Leatt Corp 10-Q for FY2022 Q3

Leatt Corp (LEAT)

10-Q 2022-11-09 For: 2022-09-30

Added on April 06, 2026

About this 10-Q

Leatt Corp filed this 10-Q on November 9, 2022, covering the quarter ended September 30, 2022 (FY2022 Q3).

Headline figures

Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $23.26M; up 5.2% from $22.1M a year earlier
Net income: $4.09M; down 4.7% from net income of $4.29M a year earlier
Diluted EPS: $0.65; down 5.8% from $0.69 a year earlier

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Nevada	20-2819367
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Class of Securities	Shares Outstanding
Common Stock, $0.001 par value	5,826,892

PART I	FINANCIAL INFORMATION	3

ITEM 1.	FINANCIAL STATEMENTS.	3
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.	13
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.	26
ITEM 4.	CONTROLS AND PROCEDURES.	26

PART II	OTHER INFORMATION	27

ITEM 1.	LEGAL PROCEEDINGS.	27
ITEM 1A.	RISK FACTORS.	27
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.	27
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES.	27
ITEM 4.	MINE SAFETY DISCLOSURES.	27
ITEM 5.	OTHER INFORMATION.	27
ITEM 6.	EXHIBITS.	27

		September 30, 2022			December 31, 2021
		Unaudited			Audited
Current Assets
Cash and cash equivalents	$	4,835,268		$	5,022,436
Short-term investments		58,267			58,262
Accounts receivable, net		22,504,973			12,660,936
Inventory, net		25,021,494			21,081,481
Payments in advance		1,201,454			1,610,640
Prepaid expenses and other current assets		1,332,503			4,178,427
Total current assets		54,953,959			44,612,182

Property and equipment, net		3,066,304			3,128,086
Operating lease right-of-use assets, net		1,163,782			1,393,213

Other Assets
Deposits		40,141			33,339

Total Assets	$	59,224,186		$	49,166,820

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Accounts payable and accrued expenses	$	12,481,062		$	14,617,671
Note payable, current		89,739			83,270
Operating lease liabilities, current		286,564			318,621
Income taxes payable		4,812,039			2,738,818
Short term loan, net of finance charges		142,936			975,025
Total current liabilities		17,812,340			18,733,405

Deferred compensation		380,000			320,000
Note payable, net of current portion		124,690			189,249
Operating lease liabilities, net of current portion		877,218			1,074,592
Deferred tax liability, net		228,600			228,600

Commitments and contingencies

Stockholders' Equity
Preferred stock, $.001 par value, 1,120,000 shares
authorized, 120,000 shares issued and outstanding		3,000			3,000
Common stock, $.001 par value, 28,000,000 shares
authorized, 5,826,892 and 5,673,683 shares issued
and outstanding		130,280			130,162
Additional paid - in capital		9,929,779			9,230,847
Accumulated other comprehensive loss		(1,335,752	)		(779,268	)
Retained earnings		31,074,031			20,036,233
Total stockholders' equity		39,801,338			28,620,974

Total Liabilities and Stockholders' Equity	$	59,224,186		$	49,166,820

		Three Months Ended						Nine Months Ended
		September 30						September 30
		2022			2021			2022			2021
		Unaudited			Unaudited			Unaudited			Unaudited

Revenues	$	23,258,752		$	22,100,827		$	65,425,170		$	49,297,861

Cost of Revenues		13,122,213			12,571,692			38,017,469			27,523,233

Gross Profit		10,136,539			9,529,135			27,407,701			21,774,628

Product Royalty Income		74,411			58,246			200,221			141,535

Operating Expenses
Salaries and wages		1,274,554			975,676			3,897,693			2,813,024
Commissions and consulting expenses		143,691			144,837			456,911			581,485
Professional fees		166,537			510,713			505,305			971,969
Advertising and marketing		1,166,804			633,915			2,526,808			1,669,648
Office lease and expenses		145,499			99,314			546,398			273,887
Research and development costs		501,604			468,922			1,516,147			1,319,183
Bad debt expense		97,325			42,197			101,680			56,290
General and administrative expenses		977,796			691,696			2,399,899			1,830,055
Depreciation		264,923			265,777			829,790			744,713
Total operating expenses		4,738,733			3,833,047			12,780,631			10,260,254

Income from Operations		5,472,217			5,754,334			14,827,291			11,655,909

Other Income
Interest and other expenses, net		7,784			1,413			5,592			1,354
Total other income		7,784			1,413			5,592			1,354

Income Before Income Taxes		5,480,001			5,755,747			14,832,883			11,657,263

Income Taxes		1,391,878			1,467,936			3,795,085			2,899,966

Net Income Available to Common Shareholders	$	4,088,123		$	4,287,811		$	11,037,798		$	8,757,297

Net Income per Common Share
Basic	$	0.70		$	0.79		$	1.90		$	1.61
Diluted	$	0.65		$	0.69		$	1.77		$	1.42

Weighted Average Number of Common Shares Outstanding
Basic		5,826,892			5,461,933			5,802,771			5,443,780
Diluted		6,261,160			6,190,748			6,237,039			6,172,596

Comprehensive Income
Net Income	$	4,088,123		$	4,287,811		$	11,037,798		$	8,757,297
Other comprehensive income, net of $0 deferred income
taxes in 2022 and 2021
Foreign currency translation		(431,436	)		(146,285	)		(556,484	)		(113,744	)

Total Comprehensive Income	$	3,656,687		$	4,141,526		$	10,481,314		$	8,643,553

										Accumulated
										Other
	Preferred Stock A			Common Stock				Additional		Comprehensive			Retained
	Shares		Amount	Shares		Amount		Paid - In Capital		Loss			Earnings		Total

Balance, January 1, 2022	120,000	$	3,000	5,673,683	$	130,162	$	9,230,847	$	(779,268	)	$	20,036,233	$	28,620,974

Compensation cost recognized in connection
with stock options	-		-	-		-		82,530		-			-		82,530

Exercise of stock options	-		-	118,000		118		255,682		-			-		255,800

Options exercised on a cashless basis	-		-	35,209		-		-		-			-		-

Restricted stock awards	-		-	-		-		360,720		-			-		360,720

Net income	-		-	-		-		-		-			11,037,798		11,037,798

Foreign currency translation adjustment	-		-	-		-		-		(556,484	)		-		(556,484	)

Balance, September 30, 2022	120,000	$	3,000	5,826,892	$	130,280	$	9,929,779	$	(1,335,752	)	$	31,074,031	$	39,801,338

		2022			2021

Cash flows from operating activities
Net income	$	11,037,798		$	8,757,297
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation		829,790			744,713
Stock-based compensation		443,250			55,020
Bad debts reserve		81,305			32,423
Inventory reserve		148,901			51,840
(Gain) loss on sale of property and equipment		(23,047	)		5,767
(Increase) decrease in:
Accounts receivable		(9,925,342	)		(10,023,484	)
Inventory		(4,088,914	)		(5,060,128	)
Payments in advance		409,186			(952,067	)
Prepaid expenses and other current assets		2,845,924			(2,212,611	)
Income tax refunds receivable		-			2,964
Deposits		(6,802	)		146
Increase (decrease) in:
Accounts payable and accrued expenses		(2,136,609	)		8,412,521
Income taxes payable		2,073,221			1,271,016
Deferred compensation		60,000			60,000
Net cash provided by operating activities		1,748,661			1,145,417

Cash flows from investing activities
Capital expenditures		(865,204	)		(892,658	)
Proceeds from sale of property and equipment		43,469			-
Increase in short-term investments, net		(5	)		(4	)
Net cash used in investing activities		(821,740	)		(892,662	)

Cash flows from financing activities
Issuance of common stock		255,800			-
Repayment of note payable to bank		(58,090	)		-
Repayment of short-term loan, net		(832,089	)		(534,948	)
Net cash used in financing activities		(634,379	)		(534,948	)

Effect of exchange rates on cash and cash equivalents		(479,710	)		(98,178	)

Net decrease in cash and cash equivalents		(187,168	)		(380,371	)

Cash and cash equivalents - beginning of period		5,022,436			2,967,042

Cash and cash equivalents - end of period	$	4,835,268		$	2,586,671

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest	$	37,427		$	21,741
Cash paid for income taxes	$	1,721,864		$	1,659,698

Other noncash investing and financing activities
Common stock issued for services	$	443,250		$	55,020

		2022		2021
Assets
Operating lease ROU assets	$	1,163,782	$	1,393,213

Liabilities
Operating lease liabilities, current	$	286,564	$	318,621
Operating lease liabilities, net of current portion		877,218		1,074,592
Total operating lease liabilities	$	1,163,782	$	1,393,213

Supplemental disclosure	September 30,	December 31,
Supplemental disclosure	2022	2021
	2022	2021
Weighted average remaining lease term	5 years	5 years
Weighted average discount rate	3.75%	4.08%

Year ended December 31,	Amounts under Operating Leases
Remaining 2022	$	74,879
2023		291,313
2024		281,663
2025		290,098
2026		298,791
2027		25,455
Total minimum lease payments	$	1,262,199
Less: amount representing interest	$	(98,417	)
Total operating lease liabilities	$	1,163,782

	Nine months			Nine months
	ended September		ended September
		30, 2022		30, 2021
Cash paid for amounts included in the measurement of lease liabilities	$	262,832	$	179,129
Right-of-use assets obtained in exchange for lease obligations	$	41,163	$	1,418,719

	September			December 31,
		30, 2022		2021
Liabilities
Note payable, current	$	89,739	$	83,270
Note payable, net off current portion		124,690		189,249
	$	214,429	$	272,519

Year ended December 31,	Amounts under Notes Payable
Remaining 2022	$	22,138
2023		90,535
2024		93,790
2025		7,966
	$	214,429

		Nine months ended September 30,
		2022	% of Revenues		2021	% of Revenues
Consumer and athlete direct revenues	$	1,928,171	3%	$	1,519,454	3%
Dealer direct revenues		13,781,437	21%		14,401,624	29%
International distributor revenues		49,715,562	76%		33,376,783	68%
	$	65,425,170	100%	$	49,297,861	100%

		Three Months Ended September 30,				Increase (Decrease)		Percentage Increase (Decrease)
Item		2022		2021		Increase (Decrease)		Percentage Increase (Decrease)

REVENUES	$	23,258,752	$	22,100,827	$	1,157,925		5%
COST OF REVENUES		13,122,213		12,571,692	$	550,521		4%
GROSS PROFIT		10,136,539		9,529,135	$	607,404		6%
PRODUCT ROYALTY INCOME		74,411		58,246	$	16,165		28%
OPERATING EXPENSES
Salaries and Wages		1,274,554		975,676	$	298,878		31%
Commissions and Consulting		143,691		144,837	$	(1,146	)	-1%
Professional Fees		166,537		510,713	$	(344,176	)	-67%
Advertising and Marketing		1,166,804		633,915	$	532,889		84%
Office Lease and Expenses		145,499		99,314	$	46,185		47%
Research and Development Costs		501,604		468,922	$	32,682		7%
Bad Debt Expense		97,325		42,197	$	55,128		131%
General and Administrative		977,796		691,696	$	286,100		41%
Depreciation		264,923		265,777	$	(854	)	0%
Total Operating Expenses		4,738,733		3,833,047	$	905,686		24%
INCOME FROM OPERATIONS		5,472,217		5,754,334	$	(282,117	)	-5%
Other Income		7,784		1,413	$	6,371		451%
INCOME BEOFRE INCOME TAXES		5,480,001		5,755,747	$	(275,746	)	-5%
Income Taxes		1,391,878		1,467,936	$	(76,058	)	-5%
NET INCOME	$	4,088,123	$	4,287,811	$	(199,688	)	-5%

		Three months ended September 30,
		2022	% of Revenues		2021	% of Revenues
Neck braces	$	1,894,839	8%	$	2,708,364	12%
Body armor		10,519,065	45%		12,365,185	56%
Helmets		4,359,829	19%		2,320,111	11%
Other products, parts and accessories		6,485,019	28%		4,707,167	21%
	$	23,258,752	100%	$	22,100,827	100%

		Nine months ended September 30,
		2022	% of Revenues		2021	% of Revenues
Neck braces	$	4,741,028	7%	$	6,224,054	13%
Body armor		32,513,336	50%		28,309,938	57%
Helmets		12,426,220	19%		4,886,324	10%
Other products, parts and accessories		15,744,586	24%		9,877,545	20%
	$	65,425,170	100%	$	49,297,861	100%

Date: November 9, 2022	LEATT CORPORATION

	By: /s/ Sean Macdonald
	Sean Macdonald
	Chief Executive Officer and Chief Financial Officer
	(Principal Executive, Financial and Accounting Officer)

1.	I have reviewed this quarterly report on Form 10-Q of Leatt Corporation;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

		Nine Months Ended September 30,				Increase (Decrease)		Percentage Increase (Decrease)
Item		2022		2021		Increase (Decrease)		Percentage Increase (Decrease)

REVENUES	$	65,425,170	$	49,297,861	$	16,127,309		33%
COST OF REVENUES		38,017,469		27,523,233	$	10,494,236		38%
GROSS PROFIT		27,407,701		21,774,628	$	5,633,073		26%
PRODUCT ROYALTY INCOME		200,221		141,535	$	58,686		41%
OPERATING EXPENSES
Salaries and Wages		3,897,693		2,813,024	$	1,084,669		39%
Commissions and Consulting		456,911		581,485	$	(124,574	)	-21%
Professional Fees		505,305		971,969	$	(466,664	)	-48%
Advertising and Marketing		2,526,808		1,669,648	$	857,160		51%
Office Lease and Expenses		546,398		273,887	$	272,511		99%
Research and Development Costs		1,516,147		1,319,183	$	196,964		15%
Bad Debt Expense		101,680		56,290	$	45,390		81%
General and Administrative		2,399,899		1,830,055	$	569,844		31%
Depreciation		829,790		744,713	$	85,077		11%
Total Operating Expenses		12,780,631		10,260,254	$	2,520,377		25%
INCOME FROM OPERATIONS		14,827,291		11,655,909	$	3,171,382		27%
Other Income		5,592		1,354	$	4,238		313%
INCOME BEOFRE INCOME TAXES		14,832,883		11,657,263	$	3,175,620		27%
Income Taxes		3,795,085		2,899,966	$	895,119		31%
NET INCOME	$	11,037,798	$	8,757,297	$	2,280,501		26%

Exhibit No.	Description

31.1	Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certifications of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certifications of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certifications of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101*	Interactive data files pursuant to Rule 405 of Regulation S-T

101.INS	Inline XBRL Instance Document-the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document

101.SCH	Inline XBRL Taxonomy Extension Schema Document

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Exhibit No.	Description

31.1	Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certifications of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certifications of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certifications of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101*	Interactive data files pursuant to Rule 405 of Regulation S-T

101.INS	Inline XBRL Instance Document-the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document

101.SCH	Inline XBRL Taxonomy Extension Schema Document

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

	/s/ Sean Macdonald
	Sean Macdonald
	Chief Executive Officer
	(Principal Executive Officer)

	/s/ Sean Macdonald
	Sean Macdonald
	Chief Financial Officer
	(Principal Financial and Accounting Officer)