Leo Motors (LEOM) 10-Q 2012 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

or

o       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-53525

Leo Motors, Inc.

(Exact name of registrant as specified in its charter)

Nevada	95-3909667
(State or other jurisdiction of incorporation or organization)	(I. R. S. Employer Identification No.)

291-1, Hasangok-dong, Hanam City, Gyeonggi-do, Republic of Korea	465-250
(Address of principal executive offices)	(Zip Code)

+82 31 796 8870

(Registrant’s telephone number, including area code)

n/a

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.	Yes x  No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).	Yes o  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  o	Accelerated filer  o
Non-accelerated filer  o  (Do not check if a smaller reporting company)	Smaller reporting company  x

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes o  No  x

The number of shares of the registrant’s common stock outstanding as of September 30, 2012 was 55,935,615 shares.

QUARTERLY REPORT ON FORM 10-Q

for the Quarter ended September 30, 2012

TABLE OF CONTENTS

 Leo Motors, Inc.

INDEX TO FORM 10-Q

PART I.	FINANCIAL INFORMATION	Page
Item 1.	Condensed Consolidated Financial Statements:
	Condensed Consolidated Balance Sheets at September 30, 2012 (unaudited), and December 31, 2011 (audited)	1
	Condensed Consolidated Statements of Operations and Comprehensive Income for the Nine and Three Months Ended September 30, 2012, and (unaudited) September 30, 2011 (unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2012 (unaudited) and September 30, 2011 (unaudited)	4
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	14
Item 4.	Controls and Procedures	15
PART II.	OTHER INFORMATION	16
Item 1.	Legal Proceedings	16
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 3.	Defaults Upon Senior Securities	17
Item 4.	Mine Safety Disclosures	17
Item 5.	Other Information	17
Item 6.	Exhibits	17
SIGNATURES		17

LEO MOTORS, INC.

Consolidated Balance Sheets

ASSETS	As of 9/30/2012		As of 12/31/2011
	Unaudited		Audited
CURRENT ASSETS
Cash		50,763		880
Accounts Receivable		40,883		86,244
Inventory		508,048		252,584
Short-term loans		63,723		196,066
Prepaid purchase		204,234		163,185
Other current assets		2,521		2,505
TOTAL CURRENT ASSETS		870,172		701,464
FIXED ASSETS, NET		50,401		48,751
OTHER ASSETS
Deposit		71,473		95,906
Other non-current assets		518		56,905
Long-tern investment in B&T Corp.		4,934,779		4,959,779
TOTAL OTHER ASSETS		5,006,770		5,112,590
TOTAL ASSETS		$5,927,343		$5,862,805
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Short term borrowings		585,187		433,651
Accounts payable and accrued expenses		60,325		20,425
Other Payables		988,577		995,658
Advance payments		142,984		86,766
Related party payable		172,626		1,434,583
Corporate and business taxes payable		211,713		263,254
TOTAL CURRENT LIABILITIES		2,161,413		3,234,337
LONG-TERM LIABILITIES - Accrued severence benefits		42,730		52,378
TOTAL LIABILITIES		2,204,143		3,286,715

1

LEO MOTORS, INC.
Consolidated Balance Sheets (Continued)
			As of 9/30/2012			As of 12/31/2011
STOCKHOLDERS' EQUITY (DEFICIT)			Unaudited			Audited
Common Stock 200,000,000 authorized at $0.001 par value;
shares issued and outstanding	2012-09-30	55,935,615
shares issued and outstanding	2011-12-31	50,833,115
Total Common Shares issued and outstanding, respectively				55,936			50,233
Additional paid-in capital				11,115,083			10,774,996
Accumulated comprehensive income(loss)				471,968			470,876
Accumulated deficit				(9,083,513	)		(9,934,703	)
Less: Treasury Stock at cost				(50,962	)		0
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)
ATTRIBUTABLE TO LEO MOTORS, INC.				2,508,512			1,361,402
Noncontrolling Interest				1,214,688			1,214,688
TOTAL LIABILITIES, AND STOCKHOLDERS' EQUITY (DEFICIT)				$5,927,343			$5,862,805

"The accompanying notes are an integral part of these consolidated financial statements."

2

LEO MOTORS, INC.

Consolidated Statements of Operations

	For the Nine Months Ended					For the Three Months Ended
		2012-09-30		2011-09-30			2012-09-30		2011-09-30
		Unaudited		Unaudited			Unaudited		Unaudited
REVENUES		$25,301		$252,555			$915		$0
COST OF SALES		20,117		219,112			4,709		0
GROSS PROFIT		5,184		33,443			-3,794		0
OTHER EXPENSES
General and administrative		579,112		443,761			205,594		146,850
TOTAL OTHER EXPENSE		579,112		443,761			205,594		146,850
NET LOSS FROM OPERATIONS		(573,928	)	(410,318	)		(209,388	)	(146,850	)
OTHER INCOME (EXPENSE)
Other income (expense)		17,109		(30,245	)		9,608		(4,646	)
Gain on assets  acquisition				0					0
Debt Forgiveness		829,645		0					0
Interest expense		118,653		0			15,728		0
TOTAL OTHER INCOME (EXPENSE)		965,407		(30,245	)		25,336		(4,646	)
INCOME (LOSS) FROM CONTINUING
OPERATION BEFORE INCOME TAXES		391,479		(440,563	)		(184,052	)	(151,496	)
Income taxes		0		0			0		0
NET INCOME (LOSS)		$391,479		($440,563	)		($184,052	)	($151,496	)
Net income (loss) attributable to noncontroling interest		143,782		118,952			178,771		40,831
NET INCOME (LOSS) ATTRIBUTABLE TO LEO
MOTORS, INC.		$535,261		($321,611	)		($5,281	)	($110,665	)
COMPREHENSIVE INCOME (LOSS):
Net loss		535,261		-321,611			-5,281		-110,665
Unrealized foreign currency transactions gain(loss)		546		12,540			546		11,967
COMPREHENSIVE INCOME (LOSS)		$535,807		($309,071	)		($4,735	)	($98,698	)
BASIC INCOME (LOSS) PER SHARE
Basic & Diluted Income (Loss) Per Share		0.010		(0.006	)		(0.000	)	(0.002	)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING		53,065,337		50,833,115			55,935,615		50,833,115

"The accompanying notes are an integral part of these consolidated financial statements."

3

LEO MOTORS, INC.

Consolidated Statements of Cash Flows

	For the Nine Months Ended
		2012-09-30		2011-09-30
		Unaudited		Unaudited
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) from continuing operations		$535,261		($321,611	)
Adjustments to reconcile net loss to net cash
used by operating activities:
Accounting for Non-controlling interest		104,432		104,432
Common stock issued for compensation		213,300		0
Depreciation		16,674		36,587
Forgiveness of debt		(829,645	)	0
Foreign currency translation		546
Gain on asset acquisition		(286,914	)	0
(Increase) decrease in accounts receivable		45,361		-8,598
(Increase) decrease in inventory		(255,464	)	(242,316	)
(Increase) decrease in short term loans		132,343		0
(Increase) decrease in deposit/prepaid		(41,049	)
(Increase) decrease in other current assets		-16		0
Increase (decrease) in accounts payable /accrued expenses		39,900		(13,243	)
Increase (decrease) in other payable		(7,081	)	518,169
Increase (decrease) in advance payments		56,218		(255,419	)
Increase (decrease) in short term borrowings		151,536		0
Increase (decrease) in taxes payable		(51,541	)	0
Increase (decrease) in other liabilities
Increase (decrease) in severence benefits		(9,648	)	(2,150	)
Net Cash Used in Operating Activities		(185,786	)	(184,149	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets		(121,614	)	(22,582	)
Return in investment		26,809		0
Decrease in deposit		63,739		13,063
(Increase) decrease in other non-current assets		715		24,226
Net Cash Provided (Used) in Investing Activities		(30,351	)	14,707

"The accompanying notes are an integral part of these consolidated financial statements."

4

LEO MOTORS, INC.

Consolidated Statements of Cash Flows (Continued)

	For the Nine Months Ended
		2012-09-30		2011-09-30
		Unaudited		Unaudited
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on notes payable		0		0
Common stock issuance		282,544		0
Contribution of treasury stock		(50,976	)	0
Short-term loan		138,517		73,502
Advance from related parties		(149,887	)	(32,297	)
Net Proceeds from borrowings		45,822		57,867
Net Cash Provided by Financing Activities		$266,020		$99,072
Foreign currency translation adjustment		0		12,540
NET DECREASE IN CASH		$49,883		$(57,830	)
CASH, BEGINNING OF PERIOD		880		71,192
CASH, END OF PERIOD		$50,763		$13,362
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Interest paid		$0		$0
Income taxes paid		$0		$14,487
SUPPLEMENTAL DISCLOSURE OF
NON-CASH ACTIVITIES
Common stock issued for services		$213,300		$0
Forgiveness of debts included as income		$829,645		$0

"The accompanying notes are an integral part of these consolidated financial statements."

5

LEO MOTORS, INC.

Notes to the Consolidated Financial Statements

As of September 30, 2012 and 2011

(Unaudited)

NOTE 1 - COMPANY BACKGROUND

Company Business

Company is currently in development, assembly and sales of the energy storage devices and electric vehicle components.

Background

Leo Motors, Inc, (the “Company”) was originally incorporated as Classic Auto Accessories, a California Corporation on July 2, 1986. The Company then underwent several name changes from FCR Automotive Group, Inc. to Shini Precision Machinery, Inc. to Simco America Inc. and then to Leo Motors. The Company had been dormant since 1989, and effectuated a reverse merger on November 12, 2007 with Leozone Inc., a South Korean Company, which is the maker of electrical transportation devices. The merger essentially exchanges shares in Leo Motors, Inc. for shares in Leozone. As this is a reverse merger the accounting treatment of such is that of a combination of the two entities with the activity of Leozone, Inc. the surviving entity, going forward. The financial statements reflect the activity for all periods presented as if the merger had occurred January 1, 2007.

On February 11, 2010, the Company acquired 50% of Leo B&T Corp.,(“B&T”) a Korean Corporation, from two shareholders of B&T in exchange for 7,000,000 shares of the Company’s common stock.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant account policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements and the notes are the representation of the Company’s management, who are responsible for their integrity and objectivity. These accounting policies conform to U.S. generally accepted accounting principles (“USGAAP”) and have been consistently applied in the preparation of the financial statements.

Basis of Presentation and Consolidation

These financial statements and related notes are expressed in US dollars. The Company’s fiscal year-end is December 31. The consolidated financial statements include the financial statements of the Leo Motors Co. Ltd. Korea where the Company is controlling shareholders with 51.42 % at the end of September 30, 2012 and 2011, respectively. All inter-company transactions and balances have been eliminated upon consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

6

Fair Value of Financial Instruments

For certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable inventory and prepaid expenses, accounts payable and deferred revenues, the carrying amounts approximate fair value due to their short maturities.

Revenue Recognition

The Company follows the guidance of the Securities and Exchange Commission’s Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements”. In general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. The following policies reflect specific criteria for the various revenues streams of the Company.

The Company generates revenue from the delivery of goods and records revenues when the sales are completed, already collected or collectability is reasonably assured, there is no future obligation and there is remote chance of future claim or refund to the customers.

Revenue is recognized when risk of ownership and title pass to the buyer, generally upon the delivery of professional services. Pricing is fixed and determinable according to the Company’s published brochures and price lists.

Accounts Receivables

Accounts receivables of the Company are reviewed to determine if their carrying value has become impaired.

The Company considers the assets to be impaired if the balances are greater than one-year old. Management regularly reviews accounts receivable and will establish an allowance for potentially uncollectible amounts when appropriate. When accounts are written off, they will be charged against the allowance.

Receivables are not collateralized and do not bear interest.

Cash Equivalents

For purposes of reporting cash flows, the Company considers all short-term investments with an original maturity of three months or less to be cash equivalent.

Fixed Assets

Fixed assets are stated at cost, less accumulated depreciation. Depreciation is provided principally on the straight-line method over the estimated useful lives of the assets, which is generally 3 to 10 years. The cost of repairs and maintenance is charged to expense as incurred. Expenditures for property betterments and renewals are capitalized. Upon sale or other disposition of a depreciable asset, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in other income (expense).

The Company will periodically evaluate whether events and circumstances have occurred that may warrant revision of the estimated useful lives of fixed assets or whether the remaining balance of fixed assets should be evaluated for possible impairment. We use an estimate of the related undiscounted cash flows over the remaining life of the fixed assets in measuring their recoverability.

7

Intangible and Long Lived Assets

The Company follows ASC 360-10, “Property, Plant, and Equipment,” which established a “primary asset” approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. Through December 31, 2011, the Company had not experienced impairment losses on its long-lived assets.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes in accordance with ASC 740-10, “Accounting for Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year; and, (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if, based on the weight of available positive and negative evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

ASC 740-10 prescribes a recognition threshold and measurement attribute for the financial statement recognition of a tax position taken or expected to be taken on a tax return. Under ASC 740-10, a tax benefit from an uncertain tax position taken or expected to be taken may be recognized only if it is “more likely than not” that the position is sustainable upon examination, based on its technical merits. The tax benefit of a qualifying position under ASC 740-10 would equal the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all the relevant information. A liability (including interest and penalties, if applicable) is established to the extent a current benefit has been recognized on a tax return for matters that are considered contingent upon the outcome of an uncertain tax position. Related interest and penalties, if any, are included as components of income tax expense and income taxes payable.

Loss per Share

Basic earnings (loss) per share is computed by dividing net income, or loss, by the weighted average number of shares of common stock outstanding for the period. Diluted earnings (loss) per share is computed by dividing net income, or loss, by the weighted average number of shares of both common and preferred stock outstanding for the period.

8

Stock-Based Compensation

SFAS No. 123, “Accounting for Stock-Based Compensation,” establishes and encourages the use of the fair value based method of accounting for stock-based compensation arrangements under which compensation cost is determined using the fair value of stock-based compensation determined as of the date of grant and is recognized over the periods in which the related services are rendered. For stock based compensation the Company recognizes an expense in accordance with SFAS No. 123 and values the equity securities based on the fair value of the security on the date of grant. Stock option awards are valued using the Black-Scholes option-pricing model.

Recent Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2010-06, Improving Disclosures about Fair Value Measurements (“ASU No. 2010-06”). The new standard addresses, among other things, guidance regarding activity in Level 3 fair value measurements. Portions of ASU No. 2010-06 that relate to the Level 3 activity disclosures became effective for the annual reporting period beginning after December 15, 2010. The adoption of this ASU did not have an impact on the Company’s consolidated financial statements.

On March 5, 2010, the FASB issued ASU No. 2010-11 Derivatives and Hedging Topic 815 “Scope Exception Related to Embedded Credit Derivatives.” This ASU clarifies the guidance within the derivative literature that exempts certain credit related features from analysis as potential embedded derivatives requiring separate accounting. The ASU specifies that an embedded credit derivative feature related to the transfer of credit risk that is only in the form of subordination of one financial instrument to another is not subject to bifurcation from a host contract under ASC 815-15-25, “Derivatives and Hedging — Embedded Derivatives — Recognition.” All other embedded credit derivative features should be analyzed to determine whether their economic characteristics and risks are “clearly and closely related” to the economic characteristics and risks of the host contract and whether bifurcation is required. The ASU became effective for the Company on July 1, 2010. The adoption of this ASU did not have an impact on the Company’s consolidated financial statements.

In May 2011, the FASB issued ASU 2011-04 which was issued to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and IFRS. ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value measurements.  This guidance is effective for the Company beginning on January 1, 2012.  The adoption of ASU 2011-04 is not expected to significantly impact the Company’s consolidated financial statements.

In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-05, Presentation of Comprehensive Income. ASU 2011-05 revises the manner in which entities present comprehensive income in their financial statements. The new guidance removes the presentation options in Accounting Standards Codification (ASC) 220, Comprehensive Income, and requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. The ASU does not change the items that must be reported in other comprehensive income. In December 2011, the FASB issued ASU 2011-12 which defers the requirement in ASU 2011-05 that companies present reclassification adjustments for each component of accumulated other comprehensive income in both net income and other comprehensive income on the face of the financial statements. ASU 2011-05 is effective for fiscal years and interim reporting periods within those years beginning after December 15, 2011, with early adoption permitted. The adoption of ASU 2011-05, as amended by ASU 2011-12, is not expected to significantly impact the Company’s consolidated financial statements.

In September 2011, the FASB issued ASU 2011-08 which provides an entity the option to first assess qualitative factors to determine whether it is necessary to perform the current two-step test for goodwill impairment.  If an entity believes, as a result of its qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required.  Otherwise, no further testing is required. The revised standard is effective for the Company for its annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011.  The adoption of ASU 2011-08 is not expected to significantly impact the Company’s consolidated financial statements.

9

NOTE 3 - EARNINGS PER SHARE

The Company reports basic and diluted earnings per share (EPS) according to the provisions of ASC Topic 260, which requires the presentation of basic EPS and, for companies with complex capital structures, diluted EPS. Basic EPS excludes dilution and is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS is computed by dividing net income (loss) available to common stockholders, adjusted by other changes in income or loss that would result from the assumed conversion of those potential common shares, by the weighted number of common shares and common share equivalents (unless their effect is antidilutive) outstanding. Common stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be antidilutive. Thus, these equivalents are not included in the calculation of diluted loss per share, resulting in basic and diluted loss per share being equal.The following is a reconciliation of the computation for basic and diluted EPS for the nine months ended September 30, 2012 and September 30, 2011:

	For the nine months ended					For the three months ended
	9/30/2012		9/30/2011			9/30/2012			9/30/2011
Net Income (Loss)		$535,261		($321,611	)		($5,281	)		($110,665	)
Weighted-average common stock Outstanding -  basic		53,065,337		50,833,115			55,935,615			50,833,115
Equivalents
Stock options		-		-			-			-
Warrants		-		-			-			-
Convertible Notes		-		-			-			-
Weighted-average common shares
outstanding-  Diluted		53,065,337		50,833,115			55,935,615			50,833,115

NOTE 4 - DUE TO RELATED PARTY

The company is indebted to its officer for advances. Repayment is on demand without interest. The balance at September 30, 2012 was $ 172,626.

NOTE 5 - PAYMENTS RECEIVED IN ADVANCE

The Company during the periods received payments from potential customers, or deposits, on future orders. The Company’s policy is to record these payments as a liability until the product is completed and shipped to the customer at which the Company recognizes revenue. As of September 30, 2012 and December 31, 2011, the balance of payments received in advance was $ 142,984 and $ 86,766, respectively.

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NOTE 6 - SUBSEQUENT EVENTS

There is no reportable subsequent event.

NOTE 7 - GOING CONCERN

As reported in the consolidated financial statements, the Company has accumulated deficits of $(9,083,513) as September 30, 2012. The Company also has certain debts that have been in default during these periods although the creditors have not pursued collection proceedings. The Company's stockholders' equity at September 30, 2012 was $5,927,343 and its current liabilities exceeded its current assetsby $1,291,241 on September 30, 2012. These negative trends have been consistent right up through the most current fiscal year, except for this quarter and the sale of their only major investment, respectively.

These factors  create  uncertainty  about  the  Company's  ability  to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable and to create operations that contribute capital from normal operations. If the Company is unable  to  obtain  adequate  capital  it  could  be  forced  to  cease operations.

In order to continue as a going concern, develop and generate revenues and achieve a  profitable  level of operations, the Company will need, among other things, additional capital resources. Management's plans to obtain such resources for the  Company  include  (1) raising additional capital through sales of common stock, (2) converting  promissory notes into  common  stock  and (3) entering into acquisition agreements  with profitable  entities  with   significant   operations.   In   addition, management is continually seeking to streamline its operations and expand the business through a variety of industries, including real estate and financial management. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations.  The accompanying   consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

None.

NOTE 9 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at September 30, 2012 and December 31, 2011:

	September 30,			December 31,
	2012			2011
Vehicles	$	7,713		$	0
Tools		5,507			4,000
Office		81,685			76,130
Facility equipment		97,643			88,093
Total property and equipment		192,008			168,223
Accumulated depreciation		(141,607	)		(119,472	)
Property and equipment, net	$	50,401		$	48,751

Depreciation expense for the nine months ended September 30, 2012 and 2011 amounted to $16,674 and $36,587, respectively.

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

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements. These forward-looking statements include, without limitation, statements containing the words “believes,”“anticipates,”“expects,”“intends,”“projects,”“will,” and other words of similar import or the negative of those terms or expressions. Forward-looking statements in this report include, but are not limited to, expectations of future levels of research and development spending, general and administrative spending, levels of capital expenditures and operating results, sufficiency of our capital resources, our intention to pursue and consummate strategic opportunities available to us, including sales of certain of our assets. Forward-looking statements subject to certain known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  These risks and uncertainties include, but are not limited to those described in “Risk Factors” of the reports filed with the Securities and Exchange Commission.

SPECIAL NOTICE ABOUT GOING CONCERN AUDIT OPINION

OUR AUDITOR HAS ISSUED AN OPINION EXPRESSING DOUBT AS TO OUR ABILITY TO CONTINUE IN BUSINESS AS A GOING CONCERN.  YOU SHOULD READ THIS 10-Q REGISTRATION WITH THE “GOING CONCERN” ISSUES IN MIND.

This Management’s Discussion and Analysis should be read in conjunction with the financial statements included in this Quarterly Report on Form 10-Q (the “Financial Statements”).  The financial statements have been prepared in accordance with generally accepted accounting policies in the United States (“GAAP”).  Except as otherwise disclosed, all dollar figures included therein and in the following management discussion and analysis are quoted in United States dollars.

Overview

Leo Motors, Inc. (the “Company”) is a  Nevada Corporation incorporated on September 8, 2004.  The Company established a wholly-owned operating subsidiary in Korea named Leo Motors, Co. Ltd. ("Leozone") on July 1, 2006.  Through Leozone the Company is engaged  in the research and development (“R&D”) of multiple products, prototypes and conceptualizations based on proprietary, patented and patent pending electric power generation, drive train and storage technologies.  Leozone operates through four unincorporated divisions: new product research & development (“R&D”), post R&D development such as product testing; production; and sales.

These Company’s products include (i) Zinc Air Fuel Battery (“ZAFC”), (ii) electric vehicles ("EV") such as cars, trucks, tractors and other commercial/military vehicles, (iii) E-Bike or electric scooters, (iv) EV components that integrate electric batteries with electric motors such as EV Controllers that use a mini-computer to control torque drive, and (v) E-Box which is an electric energy storage system for solar and wind power generation devices.

Leo Motors, Inc. (the "Company") was previously actively engaged in the process of development and production of Electric Power Train Systems (“EPTS”) encompassing electric scooters, electric sedans/SUVs/sports cars, and electric buses/trucks as well as several models of Electric Vehicle ("EV"). Our EPTS can replace internal combustion engines (“ICEs”).  Company began sales of EPTS to auto makers and agricultural machinery manufacturers.

Company has been developed eight EPTS of increasing power rating: 3kW, 5kW, 7.5kW, 15kW, 30kW, 60kW, 120kW, and 240kW systems.  Each EPTS consists of a motor, a controller, and a battery power pack with a battery management system (“BMS”).

The Company has successfully converted existing models of small cars (ICEs under 2,000cc), and also a 24 seat bus.  The Company has begun marketing its 60kW power train kits (for compact passenger cars and small trucks) and its 120kW kits (for ICE passenger cars, buses, and trucks under 5,000cc). The Company has developed a 240kW kit (for up to 10,000cc buses and trucks) as well, and is attempting to locate a strategic partner to fund the testing and production.  

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The specific goals of the Company over the next twelve months include:

· Market e-Boxes in USA, Japan and Australia

The E-Box can be used as an energy supplying device in an emergency situations or as a energy storage device for use by the military; municipal and industry; corporate; solar/wind power storage; electric coolers and heaters; yatchs or small ships. The E-Box is offered in three power classes: 1kw, 3kw and 5kw.  E-Boxes for 10kw and 550kw will be developed in the future.  The E-Box is environmentally friendly with high energy density due to the use of lithium-polymer battery.  The E-Box uses a multiple cell voltage balancing system via a battery management system (“BMS”).

Recent Business Developments

In the last nine months, the Company has focused its marketing and sales efforts on the E-Box. The E-Box is a electric power storage box ranging from 3kW to 50kW for use in homes. This project took on additional importance to the Company because of the unprecedented natural disaster in Japan. Leo is marketing the device in the US and Japan. A recent sales order from a company in the USA in the third quarter of 2011 requires us to demonstrate “proof of concept”.

Liquidity and Capital Resources

Our liquidity and capital resources are limited. Accordingly, our ability to initiate our plan of operations and continue as a going concern is currently dependent on our ability to either generate significant new revenues or raise external capital.

Results of Operations - For the Quarter Ended September 30, 2012

Revenues

Sales for the quarter ended September 30, 2012 were $915 compared to $0for the quarter ended September 30, 2011. Costs of sales were $4,709 and gross profit was $(3,794) in the quarter ended September 30, 2012 compared to $0as costs of sales and gross profit of $0 in the same period in 2011.The increase in sales for this quarter is attributable to sales of merchandise.

Expenses

During the quarter ended September 30, 2012, we incurred $205,594 in expenses, compared to $147,580 in the period ended September 30, 2011. The increase in expenses for this quarter is attributable to an increase in administrative expenses.

Expenses for the period quarter consisted of the following:

	Three Months Ended
	September 30,		September 30,
Expenses:	2012		2011
Salaries and Benefits	$	-	$	-
Consulting and Service Fees	$	-		-
Selling, General and Administrative	$	205,594		147,580
Total	$	205,594	$	147,580

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Salaries and Benefits consist of total of common stock issued to our executive officers as compensation for their services as officers of the Company and cash compensation paid to our employees during the year and the cost of all benefits provided to our employees.

Consulting and Service Fees consist of consist of accounting, legal, and professional fees.

Selling, General and Administrative consists of travel expenses, entertainment expenses, communication expenses, utilities, taxes & dues, depreciation expenses, rent, repairs, vehicle maintenance, ordinary development expenses, shipping, education & training, printing, storage, advertising, insurance, office supplies and expense, payroll expenses, investor referral fees and other miscellaneous expenses.

Results of Operations For the Nine Months ended September 30, 2012

Revenues

Sales for the nine months ended September 30, 2012 were $25,301compared to $252,555for the nine months ended September 30, 2011. Costs of sales were $20,117and gross profit was $5,184 in the nine months ended September 30, 2012 compared to $219,112as costs of sales and gross profit of $33,443in the same period in 2011. The change in sales is attributable to limited sales of prototype products.

Expenses

During the nine months ended September 30, 2012, we incurred $579,112 in expenses, compared to $443,761 in the period ended September 30, 2011.The change in expenses is attributable to an increase in admininstrative expenses.

Expenses for the period consisted of the following:

	Nine Months Ended
	September 30,		September 30,
Expenses:	2012		2011
	$	-
Salaries and Benefits		-	$	-
Consulting and Service Fees		-		-
Selling, General and Administrative		579,112		443,761
Total	$	579,112	$	443,761

Salaries and Benefits consist of total of common stock issued to our executive officers as compensation for their services as officers of the Company and cash compensation paid to our employees during the year and the cost of all benefits provided to our employees.

Consulting and Service Fees consist of consist of accounting, legal, and professional fees.

Selling, General and Administrative consists of travel expenses, entertainment expenses, communication expenses, utilities, taxes & dues, depreciation expenses, rent, repairs, vehicle maintenance, ordinary development expenses, shipping, education & training, printing, storage, advertising, insurance, office supplies and expense, payroll expenses, investor referral fees and other miscellaneous expenses.

Off-Balance Sheet Arrangements

None.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None.

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ITEM 4. CONTROLS AND PROCEDURES.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Our Chief Executive Officer and Chief Financial Officer (the "Certifying Officer") maintains a system of disclosure controls and procedures that is designed to provide reasonable assurance that information, which is required to be disclosed, is accumulated and communicated to management timely. Under the supervision and with the participation of management, the Certifying Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule [13a-14(c)/15d-14(c)] under the Exchange Act) within 45 days prior to the filing date of this report. Based upon that evaluation, the Certifying Officer concluded that our disclosure controls and procedures are not effective in timely alerting them to material information relative to our company required to be disclosed in our periodic filings with the SEC.

CHANGES IN INTERNAL CONTROLS

During the Quarter ended September 30, 2012, there were no changes made to our internal controls over financial reporting that are reasonably likely to affect the reliability of those controls, or the accuracy of our financial reporting.  

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PART II: OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

None.

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

On September 3, 2012 we issued 45,000 shares of common stock to Sang Youn Leefor services rendered. This issuance was intended to be exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated under Regulation D.

On September 3, 2012 we issued 45,000 shares of common stock to Hyeong Koo Kimfor services rendered. This issuance was intended to be exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated under Regulation D.

On September 3, 2012 we issued 15,000shares of common stock to Gyuyeol Chofor services rendered. This issuance was intended to be exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated under Regulation D.

On September 3, 2012 we issued 35,000 shares of common stock to Young Mi Oh for services rendered. This issuance was intended to be exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated under Regulation D.

On September 3, 2012 we issued 35,000 shares of common stock to Jung Hwan Lim for services rendered. This issuance was intended to be exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated under Regulation D.

On September 3, 2012 we issued 15,000 shares of common stock to Hyun Gwang Lim for services rendered. This issuance was intended to be exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated under Regulation D.

On September 3, 2012 we issued 15,000 shares of common stock to Seong Tae Oh for services rendered. This issuance was intended to be exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated under Regulation D.

On September 3, 2012 we issued 15,000 shares of common stock to Youn Jang Cho for  services rendered. This issuance was intended to be exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated under Regulation D.

On September 3, 2012 we issued 15,000 shares of common stock to YooRi Choi for services rendered. This issuance was intended to be exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated under Regulation D.

On September 3, 2012 we issued 100,000 shares of common stock So Yoon Kim for services rendered. This issuance was intended to be exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated under Regulation D.

On September 3, 2012 we issued 20,000 shares of common stock to Hyung Suk Jun for services rendered. This issuance was intended to be exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated under Regulation D.

On September 3, 2012 we issued 30,000 shares of common stock to Dohoon Kim for services rendered. This issuance was intended to be exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated under Regulation D.

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ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 – MINE SAFETY DISCLSOURES

Not Applicable.

ITEM 5 - OTHER INFORMATION

On October 13, 2012, Leo Motors, Inc. (the "Company") entered into an amendment of an agreement it entered into with PDI C&D/RDC SPRL (“PDI”) on August 10, 2012 (after amendment, the “Agreement”).  The Agreement provides for the Company to sell to PDI, units of the Company’s E-Box technology for use in DPI’s housing construction project.  The Company's E-Box is an energy storage device that is integrated into solar and /or wind turbine devices.

The Agreement set forth a purchase price of $12,825 per unit sold, with up to 50,000 units to be sold pursuant to the Agreement, solely at the request of PDI.  The Agreement contemplates an initial sale of 5,000 E-Box solar sets at an aggregate sales price of $64 million targeted to begin in 2013. Additionally, the purchaser can order an additional 50,000 E-Box Solar sets. However, there can be no assurance that any orders will actually be placed as a result of the Agreement.

Prior to making a purchase, PDI shall provide the Company with a letter of credit (via Citibank) in the Company's favor, according to the payment terms in the Agreement.

PDI is permitted to inspect a certain number of the units prior to a completed purchase.  The term of the Agreement shall extend until 50,000 units are sold pursuant to the Agreement, or may be extended by mutual consent of the parties.

The descriptions of the terms of the Agreement do not purport to be complete and are qualified in their entirety by  the Agreement, a copy of which is included as an Exhibit to this report.

ITEM 6 – EXHIBITS

The following exhibits are filed as part of this quarterly report on Form 10-Q:

No.	Description
10.1	Purchase Agreement between Leo Motors, Inc. and PDI C&D/RDC SPRL, dated August 10, 2012
10.2	Amendment to Purchase Agreement between Leo Motors, Inc. and PDI C&D/RDC SPRL, dated October 13, 2012
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated November.19. 2012
		Leo Motors, Inc.
		(Registrant)
	By:
		Jung Yong Lee
		Co-Chief Executive Officer

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