LEET TECHNOLOGY INC. Disclaimer Regarding Forward Looking Statements
In this document we make a number of statements, referred to as "forward-looking statements", that are intended to convey our expectations or predictions regarding the occurrence of possible future events or the existence of trends and factors that may impact our future plans and operating results. The safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995 does not apply to us. We note, however, that these forward-looking statements are derived, in part, from various assumptions and analyses we have made in the context of our current business plan and information currently available to us and in light of our experience and perceptions of historical trends, current conditions and expected future developments and other factors we believe to be appropriate in the circumstances. You can generally identify forward-looking statements through words and phrases such as "seek," "anticipate," "believe," "estimate," "expect," "intend," "plan," "budget," "project," "may be," "may continue," "may likely result," and similar expressions. When reading any forward looking-statement you should remain mindful that all forward-looking statements are inherently uncertain as they are based on current expectations and assumptions concerning future events or future performance of our company, and that actual results or developments may vary substantially from those expected as expressed in or implied by that statement for a number of reasons or factors, including those relating to:
? whether or not markets for our products develop and, if they do develop,
the pace at which they develop;
? our ability to attract and retain the qualified personnel to implement our
growth strategies;
? our ability to fund our short-term and long-term operating needs;
? changes in our business plan and corporate strategies; and
? other risks and uncertainties discussed in greater detail in the sections
of this document.
Each forward-looking statement should be read in context with, and with an
understanding of, the various other disclosures concerning our company and our
business made elsewhere in this document as well as other public reports filed
with the
Company Overview
The following discussion should be read in conjunction with the interim unaudited condensed consolidated financial statements and the notes thereto, which are set forth in Item 1 of this report.
The Company operates within the Esports industry and derives revenue from esports tournament management and team services. The Company offers tournament management services to their customers, whereby they are engaged to provide the service of managing and hosting a tournament of the customer's choice. The Company provides the required manpower and skills to host and manage an esports tournament on their own Matchroom.net platform or on the platform of the customer. Apart from hosting the tournaments of other customers, the Company also hosts and managed their own internally held tournaments. The Company will obtain sponsorship agreements with other third-party entities whereby the Company commits to deliver certain sponsor and promotional services in exchange for consideration.
14
Impact of COVID-19 on our business
The COVID-19 pandemic has adversely impacted global commercial activity,
disrupted supply chains, and contributed to significant volatility in financial
markets. On
In 2021, the COVID-19 pandemic had an adverse impact on our business and results of operations, as the ongoing pandemic continued to depress economic activity and reduce the demand for our products and services, as well as disrupt supply chains. The duration and impact of the COVID-19 pandemic on our business operations and overall financial performance are unknown at this time and will depend on numerous circumstances outside of our control. The likelihood of recurrence of widespread or localized virus outbreaks is high and may continue for months, likely resulting in further government ordered Movement Control Orders, social distancing policies, restrictions on travel and other extensive measures. We cannot predict the effect of these circumstances on us which makes it difficult to predict how quickly and to what extent normal economic and operating activities can resume.
In these challenging and unprecedented times, management is taking all necessary and appropriate action to maximize liquidity as the Company navigates the current landscape. These actions include significantly reducing operating expenses and the elimination of all non-essential spending and capital expenditures.
Going concern
The accompanying consolidated financial statements have been prepared on the basis that the Company is going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
The Company has suffered from a working capital deficit and accumulated deficit
of
The continuation of the Company as a going concern through the next twelve months is dependent upon the continued financial support from its stockholders and related parties. 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 for one year from the date of the filing of the financial statements.
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.
Overview and Outlook
The following comparative analysis on results of operations was based primarily on the comparative audited consolidated financial statements, footnotes and related information for the periods identified below and should be read in conjunction with the consolidated financial statements and the notes to those statements that are included elsewhere in this report.
15
Year ended
Years ended December 31,
2021 2020
Revenues $ 62,842 $ 73,416
Cost of revenue (588,690 ) (361,282 )
Gross loss (525,848 ) (287,866 )
Operating expenses:
Research and development (36,214 ) (65,975 )
General and administrative (4,795,550 ) (509,146 )
Total operating expenses (4,831,764 ) (575,121 )
Other income:
Sundry income 1,025 16,747
Loss before income taxes (5,356,587 ) (846,240 )
Income tax expense - -
NET LOSS $ (5,356,587 ) $ (846,240 ) During the years ended
December 31,
Year ended December 31, 2021 2021
Percentage Accounts
Customers Revenues of revenues receivable
Customer A $ 19,708 31% $ 19,735
Customer B 15,418 25% 98
Total: $ 35,126 56% Total: $ 19,833
December 31,
Year ended December 31, 2020 2020
Percentage Accounts
Customers Revenues of revenues receivable
Customer A $ 41,222 56% $ 3,594
Customer B 10,550 14% 11,002
Customer C 9,993 14% -
Total: $ 61,765 84% Total: $ 14,596
16
All of our major customers are located in
Revenue decreased by 14.4% to
Cost of revenue increased by 62.9% to
General and administrative expenses increased by 841.9% to
Net loss increased 533.0% to
Liquidity and Capital Resources
As of
Years Ended December 31,
2021 2020
Net cash used in operating activities
(172,771 ) (3,113 )
Net cash provided by financing activities 1,817,411 771,770
For the year ended
For the year ended
17
We expect to continue to rely on cash generated through financing from our existing shareholders and private placements of our securities to finance our operations and future acquisitions.
For the year ended
For the year ended
Net Cash Provided By Financing Activities
For the year ended
For the year ended
Off-Balance Sheet Arrangements
We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts that are indexed to our own shares and classified as shareholders' equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.
Critical Accounting Policies and Estimates
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in
Basis of presentation
These accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in
Use of estimates and assumptions
In preparing these consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the periods reported. Actual results may differ from these estimates.
18 Revenue recognition
The revenue of the Company is currently generated from the provision of white label solutions and esports event management and team services. The Company recognizes revenue in accordance with Accounting Standards Codification ("ASC") Topic 606 - Revenue from Contracts with Customers ("ASC 606") when control of a product or service is transferred to a customer.
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.
White Label Solutions Revenue
The Company derives revenue from the provision of white label solutions. The
Company offers white-label, contracted licensed, solutions primarily to their
information & communications technology ("ICT") partners. The Company engages
its ICT partners to utilize its Matchroom.net Platform. For customers
The Company's typical arrangement involves customizing the Matchroom.net platform solution, which requires technical programming support to build out the platform to its customers specifications. As a result, in analyzing the performance obligations being provided to the customer the Company considers the software license and customization services as a single performance obligation as required by ASC 606. In carrying out the services under these arrangements, the Company is often provided with upfront payment, which is deferred and recognized into revenue over the duration of the contract.
Esports Tournament Management and Team Services Revenue
The Company derives revenue from esports tournament management and team services. The Company offers tournament management services to their customers, whereby they are engaged to provide the service of managing and hosting a tournament of the customer's choice. The Company provides the required manpower and skills to host and manage an esports tournament on their own Matchroom.net platform or on the platform of the customer. The hosting and management of these tournaments on behalf of the customer is deemed to be one performance obligation and is met over the period of performance in which the tournament is held.
The amount to be recognized as revenue equals the predetermined event management fee as per the agreement in place between the Company and the customer. The Company fulfils its performance obligation through the execution and completion of hosting the tournament, over the period of performance that being the multi-day tournament. The amount per the contract is based on the needs of the customer and the required level of manpower or skills needed for the relevant tournament.
Apart from hosting the tournaments of other customers, the Company also hosts and managed their own internally held tournaments. The Company will obtain sponsorship agreements with other third-party entities whereby the Company commits to deliver certain sponsor and promotional services in exchange for consideration. Upon completion of the tournament, a work completion report will be generated and communicated to the customer. Revenue will be recorded pro rata throughout the duration of the tournament. The Company invoices its promotional partners based on the contracted services within the agreement.
19 Stock based compensation
The Company accounts for non-employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, Compensation-Stock Compensation, which requires all share-based payments to non-employees to be recognized in the financial statements based on their fair values. The fair value of the equity instrument is charged directly to compensation expense and credited to additional paid-in capital.
Income taxes
Income taxes are determined in accordance with the provisions of ASC Topic 740, Income Taxes ("ASC 740"). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.
For the years ended
The Company is subject to tax in local and foreign jurisdiction. As a result of its business activities, the Company files tax returns that are subject to examination by the relevant tax authorities.
Recent accounting pronouncement
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.
For a description of recent accounting pronouncements, see Note 3 of the notes
to our consolidated financial statements for the year ended
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