Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2019 | Nov. 05, 2019 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2019 | |
Entity Registrant Name | Leatt Corp | |
Entity Central Index Key | 0001456189 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 5,386,723 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q3 | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Current Assets | ||
Cash and cash equivalents | $ 1,906,612 | $ 1,709,900 |
Short-term investments | 58,236 | 58,232 |
Accounts receivable | 5,828,054 | 2,049,331 |
Inventory | 6,967,980 | 4,815,215 |
Payments in advance | 473,380 | 473,286 |
Prepaid expenses and other current assets | 1,025,954 | 1,247,233 |
Total current assets | 16,260,216 | 10,353,197 |
Property and equipment, net | 2,338,426 | 2,317,490 |
Operating lease right-of-use assets, net | 369,608 | |
Other Assets | ||
Deposits | 26,167 | 25,380 |
Intangible assets | 38,642 | 40,466 |
Total other assets | 64,809 | 65,846 |
Total Assets | 19,033,059 | 12,736,533 |
Current Liabilities | ||
Note payable to bank | 350,000 | 0 |
Accounts payable and accrued expenses | 6,930,930 | 2,779,182 |
Operating lease liability, current | 169,478 | |
Income tax payable | 429,072 | 70,258 |
Short term loan, net of finance charges | 73,109 | 582,128 |
Total current liabilities | 7,952,589 | 3,431,568 |
Deferred tax liabilities, net | 170,900 | 170,900 |
Deferred Compensation | 140,000 | 80,000 |
Operating lease liability, net of current portion | 200,130 | |
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, 5,386,723 and 5,370,028 shares issued and outstanding | 130,068 | 130,053 |
Additional paid - in capital | 8,049,354 | 7,868,119 |
Accumulated other comprehensive loss | (678,894) | (609,303) |
Retained earnings | 3,065,912 | 1,662,196 |
Total stockholders' equity | 10,569,440 | 9,054,065 |
Total Liabilities and Stockholders' Equity | $ 19,033,059 | $ 12,736,533 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2019 | Dec. 31, 2018 |
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 | 5,386,723 | 5,370,028 |
Common Stock, Shares, Outstanding | 5,386,723 | 5,370,028 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Revenues | $ 9,649,335 | $ 8,579,507 | $ 21,017,329 | $ 18,877,912 |
Cost of Revenues | 5,152,688 | 4,574,205 | 11,027,944 | 9,760,962 |
Gross Profit | 4,496,647 | 4,005,302 | 9,989,385 | 9,116,950 |
Product Royalty Income | 17,360 | 8,094 | 33,056 | 28,205 |
Operating Expenses | ||||
Salaries and wages | 739,366 | 588,242 | 2,330,006 | 1,983,557 |
Commissions and consulting expenses | 104,608 | 124,501 | 263,168 | 383,415 |
Professional fees | 133,480 | 163,687 | 518,017 | 461,145 |
Advertising and marketing | 520,633 | 534,817 | 1,556,515 | 1,497,429 |
Office lease and expenses | 71,725 | 69,400 | 210,263 | 211,159 |
Research and development costs | 357,258 | 357,177 | 1,063,573 | 1,059,369 |
Bad debt expense | 148,685 | 635 | 158,184 | 21,107 |
General and administrative expenses | 485,054 | 521,052 | 1,473,708 | 1,410,768 |
Depreciation | 191,712 | 174,490 | 569,707 | 502,265 |
Total operating expenses | 2,752,521 | 2,534,001 | 8,143,141 | 7,530,214 |
Income from Operations | 1,761,486 | 1,479,395 | 1,879,300 | 1,614,941 |
Other Expenses | ||||
Interest and other expenses, net | (449) | (2,393) | (4,042) | (8,320) |
Total other expenses | (449) | (2,393) | (4,042) | (8,320) |
Income Before Income Taxes | 1,761,037 | 1,477,002 | 1,875,258 | 1,606,621 |
Income Taxes | 440,259 | 370,658 | 471,542 | 408,913 |
Net Income Available to Common Shareholders | $ 1,320,778 | $ 1,106,344 | $ 1,403,716 | $ 1,197,708 |
Net Income per Common Share | ||||
Basic | $ 0.25 | $ 0.21 | $ 0.26 | $ 0.22 |
Diluted | $ 0.24 | $ 0.20 | $ 0.25 | $ 0.22 |
Weighted Average Number of Common Shares Outstanding | ||||
Basic | 5,386,723 | 5,366,382 | 5,384,753 | 5,366,382 |
Diluted | 5,532,275 | 5,504,664 | 5,530,304 | 5,504,664 |
Comprehensive Income | ||||
Net Income | $ 1,320,778 | $ 1,106,344 | $ 1,403,716 | $ 1,197,708 |
Other comprehensive income, net of $0 and $0 deferred income taxes in 2019 and 2018 | ||||
Foreign currency translation | (102,756) | (6,018) | (69,591) | (122,328) |
Total Comprehensive Income | $ 1,218,022 | $ 1,100,326 | $ 1,334,125 | $ 1,075,380 |
CONSOLIDATED STATEMENTS OF OP_2
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Parenthetical) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Deferred income taxes | $ 0 | $ 0 | $ 0 | $ 0 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - 9 months ended Sep. 30, 2019 - 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, 2018 | $ 3,000 | $ 130,053 | $ 7,868,119 | $ (609,303) | $ 1,662,196 | $ 9,054,065 |
Beginning Balance (Shares) at Dec. 31, 2018 | 120,000 | 5,370,028 | ||||
Compensation cost recognized in connection with stock options | 166,250 | 166,250 | ||||
Exercise of stock options | $ 15 | 14,985 | 15,000 | |||
Exercise of stock options (Shares) | 15,000 | |||||
Options exercised on a cashless basis (Shares) | 1,695 | |||||
Net income | 1,403,716 | 1,403,716 | ||||
Foreign currency translation adjustment | (69,591) | (69,591) | ||||
Ending Balance at Sep. 30, 2019 | $ 3,000 | $ 130,068 | $ 8,049,354 | $ (678,894) | $ 3,065,912 | $ 10,569,440 |
Ending Balance (Shares) at Sep. 30, 2019 | 120,000 | 5,386,723 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Cash flows from operating activities | ||
Net income | $ 1,403,716 | $ 1,197,708 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation | 569,707 | 502,265 |
Stock-based compensation | 166,250 | 150,332 |
Bad debts | 137,787 | 10,921 |
Inventory reserve | 35,248 | 92,898 |
(Gain) on sale of property and equipment | (1,500) | (1,260) |
(Increase) decrease in: | ||
Accounts receivable | (3,916,510) | (1,731,877) |
Inventory | (2,188,013) | (1,738,669) |
Payments in advance | (94) | 81,592 |
Prepaid expenses and other current assets | 221,279 | 97,197 |
Income tax refunds receivable | 130,171 | |
Deposits | (787) | 807 |
Increase (decrease) in: | ||
Accounts payable and accrued expenses | 4,151,748 | 2,171,945 |
Income taxes payable | 358,814 | 271,484 |
Deferred compensation | 60,000 | |
Net cash provided by operating activities | 997,645 | 1,235,514 |
Cash flows from investing activities | ||
Capital expenditures | (616,278) | (575,909) |
Proceeds from sale of property and equipment | 10,000 | 1,308 |
Increase in short-term investments, net | (4) | (9) |
Net cash used in investing activities | (606,282) | (574,610) |
Cash flows from financing activities | ||
Issuance of common stock | 15,000 | |
Proceeds from note payable to bank, net | 350,000 | 0 |
Repayments of short-term loan, net | (509,019) | (453,822) |
Net cash used in financing activities | (144,019) | (453,822) |
Effect of exchange rates on cash and cash equivalents | (50,632) | (42,842) |
Net increase in cash and cash equivalents | 196,712 | 164,240 |
Cash and cash equivalents - beginning of period | 1,709,900 | 1,518,157 |
Cash and cash equivalents - end of period | 1,906,612 | 1,682,397 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Cash paid for interest | 16,509 | 12,321 |
Cash paid for income taxes | 111,600 | 7,121 |
Other non-cash investing and financing activities | ||
Common stock issued for services | $ 166,250 | $ 150,332 |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2019 | |
Notes to Financial Statements [Abstract] | |
Basis of Presentation [Text Block] | Note 1 - Basis of presentation The consolidated balance sheet as of December 31, 2018 was audited and appears in the Form 10-K filed by the Company with the Securities and Exchange Commission on March 27, 2019. The consolidated balance sheet as of September 30, 2019 and the consolidated statements of operations and comprehensive income for the three and nine months ended September 30, 2019 and 2018, changes in stockholders’ equity for the nine months ended September 30, 2019, cash flows for the nine months ended September 30, 2019 and 2018, 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 September 30, 2019 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, 2018 as filed with the Securities and Exchange Commission in the Company’s Form 10-K. Significant Accounting Policies There have been no significant changes in the Company’s accounting policies from those disclosed in its Annual Report on Form 10-K, except for the policies described below in relation to the adoption of Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), discussed in Note 11 “Recent Accounting Pronouncements” The Company determines if an arrangement is a lease at inception. Operating leases are included in right-of-use assets (“ROU”), and lease liability obligations are included in the Company’s balance sheets. ROU assets represent the Company’s right to use an underlying asset for 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 asso 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 4 for additional information. |
Inventory
Inventory | 9 Months Ended |
Sep. 30, 2019 | |
Notes to Financial Statements [Abstract] | |
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 was $117,252 at September 30, 2019 and $83,004 at December 31, 2018. |
Intangible Assets
Intangible Assets | 9 Months Ended |
Sep. 30, 2019 | |
Notes to Financial Statements [Abstract] | |
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 nine months ended September 30, 2019 was zero. There was no impairment loss recognized for the nine months ended September 30, 2019 and 2018, respectively. |
Operating Leases - Right-of-Use
Operating Leases - Right-of-Use Assets and Lease Liability Obligations | 9 Months Ended |
Sep. 30, 2019 | |
Lessee Disclosure [Abstract] | |
Operating Leases - Right-of-Use Assets and Lease Liability Obligations [Text Block] | Note 4 – Operating Leases – Right-of-Use Assets and Lease Liability Obligations The Company has three non-cancelable operating leases, two for office space and one for office machinery, that expire in December 2020, March 2022 and April 2022. Rent expense for these operating leases is recognized over the term of the lease on a straight-line basis. Below is a summary of the Company’s Operating Right-of-Use Assets and Operating Lease liabilities as of September 30, 2019: Assets Operating lease ROU assets $ 369,608 Liabilities Operating lease liability, current 169,478 Operating lease liability, net of current portion 200,130 Total operating lease liabilities $ 369,608 During the nine months ended September 30, 2019, the Company recognized $128,713 in operating lease expenses, which are included in office lease and expenses in the Company’s consolidated statements of operations and comprehensive income. Supplemental cash flow information for the nine months ended September 30, 2019 is as follows: Nine Months Ended September 30, 2019 Cash paid for amounts included in the measurement of lease liabilities $ 137,442 Right-of-use assets obtained in exchange for lease obligations $ 500,956 Generally, our lease agreements do not specify an implicit rate. Therefore, we estimate our incremental borrowing rate, which is defined as the interest rate we would pay to borrow on a collateralized basis, considering such factors as length of lease term and the risks of the economic environment in which the leased asset operates. As of September 30, 2019, the following disclosures for remaining lease term and incremental borrowing rates were applicable: Supplemental disclosure September 30, 2019 Weighted average remaining lease term 3 years Weighted average discount rate 5.02% Maturities of lease liabilities as of September 30, 2019 were as follows: Year ended December 31, Amounts under Operating Leases Remaining 2019 $ 45,793 2020 184,831 2021 136,949 2022 46,070 Total lease payments 413,643 Less: Imputed interest (44,035 ) Total $ 369,608 |
Note Payable to Bank
Note Payable to Bank | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Note Payable to Bank [Text Block] | Note 5 - Note Payable to Bank 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 that matures on November 19, 2019, has been extended to November 19, 2020, at which time the unpaid principal, interest, or other charges outstanding under the agreement are due and payable. 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. As of September 30, 2019, the line of credit in the amount of $350,000 was used, interest of $442 was accrued for the quarter and the balance of $650,000 was available. |
Short-term Loan
Short-term Loan | 9 Months Ended |
Sep. 30, 2019 | |
Notes to Financial Statements [Abstract] | |
Short-term Loan [Text Block] | Note 6 - Short-term Loan The Company carries product liability insurance policies with a U.S. and South African-based insurance carrier. The Company finances payment of both of its product liability insurance premiums over the period of coverage which is generally twelve months. The U.S. short-term loan is payable in monthly instalments of $62,225 over eleven months including interest at 4.990% and the South African short-term loan is payable in monthly instalments of $1,556 over a ten-month period at a flat interest rate of 4.10%. The Company repaid the U.S. short-term loan in full on September 11, 2019. The Company carries various short-term insurance policies in the U.S. 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 $10,540 at 5.990% annual interest rate. |
Revenue and Cost Recognition
Revenue and Cost Recognition | 9 Months Ended |
Sep. 30, 2019 | |
Notes to Financial Statements [Abstract] | |
Revenue and Cost Recognition [Text Block] | Note 7 - Revenue and Cost Recognition The Company recognizes revenue in accordance with ASC 606. As such, the Company has and will continue to review its performance obligations in terms of material customer contractual arrangements in order to verify that revenue is recognized when performance obligations are satisfied on a periodic basis. All manufacturing of Leatt-Brace products is performed by third party subcontractors in China. The Company's products are sold worldwide to a global network of distributors and dealers, and directly to consumers when there are no dealers or distributors in their geographic area or where consumers choose to purchase directly via the Company’s e-commerce website (collectively the "customers"). Revenues from product sales are recognized when earned, net of applicable provisions for discounts and returns and allowances in the event of product defect 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 distributor payment terms range from pre-payment in full to 60 days after shipment and subsequent sales of our products by distributors have no effect on the amount and timing of payments due to us. Furthermore, products purchased by distributors may not be returned to us in the event that any such distributor relationship is terminated. Since the Company (through its wholly-owned subsidiary) serves as the distributor of Leatt products in the United States, the Company records its revenue and related cost of revenue for its product sales in the United States upon shipment of the merchandise to the dealer or to the ultimate consumer when there is no dealer in the geographic area or the consumer chooses to purchase directly from the Company’s e-commerce website and the sales order was received directly from, and paid by, the ultimate consumer. Since the Company (through its South African branch) serves as the distributor of Leatt products in South Africa, the Company records its revenue and related cost of revenue for its product sales in South Africa upon shipment of the merchandise from the branch to the dealer. The Company's standard terms and conditions of sale for non-consumer direct or web-based sales do not allow for product returns other than under warranty. International sales (other than in the United States and South Africa) are generally drop-shipped directly from the third-party manufacturer to the international distributors. Revenue and related cost of revenue is recognized at the time of shipment from the manufacturer's port when the shipping terms are Free On Board ("FOB") shipping point, 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. In the following table, revenue is disaggregated by the source of revenue: Nine months ended September 30, 2019 % of Revenues 2018 % of Revenues Consumer and athlete direct revenues $ 980,552 5% $ 808,335 4% Dealer direct revenues 6,913,057 33% 6,307,993 34% International distributor revenues 13,123,720 62% 11,761,584 62% $ 21,017,329 100% $ 18,877,912 100% 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 September 30, 2019 and December 31, 2018 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 historical experience and any specific customer collection issues that have been identified. The allowance of doubtful accounts was $228,186 at September 30, 2019 and $83,399 at December 31, 2018. 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 expense in the accompanying consolidated statements of operations and comprehensive income (loss). Shipping and handling activities associated with outbound freight, after control over a product has transferred to a customer, are accounted for as a fulfillment cost and are included in revenues and cost of revenues in the accompanying consolidated statements of operations and comprehensive income (loss). 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. For the nine months ended September 30, 2019, revenue recognized from performance obligations related to prior periods was not material. Revenue expected to be recognized in any future period related to remaining performance obligations is not material. As of September 30, 2019, contract liabilities, if any, were not material. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2019 | |
Notes to Financial Statements [Abstract] | |
Income Taxes [Text Block] | 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 September 30, 2019, the Company has no unrecognized tax benefits. |
Net Income Per Share of Common
Net Income Per Share of Common Stock | 9 Months Ended |
Sep. 30, 2019 | |
Notes to Financial Statements [Abstract] | |
Net Income Per Share of Common Stock [Text Block] | 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 nine months ended September 30, 2019, the Company had 862,000 potential common shares, consisting of 120,000 preferred shares, options to purchase 169,000 shares, outstanding that were dilutive, and options to purchase 573,000 shares that were anti-dilutive and therefore, not included in diluted net income per share. |
Common Stock
Common Stock | 9 Months Ended |
Sep. 30, 2019 | |
Notes to Financial Statements [Abstract] | |
Common Stock [Text Block] | Note 10 – Common Stock In February 2019, options to purchase 250,000 of the Company’s common stock were granted to key employees, consultants and directors under the Plan at an exercise price of $2.30 per share, exercisable over a 10-year period. On February 25, 2019, 30% of the shares underlying these options vested with a compensation expense of $82,530. The remaining 70% of the shares were unvested with unrecognized compensation value of $192,570. The fair value of the stock options granted was estimated to be $1.1004 at the date of the grant using the Black Sholes option-pricing model. The option value was calculated assuming a year’s risk-free interest rate of 2.84%, expected volatility of 32.35% and an expected dividend yield of 0.00% . In addition, in February 2019, the Company issued 1,695 shares of common stock to an employee who exercised stock options in a cashless exercise and a Director exercised stock options for the issuance of 15,000 shares for $15,000. Stock-based compensation expense related to vested stock options during the nine months ended September 30, 2019 was $166,250. As of September 30, 2019, there was $239,370 of unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a 3-year vesting period. |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 9 Months Ended |
Sep. 30, 2019 | |
Notes to Financial Statements [Abstract] | |
Recent Accounting Pronouncements [Text Block] | Note 11 – Recent Accounting Pronouncements Recently Adopted Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases Leases (Topic 842): Targeted Improvements In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation”, which aligns the measurement and classification guidance for share-based payments to non-employees with the guidance for share-based payments to employees. Under the new guidance, the measurement period for equity-classified non-employee awards will be fixed at the grant date. This update is effective for annual periods beginning after December 15, 2018, and interim periods within those periods and early adoption is permitted. The Company adopted the new standard effective January 1, 2019 and it did not have a material impact on its consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, "Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income," which provides for an election to reclassify stranded tax effects within accumulated other comprehensive income/(loss) to retained earnings due to the U.S. federal corporate income tax rate change in the Tax Cuts and Jobs Act of 2017. This standard is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. The Company adopted the new standard effective January 1, 2019 and it did not have a material impact on the consolidated financial statements. Accounting Pronouncements Not Yet Adopted In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurements”, which eliminates, adds or modifies certain disclosure requirements for fair value measurements. Entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year, with early adoption permitted to adopt either the entire standard or only the provisions that eliminate or modify the requirements. The Company does not expect this new guidance will have a material impact on the consolidated financial statements. 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. The Company does not expect this new guidance will have a material impact on the consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and in November 2018 issued ASU 2018-19, which amended the standard. The standard introduces an approach, based on expected losses, to estimate credit losses on certain types of financial instruments and modifies the impairment model for available-for-sale debt securities. The new approach to estimating credit losses (referred to as the current expected credit losses model) applies to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit exposures. This standard is effective for the Company on January 1, 2020. Entities are required to apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is currently assessing the impact, but does not expect it will have a material impact on the consolidated financial statements. |
Litigation
Litigation | 9 Months Ended |
Sep. 30, 2019 | |
Notes to Financial Statements [Abstract] | |
Litigation [Text Block] | 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. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2019 | |
Notes to Financial Statements [Abstract] | |
Subsequent Events [Text Block] | Note 13 – Subsequent Events The Company has evaluated all subsequent events through the date the financial statements were released. The revolving line of credit with a bank was fully repaid on October 17, 2019 and the balance of $1,000,000 is available. The Company entered into a Premium Finance Agreement with AFCO Acceptance Corporation “AFCO” dated October 10, 2019, to finance its U.S short-term insurance over the period of coverage. The Company is obligated to pay AFCO an aggregate sum of $753,360 in eleven payments of $70,468, at an annual interest rate of 5.740% commencing on November 1, 2019 and ending on September 1, 2020. Any late payment during the term of the agreement will be assessed by late penalty of 5% of the payment amount due, and in the event of default AFCO has the right to accelerate the payment due under the agreement. |
Recent Accounting Pronounceme_2
Recent Accounting Pronouncements (Policies) | 9 Months Ended |
Sep. 30, 2019 | |
Notes to Financial Statements [Abstract] | |
Recently Adopted Accounting Pronouncements [Policy Text Block] | Recently Adopted Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases Leases (Topic 842): Targeted Improvements In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation”, which aligns the measurement and classification guidance for share-based payments to non-employees with the guidance for share-based payments to employees. Under the new guidance, the measurement period for equity-classified non-employee awards will be fixed at the grant date. This update is effective for annual periods beginning after December 15, 2018, and interim periods within those periods and early adoption is permitted. The Company adopted the new standard effective January 1, 2019 and it did not have a material impact on its consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, "Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income," which provides for an election to reclassify stranded tax effects within accumulated other comprehensive income/(loss) to retained earnings due to the U.S. federal corporate income tax rate change in the Tax Cuts and Jobs Act of 2017. This standard is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. The Company adopted the new standard effective January 1, 2019 and it did not have a material impact on the consolidated financial statements. |
Accounting Pronouncements Not Yet Adopted [Policy Text Block] | Accounting Pronouncements Not Yet Adopted In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurements”, which eliminates, adds or modifies certain disclosure requirements for fair value measurements. Entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year, with early adoption permitted to adopt either the entire standard or only the provisions that eliminate or modify the requirements. The Company does not expect this new guidance will have a material impact on the consolidated financial statements. 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. The Company does not expect this new guidance will have a material impact on the consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and in November 2018 issued ASU 2018-19, which amended the standard. The standard introduces an approach, based on expected losses, to estimate credit losses on certain types of financial instruments and modifies the impairment model for available-for-sale debt securities. The new approach to estimating credit losses (referred to as the current expected credit losses model) applies to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit exposures. This standard is effective for the Company on January 1, 2020. Entities are required to apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is currently assessing the impact, but does not expect it will have a material impact on the consolidated financial statements. |
Operating Leases Right-of-Use
Operating Leases Right-of-Use Assets and Lease Liability Obligations (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Lessee Disclosure [Abstract] | |
Schedule of operating right-of-use assets and operating lease liabilities [Table Text Block] | Assets Operating lease ROU assets $ 369,608 Liabilities Operating lease liability, current 169,478 Operating lease liability, net of current portion 200,130 Total operating lease liabilities $ 369,608 |
Schedule of supplemental cash flow information of operating leases [Table Text Block] | Nine Months Ended September 30, 2019 Cash paid for amounts included in the measurement of lease liabilities $ 137,442 Right-of-use assets obtained in exchange for lease obligations $ 500,956 |
Schedule of remaining lease term and incremental borrowing rates [Table Text Block] | Supplemental disclosure September 30, 2019 Weighted average remaining lease term 3 years Weighted average discount rate 5.02% |
Schedule of maturities of lease liabilities [Table Text Block] | Year ended December 31, Amounts under Operating Leases Remaining 2019 $ 45,793 2020 184,831 2021 136,949 2022 46,070 Total lease payments 413,643 Less: Imputed interest (44,035 ) Total $ 369,608 |
Revenue and Cost Recognition (T
Revenue and Cost Recognition (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Notes to Financial Statements [Abstract] | |
Schedule of revenue by major customers by reporting segments [Table Text Block] | Nine months ended September 30, 2019 % of Revenues 2018 % of Revenues Consumer and athlete direct revenues $ 980,552 5% $ 808,335 4% Dealer direct revenues 6,913,057 33% 6,307,993 34% International distributor revenues 13,123,720 62% 11,761,584 62% $ 21,017,329 100% $ 18,877,912 100% |
Inventory (Narrative) (Details)
Inventory (Narrative) (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Notes to Financial Statements [Abstract] | ||
Inventory reserve for obsolescence | $ 117,252 | $ 83,004 |
Operating Leases Right-of-U_2
Operating Leases Right-of-Use Assets and Lease Liability Obligations (Narrative) (Details) | 9 Months Ended |
Sep. 30, 2019USD ($) | |
Lessee Disclosure [Abstract] | |
Operating lease expense | $ 128,713 |
Note Payable to Bank (Narrative
Note Payable to Bank (Narrative) (Details) - USD ($) | 9 Months Ended | |||
Sep. 30, 2019 | Oct. 17, 2019 | Dec. 31, 2018 | Nov. 19, 2018 | |
Line of Credit Facility [Line Items] | ||||
Note payable to bank | $ 350,000 | $ 0 | ||
Revolving line of credit [Member] | ||||
Line of Credit Facility [Line Items] | ||||
Maximum borrowing capacity | $ 1,000,000 | |||
Line bear interest at the LIBOR daily floating rate | 2.50% | |||
Note payable to bank | 350,000 | |||
Value of interest | 442 | |||
Line of credit balance | $ 650,000 | |||
Subsequent event [Member] | Revolving line of credit [Member] | ||||
Line of Credit Facility [Line Items] | ||||
Maximum borrowing capacity | $ 1,000,000 |
Short-term Loan (Narrative) (De
Short-term Loan (Narrative) (Details) | Sep. 30, 2019USD ($) |
Current U.S. short-term loan [Member] | |
Short-term loan, monthly payment | $ 62,225 |
Debt instrument, interest rate, stated percentage | 4.99% |
Current South African short-term loan [Member] | |
Short-term loan, monthly payment | $ 1,556 |
Debt instrument, interest rate, stated percentage | 4.10% |
Various short-term insurance policies in the U.S. [Member] | |
Short-term loan, monthly payment | $ 10,540 |
Debt instrument, interest rate, stated percentage | 5.99% |
Revenue and Cost Recognition (N
Revenue and Cost Recognition (Narrative) (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Product royalty income, revenue percentage | 1.00% | |
Provision for estimated returns | $ 0 | $ 0 |
Allowance for doubtful accounts | $ 228,186 | $ 83,399 |
Income Taxes (Narrative) (Detai
Income Taxes (Narrative) (Details) | Sep. 30, 2019 |
Maximum likelihood of being sustained | 50.00% |
Net Income Per Share of Commo_2
Net Income Per Share of Common Stock (Narrative) (Details) | 9 Months Ended |
Sep. 30, 2019shares | |
Weighted average number diluted shares outstanding adjustment | 862,000 |
Incremental common shares attributable to dilutive effect of conversion of preferred stock | 120,000 |
Incremental common shares attributable to dilutive effect of call options and warrants | 169,000 |
Antidilutive securities excluded from computation of earnings per share, amount | 573,000 |
Common Stock (Narrative) (Detai
Common Stock (Narrative) (Details) - USD ($) | 1 Months Ended | 9 Months Ended | ||
Feb. 28, 2019 | Feb. 25, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | |
Common stock granted to key employees, consultants and directors under the plan | 250,000 | |||
Common stock granted to key employees, consultants and directors, exercise price | $ 2.30 | |||
Common stock granted to key employees, consultants and directors, exercisable term | 10 years | |||
Percentage of options vested | 30.00% | |||
Compensation expense of options vested | $ 82,530 | |||
Percentage of options unvested | 70.00% | |||
Unrecognized compensation expense of options unvested | $ 192,570 | |||
Estimated fair value of the stock options granted | $ 1.1004 | |||
Year's risk-free interest rate | 2.84% | |||
Expected volatility | 32.35% | |||
Expected dividend yield | 0.00% | |||
Exercise of stock options (Shares) | 1,695 | |||
Exercise of stock options | $ 15,000 | |||
Stock-based compensation expense related to vested stock options | 166,250 | $ 150,332 | ||
Unrecognized compensation cost related to unvested stock options | $ 239,370 | |||
Vesting period of unrecognized compensation cost related to unvested stock options | 3 years | |||
Director [Member] | ||||
Exercise of stock options (Shares) | 15,000 | |||
Exercise of stock options | $ 15,000 |
Subsequent Events (Narrative) (
Subsequent Events (Narrative) (Details) | Oct. 10, 2019USD ($)payment | Oct. 17, 2019USD ($) | Nov. 19, 2018USD ($) |
Revolving line of credit [Member] | |||
Subsequent Event [Line Items] | |||
Maximum borrowing capacity | $ 1,000,000 | ||
Subsequent event [Member] | Premium finance agreement [Member] | AFCO Acceptance Corporation "AFCO" [Member] | |||
Subsequent Event [Line Items] | |||
Aggregate payment amount | $ 753,360 | ||
Periodic payment | $ 70,468 | ||
Number of payments | payment | 11 | ||
Annual interest rate | 5.74% | ||
Late penalty, percentage rate | 5.00% | ||
Subsequent event [Member] | Revolving line of credit [Member] | |||
Subsequent Event [Line Items] | |||
Maximum borrowing capacity | $ 1,000,000 |
Schedule of Right-of-Use Assets
Schedule of Right-of-Use Assets and Lease Liability Obligations (Details) | Sep. 30, 2019USD ($) |
Assets | |
Operating lease ROU assets | $ 369,608 |
Liabilities | |
Operating lease liability, current | 169,478 |
Operating lease liability, net of current portion | 200,130 |
Total operating lease liabilities | $ 369,608 |
Schedule of Supplemental cash f
Schedule of Supplemental cash flow information of Operating Leases (Details) | 9 Months Ended |
Sep. 30, 2019USD ($) | |
Lessee Disclosure [Abstract] | |
Cash paid for amounts included in the measurement of lease liabilities | $ 137,442 |
Right-of-use assets obtained in exchange for lease obligations | $ 500,956 |
Schedule of Remaining lease ter
Schedule of Remaining lease term and incremental borrowing rates of Operating leases (Details) | Sep. 30, 2019 |
Lessee Disclosure [Abstract] | |
Weighted average remaining lease term | 3 years |
Weighted average discount rate | 5.02% |
Schedule of Maturities of lease
Schedule of Maturities of lease liabilities (Details) | Sep. 30, 2019USD ($) |
Lessee Disclosure [Abstract] | |
Remaining 2019 | $ 45,793 |
2020 | 184,831 |
2021 | 136,949 |
2022 | 46,070 |
Total lease payments | 413,643 |
Less: Imputed interest | (44,035) |
Total | $ 369,608 |
Schedule of revenue by major cu
Schedule of revenue by major customers by reporting segments (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Revenues | $ 9,649,335 | $ 8,579,507 | $ 21,017,329 | $ 18,877,912 |
% of Revenues | 100.00% | 100.00% | ||
Consumer and athlete direct revenues [Member] | ||||
Revenues | $ 980,552 | $ 808,335 | ||
% of Revenues | 5.00% | 4.00% | ||
Dealer direct revenues [Member] | ||||
Revenues | $ 6,913,057 | $ 6,307,993 | ||
% of Revenues | 33.00% | 34.00% | ||
International distributor revenues [Member] | ||||
Revenues | $ 13,123,720 | $ 11,761,584 | ||
% of Revenues | 62.00% | 62.00% |