UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2010
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Commission file number 000-53525
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Leo Motors, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 95-3909667
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(State or other jurisdiction of (I. R. S. Employer Identification No.)
incorporation or organization)
291-1, Hasangok-dong, Hanam City, Gyeonggi-do, Republic of Korea 465-250
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code+82 31 796 8805
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Copy to:
Cutler Law Group
3355 W. Alabama Ste. 1150
Houston, TX 77098
Fax: 800-836-0714
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on which Registered
None None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock ($.001 par value)
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(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. [ ] Yes [x] No
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. [ ] Yes [x] No
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. [x] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Sec. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
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
definition of "accelerated filer, large accelerated filer and smaller reporting
company" as defined in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). [ ] Yes [x] No
The aggregate market value of the common equity held by non-affiliates of the
registrant as of June 30, 2009 (the last business day of the registrant's most
recently completed second fiscal quarter) was $13,571,680
The number of shares of the registrant's common stock outstanding as of March
31, 2010 was 50,708,115 shares.
Page 2
LEO MOTORS, INC.
TABLE OF CONTENTS
PART I
Forward-Looking Statements 3
Item 1. Business 3
Item 1A. Risk Factors 13
Item 1B. Unresolved Staff Comments 13
Item 2. Properties 13
Item 3. Legal Proceedings 14
Item 4. (Removed and Reserved) 16
PART II
Item 5. .. Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities 17
Item 6. Selected Financial Data 18
Item 7. .. Management's Discussion and Analysis of Financial Condition
and Results of Operations 19
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 26
Item 8. Financial Statements and Supplementary Data 27
Item 9. .. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 51
Item 9A. Controls and Procedures 52
Item 9B. Other Information 53
PART III
Item 10. Directors, Executive Officers and Corporate Governance 53
Item 11. Executive Compensation 57
Item 12. . Security Ownership of Certain Beneficial Owners and Management
and related stockholder matters 63
Item 13. . Certain Relationships and Related Transactions, and
Director Independence 64
Item 14. Principal Accounting Fees and Services 65
PART IV
Item 15. Exhibits, Financial Statement Schedules 65
Signatures 66
Page 3
PART I
ITEM 1. BUSINESS
A. BUSINESS DEVELOPMENT
There were no changes to Business Development during the year.
B. FINANCIAL INFORMATION ABOUT SEGMENTS
As defined by generally accepted accounting principles ("GAAP"), we do not have
any segments separate and apart from our business as a whole. Accordingly,
there are no measures of revenue from external customers, profit and loss, or
total assets aside from what is reported in the Financial Statements attached to
this Form 10-K.
C. BUSINESS OF THE COMPANY
OVERVIEW
Leo Motors, Inc., a Delaware Company (the "Company"), through its operating
subsidiary Leo Motors, Co. Ltd., a Korean Company ("Leozone"), is in the
business of developing and marketing Electric Vehicles ("EVs") and EV
components. Our current operations consist of developing the designs and
prototypes of our EV models, testing, establishing relationships with potential
customers, small scale sales of our EVs, and developing our business plan. Our
ultimate goal is to begin full scale manufacture of our designs, enter the
Global EV market and establish ourselves as a reputable provider of EVs and EV
components.
Our overarching strategy is to gain an initial foothold in the EV market as a
niche supplier, build our reputation as a technology leader and a socially
responsible company, and develop our catalog of products and technology while
the market for EV develops.
CHANGES TO OUR BUSINESS
The most significant change to our business during 2010 and through the date
hereof is that we began generating revenues in March of 2010. Without
significant income during the preceding development stage, the Company invested
a significant amount of capital in realizing and developing its technology. But
the Company has since begun generated revenues, and has received purchase orders
from globally recognizable companies.
Our business plan remains to become a technology provider in the global EV
market, however, due to the need to generate revenues in short term we decided
to focus our efforts in 2010 on the development and marketing of electric
scooters. Our efforts made successful results as the Company sold almost 1,000
units of electric scooters, and made a significant amount of revenue for the
first time since its inception.
The next step is to accelerate the capitalization of Company's developments, and
to further develop its products to gain a share of the EV component market. The
Company intends to have production capabilities of EV power trains and e-box
which can store mass electric power to be used in wind and solar power plants,
and in home and offices for back-up power supply for emergency. In order to
commercialize the development of our Zinc-Air fuel cell Generator ("ZAG"), the
Company is developing ZAG as an EV range extender which can generate 30kW of
electricity per hour.
Page 4
The steps toward implementing our business plan can be summarized by the
following table:
The Company could not finish the development of 240 kW power trains which would
be used in heavy duty vehicles such as buses and trucks. 240 kW controllers are
currently underway.
Power Trains
STEP ANTICIPATED COST ANTICIPATED START DATE
----------------------- ----------------- ----------------------
Initial Design N/A Completed
Initial Prototypes $ N/A Completed
Testing $ 300,000 July 2011
Production Capability $ 500,000 September 2011
Production of Inventory $ 100,000 December 2011
Marketing & Sales $ 100,000 In process
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TOTAL 1,000,000
e-Box
STEP ANTICIPATED COST ANTICIPATED START DATE
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Initial Design $ N/A Completed
Initial Prototypes $ N/A Completed
Testing $ N/A Completed
Component Development $ N/A Completed
Production Capability $ 500,000 Completed
Production of Inventory $ N/A Completed
Marketing & Sales $ 100,000 In process
----------------------- ----------------- ---------------------
TOTAL 600,000
ZAG
STEP ANTICIPATED COST ANTICIPATED START DATE
----------------------- ----------------- ----------------------
Initial Design $ N/A Completed
Initial Prototypes $ N/A Completed
Testing $ N/A Completed
Component Development $ 1,000,000 Completed
Production Capability $ 1,000,000 Completed
Production of Inventory $ N/A Completed
Marketing & Sales $ 100,000 In process
----------------------- ----------------- ---------------------
TOTAL 2,100,000
In addition to broadening the scope of our products, we intend to expand our
business by entering new potential markets. We had intended to enter the US,
Japanese, and EU markets by the end of 2010. However, we could not because we
are unable to timely finance our operations and to get the appropriate local
partners. We will continue our efforts in 2011 towards entering these markets.
Page 5
SALES AND DISTRIBUTION ARRANGEMENTS
We believe Leo can survive in competition with giant car companies because Leo
is not just small venture EV developer in direct competition with them. The big
automakers are not our competitors, but our prospects, because we have developed
the solutions those companies need to produce Plug-in Hybrid EVs ("PHEVs") or
EVs. The Company also develops EVs, but our vehicles are customized vehicles or
vehicles to test our power trains. These are aspects where a smaller company may
have an advantage over bigger automotive companies, because of the larger
companies' scale and labor unions. We believe their solution is to make
alliances with smaller companies like us when they have such needs.
The Company has developed many key technologies for EVs and is now focused on
commercializing these breakthroughs. The company has a long list of potential
buyers of customized vehicles, electric bikes, parts, and components, and is
currently in negotiations to secure a number of contracts.
We have developed and delivered an e-SUV to a Korean Car Manufacturer using our
100kW E-Power Train which the company developed in 2010. The test vehicle was
exhibited at and made a demonstration run to the public in the 2011 Seoul Motors
Show. When final testing of the test vehicle is successful, we intend to supply
and incorporate our EV power trains into their body and chassis and market the
completed vehicle to the public.
The Company delivered a prototype of electric tractor using our 60kW power
train. After the proper tests, we intend to supply power trains and engineering
services to that project.
The Company has received a Zinc Air Generator (ZAG) Development Order from an
oil development equipment company. We received a purchase order to develop ZAG
to be used in the unmanned environment in the ocean. With a written commitment
from the client, the Company has started the Phase 1 development. The total
project consists of 3 Phases to be completed by 2013.
MARKETING
Our initial marketing strategy is to focus on individual sales to fleets and EV
manufacturers. We have already begun marketing our scooters to governments and
companies throughout the world. For the marketing of power trains and ZAG, we
have targeted mass manufacturing car brands in the world.
ITEM 1A. RISK FACTORS
Not required by smaller reporting companies.
ITEM 1B. UNRESOLVED STAFF COMMENTS
We filed a registration statement on Form 10 on December 10, 2008, and
Amendments to the Form 10 on March 3, 2009, April 27, 2009, September 9, 2009,
and May 5, 2010. We have received comments from the SEC on the latest Amendment
and are in the process of responding to them. Until the Form 10 has cleared
comments, we and our shareholders cannot rely on the Form 10 or our subsequent
periodic reports to satisfy a requirement of current adequate information for
any securities transactions.
In addition to comments on our form 10, we are subject to a continuing
requirement to update our
Page 6
Quarterly and Annual Reports to be consistent with any changes made to our Form
10.
We do not currently have any other unresolved staff comments.
ITEM 2. PROPERTIES
We operate out of an office and workshop located at 291-1, Hasangok-dong, Hanam
City, Gyeonggi-do, Republic of Korea 465-250.
At this time we do not intend to establish any manufacturing facilities
ourselves. Instead we will either outsource manufacturing of our products, or
enter into joint ventures with partners who will provide the manufacturing
facilities.
As the market for our product develops, we may decide to establish our own
facilities in various locations, outsource manufacturing of our other products,
or enter into additional joint ventures for the manufacturing of our EVs.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. (REMOVED AND RESERVED)
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
MARKET INFORMATION
Our common stock is quoted in United States markets on the Pink Sheets,
maintained by Pink OTC Markets, Inc., a privately owned company headquartered in
New York City, under the symbol "LEOM." There is no assurance that the common
stock will continue to be traded on the Pink Sheets or that any liquidity exists
for our shareholders.
MARKET PRICE
The following table shows the high and low per share price quotations of the
Company's common stock as reported by the Pink Sheets for the periods presented.
These quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commissions, and may not necessarily represent actual transactions. The Pink
Sheets market is extremely limited and the prices quoted by brokers are not a
reliable indication of the value of the common stock. The periods presented
represent fiscal quarters, with the fourth quarter of each year ending on
December 31.
HIGH LOW
Fiscal 2010
First Quarter $2.75 $1.20
Second Quarter $2.20 $0.70
Third Quarter $1.65 $0.55
Fourth Quarter $1.00 $0.25
Page 7
As of December 31, 2010, the Company had 100,000,000 shares of common stock
authorized with 50,833,115 shares issued and outstanding and approximately
9,294,694 freely tradable shares in the public float. As of March 31 2011 the
issued and outstanding was 48,833,115 because 2,000,000 shares issued for Sea
Motors was cancelled at Jan 19, 2011. These shares were held by approximately
941 shareholders of record and Company estimates by over 1,000 beneficial
shareholders.
PENNY STOCK REGULATIONS
Our common stock is quoted in United States markets on the OTCQB, maintained by
OTC Markets Group Inc., a privately owned company headquartered in New York
City, under the symbol "LEOM." On Dec 31, 2010 the last reported sale price of
our common stock was $0.34 per share. As such, the Company's common stock may
be subject to provisions of Section 15(g) and Rule 15g-9 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), commonly referred to as
the "penny stock rule."
Section 15(g) and Rule 15g-9 sets forth certain requirements for transactions in
penny stocks, in particular that either (1) the transaction meets one of a few
specific exemptions, or (2) the broker dealer executing the transaction for a
customer (a) obtain informed consent from the customer and (b) make an
individualized determination of the customer's suitability for trading in penny
stocks based on personal financial information. Rule 15g-9(d) incorporates the
definition of "penny stock" that is found in Rule 3a51-1 of the Exchange Act.
The SEC generally defines "penny stock" to be any equity security that has a
market price less than $5.00 per share, subject to certain exceptions. As long
as the Company's common stock is deemed to be a penny stock, trading in the
shares will be subject to additional sales practice requirements on
broker-dealers who sell penny stocks to persons other than established customers
and accredited investors.
DIVIDENDS
The Company has not issued any dividends on the common stock to date, and does
not intend to issue any dividends on the common stock in the near future. We
currently intend to use all profits to further the growth and development of the
Company.
RECENT SALES OF UNREGISTERED SECURITIES
During the year ended December 31, 2010, and in the subsequent period through
the date hereof the Company made the following issuances of unregistered
securities:
On February 3, 2010 we issued 3,000,000 shares to members of our management team
as compensation for their services. 2,000,000 shares were issued to our
president, Mr. Kang. 500,000 shares each were issued to Jung Yong Lee and Young
Il Kim. This issuance was completed in accordance with Section 4(2) of the
Securities Act in an offering without any public offering or distribution.
These shares are restricted securities and include an appropriate restrictive
legend.
On February 3, 2010 we issued 75,000 shares for consulting services. This
issuance was completed in accordance with Section 4(2) of the Securities Act in
an offering without any public offering or distribution. These shares are
restricted securities and include an appropriate restrictive legend.
On February 22, 2010 we issued 7,000,000 shares to purchase 50% of Leo B&T.
This issuance was completed in accordance with Section 4(2) of the Securities
Act in an offering without any public offering or distribution. These shares
are restricted securities and include an appropriate restrictive legend.
Page 8
On September 22 and November 22, 2010 we issued 50,000 shares for consulting
services. This issuance was completed in accordance with Section 4(2) of the
Securities Act in an offering without any public offering or distribution.
These shares are restricted securities and include an appropriate restrictive
legend.
PURCHASES OF EQUITY SECURITIES
None.
ITEM 6. SELECTED FINANCIAL DATA
Not required by smaller reporting companies.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
FORWARD-LOOKING STATEMENTS
Statements about our future expectations are "forward-looking statements" within
the meaning of applicable Federal Securities Laws, and are not guarantees of
future performance. When used herein, the words "may," "will," "should,"
"anticipate," "believe," "appear," "intend," "plan," "expect," "estimate,"
"approximate," and similar expressions are intended to identify such
forward-looking statements. These statements involve risks and uncertainties
inherent in our business, including those set forth in Item 1A under the caption
"Risk Factors," in this Annual Report on Form 10-K for the year ended December
31, 2008, and other filings with the SEC, and are subject to change at any time.
Our actual results could differ materially from these forward-looking
statements. We undertake no obligation to update publicly any forward-looking
statement.
OVERVIEW
Leo Motors, Inc. (the "Company") is in the process of development and production
of Electric Power Train Systems (EPTS) encompassing electric scooters, electric
sedan/SUV/sports cars, and electric buses/trucks as well as several models of
Electric Vehicle ("EV"). Our EPTS can replace internal combustion engines (ICE).
Our EPTS for passenger cars and agricultural tractors have been sold to car
makers and agricultural machinery manufacturers. During the last two years, we
have been developing eight EPTS: 3kW, 5kW, 7.5kW, 15kW, 30kW, 60kW, 100kW,
120kW, and 240kW systems. Each EPTS consists of a motor, controller, and battery
power pack controlled by a Battery Management System (BMS).
The Company has successfully converted existing models of small cars (internal
combustion engines under 2,000cc), and also a 24 seat bus. The Company launched
60kW power train (for compact passenger cars and small trucks) kits and 120kW
(for under 5,000cc ICE passenger cars, buses, and trucks) kits. The Company
developed 240kW kit (for 10,000cc buses and trucks) as well. The 240kW kit was
scheduled to be tested by October of 2010, but the Company postponed the test
because it found unexpected problems in procuring the electric lines and
inverters for high ampere power.
The Company has also developed Low Speed EV ("LSV"), four-wheeled electric
scooter, and electric bikes. This year, the company launched electric bikes,
and is now selling them to the distributors. The company also has developed the
Zinc Air Fuel Cell Generator to be used as a range extender for EV.
Page 9
In 2010, we believe the company has successfully made a turning point. The
Company had been in the development stage in both technology and as a business.
The Company spent a lot of money without any meaningful sales. The first mass
sales were made in 2010. The Company sold almost 1,000 units of electric
scooters last year to its national dealer in Korea. It was the largest sales
performance in the electric two wheeler market in Korea. The Company expects it
can sell more than 4000 units, for revenues of approximately US$ 12 million in
2011 if the Korean government starts subsidizing electric scooter purchaes.
Such subsidization has been discussed among Korea's legislative bodies and
government offices.
The specific goals of the Company over the next twelve months include:
- Develop or acquire mass production facilities for power trains and BMS
- Finalize the development of ZAFCG to be used in EVs by September 2011, and
develop or acquire mass production plant to produce ZAFCG by December 2011.
- Finish the development of the 240kW system by May 2011.
- Find large-scale buyers for our EPTS and components.
SUMMARY OF RECENT BUSINESS DEVELOPMENTS
The greatest achievements in 2010 were that the Company has made many value
references which can be a strong platform for future sales as well as proofs of
technical competencies of the Company. Our 100kW EPTS was chosen for the
electric car project of one large car manufacturer. We have made one electric
test car for the client using body of the client's car model. The newly
developed test EV of the client has been publicly demonstrated, and tested in
the 2011 Seoul Motor Show. The development was very successful. The Company
expects to make another test EV. After developing these test EVs, the Company
may make many prototypes for final testing before jumping beginning mass
production.
We have developed an electric tractor using our 60kW power train. The new
development was made using the body and chassis provided by Tong Yang, the major
Agricultural Machinery Brand in Korea. The development was made by an order
from Tong Yang. The newly developed electric Tractor is under tests, and will
be exhibited in the major International Agricultural Machinery Show in 2011. If
tests are successful, we expect to receive orders for our 60kW EPTS and our
engineering services.
After the development of our 1kW Zinc Air Fuel Cell Generator ("ZAFCG") and a
seminar which announced the unprecedented development, the Company exerted
itself in commercialization of the development. In the end of 2010, the Company
received an order to develop the ZAFCG which will be used in the ocean from an
oil development company. The Company has successfully finished the feasibility
study of the development, and received the development fees of the first phase.
The Company is going to make a pilot test and engineering design in 2011, and
will finalize the development by making the final prototype and tests in 2012.
The Company received a request to develop and supply high capacity battery power
pack from a major company in the military industry. The Company is preparing a
test power pack for delivery to the client. If the test is successful, the
Company will market its power packs to the client.
Page 10
LIQUIDITY AND CAPITAL RESOURCES
Our liquidity requirements arise principally from our plans to develop EV
production capability, additional product development, and marketing costs.
Although in the future we intend to fund our liquidity requirements through a
combination of cash on hand and revenues from operations, during the fiscal year
2010, the Company had incurred $1,521,092 in expenses, not including salary and
consulting expense paid by stock, and had realized $2,605,066 in revenues.
Accordingly, our ability to fully develop and market our technologies and
products is currently dependent on our ability to either generate significant
new revenues or raise external capital.
Our monthly operating cost including salaries and general expense is currently
approximately $150,000, as we focus on our e-Bikes and power trains. In 2010 we
received approximately $2.5 million in advance from our distribution agreement
in Korea; accordingly, our ability to fun operations in the short term has been
secured. However, in order to continue the projects we have put on hold, we
will require additional revenues or financing.
Our long term survival will depend on the growth of our operations towards full
scale manufacturing and sales of our EVs, which in turn will depend on our
ability to raise sufficient financing. If our fund raising efforts should fail
or fall short of our goal, we will have to restructure our business plan in
order to sustain our operations. However, in that event we may be unable to
implement our business plan or continue operations.
RESULTS OF OPERATIONS
Revenues
--------
Sales for year ended December 31, 2010 were $2,605,066 compared to $896,953 for
year ended Dec 31, 2009. Costs of sales were $2,528,435 and gross profit was
$76,631 in 2010 compared to $787,423 and $109,530 as costs of sales and gross
profit in the same period in 2009. The sales during this period were mainly
generated from the electric scooters business. The order of 1,187 electric
scooters was received from M&M Co., Ltd which is our domestic distributor, for
total revenues of 4.2 billion Korean Won (approximately $ 3.73 million USD) and
870 units were delivered by the end of the period. The remaining units will be
reordered with the new model in 2011 We believe the revenue from EV will recur
this year as our goal is to begin mass production and marketing of our products.
Expenses
--------
During the period, we incurred $3,771,092 in expenses, compared to $3,357,967 in
2009. The primary increase was due to payment of Salaries and Benefits to the
Board Director paid in Stock and development cost. We also hired R&D and sales
staff to activate our business. The company rented another building near the
existing office to function for the sales and administration divisions. As the
electric scooter has been launched in our domestic market and the company has
started mass production for the scooter, the marketing expenses and indirect
costs were also increased.
Expenses for the quarter consisted of the following:
EXPENSES: 2010 2009
------------------------------------- ---------- ----------
Salaries and Benefits $ 410,955 $ 598,418
Salaries and Benefits by Stock priced 2,250,000 -
Page 11
Service Fees - 2,413,055
General and Administrative 751,802 346,495
Depreciation & Amortization 358,555
Bad Debt 8,780
Salaries and Benefits - consist of total cash compensation paid to our employees
during the year and the cost of all benefits provided to our employees.
Service Fees - consist of consist of accounting, legal, and professional fees.
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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DAT
Description Page
------------------------------------------------------------ ----
Report of Independent Registered Public Accounting Firm F-13
Consolidated Balance Sheets F-14
Consolidated Statements of Operations F-15
Consolidated Statements of Changes in Shareholders' Interest F-16
Consolidated Statements of Cash Flows F-17
Notes to Consolidated Financial Statements F-19
Page 12
Stan J.H. Lee, CPA
2160 North Central Rd. Suite 209 *Fort Lee * NJ 07024-7547
P.O. Box 436402 * San Diego * CA 92143-6402
619-623-7799 * Fax 619-564-3408 * E-mail) stan2u@gmail.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------------
To the Shareholders and Board Members of Leo Motors Inc.;
We have audited the accompanying consolidated balance sheet of Leo Motors Inc.
as of December 31, 2010 and the related consolidated statements of operation,
changes in stockholders' equity and cash flows for the fiscal year then ended.
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit. The financial statements of Leo Motors Inc as of December 31,
2009, were audited by other auditors whose report dated April 5, 2010, expressed
an unqualified opinion on those statements except for going concern paragraph.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. An audit includes consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for my opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Leo Motors Inc. as of December
31, 2010, and the results of its operations and its cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in the notes to the financial
statements, the Company is in the development stage, has suffered a loss, has a
net capital deficiency and has yet to generate an internal cash flow. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are also described
in the notes. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/ Stan J.H. Lee, CPA
--------------------------
Stan J.H. Lee, CPA
Dated April 13, 2011
Fort Lee, NJ 07024
Registered with the Public Company Accounting Oversight Board
Member of New Jersey Society of CPAs
Registered with Canadian Public Accountability Board
F-13
LEO MOTORS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF AS OF
DECEMBER 31 DECEMBER 31
ASSETS 2010 2009
------------------------------------------------ ------------- -------------
CURRENT ASSETS
Cash $ 71,192 $ 499,025
Accounts Receivable-net of allowance of $8,780
and $8,394 ,respectively - 244,670
Inventory 1,054,833 395,001
Short-term loans 196,066 -
Prepaid purchase 131,850 -
Prepaid costs and other current assets 54,693 151,067
------------- -------------
TOTAL CURRENT ASSETS 1,508,634 1,289,763
Fixed assets- net of accumulated depreciation 135,227 157,981
Deposit 141,089 107,640
Other non-current assets 65,719 -
Investment in Subsidiary - -
Long -term investment in B&T Corp 5,286,175 -
------------- -------------
TOTAL OTHER ASSETS 5,628,210 265,621
------------- -------------
TOTAL ASSETS $ 7,136,844 $ 1,555,384
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
------------------------------------------------
CURRENT LIABILITIES
Accrued payroll $ 300,000 $ -
Short term borrowings 1,127,209 428,229
Accounts payable and accrued expenses 494,983 433,004
Accrued expenses 136,913 -
Other payables 8,150 5,847
Payments received in advance from customers 544,224 296,167
Accrued warranty expense 52,101 -
Related party payable 1,040,142 -
Corporation and business taxes payable 135,054 -
------------- -------------
TOTAL CURRENT LIABILITIES 3,838,776 1,163,247
Accrued severance benefits 52,167 30,030
------------- -------------
TOTAL LIABILIITIES 3,890,943 1,163,247
Noncontrolling interest 1,373,341 1,020,428
STOCKHOLDERS' EQUITY
Common stock, Authorized 100,000,000 Shares,
$0.001 par value,50,833,115 and 40,708,115
shares issued and outstanding, as of December
31, 2010 and 2009, respectively 50,833 40,708
Additional paid-in capital 10,543,396 3,964,160
Accumulated comprehensive income (loss) 426,910 406,476
Deficit (9,148,579) (5,069,666)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 1,872,560 (658,322)
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 7,136,844 $ 1,525,354
============= =============
See the Accompanying Notes to the Financial Statements
F-14
LEO MOTORS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED
DECEMBER 31 DECEMBER 31
2010 2009
------------- -------------
TOTAL SALES 2,605,066 896,953
COST OF SALES 2,528,435 (787,423)
------------- -------------
GROSS PROFIT 76,631 109,530
EXPENDITURES :
Officer compensation paid in stock 2,250,000 -
Salaries and benefits 410,955 598,418
Consulting and service fees 149,500 2,413,055
Selling , general and administrative 645,801 346,495
Research and Development 53,105 -
Bad debt 8,780 -
Depreciation 272,354 -
Amortization 86,201 -
------------- -------------
TOTAL EXPENDITURES 3,876,696 3,357,968
------------- -------------
NET LOSS FROM OPERATIONS (3,800,065) (3,248,438)
OTHER INCOME & (EXPENSES)
Investment loss - B&T Corp. (213,825) -
Interest income 346 1,631
Interest expense (53,966) (9,551)
Non-operating income 35,838 92,652
Non-operating expense (47,241) (214,738)
------------- -------------
Total Other Income & (Expenses) (278,848) (130,006)
------------- -------------
NET LOSS BEFORE INCOME TAX &
BENEFIT & NONCONTROLLING INTEREST (4,078,913) (3,378,444)
Income taxes expense - -
------------- -------------
NET LOSS (4,078,913) (3,378,444)
Net loss (income) attributable to
noncontrolling interest 1,725,788 160,173
------------- -------------
NET INCOME (LOSS) ATTRBUTABLE TO
LEO MOTORS, INC. $ (2,353,125) $ (3,538,617)
COMPREHENSIVE INCOME (LOSS);
NET LOSS (4,078,913) (3,538,617)
Unrealized foreign currency transaction
gain (loss) 20,434 4,698
------------- -------------
COMPREHENSIVE INCOME (LOSS) $ (4,058,479) $ (3,533,919)
LOSS PER SHARE - BASIC & DILUTED (0.08) (0.09)
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 49,723,457 37,743,179
See the Accompanying Notes to the Financial Statement
F-15
LEO MOTORS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
ADDITIONAL RETAINED TOTAL
COMMON STOCK PAID IN COMPREHENSIVE EARNINGS STOCKHOLDERS'
SHARES AMOUNT CAPITAL INCOME(LOSS) (DEFICIT) EQUITY
----------- ------- ------------ --------------- ------------ ---------------
Balance, January 1, 2008 $30,312,315 $30,312 $ 181,570 $ - $ (357,796) $ (145,914)
Net loss for the year (52,446) (1,007,144) (1,059,590)
Balance December 31, 2007 30,312,315 30,312 181,570 (52,446) (1,364,940) (1,205,504)
Stock issusd for debt and services 1,300,800 1,301 141,781 143,082
net Loss for the year 289,832 (166,109) 123,723
----------- ------- ------------ --------------- ------------ ---------------
Balance, December 31, 2008 31,613,115 31,613 323,351 237,386 (1,531,049) (938,699)
Stocks issued for service and
cash during the year 9,095,000 9,095 3,640,809 3,649,904
Net loss for the year ended
December 31, 2009 (3,538,617) (3,538,617)
Foreign currency translation
adjustment 169,090 169,090
----------- ------- ------------ --------------- ------------ ---------------
Balance, December 31, 2009 $40,708,115 $40,708 $ 3,964,160 $ 406,476 $(5,069,666) $ (658,322)
Common stock issued for
acquisition of Leo B&T Corp. 7,000,000 7,000 5,493,000 5,500,000
Stock-based compensation 3,000,000 3,000 2,247,000 2,250,000
Common stock issued for
consulting and other service 125,000 125 149,375 149,500
GAAP conversion adjustment, net (1,310,139) (1,310,139)
Net loss for the year ended
December 31, 2010 (4,078,913) (4,078,913)
Foreign currency translation
adjustment 20,434 20,434
----------- ------- ------------ --------------- ------------ ---------------
Balance, December 31, 2010 $50,833,115 $50,833 $10,543,396 $ 426,910 $(9,148,579) $ 1,872,560
=========== ======= ============ =============== ============ ===============
<FN>
See the Accompanying Notes to the Financial Statements
F-16
LEO MOTORS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the fiscal years ended
December 31 December 31
CASH FLOWS FROM OPERATING ACTIVITIES 2010 2009
---------------- -------------
Net loss $ (4,078,913) $ (3,538,617)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Stock issued
Depreciation 272,354 39,195
Foreign currency translation 20,434 169,090
Change in long-term investment 213,825 -
GAAP conversion adjustment (1,310,768) -
Changes in working capital:
(Increase) decrease in inventory (659,832) (359,426)
(Increase) decrease in accounts receivable 244,670 (230,816)
(Increase) decrease in short term loans (196,066) -
(Increase) decrease in prepaid purchase (131,850) -
(Increase) decrease in deposit/prepaid 96,374 (20,499)
Increase (decrease) in accrued salary 300,000 -
Increase (decrease) in accounts payables
and accrued expenses 198,892 416,154
Increase (decrease) in other payable 2,303 5,847
Payments in advance from customers 248,057 (100,030)
Increase (decrease) in accrued warranty
expense 52,101 -
Increase (decrease) in taxes payable 135,142 (2,080)
Increase (decrease) in accrued severance
benefits 22,137 30,030
---------------- -------------
Net Cash Provided by (Used in) Operating
Activities (4,571,140) (3,591,152)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Leo B&T Corp. (5,500,000) -
Purchase of fixed assets (249,600) (191,236)
Outlay for deposit (33,449) (44,536)
Increase in other non-current assets (65,179) -
---------------- -------------
Net Cash Provided by (Used in) Investing
Activities (5,848,228) (235,772)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowing 698,980 428,229
Advances from related parties (Debt
reduction related party) 1,040,142 (804,794)
Increase in minority interest 352,913 1,020,428
Issuance of common stock 7,899,500 3,649,904
---------------- -------------
Net Cash flows from financing activities 9,991,535 4,293,767
---------------- -------------
Net Increase (Decrease) in Cash (427,833) 466,843
Cash at the Beginning of the period 499,025 32,181
---------------- -------------
Cash at the End of the period $ 71,192 $ 499,025
================ =============
F-17
LEO MOTORS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (CONT'D)
Supplemental Cash Flow Disclosures:
Cash paid during year for interest $ 53,966 $ 9,551
================ =============
Cash paid during year for taxes $ - $ -
================ =============
See the Accompanying Notes to the Financial Statements
F-18
LEO MOTORS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
NOTE 1 - OVERVIEW AND BACKGROUND
Company Business
-----------------
Company is currently in development, assembly and sales of the specialized
electric vehicle.
Background
----------
Leo Motors, Inc, 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 Shinil
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.
Going Concern
--------------
The Company has a net loss of $ 4,078,913 in 2010 and $ 3,378,444 in 2009 and
has a working capital and stockholder's deficiency of $ 2,330,142 at December
31, 2010. This raises substantial doubt about its ability to continue as a
going concern. The ability of the Company to continue as a going concern is
dependent on the Company's ability to generate profitability and/or obtain
continuous funding source. The financial statements do not include any
adjustments that might be necessary if the Company is unable to continue as a
going concern.
NOTE 2 - SUMMAY 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 shareholder with 57.69 % at the end of December 31, 2010
and 2009, 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.
F-19
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. The Company has
established a reserve on receivables of $ 8,780 in 2010 and $ 8,394 in
2009.
Concentration of Credit Risk
-------------------------------
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of cash, cash equivalents and trade accounts
receivable. The Company places its cash with high credit quality financial
institutions in Korea. The Company has not experienced any losses in such bank
accounts through December 31, 2010. At December 31, 2010 and 2009, our bank
deposits were $ 63,696 and $498,238, respectively.
The Company extends credit based on an evaluation of the customer's financial
condition, generally
without collateral. Exposure to losses on receivables is principally dependent
on each customer's financial condition. The Company monitors its exposure for
credit losses and maintains allowances for anticipated losses, as required.
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
F-20
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.
Advertising Costs
------------------
Advertising costs are expensed as incurred. The total advertising expense were $
42,360 in 2010 and $ 2,992 in 2009 and have been included as part of operating
expenses.
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
Consulting and Service Fees
------------------------------
It consist of legal, and paid to Investor Relations firm and professional fees
and, mostly paid in common stock.
Research and Development
--------------------------
Company sponsored research and development costs, related to both present and
future products, are charged to operations when incurred and are included in
operating expenses
F-21
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 and Impact of New Accounting Standards
-------------------------------------------------------------------------------
The Company does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the Company's results of
operations, financial position, or cash flow.
NOTE 3 - EARNINGS PER SHARE
Basic earnings per share are calculated by dividing net loss by the weighted
average number of common shares outstanding during the period.
NOTE 4 - ACCOUNTS RECEIVABLE
The Company recognizes a receivable on sales of parts and electrical motor
equipment. The Company has established a reserve for allowance for doubtful
accounts in 2010 equal to $ 8,780 and 2009, $8,394.
NOTE 5 - INVENTORY
The Company accounts for its inventory under the FIFO method and lower of cost
or market method of costing. The company's inventory consists of parts for the
electric transportation industry. As of December 31, 2010 and 2009, the
inventory consisted of:
2009 2010
----------- --------
Raw materials $ 975,301 $161,947
Work-in-process 99,531 -
Finished goods 10,002 10,002
----------- --------
TOTAL
$1,084,834 $395,001
=========== ========
Reserve for slow moving and obsolete goods (30,000) -
----------- --------
$1,054,834 $395,001
NOTE 6 - FIXED ASSETS
The Company's assets consist of the following:
2010 2009
----------- ---------
Vehicles $ 4,741 $ 77,753
Tools 37,154 67,679
Equipment, furniture , fixtures and equipment 203,316 55,396
----------- ---------
245, 211 200,828
Less Accumulated Depreciation ( 109,984) (42,847)
----------- ---------
Net $ 135,227 $157,981
=========== =========
F-22
The Company depreciates it assets over useful lives of between 3 and 7 years.
Depreciation expense was $ 272,354 in 2010 $ 39,195 in 2009.
NOTE 7 - DUE TO RELATED PARTY
The company is indebted to its officer for advances. Repayment is on demand
without interest. The balance at December 31, 2010 was $ 1,040,142. The Company
reduced this obligation by the issuance of 1,000,800 valued at $110,088 during
2008 and cash repayment in 2009.
NOTE 8 - 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 December 31, 2010 and 2009, the balance of
payments received in advance was $ 544,244 and $ 296,167.
NOTE 9-BANK LOAN
The Company is indebted to Shin Han Bank at December 31, 2010 and 2009 for $
438,982 and $ 428,229, payable in May 2011, interest at 6.57 % per annum. The
loan is secured by guarantee issued by 'KIBO", a Korean government agency
created to guarantee loans to small-to-medium technology companies.
NOTE 10 - CAPITAL STOCK - 2010 ISSUANCE
The company issued 7,000,000 shares to acquire 50 % of Leo BnT Corp. in February
2010. At $ .79 per share resulting in purchase price paid in the amount of $
5,500,000. Also on February 8 2010, 3,000,000 shares as compensation paid to
officers which was valued at $ .75 per share. The remainder 125,000 shares were
for the consulting fee and IR service paid in stock with price ranging from $
..48 to $ 1,45 per share.
Company has only one class of stock, common stock. For the years ended
December 31, 2010 and 2009, the Company issued 10,125.000 and 9,095,000
shares, respectively. The shares for services were recognized as consulting
and service fees. The Company us authorized to issue 100,000,000 shares and as
of December 31, 2010 , the Company has 50,833,115 shares issued and outstanding
and December 31, 2009, 40,708,115 shares issued and outstanding.
NOTE 11 - OPERATING RISK
(a) Concentration of credit risk
Financial instruments that potentially expose the Company to concentration of
credit risk consist primarily of cash. The Company places its cash with
financial institutions with high credit ratings.
(b) Country risk
Revenues of the Company are mainly derived from the sale in Korea. The Company
hopes to expand its operations to other Countries, however, such expansion has
not been commenced and there are no assurances that the Company will be able to
achieve such an expansion successfully. Therefore, a downturn or stagnation in
the economic environment of Korea could have a material adverse effect on the
Company's financial condition.
(c) Product risk
The Company might have to compete with larger companies who have greater funds
available for expansion, marketing, research and development and the ability to
attract more qualified personnel. There can be no assurance that Company will
remain competitive should this occur.
F-23
(d) Exchange risk
The Company cannot guarantee that the current exchange rate will remain steady,
therefore there is a possibility that the Company could post the same amount of
profit for two comparable periods and because of a fluctuating exchange rate
actually post higher or lower profit depending on exchange rate of Korean Won
were converted to U.S. dollars on that date. The exchange rate could fluctuate
depending on changes in the political and economic environments without notice.
(e) Key personnel risk
The Company's future success depends on the continued services of few
individuals and loss of one or several of their service would be detrimental to
the Company and could have an adverse effect on business development. The
Company does not currently maintain key man insurance on their life but plan to
implement in near future. Future success is also dependent on the ability to
identify, hire, train and retain other qualified managerial and other employees.
NOTE 12 - SEGMENT INFORMATION
The following information is presented in accordance with SFAS No. 131,
Disclosure about Segments of an Enterprise and Related Information. In period
ended December 31, 2010 and 2009, the Company operated in a single reportable
business segment, sales of specialized electric vehicle.
The Company's reportable segments are strategic business units that offer
different products. The Company's reportable segments, although integral to the
success of the others, offer distinctly different products and services and
require different types of management focus. As such, these segments are managed
separately.
Condensed information with respect to these reportable business segments for the
period is as follows:
Sales from specialized electric vehicles $ 2,605,066.
NOTE 13 - COMMITMENT AND CONTINGENCIES
13.1 Lease Commitments
Company leases its office space in Ha-Nam City in Korea which expires on March
31, 2011 and its monthly minimum rental is $ 6,875.
The minimum obligations under such commitments for the years ending December 31
until its expiration are:
Year 2011 $ 20,625
Rental expense for the period ended December 31, 2010 and 2009 were $ 44,634
were $ 32,252.
13.2 Litigation
The Company has no threatened, pending or unsettled litigation as of April _ ,
2010, the date the financial statement is available for issuance.
NOTE 14 - SUBSEQUENT EVENTS
There is no reportable subsequent event.
F-24
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
On April 4, 2011, Leo Motors, Inc. (the "Company") accepted the resignation of
Gruber & Company LLC as the Company's Independent Registered Public Accounting
Firm. Gruber & Company informed the Company on January 25, 2011 that it may not
be able to continue as Auditor because Mr. Gruber, its principal, does not speak
Korean. From then until April 4, 2011, the Company attempted to determine
whether Gruber & Company could continue as the Company's principal auditor under
PCAOB rules and regulations. It was determined on April 4, 2011 that the PCAOB
rules and regulations required Gruber & Company to resign.
On April 7, 2011, the Company engaged Stan Jeong-Ha Lee as its Independent
Registered Public Accounting Firm. Mr. Lee has been engaged to audit our 2010
annual financial statements; and to provide review and auditing services for the
Company going forward. Mr. Lee, who speaks Korean, has assisted with the audit
since the beginning of the audit process, and has assisted with the auditor
review of the 1st, 2nd and 3rd Quarter 2010 quarterly financial statements.
The decision to change accountants was recommended, approved and ratified by the
Company's Board of Directors effective April 7, 2011. Gruber & Company's
reports on the financial statements of the Company for the years ended December
31, 2009 and 2008 did not contain any adverse opinion or disclaimer of opinion
and was not qualified or modified as to uncertainty, audit scope or accounting
principles other than the inclusion of an explanatory paragraph discussing the
Company's ability to continue as a going concern.
During the years ended December 31, 2010, 2009 and 2008, and any subsequent
interim periods through the date of Gruber & Company's resignation, there were
no disagreements between Gruber & Company and the Company on a matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreement, if not resolved to the satisfaction of
Gruber & Company would have caused Gruber & Company to make reference to the
subject matter of the disagreement in connection with its report on the
Company's financial statements.
There have been no reportable events as defined in Item 304(a)(1)(v) of
Regulation S-K during the years ended December 31, 2010, 2009, and 2008, and any
subsequent interim periods through the date the Company was informed of Gruber &
Company's status.
The Company has requested that Gruber & Company respond to any inquiries of any
new auditors hired by the Company relating to their engagement as the Company's
independent accountant. The Company has requested that Gruber & Company review
the Item 4.01 disclosure in this report and has provided Gruber & Company with
an opportunity to provide a letter addressed to the Commission containing any
new information, clarification of the Company's expression of its views, or the
respect in which Gruber & Company does not agree with the statements made by the
Company herein. Gruber & Company provided the letter filed as Exhibit 16.1 to
the Company's Current Report on Form 8-K filed on April 14, 2011.
The Company has not previously consulted with Mr. Lee regarding either (i) the
application of accounting principles to a specific completed or contemplated
transaction; (ii) the type of audit
Page 25
opinion that might be rendered on the Company's financial statements; or (iii) a
reportable event (as provided in Item 304(a)(1)(v) of Regulation S-K) during the
years ended December 31, 2010, 2009, and 2008, and any later interim period,
including the interim period up to and including the date of Gruber & Company's
resignation.
Mr. Lee has reviewed the disclosure required by Item 304 (a) before it was filed
with the Commission and has been provided an opportunity to furnish the Company
with a letter addressed to the Commission containing any new information,
clarification of the Company's expression of its views, or the respects in which
it does not agree with the statements made by the Company in response to Item
304 (a). Mr. Lee did not furnish a letter to the Commission.
ITEM 9A. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures
-----------------------------------------------------
Our management, including our Principal Executive and Principal Financial
Officer, evaluated the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Securities Exchange Act Rules
13a-15(e) and 15d-15(e)) as of December 31, 2010. Our disclosure controls and
procedures are designed to ensure that information required to be disclosed by
the issuer in the reports that it files or submits under the Act (15 U.S.C. 78a
et seq.) is recorded, processed, summarized, and reported, within the time
periods specified in the Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by an issuer in the reports
that it files or submits under the Act is accumulated and communicated to the
issuer's management, including its principal executive and principal financial
officers, or persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure. Based on this evaluation, our
Chief Executive and Principal Financial Officer concluded that our disclosure
controls and procedures were not effective as of December 31, 2010.
(b) Management's Report on Internal Control over Financial Reporting
-----------------------------------------------------------------------
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-a5(f)
under the Exchange Act. Our internal control over financial reporting is
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with U.S. GAAP. Our internal control over financial reporting
includes those policies and procedures that: (i) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of our assets; (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP, and that our receipts and expenditures are
being made only in accordance with authorizations of our management and
directors; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use of disposition of our assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Under the supervision of our Chief Executive Officer, our management assessed
the effectiveness of our internal control over financial reporting as of
December 31, 2010. In making this assessment,
Page 26
management used the criteria set forth in Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on this assessment, our management has concluded that our internal control
over financial reporting was ineffective as of December 31, 2010 and there are
material weaknesses in our internal control over financial reporting. A
material weakness is a deficiency, or a combination of control deficiencies, in
internal control over financial reporting such that there is a reasonable
possibility that a material misstatement of our annual or interim financial
statements will not be prevented or detected on a timely basis.
The material weaknesses relate to the limited number of persons responsible for
the recording and reporting of financial information, the lack of separation of
financial reporting duties, and the limited size of our management team in
general. We are in the process evaluating methods of improving our internal
control over financial reporting, including the possible addition of financial
reporting staff and the increased separation of financial reporting
responsibility, and intend to implement such steps as are necessary and possible
to correct these material weaknesses.
This annual report does not include an attestation report of our registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the SEC that permit us to provide
only management's report in this Annual Report on Form 10-K. Our registered
public accounting firm will not be required to opine on internal controls until
fiscal 2010.
(c) Change in Internal Controls
------------------------------
There were no changes in our internal control over financial reporting during
the quarter ended December 31, 2010, that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
ITEM 9B. OTHER INFORMATION
None.
Page 27
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTOR AND EXECUTIVE OFFICER SUMMARY
The following table sets forth the names, ages, and principal offices and
positions of our current directors, executive officers, and persons we consider
to be significant employees. The Board of Directors elects our executive
officers annually. Our directors serve one-year terms or until their successors
are elected, qualified and accept their positions. The executive officers serve
terms of one year or until their death, resignation or removal by the Board of
Directors. There are no family relationships or understandings between any of
the directors and executive officers. In addition, there was no arrangement or
understanding between any executive officer and any other person pursuant to
which any person was selected as an executive officer.
NAME OF DIRECTOR OR OFFICER AGE POSITION
Jung Yong ("John") Lee 46 Chief Executive Officer, President
and Interim Chief Financial Officer
Young Il Kim 55 Director
EXECUTIVE OFFICER AND DIRECTOR BIOS
Jung Yong (John) Lee, Chief Executive Officer, President and Interim Chief
--------------------------------------------------------------------------------
Financial Officer
------------------
Mr. Lee joined the Company's operating subsidiary as its CEO and President in
June 2006, and joined the Company upon its acquisition on September 3, 2007. In
November 2008 he resigned as CEO and President but remained with the Company as
CTO and Director. Prior to joining the Company, Mr. Lee has held several
positions in EV design and projects. He lead the Research and Development
Department for Geo EV beginning in 2002, and for Pyeonghwa Motors, a Korean car
manufacturer and dealer, beginning in February 2004. His experience includes
heading projects that have incorporated the Polymer Battery, Dual Motor System,
and alternative energy vehicle design. He has also worked on the Ford SUV
Concept Project for 1997's Melbourne Motor show, the City Car Project, and the
Limousine Project.
Mr. Lee received his Masters of Industrial Design (Vehicle Styling) from RMIT
University in Melbourne, Australia, and his PhD in Industrial Design from the
University of New South Wales in Sydney, Australia. He has taught Engineering
Industrial Design at Dankook University in Seoul, South Korea.
Young Il Kim, Director
-------------------------
Dr. Kim joined the Company on October 11, 2009. Dr. Kim began his career in the
auto industry in 1988, at Panther Sports Car as Senior Designer and Manager. He
later served as Chief Designer of commercial vehicles and concept vehicles at
Sang-Yong Motor Company before joining the Hyundai Motor Group in 1995.
From 1995 through 2007, Dr. Kim held various positions of increasing
responsibility under the Hyundai and Kia Motors Group umbrella, including Chief
Designer at Hyundai Precision through March 2005,
Page 28
Chief Designer and Senior Vice President at Hyundai and Kia Marketing Division
from March 2005 to September 2006, and Executive Vice President in the Marketing
Division in charge of Brand and Design Differentiation between Hyundai and Kia
Motors from September 2006 to February 2007. From then until March 2009 he was
CEO and President of Innocean Worldwide, a Marketing and Advertising Company of
the Hyundai and Kia Group.
Dr. Kim, who holds an Industrial Designer of Product Design degree from
Wuppertal University, Germany, and a PhD in Design from Kook-Min University,
Seoul, Korea, has enjoyed a distinguished academic career as well, having
lectured at various colleges and universities on the subjects of design and
marketing since 2000. Dr. Kim was a visiting professor at Gothenburg University,
Sweden during the 2004/05 academic year, and is currently serving as a visiting
professor at Kyung-hee University, where he began in August 2009.
LEGAL AND DISCIPLINARY HISTORY
No officer, director or control person of the Company has been the subject of:
1. A conviction in a criminal proceeding or named as a defendant in a
pending criminal proceeding (excluding traffic violations and other minor
offenses);
2. The entry of an order, judgment, or decree, not subsequently reversed,
suspended or vacated, by a court of competent jurisdiction that permanently or
temporarily enjoined, barred, suspended or otherwise limited such person's
involvement in any type of business, securities, commodities, or banking
activities;
3. A finding or judgment by a court of competent jurisdiction (in a civil
action), the Securities and Exchange Commission, the Commodity Futures Trading
Commission, or a state securities regulator of a violation of federal or state
securities or commodities law, which finding or judgment has not been reversed,
suspended, or vacated; or
4. The entry of an order by a self-regulatory organization that permanently
or temporarily barred, suspended or otherwise limited such person's involvement
in any type of business or securities activities.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires our directors and officers, and persons who own more than ten percent
of the Common Stock to file reports of ownership and changes in ownership with
the Securities and Exchange Commission ("SEC") and the American Stock Exchange.
SEC regulations require reporting persons to furnish us with copies of all
Section 16(a) forms they file.
Based solely on our review of the copies of the Forms 3, 4 and 5 and amendments
thereto furnished to us by the persons required to make such filings during
fiscal 2010 and our own records, we believe that Dr. Kang, Mr. Lee and Mr. Kim
each failed to file timely a Form 3, 4 or 5 during the year ending December 31,
2010.
CORPORATE GOVERNANCE.
We have not adopted a code of ethics do date. We are in the process of
evaluating the standards of conduct necessary for the deterrence of malfeasance
and the promotion of ethical conduct and
Page 29
accountability, and will determine whether a code of ethics is necessary based
on our evaluation.
The Company does not have a standing Nominating Committee. There have been no
changes to the procedures whereby security holders may recommend nominees to the
registrant's board of directors.
The Company is not a "listed issuer" as defined by Rule 10A-3, and does not have
a standing Audit Committee. We do not have a financial expert serving on our
board of directors.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
Objectives and Philosophy of our Executive Compensation Program
----------------------------------------------------------------------
We do not have a standing compensation committee. Our board of directors as a
whole makes the decisions as to employee benefit programs and officer and
employee compensation. The primary objectives of our executive compensation
programs are to:
- attract, retain and motivate skilled and knowledgeable individuals;
- ensure that compensation is aligned with our corporate strategies and
business objectives;
- promote the achievement of key strategic and financial performance
measures by linking short-term and long-term cash and equity incentives to
the achievement of measurable corporate and individual performance goals;
and
- align executives' incentives with the creation of stockholder value.
To achieve these objectives, our board of directors evaluates our executive
compensation program with the objective of setting compensation at levels they
believe will allow us to attract and retain qualified executives. In addition,
a portion of each executive's overall compensation is tied to key strategic,
financial and operational goals set by our board of directors. We also
generally provide a portion of our executive compensation in the form of options
that vest over time, which we believe helps us retain our executives and align
their interests with those of our stockholders by allowing the executives to
participate in our longer term success as reflected in asset growth and stock
price appreciation.
Named Executive Officers
--------------------------
The following table identifies our principal executive officer, our principal
financial officer and our most highly paid executive officers during the last
full fiscal period reported herein, who, for purposes of this Compensation
Disclosure and Analysis only, are referred to herein as the "named executive
officers."
Name Corporate Office
---------------------- ------------------------------
Jung Yong ("John") Lee President, CEO and Interim CFO
Components of our Executive Compensation Program
-----------------------------------------------------
At this time, the primary elements of our executive compensation program are
base salaries and option grant incentive awards, although the board of directors
has the authority to award cash bonuses, benefits and other forms of
compensation as it sees fit.
We do not have any formal or informal policy or target for allocating
compensation between short-term
Page 30
and long-term compensation, between cash and non-cash compensation or among the
different forms of non-cash compensation. Instead, we have determined
subjectively on a case-by-case basis the appropriate level and mix of the
various compensation components. Similarly, we do not rely extensively on
benchmarking against our competitors in making compensation related decisions,
although we may consider industry compensation trends as one of many factors in
our case-by-case determination of proper compensation.
Base salaries
--------------
Base salaries are used to recognize the experience, skills, knowledge and
responsibilities required of our named executive officers. Base salary, and
other components of compensation, may be evaluated by our board of directors for
adjustment based on an assessment of the individual's performance and
compensation trends in our industry.
Equity Awards
--------------
Our stock option award program is the primary vehicle for offering long-term
incentives to our executives. Our equity awards to executives have typically
been made in the form of warrants. We believe that equity grants in the form of
warrants provide our executives with a direct link to our long-term performance,
create an ownership culture, and align the interests of our executives and our
stockholders.
Cash bonuses
-------------
Our board of directors has the discretion to award cash bonuses based on our
financial performance and individual objectives. The corporate financial
performance measures (revenues and profits) will be given the greatest weight in
this bonus analysis. We have not yet granted any cash bonuses to any named
executive officer nor have we yet developed any specific individual objectives
while we wait to attain revenue and profitability levels sufficient to undertake
any such bonuses.
Benefits and other compensation
----------------------------------
Our named executive officers are permitted to participate in such health care,
disability insurance, bonus and other employee benefits plans as may be in
effect with the Company from time to time to the extent the executive is
eligible under the terms of those plans. As of the date of this Registration
Statement, we have not implemented any such employee benefit plans.
CURRENT EXECUTIVE COMPENSATION
Summary Annual Salary
-----------------------
As discussed above, we have agreed to pay the Named Executive Officers an annual
salary. Base salary may be increased from time to time with the approval of the
board of directors. The following table summarizes the agreed annual salary of
each of the named executive officers.
Name Annual Salary
---------------------- --------------
Jung Yong ("John") Lee $ 200,000
Agreed Compensation
--------------------
Jung Yong ("John") Lee, Chief Executive Officer and Interim Chief Financial
Officer - Mr. Lee will earn an annual Salary of $ 200,000 as compensation for
his services as president and CEO.
Page 31
GRANTS OF PLAN-BASED AWARDS TABLE FOR FISCAL YEAR 2010
On January 15, 2010, the Company adopted an employee stock option plan,
designated as the "2010 Employee Stock Option Plan. 10,000,000 options were
issued to our CEO on February 1, 2010 and it was cancelled at Jan 19 2011.
During fiscal 2010, we did not grant any other equity awards under any equity
award plan.
OPTION EXERCISES FOR FISCAL 1009
During fiscal 2010, none of the named executive officers exercised options.
NONQUALIFIED DEFERRED COMPENSATION
We currently offer no defined contribution or other plan that provides for the
deferral of compensation on a basis that is not tax-qualified to any of our
employees, including the named executive officers.
COMPENSATION OF DIRECTORS
We intend to use a combination of cash and equity-based compensation to attract
and retain candidates to serve on our board of directors. We issued 2,000,000
shares of common stock to Shi Chul Kang, 500,000 shares of common stock to Jung
Yong Lee and 500,000 shares of common stock to Young Il Kim as the board of
directors on Jan 1, 2010.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
We do not currently have a standing Compensation Committee. Our entire board of
directors participated in deliberations concerning executive officer
compensation.
COMPENSATION COMMITTEE REPORT
The board of directors has reviewed and discussed the Compensation Discussion
and Analysis required by Item 402(b) of Regulation S-K with management and,
based on such review and discussions, the board of directors has recommended
that this Compensation Discussion and Analysis be included in this Registration
Statement on Form 10.
Page 32
SUMMARY COMPENSATION TABLE
The following table sets forth the total compensation paid to, or accrued by, the Company's
highest paid executive officers during the fiscal years ended December 31, 2010 and December
31, 2009. No restricted stock awards, long-term incentive plan payout or other types of
compensation, other than the compensation identified in the chart below and its accompanying
notes, were paid to these executive officers during that fiscal year.
ANNUAL ANNUAL OTHER COMPEN- LONG TERM
NAMED COMPEN- COMPEN- ANNUAL SATION COMPEN-
EXECUTIVE SATION SATION COMPEN- RESTRICTED SATION LTIP ALL
OFFICER YEAR SALARY ($)(3)BONUS ($) SATION STOCK (#) OPTIONS PAYOUTS OTHER
-------------- ---- ----------- --------- ------- ----------- --------- ------- -----
Robert Kang(2) 2009 336,527 0 0 0 0 0 0
2010 35,714 0 0 0 0 0 0
Jung Yong Lee1 2008 35,714 0 0 0 0 0 0
2009 35,714 0 0 0 0 0 0
<FN>
(1) Jung Yong Lee was the Company's President and CEO from September 19, 2007 to November 18,
2008. And he became President and CEO on March 11, 2011.
(2) Robert Kang was the Company's President and CEO from November 18, 2008 to Mar 14 2011.
(3) Number represents Dec 31 2010 exchange rate between US$ and Korean Won.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END TABLE
The following table sets forth information regarding the outstanding warrants held by our
named officers as of December 31, 2010.
OPTION AWARDS
-------------------------------------------------------------------------------
EQUITY INCENTIVE
PLAN AWARDS:
NUMBER OF NUMBER OF
SECURITIES NUMBER OF SECURITIES
UNDERLYING SECURITIES UNDERLYING UNDERLYING OPTION
UNEXERCISED UNEXERCISED UNEXERCISED EXERCISE OPTION
OPTIONS OPTIONS UNEARNED PRICE EXPIRATION
NAME (#) EXERCISABLE (#) UNEXERCISABLE OPTIONS ($) DATE
------------- --------------- --------------------- ---------------- --------- ----------
Jung Yong Lee 0 0 - - -
Page 33
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows the beneficial ownership of our common stock as of
March 31, 2010. The table shows the amount of shares owned by:
(1) each person known to us who owns beneficially more than five percent of
the outstanding shares of any class of the Company's stock, based on the number
of shares outstanding as of March 31, 2011;
(2) each of the Company's Directors and Executive Officers; and
(3) all of its Directors and Executive Officers as a group.
AMOUNT OF PERCENT OF
SHARES SHARES
IDENTITY OF BENEFICIALLY BENEFICIALLY
PERSON OR GROUP OWNED OWNED(1,2) CLASS
------------------- ------------ ------------- ------
Jung Yong Lee
CEO and Interim CFO 6,500,000 13.40% Common
------------------- ------------ ------------- ------
Young Il Kim
Director 1,800,000 3.7% Common
------------------- ------------ ------------- ------
(1) The percentage of shares owned is based on 48,833,115 shares being
outstanding as of March 31, 2011. If the beneficially owned shares of any
individual or group in the above table include any options, warrants, or other
rights to purchase shares in the Company's stock, such right to purchase shares
(if any) is disclosed by footnote below and the percentage of shares owned
includes such shares as if the right to purchase had been duly exercised.
(2) BENEFICIAL OWNERSHIP OF SECURITIES: Pursuant to Rule 13d-3 under the
Securities Exchange Act of 1934, involving the determination of beneficial
owners of securities, a beneficial owner of securities is person who directly or
indirectly, through any contract, arrangement, understanding, relationship or
otherwise has, or shares, voting power and/or investment power with respect to
the securities, and any person who has the right to acquire beneficial ownership
of the security within sixty days through means including the exercise of any
option, warrant or conversion of a security.
ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
DIRECTOR INDEPENDENCE
The Company is not listed on any national exchange, or quoted on any
inter-dealer quotation service, that imposes independence requirements on any
committee of the Company's directors, such as an audit, nominating or
compensation committee. As all of the Company's directors are employees of the
Company, the Company does not have any independent directors on its Board, as
defined by the New York Stock Exchange.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The following is a summary of the fees paid to Gruber & Company LLC, the
Company's former independent public accounting firm, and Stan Jeong-Ha Lee, the
Company's independent public
Page 34
accountant, during the fiscal years ended December 31, 2009 and 2010.
2009 2010
------- --------
Audit fees $30,000 $30,0001
Audit-related fees - -
Tax fees - -
All other fees - -
TOTAL $30,000 $ 30,000
AUDIT COMMITTEE PRE-APPROVAL OF SERVICES OF PRINCIPAL ACCOUNTANTS
The Company does not have a standing audit committee. The Board as a whole has
the authority and responsibility to select, evaluate, determine the compensation
of, and, where appropriate, replace the independent auditor. After determining
that providing the non-audit services is compatible with maintaining the
auditor's independence, the board pre-approves all audits and permitted
non-audit services to be performed by the independent auditor, except for de
minimus amounts. If it is not practical for the board to meet to approve fees
for permitted non-audit services, the board has authorized its chairman to
approve them and to review such pre-approvals with the Board at its next
meeting.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS AND SCHEDULES.
The following consolidated financial statements of Leo Motors, Inc. and
Subsidiaries are included herein by reference to the pages listed in "Item 8.
Financial Statements and Supplementary Data":
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2010 and 2009
Consolidated Statements of Operations for the years ended December 31,
2010, and 2009
Consolidated Statements of Changes in Shareholders' Interest for the years
ended December 31, 2010 and 2009
Consolidated Statements of Cash Flows for the years ended December 31, 2010
and 2009
Notes to Consolidated Financial Statements
EXHIBITS
The following Exhibits are included herein:
31.1 Certification of the Principal Executive and Principal Financial
Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule
13a-14(a) or Rule 15d-14(a)).
32.1 Certification by the Principal Executive and Principal Financial
Officer of Leo Motors, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (18 U.S.C. 1350).
Page 35
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
LEO MOTORS, INC.
(THE REGISTRANT)
By \s\ Jung Yong Lee
--------------------
Jung Yong Lee
Chief Executive Officer, President and
Interim Chief Financial Officer
Date: April 15, 2011
Page 36