See accompanying notes to these unaudited condensed
consolidated financial statements.
See accompanying notes to these unaudited condensed
consolidated financial statements.
See accompanying notes to these unaudited condensed
consolidated financial statements.
See accompanying notes to unaudited condensed consolidated
financial statements.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022
(Unaudited)
| 1. |
DESCRIPTION OF BUSINESS AND ORGANIZATION |
Leet Technology Inc. (“the Company”
or “LTES”) was incorporated on July 2, 2013 under the laws of the State of Delaware. The Company currently operates an eSports
platform in Malaysia.
On August 23, 2021, the Company was approved to
change its current name to Leet Technology Inc. and the trading symbol of LTES.
On February 15, 2022, Leet Entertainment Group
Limited transferred all 1,000 ordinary shares of Leet Entertainment Sdn. Bhd to the Company at part of the Company’s plans to restructure
and simplify the corporate structure.
On April 4, 2022, the Company sold all its 10,000
shares in Leet Technology Limited, with its wholly owned subsidiary Leet Entertainment Group Limited, to Mr. Song, the majority shareholder
of the Company, for $10,000 as part of its plans to restructure and simplify the corporate structure. With the completion of this corporate
restructure, the Company shall henceforth only have one wholly owned Malaysian subsidiary, Leet Entertainment Sdn Bhd. Prior to the corporate
restructure, Leet Entertainment Group Limited, a wholly owned subsidiary of Leet Technology Limited, transferred all its assets, liabilities,
and business operations to Leet Entertainment Sdn Bhd with the approval by the board of directors. There were no changes to the main business
activities of the Company as a result of these transactions.
On December 13, 2021, LEET Inc. was incorporated
under the laws of British Virgins Islands (BVI). On July 22, 2022, the Board of Directors of the Company approved and authorized the Company
to purchase all of Mr. Song's shares in LEET Inc. for a cash consideration of $1. As of July 26, 2022, LEET Inc. became a wholly owned
subsidiary of the Company.
Description
of subsidiaries
| Schedule of 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 Technology Limited * |
|
Labuan, Malaysia |
|
Investment holding |
|
10,000 ordinary shares at par value of US$1 |
|
100% |
| |
|
|
|
|
|
|
|
|
| Leet Entertainment Group Limited* |
|
Hong Kong |
|
Provision of information technology and mobile application development and digital content publishing service |
|
1 ordinary share at par value of 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 MYR1 |
|
100% |
| |
|
|
|
|
|
|
|
|
| LEET Inc. |
|
BVI |
|
Investment holding |
|
1 ordinary share at par value of US$1 |
|
100% |
| * |
were disposed on April 4, 2022. |
The Company
and its subsidiary are hereinafter referred to as (the “Company”).
| 2. |
LIQUIDITY GOING CONCERN UNCERTAINTIES |
The accompanying unaudited condensed consolidated
financial statements have been prepared using the going concern basis of accounting, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business.
The Company has determined that certain factors
raise substantial doubt about its ability to continue as a going concern for a least one year from the date of issuance of these unaudited
condensed consolidated financial statements.
As of September 30, 2022, the Company had $11,572
in cash, working capital deficit of $1,525,045 and accumulated deficit of $10,100,927. The Company incurred a continuous net loss of $2,266,221
during the nine months ended September 30, 2022. The Company believes that its current level of cash is not sufficient to fund its operations
and obligations without additional financing. 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
over 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 unaudited condensed consolidated financial
statements.
These and other factors raise substantial doubt
about the Company’s ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include
any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result
in the Company not being able to continue as a going concern.
| 3. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
The accompanying unaudited condensed consolidated
financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the
accompanying unaudited condensed consolidated financial statements and notes.
The accompanying unaudited condensed consolidated
financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States
(“US GAAP”) for interim financial reporting, and in accordance with instructions for Form 10-Q and Article 8 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the unaudited consolidated financial statements contained in this report reflect all
adjustments that are normal and recurring in nature and considered necessary for a fair presentation of the financial position and the
results of operations for the interim periods presented. The year-end balance sheet data was derived from audited financial statements
but does not include all disclosures required by US GAAP. The results of operations for the interim period are not necessarily indicative
of the results expected for the full year. These unaudited condensed consolidated financial statements, footnote disclosures and other
information should be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report
on Form 10-K for the year ended December 31, 2021.
| Use of estimates and assumptions |
In preparing these unaudited condensed consolidated
financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements during the period reported. Actual results may differ from
these estimates.
The unaudited condensed consolidated financial
statements include the financial statements of the Company and its subsidiaries. All inter-company balances and transactions within the
Company have been eliminated upon consolidation.
Cash 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 in accordance
with Accounting Standards Codification (“ASC”) 310, “Receivables.” 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 creditworthiness and their payment history. Accounts
receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified
amount are reviewed individually for collectability. At the end of each quarter, 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. The Company does not have any off-balance-sheet
credit exposure related to its customers. As of September 30, 2022 and December 31, 2021, there were no allowance for doubtful accounts.
Plant and equipment are stated at historical cost
less accumulated depreciation. Leasehold improvements are amortized over the lessor of the based term of the lease or 5 years of the leasehold
improvement. 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:
| Schedule of useful lives of plant and equipment |
|
| |
Expected useful lives |
| Computer equipment |
5 years |
| Furniture and fixtures |
5 years |
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.
| Capitalized development costs |
In accordance with ASC 340-40, Other Assets and
Deferred Costs (ASC 340-40”), the Company capitalizes certain development costs required to fulfill its obligations under contracts
for its customers. These direct costs are typically incurred at a contract’s inception which enables the Company to satisfy its
future performance obligations for its customers. These costs primarily consist of direct labor for coding, programing, and additional
customizations specific to the customers licensed platform offering. These costs are expected to be recovered through the life of the
contract.
The capitalized development
costs are amortized on a customer specific contract basis using the straight-line method over the estimated economic life of the application,
typically two years, beginning when those development effort were placed into service.
| Research and development costs |
Research and development costs are expensed as
incurred and consist of development work associated with our existing technology, customer solutions and processes. Our research and development
expenses relate primarily to payroll costs for personnel, costs associated with various projects, including testing, development and other
related expenses.
| Impairment of long-lived assets |
In accordance with the provisions of ASC Topic
360, “Impairment or Disposal of Long-Lived Assets”, all long-lived assets such as plant and equipment, intangible assets,
and right of use (“ROU”) assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison
of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed
the fair value of the assets. There was no impairment charge for the nine months ended September 30, 2022 and 2021.
Contract liability
Billing practices for the Company’s contracts
are governed by the contract terms of each project. Billings do not necessarily correlate with revenues recognized. The Company records
contract liabilities to account for these differences in timing.
The contract liability, represents the Company’s
obligation to transfer goods or services to a customer for which the Company has been paid by the customer or for which the Company is
obligated to perform under the contract. Revenue for future services reflected in this account are recognized, and the liability is reduced,
as the Company subsequently satisfies the performance obligation under the contract.
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 who
have their own platforms and apps being used, the Company will customize the design of Matchroom.net to meet the customer’s need
and integrate, a customized solution into the customer’s system. The Matchroom.net platform and software solution is customizable
to the specific needs of each customer and can be integrated across multiple platforms. On average it will take the Company three months
to complete the customization of the platform for a customers use.
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. Additionally, the Company recognizes ticket when the performance obligation has been satisfied.
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 (couple
of days) 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 recording pro rata during
the duration of the tournament. The Company invoices its promotional partners based on the contracted services within the agreement.
Disaggregation of Revenue
The Company has disaggregated its revenue from contracts with customers
into categories based on the nature of the revenue. The following table presents the revenue streams by segments, with the presentation
revenue categories presented on the statements of operation for the periods indicated:
| Schedule of foreign currencies translation | |
| | |
| | |
| | |
| |
| | |
Three months ended September 30, | | |
Nine months ended September 30, | |
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| | |
| | |
| | |
| | |
| |
| White label solutions | |
$ | 42,924 | | |
$ | 5,149 | | |
$ | 95,659 | | |
$ | 15,469 | |
| Esport tournament management and team services | |
| 379 | | |
| 6,861 | | |
| 8,775 | | |
| 16,491 | |
| Matchroom Mini-app solutions | |
| 7,824 | | |
| 2,970 | | |
| 11,554 | | |
| 11,486 | |
| | |
$ | 51,127 | | |
$ | 14,980 | | |
$ | 115,988 | | |
$ | 43,446 | |
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 nine months ended September 30, 2022 and
2021, the Company did not have any interest and penalties associated with tax positions. As of September 30, 2022 and December 31, 2021,
the Company did not have any significant unrecognized uncertain tax positions.
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.
Foreign currencies translation
Transactions denominated in currencies other than
the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction.
Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency
using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the condensed consolidated
statement of operations.
The reporting currency of the Company is United
States Dollar ("US$") and the accompanying unaudited condensed consolidated financial statements have been expressed in US$.
The functional currencies of the Company’s operating subsidiaries are their local currencies (Hong Kong Dollars (“HKD”)
and Malaysian Ringgit (“MYR”)). HKD-denominated assets and liabilities are translated into the United States Dollar using
the exchange rate at the balance sheet date (0.1274 and 0.12866, at September 30, 2022 and December 31, 2021, respectively), and revenue
and expense accounts are translated using the weighted average exchange rate in effect for the period (0.1278 and 0.12885 for the nine
months ended September 30, 2022 and 2021, respectively). MYR-denominated assets and liabilities are translated into the United States
Dollar using the exchange rate at the balance sheet date (0.21578 and 0.24145, at September 30, 2022 and December 31, 2021, respectively),
and revenue and expense accounts are translated using the weighted average exchange rate in effect for the period (0.23048 and 0.24226
for the nine months ended September 30, 2022 and 2021, respectively).
Comprehensive income
ASC Topic 220, “Comprehensive Income”,
establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income
as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented
in the accompanying unaudited condensed consolidated statements of changes in stockholders’ deficit, 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.
Retirement plan costs
Contributions to retirement plans (which are defined
contribution plans) are charged to general and administrative expenses in the accompanying unaudited condensed consolidated statements
of operation as the related employee service is provided.
Leases
The Company accounts for leases in accordance
with Topic 842, “Leases” (“ASC 842”) and determines if an arrangement is a lease at inception. Operating leases
are included in operating ROU assets, other current liabilities, and operating lease liabilities in our unaudited condensed consolidated
balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in our
unaudited condensed consolidated balance sheets.
ROU assets represent the right to use an underlying
asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease
ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most
of the Company’s leases do not provide an implicit rate, the Company generally use the incremental borrowing rate based on the estimated
rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU
asset also includes any lease payments made and excludes lease incentives. The lease terms may include options to extend or terminate
the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line
basis over the lease term.
In accordance with the guidance in ASC 842, components
of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area
maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). Subsequently, the fixed and in-substance fixed
contract consideration (including any related to non-components) must be allocated based on the respective relative fair values to the
lease components and non-lease components.
Net loss per share
The Company calculates net income or loss per
share in accordance with ASC Topic 260, “Earnings per Share.” Basic income or loss per share is computed by dividing the net
income or loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is the same as
basic net loss per share when their inclusion would have an anti-dilutive effect due to the continuing net losses. The following anti-dilutive
equity and debt securities were excluded from the computation of net loss per share.
| Schedule of anti-dilutive equity and debt securities | |
| | |
| |
| | |
As of | |
| | |
September 30, 2022 | | |
September 30, 2021 | |
| | |
| (Shares) | | |
| (Shares) | |
| | |
| | | |
| | |
| Warrants | |
| – | | |
| 1,650,288 | |
Contingencies
The Company follows the ASC 450-20 to report accounting
for contingencies. Certain conditions may exist as of the date the unaudited 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 unaudited condensed consolidated financial statements. If the assessment indicates that a potentially
material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent
liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally
not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon
information available at this time that any 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 Carrying amounts for cash, accounts receivable,
deposits receivable, accounts payable, accrued liabilities, and other payables approximate their fair value because of their short-term
maturity. The Company determined that the carrying amount of accrued compensation payable to officers and directors and amounts due to
related parties approximates fair value as these amounts are indicative of the amounts the company would expect to settle in current market
exchange.
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.
Series B Convertible Preferred Stock
The Company accounts for the Series B Convertible Preferred Stock in
accordance with the guidance in ASC 480, Distinguishing Liabilities from Equity. Preferred stock subject to mandatory redemption are classified
as a liability instrument and are measured at fair value. Conditionally preferred stock (including preferred stock that feature redemption
rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within
the Company’s control) are classified as temporary equity.
Recent accounting pronouncements
Accounting Standards Issued, Adopted
In March 2020, the FASB issued ASU 2020-04, Reference
Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848), which provides temporary optional
expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens
of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates such as the Secured Overnight
Financing Rate (SOFR). This guidance is effective upon issuance and generally can be applied through the end of calendar year 2022. Adoption
of the standard requires certain changes to be made prospectively. Adopting the standard did not have a material impact on the unaudited
condensed consolidated 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 impact and
applicability of this new standard.
From time
to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that are
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.
Plant and equipment
consisted of the following:
| Schedule of plant and equipment | |
| | |
| |
| | |
As of | |
| | |
September 30, 2022 | | |
December 31, 2021 | |
| | |
| | |
| |
| Computer equipment | |
$ | 171,659 | | |
$ | 170,056 | |
| Furniture and fixtures | |
| 8,855 | | |
| 5,607 | |
| Leasehold improvements | |
| 22,667 | | |
| 18,009 | |
| Foreign currency translation difference | |
| (20,416 | ) | |
| (1,026 | ) |
| | |
| 182,765 | | |
| 192,646 | |
| Less: accumulated depreciation and amortization | |
| (69,125 | ) | |
| (39,756 | ) |
| Less: foreign currency translation difference | |
| 6,285 | | |
| 301 | |
| | |
$ | 119,925 | | |
$ | 153,191 | |
Depreciation and amortization expense for the
three months ended September 30, 2022 and 2021 were $11,429 and $8,763, respectively.
Depreciation and amortization expense for the
nine months ended September 30, 2022 and 2021 were $29,370 and $13,850, respectively.
During the nine months ended September 30, 2022
and year ended December 31, 2021 the Company purchased computers and equipment of approximately $0 and $145,883, respectively from a related
party, Bru Haas Consultants.
| |
5. |
CAPITALIZED DEVELOPMENT COSTS |
During the nine months ended September 30, 2022
and 2021, the Company capitalized development costs of $215,959 and $0, respectively for the customization and enhancements of the gaming
platform provided to customers under contract. The estimated useful life specific to each contracts total capitalized cost is based on
the original length of the customer contract from 6 months to 24 months. During the nine months ended September 30, 2022 and 2021, the
Company amortized development costs of $131,961 and $0, respectively.
The Company entered into an operating lease for
office premises. The lease term is fixed for 2 years. The Company adopted ASC 842, using the modified-retrospective approach as discussed
in Note 3, and as a result, recognized a right-of-use asset and a lease liability. The Company uses 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.
The consolidated balance sheet allocation of assets
and liabilities related to operating lease is as follows:
| Schedule of allocation of assets and liabilities | |
| |
| | |
| |
| | |
Consolidated Balance | |
As of | |
| | |
Sheets Caption | |
September 30, 2022 | | |
December 31, 2021 | |
| | |
| |
| | |
| |
| Assets | |
Operating lease right-of-use assets | |
$ | 3,812 | | |
$ | 8,052 | |
| | |
| |
| | | |
| | |
| Liabilities: | |
| |
| | | |
| | |
| Current | |
Operating lease liability – current | |
$ | 2,657 | | |
$ | 5,042 | |
| Non-current | |
Operating lease liability – non-current | |
| – | | |
| 2,971 | |
| | |
| |
| | | |
| | |
| Total lease liabilities | |
| |
$ | 2,657 | | |
$ | 8,013 | |
For the nine months ended September 30,
2022 and 2021, the Company recorded lease expenses of $4,978 and $3,925 respectively.
The future minimum operating lease commitments
for operating leases having initial or non-cancelable terms in excess of one year are as follows:
| Schedule of lease obligations | |
| |
| Year Ending September 30, | |
| |
| 2023 | |
$ | 2,718 | |
| Total minimum lease payments | |
| 2,718 | |
| Less: interest | |
| (61 | ) |
| | |
| | |
| Total present value of lease liabilities | |
$ | 2,657 | |
Preferred
Stock
The Company’s articles of incorporation
authorize the Company to issue up to 20,000,000 preferred shares of $0.0001 par value.
Series
A Preferred Stock
The Company has been authorized to issue 1,000,000
shares of Series A Preferred Stock. The Series A shares have the following preferences: no dividend rights; no liquidation preference
over the Company’s common stock; no conversion rights; no redemption rights; no call rights by the Company; each share of Series
A Preferred stock will have one hundred (100) votes on all matters validly brought to the Company’s common stockholders.
As of September 30, 2022 and December 31, 2021,
the total number of Series A preferred shares issued and outstanding was 1,000,000 shares.
Series B Convertible Preferred Stock
The Company has authorized 10,000,000 shares of
Series B Convertible Preferred Stock. The Series B shares have the following preferences: (i) dividend rights in pari passu with the Company’s
common stock on an as converted basis, (ii) liquidation preference over the Company’s common stock, (iii) conversion
rights of 10 shares of common stock for each share of Series B Convertible Preferred Stock converted, (iv) no redemption rights, (v) no
call rights, (vi) each share of Series B Convertible Preferred Stock will have 1,000 votes on all matters validly brought to the Company’s
common stockholders.
As of September 30, 2022 and December 31, 2021,
the total number of Series B preferred shares issued and outstanding was 5,898,256 shares and nil shares respectively.
Common
Stock
The Company has authorized 10,000,000,000 shares
of $0.0001 par value. Holders of common stock are entitled to one vote for each share held. There are no restrictions that limit the Company’s
ability to pay dividends on its common stock, subject to the requirements of the Delaware Revised Statutes. The Company has not declared
any dividends since incorporation.
On September 3, 2021, the Company issued an aggregate of 7,000,000
shares of Common Stock pursuant to the terms of the 2021 Employee Stock Incentive Plan to its consultants. Management recognized that
the issuance was incorrect as it exceeded its mandate with the prior Form S-8 registration statement with respect to the allowance of
shares registered.
To rectify the above, the Board of Directors approved the 2022 Stock
Incentive Plan for Employees and Consultants and filed Form S-8 on June 30, 2022, to register 7,000,000 shares of Common Stock. On June
30, 2022, the Company issued 7,000,000 shares of its Common Stock to employees and consultants for services rendered and proceeded to
cancel the 7,000,000 shares of Common Stock that was incorrectly issued.
As of September 30, 2022 and December 31, 2021,
the Company had 152,899,640 shares of its common stock issued and outstanding.
On September 30, 2022, the Company issued to
Porta Capital Limited, Bru Haas (B) Sdn Bhd, Bru Haas Sdn Bhd, Clicque Technology Sdn Bhd, Tilla Network Limited and Porta Network Inc.,
the Company’s related parties (collectively as the “Related Parties”), an aggregate of 5,898,256
shares of Series B Convertible Preferred Stock, par value $0.0001
per share (the “Series B Preferred Stock”), of the Company pursuant to certain Debt Conversion Agreements, each dated
September 30, 2022 (the “Debt Conversion Agreement”), between the Related Parties and the Company. Pursuant to the Board
Resolution dated September 28, 2022, approving the adoption of certain rights and preferences of Series B Preferred Shares, the Agreements
included the following rights: (i) dividend rights where each share of Series B Preferred Stock accrues an annual dividend of 8% and
(ii) redemption rights only at the option of the Company at a rate of 110% during the period ending 360 days after the Issue Date. The
price per Series B Preferred Stock is 0.80 USD. The Series B Preferred Shares were issued on September 30, 2022 in exchange for all or
a portion of the balances due to each Related Party as of June 30, 2022. Because all of the shareholders of the Series B Preferred Shares
are related parties of the company and majority owned by the the same majority owner of the Company, it's determined that the preferred
shareholders can control the Company's ability to exercise its redemption right at any time and therefore, mezzanine equity classification
is appropriate in accordance with ASC - 480, Distinguishing Liabilities from Equity.
The Company issued common stock warrants in
individual sales and in connection with common stock purchase agreements. The warrants have expiration dates ranging from three 3 to
four 4 years from the date of grant and exercise prices ranging from $0.10 to $1.00.
A summary of warrant activity for the periods
presented is as follow:
| Schedule of warrant activity | |
| | |
| | |
| |
| | |
Weighted average | |
| | |
Warrants for
common shares | | |
Exercise price | | |
Remaining
contractual life
(in years) | |
| Outstanding as of December 31, 2020 | |
| 4,080,160 | | |
$ | 0.71 | | |
| 0.79 | |
| Forfeited, cancelled, expired | |
| (3,169,750 | ) | |
| 0.08 | | |
| (0.46 | ) |
| Outstanding as of December 31, 2021 | |
| 910,410 | | |
| 0.79 | | |
| 0.33 | |
| Forfeited, cancelled, expired | |
| (910,410 | ) | |
| (0.79 | ) | |
| (0.33 | ) |
| Outstanding as of September 30, 2022 | |
| – | | |
$ | – | | |
| – | |
There were no warrants exercisable at September
30, 2022. The intrinsic value of the warrants exercisable during the nine months ended September 30, 2022 and 2021 was $0 and $0, respectively.
The Company recorded $0 tax provision for the
nine months ended September 30, 2022 and 2021, due in large part to its expected tax losses for the year and maintaining a full valuation
allowance against its net deferred tax assets in every jurisdiction that it is operating in.
At December 31, 2021,
the Company has U.S. federal operating loss carryforwards of $7,247,356, and state of California operating loss carryforwards of $6,542,099.
Due to U.S. enacted Public Law 115-97, known as the Tax Cuts and Jobs Act (the "TCJA") in 2017, U.S. federal net operating loss
carryforwards in the amount of $4,601,190, generated after 2017 have an indefinite carryforward period. U.S. net operating loss carryforwards,
in the amount of $2,646,166, generated prior to 2018 will expire, if unused, beginning in 2034. State net operating loss carryforwards
will begin to expire, if unused, in 2034.
At December 31, 2021,
the Company’s subsidiary operating in Hong Kong has net operating loss carryforwards of $698,685 which do not expire and therefore
can be carried forward indefinitely.
At December 31, 2021,
the Company’s subsidiary operating in Malaysia has net operating loss of $2,525,831. Net operating loss carryforwards will begin
to expire, if unused, in 2025.
The Company follows the provision of ASC 740
which prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial
statements uncertain tax positions that the Company has taken or expects to take on a tax return. The Company did not
have any unrecognized tax positions or benefits as of September 30, 2022 and December 31, 2021. The Company recognizes interest
and penalties accrued on any unrecognized tax benefits as a component of income tax expense. We do not expect any material changes
in our unrecognized tax benefits over the next 12 months.
The Company’s ability to utilize U.S. net
operating loss carryforwards to offset future taxable income may be deferred or limited significantly if the Company were to experience
an “ownership change” as defined in section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions
of state law. In general, an ownership change occurs when the ownership of the Company’s stock by 5 percent or more shareholders
“5-percent shareholders” exceeds 50 percentage points within a three-year period. We have not conducted a Section 382 study
to determine whether the use of our U.S. net operating losses is limited. We may have experienced ownership changes in the past, and we
may experience ownership changes in the future, some of which are outside our control. This could limit the amount of net operating losses
that we can utilize annually to offset future taxable income or tax liabilities.
| 11. |
RELATED PARTY TRANSACTIONS |
Related party balances consisted of the following:
| Schedule of Related party balances consisted | |
| | |
| |
| | |
As of | |
| | |
September 30, 2022 | | |
December 31, 2021 | |
| | |
| | |
| |
| Due to Porta Capital Limited (“Porta Capital”) | |
$ | 28,913 | | |
$ | 2,063,876 | |
| Due to Bru Haas (B) Sdn Bhd (“Bru Haas (B)”) | |
| 245,394 | | |
| 1,675,573 | |
| Due to Bru Haas Sdn Bhd (“Bru Haas”) | |
| 9,168 | | |
| 168,649 | |
| Due to Clicque Technology Snd Bhd (“Clicque”) | |
| 37,744 | | |
| 90,272 | |
| Due to Tila Network Limited (“Tila Network”) | |
| – | | |
| 19,478 | |
| Due to Porta Network Inc. (“Porta Network”) | |
| 722 | | |
| 5,734 | |
| Due to Mr. Song Dai (“Mr. Song”) | |
| – | | |
| 12,014 | |
| | |
$ | 321,941 | | |
$ | 4,035,596 | |
Mr. Song is the director and major shareholder
of the Company, and he is also the major shareholder of Porta Capital, Bru Haas (B), Bru Haas, Tila Network, and Porta Network. Amount
due to these related companies are those trade and nontrade payables arising from transactions between the Company and the related companies,
such as advances made by the related companies on behalf of the Company, and advances made by the Company on behalf of the related companies.
Those advances are unsecured, non-interest bearing and have no fixed terms of repayment.
The advances to Mr. Song is mainly for working
capital purpose. The advances are unsecured, non-interest bearing and have no fixed terms of repayment.
On September 30, 2022, the Company issued to
Porta Capital Limited, Bru Haas (B) Sdn Bhd, Bru Haas Sdn Bhd, Clicque Technology Sdn Bhd, Tilla Network Limited and Porta Network Inc.,
the Company’s related parties (collectively as the “Related Parties”), an aggregate of 5,898,256 shares of Series B
Convertible Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”), of the Company pursuant to certain
Debt Conversion Agreements, each dated September 30, 2022 (the “Debt Conversion Agreement”), between the Related Parties
and the Company. The effect of the Debt Conversion Agreement is that all or a portion of the Related party balances has been converted
to Series B Convertible Preferred Shares.
| Schedule of commercial terms among related parties |
| |
| | |
| |
| |
| |
Nine months ended September 30, | |
| |
| |
2022 | | |
2021 | |
| Nature of transactions with related parties |
| |
| | |
| |
| Online sales income from Bru Haas |
| |
$ | – | | |
$ | 1,178 | |
| |
| |
| | | |
| | |
| Research and development consulting fee to related parties: |
| |
| | | |
| | |
| - Porta Capital |
(a) | |
$ | 27,133 | | |
$ | 27,170 | |
| |
| |
| | | |
| | |
| Consultancy fee to related parties |
| |
| | | |
| | |
| - Clicque |
(b) | |
$ | 114,096 | | |
$ | 38,761 | |
| |
| |
| | | |
| | |
| Rent expense of Matchroom platform server to related parties: |
| |
| | | |
| | |
| - Porta Capital |
(c) | |
$ | 84,999 | | |
$ | 87,849 | |
| - Bru Haas (B) |
(d) | |
| 218,605 | | |
| 60,000 | |
| Total |
| |
$ | 303,604 | | |
$ | 147,849 | |
| |
| |
| | | |
| | |
| Network Bandwidth expense to Bru Haas (B) |
(e) | |
$ | 161,105 | | |
$ | 145,120 | |
Both platform server rent expense and network
bandwidth expense are recorded in the cost of revenue.
(a) The Company entered a consultancy service
agreement with Porta Capital for a fixed period of 56 months commenced from May 1, 2017. The consultancy service fee is $3,000 per month
and the agreement was renewed for another fixed period of 21 months from April 1 2022 with $3,000 per month.
(b) The Company entered two separate consultancy
service agreements with Clicque for a fixed period of 36 months each commenced from June 1, 2021 and December 1, 2021. The consultancy
service fees are RM 40,000 (equivalent to approximately $9,700) per month and RM 15,000 (equivalent to approximately $3,600) per month,
respectively.
(c) The Company entered a platform server rental
agreement with Porta Capital for a fixed period of 60 months commenced from November 1 2017. The rent is $6,500 per month and the agreement
was renewed for another fixed period of 60 months from March 1, 2021 with$9,500 per month.
(d) The Company entered a platform server rental
agreement with Bru Haas (B) for a fixed period of 60 months commenced from July 1, 2021. The rent is $20,000 per month.
The Company entered a security operations center
service agreement with Bru Haas (B) for a fixed period of 12 months commenced from February 17, 2022. The rent is $4,705 per month.
(e) The Company entered a network bandwidth rental
agreement with Bru Haas (B) for a fixed period of 12 months commenced from January 1, 2022. The rent is $18,000 per month.
During the nine months ended September 30,
2022 and 2021, the Company utilized space on a rent-free basis in the office located at Unit 805, 8th Floor, Menara Mutiara Majestic,
Jalan Othman, Petaling Jaya 46000, Selangor, Malaysia which is owned by Mr. Song. The fair market value of the rent is RM1,800 per month.
| 12. |
CONCENTRATIONS OF RISK |
The Company
is exposed to the following concentrations of risk:
For the nine months ended September 30, 2022,
the individual customer who accounts for 10% or more of the Company’s revenues and its outstanding receivable balances as at period-end
dates, are presented as follows:
| Schedule of concentrations of risk |
|
| | |
|
| |
|
|
| |
|
Nine months ended
September 30, 2022 |
| |
September 30, 2022 |
|
Customers |
|
Revenues | |
Percentage
of revenues |
| |
Accounts
receivable |
|
| |
|
| |
|
|
|
|
|
| Customer A |
|
$ | 73,563 | |
63% |
| $ |
86,398 |
|
| Customer B |
|
| 16,983 | |
15% |
| |
3,867 |
|
| |
|
| | |
|
|
|
|
|
| |
Total: |
$ | 90,546 | |
78% |
Total: | $ |
90,265 |
|
For the nine months ended September 30, 2021,
the individual customer who accounts for 10% or more of the Company’s revenues and its outstanding receivable balances as at September
30, 2021, are presented as follows:
| |
|
Nine months ended
September 30, 2021 | |
|
September 30, 2021 |
|
Customers |
|
Revenues | |
Percentage
of revenues | |
|
Accounts
receivable |
|
| |
|
| |
| |
|
|
|
| Customer A |
|
$ | 15,469 | |
36% | |
$ |
3,538 |
|
| Customer B |
|
| 8,508 | |
19% | |
|
8,547 |
|
| |
|
| | |
| |
|
|
|
| |
Total: |
$ | 23,977 | |
55% | Total: |
$ |
12,085 |
|
For the three months ended September 30, 2022,
the individual customer who accounts for 10% or more of the Company’s revenues and its outstanding receivable balances as at period-end
dates, are presented as follows:
| |
|
Three months ended
September 30, 2022 |
|
September 30, 2022 |
|
Customers |
|
Revenues | |
Percentage
of revenues |
|
Accounts
receivable |
|
| |
|
| |
|
|
|
|
|
| Customer A |
|
$ | 28,480 | |
56% |
|
$ |
86,398 |
|
| Customer B |
|
| 12,623 | |
25% |
|
|
3,867 |
|
| |
|
| | |
|
|
|
|
|
| |
Total: |
$ | 41,103 | |
81% |
Total: |
$ |
90,265 |
|
For the three months ended September 30, 2021,
the individual customer who accounts for 10% or more of the Company’s revenues and its outstanding receivable balances as at September
30, 2021, are presented as follows:
| |
|
Three months ended
September 30, 2021 |
|
September 30, 2021 |
|
Customers |
|
Revenues | |
Percentage
of revenues |
|
Accounts
receivable |
|
| |
|
| |
|
|
|
|
|
| Customer A |
|
$ | 5,149 | |
34% |
|
$ |
3,538 |
|
| Customer B |
|
| 5,514 | |
37% |
|
|
8,547 |
|
| |
|
| | |
|
|
|
|
|
| |
Total: |
$ | 10,663 | |
71% |
Total: |
$ |
12,085 |
|
| (b) |
Economic and political risk |
The Company’s major operations are conducted
in Malaysia. Accordingly, the political, economic, and legal environments in Malaysia, as well as the general state of 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 MYR converted
to US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice.
| (d) |
Concentration of credit risk |
Financial instruments that potentially subject
the Company to concentrations of credit risk consist principally of cash. The Company maintains cash with various financial institutions
in Malaysia. Cash are maintained with high credit quality institutions, the composition and maturities of which are regularly monitored
by management. The Perbadanan Insurans Deposit Malaysia (“PIDM”) pays compensation up to a limit of RM250,000
if the bank with which an individual/a company hold its eligible deposit fails. At September 30, 2022 and December 31, 2021, the Company
did not have deposit funds that exceeded the insured limits in Malaysia.
| 13. |
COMMITMENTS AND CONTINGENCIES |
The Company from time to time may be involved
in legal proceedings and disputes arising in the normal course of business. The Company believes that there are no material claims or
actions pending or threatened against the Company.
On April
28, 2021, the Company entered into a financial advisory agreement, (“the agreement”) with Maxim Group, LLC (“Maxim”),
a leading full-service investment banking, securities and wealth management firm, pursuant to which Maxim will provide certain advisory
services including strategic corporate planning, capitalization, and marketing. Additionally, Maxim, will advise the Company with respect
to its objective to list on a national securities exchange. As consideration for Maxim’s services pursuant to the agreement,
the Company agreed to issue restricted shares of the Company’s common stock to Maxim equal to 2% of the outstanding shares of the
Company’s Common Stock. As mentioned in Note 7, the Company issued 1,403,973 restricted shares, 1% of the outstanding shares of
the common stock, upon execution of the agreement. Under the terms of the agreement, the Company is committed to issue additional restricted
shares of 1% of the outstanding shares of its common stock upon a successful listing of the Company’s common stock to a national
exchange (NASDAQ or NYSE).
On October
6, 2021, the Company entered into an agreement, (“the Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln
Park”, “the Investor”), in which the Company has the right, but not the obligation, to direct Lincoln Park to purchase
up to $15,000,000 of common stock, in increments of 100,000 shares, subject to certain limitations and adjustments noted in the Purchase
Agreement. As consideration for Lincoln Park’s irrevocable commitment to purchase shares of the Company’s Common Stock
upon the terms of and subject to satisfaction of the conditions set forth in the Purchase Agreement, the Company agreed to issue 1,003,378
shares of its Common Stock to Lincoln Park as commitment shares, and up to 1,003,378 additional shares of Common Stock on a pro rata basis
as Lincoln Park purchases up to its $15,000,000 total aggregate dollar amount purchase commitment under the Purchase Agreement.
The right of the Company to commence sales under the purchase agreement is subject to the satisfaction of certain conditions including
but not limited to a Registration Statement covering the resale of the shares being declared effective under the Securities Act by the
SEC, and no stop order with respect to the Registration Statement shall be pending or threatened by the SEC. As mentioned in Note
7, on October 21, 2021, the Company issued the 1,003,378 initial commitment shares. As of the date of these financial statements,
the Company has not filed the Registration Statement pursuant to this Purchase Agreement. The Purchase Agreement prohibits the Company
from directing Lincoln Park to purchase any shares of the Company’s common stock if those shares, when aggregated with all other
shares of common stock then beneficially owned by Lincoln Park (as calculated pursuant to Section 13(d) of the Securities Exchange Act
of 1934, as amended, and Rule 13d-3 thereunder), would result in Lincoln Park beneficially owning more than 4.99% of the outstanding shares
of the Company’s common stock.
The Company entered several commitment agreements
with related parties, see Note 10.
The Company evaluated subsequent events and transactions
that occurred after the balance sheet date up to November 21, 2022, the date that the unaudited condensed financial statements were issued.
Other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in
the unaudited condensed financial statements.
On October 12, 2022, the Company’s
wholly owned subsidiary LEET Inc. filed Form S-4 with the Securities and Exchange Commission and received Notice of Effectiveness on
October 21, 2022. The merger of the Company into LEET Inc, currently a wholly-owned subsidiary of the Company incorporated under the
laws of the BVI (“Leet BVI”), with Leet BVI being the surviving entity will affect the corporate reorganization of the Company.
On November
3, 2022, the Company and Lincoln Park mutually agreed, in writing, to terminate the Purchase Agreement dated October 6, 2021, and Registration
Rights Agreement, dated October 6, 2021 (the “Agreements”), effective as of 4:30 p.m., Eastern time, on such date, including all
representations, warranties, covenants and agreements of the parties therein, other than the indemnification and related obligations of
the Company in the Purchase Agreement, which will survive termination. The effect of the termination is that neither the Company (or its
affiliates, directors, officers, employees, agents or other representatives), on the one hand, nor Lincoln Park (or its affiliates, or
its directors, officers, employees, agents or other representatives), on the other hand, shall have any liability or obligation to each
other or any rights or remedies against the other under either of the Agreements, except as provided in the Termination Agreement.
On November
4, 2022 (the “Issue Date”), Leet Technology Inc. (the “Company”) entered into a Securities Purchase Agreement
dated as of November 4, 2022 (the “SPA”), by and between the Company and 1800 Diagonal Lending LLC, a Virginia limited liability
company (the “Investor”). Pursuant to the SPA, among other things, the Company agreed to issue to the Investor a convertible
note in the principal amount of $113,300.00 (the “Note” and together with the SPA, the “Agreements”). The Note
contains an original issue discount amount of $10,300.00, legal fees payable to Investor’s legal counsel of $2,000.00 and to Investor
a due diligence fee of $1,000.00. The Note accrues interest at an annual interest rate of 8% and matures on November 4, 2024 (the “Maturity
Date”). The Investor may convert the Note into shares of the Company’s common stock, par value $0.0001 per share (the “Common
Stock”), 180 days after the Issue Date. The Company has the right to prepay the outstanding principal amount of the Note, plus any
accrued interest on the outstanding principal (including any default interest) at a rate of (x) 110% during the period ending 60 days
after the Issue Date, (y) 115% during the period between 61 days and 180 days after the Issue Date and (z) 120% during the period between
180 days and 730 days after the Issue Date.
