Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | May 08, 2017 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2017 | |
Trading Symbol | leatpk | |
Entity Registrant Name | Leatt Corp | |
Entity Central Index Key | 1,456,189 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 5,362,992 | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well Known Seasoned Issuer | No | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q1 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Current Assets | ||
Cash and cash equivalents | $ 1,143,509 | $ 1,103,003 |
Short-term investments | 58,201 | 58,196 |
Accounts receivable | 2,964,288 | 2,217,840 |
Inventory | 3,512,369 | 4,578,125 |
Payments in advance | 746,979 | 569,498 |
Income tax refunds receivable | 0 | 83,567 |
Prepaid expenses and other current assets | 461,428 | 847,032 |
Total current assets | 8,886,774 | 9,457,261 |
Property and equipment, net | 1,184,818 | 1,190,688 |
Deferred tax asset | 170,300 | 108,300 |
Other Assets | ||
Deposits | 25,494 | 24,892 |
Intangible assets | 72,716 | 69,133 |
Total other assets | 98,210 | 94,025 |
Total Assets | 10,340,102 | 10,850,274 |
Current Liabilities | ||
Accounts payable and accrued expenses | 2,187,020 | 3,021,618 |
Income taxes payable | 64,391 | 0 |
Short term loan, net of finance charges | 300,773 | 542,532 |
Total current liabilities | 2,552,184 | 3,564,150 |
Deferred tax liabilities | 65,400 | 65,400 |
Commitments and contingencies | 0 | 0 |
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, 5,362,992 and 5,362,992 shares issued and outstanding | 130,053 | 130,053 |
Additional paid - in capital | 7,646,807 | 7,469,694 |
Accumulated other comprehensive loss | (557,362) | (610,083) |
Retained earnings | 500,020 | 228,060 |
Total stockholders' equity | 7,722,518 | 7,220,724 |
Total Liabilities and Stockholders' Equity | $ 10,340,102 | $ 10,850,274 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Mar. 31, 2017 | Dec. 31, 2016 |
Preferred Stock, Par Value Per Share | $ 0.001 | $ 0.001 |
Preferred Stock, Shares Authorized | 1,120,000 | 1,120,000 |
Preferred Stock, Shares Issued | 120,000 | 120,000 |
Preferred Stock, Shares Outstanding | 120,000 | 120,000 |
Common Stock, Par Value Per Share | $ 0.001 | $ 0.001 |
Common Stock, Shares Authorized | 28,000,000 | 28,000,000 |
Common Stock, Shares, Issued | 5,362,992 | 5,362,992 |
Common Stock, Shares, Outstanding | 5,362,992 | 5,362,992 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Revenues | $ 5,817,769 | $ 4,827,492 |
Cost of Revenues | 2,907,670 | 2,313,657 |
Gross Profit | 2,910,099 | 2,513,835 |
Product Royalty Income | 10,956 | 13,882 |
Operating Expenses | ||
Salaries and wages | 759,243 | 681,302 |
Commissions and consulting expenses | 153,048 | 166,071 |
Professional fees | 310,791 | 181,659 |
Advertising and marketing | 401,554 | 361,593 |
Office rent and expenses | 66,051 | 64,190 |
Research and development costs | 323,243 | 342,815 |
Bad debt expense (recovery) | (4,641) | 2,827 |
General and administrative expenses | 401,413 | 446,946 |
Depreciation | 88,965 | 104,517 |
Total operating expenses | 2,499,667 | 2,351,920 |
Income from Operations | 421,388 | 175,797 |
Other Expenses | ||
Interest and other income, net | (2,988) | (1,941) |
Total other expenses | (2,988) | (1,941) |
Income Before Income Taxes | 418,400 | 173,856 |
Income Taxes | 146,440 | 60,876 |
Net Income Available to Common Shareholders | $ 271,960 | $ 112,980 |
Net Income per Common Share | ||
Basic | $ 0.05 | $ 0.02 |
Diluted | $ 0.05 | $ 0.02 |
Weighted Average Number of Common Shares Outstanding | ||
Basic | 5,362,992 | 5,233,272 |
Diluted | 5,499,103 | 5,545,027 |
Comprehensive Income | ||
Net Income | $ 271,960 | $ 112,980 |
Other comprehensive income, net of $0 and $0 deferred income taxes in 2017 and 2016 | ||
Foreign currency translation | 52,721 | 23,049 |
Total Comprehensive Income | $ 324,681 | $ 136,029 |
CONSOLIDATED STATEMENTS OF OPE5
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Parenthetical) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Deferred Income Taxes | $ 0 | $ 0 |
CONSOLIDATED STATEMENT OF CHANG
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - 3 months ended Mar. 31, 2017 - USD ($) | Preferred Stock A [Member] | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Other Comprehensive Loss [Member] | Retained Earnings [Member] | Total |
Beginning Balance at Dec. 31, 2016 | $ 3,000 | $ 130,053 | $ 7,469,694 | $ (610,083) | $ 228,060 | $ 7,220,724 |
Beginning Balance (Shares) at Dec. 31, 2016 | 120,000 | 5,362,992 | ||||
Compensation cost recognized in connection with stock options | 177,113 | 177,113 | ||||
Net income | 271,960 | 271,960 | ||||
Foreign currency translation adjustment | 52,721 | 52,721 | ||||
Ending Balance at Mar. 31, 2017 | $ 3,000 | $ 130,053 | $ 7,646,807 | $ (557,362) | $ 500,020 | $ 7,722,518 |
Ending Balance (Shares) at Mar. 31, 2017 | 120,000 | 5,362,992 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Cash flows from operating activities | ||
Net income | $ 271,960 | $ 112,980 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation | 88,965 | 104,517 |
Deferred income tax | (62,000) | 0 |
Stock-based compensation | 177,113 | 155,742 |
Inventory reserve | 117,039 | 8,089 |
Bad debt | (6,717) | 0 |
(Increase) decrease in: | ||
Accounts receivable | (739,731) | 475,585 |
Inventory | 948,717 | 216,935 |
Payments in advance | (177,481) | (128,435) |
Prepaid expenses and other current assets | 385,604 | 242,714 |
Income tax refunds receivable | 83,567 | 0 |
Other receivables | 0 | 30,000 |
Deposits | (602) | (211) |
Increase (decrease) in: | ||
Accounts payable and accrued expenses | (834,598) | (492,863) |
Income taxes payable | 64,391 | (139,150) |
Net cash provided by operating activities | 316,227 | 585,903 |
Cash flows from investing activities | ||
Capital expenditures | (61,267) | (12,037) |
Increase in short-term investments, net | (5) | (8) |
Net cash used in investing activities | (61,272) | (12,045) |
Cash flows from financing activities | ||
Repayments of short-term loan, net | (241,759) | (217,511) |
Net cash used in financing activities | (241,759) | (217,511) |
Effect of exchange rates on cash and cash equivalents | 27,310 | 5,628 |
Net increase in cash and cash equivalents | 40,506 | 361,975 |
Cash and cash equivalents - beginning | 1,103,003 | 1,054,750 |
Cash and cash equivalents - ending | 1,143,509 | 1,416,725 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Cash paid for interest | 3,443 | 3,483 |
Cash paid for income taxes | 60,482 | 200,027 |
Other noncash investing and financing activities | ||
Common stock issued for services | 177,113 | 155,742 |
Common stock issued in exchange for a receivable | $ 0 | $ 39,000 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2017 | |
Basis of Presentation [Text Block] | Note 1 - Basis of presentation The consolidated balance sheet as of December 31, 2016 was audited and appears in the Form 10-K filed by the Company with the Securities and Exchange Commission on March 29, 2017. The consolidated balance sheet as of March 31, 2017 and the consolidated statements of operations and comprehensive income for the three months ended March 31, 2017 and 2016, changes in stockholders’ equity for the three months ended March 31, 2017, cash flows for the three months ended March 31, 2017 and 2016, and the related information contained in these notes have been prepared by management without audit. In the opinion of management, all adjustments (which include only normal recurring items) necessary to present fairly the financial position, results of operations and cash flows in conformity with generally accepted accounting principles as of March 31, 2017 and for all periods presented have been made. Interim operating results are not necessarily indicative of operating results for a full year. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. While management of the Company believes that the disclosures presented are adequate to make the information not misleading, it is suggested that these condensed consolidated financial statements be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2016 as filed with the Securities and Exchange Commission in the Company’s Form 10-K. |
Inventory
Inventory | 3 Months Ended |
Mar. 31, 2017 | |
Inventory [Text Block] | Note 2 - Inventory Inventory is stated at the lower of cost or 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, the Company must 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, the Company utilizes historical experience as well as current market information. The reserve for obsolescence as of the three months ended March 31, 2017 and 2016, was $283,146 and $168,804, respectively. |
Intangible Assets
Intangible Assets | 3 Months Ended |
Mar. 31, 2017 | |
Intangible Assets [Text Block] | Note 3 - Intangible Assets The Company’s intangible assets consist of acquired patents with an indefinite useful life and are thus not amortized. Intangible assets are carried at cost less impairment. Amortization expense for the three months ended March 31, 2017 was zero. There was no impairment of intangible assets at March 31, 2017. |
Short-term Loan
Short-term Loan | 3 Months Ended |
Mar. 31, 2017 | |
Short-term Loan [Text Block] | Note 4 - Short-term Loan The Company carries two product liability insurance policies; one with a U.S. insurance carrier and a second with a South African insurance carrier. The Company finances payment of its short-term insurance premiums over the period of coverage, which is generally twelve months. The U.S. short-term loan is payable in monthly installments of $58,921 over an eleven-month period at an APR of 3.397% and the South African short-term loan is payable in monthly installments of $1,813 over a ten-month period at a flat interest rate of 4.10% . The Company also carries directors’ and officers’ liability insurance. The Company finances payment of its short-term insurance premiums over the period of coverage, which is generally twelve months. The short-term loan is payable in eleven payments of $5,375 at a 3.397% annual interest rate. In addition, the Company carries Network Security/Privacy insurance. The Company finances payment of its short-term insurance premiums over the period of coverage over six months. The short-term loan is payable in five payments of $1,453 at a 3.397% annual interest rate. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2017 | |
Income Taxes [Text Block] | Note 5- 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 March 31, 2017, the Company has no unrecognized tax benefits. |
Net Income Per Share of Common
Net Income Per Share of Common Stock | 3 Months Ended |
Mar. 31, 2017 | |
Net Income Per Share of Common Stock [Text Block] | Note 6 - 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 three months ended March 31, 2017, the Company had 473,000 potential common shares, consisting of 120,000 preferred shares, options to purchase 30,000 shares, outstanding that were dilutive, and options to purchase 323,000 shares that were anti-dilutive and therefore, not included in diluted net income per share. |
Common Stock
Common Stock | 3 Months Ended |
Mar. 31, 2017 | |
Common Stock [Text Block] | Note 7 – Common Stock Stock-based compensation expense related to vested stock options during the quarter ended March 31, 2017 was $177,113. As of March 31, 2017 there was $255,893 of unrecognized compensation costs related to unvested stock options, which is expected to be recognized over a 3 year vesting period. |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 3 Months Ended |
Mar. 31, 2017 | |
Recent Accounting Pronouncements [Text Block] | Note 8 – Recent Accounting Pronouncements Recently Adopted Accounting Pronouncements In July 2015, the FASB issued Accounting Standards Update (“ASU”) 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory,” which applies to inventory that is measured using first-in, first-out (FIFO) or average cost. This ASU simplifies the subsequent measurement of inventories by replacing the lower of cost or market test with a lower of cost or net realizable value test. The ASU is effective for annual periods beginning after December 15, 2016. Early adoption is permitted. The Company adopted the new standard on January 1, 2017. The adoption of this ASU did not have a material impact on the consolidated financial statements. In March 2016, the FASB issuedASU 2016-09 “Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09").” ASU 2016-09 amends the guidance on several aspects of accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, accounting for forfeitures, and classification on the statement of cash flows. The ASU is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company adopted the new standard on January 1, 2017. The Company elected to apply the amendments related to the classification of excess tax benefits on the statement of cash flows on a prospective basis, and prior periods were not adjusted. The adoption of this ASU did not have a material impact on the consolidated financial statements. Accounting Pronouncements Not Yet Adopted In January 2017, the FASB issued ASU 2017-01, “Clarifying the Definition of a Business,” which further clarifies the definition of a business in an effort to assist entities in evaluating whether a set of transferred assets constitutes a business. Under this new guidance, if substantially all of the fair value of gross assets acquired is concentrated in a single asset or similar asset group, the set of transferred assets would not meet the definition of a business and no further evaluation is necessary. If this threshold is not met, the entity would then evaluate whether the set of transferred assets and activities meets the requirement that a business include, at a minimum, an input and a process that together have the ability to create an output. This guidance is effective for annual and quarterly periods beginning after December 15, 2017, with early adoption permitted. The Company expects to adopt the ASU beginning January 1, 2018. In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by eliminating the requirement to calculate the implied fair value of goodwill. Rather, the goodwill impairment is calculated by comparing the fair value of a reporting unit to its carrying value, and an impairment loss is recognized for the amount by which the carrying amount exceeds the fair value, limited to the total goodwill allocated to the reporting unit. All reporting units apply the same impairment test under the new standard. The Company is required to adopt this ASU for its annual and any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect this new guidance will have a material impact on the consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” (“ASU 2014-09”). ASU 2014-09, as amended, outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model will require an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. On August 12, 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date". The amendments in this update defers the effective date of Update 2014-09 for all entities by one year. The ASU, as amended, is effective for the first interim period within an annual period beginning after December 15, 2017, and early adoption is not permitted. The new guidance allows for two methods of adoption: (a) “full retrospective” adoption, meaning that the standard is applied to all periods presented, or (b) “modified retrospective” adoption, meaning that the cumulative effect of applying the new guidance is recognized as an adjustment to the opening retained earnings balance for the year of implementation. The Company plans to adopt the new revenue standard effective January 1, 2018, on a modified retrospective method with the cumulative effect of the change reflected in retained earnings as of January 1, 2018, and not restate prior periods. The Company continues to monitor FASB activity to assess certain interpretative issues and the associated implementation of the new standard. The Company is in the process of reviewing its revenue arrangements, which are expected to include product sales and royalty payments, and is not yet able to estimate the anticipated impact to the consolidated financial statements from the implementation of the new standard as the Company continues to interpret the principles of the new standard. In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” This ASU is a comprehensive new lease standard that amends various aspects of existing accounting guidance for leases. The core principle of this ASU will require lessees to present the assets and liabilities that arise from leases on their balance sheets. The ASU is effective for public companies for annual and interim reporting periods beginning after December 15, 2018. Early adoption is permitted. The Company is evaluating the new standard to determine the impact on the Company’s consolidated financial statements. In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory”("ASU 2016-16"). The ASU clarifies the accounting for the current and deferred income taxes for an intra-entity transfer of an asset other than inventory. The ASU is effective for the Company in the first quarter of 2018, with early adoption permitted, and is to be applied using a modified retrospective approach. The Company is evaluating the new standard to determine the impact on the Company’s consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force).” The ASU requires the statement of cash flows to explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents are to be included with cash and cash equivalents when reconciling the beginning of period and end of period amounts shown on the statement of cash flows. The ASU is effective for the Company for annual reporting periods beginning after December 15, 2017 and is required to be adopted using a retrospective approach, if applicable, with early adoption permitted. The adoption of this ASU will not have a material impact on the Company’s consolidated financial statements. |
Litigation
Litigation | 3 Months Ended |
Mar. 31, 2017 | |
Litigation [Text Block] | Note 9 - 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. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2017 | |
Subsequent Events [Text Block] | Note 10 – Subsequent Events The company has evaluated all subsequent events through the date the financial statements were released. Two Eleven, our California subsidiary, renewed their lease agreement for their current premises. The lease agreement leases a 14,101 - square foot space in Santa Clarita, California, pursuant to a lease agreement between Two Eleven and Harold & Bonnie Peace Trust, dated March 30, 2017. Two Eleven uses approximately 9% of the office space for executive offices and the remaining 91% of the space for warehousing. The new lease agreement, dated March 30, 2017, calls for a monthly base rent in the amount of $10,216 beginning May 1, 2017 for a period of five years until April 30, 2022, with a maximum annual increase of 3%. |
Inventory (Narrative) (Details)
Inventory (Narrative) (Details) | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Inventory 1 | $ 283,146 |
Inventory 2 | $ 168,804 |
Short-term Loan (Narrative) (De
Short-term Loan (Narrative) (Details) | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Short-term Loan 1 | $ 58,921 |
Short-term Loan 2 | 3.397% |
Short-term Loan 3 | $ 1,813 |
Short-term Loan 4 | 4.10% |
Short-term Loan 5 | $ 5,375 |
Short-term Loan 6 | 3.397% |
Short-term Loan 7 | $ 1,453 |
Short-term Loan 8 | 3.397% |
Income Taxes (Narrative) (Detai
Income Taxes (Narrative) (Details) | 3 Months Ended |
Mar. 31, 2017 | |
Income Taxes 1 | 50.00% |
Net Income Per Share of Commo21
Net Income Per Share of Common Stock (Narrative) (Details) | 3 Months Ended |
Mar. 31, 2017shares | |
Net Income Per Share Of Common Stock 1 | 473,000 |
Net Income Per Share Of Common Stock 2 | 120,000 |
Net Income Per Share Of Common Stock 3 | 30,000 |
Net Income Per Share Of Common Stock 4 | 323,000 |
Common Stock (Narrative) (Detai
Common Stock (Narrative) (Details) | 3 Months Ended |
Mar. 31, 2017USD ($)yr | |
Common Stock 1 | $ 177,113 |
Common Stock 2 | $ 255,893 |
Common Stock 3 | yr | 3 |
Subsequent Events (Narrative) (
Subsequent Events (Narrative) (Details) | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Subsequent Events 1 | 14,101 |
Subsequent Events 2 | 9.00% |
Subsequent Events 3 | 91.00% |
Subsequent Events 4 | $ 10,216 |
Subsequent Events 5 | 3.00% |