8-K
Leatt Corp (LEAT)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 ___________________________
FORM 8-K
CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
May 11, 2023
LEATT CORP.(Exact name of registrant as specified in its charter)
| Nevada | 000-54693 | 20-2819367 |
|---|---|---|
| (State or other jurisdiction | (Commission | (IRS Employer |
| of incorporation) | File Number) | Identification No.) |
12 Kiepersol Drive, Atlas Gardens, Contermanskloof Road
Durbanville, Western Cape, South Africa
7550
\(Address of principal executive offices\) \(ZIP Code\)
Registrant’s telephone number, including area code:
+27-21-557-7257
Not Applicable (Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbols | Name of each exchange on which registered |
|---|---|---|
| — | — | — |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b -2 of this chapter).
Emerging growth company ☑
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☑
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On May 11, 2023, the Company issued a press release announcing its financial results for the quarter ended March 31, 2023. A copy of the press release, which the Company is furnishing to the Securities and Exchange Commission (the "Commission") is attached as Exhibit 99.1 and incorporated by reference herein.
In accordance with General Instruction B.2 of Current Report on Form 8-K, the information contained in this Report and the exhibit attached hereto shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall such information or such exhibits be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
ITEM 7.01 REGULATION FD DISCLOSURE.
The information set forth in Item 2.02 above is incorporated by reference herein.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits.
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release, dated May 11, 2023 |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| LEATT CORPORATION | ||
|---|---|---|
| Dated: May 11, 2023 | By: | /s/ Sean Macdonald |
| Sean Macdonald | ||
| Chief Executive Officer and Chief Financial Officer |
EXHIBIT INDEX
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release, dated May 11, 2023 |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
Leatt Corp.: Exhibit 99.1 - Filed by newsfilecorp.com
Leatt Corp Announces Results for the First Quarter 2023
CAPE TOWN, South Africa, (May 11, 2023) - Leatt Corporation (OTCQB: LEAT), a leading developer and marketer of protective equipment and ancillary products for many forms of sports, especially extreme high-velocity sports, today announced financial results for the first quarter ending March 31, 2023. All financial numbers are in U.S. dollars.
First Quarter 2023 and Recent Highlights
• Global revenues of $13.1 million, down 46%, compared to the record-breaking first quarter of 2022.
• Gross Profit increased to 44% as supply chain constraints continue to improve.
• Cash and cash equivalents increased 60% to $11.4 million, compared to $4.2 million in 2022.
• Cash provided by operating activities of $5.3 million for the first quarter of 2023.
• 2023 Design & Innovation Awards for Mono Suit MTB HydraDri 5.0 and MTB Enduro Helmet.
• Partnership with Orbea Leatt Speed Company Racing Team and Expansion into Marathon Endurance Segment.
CEO, Sean Macdonald, commented: "The wider MOTO and MTB industry continues to experience a variety of post-Covid issues including supply chain dynamics that have created challenging stocking and inventory issues. Although we continue to see consumer demand for Leatt products, the first quarter of 2023 was particularly challenging in terms of growth in comparison with the 2022 period. The first quarter of 2022 was by far the strongest quarter in our company's history in terms of revenue, which increased 88% over the prior comparable period. However, we are optimistic that the arrival of the spring riding season after the extended cold weather period will increase consumer participation in outdoor activities which will in turn stimulate growth as industry-wide inventory levels are digested and replenished at distributor and dealer levels. Our team remains enthusiastic about the future of our brand and Company as we work towards a return to delivering double-digit growth.
"Global revenues for the first quarter were $13.1 million, a decrease of 46% compared to the exceptionally strong first quarter of 2022. International revenues were $9.2 million, a decrease of 52% year-over-year, and sales in the U.S. were $3.9 million, a 26% decrease year-over-year. U.S. dealers continue to manage elevated stocking levels and adjust ordering patterns accordingly and we continue to actively grow and invest in our team of U.S. employee sales reps to reach a wider dealer base of both MOTO and MTB dealers throughout the country.
"Gross profit as a percentage of sales increased to 44% in the first quarter of 2023 as a result of a strong improvement in global and domestic shipping and logistics costs as supply chain constraints continue to improve and our focus on maintaining margins and strong brand positioning strategies remain in place. Net income in the first quarter was $1.02 million, a decrease of 76%, compared to the strong prior period. Total operating expenses increased by 8%, displaying our ability to control costs despite a global inflationary environment. Cash flow generated from operations was $5.3 million, as our team continues to focus on working capital management and cash flow during a challenging industry period, a testament to the resilience of our business model and team.
"We are very encouraged by the increased Leatt activity on both our own consumer direct channels and those of our international e-commerce partners. Increased Leatt.com consumer purchasing continued to grow during the first quarter of 2023, with consumer direct sales increasing by 10% as Leatt as a brand recognized globally for product excellence and design continues to gain momentum.
"Our team of sales and brand managers covering key established and emerging global markets are working closely with our distribution partners to facilitate a strong Leatt presence at the dealer level and react to fluid market conditions. We continue to focus on building and refining a strong multi-channel sales organization that has the ability to leverage our 'head-to-toe' offering of exceptional products."
Founder and Chairman, Dr. Christopher Leatt, remarked: "Our design and engineering team, in collaboration with our team riders, continues to deliver an exceptional product pipeline and product offerings that are recognized throughout the industry. We believe that this continued focus on excellence in product innovation will allow us to gain market share moving forward."
Financial Summary
Total revenues for the first quarter of 2023 were $13.1 million, down 46%, compared to $24.2 million for the first quarter of 2022 which was an exceptional quarter for the Company. Revenues for the first quarter of 2022 increased by 88% when compared to the prior year period.
The decrease in global revenues is attributable to a $6.1 million decrease in body armor sales, a $2.6 million decrease in helmet sales, a $1.7 million decrease in other products, parts, and accessories sales, and a $0.8 million decrease in neck brace sales. The impact of an exceptionally strong comparative quarter was compounded by industry-wide stocking dynamics that continue to affect distributor and dealer ordering levels.
Income from operations for the first quarter of 2023 was $1.4 million, down 75%, compared to $5.6 million for the first quarter of 2022.
Net income for the first quarter of 2023 was $1.02 million or $0.17 per basic and $0.16 per diluted share, down 76%, as compared to net income of $4.2 million, or $0.73 per basic and $0.68 per diluted share, for the first quarter of 2022.
Leatt continued to meet its working capital needs from cash on hand and internally generated cash flow from operations. At March 31, 2023, the Company had cash and cash equivalents of $11.4 million and a current ratio of 5.6:1.
Business Outlook
Mr. Macdonald added: "Despite the variety of post-Covid challenges, we continue to push hard and to focus on the areas that we can control-strong brand building, a global, multi-channel, professional sales organization, a pipeline of exceptional products, a plan to reach a much wider rider community and continued financial resilience. We believe that our strengths in these areas will overcome current industry stocking dynamics and product stock will get digested, rider participation will remain strong and we will return to our track record of double-digit growth.
"The increased activity on the leatt.com site, with consumer direct sales now representing 5% of global revenues, is a testament to the brand momentum that we have experienced over the past several years. This is a trend that our online global dealers continue to report-amidst constrained stocking ability at dealer and distributor levels, consumer demand and resultant sell-through of Leatt product categories remain healthy and well-positioned for future growth.
"Many of our product categories, such as our innovative helmets, knee braces, off-road motorcycle boots and mountain biking shoes, and other apparel, are still in their infancy and show potential to meet the needs of riders of all levels and contribute to exponential growth. We are particularly excited about our entries into much wider segments of the MTB and MOTO markets in the second half of the year. We believe that this continued expansion will appeal to large total addressable markets.
"Although the results of the first quarter of 2023 were particularly challenging in the context of distributor and dealer adjustments to ordering patterns as the industry continues to digest areas of elevated stocking levels due to post-Covid supply chain dynamics, we believe that the onset of the delayed spring season will mean strong consumer participation in outdoor activities as we look towards the second half of 2023."
Conference Call
The Company will host a conference call at 10:00 am ET on Thursday, May 11, 2023, to discuss the first quarter 2023 results.
Participants should dial in to the call ten minutes before the scheduled time, using the following numbers: 1-877-407-9716 (U.S.A) or +1-201-493-6779 (international) to access the call.
Audio Webcast
There will also be a simultaneous live webcast through the Company's website, www.leatt-corp.com. Participants should register on the website approximately ten minutes prior to the start of the webcast.
Replay
An audio replay of the conference call will be available for seven days and can be accessed by dialing 1-844-512-2921 (U.S.A) or +1-412-317-6671 (international) and using passcode 13738621.
For those unable to attend the call, a recording of the live webcast will be archived shortly following the event for 30 days on the Company's website.
About Leatt Corp
Leatt Corporation develops personal protective equipment and ancillary products for all forms of sports, especially extreme motorsports. The Leatt-Brace® is an award-winning neck brace system considered the gold standard for neck protection for anyone wearing a crash helmet in two-wheeled sports as a form of protection. It was designed for participants in extreme sports or riding motorcycles, bicycles, mountain bicycles, all-terrain vehicles, snowmobiles, and other vehicles. For more information, visit www.leatt.com.
Follow Leatt® on Facebook, Twitter, and Instagram.
Forward-looking Statements
This press release may contain forward-looking statements regarding Leatt Corporation (the "Company") within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact included herein are "forward-looking statements" including statements regarding the likelihood that the Company's double digit revenue growth will continue; the ability of the Company to continue to maintain its innovative and cutting-edge pipeline of branded products or to financially benefit from its sales and marketing efforts; the ability of the Company to meet increased customer demand; the financial outlook of the Company; the general ability of the Company to achieve its commercial objectives; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects," "anticipates," "seeks," "should," "could," "intends," or "projects" or similar expressions, and involve known and unknown risks and uncertainties. These statements are based upon the Company's current expectations and speak only as of the date hereof. Any indication of the merits of a claim does not necessarily mean the claim will prevail at trial or otherwise. Financial performance in one period does not necessarily mean continued or better performance in the future. The Company's actual results in any endeavor may differ materially and adversely from those expressed in any forward-looking statements as a result of various factors and uncertainties, which factors or uncertainties may be beyond our ability to foresee or control. Other risk factors include the status of the Company's common stock as a "penny stock" and those listed in other reports posted on The OTC Markets Group, Inc.
Contact:
Investor Relations
Investor-info@leatt.com
(917)-841-8371
[FINANCIAL TABLES TO FOLLOW]
LEATT CORPORATIONCONSOLIDATED BALANCE SHEETS
ASSETS
| March 31, 2023Unaudited | December 31, 2022 Audited | ||||
|---|---|---|---|---|---|
| Current Assets | |||||
| Cash and cash equivalents | 11,372,775 | $ | 7,102,945 | ||
| Accounts receivable, net | 9,529,007 | 12,839,597 | |||
| Inventory, net | 19,826,662 | 22,805,462 | |||
| Payments in advance | 1,015,125 | 1,047,137 | |||
| Deferred asset, net | 240,879 | 1,016,815 | |||
| Prepaid expenses and other current assets | 3,294,498 | 2,878,112 | |||
| Total current assets | 45,278,946 | 47,690,068 | |||
| Property and equipment, net | 3,151,033 | 3,104,336 | |||
| Operating lease right-of-use assets, net | 1,018,609 | 1,092,170 | |||
| Other Assets | |||||
| Deposits | 40,304 | 40,796 | |||
| Total Assets | 49,488,892 | $ | 51,927,370 | ||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||
| Current Liabilities | |||||
| Accounts payable and accrued expenses | 3,601,788 | $ | 6,011,390 | ||
| Notes payable, current | 109,436 | 108,398 | |||
| Operating lease liabilities, current | 272,974 | 280,743 | |||
| Deferred compensation, current | - | 400,000 | |||
| Income taxes payable | 3,487,567 | 3,382,700 | |||
| Short term loan, net of finance charges | 645,758 | 1,030,196 | |||
| Total current liabilities | 8,117,523 | 11,213,427 | |||
| Notes payable, net of current portion | 115,713 | 141,967 | |||
| Operating lease liabilities, net of current portion | 745,635 | 811,427 | |||
| Deferred tax liability, net | 66,200 | 66,200 | |||
| 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, 5,971,340 and 5,971,340 shares issued and outstanding | 130,309 | 130,309 | |||
| Additional paid - in capital | 10,645,497 | 10,645,497 | |||
| Accumulated other comprehensive loss | (1,354,892 | ) | (1,081,143 | ) | |
| Retained earnings | 31,019,907 | 29,996,686 | |||
| Total stockholders' equity | 40,443,821 | 39,694,349 | |||
| Total Liabilities and Stockholders' Equity | 49,488,892 | $ | 51,927,370 |
All values are in US Dollars.
The accompanying notes are an integral part of these consolidated financial statements.
LEATT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
| Three Months EndedMarch 31 | ||||
|---|---|---|---|---|
| 2023 Unaudited | 2022 Unaudited | |||
| Revenues | 13,079,343 | $ | 24,228,108 | |
| Cost of Revenues | 7,306,573 | 14,601,018 | ||
| Gross Profit | 5,772,770 | 9,627,090 | ||
| Product Royalty Income | 13,136 | 78,839 | ||
| Operating Expenses Salaries and wages | 1,241,436 | 1,297,962 | ||
| Commissions and consulting expenses | 96,324 | 162,586 | ||
| Professional fees | 337,243 | 259,115 | ||
| Advertising and marketing | 841,094 | 613,890 | ||
| Office lease and expenses | 150,240 | 207,021 | ||
| Research and development costs | 584,991 | 533,700 | ||
| Bad debt expense | 49,395 | 18,324 | ||
| General and administrative expenses | 818,179 | 711,752 | ||
| Depreciation | 279,810 | 276,924 | ||
| Total operating expenses | 4,398,712 | 4,081,274 | ||
| Income from Operations | 1,387,194 | 5,624,655 | ||
| Other Income (Expenses) | ||||
| Interest and other expenses, net | (20,924 | ) | 6,157 | |
| Total other income (expenses) | (20,924 | ) | 6,157 | |
| Income Before Income Taxes | 1,366,270 | 5,630,812 | ||
| Income Taxes | 343,049 | 1,408,057 | ||
| Net Income Available to Common Shareholders | 1,023,221 | $ | 4,222,755 | |
| Net Income per Common Share | ||||
| Basic | 0.17 | $ | 0.73 | |
| Diluted | 0.16 | $ | 0.68 | |
| Weighted Average Number of Common Shares Outstanding | ||||
| Basic | 5,971,340 | 5,765,461 | ||
| Diluted | 6,279,677 | 6,246,325 | ||
| Comprehensive Income | ||||
| Net Income | 1,023,221 | $ | 4,222,755 | |
| Other comprehensive income, net of 0 and 0 deferred income taxes in 2023 and 2022 | ||||
| Foreign currency translation | (273,749 | ) | 257,734 | |
| Total Comprehensive Income | 749,472 | $ | 4,480,489 |
All values are in US Dollars.
The accompanying notes are an integral part of these consolidated financial statements.
LEATT CORPORATION CONSOLIDATED STATEMENTS OF CASHFLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022
| 2023 | 2022 | |||||
|---|---|---|---|---|---|---|
| Cash flows from operating activities | ||||||
| Net income | 1,023,221 | 4,222,755 | ||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||
| Depreciation | $ | 279,810 | $ | 276,924 | ||
| Stock-based compensation | - | 202,770 | ||||
| Bad debts reserve | 41,284 | 14,526 | ||||
| Inventory reserve | 182,529 | 13,656 | ||||
| Deferred asset allowance | (26,827 | ) | - | |||
| (Gain) loss on sale of property and equipment | 13 | (21,590 | ) | |||
| (Increase) decrease in: | ||||||
| Accounts receivable | 3,269,306 | (5,097,249 | ) | |||
| Deferred asset | 802,763 | - | ||||
| Inventory | 2,796,271 | 1,151,008 | ||||
| Payments in advance | 32,012 | 68,865 | ||||
| Prepaid expenses and other current assets | (416,386 | ) | 277,927 | |||
| Deposits | 492 | (16,411 | ) | |||
| Increase (decrease) in: | ||||||
| Accounts payable and accrued expenses | (2,409,602 | ) | (3,207,604 | ) | ||
| Income taxes payable | 104,867 | 1,407,703 | ||||
| Deferred compensation | (400,000 | ) | 20,000 | |||
| Net cash provided by (used in) operating activities | 5,279,753 | (686,720 | ) | |||
| Cash flows from investing activities | ||||||
| Capital expenditures | (368,497 | ) | (260,912 | ) | ||
| Proceeds from sale of property and equipment | - | 35,848 | ||||
| Increase in short-term investments, net | - | (1 | ) | |||
| Net cash used in investing activities | (368,497 | ) | (225,065 | ) | ||
| Cash flows from financing activities | ||||||
| Issuance of common stock | - | 255,800 | ||||
| Repayment of notes payable to bank | (25,216 | ) | (14,394 | ) | ||
| Repayment of short-term loan, net | (384,438 | ) | (313,958 | ) | ||
| Net cash used in financing activities | (409,654 | ) | (72,552 | ) | ||
| Effect of exchange rates on cash and cash equivalents | (231,772 | ) | 207,577 | |||
| Net increase (decrease) in cash and cash equivalents | 4,269,830 | (776,760 | ) | |||
| Cash and cash equivalents - beginning of period | 7,102,945 | 5,022,436 | ||||
| Cash and cash equivalents - end of period | $ | 11,372,775 | $ | 4,245,676 | ||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||
| Cash paid for interest | $ | 21,135 | $ | 16,133 | ||
| Cash paid for income taxes | $ | 237,086 | $ | 354 | ||
| Other noncash investing and financing activities | ||||||
| Common stock issued for services | $ | - | $ | 202,770 |
The accompanying notes are an integral part of these consolidated financial statements.