Maturities of lease liabilities as of June 30, 2021 were as follows:

Accounts receivable consist of amounts due to the period of coverage over six months. The short-term loanCompany from normal business activities. Credit is payable in five payments of $1,453 at a 3.397% annual interest rate.granted to substantially all distributors on an unsecured basis. The Company repaidcontinuously monitors collections and payments from customers and maintains an allowance for doubtful accounts receivable based upon historical experience and any specific customer collection issues that have been identified. The allowance of doubtful accounts was $113,648 at June 30, 2021 and $101,885 at December 31, 2020.

Special Note Regarding Forward Looking Statements

This report contains forward-looking statements that are contained principally in the sections entitled “Our"Our Business,” “Risk" "Risk Factors,”" and “Management’s"Management's Discussion and Analysis of Financial Condition and Results of Operations.”" These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performancesperformance or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, the factors described in the section captioned “Risk Factors”"Risk Factors" in our latest annual report on Form 10-K filed with the SEC. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “would”"anticipates," "believes," "could," "estimates," "expects," "intends," "may," "plans," "potential," "predicts," "projects," "should," "would" and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. These forward-looking statements include, among other things, statements relating to:

• •our expectations regarding growth in the motor sports market;

• •our expectation regarding increasing demand for protective equipment used in the motor sports market;

• •our belief that we will be able to effectively compete with our competitors and increase our market share;

• •our expectations with respect to increased revenue growth and our ability to achieve profitability resulting from increases in our production volumes; and

• •our future business development, results of operations and financial condition.

Also, forward-looking statements represent our estimates and assumptions only as of the date of this quarterly report. You should read this quarterly report and the documents that we reference and filed as exhibits to the quarterly report completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.

Use of Certain Defined Terms

Except as otherwise indicated by the context, references in this quarterly report to:

• “

  •"Leatt,” “we,” “us,” “our,”" "we," "us," "our," the “Registrant”"Registrant" or the “Company”"Company" are to the combined business of Leatt Corporation, a Nevada corporation, its South African branch, Leatt SA, and its direct, wholly-owned subsidiaries, Two Eleven and Three Eleven;

• “

  •"Leatt SA”SA" are to the Company’sCompany's branch office known as ‘Leatt'Leatt Corporation (Incorporated in the State of Nevada)’' incorporated under the laws of South Africa with registration number: 2007/032780/10;

• “

  •"Leatt USA”USA" are to Leatt USA, LLC, a Nevada Limited Liability Company;

• “PRC”

  •"PRC", and “China”"China" are to the People’sPeople's Republic of China;

• “

  •"Two Eleven”Eleven" refers to Two Eleven Distribution, LLC, a California limited liability company;

• “Nevada Limited Liability Company;

  •"Three Eleven”Eleven" are to Three Eleven Distribution (Pty) Limited, a South African Company;

• “

  •"Securities Act”Act" are to the Securities Act of 1933, as amended, and to “Exchange Act”"Exchange Act" are to Securities Exchange Act of 1934, as amended;

• “

  •"South Africa”Africa" are to the Republic of South Africa;

• “

  •"U.S. dollar,” “$”" "$" and “US$”"US$" are to the legal currency of the United States.

• “

  •"Xceed Holdings”Holdings" refers to Xceed Holdings CC., a close corporation incorporated under the laws of South Africa, and wholly-ownedwholly- owned by The Leatt Family Trust, of which Dr. Christopher J. Leatt, the Company’sCompany's chairman, is a Trustee and Beneficiary; and

• “ZAR”

  •"ZAR" refers to the South African Rand, the legal currency of South Africa. For all ZAR amounts reported, the dollar amount has been calculated on the basis that $1 = ZAR13.515614.3121, for its SeptemberJune 30, 20172021 balance sheet.

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We were incorporated in the State of Nevada on March 11, 2005, under the name Treadzone, Inc. We were a shell company with little or no operations until March 1, 2006, when we acquired the exclusive global manufacturing, distribution, sale and use rights to the Leatt-Brace®, pursuant to a license agreement between the Company and Xceed Holdings, a company controlled by the Company's Chairman and founder, Dr. Christopher Leatt. On May 25, 2005, we changed our name to Leatt Corporation in connection with our anticipated acquisition of the Leatt-Brace® rights. Leatt designs, develops, markets and distributes personal protective equipment for participants in all forms of motor sports and leisure activities, including riders of motorcycles, bicycles, snowmobiles and ATVs. The Company sells its products to customers worldwide through a global network of distributors and retailers. Leatt also acts as the original equipment manufacturer for neck braces sold by other international brands.

The Company’sCompany's flagship products are based on the Leatt-Brace® system, a patented injection molded neck protection system owned by Xceed Holdings, designed to prevent potentially devastating injuries to the cervical spine and neck. The Company has the exclusive global manufacturing, distribution, sale and use rights to the Leatt-Brace®, pursuant to a license agreement between the Company and Xceed Holdings, a company owned and controlled by the Company’sCompany's Chairman and founder, Dr. Christopher Leatt. The Company also has the right to use apparatus embodying, employing and containing the Leatt-Brace® technology and has designed, developed, marketed and distributed other personal protective equipment using this technology, as well as its own developed technology, including the Company’sCompany's new body protection products which it markets under the Leatt Protection Range brand.

The Company’sCompany's research and development efforts are conducted at its research facilities, located at its executive headquarters in Cape Town, South Africa. The Company employs 43 full-time employees who are dedicated exclusively to research, development, and testing. The Company also utilizes consultants, academic institutions and engineering companies as independent contractors or consultants, from time to time, to assist it with its research and development efforts. Leatt products have been tested and reviewed internally and by external bodies. All Leatt products are compliant with applicable European Union directives, or CE certified, where appropriate. Certain products, suchDepending on the market we have other certifications outside of CE. For the US market our motorcycle helmets comply with the DOT (FMVSS 218) helmet safety standard and our bicycle helmet complies with EN1078, as well as CPSC 1203. Our downhill specific bicycle helmets also comply with ASTM F1952. For our Australian Market our bicycle helmet complies with AS/NZS 2063. For the UK market our motorcycle helmets comply with ACU Gold and our GPX 3.5 helmet with JIS T 8133 for the Japanese Market. We are currently in the process of applying to certify our Moto GPX was tested by BMW Motorrad (Germany)3.5 helmet and reviewed by KTM (Austria).latest helmet model, Moto 7.5, to the CCC standard in China and the NBR 7471 standard in Brazil.

Our products are predominately manufactured in China under outsource manufacturing arrangements with third-party manufacturers located there.there subject to agreed standard terms. The Company utilizes outside consultants and its own employees to ensure the quality of its products through regular on-site product inspections. Products purchased throughsold to our international salescustomers are usually shipped directly from our manufacturers’consolidation warehouse or manufacturers' warehouses or points of dispatch to customers or their import agents.

Leatt earns revenues through the sale of its products through approximately 6055 distributors worldwide, who in turn sell its products to retailers. Leatt distributors are required to follow certain standard business terms and guidelines for the sale and distribution of Leatt products. Two Eleven and Leatt SA directly distribute Leatt products to retailersdealers in the United States and South Africa, respectively. Additionally, Two Eleven sells products directly to customers via Leatt’s online store.

Principal Factors Affecting Our Financial Performance

We believe that the following factors will continue to affect our financial performance:

• •Global Economic Fragility–- The ongoing turmoil in the global economy, especially in the U.S., Asia and Europe, may have an impact on our business and our financial condition, and we may face challenges if economic conditions do not improve. These economic conditions may impact levels of consumer spending which have deteriorated and may remain depressed forin the foreseeable future. If demand for our products fluctuates as a result of these economic conditions or otherwise, our revenue and gross margin could be harmed.

•Trade Restrictions - We engage in international manufacturing and sales which exposes us to trade restrictions and disruptions that could harm our business and competitive position. Most of our products are manufactured in China, and the U.S. administration has announced tariffs on certain product imported into the United States with China as the country of origin. While these tariffs have not had a significant impact on the shipment of our products to international markets as at June 30, 2021, we believe that the future imposition of, or significant increases in, the level of tariffs, custom duties, export quotas and other barriers and restrictions by the U.S. on China or other countries could disrupt our supply chain, increase the cost of our raw materials and therefore our pricing, and impose the burdens of compliance with foreign trade laws, any of which could potentially affect our bottom line and sales. While we are in continuous discussions with our manufacturers to ensure there are contingencies in place, we cannot assure you that we will not be adversely affected by changes in the trade laws of foreign jurisdictions where we sell and seek to sell our products.

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• Fuel Prices–- Significant fluctuations in fuel prices could have both a positive and negative effect on our business and operations. A significant portion of our revenue is derived from international sales and significant fluctuations in world fuel prices could significantly increase the price of shipping or transporting our products which we may not be able to pass on to our customers. On the other hand, fluctuations in fuel prices lead to higher commuter costs which may encourage the increased use of motorcycles and bicycles as alternative modes of transportation and lead to an increase in the market for our protection products.

• Product Liability Litigation –- We face an inherent business risk of exposure to product liability claims arising from the claimed failure of our products to help prevent the types of personal injury or death against which they are designed to help protect. Therefore, we have acquired very costly product liability insurance worldwide. We have not experienced any material uninsured losses due to product liability claims, but it is possible that we could experience material losses in the future. After a two-week trial in the United States District Court for the Northern District of Ohio (Eastern) ending on April 17, 2014, a federal jury returned a defense verdict for the Company in the first Leatt- Brace® product liability lawsuit to be tried in the United States. The plaintiffs in that case had alleged that defective product design and failure to warn had caused a motocross rider to suffer multiple mid-thoracic spine fractures, causing immediate and permanent paraplegia, when he crashed at a relatively low speed on February 13, 2011. When the accident occurred, he was wearing a helmet and other safety gear from several different companies, including the Company's acclaimed Leatt-Brace®Leatt- Brace®. The Company produced evidence at trial showing that his thoracic paraplegia was an unavoidable consequence of his fall, not the result of wearing a Leatt- Brace®, and that the neck brace likely saved his life (or saved him from quadriplegia) by preventing cervical spine injury. The Company had maintained from the onset that this and a small handful of other lawsuits are without merit and that it would vigorously defend itself in each case. In this case, the plaintiffs subsequently appealed the court’scourt's decision and the parties reached an amicable settlement. Although we carry product liability insurance, a successful claim brought against us could significantly harm our business and financial condition and have an adverse impact on our ability to renew our product liability insurance or secure new coverage.

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  • Protection of Intellectual Property–- We believe that the continued success of our business is dependent on our intellectual property portfolio consisting of globally registered trademarks, design patents and utility patents related to the Leatt-Brace®Leatt -Brace®. We believe that a loss of these rights would harm or cause a material disruption to our business and, our corporate strategy is to aggressively take legal action against any violators of our intellectual property rights, regardless of where they may be. From time to time, we have had to enforce our intellectual property rights through litigation, and we may be required to do so in the future. Such litigation may result in substantial costs and could divert resources and management attention from the operations of our business.
    
    

  • Fluctuations in Foreign Currencies –- We are exposed to foreign exchange risk as our revenues and consolidated results of operations may be affected by fluctuations in foreign currency as we translate these currencies into U.S. dollars when we consolidate our financial results. While our reporting currency is the U.S. Dollar, a portion of our consolidated revenues are denominated in South African Rand, or ZAR, certain of our assets are denominated in ZAR, and our research and marketing operations in South Africa utilize South African labor sources. A decrease in the value of the U.S. dollar in relation to the ZAR could increase our cost of doing business in South Africa. If the ZAR depreciates against the U.S. Dollar, the value of our ZAR revenues, earnings and assets as expressed in our U.S. Dollar financial statements will decline. We have not entered into any hedging transactions in an effort to reduce our exposure to foreign exchange risk. Furthermore, since 64%61% of our sales is derived outside the U.S., where the U.S. dollar is not the primary currency, significant fluctuations in exchange rates such as the strengthening of the dollar versus our customers’customers' local currency can adversely affect our ability to remain competitive in those areas.

  • Natural or Man-made Catastrophic Events - We are exposed to natural or man-made catastrophic events that may disrupt our business and may reduce consumer demand for our products. A disruption or failure of our systems or operations in the event of a natural disaster, health pandemic, such as the outbreak and global spread of COVID-19 or the coronavirus, or a man-made catastrophic event could cause delays in completing sales, continuing production or performing other critical functions of our business, particularly if a catastrophic event occurred at our primary manufacturing locations or our distributor locations worldwide. Any of these events could severely affect our ability to conduct normal business operations and, as a result, our operating results could be adversely affected. There may also be secondary impacts that are unforeseeable, such as impacts on our consumers and on consumer purchasing behavior, which could cause delays in new orders, delays in completing sales or even order cancellations.  As the COVID-19 pandemic continues to evolve, we believe the extent of the impact to our operations will be primarily driven by the severity and duration of the pandemic, the pandemic's impact on the U.S. and global economies and the timing, scope and effectiveness of federal, state and local governmental responses to the pandemic. Due to strong consumer demand for outdoor product categories, we did not see any significant material negative impact of COVID-19 on the Company's results of operations for the quarter ended June 30, 2021.  We remain cautiously optimistic that ongoing efforts to increase the availability of new COVID-19 vaccines worldwide will mitigate the spread of the virus throughout Europe and the U.S. (our largest markets) and bring about an end to global quarantines.  The continued mutation and spread of the virus, economic headwinds caused by global quarantines, or the occurrence of any other catastrophic events, could have a negative impact on our sales revenue for the coming periods and beyond.

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  • Rising Freight Shipping and Logistics Costs - The economic disruption resulting from the COVID-19 pandemic has had an adverse impact on the global freight shipping industry and on the cost of shipping our products to our global network of distributors, dealers and customers, or their import agents, from warehouses in China. Over the past year, the strong rise in demand for Chinese exports has outpaced the availability of containers in Asia, creating a container shortage and huge backlogs in many freight markets around the world, including the US, the Middle East, and East Asia. These container shortages at Asian ports have exacerbated supply bottlenecks and further increased shipping costs, by up to 400% in some regions, as companies in Asia are reported to be paying premium rates to get containers back. Further compounding matters is the shortage of dockworkers and truck drivers available to load and unload containers at ports in Europe and the United States and to move them to other locations, resulting in congested ports.  We are working closely with our supply chain management in Asia, our logistics service providers, and our freight forwarders, to streamline our global shipping and logistics processes, to mitigate any disruption to our operations.  Continued disruption and pricing volatility in the global shipping and logistics industry could have a negative impact on our results of operations for the coming periods and beyond.

  Results of Operations

  The following summary of our results of operations should be read in conjunction with our financial statements and the notes thereto for the three- and nine-monthsix-month periods ended SeptemberJune 30, 20172021 and 20162020 included herein.

  Comparison of Three Months Ended SeptemberJune 30, 2017 compared to the Three Months Ended September 30, 20162021 and 2020

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  The following table summarizes the results of our operations during the three-month periods ended SeptemberJune 30, 20172021 and 20162020 and provides information regarding the dollar and percentage increase or (decrease) in such periods:

  		Three Months Ended September 30,										Percentage
  		2017			2016				$ Increase			Increase
  Item									(Decrease)			(Decrease)
  REVENUES	$	5,455,088		$	4,631,557			$	823,531			18%
  COST OF REVENUES		2,914,008			2,183,072			$	730,936			33%
  GROSS PROFIT		2,541,080			2,448,485			$	92,595			4%
  PRODUCT ROYALTY INCOME		39,396			16,224			$	23,172			143%
  OPERATING EXPENSES
  Salaries and Wages		562,803			548,829			$	13,974			3%
  Commissions and Consulting		109,217			144,480			$	(35,263	)		-24%
  Professional Fees		88,901			110,700			$	(21,799	)		-20%
  Advertising and Marketing		449,176			502,522			$	(53,346	)		-11%
  Office Rent and Expenses		68,423			66,593			$	1,830			3%
  Research and Development Costs		321,443			402,924			$	(81,481	)		-20%
  Bad Debt Expense		7,956			16,216			$	(8,260	)		-51%
  General and Administrative		419,052			505,194			$	(86,142	)		-17%
  Depreciation		131,374			103,586			$	27,788			27%
  Total Operating Expenses		2,158,345			2,401,044			$	(242,699	)		-10%
  INCOME FROM OPERATIONS		422,131			63,665			$	358,466			563%
  Other Expenses		(95	)		(3,270	)		$	(3,365	)		-103%
  INCOME BEFORE INCOME TAXES		422,036			60,395			$	361,641			599%
  Income Taxes		128,747			21,139			$	107,608			509%
  NET INCOME	$	293,289		$	39,256			$	254,033			647%

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  		Three Months Ended June 30,									Percentage
  		2021			2020			$ Increase			Increase
  Item								(Decrease)			(Decrease)
  REVENUES	$	14,300,559		$	6,943,130		$	7,357,429			106%
  COST OF REVENUES		8,107,020			3,688,623		$	4,418,397			120%
  GROSS PROFIT		6,193,539			3,254,507		$	2,939,032			90%
  PRODUCT ROYALTY INCOME		58,479			3,182		$	55,297			1738%
  OPERATING EXPENSES
  Salaries and Wages		912,811			622,846		$	289,965			47%
  Commissions and Consulting		215,986			103,906		$	112,080			108%
  Professional Fees		123,501			213,318		$	(89,817	)		-42%
  Advertising and Marketing		518,153			357,028		$	161,125			45%
  Office Lease and Expenses		87,200			72,386		$	14,814			20%
  Research and Development Costs		445,156			336,608		$	108,548			32%
  Bad Debt Expense (Recovery)		(51,732	)		41,900		$	(93,632	)		-223%
  General and Administrative		609,760			410,128		$	199,632			49%
  Depreciation		242,401			190,749		$	51,652			27%
  Total Operating Expenses		3,103,236			2,348,869		$	754,367			32%
  INCOME FROM OPERATIONS		3,148,782			908,820		$	2,239,962			246%
  Other Income (Expenses)		3,948			(9,477	)	$	13,425			142%
  INCOME BEFORE INCOME TAXES		3,152,730			899,343		$	2,253,387			251%
  Income Taxes		744,082			224,836		$	519,246			231%
  NET INCOME	$	2,408,648		$	674,507		$	1,734,141			257%

  Revenues–- We earn revenues from the sale of our protective gear comprising of neck braces, body armor, helmets and other products, parts and accessories both in the United States and abroad.  Revenues for the three monthsquarter ended SeptemberJune 30, 20172021 were $5.46$14.30 million, an 18%a 106% increase, compared to revenues of $4.63$6.94 million for the quarter ended SeptemberJune 30, 2016.2020. Revenues associated with international customers were $3.87$9.58 million and $2.70$3.44 million, or 71%67% and 58%50% of revenues, respectively, for the three monthsquarters ended SeptemberJune 30, 20172021 and 2016.2020. This increase in worldwideglobal revenues is primarily attributable to a $0.57 million increase in helmet sales, a $0.45$4.43 million increase in body armor sales, and a $0.58$1.95 million increase in sales of other products, parts and accessories that were partially offset byand a $0.78$0.49 million decreaseincrease in helmet sales and a $0.49 million increase in neck brace sales.

  The following table sets forth our revenues by product line for the three months ended SeptemberJune 30, 20172021 and 2016:2020:

  		Three months ended September 30
  					% of						% of						Three months ended June 30,
  		2017			Revenues			2016			Revenues			2021			% of Revenues			2020			% of Revenues
  Neck braces	$	1,091,601			20%		$	1,875,724			40%		$	1,578,424			11%		$	1,084,715			15%
  Body armor		2,680,405			49%			2,228,104			48%			8,568,017			60%			4,140,175			60%
  Helmets		648,313			12%			74,879			2%			1,025,318			7%			536,403			8%
  Other Products, Parts and Accessories		1,034,769			19%			452,850			10%
  Other products, parts and accessories														3,128,800			22%			1,181,837			17%
  	$	5,455,088			100%		$	4,631,557			100%		$	14,300,559			100%		$	6,943,130			100%

  Sales of our flagship neck brace accounted for $1.09$1.58 million and $1.88$1.08 million, or 20%11% and 40%15% of our revenues for the quarters ended SeptemberJune 30, 20172021 and 2016,2020, respectively. The 42% decrease46% increase in neck brace revenues during the 2021 second quarter is primarily attributable to a 39% decrease47% increase in the volume of neck braces sold to our customers worldwide.worldwide during the period as global consumer demand for neck braces continues to increase.

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  Our body armor products are comprised of chest protectors, full upper body protectors, upper body protection vests, back protectors, knee braces, and knee and elbow guards.guards, off-road motorcycle boots and mountain biking shoes.  Body armor sales accounted for $2.68$8.57 million and $2.22$4.14 million, or 49%60% and 48%60% of our revenues for the quarters ended SeptemberJune 30, 20172021 and 2016,2020, respectively. The 20%107% increase in body armor revenues wasduring the 2021 second quarter is primarily the result of an 83% increase in salesthe volume of body protectors sold during the Company’s C-Frame knee brace lineperiod due to continuedremarkable worldwide demand for the C-Frame Pro knee braceour exceptional line of premium, athlete tested upper body and limb protectors designed for both in the United Statesoff-road motorcycle and abroad.mountain biking use and continued encouraging shipments of our growing footwear category, consisting of off-road motorcycle boots and mountain bike shoes.

  Our helmets accounted for $0.65$1.03 million and $0.54 million or 12%7% and 8% of our revenues for the three monthsquarters ended SeptemberJune 30, 2017 as compared to $0.07 million or 2% of our revenues for the same 2016 period.2021 and 2020, respectively. The $0.57 million91% increase in helmet sales during the 2021 second quarter is primarily due to a 64% increase in the resultvolume of helmets sold globally during the initial shipment of our highly anticipated DBX 3.0 Enduro helmet for bicycle use.2021 period.

  Our other products, parts and accessories are comprised of goggles, hydration bags and apparel items including jerseys, pants, shorts and jackets as well as aftermarket support items required primarily to replace worn or damaged parts through our global distribution network, as well as clothing, outerwear and accessories that include hats, jackets, bags, hydration kits and cooling garments.network. Other products, parts and accessories sales accounted for $1.03$3.13 million and 0.45$1.18 million, or 19%22% and 10%17% of our revenues for the quarters ended SeptemberJune 30, 20172021 and 2016,2020, respectively. The 129%165% increase in revenues from the sale of other products, parts and accessories during the 2021 second quarter is primarily due to increased salesa 504% increase in the volume of our GPX and DBXriding apparel designed for both off-road motorcycle and bicyclemountain biking use respectively.sold during the 2021 period and continued, consistent consumer demand for our innovative Velocity line of military tested bulletproof goggles.

  Cost of Revenues and Gross Profit –- Cost of revenues for the quarters ended SeptemberJune 30, 20172021 and 20162020 were $2.91$8.11 million and $2.18$3.69 million, respectively. Gross Profit for the quarters ended SeptemberJune 30, 20172021 and 20162020 were $2.54 million$6.19 and $2.45$3.25 million, respectively, or 47%43% and 53%47% of revenues respectively. Ourneck braceproductsOur neck brace products continue to generate a higher gross profit margin than our other product categories. Neck brace revenues accounted for 20%11% and 40%15% of our revenues for the quarters ended SeptemberJune 30, 20172021 and 20162020, respectively. Additionally, while revenues associated with international customers were 71% and 58% of our revenues for the three months ended September 30, 2017 and 2016 respectively, revenue associated with international customers continue to generate a lower gross profit margin than dealer direct sales in the United States.

  Product Royalty Income –- Product royalty income is earned on sales to distributors that have royalty agreements in place, as well as on sales of licensed products by third parties that have licensing agreements in place. Product royalty income for the quarters ended SeptemberJune 30, 20172021 and 20162020 were $39,396$58,479 and $16,224,$3,182, respectively. The 143%1738% increase in product royalty income is due to an increase in the sale of licensed products by licensees in the 20172021 period.

  Salaries and Wages –- Salaries and wages for the quarters ended SeptemberJune 30, 20172021 and 20162020 were $562,803$912,811 and $548,829,$622,846, respectively. This 3%47% increase in salaries and wages during the 20172021 period was primarily due to the employment of additional sales and marketing personnelprofessionals in North America during the United States.2021 period and the temporary staff cost reduction measures implemented by the Company globally during the second quarter of 2020, in an effort to partially mitigate the potential effects of the COVID-19 pandemic.

  Commissions and Consulting Expense –- During the quarters ended SeptemberJune 30, 20172021 and 2016,2020, commissions and consulting expenses were $109,217$215,986 and $144,480,$103,906, respectively. This 24% decrease108% increase in commissions and consulting expenses is primarily due to the restructuring ofan increase in commissions and performance incentives paid to both Company-employed and external sales personnel in the Company’s USUnited States as a result of the achievement of exceptional sales representatives.growth in the region during the 2021 period.

  Professional Fees –- Professional fees consist of costs incurred for audit, tax and regulatory filings, as well as patent protection and product liability litigation expenses incurred as the Company continues to expand. Professional fees for the quarters ended SeptemberJune 30, 20172021 and 20162020 were $88,901$123,501 and $110,700,$213,318, respectively. This 20%42% decrease in professional fees is primarily due to decreaseda decrease in spending on corporate legal expendituresproduct liability litigation during the 20172021 period.

  Advertising and Marketing –- The Company places paid advertising in various motorsport magazines and online media, and sponsors a number of events, teams and individuals to increase product and brand visibility. Advertising and marketing expenses for the quarters ended SeptemberJune 30, 20172021 and 20162020 were $449,176$518,153 and $502,522,$357,028, respectively. The 11% decrease45% increase in advertising and marketing expenditures during the 20172021 period is primarily due to earlier timing ofan increase in costs incurred in the production and implementation of global marketing campaigns designed tothat incorporate athlete sponsorship, coordinated paid media advertising that include digital, print, and social engagement activities, and customer product launch and sales meetings. This increase in costs was further compounded by the decrease in race support and promote the Company’s widening product range and target market reachcontingency sponsorship costs incurred during the 2017 period.2020 period, as a result of the cancellation of various race series globally to curb the spread of the COVID-19 pandemic.

  Office RentLease and Expenses–- Office rentlease and expenses for the quarters ended SeptemberJune 30, 20172021 and 20162020 were $68,423$87,200 and $66,593,$72,386, respectively. This 3%The 20% increase in office rentlease and expenses during the 20172021 period iswas primarily due to an increase in warehouse lease expenditure in the United States in line with lease escalation clauses foradditional storage required as the Company’s worldwide facilities.Company continues to rapidly expand its assortment of exceptional protective gear.

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  Research and Development Costs –- These costs consist of the salaries of personnel who are directly involved in the research and development of innovative products, as well as the direct costs associated with developing these products. Research and development costs for the quartersquarter ended SeptemberJune 30, 2017 and 2016, decreased2021 increased to $321,443,$445,156, from $402,924,$336,608 during the same 20162020 quarter. The 20% decrease32% increase in research and development costs during the 2021 second quarter is primarily duea result of increased development costs incurred as the Company continues its efforts to refine and expand the product categories that it sells and build a pipeline of innovative, cutting-edge protective gear that appeals to a restructuringwider rider audience. This increase in costs during the 2021 period also reflects a restoration of personnel costs that had been temporarily reduced during the 2020 second quarter, as part of cost-reduction measures implemented by the Company globally as part of its efforts to mitigate the potential financial impact of the salaries paid to personnel in the research and development department.COVID-19 pandemic.

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  Bad Debt Expense (Recovery) –- Bad Debt Expensedebt expense (recovery) for the quarters ended SeptemberJune 30, 20172021 and 20162020 were $7,956($51,732) and $16,216,$41,900, respectively. This decrease in Bad Debt Expensebad debt expense (recovery) is primarily the result of a decrease in the write off of higher value unrecoverable debts owing to the Companyprovision for doubtful accounts during the 2016 period.2021 period, in line with a decrease in the accounts receivable balances at Two Eleven Distribution in the United States at June 30, 2021, when compared to March 31, 2021.

  General and Administrative Expenses –- General and administrative expenses consist of insurance, travel, merchant fees, telephone, office and computer supplies. General and administrative expenses for the quarters ended SeptemberJune 30, 20172021 and 20162020 were $419,052$609,760 and $505,194,$410,128, respectively. The 17% decrease49% increase in general and administrative expenses is primarily due to a decreasean increase in product liability insurance premiums.premiums during the 2021 period and a significant decrease in travel expenditures incurred during the 2020 period, as a result of the worldwide travel restrictions imposed to curtail the spread of the COVID-19 pandemic.

  Depreciation Expense–- Depreciation Expense for the quarters ended SeptemberJune 30, 20172021 and 20162020 were $131,374$242,401 and $103,586,$190,749, respectively. This 27%% increase in depreciation during the 2021 second quarter is primarily due to the addition of mouldsmolds and tooling utilized in the production of the Company’s wideningCompany's growing product range.

  Total Operating Expenses –- Total operating expenses decreasedincreased by $242,699,$754,367 to $2.16$3.10 million in the three months ended SeptemberJune 30, 2017,2021, or 10%32%, compared to $2.40$2.35 million in the 20162020 period. This decreaseincrease is primarily due to decreasedan increase in salaries and wages, advertising and marketing expenditure, general and administrative costs and research and development costs and advertising and marketing costs discussed above.expenses, that were partially offset by a decrease in professional fees incurred during the 2021 period.

  Net Income –- The net income after income taxes for the quarter ended SeptemberJune 30, 20172021 was $293,289$2.41 million, as opposed to a net income of $39,256$674,507 for the quarter ended SeptemberJune 30, 2016.2020. This increase in net income is primarily due to the increase in sales revenues and decrease in operating costsgross profit discussed above.

  NineComparison of Six Months Ended SeptemberJune 30, 2017 Compared to the Nine Months Ended September 30, 20162021 and 2020

  The following table summarizes the results of our operations during the nine-monthsix-month periods ended SeptemberJune 30, 20172021 and 20162020 and provides information regarding the dollar and percentage increase or (decrease) in such periods:

  		Nine Months Ended September 30,										Percentage
  		2017			2016				$Increase			Increase
  Item									(Decrease)			(Decrease)
  REVENUES	$	14,783,154		$	13,152,964			$	1,630,190			12%
  COST OF REVENUES		7,566,816			6,206,741			$	1,360,075			22%
  GROSS PROFIT		7,216,338			6,946,223			$	270,115			4%
  PRODUCT ROYALTY INCOME		90,313			69,755			$	20,558			29%
  OPERATING EXPENSES
  Salaries and Wages		1,877,560			1,754,043			$	123,517			7%
  Commissions and Consulting		388,538			444,472			$	(55,934	)		-13%
  Professional Fees		519,673			363,018			$	156,655			43%
  Advertising and Marketing		1,258,511			1,216,916			$	41,595			3%
  Office Rent and Expenses		201,101			193,745			$	7,356			4%
  Research and Development Costs		966,841			1,083,983			$	(117,142	)		-11%
  Bad Debt Expense (Recovery)		8,606			(6,341	)		$	14,947			236%
  General and Administrative		1,254,542			1,466,992			$	(212,450	)		-14%
  Depreciation		322,829			314,584			$	8,245			3%
  Total Operating Expenses		6,798,201			6,831,412			$	(33,211	)		0%
  INCOME FROM OPERATIONS		508,450			184,566			$	323,884			175%
  Other Income (Expenses)		(5,650	)		65,539			$	(71,189	)		-109%
  INCOME BEFORE INCOME TAXES		502,800			250,105			$	252,695			101%
  Income Taxes		158,614			109,325			$	49,289			45%
  NET INCOME	$	344,186		$	140,780			$	203,406			144%

  
  
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  		Six Months Ended June 30,									Percentage
  		2021			2020			$ Increase			Increase
  Item								(Decrease)			(Decrease)
  REVENUES	$	27,197,034		$	14,485,004		$	12,712,030			88%
  COST OF REVENUES		14,951,541			7,707,044		$	7,244,497			94%
  GROSS PROFIT		12,245,493			6,777,960		$	5,467,533			81%
  PRODUCT ROYALTY INCOME		83,289			4,659		$	78,630			1688%
  OPERATING EXPENSES
  Salaries and Wages		1,837,348			1,467,452		$	369,896			25%
  Commissions and Consulting		436,648			187,342		$	249,306			133%
  Professional Fees		461,256			534,905		$	(73,649	)		-14%
  Advertising and Marketing		1,035,733			981,231		$	54,502			6%
  Office Lease and Expenses		174,573			146,200		$	28,373			19%
  Research and Development Costs		850,261			724,812		$	125,449			17%
  Bad Debt Expense		14,093			26,920		$	(12,827	)		-48%
  General and Administrative		1,138,359			930,243		$	208,116			22%
  Depreciation		478,936			382,801		$	96,135			25%
  Total Operating Expenses		6,427,207			5,381,906		$	1,045,301			19%
  INCOME FROM OPERATIONS		5,901,575			1,400,713		$	4,500,862			321%
  Other Expenses		(59	)		(18,106	)	$	18,047			100%
  INCOME BEFORE INCOME TAXES		5,901,516			1,382,607		$	4,518,909			327%
  Income Taxes		1,432,030			345,652		$	1,086,378			314%
  NET INCOME	$	4,469,486		$	1,036,955		$	3,432,531			331%

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  Revenues–- We earn revenues from the sale of our protective gear comprising of neck braces, body armor, helmets and other products, parts and accessories both in the United States and internationally. Revenues offor the nine-month periodsix months ended SeptemberJune 30, 20172021 were $14.78$27.20 million, a 12%88% increase, compared to revenues of $13.16$14.49 million for the periodsix months ended SeptemberJune 30, 2016.2020.  Revenues generated from sales to our customers in the United States increased from $5.46 million to $10.48 million, for the six months ended June 30, 2021 and 2020, respectively. Revenues associated with international customers were $9.48$16.71 million and $7.50$9.02 million, or 64%61% and 57%62% of revenues, respectively, for the ninesix months ended SeptemberJune 30, 20172021 and 2016. The2020. This increase in worldwideglobal revenues during the 2021 period is attributable to a $1$7.69 million increase in body armor sales, a $0.84$2.60 million increase in sales of other products, parts and accessory sales andaccessories, a $0.28$1.29 million increase in helmet sales which was partially offset byand a $0.57$1.12 million decreaseincrease in neck brace sales.

  The following table sets forth our revenues by product line for the ninesix months ended SeptemberJune 30, 20172021 and 2016:2020:

  		Nine months ended September 30
  					% of						% of						Six months ended June 30,
  		2017			Revenues			2016			Revenues			2021			% of Revenues			2020			% of Revenues
  Neck braces	$	4,197,565			28%		$	4,769,506			36%		$	3,515,690			13%		$	2,393,958			16%
  Body armor		7,287,339			49%			6,209,004			47%			15,944,753			59%			8,251,852			57%
  Helmets		1,540,803			11%			1,258,093			10%			2,566,213			9%			1,272,129			9%
  Other Products, Parts and Accessories		1,757,447			12%			916,361			7%
  Other products, parts and accessories														5,170,378			19%			2,567,065			18%
  	$	14,783,154			100%		$	13,152,964			100%		$	27,197,034			100%		$	14,485,004			100%

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  Sales of our flagship neck brace accounted for $4.20$3.52 million and $4.77$2.39 million, or 28%13% and 36%16% of our revenues for the nine-monthsix-month periods ended SeptemberJune 30, 20172021 and 2016,2020, respectively. A 14% decrease in neck brace sales volumes to our customers in the United States during the 2017 period was the primary reason for the overall 12% decreaseThe 47% increase in neck brace revenues is primarily attributable to a 28% increase in the volume neck braces sold to our customers globally during the ninesix months ended SeptemberJune 30, 2017.2021.

  Our body armor products are comprised of chest protectors, full upper body protectors, upper body protection vests, back protectors, knee braces, knee and elbow guards, off-road motorcycle boots and mountain biking shoes.  Body armor sales accounted for $7.29million$15.94 million and $6.21$8.25 million, or 49%59% and 47%57% of our revenues for the nine-monthsix-month period ended SeptemberJune 30, 20172021 and 2016,2020, respectively. The 17%93% increase in body armor revenues was primarily the result of ana 75% increase in salesthe volume of body protectors sold during the Company’s C-Frame knee brace lineperiod due to continuedremarkable worldwide demand for the C-Frame Pro knee brace.our exceptional line of premium, athlete tested upper body and limb protectors designed for both off-road motorcycle and mountain biking use and continued exceptional shipments of our highly anticipated and growing footwear category, consisting of off-road motorcycle boots and mountain bike shoes.

  Our helmetsHelmets accounted for $1.54million,$2.57 million and $1.27 million, or 11%9% and 9% of our revenues for the nine monthssix-month periods ended SeptemberJune 30, 2017, as compared to $1.26 million, or 10% of our revenues for the nine months ended September 30, 2016.2021 and 2020, respectively. The 22%102% increase in helmet revenuessales during the 2021 period is primarily due to initial shipmentsa 106% increase in the volume of our DBX 3.0 All Mountain and DBX 3.0 Enduro helmets for bicycle usesold during the first nine months of 2017.2021 period.

  Our other products, parts and accessories are comprised of goggles, hydrations bags and apparel items including jerseys, pants, shorts and jackets as well as aftermarket support items required primarily to replace worn or damaged parts through our global distribution network, as well as clothing, outerwear and accessories including hats, jackets, bags, hydration kits and cooling garments.network.  Other products, parts and accessories sales accounted for $1.76$5.17 million and $0.92$2.57 million, or 12%19% and 7%18% of our revenues for the nine monthssix-month periods ended SeptemberJune 30, 20172021 and 2016,2020, respectively. The 92%101% increase in revenues from the sale of other products, parts and accessories is primarily due to a 266% increase in the successful market acceptance and resultant increased sales volume of our GPX and DBXriding apparel designed for both off-road motorcycle and bicyclemountain biking use respectively.sold during the 2021 period as demand four our cutting edge apparel continues to grow globally.

  Cost of Revenues and Gross Profit –- Cost of revenues for the nine-monthsix-month periods ended SeptemberJune 30, 20172021 and 20162020 were $7.57million and$6.21$14.95 million and $7.71 million, respectively. Gross Profit for the nine-monthsix-month periods ended SeptemberJune 30, 29172021 and 20162020 were $7.22and $6.95$12.24 and $6.78 million, respectively, or 49% and53%45% and 47% of revenues respectively. Our neck brace products continue to generate a higher gross margin than our other product categories. Neck brace revenues accounted for 28%11% and 36%15% of our revenues for the nine monthssix-month periods ended SeptemberJune 30, 20172021 and 2016,2020, respectively. Additionally, while revenues associated with international customers were 64% and 57% of our revenues for the nine months ended September 30, 2017 and 2016, respectively, revenue associated with international customers continue to generate a lower gross margin than dealer direct sales in the United States.

  Product Royalty Income –- Product royalty income is earned on sales to distributors that have royalty agreements in place, as well as on sales of licensed products by third parties that have licensing agreements in place. Product royalty income for the nine-monthsix-month periods ended SeptemberJune 30, 20172021 and 20162020 were $90,313and $69,755,$83,289 and $4,659, respectively. The 29% increase in product royalty income is due to an increase in the sale of licensed products by licensees in the 20172021 period.

  Salaries and Wages –- Salaries and wages for the nine-month periodsix-month periods ended SeptemberJune 30, 20172021 and 20162020 were $1,877,560$1,837,348 and $1,754,043,$1,467,452, respectively. This 7%The 25% increase in salaries and wages during the 20172021 period was primarily due to the employment of additional sales and marketing personnelprofessionals in North and South America during the United States.2021 period and the temporary staff cost reduction measures implemented by the Company globally during the second quarter of 2020, in an effort to partially mitigate the potential effects of the COVID-19 pandemic.

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  Commissions and Consulting Expense –- During the nine-monthsix-month periods ended SeptemberJune 30, 20172021 and 2016,2020, commissions and consulting expenses were $388,538$436,648 and $444,472, respectively. This 13% decrease$187,342. This133% increase in commissioncommissions and consulting expenditureexpenses during the 2021 period is primarily due to an increase in commissions and performance incentives paid to both Company employed and external sales personnel in the United States as a result of the restructuringachievement of exceptional sales growth in the Company’s US sales representative structure.region during the 2021 period.

  Professional Fees –- Professional fees consist of costs incurred for audit, tax and regulatory filings, as well as patent protection and product liability litigation expenses incurred as the Company continues to expand. Professional fees for the nine-monthsix-month periods ended SeptemberJune 30, 20172021 and 20162020 were $519,673and $363,018,$461,256 and $534,905, respectively. This 43% increase14% decrease in professional fees is primarily due to increased spendinga decrease in expenditure on product liability litigation during the 20172021 period.

  Advertising and Marketing –- The Company places paid advertising in various motorsport magazines and online media, and sponsors a number of events, teams and individuals to increase product and brand visibility. Advertising and marketing expenses for the nine-month periodssix-months ended SeptemberJune 30, 20172021 and 20162020 were $1,258,511and $1,216,916,$1,035,733 and $981,231, respectively. The 3%6% increase in advertising and marketing expenditures during the 20172021 period is primarily due to an increase in costs associated with the production and implementation of global marketing campaigns designedthat incorporate athlete sponsorship, coordinated paid media advertising that include digital, print and social engagement activities that were partially offset by a decrease in costs associated with traditional face-to-face sales and marketing conferences that were impractical and replaced with online digital meetings as a result of the of travel restrictions imposed to globally support and promotecurtail the Company’s widening product range, target market reach and brand awareness.further spread of the COVID-19 pandemic. 

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  Office RentLease and Expenses –- Office rentlease and expenses for the nine-monthsix-month periods ended SeptemberJune 30, 20172021 and 20162020 were $201,101and $193,745,$174,573 and $146,200, respectively. The 4%19% increase in office rentlease and expenses during the 20172021 period iswas primarily due to an increase in warehouse lease expenditures in the United States in line with lease escalation clauses foradditional storage space required to accommodate the Company’s worldwide facilities.Company's rapidly growing assortment of exceptional protective gear.

  Research and Development Costs –- These costs consist of the salaries of personnel who are directly involved in the research and development of innovative products, as well as the direct costs associated with developing these products. Research and development costs for the nine-month periodsix-month periods ended SeptemberJune 30, 2017 decreased2021 and 2020, increased to $966,841,$850,261, from $1,083,983,$724,812, during the same 20162020 period. The 11% decrease17% increase in research and development costs during the 2021 period is primarily due to increased development costs as the Company continues to expand its product offering with exceptional protective gear across multiple product categories and continues to develop a restructuringpipeline of innovative products that appeal to a wider riding audience. This increase in costs during the 2021 period also reflects a restoration of personnel costs that had been temporarily reduced during the 2020 second quarter, as part of cost-reduction measures implemented by the Company globally as part of its efforts to mitigate the potential financial impact of the salaries paid to personnel in the research and development department.COVID-19 pandemic.

  Bad Debt Expense (Recovery) –- Bad Debt Expense (Recovery)debt expense for the nine-monthsix-month periods ended SeptemberJune 30, 20172021 and 20162020 were $8,606$14,093 and ($6,341),$26,920, respectively. This increase48% decrease in Bad Debt Expense (Recovery)bad debt expense during the 2021 period is primarily the result of a decrease in the recovery of previously unrecoverable debts duringprovision for doubtful accounts in line with a decrease in the 2016 period.accounts receivable balances at Two Eleven Distributors in the United States at June 30, 2021, when compared to December 31, 2020.

  General and Administrative Expenses –- General and administrative expenses consist of insurance, travel, merchant fees, telephone, office and computer supplies. General and administrative expenses for the nine-monthsix-month periods ended SeptemberJune 30, 20172021 and 20162020 were $1,254,542and $1,466,992,$1,138,359 and $930,243, respectively. The 14% decrease22% increase in general and administrative expenses during the 2021 period is primarily as a result of an increase in expenditure on product liability insurance premiums during the 2021 period and a decrease in product liability insurance premiums.travel expenditures incurred as a result of the worldwide travel restrictions imposed to curtail the spread of the COVID-19 pandemic during the 2020 period.

  Depreciation Expense –- Depreciation Expense for the nine-monthsix-month periods ended SeptemberJune 30, 20172021 and 20162020 were $322,829and $314,584,$478,936 and $382,801, respectively. This 3%25% increase in depreciation during the 2021 period is primarily due to the addition of mouldsmolds and tooling utilized in the production of the Company’sCompany's widening product range. This additional depreciation was partially offset by certain assets that were fully depreciated during the period as they had reached the end of their economic lives.

  Total Operating Expenses –- Total operating expenses decreasedincreased by $33,211,$1.05 million to $6.80 millionin$6.43 million in the nine monthssix-month period ended SeptemberJune 30, 2017,2021, or 0.5%19%, compared to $6.83$5.38 million in the 20162020 period. This decreaseincrease in total operating expenses during the 2021 period is primarily due to decreasedan increase in salaries and wages, commissions and consulting costs, general and administrative costs and research and development costsexpenses that were partially offset by increaseda decrease in professional fees and salaries and wages discussed above.incurred during the 2021 period.

  Net incomeIncome –- Net income after income taxes for the nine-monthsix-month period ended SeptemberJune 30, 20172021 was $344,186as$4.47 million, as opposed to a net income after income taxes of $140,780$1.04 million for the nine-monthsix-month period ended SeptemberJune 30, 2016.2020.  This increase in net income during the 2021 period is primarily due to the increased revenuesincrease in revenue and decreased operating expensesgross profit discussed above.

  Liquidity and Capital Resources

  At SeptemberJune 30, 2017,2021, we had cash and cash equivalents of $1.23$3.75 million and $0.58$0.06 million of short-term investments. The following table sets forth a summary of our cash flows for the periods indicated:

  		June 30
  		2021			2020
  Net cash provided by operating activities	$	1,270,276		$	1,185,156
  Net cash used in investing activities	$	(191,445	)	$	(107,231	)
  Net cash used in financing activities	$	(317,720	)	$	(342,850	)
  Effect of exchange rate changes on cash and cash equivalents	$	20,427		$	(180,501	)
  Net increase in cash and cash equivalents	$	781,538		$	554,574
  Cash and cash equivalents at the beginning of period	$	2,967,042		$	2,072,864
  Cash and cash equivalents at the end of period	$	3,748,580		$	2,627,438

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  			September 30,
  			2017			2016
  	Net cash provided by operating activities	$	1,769,424		$	521,820
  	Net cash used in investing activities	$	(1,155,399	)	$	(93,781	)
  	Net cash used in financing activities	$	(483,773	)	$	(581,003	)
  	Effect of exchange rate changes on cash and cash equivalents	$	1,617		$	51,632
  	Net increase (decrease) in cash and cash equivalents	$	131,869		$	(101,332	)
  	Cash and cash equivalents at the beginning of period	$	1,103,003		$	1,054,750
  	Cash and cash equivalents at the end of period	$	1,234,872		$	953,418

  Cash increased by $131,869,$781,538, or 12%26%, for the ninesix months ended SeptemberJune 30, 2017.2021, when compared to cash on hand at December 31, 2020. The primary sources of cash for the six months ended June 30, 2021, were net income of $4,469,486, a decrease in inventory of $3,478,553 and a decrease in accounts receivable of $2,077,870. The primary uses of cash for the ninesix months ended SeptemberJune 30, 20172021 were increased inventorydecreased accounts payables of $1.77 million, increased accounts receivables of $741,392, capital expenditures of $1.16 million$5,377,741 and the repayment of the short-term loan amount of $483,773. The primary sources of cash for the nine months ended September 30, 2017 were increased accounts payable and accrued expenses of $2.58 million, and increasedan increase in prepaid expenses and other current assets of $516,895. As of September 30, 2017, we did not have any credit facilities or significant amounts owed to third party lenders.$3,989,785.

  The Company is currently meeting its working capital needs through cash on hand as well as internally generated cash from operations. Management believes that its current cash and cash equivalent balances, along with the net cash generated by operations are sufficient to meet its anticipated operating cash requirements for at least the next twelve months. There are currently no plans for any major capital expenditures in the next twelve months. Our long-term financing requirements depend on our growth strategy, which relates primarily to our desire to increase revenue both in the U.S. and abroad.

  Obligations under Material Contracts

  Pursuant to our Licensing Agreement with Xceed Holdings, a company owned and controlled by Dr. Christopher Leatt, our founder, chairman and chairman,head of research and development, we pay Xceed Holdings 4% of all neck brace sales revenue billed and received by the Company on a quarterly basis based on sales of the previous quarter.  During the quarters ended June 30, 2021 and 2020, the Company paid an aggregate of $79,590 and $61,215, in licensing fees to Xceed Holdings. In addition, pursuant to a separate license agreement between the Company and Mr. J. P. De Villiers, our former director, the Company is obligated to pay a royalty fee of 1% of all our billed and received neck brace sales revenue, in quarterly installments, based on sales of the previous quarter, to a trust that is beneficially owned and controlled by Mr. De Villiers. During the quarters ended June 30, 2021 and 2020, the Company paid an aggregate of $19,898 and $15,285, in licensing fees to Mr. De Villiers.

  On July 8, 2015, the Company entered into a consulting agreement with Innovate Services Limited, or Innovate, a Seychelles limited company in which, Dr. Leatt is an indirect beneficiary. Pursuant to the terms of the Consulting Agreement, as amended, Innovate has agreed to serve as the Company’sCompany's exclusive research, development and marketing consultant, in exchange for a monthly fee of $35,639;$38,062; provided that Dr. Leatt personally performs the services to be performed by Innovate under the Agreement, pursuant to a separate employment agreement between Innovate and Dr. Leatt. The parties further agreed that all intellectual property generated in connection with the services provided under the Consulting Agreement will be the sole property of the Company. The Consulting Agreement was effective as of May 15, 2015 and will continue unless terminated by either party in accordance with its terms. Either party has the right to terminate the Consulting Agreement upon 6six months' prior written notice, except that the Consulting Agreement may be terminated immediately without notice if the services to be performed under the Consulting Agreement cease to be performed by Dr. Leatt, or for any other material breach of the Agreement. The parties have agreed to settle any dispute under the Consulting Agreement through arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association (AAA), and that the resulting arbitration award will be final and binding on both parties and will not be subject to any appeal. The foregoing description does not purport to be a complete statement ofEffective January 1, 2019, the parties’ rightsCompany and obligations underInnovate amended the Consulting Agreement to increase the monthly fee payable to Innovate under the agreement to $40,435, in accordance with the parties' prior agreement that Innovate may increase its monthly fees by no greater than the lesser of: (a) two and the transactions contemplated thereby or a complete explanationone-half percent (2.5%) of the materials thereof.

  On October 13, 2016,prior year's annualized fee; or (b) a percentage equal to then-applicable annual percentage increase in the Consumer Price Index published by the United States Department of Labor's bureau of labor statistics, plus one-half percent (0.5%).  Accordingly, effective January 1, 2021, the Company's monthly fee to Innovate, increased to $42,233. During the quarters ended June 30, 2021 and 2020, the Company entered into a Premium Finance Agreement with AFCO Acceptance Corporation “AFCO” to finance its U.S. short-term insurance over the period of coverage. The Company was obligated to pay AFCOpaid an aggregate sum of $637,260$126,699 and $103,615, respectively, in eleven payments of $58,921, at an annual interest rate of 3.397%, commencing on November 1, 2016 and ending on September 1, 2017. Any late payment during the term of the agreement wasconsulting fees to be assessed a late penalty of 5% of the payment amount due, and in the event of default AFCO had the right to accelerate the payment due under the agreement. This agreement was paid in full on September 1, 2017. On October 16, 2017, the Company entered into a new Premium Finance Agreement with AFCO to finance its U.S. short-term insurance over the period of coverage. The Company is obligated to pay AFCO an aggregate sum of $593,400 in eleven payments of $55,071, at an annual interest rate of $4.15%, commencing on November 1, 2017 and ending on September 1, 2018. Any late payment during the term of the agreement will be assessed a late penalty of 5% of the payment amount due, and in the event of default AFCO has the right to accelerate the payment due under the agreement.Innovate.

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  Pursuant to a Premium Finance Agreement, dated March 30, 2017,June 14, 2021, between the Company and AFCO, the Company is obligated to pay AFCO an aggregate sum of $7,195$238,696 in fivetwelve payments of $1,453$20,290, at a 3.397%4.350% annual interest rate, commencing on MayJune 1, 20172021 and ending on SeptemberApril 1, 2017.2022. Any late payment during the term of the agreement will be assessed a late penalty of 5% of the payment amount due, and in the event of default AFCO has the right to accelerate the payment due under the agreement. As of SeptemberJune 30, 2017,2021, the Company had not defaulted on its payment obligations under this agreement. This agreement was paid in full on September 1, 2017..

  Pursuant toThe Company entered into a Premium Finance Agreement with AFCO Acceptance Corporation "AFCO" dated May 22, 2017, betweenOctober 27, 2020, to finance its U.S short-term insurance over the Company and AFCO, theperiod of coverage.  The Company is obligated to pay AFCO an aggregate sum of $89,708$926,110 in eleven payments of $8,315$84,192, at a 3.900%an annual interest rate of 4.950% commencing on JuneNovember 1, 20172020 and ending on AprilSeptember 1, 2018.2021.  Any late payment during the term of the agreement will be assessed a late penalty of 5% of the payment amount due, and in the event of default AFCO has the right to accelerate the payment due under the agreement. As of SeptemberJune 30, 2017,2021, the Company had not defaulted on its payment obligations under this agreement.

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  On November 19, 2018, the Company entered into a $1,000,000 revolving line of credit agreement with a bank. Payments for the advances under the line bear interest at the LIBOR Daily Floating Rate plus 2.5 percentage points commencing January 1, 2019. The line of credit matured on November 19, 2020, at which time the unpaid principal, interest, or other charges outstanding under the agreement are due and payable. On November 5, 2020, the Company executed an amendment to the line of credit to extend the line of credit facility through November 19, 2021. The amendment took retroactive effect to October 27, 2020 and introduced an index floor so that payments for any future advances will bear interest at the greater of the LIBOR Daily Floating Rate or an Index Floor of 1.25 percentage points plus 2.5 percentage points. Obligations under the line of credit are secured by equipment and fixtures in the United States of America, accounts receivable and inventory of Leatt Corporation and Two-Eleven Distribution, LLC. On March 1, 2021, we executed a second amendment to the line of credit. The amendment took retroactive effect to February 17, 2021, extended the line of credit facility through February 28, 2022, and increased the revolving line of credit to $1,500,000.  As of June 30, 2021, there were no advances of the line of credit leaving $1,500,000 of the line of credit available for advance.

  Critical Accounting Policies

  Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make 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 and the reported revenues and expenses during the reporting period. We have identified the following as the items that require the most significant judgment and often involve complex estimation: revenue recognition, estimating allowances for doubtful accounts receivable, inventory valuation, impairment of long-lived assets, leases and accounting for income taxes.

  Revenue and Cost Recognition- The Company recognizes revenue in accordance with ASC 606 "Revenues from Contracts with Customers".  As such the Company has and will continue to review its performance obligations in terms of material customer contractual arrangements in order to verify that revenue is recognized when performance obligations are satisfied on a periodic basis.

  All manufacturing of Leatt-BraceLeatt products is performed by third party subcontractors that are predominately based in China. The Company's products are sold worldwide to a global network of distributors and dealers, and directly to consumers when there are no dealers or distributors in their geographic area or where consumers choose to purchase directly via the Company's e-commerce website (collectively the "customers").

  Revenues from product sales are recognized when earned, net of applicable provisions for discounts and returns and allowances in the event of product defect. Revenuedefect where no exchange of product is consideredpossible. Revenues are recognized when our performance obligations are satisfied as evidenced by transfer of control of promised goods to our customers, in an amount that reflects the consideration we expect to be realizedentitled to in exchange for those goods or realizable and earned when allservices. Product royalty income, representing less than 1% of total revenues, is recorded as the following criteria are met: title and risk of loss have passed tounderlying product sales occur, in accordance with the customer, persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed and determinable and collectability is reasonably assured. related licensing arrangements.

  Our distributor payment terms range from pre-payment in full to 60 days after shipment and subsequent sales of our products by distributors have no effect on the amount and timing of payments due to us. Furthermore, products purchased by distributors may not be returned to us in the event that any such distributor relationship is terminated.

  Since the Company (through its wholly-owned subsidiary) serves as the distributor of Leatt products in the United States, the Company records its revenue and related cost of revenue for its product sales in the United States upon shipment of the merchandise to the dealer or to the ultimate consumer when there is no dealer in the geographic area or the consumer chooses to purchase directly from the Company's e-commerce website and the sales order was received directly from, and paid by, the ultimate consumer. Since the Company (through its South African branch) serves as the distributor of Leatt products in South Africa, the Company records its revenue and related cost of revenue for its product sales in South Africa upon shipment of the merchandise from the branch to the dealer.

  The Company's standard terms and conditions of sale for non-consumer direct or web-based sales do not allow for product returns other than under warranty.

  International sales (other than in the United States and South Africa) are generally drop-shipped directly from the third-party manufacturer to the international distributors.

  Revenue and related cost of revenue is recognized at the time of shipment from the manufacturer's port when the shipping terms are Free On Board ("FOB") shipping point.point, Cost and Freight ("CFR") or Cost and Insurance to named place ("CIP") as legal title and risk of loss to the product pass to the distributor. Sales to all customers (distributors, dealers and consumers) are generally final; however, in limited instances, product may be returned and exchanged due to product quality issues. Historically, returns due to product quality issues have not been material and there have been no distributor terminations that resulted in product returns. Cost of revenues also includes royalty fees associated with sales of Leatt-Brace products. Product royalty income is recorded as the underlying product sales occur, in accordance with the related licensing arrangements.

  The Company reviews the reserves for customer returns at each reporting period and adjusts them to reflect data available at that time. To estimate reserves for returns, the Company estimates the expected returns and claims based on historical rates as well as events and circumstances that indicate changes to historical rates of product returns and claims. Historically, returns due to product quality issues have not been material and there have been no distributor terminations that resulted in product returns. The provision for estimated returns at June 30, 2021 and 2020 were $0 and $0, respectively.

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  Sales commissions are expensed when incurred, which is generally at the time of sale or cash received from customers, because the amortization period would have been one year or less. These costs are recorded in commissions and consulting expenses within operating expense in the accompanying consolidated statements of operations and comprehensive income.

  Shipping and handling activities associated with outbound freight, after control over a product has transferred to a customer, are accounted for as a fulfilment cost and are included in revenues and cost of revenues in the accompanying consolidated statements of operations and comprehensive income.

  Revenue recognized from contracts with customers is recorded net of sales taxes, value added taxes, or similar taxes that are collected on behalf of local taxing authorities.

  Allowance for Doubtful Accounts Receivable -Accounts receivable consist of amounts due to the Company from normal business activities. Credit is granted to substantially all distributors on an unsecured basis. We continuously monitor collections and payments from customers and maintain an allowance for doubtful accounts receivable based upon historical experience and any specific customer collection issues that have been identified. In determining the amount of the allowance, we are required to make certain estimates and assumptions. Accounts receivable balances that are still outstanding after we have used reasonable collection efforts are written off as uncollectible. While such credit losses have historically been minimal, within our expectations and the provisions established, we cannot guarantee that we will continue to experience the same credit loss rates that we have in the past. A significant change in the liquidity or financial position of any of our significant customers could have a material adverse effect on the collectability of our accounts receivable and our future operating results. The allowance for doubtful accounts at June 30, 2021 was $113,648 and at December 31, 2020 was $101,885.

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  Inventory Valuation – - Inventory is stated at the lower of cost or market. Cost is determined using the first-in first-out (FIFO) method. Inventory consists primarily of finished goods. Shipping and handling costs are included in the cost of inventory. In assessing the inventory value, we make estimates and judgments regarding reserves required for product obsolescence, aging of inventory and other issues potentially affecting the saleable condition of products. In performing such evaluations, we utilize historical experience as well as current market information. The reserve for obsolescence as of the nine-month periods ended Septemberat June 30, 20172021 was $156,586 and 2016at December 31, 2020 was $282,876 and $186,899, respectively.$116,591.

  Impairment of Long-Lived Assets–- Our long-lived assets include property and equipment. We evaluate our long-lived assets for recoverability whenever events or changes in circumstances indicate that an asset may be impaired. In evaluating an asset for recoverability, we estimate the future cash flow expected to result from the use of the asset and eventual disposition. If the expected future undiscounted cash flow is less than the carrying amount of the asset, an impairment loss, equal to the excess of the carrying amount over the fair value of the asset, is recognized. We have determined there waswere no impairment chargecharges during the nine monthsquarters ended SeptemberJune 30, 20172021 and 2016.2020.

  Operating Leases - The Company determines if an arrangement is a lease at contract inception. Operating leases are included in the right-of-use assets ("ROU''), and lease liability obligations are included in the Company's consolidated balance sheets. ROU assets represent the Company's right to use an underlying asset of the lease term and lease liability obligations represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date, based on the present value of lease payments over the lease term. As the Company's leases typically do not provide an implicit rate, the Company estimates its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The ROU asset also includes any lease payments made, and excludes lease incentives and lease direct costs. The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense is recognized on a straight-line basis over the lease term.

  Income Taxes - As part of the process of preparing our consolidated financial statements, we are required to estimate our income tax provision (benefit) in each of the jurisdictions in which we operate. This process involves estimating our current income tax provision (benefit) together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheets. We regularly evaluate our ability to recover the reported amount of our deferred income taxes considering several factors, including our estimate of the likelihood of the Company generating sufficient taxable income in future years during the period over which the temporary differences reverse.

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  Recent Accounting Pronouncements

  See Note 8, “Summary of Significant10, "Recent Accounting Policies”Pronouncements" in the Notes to Consolidated Financial Statements for a full description of recent accounting pronouncements, including the respective dates of adoption, or expected adoption and effects ofon our consolidated financial position, results of operations and cash flows.

  Off-Balance Sheet Arrangements

  We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to its stockholders.

  ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

  Not Applicable.

  ITEM 4. CONTROLS AND PROCEDURES.

  Disclosure Controls and Procedures

  As of SeptemberJune 30, 2017,2021, the Company’sCompany's management, under the direction of its Chief Executive Officer and the Chief Financial Officer, Mr. Sean Macdonald, carried out an evaluation of the effectiveness of the design and operation of the disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the time periods specified by the SEC’sSEC's rules and forms, and is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based upon that evaluation, the Company’sCompany's Chief Executive Officer and Chief Financial Officer determined that the Company’sCompany's disclosure controls and procedures were deemed to be effective.

  Changes in Internal Controls Over Financial Reporting

  There were no changes in our internal controls over financial reporting during the period ended SeptemberJune 30, 2017,2021, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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  PART II
  
  OTHER INFORMATION

  ITEM 1. LEGAL PROCEEDINGS.

  From time to time, we may become involved in various lawsuits and legal proceedings in the ordinary course of our business. Other than as set forth below, we are currently not aware of any legal proceedings the ultimate outcome of which, in our judgment based on information currently available, would have a material adverse effect on our business, financial condition or operating results.

  •On February 25, 2015,April 3, 2018, a wrongful death lawsuit was filed against the Company on behalf of a motorcycle rider in the Northern DistrictSuperior Court of Indiana, Lafayette Division forCalifornia, County of Imperial. The claims being asserted against the defendant is strict liability, negligence, failure to warn, and breach of warranty, negligence, punitive damagesimplied and deceptive and misleading advertising and marketing. On September 14, 2017 the Court awarded summary judgement in favor of the Company and the plaintiff has appealed this decision by the Court.

  On August 7, 2017, a lawsuit was filed against the Company on behalf of a motorcycle rider in the Southern District Court of Iowa for strict liability, breach of warranty, negligence, gross negligence and consumer fraud.express warranties. The litigation is in the initial stage and no hearing date has yet been set.vacated and has not been rescheduled to-date.  The Company believes that the lawsuit is without merit and intends to vigorously defend itself.

  ITEM 1A. RISK FACTORS.

  There are no material changes from the risk factors previously disclosed in Item 1A “Risk Factors”"Risk Factors" of our annual report on Form 10-K for the period ended December 31, 2016.2020.

  ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

  None.

  None.

  ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

  None.

  None.

  ITEM 4. MINE SAFETY DISCLOSURES.

  None.

  None.

  ITEM 5. OTHER INFORMATION.

  We have no information to disclose that was required to be in a report on Form 8-K during the period covered by this report but was not reported. There have been no material changes to the procedures by which security holders may recommend nominees to our board of directors.

  ITEM 6. EXHIBITS.

  The following exhibits are filed as part of this report or incorporated by reference:

  Exhibit	Description
  No.
  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	XBRL Taxonomy Extension Schema Document
  101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
  101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
  101.LAB	XBRL Taxonomy Extension Label Linkbase Document
  101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
  104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

  
  

  *

  Filed with this Form 10-Q for Leatt Corporation. Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, or for purposes of Section 18 of the Securities Act of 1934, as amended, and otherwise are not subject to liability under those sections.

  
  

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  SIGNATURES*  Filed with this Form 10-Q for Leatt Corporation. Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, or for purposes of Section 18 of the Securities Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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  SIGNATURES

  In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

  Date: November 9, 2017August 12, 2021	LEATT CORPORATION
  	By: /s/ Sean Macdonald
  	Sean Macdonald
  	Chief Executive Officer and Chief Financial Officer
  	(Principal Executive, Financial and Accounting Officer)

  
  

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  EXHIBIT INDEX

  Exhibit	Description
  No.
  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

  
  

  *	Filed with this Form 10-Q for Leatt Corporation. Pursuant to Rule 406T of Regulation S-T,
  101.INS	Inline XBRL Instance Document–the interactive data files oninstance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document
  101.SCH	XBRL Taxonomy Extension Schema Document
  101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
  101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
  101.LAB	XBRL Taxonomy Extension Label Linkbase Document
  101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
  104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, or for purposes of Section 18 of the Securities Act of 1934, as amended, and otherwise are not subject to liability under those sections. 101).

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  *  Filed with this Form 10-Q for Leatt Corporation. Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, or for purposes of Section 18 of the Securities Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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