|
|
9,030
|
|
|
|
16,981
|
|
|
|
|
|
|
|
|
|
26,011
|
|
Deposits and prepayments
|
|
|
–
|
|
|
|
890
|
|
|
|
|
|
|
|
|
|
890
|
|
Operating lease right-of-use asset
|
|
|
–
|
|
|
|
4,179
|
|
|
|
|
|
|
|
|
|
4,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
14,724
|
|
|
|
27,632
|
|
|
|
|
|
|
|
|
|
42,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposit
|
|
|
6,481
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
6,481
|
|
Plant and equipment
|
|
|
–
|
|
|
|
8,546
|
|
|
|
|
|
|
|
|
|
8,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
21,205
|
|
|
$
|
36,178
|
|
|
|
|
|
|
|
|
$
|
57,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
150
|
|
|
$
|
–
|
|
|
|
|
|
|
|
|
$
|
150
|
|
Accrued liabilities and other payables
|
|
|
1,993
|
|
|
|
268,816
|
|
|
|
|
|
|
|
|
|
270,809
|
|
Accrued interest, related party
|
|
|
1,150,118
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
1,150,118
|
|
Note payable, related party
|
|
|
260,800
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
260,800
|
|
Amount due to a director
|
|
|
–
|
|
|
|
2,026
|
|
|
|
|
|
|
|
|
|
2,026
|
|
Amounts due to related companies
|
|
|
–
|
|
|
|
1,724,759
|
|
|
|
|
|
|
|
|
|
1,724,759
|
|
Lease liabilities
|
|
|
–
|
|
|
|
4,245
|
|
|
|
|
|
|
|
|
|
4,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,413,061
|
|
|
|
1,999,846
|
|
|
|
|
|
|
|
|
|
3,412,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note payable
|
|
|
150,000
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
150,000
|
|
Note payable, related party
|
|
|
2,020,000
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
2,020,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,170,000
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
2,170,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
3,583,061
|
|
|
|
1,999,846
|
|
|
|
|
|
|
|
|
|
5,582,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ deficit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
1,000
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
1,000
|
|
Common stock
|
|
|
13,135
|
|
|
|
–
|
|
|
|
1,000
|
|
|
(b)
|
|
|
14,135
|
|
Additional paid-in capital
|
|
|
3,676,636
|
|
|
|
10,000
|
|
|
|
(3,686,636
|
)
|
|
(a)
|
|
|
–
|
|
Accumulated other comprehensive loss
|
|
|
–
|
|
|
|
(27,945
|
)
|
|
|
|
|
|
|
|
|
(27,945
|
)
|
Accumulated deficit
|
|
|
(7,252,627
|
)
|
|
|
(1,945,723
|
)
|
|
|
3,685,636
|
|
|
(a), (b)
|
|
|
(5,521,714
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders’ deficit
|
|
|
(3,561,856
|
)
|
|
|
(1,963,668
|
)
|
|
|
|
|
|
|
|
|
(5,525,524
|
)
|
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
$
|
21,205
|
|
|
$
|
36,178
|
|
|
|
|
|
|
|
|
$
|
57,383
|
|
BLOW & DRIVE INTERLOCK CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT
OF OPERATION
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2020
(Unaudited)
|
|
Historical
|
|
|
Historical
|
|
|
|
|
|
|
|
|
BDIC
|
|
|
LEET
|
|
|
Pro forma
Adjustment
|
|
Pro Forma
Condensed
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, net
|
|
$
|
103,035
|
|
|
$
|
79,721
|
|
|
|
|
$
|
182,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IT operating expenses
|
|
|
–
|
|
|
|
(102,472
|
)
|
|
|
|
|
(102,472
|
)
|
Professional fees
|
|
|
(66,116
|
)
|
|
|
(6,216
|
)
|
|
|
|
|
(72,332
|
)
|
Payroll
|
|
|
(43,125
|
)
|
|
|
(9,934
|
)
|
|
|
|
|
(134,059
|
)
|
Research and development
|
|
|
–
|
|
|
|
(26,975
|
)
|
|
|
|
|
(26,975
|
)
|
General and administrative expenses
|
|
|
(45,376
|
)
|
|
|
(181,008
|
)
|
|
|
|
|
(226,384
|
)
|
Total operating expenses
|
|
|
(154,617
|
)
|
|
|
(407,605
|
)
|
|
|
|
|
(562,222
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAXES
|
|
|
(51,582
|
)
|
|
|
(327,884
|
)
|
|
|
|
|
(379,466
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(51,582
|
)
|
|
$
|
(327,884
|
)
|
|
|
|
$
|
(379,466
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
131,350,683
|
|
|
|
|
|
|
|
|
|
141,350,683
|
|
BLOW & DRIVE INTERLOCK CORPORATION
NOTES TO PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
AS OF SEPTEMBER 30, 2020
(Unaudited)
NOTE-1 BACKGROUND
On November 18, 2020, Blow & Drive
Interlock Corporation or the Company or BDIC completed the Share Exchange Agreement with Leet Technology Limited and Subsidiaries
(collectively “LTL”) (the “Share Exchange”) for its 100% equity interest.
The consideration of the Share Exchange
totaled approximately 10,000,000 shares of the Company’s common stock, at the price of $0.10 equal to $1,000,000.
This Acquisition is considered as related
party transaction, whereas Mr. Dai SONG, a director of BDIC, controls both the Company and LTL.
NOTE-2 BASIS OF PRESENTATION
Because BDIC is a shell company, LTL will
comprise the ongoing operations of the combined entity and its senior management will serve as the senior management of the combined
entity, LTL is deemed to be the accounting acquirer for accounting purposes. The transaction will be treated as a recapitalization
of BDIC. Accordingly, the consolidated assets, liabilities and results of operations of LTL will become the historical financial
statements of LTL, and BDIC’s assets, liabilities and results of operations will be consolidated with LTL beginning on the
acquisition date. These pro forma financial statements are presented as a continuation of LTL.
The pro forma balance sheet as of September
30, 2020, is based on the historical financial statements of BDIC after giving effect to LTL’s acquisition of BDIC as a reverse
merger using the acquisition method of accounting and applying the assumptions and adjustments described in the notes to the pro
forma financial statements as if such acquisition had occurred as of September 30, 2020 for the balance sheet for pro forma financial
statements purposes.
The pro forma financial statements have
been prepared by management for illustrative purposes only and are not necessarily indicative of the financial position or results
of operations in future periods. The pro forma adjustments are based on the preliminary information available at the time of the
preparation of this document and assumptions that management believes are reasonable. The pro forma financial statements, including
the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with BDIC’s historical
financial statements included elsewhere on Form 10-Q for the quarter ended September 30, 2020, as Exhibits filed with SEC herewith.
The pro forma financial statements do not
purport to represent what the results of operations or financial position of the combined entity would actually have been if the
merger had in fact occurred on September 30, 2020, nor do they purport to project the results of operations or financial position
of the combined entity for any future period or as of any date.
These pro forma financial statements do
not give effect to any restructuring costs or to any potential cost savings or other operating efficiencies that could result from
the merger between BDIC and LTL since such amounts, if any, are not presently determinable.
BLOW & DRIVE INTERLOCK CORPORATION
NOTES TO PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
AS OF SEPTEMBER 30, 2020
(Unaudited)
NOTE-3 PRO FORMA ADJUSTMENTS
The pro forma financial statements have
been prepared as if the acquisition was completed on September 30, 2020 for combined balance sheet purpose and reflects the following
pro forma adjustment(s):
(a)
|
To eliminate the accumulated deficits of BDIC incurred before the merger transaction to reflect
the recapitalization of BDIC
|
|
|
|
Dr. Additional paid-in
capital 3,686,636
|
|
Cr. Accumulated deficit
3,686,636
|
(b)
|
To reflect the issuance of 10,000,000 shares of common stock of BDIC for the acquisition of 100%
of LTL outstanding capital stock and reclassify 100 ordinary shares of BDIC to additional paid-in capital
|
|
|
|
Dr. Accumulated deficit
1,000
|
|
Cr. Common stock 1,000
|
NOTE-4 PRO FORMA EARNINGS PER
SHARE
The pro forma earnings per share, giving
effect to the share exchange transaction has been computed as follows:
Net loss
|
|
$
|
(379,466
|
)
|
|
|
|
|
|
Net loss per share – Basic and diluted
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
Weighted average number of shares deemed issued and outstanding
|
|
|
141,350,683
|
|