Leatt Corp. Announces 2012 Third Quarter Results

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Nov 14, 2012, 04:30 ET

CAPE TOWN, South Africa, Nov. 14, 2012 /PRNewswire/ -- Leatt Corporation (OTCQB: LEAT) today announced results for its third quarter and nine months ended September 30, 2012. Leatt Corp is a global developer, marketer and distributor of personal protective equipment for all forms of sports, especially extreme motor sports; products include the flagship Leatt-Brace®, a neck brace system designed to help prevent potentially devastating injuries to the cervical spine (neck) for helmeted sports.

"Our protective gear continued to make a larger revenue contribution for the period," commented Sean Macdonald, Leatt Corp's Chief Executive Officer. "But it was a challenging quarter for us as the third quarter of 2011 included stocking orders for a major new original equipment manufacturing (OEM) partner in Europe, and that customer is not expected to re-stock prior to the first quarter of 2013. In addition, during the second quarter of 2012, we terminated a relationship with a previous OEM partner, and although the replacement OEM partner is expected to show improved sales of our products, there was a period of time between the old and the new OEM partner when product sales languished. These changes impacted our year-over-year results, particularly for the Company's flagship Leatt braces developed for OEM customers during the 2012 period. Our bottom line for the third quarter was also impacted by a significant increase in professional fees in connection with litigation and with the implementation of several steps toward our new status as a fully reporting U.S. public company. We expect that there will be an upturn in sales for the fourth quarter, although the year overall is expected to be marginally down. We expect higher year-over-year comparisons in 2013."

For the nine months ended September 30, 2012, revenues were $10.5 million, with a net loss of $552,204, or $0.00 per share, as compared to $11.5 million, with net income of $318,575, or $0.0611 per share, for the first nine months of 2011. For the three months ended September 30, 2012, revenues were $2.7 million, with net loss of $755,584, or $0.00 per share, compared to revenues of $3.6 million, with net income of $147,443, or $0.0283 per share, for the third quarter of 2011.

Leatt's cash and cash equivalents increased to $1.3 million as of September 30, 2012, and its current ratio was strong at 3:1. Cash generated from operating activities during the first nine months of 2012 was $1.0 million. The Company has no long-term debt, and a short-term note for $617,000 reported on the December 31, 2011 balance sheet was paid off.

Mr. Macdonald went on to say, "We are pleased with our increasing cash position which has enabled us to continue development of new products for introduction to the market. We have developed revised versions of our GPX Club and Adventure off-road braces, our new Race and Trail line, to make them more comfortable for the athletes who use them and to stimulate brace sales. These new braces were introduced to the market, along with our new body protection products a few weeks ago and have seen some success in the market place. We expect to introduce new body protection products for mountain bikes and motor sports within the next year."

The Company has had a number of successes during the last three quarters, including the following highlights:

New SFI Approval: On November 1, 2012, the SFI Foundation, Inc. (SFI) notified the Company that its new MRX neck brace for automobile racing had been certified in the SFI's 38.1 Head and Neck Restraint System Program through October 2014. SFI is a non-profit organization established to issue and administer standards for specialty/performance automotive and racing equipment, and SFI testing is compulsory for neck protection used in automotive racing in the United States.
Jörn Steffens: Leatt welcomed the addition of Jörn Steffens to its research and development team as a product development and design consultant. Mr. Steffens brings over 20 years of knowledge and experience of the research and development processes in the motorcycle clothing and accessories industries and functional clothing in general, as well as of global design, sourcing and production management. Prior to joining Leatt, Mr. Steffens was a part of the management team at the MAT Group, where he served two years as the Business Unit Manager for its Apparel and Body Protection department, and three years as its Business Development Manager, and prior to that Mr. Steffens served as Manager of Leidel & Kracht Schaumstoff-Technik GmbH's Body Protection Division.
Patent Victory: On October 10, 2012, the Opposition Division of the European Patent Office upheld the validity of the Company's licensed European patent for its neck brace and rejected Alpinestars S.P.A.'s challenge of its validity.
London Summer Games: A number of the competitors in both men's and women's BMX events in the London Summer Games wore custom Leatt Braces, including 4 of the 8 finalists in the women's event.
SEC Reporting: Leatt became an SEC reporting Company at the end of the second 2012 quarter and timely filed its first periodic report (a Form 10-Q) with the SEC on August 13, 2012. The Company's change in status also resulted in an upgrade of the Company's stock quotation to the QB tier of the OTC Market.

Business Outlook

Leatt anticipates that the market demand for its products, especially its new protective products, will increase through the next twelve months, despite the volatile macro-economic environment.

"While we expect continued fluctuations in orders for products developed for OEM customers, we plan to continue marketing our flagship Leatt Brace and our new protective products globally, and to seek ways to expand the range of sports in which our safety and protective products may be utilized," continued Mr. Macdonald. "We expect to introduce our new SFI certified automobile brace to markets, which we expect will generate better results for the Company in the coming year. SFI testing is compulsory for neck protection used in automotive racing in the United States and we believe that SFI certification was a significant milestone in the introduction of our products into the U.S. automobile racing market."

Conference Call / Webcast

Thursday, November 15 at 11:00 am ET (8 a.m. Pacific) a conference call will be held to review the LEAT third quarter 2012 results. Interested parties should call 877-317-6789 (domestic) or +1-412-317-6789 (international), to access the call.

You may also access this call via the Internet by visiting the company's website at www.leatt-corp.com and clicking on the webcast link. Access to the webcast will be available for 30 days.

For those who are unavailable to listen to the live broadcast, a replay will be available for one week and can be accessed by dialing 877-344-7529 (domestic) and 412-317-0088 (international) and using conference number 10021282.

About Leatt Corporation

Leatt Corporation develops, distributes and markets personal protective equipment and ancillary products for all forms of sports, especially extreme motor sports. The Leatt-Brace® is an award-winning neck brace system considered the gold standard for neck protection for anyone wearing a crash helmet as a form of protection. It was designed for participants in extreme sports or riding motorcycles, bicycles, mountain bicycles, all-terrain vehicles, snowmobiles and other vehicles. For more information, visit: www.leatt-corp.com | www.leatt.com

Forward-looking Statements

This press release may contain forward-looking statements regarding Leatt Corporation (the "Company") within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact included herein are "forward-looking statements" including statements regarding: the financial outlook of the Company; the significance of SFI certification of the Company's new MRX products; the ability of the Company to continue successful marketing of the Leatt Brace and its new protective products globally as well as expand the range of sports in which its products are used; the general ability of the Company to achieve its commercial objectives, including the Company's plan to develop and introduce its new MRX and body armor products and in turn generate better results in the 2012 fourth quarter or in the coming year; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects," "anticipates," "seeks," "should," "could," "intends," or "projects" or similar expressions, involve known and unknown risks and uncertainties. These statements are based upon the Company's current expectations and speak only as of the date hereof. Any indication of the merits of a claim does not necessarily mean the claim will prevail at trial or otherwise. Financial performance in one period does not necessarily mean continued or better performance in the future. The Company's actual results in any endeavor may differ materially and adversely from those expressed in any forward-looking statements as a result of various factors and uncertainties, which factors or uncertainties may be beyond our ability to foresee or control. Other risk factors include the status of the Company's common stock as a "penny stock" and those listed in other reports posted on The OTC Markets Group, Inc.

Contacts:

Leatt Corporation
Sean Macdonald
Chief Executive Officer
[email protected]
+ (27) 21 557 7257

Allen & Caron, Inc.
Rudy Barrio (Investors)
[email protected]
(212) 691-8087

Len Hall (Media)
[email protected]
(949) 474-4300

- Financial Tables Follow -

LEATT CORPORATION CONSOLIDATED BALANCE SHEETS

ASSETS

		September 30		December 31
		2012		2011
		Unaudited		Audited

Current Assets
Cash and cash equivalents	$	1,340,354	$	1,084,806
Short-term investments		310,951		310,329
Accounts receivable		1,835,630		2,993,681
Inventory		4,445,773		3,679,223
Payments in advance		130,759		179,653
Income tax refunds receivable		1,991		-
Deferred tax asset		47,000		47,000
Prepaid expenses and other current assets		43,524		825,817
Total current assets		8,155,982		9,120,509

Property and equipment, net		1,227,808		1,372,521

Other Assets
Deposits		44,647		33,509
Intangible assets		113,608		116,230
Total other assets		158,255		149,739

Total Assets	$	9,542,045	$	10,642,769

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Accounts payable and accrued expenses	$	2,381,416	$	2,171,456
Customer deposits		-		265
Income taxes payable		-		148,000
Short term loan, net of finance charges		-		617,010
Total current liabilities		2,381,416		2,936,731

Deferred tax liabilities		99,839		100,000

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, 5,200,623 shares issued and outstanding		130,008		130,008
Additional paid - in capital		7,297,190		7,286,865
Accumulated other comprehensive income		196,249		199,618
Accumulated deficit		(565,657)		(13,453)
Total stockholders' equity		7,060,790		7,606,038

Total Liabilities and Stockholders' Equity	$	9,542,045	$	10,642,769

LEATT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

		Three Months Ended				Nine Months Ended
		September 30				September 30
		2012		2011		2012		2011
		Unaudited		Unaudited		Unaudited		Unaudited

Revenues	$	2,689,157	$	3,582,144	$	10,481,585	$	11,490,294

Cost of Revenues		1,317,056		1,499,775		4,715,416		4,518,438

Gross Profit		1,372,101		2,082,369		5,766,169		6,971,856

Operating Expenses
Salaries and wages		547,144		526,019		1,613,684		1,576,776
Commissions and consulting expenses		122,987		101,420		371,057		399,499
Professional fees		310,696		99,974		864,448		533,635
Advertising and marketing		429,421		192,349		968,501		963,244
Office rent and expenses		66,015		65,482		206,348		188,958
Research and development costs		255,982		340,275		777,437		952,815
Bad debts		-		-		-		2,043
General and administrative expenses		528,407		561,980		1,574,650		1,597,273
Depreciation		102,496		119,539		318,390		284,173
Total operating expenses		2,363,148		2,007,038		6,694,515		6,498,416

Income (Loss) from Operations		(991,047)		75,331		(928,346)		473,440

Other Income
Interest and other income, net		130,463		72,112		377,102		96,735
Total other income		130,463		72,112		377,102		96,735

Income (Loss) Before Income Taxes		(860,584)		147,443		(551,244)		570,175

Income Taxes		(105,000)		-		960		251,600

Net Income (Loss) Available to Common Shareholders	$	(755,584)	$	147,443	$	(552,204)	$	318,575

Net Income (Loss) per Common Share
Basic	$	0.000	$	0.0283	$	0.000	$	0.0611
Diluted	$	0.000	$	0.0283	$	0.000	$	0.0611

Weighted Average Number of Common Shares Outstanding
Basic		5,200,623		5,200,312		5,200,623		5,210,816
Diluted		5,200,623		5,200,312		5,200,623		5,210,816

Comprehensive Income (Loss)
Net Income (Loss)	$	(755,584)	$	147,443	$	(552,204)	$	318,575
Other Comprehensive Income, net of $-0- deferred income taxes
Foreign currency translation		5,293		(282,987)		(3,369)		(299,905)

Total Comprehensive Income (Loss)	$	(750,291)	$	(135,544)	$	(555,573)	$	18,670

LEATT CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

										Accumulated
										Other
	Preferred Stock A			Common Stock				Additional		Comprehensive		(Accumulated
	Shares		Amount	Shares		Amount		Paid - In Capital		Loss		Deficit)		Total
Balance, January 1, 2012 - as previously reported	3,000,000	$	3,000	130,007,807	$	130,008	$	7,286,865	$	199,618	$	(13,453)	$	7,606,038
Reverse Stock Split	(2,880,000)		-	(124,807,184)		-		-		-		-		-
Balance, January 1, 2012 - as adjusted	120,000	$	3,000	5,200,623	$	130,008	$	7286,865	$	199,618	$	(13,453)	$	7,606,038
Compensation cost recognized in connection with stock options	-		-	-		-		10,325		-		-		10,325
Net loss	-		-	-		-		-		-		(552,204)		(552,204)
Foreign currency translation adjustment	-		-	-		-		-		(3,369)		-		(3,369)
Balance, September 30, 2012	120,000	$	3,000	5,200,623	$	130,008	$	7,297,190	$	196,249	$	(565,657)	$	7,060,790

LEATT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

		2012		2011

Cash flows from operating activities
Net income (loss)	$	(552,204)	$	318,575
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation		318,390		284,173
Deferred income taxes		(161)		(1,412)
Stock-based compensation		10,325		-
Bad debts		-		5,443
Gain on disposal of property and equipment		(7,851)		-
(Increase) decrease in:
Accounts receivable		1,158,051		371,036
Inventory		(766,550)		(2,001,380)
Payments in advance		48,894		(46,318)
Prepaid expenses and other current assets		782,293		595,690
Income tax refunds receivable		(1,991)		40,300
Deposits		(11,138)		(1,164)
Increase (decrease) in:
Accounts payable and accrued expenses		209,960		947,620
Income taxes payable		(148,000)		299,425
Customer deposits		(265)		(59,281)
Net cash provided by operating activities		1,039,753		752,707

Cash flows from investing activities
Capital expenditures		(94,201)		(447,341)
Proceeds from sale of property and equipment		7,851		-
Increase in short-term investments, net		(622)		(783)
Net cash used in investing activities		(86,972)		(448,124)

Cash flows from financing activities
Repurchase of common stock		-		(81,417)
Repayments of short-term loan, net		(617,010)		(631,430)
Net cash used in financing activities		(617,010)		(712,847)

Effect of exchange rates on cash and cash equivalents		(80,223)		(121,452)

Net increase (decrease) in cash and cash equivalents		255,548		(529,716)

Cash and cash equivalents - beginning of period		1,084,806		1,235,107

Cash and cash equivalents - end of period	$	1,340,354	$	705,391

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest	$	122	$	430
Cash paid for income taxes	$	960	$	800

Other noncash investing and financing activities Common stock issued for services	$	10,325	$	-