Note 7 - Revenue and Cost Recognition

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 where no exchange of product is possible. 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 entitled to in exchange for those goods or services. Product royalty income, representing less than 1% of total revenues, is recorded as the underlying product sales occur, in accordance with the related licensing arrangements.

The Company's standard distributor payment terms range from pre-payment in full to 60 days after shipment and subsequent sales of ~~our products~~product by distributors have no effect on the amount and timing of payments due to ~~us,~~the Company, however, in limited instances qualified distributors and dealers may be granted extended payment terms during selected order periods. In performing such evaluations, ~~we utilize~~the Company utilizes historical experience, sales performance, and credit risk requirements. Furthermore, products purchased by distributors may not be returned to usthe Company 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.

As of June 30, 2023 and December 31, 2022, sales totaling $594,365 and $2,509,534 were deferred, respectively, as all of the requirements to have a complete contract with certain customers in accordance with ASC 606 had not been met at such respective date. The shipped goods associated with these deferred sales are included in the caption deferred asset in the balance sheet, net of an allowance for potential loss amounting to $67,523 and $105,071 as of June 30, 2023 and December 31, 2022, respectively.

International sales (other than in the United States and South Africa) are generally drop-shipped directly from the Company's consolidation warehouse or 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, 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 ~~material~~ 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.

In the following table, revenue is disaggregated by the source of revenue:

		Six months ended June 30,					Six months ended June 30,
		2022	% of Revenues		2021	% of Revenues		2023	% of Revenues		2022	% of Revenues
Consumer and athlete direct revenues	$	1,385,732	3%	$	1,137,597	4%	$	1,532,837	6%	$	1,385,732	3%
Dealer direct revenues		8,551,462	20%		10,140,312	37%		6,065,359	24%		8,551,462	20%
International distributor revenues		32,229,224	77%		15,919,125	59%		17,831,371	70%		32,229,224	77%
	$	42,166,418	100%	$	27,197,034	100%	$	25,429,567	100%	$	42,166,418	100%

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, ~~2022~~2023 and December 31, ~~2021~~2022 was $0, and $0, respectively.

Accounts receivable consist of amounts due to the Company from normal business activities. Credit is granted to substantially all distributors on an unsecured basis. The Company continuously monitors collections and payments from customers and maintains an allowance for doubtful accounts receivable based upon the expected credit losses determined utilizing historical experience and any specific customer collection issues that have been identified. In determining the amount of the allowance, the Company is required to make certain estimates and assumptions. Accounts receivable balances that are still outstanding after the Company used reasonable collection efforts are written off as uncollectible. While such credit losses have historically been minimal, within the Company's expectations and the provisions established, the Company cannot guarantee that it will continue to experience the same credit loss rates as in the past. A significant change in the liquidity or financial position of any of the Company's significant customers could have a material adverse effect on the collectability of the Company's accounts receivable and future operating results. The allowance offor doubtful accounts was ~~$283,713~~$540,716 at June 30, ~~2022~~2023 and ~~$291,584~~$743,621 at December 31, ~~2021.~~2022.

Sales commissions are expensed when incurred, which is generally at the time of sale, because the amortization period would have been one year or less. These costs are recorded in commissions and consulting expenses within operating expenses 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 ~~fulfillment~~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.

Note 8 - Income Taxes

The Company uses the asset and liability approach to account for income taxes. Deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the income tax basis of assets and liabilities. A valuation allowance is applied against any net deferred tax asset if, based on available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The provision for income taxes included taxes currently payable, if any, plus the net change during the period in deferred tax assets and liabilities recorded by the Company.

The Company applies the provisions of FASB ASC Topic 740-10, Accounting for Uncertainty in Income Taxes ("Standard"), which provides that the tax effects from an uncertain tax position can be recognized in the consolidated financial statements only if the position is more likely than not of being sustained upon an examination by tax authorities. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, the standard provides guidance on derecognition, classification, interest and penalties; accounting in interim periods, disclosure and transition, and any amounts when incurred would be recorded under these provisions.

The Company's practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of June 30, ~~2022,~~2023, the Company has no unrecognized tax benefits.

Note 9 - Net Income Per Share of Common Stock

Basic net income per common share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of common stock shares and dilutive potential common shares outstanding during the period. For the six months ended June 30, ~~2022,~~2023, the Company had ~~471,000~~341,000 potential common shares, consisting of 120,000 preferred shares, and options to purchase ~~351,000~~221,000 shares, outstanding that were dilutive.

Note 10 - Common Stock

In January 2022, the Company issued 78,000 shares of common stock to an employee who exercised stock options. In March 2022, the Company issued 40,000 shares of common stock to two employees who exercised stock options.

In May 2022, the Company issued 35,209 shares of common stock to an employee who exercised stock ~~options in a cashless exercise.~~options.

Stock-based compensation expense related to vested stock options during the six months ended June 30, 2022 was $82,530. As of June 30, ~~2022,~~2023, there was $0 of unrecognized compensation cost related to unvested stock options.

Stock-based compensation expense related to vested restricted stock awards during the six months ended June 30, 2022 was ~~$240,480.~~$120,240. As of June 30, ~~2022,~~2023, there was ~~$240,480~~$0 of unrecognized compensation cost related to unvested restricted stock.

Note 11 - Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements - ~~In November 2021,~~In September 2022, the Financial Accounting Standards Board ("FASB") issued Accounting ~~Standard~~Standards Update ("ASU") ~~No. 2021-10 Government Assistance~~2022-04, Liabilities-Supplier Finance Programs (Topic ~~832)~~405-50): ~~"Disclosures by Business Entities About Government Assistance," which~~Disclosure of Supplier Finance Program Obligations. This standard requires ~~entities~~a buyer that uses supplier finance programs to ~~provide~~make annual disclosures about ~~transactions with a government that are accounted for by applying a grant or contribution model by analogy. The standard is effective for annual periods beginning after December 15, 2021.~~the programs' key terms, the balance sheet presentation of related amounts, the confirmed amount outstanding at the end of the period and associated rollforward information. The Company adopted ~~the~~this standard effective January 1, ~~2022.~~2023. The adoption ~~of the standard had no~~did not have an impact on the Company's disclosures as the impact of supplier finance programs is not material to the Company's consolidated financial statements.

Accounting Pronouncements Not Yet Adopted - There were no new material accounting standards issued in the first quarter of 2023.

The Company evaluated all ASU's issued by the FASB for consideration of their applicability. ASU's not included in ~~our~~the Company's disclosures were assessed and determined to be either not applicable or are not expected to have a material impact on the Company's consolidated financial statements.

Note 12 - Litigation

In the ordinary course of business, the Company is involved in various legal proceedings involving product liability and personal injury and intellectual property litigation. The Company is insured against loss for certain of these matters. The Company will record contingent liabilities resulting from asserted and unasserted claims against it when it is probable that the liability has been incurred and the amount of the loss is reasonably estimable. The Company will disclose contingent liabilities when there is a reasonable possibility that the ultimate loss will exceed the recorded liability. While the outcome of currently pending litigation is not yet determinable, the ultimate exposure with respect to these matters cannot be ascertained. However, based on the information currently available to the Company, the Company does not expect that any liabilities or costs that might be incurred to resolve these matters will have a material adverse effect on the financial condition, results of operations, liquidity or cash flows of the Company.

Note 13 - Risks and Uncertainties

~~As the~~The COVID-19 pandemic ~~continues to evolve, the Company believes the extent of the~~had an adverse impact ~~to its operations will be primarily driven~~on global shipping and supply chains which caused a disruption in our customers' ordering patterns and ultimately inflated certain industry wide stock levels. This was further compounded by the ~~severity~~global economic slowdown experienced worldwide due to a high inflationary environment and ~~duration~~geo-political instability. Elevated industry wide inventory levels and adverse economic conditions compounded by resultant foreign exchange rate volatility may impact levels of consumer spending in the ~~pandemic,~~foreseeable future, which may affect the ~~pandemic's impact on the U.S.~~Company's profitability, 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 since the initial stages of the pandemic, we did not see any significant materialcould have a negative impact ~~of COVID-19~~ on the Company's results of operations for the six months ended June 30, 2022. The Company remains 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 sales revenue for the coming periods and beyond.

Note 14 - Subsequent Events

The Company has evaluated all subsequent events through the date the financial statements were released.

On May 18, 2023, the Company entered into a new lease agreement for warehousing space in South Africa, commencing on July 1, 2023 and expiring in February 2025. The lease agreement requires the Company to pay monthly rent of $829 for the first twelve months and $896 for the following eight months. The Company expects to recognize an operating lease right-of-use asset and operating lease liability of $15,942 and $15,942 as of the effective date of the lease. The estimated interest rate for this lease agreement as of July 1, 2023 is 5.168%.

On May 23, 2023, the Company entered into an extension agreement of the existing lease agreement for warehousing space in South Africa which would have expired August 31, 2023, the extension on the lease agreement commences on September 1, 2023 and expires in February 2025. The extension of the lease agreement requires the Company to pay monthly rent of $1,585 for the first six months and $1,696 for the following twelve months. The Company expects to recognize an operating lease right-of-use asset and operating lease liability of $27,913 and $27,913 as of the effective date of the lease. The estimated interest rate for this lease agreement as of July 1, 2023 is 5.168%.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Special Note Regarding Forward Looking Statements

This report contains forward-looking statements that are contained principally in the sections entitled "Our Business," "Risk Factors," and "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, performance 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" 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" 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 and bicycle market;

• our expectation regarding increasing demand for protective equipment used in the motor sports and bicycle 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 report to:

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

• "Leatt Prop" refers to Leatt Prop (Pty) Ltd, a South African Company incorporated under the laws of South Africa with registration number: 2022/523867/07;

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

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

• "PRC", and "China" are to the People's Republic of China;

• "Two Eleven" refers to Two Eleven Distribution, LLC, a Nevada Limited Liability Company;

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

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

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

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

• "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 = ~~ZAR 16.1471~~ZAR18.7246 for its June 30, ~~2022~~2023 balance sheet.

Overview of Our Business

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'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'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's new body protection products which it markets under the Leatt Protection Range brand.

The Company's research and development efforts are conducted at its research facilities, located at its executive headquarters in Cape Town, South Africa. The Company employs 34 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. Depending 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 Moto 3.5 helmet with JIS T 8133 for the Japanese Market. For the Brazilian market our Moto 7.5 and Moto 3.5 helmets comply with NBR 7471.

Our products are predominately manufactured in China in accordance with our manufacturing specifications, pursuant to outsourced manufacturing arrangements with third-party manufacturers located there, based on agreed terms. We are also building manufacturing capacity outside China, namely, in Thailand and Bangladesh. The Company utilizes outside consultants and its own employees to ensure the quality of its products through regular on-site product inspections. Products sold to our international customers are usually shipped directly from our consolidation warehouse or manufacturers' warehouses to customers or their import agents.

Leatt earns revenues through the sale of its products through approximately 5559 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 dealers in the United States and South Africa, respectively.

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 in the foreseeable future. If demand for~~We sell our products ~~fluctuates~~through a global network of distributors and dealers who may have difficulty clearing elevated multi-brand stock, previously ordered in response to industry wide supply chain challenges, which in turn could slow new orders and affect our financial performance. If our customers were to experience prolonged slow growth or recession as a result of these ~~economic~~ conditions or otherwise, we could see a drop-in demand for our ~~revenue~~products and ~~gross margin could be harmed.~~potentially difficulty in collecting accounts receivable.

• 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 products imported into the United States with China as the country of origin. While these tariffs have not had ~~a significant~~any pricing impact on the shipment of our products to international markets as atof June ~~30, 2022,~~2023, 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.

• 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®. 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'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.

• 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®. 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 ~~78%~~70% of our sales are 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' 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 since the initial stages of the pandemic, we did not see any significant material negative impact of COVID-19 on the Company's results of operations for the six months ended June 30, ~~2022.~~2023. 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~~COVID-19 pandemic had an adverse impact on global shipping and ~~spread of~~supply chains which caused a disruption in our customers ordering patterns and ultimately inflated certain industry wide stock levels. This was further compounded by the ~~virus,~~global economic ~~headwinds caused by global quarantines, or the~~slowdown experienced worldwide due to a high inflationary environment and geo-political instability. The occurrence of any other catastrophic events could have a negative impact on our sales revenue for the coming periods and beyond.

• Conflict in Ukraine - We are exposed to conflicts that may disrupt our business and may reduce consumer demand for our products. A disruption or failure of our systems, government sanctions or operations in the event of a conflict could directly affect consumer demand for our products, cause delays in completing sales, shipping of our products, continuing production or performing other critical functions of our business, particularly if a conflict occurs at our primary manufacturing locations or our distributor locations worldwide. Furthermore, a prolonged conflict may have unintended global consequences such as increased inflation, fuel and transportation costs. While we have conducted due diligence on our customers in Russia to ensure that they do not fall into any sanctioned categories, we have seen a delay in the receipt of receivables in our bank account from the distributors of our products in Russia caused by enhanced screening of Russian funds in compliance with global sanctions against Russia for the war in Ukraine. The prolonging or expansion of the conflict could have an adverse impact on our consumers and on consumer purchasing behavior, and result in delays of new orders and completing sales, order cancellations, or payment and shipping delays. We will continue to monitor this fluid situation and any adverse impact that it may have on the global economy in general and on our business operations and especially that of our customers in particular, and we will develop contingencies as necessary to address any disruptions to our business operations as they arise.

• 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,~~several quarters, 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 U.S., the Middle East, and East Asia. These container shortages at Asian ports and the resultant port congestion in global markets have exacerbated supply bottlenecks and ~~further~~ increased shipping ~~costs, by up to 400%~~costs. Although we have experienced an easing 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 U.S. 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. Continuedthese dynamics, further 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 six-month periods ended June 30, ~~2022~~2023 and ~~2021~~2022 included herein.

Comparison of Three Months Ended June 30, ~~2022~~2023 and Three Months Ended June 30, ~~2021~~2022

The following table summarizes the results of our operations during the three months ended June 30, ~~2022~~2023 and ~~2021~~2022 and provides information regarding the dollar and percentage increase or (decrease) in such periods:

		Three Months Ended June 30,								Percentage
		2023		2022			Increase			Increase
Item							(Decrease)			(Decrease)
REVENUES	$	12,350,224		$	17,938,310		$	(5,588,086	)	-31%
COST OF REVENUES		7,007,442			10,294,238		$	(3,286,796	)	-32%
GROSS PROFIT		5,342,782			7,644,072		$	(2,301,290	)	-30%
PRODUCT ROYALTY INCOME		10,248			46,971		$	(36,723	)	-78%
OPERATING EXPENSES
Salaries and Wages		1,228,491			1,325,177		$	(96,686	)	-7%
Commissions and Consulting		110,925			150,634		$	(39,709	)	-26%
Professional Fees		111,785			79,653		$	32,132		40%
Advertising and Marketing		863,378			746,114		$	117,264		16%
Office Lease and Expenses		161,572			193,878		$	(32,306	)	-17%
Research and Development Costs		632,968			480,843		$	152,125		32%
Bad Debt Recovery		(230,616	)		(13,969	)	$	(216,647	)	-1551%
General and Administrative		868,595			710,351		$	158,244		22%
Depreciation		292,374			287,943		$	4,431		2%
Total Operating Expenses		4,039,472			3,960,624		$	78,848		2%
INCOME FROM OPERATIONS		1,313,558			3,730,419		$	(2,416,861	)	-65%
Other Expenses		(16,874	)		(8,349	)	$	(8,525	)	-102%
INCOME BEOFRE INCOME TAXES		1,296,684			3,722,070		$	(2,425,386	)	-65%
Income Taxes		520,545			995,150		$	(474,605	)	-48%
NET INCOME	$	776,139		$	2,726,920		$	(1,950,781	)	-72%

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

REVENUES $ 17,938,310 $ 14,300,559 $ 3,637,751 25%
COST OF REVENUES 10,294,238 8,107,020 $ 2,187,218 27%
GROSS PROFIT 7,644,072 6,193,539 $ 1,450,533 23%
PRODUCT ROYALTY INCOME 46,971 58,479 $ (11,508 ) -20%
OPERATING EXPENSES
Salaries and Wages 1,325,177 912,811 $ 412,366 45%
Commissions and Consulting 150,634 215,986 $ (65,352 ) -30%
Professional Fees 79,653 123,501 $ (43,848 ) -36%
Advertising and Marketing 746,114 518,153 $ 227,961 44%
Office Lease and Expenses 193,878 87,200 $ 106,678 122%
Research and Development Costs 480,843 445,156 $ 35,687 8%
Bad Debt Recovery (13,969 ) (51,732 ) $ 37,763 73%
General and Administrative 710,351 609,760 $ 100,591 16%
Depreciation 287,943 242,401 $ 45,542 19%
Total Operating Expenses 3,960,624 3,103,236 $ 857,388 28%
INCOME FROM OPERATIONS 3,730,419 3,148,782 $ 581,637 18%
Other Income (Expenses) (8,349 ) 3,948 $ (12,297 ) -311%
INCOME BEOFRE INCOME TAXES 3,722,070 3,152,730 $ 569,340 18%
Income Taxes 995,150 744,082 $ 251,068 34%
NET INCOME $ 2,726,920 $ 2,408,648 $ 318,272 13%

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 quarter ended June 30, ~~2022~~2023 were ~~$17.94~~$12.35 million, a ~~25% increase,~~31% decrease, compared to ~~$14.30~~$17.94 million for the quarter ended June 30, ~~2021.~~2022. This ~~increase~~decrease in worldwide revenues is ~~primarily~~ attributable to a ~~$0.94~~$4.14 million ~~increase~~decrease in body armor sales, a ~~$1.35~~$1.82 million ~~increase in helmet sales and a $1.61 million increase~~decrease in other products, parts and ~~accessories,~~accessory sales, and a $0.77 million decrease in neck brace sales, that ~~were~~was partially offset by a ~~$0.26~~$1.15 million ~~decrease~~increase in ~~neck brace~~helmet sales. Revenues associated with international customers were $8.93 million and $13.91 million, or 72% and ~~$9.58 million, or~~ 78% ~~and 67%~~ of revenues, respectively, for the quarters ended June 30, 2023 and 2022, ~~and 2021,~~ respectively.

The following table sets forth our revenues by product line for the quarter ended June 30, ~~2022~~2023 and ~~2021:~~2022:

		Three months ended June 30,							Three months ended June 30,
		2022	% of Revenues		2021	% of Revenues		2023	% of Revenues		2022	%of Revenues
Neck braces	$	1,314,710	7%	$	1,578,424	11%	$	541,056	4%	$	1,314,710	7%
Body armor		9,511,878	53%		8,568,017	60%		5,375,160	43%		9,511,878	53%
Helmets		2,377,878	13%		1,025,318	7%		3,523,450	29%		2,377,878	13%
Other products, parts and accessories		4,733,844	27%		3,128,800	22%		2,910,558	24%		4,733,844	27%
	$	17,938,310	100%	$	14,300,559	100%	$	12,350,224	100%	$	17,938,310	100%

Sales of our flagship neck brace accounted for $0.54 and $1.31 million, or 4% and ~~$1.58 million, or~~ 7% ~~and 11%~~ of our revenues for the quarters ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The ~~17%~~59% decrease in neck brace revenues is primarily attributable to a ~~17%~~59% decrease in the volume of neck braces sold to our customers in the United States and abroad during the ~~2022~~2023 period.

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 $5.38 and $9.51 million, or 43% and ~~$8.57 million, or~~ 53% ~~and 60%~~ of our revenues for the quarters ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The ~~11% increase~~43% decrease in body armor revenues during the ~~2022~~2023 second quarter is primarily the result of ~~continued strong demand for our off-road motorcycle boots and~~a 60% decrease in the volume of upper body ~~protective gear globally.~~armor protection units sold globally during the 2023 period.

Our helmet sales accounted for $3.52 and $2.38 million or 29% and ~~$1.03 million or~~ 13% ~~and 7%~~ of our revenues for the quarters ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The ~~132%~~48% increase in helmet sales during the ~~2022~~2023 second quarter is primarily due to a strong increase in MTB helmet sales. Sales of our award winning, innovative and expanding MTB helmet line up increased by 116% when compared to the second quarter of 2022. Additionally, MOTO helmet sales volume ofincreased by 141% during the period due to strong demand for our ~~expanded and~~ redesigned MOTO helmet line ~~up for off-road motorcycle use to our customers in the United States and abroad.~~up.

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. Other products, parts and accessories sales accounted for $2.91 and $4.73 million, or 24% and ~~$3.13 million, or~~ 27% ~~and 22%~~ of our revenues for the quarters ended June 30, ~~2022~~2023, and ~~2021,~~2022, respectively. The ~~51% increase~~39% decrease in revenues from the sale of other products, parts and accessories during the ~~2022~~2023 second quarter is primarily due to ~~continued strong~~a 33% decrease in the sales volume of ~~our~~ MOTO and MTB technical apparel designed for off-road motorcycle and mountain biking ~~use, respectively.~~use.

Cost of Revenues and Gross Profit - Cost of revenues for the quarters ended June 30, 2023 and 2022 were $7.01 and ~~2021 were~~ $10.29 ~~million and $8.11~~ million, respectively. Gross Profit for the quarters ended June 30, 2023 and 2022 were $5.34 and ~~2021 were~~ $7.64 ~~million and $6.19~~ million, respectively, or 43% and 43% of revenues, respectively. Our neck brace products continue to generate a higher gross profit margin than our other product categories. Although neck brace revenues accounted for 7%4% and ~~11%~~7% of our revenues for the quarters ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively our gross profit remained consistent with the ~~2021~~2022 period due to afurther stabilization in global ~~and domestic~~ shipping and logistics ~~costs.~~costs as the significant global shipping constraints resulting from the COVID-19 pandemic continued to improve.

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 June 30, 2023 and 2022 were $10,248 and ~~2021 were~~ $46,971, ~~and $58,479,~~ respectively. The ~~20%~~78% decrease in product royalty income is due to a decrease in the sale of licensed products by licensees during the ~~2022~~2023 period.

Salaries and Wages - Salaries and wages for the quarters ended June 30, 2023 and 2022 were $1,228,491 and ~~2021 were~~ $1,325,177, ~~and $912,811,~~ respectively. The ~~45% increase~~7% decrease in salaries and wages during the ~~2022~~2023 period was primarily due to ~~the employment of additional sales professionals and operational warehousing staff~~a decrease in ~~the United States as we continue to expand and build our selling activities domestically in order to facilitate growth. Additionally,~~ share compensation costs relating to a share issuance made to key personnel ~~contributed to the increase in salaries and wages for~~during the 2022 ~~period.~~period which was partially offset by the employment of additional international marketing and sales personel as the Company continues to build a diversified multi-channel sales organization.

Commissions and Consulting Expense - During the quarters ended June 30, ~~2022~~2023 and ~~2021,~~2022, commissions and consulting expenses were ~~$150,634~~$110,925 and ~~$215,986,~~$150,634, respectively. The ~~30%~~26% decrease in commissions and consulting expenses is primarily the result of a decrease in commissions and incentives paid to both in-house and external sales representatives in the United States in line with a decrease in sales growth in the region.

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 June 30, 2023 and 2022 were $111,785 and ~~2021 were~~ $79,653, ~~and $123,501,~~ respectively. The ~~36% decrease~~40% increase in professional fees is primarily due to ~~a decrease~~an increase in patent development and ~~product liability litigation expenses incurred during~~maintenance costs as the ~~2022 period.~~Company continues to develop and patent a pipeline of innovative products and technologies.

Advertising and Marketing - The Company places paid advertising in various motorsport and bicycle magazines and online media and sponsors a number of events, professional teams and individuals to increase product and brand visibility globally. Advertising and marketing expenses for the quarters ended June 30, 2023 and 2022 were $863,378 and ~~2021 were~~ $746,114, ~~and $518,153,~~ respectively. The ~~44%~~16% increase in advertising and marketing expenditure during the ~~2022~~2023 period is primarily due to the production, execution and distribution of global marketing campaigns that incorporate athlete sponsorships and influencer endorsement activations, event and trade show attendance, campaign activation and coordinated digital and web-based marketing activities designed to market the Company's growing product offering and increase global consumer engagement.

Office Lease and Expenses - Office lease and expenses for the quarters ended June 30, 2023 and 2022 were $161,572 and ~~2021 were~~ $193,878, ~~and $87,200,~~ respectively. The ~~122% increase~~17% decrease in office lease and expenses during the ~~2022~~2023 period is primarily due to a decrease in additional warehouse storage rented in the United States as the Company continues to ~~expand~~streamline inventory levels and warehouse operations at its Reno, Nevada ~~warehouse to accommodate storage of its expanding line up of exceptional protective gear.~~warehouse.

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 quarter ended June 30, ~~2022,~~2023, increased to ~~$480,843,~~$632,968, from ~~$445,156~~$480,843 during the same ~~2021~~2022 quarter. The 8%32% increase in research and development costs during the ~~2022~~2023 second quarter is primarily due to ~~the employment of professional product~~certification, homologation and development ~~engineering~~ and design ~~personnel~~consulting costs incurred in order to continue the refinement of the Company's ~~widening~~growing product categories and the expansion of our pipeline of exceptional cutting-edge products.

Bad Debt Recovery - Bad debt recovery for the quarters ended June 30, 2023 and 2022 were $230,616 and ~~2021 were~~ $13,969, ~~and $51,732,~~ respectively. The ~~73% decrease~~increase in bad debt recovery is primarily the result of a decrease in provisions made for unrecoverable debts during the ~~2022~~2023 period, in line with a decrease in the Two Eleven's accounts receivable balance at June 30, ~~2022,~~2023, when compared to March 31, ~~2022, that was partially offset by an increase~~2023 and a decrease in the provision for unrecoverable debts relating to the Company's international customers.

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 June 30, 2023 and 2022 were $868,595 and ~~2021 were~~ $710,351, ~~and $609,760,~~ respectively. The ~~16%~~22% increase in general and administrative expenses is primarily due to an increase in product ~~and general~~ liability insurance premiums paid during the ~~2022 period as~~2023 period. Additionally, travel expenditure increased in line with a ~~result~~relaxation of ~~increased inventory levels to facilitate~~global COVID-19 related travel restrictions and an increase in ~~the Company's selling activities.~~product development, marketing and sales activation travel.

Depreciation Expense - Depreciation expense for the quarters ended June 30, 2023 and 2022 were $292,374 and ~~2021 were~~ $287,943, ~~and $242,401,~~ respectively. The ~~19%~~2% increase in depreciation during the ~~2022~~2023 second quarter is primarily due to the addition of ~~molds~~moulds and tooling utilized in the production of the Company's expanding product categories.

Total Operating Expenses - Total operating expenses increased by ~~$857,388,~~$78,848, to ~~$3,960,624~~$4.04 million, infor the quarter ended June 30, ~~2022,~~2023, or ~~28%~~2%, compared to ~~$3.10~~$3.96 million in the ~~2021~~2022 period. This increase is primarily due to increases in ~~salaries,~~ general and administrative, ~~office and warehouse leasing and~~ advertising and marketing and research and development costs that were partially offset by bad debt recoveries, a decrease in ~~professional fees~~salaries and wages and commissions paid as discussed above.

Net Income - The net income after income taxes for the quarter ended June 30, ~~2022~~2023 was ~~$2.73 million,~~$776,139, as opposed to net income of ~~$2.41~~$2.73 million for the quarter ended June 30, ~~2021.~~2022. This ~~13% increase~~72% decrease in net income is primarily due to the ~~increase~~decrease in sales revenues discussed above.

Comparison of Six Months Ended June 30, ~~2022~~2023 and Six Months Ended June 30, ~~2021~~2022

The following table summarizes the results of our operations during the six-month periods ended June 30, ~~2022~~2023 and ~~2021~~2022 and provides information regarding the dollar and percentage increase or (decrease) in such periods:

Six Months Ended June 30, Percentage
2022 2021 Increase Increase
Item (Decrease) (Decrease)

REVENUES $ 42,166,418 $ 27,197,034 $ 14,969,384 55%
COST OF REVENUES 24,895,256 14,951,541 $ 9,943,715 67%
GROSS PROFIT 17,271,162 12,245,493 $ 5,025,669 41%
PRODUCT ROYALTY INCOME 125,810 83,289 $ 42,521 51%
OPERATING EXPENSES
Salaries and Wages 2,623,139 1,837,348 $ 785,791 43%
Commissions and Consulting 313,220 436,648 $ (123,428 ) -28%
Professional Fees 338,768 461,256 $ (122,488 ) -27%
Advertising and Marketing 1,360,004 1,035,733 $ 324,271 31%
Office Lease and Expenses 400,899 174,573 $ 226,326 130%
Research and Development Costs 1,014,543 850,261 $ 164,282 19%
Bad Debt Expense 4,355 14,093 $ (9,738 ) -69%
General and Administrative 1,422,103 1,138,359 $ 283,744 25%
Depreciation 564,867 478,936 $ 85,931 18%
Total Operating Expenses 8,041,898 6,427,207 $ 1,614,691 25%
INCOME FROM OPERATIONS 9,355,074 5,901,575 $ 3,453,499 59%
Other Income (Expenses) (2,192 ) (59 ) $ (2,133 ) -3615%
INCOME BEOFRE INCOME TAXES 9,352,882 5,901,516 $ 3,451,366 58%
Income Taxes 2,403,207 1,432,030 $ 971,177 68%
NET INCOME $ 6,949,675 $ 4,469,486 $ 2,480,189 55%

	Six Months Ended June 30,									Percentage
	2023			2022			Increase			Increase
Item							(Decrease)			(Decrease)
REVENUES	$	25,429,567		$	42,166,418		$	(16,736,851	)	-40%
COST OF REVENUES		14,314,015			24,895,256		$	(10,581,241	)	-43%
GROSS PROFIT		11,115,552			17,271,162		$	(6,155,610	)	-36%
PRODUCT ROYALTY INCOME		23,384			125,810		$	(102,426	)	-81%
OPERATING EXPENSES
Salaries and Wages		2,469,927			2,623,139		$	(153,212	)	-6%
Commissions and Consulting		207,249			313,220		$	(105,971	)	-34%
Professional Fees		449,028			338,768		$	110,260		33%
Advertising and Marketing		1,704,472			1,360,004		$	344,468		25%
Office Lease and Expenses		311,812			400,899		$	(89,087	)	-22%
Research and Development Costs		1,217,959			1,014,543		$	203,416		20%
Bad Debt Expense (Recovery)		(181,221	)		4,355		$	(185,576	)	-4261%
General and Administrative		1,686,774			1,422,103		$	264,671		19%
Depreciation		572,184			564,867		$	7,317		1%
Total Operating Expenses		8,438,184			8,041,898		$	396,286		5%
INCOME FROM OPERATIONS		2,700,752			9,355,074		$	(6,654,322	)	-71%
Other Expenses		(37,798	)		(2,192	)	$	(35,606	)	-1624%
INCOME BEOFRE INCOME TAXES		2,662,954			9,352,882		$	(6,689,928	)	-72%
Income Taxes		863,594			2,403,207		$	(1,539,613	)	-64%
NET INCOME	$	1,799,360		$	6,949,675		$	(5,150,315	)	-74%

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 for the six months ended June 30, ~~2022~~2023 were ~~$42.17~~$25.43 million, a ~~55% increase,~~40% decrease, compared to ~~$27.20~~$42.17 million for the six months ended June 30, ~~2021.~~2022. Revenues generated from sales to our customers in the United States decreased from ~~$10.48~~$9.32 million to ~~$9.32~~$7.32 million, for the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Revenues associated with international customers were $18.11 million and $32.85 million, or 71% and ~~$16.71 million, or~~ 78% ~~and 61%~~ of revenues, respectively, for the six months ended June 30, ~~2022~~2023 and ~~2021.~~2022. This ~~increase~~decrease in global revenues during the ~~2022~~2023 period is attributable to a ~~$6.05~~$10.25 million ~~increase~~decrease in body armor sales, a ~~$4.09~~$3.55 million ~~increase~~decrease in sales of other products, parts and accessories, ~~and~~ a ~~$5.50 million increase in helmet sales that were partially offset by a $0.67~~$1.53 million decrease in neck brace sales and a $1.41 million decrease in helmet sales.

The following table sets forth our revenues by product line for the six months ended June 30, ~~2022~~2023 and ~~2021:~~2022:

			Six months ended June 30,					Six months ended June 30,
		2022	% of Revenues		2021	% of Revenues		2023	% of Revenues		2022	% of Revenues
Neck braces	$	2,846,189	7%	$	3,515,690	13%	$	1,321,371	5%	$	2,846,189	7%
Body armor		21,994,271	52%		15,944,753	59%		11,741,341	47%		21,994,271	52%
Helmets		8,066,391	19%		2,566,213	9%		6,652,204	26%		8,066,391	19%
Other products, parts and accessories		9,259,567	22%		5,170,378	19%		5,714,651	22%		9,259,567	22%
	$	42,166,418	100%	$	27,197,034	100%	$	25,429,567	100%	$	42,166,418	100%

Sales of our flagship neck brace accounted for $1.32 million and $2.85 million, or 5% and ~~$3.52 million, or~~ 7% ~~and 13%~~ of our revenues for the six-month periods ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The ~~19%~~54% decrease in neck brace revenues is primarily attributable to a ~~26%~~54% decrease in the volume of neck braces sold to our customers in the United States and abroad.

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 $11.74 million and $21.99 million, or 47% and ~~$15.94 million, or~~ 52% ~~and 59%~~ of our revenues for the six-month period ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The ~~38% increase~~47% decrease in body armor revenues was primarily the result of ~~continued shipments~~a 47% decrease in upper body armor revenues and a 49% decrease in the volume of ~~our footwear category consisting of off-road~~ motorcycle boots ~~and mountain biking shoes and continued~~sold when compared to the 2022 period, which was an exceptionally strong ~~consumer demand~~period for ~~our innovative upper body and limb protectors.~~motorcycle boot sales. Motorcycle boot revenues for the six months ended June 30, 2022 had increased by 189%, when compared to the prior year period.

Our Helmets accounted for $6.65 million and $8.07 million, or 26% and ~~$2.57 million, or~~ 19% ~~and 9%~~ of our revenues for the six-month periods ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The ~~214% increase~~18% decrease in helmet sales during the ~~2022~~2023 period is primarily due to ~~continued strong demand for~~a 20% decrease in the ~~Company's expanding~~volume of MOTO and ~~award-winning~~ MTB ~~helmet line up designed to appeal to a wide range of riders, and continued strong shipments of our redesigned MOTO helmet line up for off-road motorcycle use~~helmets sold to our customers in the United States and ~~abroad.~~abroad during the 2023 period, when compared to the 2022 period, which was an exceptionally strong period globally for helmet sales. Helmet revenues for the quarter ending June 30, 2022 had increased by 214%, when compared to the prior year 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. Other products, parts and accessories sales accounted for ~~$9.26~~$5.71 million and ~~$5.17~~$9.26 million, or 22% and ~~19%~~22% of our revenues for the six-month periods ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The ~~79% increase~~38% decrease in revenues from the sale of other products, parts and accessories is primarily due to ~~strong demand for~~a 37% decrease in revenues derived from the sale of our MOTO and MTB technical apparel designed for off-road motorcycle and mountain biking use ~~respectively.~~respectively when compared to the 2022 period, which was a particularly strong period for apparel sales. Apparel revenues for the six months ended June 30, 2022 had increased by 50%, when compared to the prior year period.

Cost of Revenues and Gross Profit - Cost of revenues for the six-month periods ended June 30, 2023 and 2022 ~~and 2021~~ were ~~$24.90~~$14.31 million and ~~$14.95~~$24.90 million, respectively. Gross Profit for the six-month periods ended June 30, 2023 and 2022 ~~and 2021~~ were ~~$17.27~~$11.12 million and ~~$12.24~~$17.27 million, respectively, or ~~41%~~44% and ~~45%~~41% of revenues respectively. Our neck brace products continue to generate a higher gross margin than our other product categories. ~~Neck~~Although neck brace revenues accounted for 7%5% and ~~13%~~7% of our revenues for the six-month periods ended June 30, 2023 and 2022, ~~and 2021, respectively. Additionally,~~respectively, revenues associated with international customers were ~~78%~~71% and ~~61%~~78% of our revenues for the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022 respectively with revenues associated with international distribution customers continuing to generate a lower gross profit margin than direct dealer sales in the United States. The increase in gross profit as a percentage of revenues for the six month period ended June 30, 2023 was further influenced by a decrease in global shipping and logistic costs as supply chain constraints as a result of the COVID-19 pandemic continued to improve.

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 six-month periods ended June 30, 2023 and 2022 were $23,384 and ~~2021 were~~ $125,810, ~~and $83,289,~~ respectively. The ~~51% increase~~81% decrease in product royalty income is due to ~~an increase~~a decrease in the sale of licensed products by licensees during the ~~2022~~2023 period.

Salaries and Wages - Salaries and wages for the six-month periods ended June 30, 2023 and 2022 were $2,469,927 and ~~2021 were~~ $2,623,139, ~~and $1,837,348,~~ respectively. The ~~43% increase~~6% decrease in salaries and wages during the ~~2022~~2023 period was primarily due to ~~the employment of additional sales professionals and warehousing staff~~a decrease in ~~the United States as we continue to expand and build our selling activities domestically in order to facilitate growth. Additionally,~~ share compensation costs relating to a share issuance made to key personnel in the recognition of performance ~~contributed significantly to the increase in salaries and wages for~~during the 2022 ~~period.~~period that was partially offset by the employment of additional sales and marketing professionals in the United States and abroad as we continue to expand our diversified multi-channel sales operations globally.

Commissions and Consulting Expense - During the six-month periods ended June 30, ~~2022~~2023 and ~~2021,~~2022, commissions and consulting expenses were ~~$313,220~~$207,249 and ~~$436,648.~~$313,220. This ~~28%~~34% decrease in commissions and consulting expenses during the ~~2022~~2023 period is primarily due to a decrease in commissions and incentives paid to both in-house and external sales representatives in the United States in line with a decrease in domestic sales ~~growth in the region.~~growth.

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 six-month periods ended June 30, 2023 and 2022 were $449,028 and ~~2021 were~~ $338,768, ~~and $461,256,~~ respectively. This ~~27% decrease~~33% increase in professional fees is primarily due to an increase in patent development and maintenance costs incurred as the Company continues to build a ~~decrease in expenditure on product liability litigation~~pipeline of innovative products and technologies. Additionally, audit fees increased during the ~~2022~~2023 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 six-months ended June 30, 2023 and 2022 were $1,704,472 and ~~2021 were~~ $1,360,004, ~~and $1,035,733,~~ respectively. The ~~31%~~25% increase in advertising and marketing expenditure during the ~~2022~~2023 period is primarily due to the production ~~execution~~ and ~~distribution~~execution of global marketing campaigns that incorporate ~~high caliber~~high-caliber athlete and influencer sponsorships, event and trade show attendance ~~and activation activities,~~attendance, media outreach and coordinated digital marketing ~~plans~~activities designed to market the Company's growing product offering ~~to a wider group of riders~~ and ~~enthusiasts and continue building a~~increase global consumer ~~brand.~~engagement.

Office Lease and Expenses - Office lease and expenses for the six-month periods ended June 30, 2023 and 2022 were $311,812 and ~~2021 were~~ $400,899, ~~and $174,573,~~ respectively. The ~~130% increase~~22% decrease in office lease and expenses during the ~~2022~~2023 period was primarily due to a decrease in additional warehouse storage rented in the United States as the Company continues to ~~build out~~streamline and ~~expand~~consolidate inventory levels and warehousing operations at its Reno, Nevada ~~warehouse to accommodate storage and sales of its expanding line up of exceptional protective gear.~~warehouse.

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 six-month periods ended June 30, ~~2022~~2023 and ~~2021,~~2022, increased to ~~$1,014,543,~~$1,217,959, from ~~$850,261,~~$1,014,543, during the same ~~2021~~2022 period. The ~~19%~~20% increase in research and development costs during the ~~2022~~2023 period is primarily due to ~~the employment of industry specific product~~certification, homologation, testing and specialized design and development ~~engineering and design professionals~~fees incurred as the Company continues to refine its widening product categories and expand a pipeline of exceptional cutting-edge ~~products.~~products and technologies.

Bad Debt Expense (Recovery) - Bad debt expense (recovery) for the six-month periods ended June 30, 2023 and 2022 were ($181,221) and ~~2021 were~~ $4,355, ~~and $14,093,~~ respectively. This ~~69% decrease~~increase in bad debt ~~expense~~recovery during the ~~2022~~2023 period is primarily the result of a decrease in provisions made for unrecoverable debts during the ~~2022~~2023 period in line with a decrease in ~~the Two Eleven~~ accounts receivable ~~balance~~balances at June 30, ~~2022,~~2023, when compared to December 31, ~~2021, that was partially offset by an increase in the provision for unrecoverable debts relating to the Company's international customers.~~2022.

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 six-month periods ended June 30, 2023 and 2022 were $1,686,744 and ~~2021 were~~ $1,422,103, ~~and $1,138,359,~~ respectively. The ~~25%~~19% increase in general and administrative expenses during the ~~2022~~2023 period is primarily as a result of an increase in expenditures on product liability ~~general risk and directors' and officers'~~ insurance ~~premiums during the 2022 period, as the Company expands its product offerings and selling activities.~~premiums. Additionally, travel expenditure increased in line with a relaxation of global COVID-19 related travel restrictions ~~imposed as a result of the COVID-19 pandemic~~ and an increase in product development, marketing, trade show and sales ~~management travel activity.~~activation travel.

Depreciation Expense - Depreciation Expense for the six-month periods ended June 30, 2023 and 2022 were $572,184 and ~~2021 were~~ $564,867, ~~and $478,936,~~ respectively. This ~~18%~~1% increase in depreciation during the ~~2022~~2023 period is primarily due to the addition of ~~molds~~online software and ~~tooling utilized in the production of~~web enhancements designed to improve consumer engagement and sales across the Company's ~~widening product range.~~web-based selling platforms.

Total Operating Expenses - Total operating expenses increased by ~~$1.61~~$0.40 million to ~~$8.04 million in the six-month period ended June 30, 2022, or 25%, compared to $6.43~~$8.44 million for the six-month period ended June 30, ~~2021.~~2023, or 5%, compared to $8.04 million for the six-month period ended June 30, 2022. This increase in total operating expenses during the ~~2022~~2023 period is primarily due to increases in ~~salaries,~~advertising and marketing, general and administrative ~~office and warehouse leasing, advertising and marketing~~ and research and development costs that were partially offset by ~~a decrease~~an increase in ~~professional fees~~bad debts recovered, salaries and wages and commissions paid as discussed above.

Net Income - Net income after income taxes for the six-month period ended June 30, ~~2022~~2023 was ~~$6.95~~$1.80 million, compared to net income of ~~$4.47~~$6.95 million for the six-month period ended June 30, ~~2021.~~2022. This ~~increase~~decrease in net income during the ~~2022~~2023 period is primarily due to the ~~increase~~decrease in ~~revenue and gross profit~~revenues discussed above.

Liquidity and Capital Resources

At June 30, ~~2022,~~2023, we had cash and cash equivalents of ~~$4.95 million and $0.06 million of short-term investments.~~$12.00 million. The following table sets forth a summary of our cash flows for the periods indicated:

June 30,
2022 2021
Net cash provided by operating activities $ 953,460 $ 1,270,276
Net cash used in investing activities $ (392,765 ) $ (191,445 )
Net cash used in financing activities $ (528,191 ) $ (317,720 )
Effect of exchange rate changes on cash and cash equivalents $ (105,169 ) $ 20,427
Net increase (decrease) in cash and cash equivalents $ (72,665 ) $ 781,538
Cash and cash equivalents at the beginning of period $ 5,022,436 $ 2,967,042
Cash and cash equivalents at the end of period $ 4,949,771 $ 3,748,580

		June 30
		2023			2022
Net cash provided by operating activities	$	6,818,148		$	953,460
Net cash used in investing activities	$	(265,819	)	$	(392,765	)
Net cash used in financing activities	$	(790,369	)	$	(528,191	)
Effect of exchange rate changes on cash and cash equivalents	$	(867,308	)	$	(105,169	)
Net increase (decrease) in cash and cash equivalents	$	4,894,652		$	(72,665	)
Cash and cash equivalents at the beginning of period	$	7,102,945		$	5,022,436
Cash and cash equivalents at the end of period	$	11,997,597		$	4,949,771

Cash ~~decreased~~increased by ~~$72,665~~$4,894,652 or 1%69%, for the six months ended June 30, ~~2022,~~2023, when compared to cash on hand at December 31, ~~2021.~~2022. The primary sources of cash for the six months ended June 30, ~~2022~~2023 were net income of ~~$6,949,675,~~$1,799,360, decreased accounts receivable of $2,692,726, decreased inventory of $3,466,369, decreased prepaid expenses and other current assets of ~~$729,338, increased income taxes payable~~$865,006 and a decrease in deferred assets of ~~$703,220 and proceeds from the issuance of common stock amounting to $255,800.~~$762,012. The primary uses of cash for the six months ended June 30, ~~2022~~2023 were ~~increased accounts receivable of $1,155,162,~~ decreased accounts payable and accrued expenses of ~~$6,649,900, increased inventory~~$858,760, a decrease in income taxes payable of ~~$866,061~~$2,026,505, decreased deferred compensation of $400,000, capital expenditure of $265,819 and the repayment of a short term loan amounting to ~~$747,845.~~$738,228.

The Company is currently meeting its working capital needs through cash on hand, a revolving line of credit with a bank, 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 controlled by Dr. Christopher Leatt, our founder, chairman and 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, ~~2022~~2023 and ~~2021,~~2022, the Company paid an aggregate of ~~$66,844~~$34,857 and ~~$79,590,~~$66,844, 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, ~~2022~~2023 and ~~2021,~~2022, the Company paid an aggregate of ~~$16,711~~$8,714 and ~~$19,898,~~$16,711, in licensing fees to Mr. De Villiers.

From May 15, 2015 through October 31, 2021, the Company was party to a consulting agreement, dated July 8, 2015, between the Company and Innovate Services Limited, or Innovate, a Seychelles limited company in which Dr. Leatt is an indirect beneficiary, pursuant to which, as amended, Innovate served as the Company's exclusive research, development and marketing consultant, in exchange for a monthly fee of $42,233; provided that Dr. Leatt personally performs the services to be performed by Innovate under the agreement. Either party had the right to terminate the agreement for convenience, upon six months' prior written notice, or by the Company immediately without notice in the event of Innovate's breach of an obligation under the contract or if Dr. Leatt could no longer perform the services. On November 8, 2021, the Company terminated the agreement with Innovate, effective October 31, 2021, in connection with the wind-up of Innovate's business operations. The termination of the agreement with Innovate will not have an adverse effect on the Company's research and development operations as the Company simultaneously entered into a new consulting agreement with Innovation Services Limited, Jersey limited company beneficially owned by Dr. Leatt, for the same research, development and marketing services, and on substantially the same terms and conditions as the terminated agreement. During the quarters ended June 30, 2022 and 2021, the Company recognized an aggregate of $0 and $126,699, respectively, in consulting fees to Innovate.

On November 8, 2021, the Company entered into a consulting agreement with Innovation Services Limited, a Jersey limited company in which, Dr. Christopher Leatt, the Company's founder and chairman, is an indirect beneficiary. Pursuant to the terms of the agreement, Innovation has agreed to serve as the Company's exclusive research, development and marketing consultant, in exchange for a monthly fee of $42,233; provided, however, that Dr. Leatt must remain an Innovation director and beneficiary of a majority of its ownership interests during the term of the agreement, and Dr. Leatt must remain the Company's primary point of contact responsible for the oversight, review and delivery of the services to be performed by Innovation under the agreement. Innovation may increase its monthly fees, on an annual basis, by no greater than the lesser of: (a) two and one-half percent (2.5%) of the prior year's annualized fee; or (b) a percentage equal to then-applicable annual percentage increase in the Consumer Price Index (CPI) published by the United States Department of Labor's bureau of labor statistics, plus one-half percent (0.5%). 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 November 1, 2021, and will continue unless terminated by either party in accordance with its terms. Either party has the right to terminate the consulting agreement upon six months' prior written notice, except that the consulting agreement may be terminated by the Company immediately without notice if the services to be performed by Innovation cease to be performed by Dr. Leatt, if beneficial ownership in Innovation by Dr. Leatt's and his immediate family members decreases, or for any other material breach of the agreement. The parties have agreed to settle any dispute under the consulting agreement by submission to JAMS for final and binding arbitration pursuant to its Comprehensive Arbitration Rules and Procedures and in accordance with the Expedited Procedures in those Rules.

The Company also simultaneously entered into a side letter agreement, dated November 8, 2021, with Dr. Leatt, pursuant to which Dr. Leatt agreed, among other things: (1) not to perform services similar to the services provided under the agreement for any current or future, direct or indirect competitor of the Company or any similar company; (2) not to solicit any current or future employees of the Company for employment with Innovation or any other entity with which he may become affiliated, or to contact or solicit any current or future stockholder or investor of the Company in connection with any matter that is not directly related to the ongoing or future business operations of the Company; and (3) that he will apprise the Company of any business opportunity that he becomes aware of that could benefit the Company so that the Company, can in its sole discretion, make a determination regarding whether to pursue such opportunity in the best interest of the Company and its stockholders. Dr. Leatt further agreed to continue dedicating a majority of his time on matters related to performance of his duties as a director of the Company and to the fulfillment of his obligations to the Company's research and development efforts under the consulting agreement, and the Company will have the right to adjust the amount of the fees payable under the consulting agreement to the extent of any substantial diminution in his fulfillment of such duties and obligations. ~~Accordingly,~~The monthly fee increased to $43,289 effective January 1, 2022, ~~the Company's monthly fee to Innovation,~~and thereafter, increased to ~~$43,289.~~$44,371 effective January 1, 2023. The foregoing description of the Consulting Agreement and Side Letter Agreement is qualified in its entirety by reference to the Consulting Agreement and the Side Letter Agreement, copies of which are filed as Exhibits 10.1 and 10.2, respectively, hereto and are incorporated by reference in this report. During the quarters ended June 30, ~~2022~~2023 and ~~2021,~~2022, the Company recognized an aggregate of ~~$129,867~~$113,114 and ~~$0,~~$129,867, respectively, in consulting fees to Innovation.

Pursuant to a Premium Finance Agreement, dated ~~May 27,~~October 25, 2022, between the Company and Aon Premium Finance, ~~LLC, or APF,~~ the Company is obligated to pay APF an aggregate sum of ~~$80,233~~$1,235,372 in ~~eleven monthly payments on a sliding scale, as follows, $37,381, $37,381, $1,172, $ 1,172, $ 1,172 and thereafter six~~ten payments of ~~$326,~~$123,537, at ~~a 6.360%~~an 8.250% annual interest rate, commencing on ~~June~~December 1, 2022 and ending on ~~April~~September 1, 2023. Any late payment during the term of the agreement would be assessed a late penalty of 5% of the payment amount due, and in the event of default APF has the right to accelerate the payment due under the agreement. As of June 30, 2022, the Company had not defaulted on its payment obligations under this agreement.

Pursuant to a Premium Finance Agreement, dated October 29, 2021, between the Company and APF, the Company is obligated to pay APF an aggregate sum of $1,122,858 in eleven payments of $102,078, at a 4.650% annual interest rate, commencing on November 1, 2021 and ending on September 1, 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 APF has the right to accelerate the payment due under the agreement. As of June 30, ~~2022,~~2023, the Company had not defaulted on its payment obligations under this agreement.

Pursuant to a Premium Finance Agreement, dated November 22, 2022, between the Company and Aon Premium Finance, the Company is obligated to pay APF an aggregate sum of $32,451 in ten payments of $3,369, at an 8.250% annual interest rate, commencing on December 1, 2022 and ending on September 1, 2023. 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 APF has the right to accelerate the payment due under the agreement. As of June 30, 2023, the Company had not defaulted on its payment obligations under this agreement.

Pursuant to a Premium Finance Agreement, dated May 23, 2023, between the Company and Aon Premium Finance, the Company is obligated to pay APF an aggregate sum of $57,278 in four payments of $14,320, at an 9.990% annual interest rate, commencing on June 1, 2023 and ending on September 1, 2023. 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 APF has the right to accelerate the payment due under the agreement. As of June 30, 2023, the Company had not defaulted on its payment obligations under this agreement.

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. Effective January 21, 2022, the Company executed an amendment to the line of credit to extend the line of credit facility through February ~~28,~~29, 2023 and to replace interest determined by LIBOR Daily Floating Rate with the Bloomberg Short-Term Bank Yield Index rate. Effective January 20, 2023, the Company executed an amendment to the line of credit to extend the line of credit facility through February 29, 2024. As of June 30, ~~2022,~~2023, there were no advances of the line of credit leaving $1,500,000 of the line of credit available for advance.

On December 29, 2021, Two Eleven entered into a Loan and Security agreement with a bank, effective December 17, 2021, to finance equipment. The Equipment Note financed under the Loan and Security Agreement has a total value of $272,519, payable in 36 consecutive monthly installments commencing February 5, 2022, and continuing to January 5, 2025. Interest shall accrue on the entire principal amount of this Equipment Note outstanding from time to time at a fixed rate of 3.5370% per annum. The principal and interest amount of each payment shall be $7,990. As of June 30, 2023 and December 31, 2022, respectively, $147,422 and $192,290 of the Equipment Note was outstanding.

On December 20, 2022, Two Eleven entered into a Loan and Security Agreement with a bank, effective December 1, 2022, to finance certain equipment owned by Two Eleven. The note issued under the agreement, the Equipment Note, has a total value of $58,075, payable by Two Eleven in 36 consecutive monthly installments, commencing on February 5, 2023, and continuing through to January 5, 2026. Interest will accrue on the entire principal amount of ~~$236,373~~the Equipment Note outstanding from time to time at a fixed rate of 7.8581% per annum, and the principal and interest amount of each installment payment will be $1,816. As of June 30, 2023, and December 31, 2022, respectively, $50,802 and $58,075 of the Equipment Note was outstanding.

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'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 where no exchange of product is possible. 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 entitled to in exchange for those goods or services. Product royalty income, representing less than 1% of total revenues, is recorded as the underlying product sales occur, in accordance with the related licensing arrangements.

Our standard 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, however, in limited instances qualified distributors and dealers may be granted extended payment terms during selected order periods. In performing such evaluations, we utilize historical experience, sales performance, and credit risk requirements. Furthermore, products purchased by distributors may not be returned to us in the event that any such distributor relationship is terminated.

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, 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.

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 expenses 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~~maintains an allowance for doubtful accounts receivable based upon the expected credit ~~losses~~lossess determined utilizing 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 had 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 was ~~$283,713~~$540,716 at June 30, ~~2022~~2023 and ~~$291,584~~$743,621 at December 31, ~~2021.~~2022.

Inventory Valuation - Inventory is stated at the lower of cost or ~~market.~~net realizable value. 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 was ~~$210,452~~$285,236 at June 30, ~~2022~~2023 and ~~$116,183~~$105,072 at December 31, ~~2021.~~2022.

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 ~~was~~were no impairment ~~charge~~charges during the ~~quarters~~six months ended June 30, ~~2022~~2023 and ~~2021.~~2022.

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. Please refer to Note 3 "Leases", in the Notes to Consolidated Financial Statements for additional information.

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.

Recent Accounting Pronouncements

See Note 11, "Recent Accounting 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 on 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 June 30, ~~2022,~~2023, the Company'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'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's Chief Executive Officer and Chief Financial Officer determined that the Company'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 June 30, ~~2022,~~2023, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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~~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 April 3, 2018, a wrongful death lawsuit was filed against the Company in Superior Court of California, Imperial County, and subsequently removed to USDC San Diego. The claims asserted included strict liability, negligence, failure to warn, and breach of implied and express warranties. After facing a vigorous defense, the plaintiffs agreed to a confidential settlement dismissing all claims against the Company. A formal dismissal order has not yet been entered.

ITEM 1A. RISK FACTORS.

There are no material changes from the risk factors previously disclosed in Item 1A "Risk Factors" of our annual report on Form 10-K for the period ended December 31, ~~2021.~~2022.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

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 No.	Description

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

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

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

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

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

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

101.SCH	Inline XBRL Taxonomy Extension Schema Document

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document

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

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.

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: August 11, 10, 2023~~2022~~	LEATT CORPORATION

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

EXHIBIT INDEX

Exhibit No.	Description

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

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

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

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

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

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

101.SCH	Inline XBRL Taxonomy Extension Schema Document

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document

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

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

Class of Securities	Shares Outstanding
Common Stock, $0.001 par value	~~5,826,892~~5,971,340

ASSETS

		June 30, 2022			December 31, 2021
		Unaudited			Audited
Current Assets
Cash and cash equivalents	$	4,949,771		$	5,022,436
Short-term investments		58,263			58,262
Accounts receivable, net		13,823,969			12,660,936
Inventory, net		21,853,273			21,081,481
Payments in advance		1,351,666			1,610,640
Prepaid expenses and other current assets		3,449,089			4,178,427
Total current assets		45,486,031			44,612,182

Property and equipment, net		2,959,009			3,128,086
Operating lease right-of-use assets, net		1,239,776			1,393,213

Other Assets
Deposits		41,333			33,339

Total Assets	$	49,726,149		$	49,166,820

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Accounts payable and accrued expenses	$	7,967,771		$	14,617,671
Note payable, current		88,950			83,270
Operating lease liabilities, current		301,640			318,621
Income taxes payable		3,442,038			2,738,818
Short term loan, net of finance charges		227,180			975,025
Total current liabilities		12,027,579			18,733,405

Deferred compensation		360,000			320,000
Note payable, net of current portion		147,423			189,249
Operating lease liabilities, net of current portion		938,136			1,074,592
Deferred tax liability, net		228,600			228,600

Commitments and contingencies

Stockholders' Equity
Preferred stock, $.001 par value, 1,120,000 shares authorized, 120,000 shares issued and outstanding		3,000			3,000
Common stock, $.001 par value, 28,000,000 shares authorized, 5,826,892 and 5,673,683 shares issued and outstanding		130,280			130,162
Additional paid - in capital		9,809,539			9,230,847
Accumulated other comprehensive loss		(904,316	)		(779,268	)
Retained earnings		26,985,908			20,036,233
Total stockholders' equity		36,024,411			28,620,974

Total Liabilities and Stockholders' Equity	$	49,726,149		$	49,166,820

ASSETS

		June 30, 2023			December 31, 2022
		Unaudited			Audited
Current Assets
Cash and cash equivalents	$	11,997,597		$	7,102,945
Accounts receivable, net		10,349,776			12,839,597
Inventory, net		19,158,929			22,805,462
Payments in advance		1,042,058			1,047,137
Deferred asset, net		292,321			1,016,815
Prepaid expenses and other current assets		2,013,106			2,878,112
Total current assets		44,853,787			47,690,068

Property and equipment, net		3,228,198			3,104,336
Operating lease right-of-use assets, net		945,901			1,092,170

Other Assets
Deposits		39,872			40,796

Total Assets	$	49,067,758		$	51,927,370

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Accounts payable and accrued expenses	$	5,152,630		$	6,011,390
Notes payable, current		110,484			108,398
Operating lease liabilities, current		266,057			280,743
Deferred compensation, current		-			400,000
Income taxes payable		1,356,195			3,382,700
Short term loan, net of finance charges		291,968			1,030,196
Total current liabilities		7,177,334			11,213,427

Notes payable, net of current portion		87,740			141,967
Operating lease liabilities, net of current portion		679,844			811,427
Deferred tax liability, net		66,200			66,200

Commitments and contingencies		-			-


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		(1,518,212	)		(1,081,143	)
Retained earnings		31,796,046			29,996,686
Total stockholders' equity		41,056,640			39,694,349

Total Liabilities and Stockholders' Equity	$	49,067,758		$	51,927,370

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

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

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

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

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

Restricted stock awards	-		-	-		-		240,480		-			-		240,480

Net income	-		-	-		-		-		-			6,949,675		6,949,675

Foreign currency translation adjustment	-		-	-		-		-		(125,048	)		-		(125,048	)

Balance, June 30, 2022	120,000	$	3,000	5,826,892	$	130,280	$	9,809,539	$	(904,316	)	$	26,985,908	$	36,024,411

PART I	FINANCIAL INFORMATION	1

ITEM 1.	FINANCIAL STATEMENTS.	1

ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.	11

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.	24
~~ITEM 4.~~	~~CONTROLS AND PROCEDURES.~~	24

~~PART II~~ITEM 4.	~~OTHER INFORMATION~~CONTROLS AND PROCEDURES.	2524

PART II	OTHER INFORMATION	25

ITEM 1.	LEGAL PROCEEDINGS.	25

ITEM 1A.	RISK FACTORS.	25

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.	25

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES.	25

ITEM 4.	MINE SAFETY DISCLOSURES.	25

ITEM 5.	OTHER INFORMATION.	25

ITEM 6.	EXHIBITS.	2526

		Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
		June 30						June 30						June 30						June 30
		2022			2021			2022			2021			2023			2022			2023			2022
		Unaudited			Unaudited			Unaudited			Unaudited			Unaudited			Unaudited			Unaudited			Unaudited

Revenues	$	17,938,310		$	14,300,559		$	42,166,418		$	27,197,034		$	12,350,224		$	17,938,310		$	25,429,567		$	42,166,418

Cost of Revenues		10,294,238			8,107,020			24,895,256			14,951,541			7,007,442			10,294,238			14,314,015			24,895,256

Gross Profit		7,644,072			6,193,539			17,271,162			12,245,493			5,342,782			7,644,072			11,115,552			17,271,162

Product Royalty Income		46,971			58,479			125,810			83,289			10,248			46,971			23,384			125,810

Operating Expenses
Salaries and wages		1,325,177			912,811			2,623,139			1,837,348			1,228,491			1,325,177			2,469,927			2,623,139
Commissions and consulting expenses		150,634			215,986			313,220			436,648			110,925			150,634			207,249			313,220
Professional fees		79,653			123,501			338,768			461,256			111,785			79,653			449,028			338,768
Advertising and marketing		746,114			518,153			1,360,004			1,035,733			863,378			746,114			1,704,472			1,360,004
Office lease and expenses		193,878			87,200			400,899			174,573			161,572			193,878			311,812			400,899
Research and development costs		480,843			445,156			1,014,543			850,261			632,968			480,843			1,217,959			1,014,543
Bad debt expense (recovery)		(13,969	)		(51,732	)		4,355			14,093			(230,616	)		(13,969	)		(181,221	)		4,355
General and administrative expenses		710,351			609,760			1,422,103			1,138,359			868,595			710,351			1,686,774			1,422,103
Depreciation		287,943			242,401			564,867			478,936			292,374			287,943			572,184			564,867
Total operating expenses		3,960,624			3,103,236			8,041,898			6,427,207			4,039,472			3,960,624			8,438,184			8,041,898

Income from Operations		3,730,419			3,148,782			9,355,074			5,901,575			1,313,558			3,730,419			2,700,752			9,355,074

Other Income (Expenses)
Other Expenses
Interest and other expenses, net		(8,349	)		3,948			(2,192	)		(59	)		(16,874	)		(8,349	)		(37,798	)		(2,192	)
Total other income (expenses)		(8,349	)		3,948			(2,192	)		(59	)
Total other expenses														(16,874	)		(8,349	)		(37,798	)		(2,192	)

Income Before Income Taxes		3,722,070			3,152,730			9,352,882			5,901,516			1,296,684			3,722,070			2,662,954			9,352,882

Income Taxes		995,150			744,082			2,403,207			1,432,030			520,545			995,150			863,594			2,403,207

Net Income Available to Common Shareholders	$	2,726,920		$	2,408,648		$	6,949,675		$	4,469,486		$	776,139		$	2,726,920		$	1,799,360		$	6,949,675

Net Income per Common Share
Basic	$	0.47		$	0.44		$	1.20		$	0.82		$	0.13		$	0.47		$	0.30		$	1.20
Diluted	$	0.44		$	0.39		$	1.12		$	0.72		$	0.12		$	0.44		$	0.29		$	1.12

Weighted Average Number of Common Shares Outstanding
Basic		5,815,285			5,438,686			5,790,510			5,434,553			5,971,340			5,815,285			5,971,340			5,790,510
Diluted		6,255,537			6,172,686			6,230,763			6,168,553			6,268,520			6,255,537			6,268,520			6,230,763

Comprehensive Income
Net Income	$	2,726,920		$	2,408,648		$	6,949,675		$	4,469,486		$	776,139		$	2,726,920		$	1,799,360		$	6,949,675
Other comprehensive income, net of $0 deferred income taxes in 2022 and 2021
Other comprehensive income, net of $0 deferred income taxes in 2023 and 2022
Foreign currency translation		(382,782	)		60,893			(125,048	)		32,541			(163,320	)		(382,782	)		(437,069	)		(125,048	)

Total Comprehensive Income	$	2,344,138		$	2,469,541		$	6,824,627		$	4,502,027		$	612,819		$	2,344,138		$	1,362,291		$	6,824,627

		2022			2021

Cash flows from operating activities
Net income	$	6,949,675		$	4,469,486
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		564,867			478,936
Stock-based compensation		323,010			55,020
Bad debts reserve		(7,871	)		11,763
Inventory reserve		94,269			39,995
(Gain) loss on sale of property and equipment		(22,905	)		5,767
(Increase) decrease in:
Accounts receivable		(1,155,162	)		2,077,870
Inventory		(866,061	)		3,478,553
Payments in advance		258,974			(397,698	)
Prepaid expenses and other current assets		729,338			(3,989,785	)
Income tax refunds receivable		-			2,964
Deposits		(7,994	)		(233	)
Increase (decrease) in:
Accounts payable and accrued expenses		(6,649,900	)		(5,377,741	)
Income taxes payable		703,220			375,379
Deferred compensation		40,000			40,000
Net cash provided by operating activities		953,460			1,270,276

Cash flows from investing activities
Capital expenditures		(435,537	)		(191,443	)
Proceeds from sale of property and equipment		42,773			-
Increase in short-term investments, net		(1	)		(2	)
Net cash used in investing activities		(392,765	)		(191,445	)

Cash flows from financing activities
Issuance of common stock		255,800			-
Repayment of note payable to bank		(36,146	)		-
Repayment of short-term loan, net		(747,845	)		(317,720	)
Net cash used in financing activities		(528,191	)		(317,720	)

Effect of exchange rates on cash and cash equivalents		(105,169	)		20,427

Net increase (decrease) in cash and cash equivalents		(72,665	)		781,538

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

Cash and cash equivalents - end of period	$	4,949,771		$	3,748,580

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest	$	30,178		$	16,379
Cash paid for income taxes	$	1,699,987		$	1,088,360

Other noncash investing and financing activities
Common stock issued for services	$	323,010		$	55,020

Supplemental disclosure	June 30, 2022	December 31, 2021	June 30, 2023	December 31, 2022
Weighted average remaining lease term	5 years		3.55 years	5 years
Weighted average discount rate	3.75%	4.08%	3.75%	3.75%

Year ended December 31,		Amounts under Operating Leases			Amounts under Operating Leases
Remaining 2022	$	149,366
2023		293,329
Remaining 2023				$	140,931
2024		281,663			281,664
2025		290,098			290,098
2026		298,791			298,792
2027		25,455			25,455
Total minimum lease payments	$	1,338,702		$	1,036,940
Less: amount representing interest	$	(98,926	)	$	(91,039	)
Total operating lease liabilities	$	1,239,776		$	945,901

						Six months ended		Six months ended
		Six months ended June 30, 2022		Six months ended June 30, 2021		June 30, 2023		June 30, 2022
Cash paid for amounts included in the measurement of lease liabilities	$	191,732	$	119,300	$	150,041	$	191,732
Right-of-use assets obtained in exchange for lease obligations	$	41,163	$	15,170	$	-	$	41,163

		June 30,		December 31,
		2022		2021
Liabilities
Note payable, current	$	88,950	$	83,270
Note payable, net off current portion		147,423		189,249
	$	236,373	$	272,519

		June 30, 2023		December 31, 2022
Liabilities
Notes payable, current	$	110,484	$	108,398
Notes payable, net of current portion		87,740		141,967
	$	198,224	$	250,365

Year ended December 31,		Amounts under Notes Payable		Amounts under Notes Payable
Remaining 2022	$	44,082
2023		90,535
Remaining 2023			$	54,715
2024		93,790		112,983
2025		7,966		28,723
2026				1,803
	$	236,373	$	198,224

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

REVENUES	$	17,938,310		$	14,300,559		$	3,637,751		25%
COST OF REVENUES		10,294,238			8,107,020		$	2,187,218		27%
GROSS PROFIT		7,644,072			6,193,539		$	1,450,533		23%
PRODUCT ROYALTY INCOME		46,971			58,479		$	(11,508	)	-20%
OPERATING EXPENSES
Salaries and Wages		1,325,177			912,811		$	412,366		45%
Commissions and Consulting		150,634			215,986		$	(65,352	)	-30%
Professional Fees		79,653			123,501		$	(43,848	)	-36%
Advertising and Marketing		746,114			518,153		$	227,961		44%
Office Lease and Expenses		193,878			87,200		$	106,678		122%
Research and Development Costs		480,843			445,156		$	35,687		8%
Bad Debt Recovery		(13,969	)		(51,732	)	$	37,763		73%
General and Administrative		710,351			609,760		$	100,591		16%
Depreciation		287,943			242,401		$	45,542		19%
Total Operating Expenses		3,960,624			3,103,236		$	857,388		28%
INCOME FROM OPERATIONS		3,730,419			3,148,782		$	581,637		18%
Other Income (Expenses)		(8,349	)		3,948		$	(12,297	)	-311%
INCOME BEOFRE INCOME TAXES		3,722,070			3,152,730		$	569,340		18%
Income Taxes		995,150			744,082		$	251,068		34%
NET INCOME	$	2,726,920		$	2,408,648		$	318,272		13%

		June 30,
		2022			2021
Net cash provided by operating activities	$	953,460		$	1,270,276
Net cash used in investing activities	$	(392,765	)	$	(191,445	)
Net cash used in financing activities	$	(528,191	)	$	(317,720	)
Effect of exchange rate changes on cash and cash equivalents	$	(105,169	)	$	20,427
Net increase (decrease) in cash and cash equivalents	$	(72,665	)	$	781,538
Cash and cash equivalents at the beginning of period	$	5,022,436		$	2,967,042
Cash and cash equivalents at the end of period	$	4,949,771		$	3,748,580