10-K 1 form10k.htm FORM 10-K Leatt Corp.: Form 10-K - Filed by newsfilecorp.com
false0001456189FY 0001456189 2023-01-01 2023-12-31 0001456189us-gaap:RetainedEarningsMember 2021-12-31 0001456189us-gaap:AdditionalPaidInCapitalMember 2021-12-31 0001456189us-gaap:CommonStockMember 2021-12-31 0001456189us-gaap:PreferredStockMember 2021-12-31 0001456189us-gaap:AdditionalPaidInCapitalMember 2022-01-01 2022-12-31 0001456189us-gaap:CommonStockMember 2022-01-01 2022-12-31 0001456189us-gaap:RetainedEarningsMember 2022-01-01 2022-12-31 0001456189us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-01-01 2022-12-31 0001456189us-gaap:RetainedEarningsMember 2023-01-01 2023-12-31 0001456189us-gaap:RetainedEarningsMember 2022-12-31 0001456189us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-12-31 0001456189us-gaap:AdditionalPaidInCapitalMember 2022-12-31 0001456189us-gaap:CommonStockMember 2022-12-31 0001456189us-gaap:PreferredStockMember 2022-12-31 0001456189us-gaap:CommonStockMember 2023-01-01 2023-12-31 0001456189us-gaap:AdditionalPaidInCapitalMember 2023-01-01 2023-12-31 0001456189us-gaap:RetainedEarningsMember 2023-12-31 0001456189us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-12-31 0001456189us-gaap:AdditionalPaidInCapitalMember 2023-12-31 0001456189us-gaap:CommonStockMember 2023-12-31 0001456189us-gaap:PreferredStockMember 2023-12-31 0001456189us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-01-01 2023-12-31 0001456189us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-12-31 0001456189 2021-12-31 0001456189 2022-01-01 2022-12-31 0001456189 2022-12-31 0001456189 2023-12-31 0001456189country:USus-gaap:PensionPlansDefinedBenefitMember 2023-01-01 2023-12-31 0001456189country:USus-gaap:PensionPlansDefinedBenefitMember 2022-01-01 2022-12-31 0001456189country:ZAsrt:MinimumMemberleat:ProvidentFundMember 2023-01-01 2023-12-31 0001456189country:ZAleat:ProvidentFundMember 2023-01-01 2023-12-31 0001456189country:ZAleat:ProvidentFundMember 2022-01-01 2022-12-31 0001456189leat:SalesOfLeattbraceProductsMember 2023-01-01 2023-12-31 0001456189leat:SalesOfLeattbraceProductsMember 2022-01-01 2022-12-31 0001456189leat:SalesOfLeattbraceProductsMember 2022-12-31 0001456189leat:InnovateMember 2023-01-01 2023-06-30 0001456189leat:InnovateMember 2023-01-01 2023-12-31 0001456189leat:InnovateMember 2022-01-01 2022-12-31 0001456189leat:InnovateMember 2023-07-01 2023-12-31 0001456189leat:SalesOfLeattbraceProductsMember 2023-12-31 0001456189leat:ConsumerAndAthleteDirectRevenuesMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember 2022-01-01 2022-12-31 0001456189leat:ConsumerAndAthleteDirectRevenuesMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember 2023-01-01 2023-12-31 0001456189leat:DealerDirectRevenuesMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember 2022-01-01 2022-12-31 0001456189leat:DealerDirectRevenuesMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember 2023-01-01 2023-12-31 0001456189leat:InternationalDistributorRevenuesMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember 2022-01-01 2022-12-31 0001456189leat:InternationalDistributorRevenuesMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember 2023-01-01 2023-12-31 0001456189us-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember 2022-01-01 2022-12-31 0001456189us-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember 2023-01-01 2023-12-31 0001456189srt:MinimumMemberus-gaap:ComputerEquipmentMember 2023-12-31 0001456189srt:MaximumMemberus-gaap:ComputerEquipmentMember 2023-12-31 0001456189srt:MinimumMemberus-gaap:ToolsDiesAndMoldsMember 2023-12-31 0001456189srt:MaximumMemberus-gaap:ToolsDiesAndMoldsMember 2023-12-31 0001456189srt:MinimumMemberus-gaap:OfficeEquipmentMember 2023-12-31 0001456189srt:MaximumMemberus-gaap:OfficeEquipmentMember 2023-12-31 0001456189srt:MinimumMemberus-gaap:VehiclesMember 2023-12-31 0001456189srt:MaximumMemberus-gaap:VehiclesMember 2023-12-31 0001456189leat:PreviousUSShorttermLoanMember 2023-12-31 0001456189leat:CurrentUSShorttermLoanMember 2023-12-31 0001456189leat:PreviousSouthAfricanShorttermLoanMember 2023-12-31 0001456189leat:CurrentSouthAfricanShorttermLoanMember 2023-12-31 0001456189leat:OneCustomerUSRevenueMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember 2023-01-01 2023-12-31 0001456189leat:OneCustomerUSRevenueMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember 2022-01-01 2022-12-31 0001456189leat:OneCustomerAccountsReceivableMemberus-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMember 2023-12-31 0001456189leat:OneCustomerAccountsReceivableMemberus-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMember 2023-01-01 2023-12-31 0001456189leat:OneCustomerAccountsReceivableMemberus-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMember 2022-12-31 0001456189leat:OneCustomerAccountsReceivableMemberus-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMember 2022-01-01 2022-12-31 0001456189leat:OneCustomerInternationalRevenueMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember 2023-01-01 2023-12-31 0001456189leat:OneCustomerInternationalRevenueMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember 2022-01-01 2022-12-31 0001456189leat:OneCustomerInternationalAccountsReceivableMemberus-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMember 2023-12-31 0001456189leat:OneCustomerInternationalAccountsReceivableMemberus-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMember 2022-12-31 0001456189leat:OneCustomerInternationalAccountsReceivableMemberus-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMember 2023-01-01 2023-12-31 0001456189leat:OneCustomerInternationalAccountsReceivableMemberus-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMember 2022-01-01 2022-12-31 0001456189leat:InternationalRevenueMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember 2023-01-01 2023-12-31 0001456189leat:InternationalRevenueMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember 2022-01-01 2022-12-31 0001456189srt:MaximumMember 2023-12-31 0001456189srt:MinimumMemberus-gaap:LeaseholdImprovementsMember 2023-12-31 0001456189srt:MaximumMemberus-gaap:LeaseholdImprovementsMember 2023-12-31 0001456189us-gaap:BuildingMember 2023-12-31 0001456189 2023-06-30 0001456189 2024-03-07 0001456189us-gaap:LandMember 2022-12-31 0001456189us-gaap:LandMember 2023-12-31 0001456189us-gaap:ToolsDiesAndMoldsMember 2022-12-31 0001456189us-gaap:ToolsDiesAndMoldsMember 2023-12-31 0001456189us-gaap:ComputerEquipmentMember 2022-12-31 0001456189us-gaap:ComputerEquipmentMember 2023-12-31 0001456189us-gaap:OfficeEquipmentMember 2022-12-31 0001456189us-gaap:OfficeEquipmentMember 2023-12-31 0001456189us-gaap:VehiclesMember 2022-12-31 0001456189us-gaap:VehiclesMember 2023-12-31 0001456189us-gaap:LeaseholdImprovementsMember 2022-12-31 0001456189us-gaap:LeaseholdImprovementsMember 2023-12-31 0001456189us-gaap:BuildingMember 2022-12-31 0001456189leat:LeaseAgreementToLeaseWarehouseAndOfficeSpaceInRenoNevadaMember 2020-12-01 2020-12-14 0001456189leat:LeaseAgreementToLeaseWarehouseAndOfficeSpaceInRenoNevadaMember 2020-12-14 0001456189leat:LeaseAgreementToLeaseWarehouseAndOfficeSpaceInRenoNevadaMember 2021-08-02 0001456189leat:NonCancelableOperatingLeaseAgreementForWarehousingSpaceInSouthAfricaMember 2022-05-01 2022-05-24 0001456189leat:NonCancelableOperatingLeaseAgreementForWarehousingSpaceInSouthAfricaMember 2022-05-24 0001456189leat:NonCancelableOperatingLeaseAgreementForWarehousingSpaceInSouthAfricaMember 2022-04-01 0001456189leat:NonCancelableOperatingLeaseAgreementForWarehousingSpaceInSouthAfricaMember 2022-02-01 2022-02-24 0001456189leat:NonCancelableOperatingLeaseAgreementForWarehousingSpaceInSouthAfricaMember 2022-02-24 0001456189leat:NonCancelableOperatingLeaseAgreementForWarehousingSpaceInSouthAfricaMember 2023-05-01 2023-05-25 0001456189leat:NonCancelableOperatingLeaseAgreementForWarehousingSpaceInSouthAfricaMember 2023-05-25 0001456189leat:NonCancelableOperatingLeaseAgreementForWarehousingSpaceInSouthAfricaMember 2023-07-01 0001456189leat:NonCancelableOperatingLeaseAgreementForWarehousingSpaceInSouthAfricaMember 2023-05-01 2023-05-23 0001456189leat:NonCancelableOperatingLeaseAgreementForWarehousingSpaceInSouthAfricaMember 2023-05-23 0001456189leat:NonCancelableOperatingLeaseAgreementForWarehousingSpaceInSouthAfricaMember 2023-01-01 2023-12-31 0001456189leat:TwoZeroOneOneEquityIncentivePlanMember 2013-06-30 0001456189leat:TwoZeroOneOneEquityIncentivePlanMember 2015-12-31 0001456189leat:TwoZeroOneOneEquityIncentivePlanMember 2018-12-31 0001456189 2021-01-01 2021-12-31 0001456189leat:TwoZeroOneOneEquityIncentivePlanMember 2020-12-31 0001456189leat:OptionsGrantedFebruaryTwoZeroOneNineMember 2019-02-01 2019-02-28 0001456189leat:OptionsGrantedFebruaryTwoZeroOneNineMember 2020-02-01 2020-02-25 0001456189leat:OptionsGrantedFebruaryTwoZeroOneNineMember 2022-02-01 2022-02-25 0001456189leat:OptionsGrantedFebruaryTwoZeroOneNineMember 2020-01-01 2020-12-31 0001456189leat:TwoZeroOneOneEquityIncentivePlanMemberleat:KeyEmployeesAndOutsideDirectorMemberus-gaap:RestrictedStockMember 2020-12-01 2020-12-29 0001456189leat:TwoZeroOneOneEquityIncentivePlanMemberleat:KeyEmployeesAndOutsideDirectorMemberus-gaap:RestrictedStockMember 2022-12-01 2022-12-29 0001456189leat:TwoZeroOneOneEquityIncentivePlanMember 2013-05-31 0001456189leat:TwoZeroOneOneEquityIncentivePlanIndividualParticipantMember 2023-12-31 0001456189leat:OptionsGrantedFebruaryTwoZeroOneNineMember 2021-02-01 2021-02-25 0001456189leat:TwoZeroOneOneEquityIncentivePlanMemberleat:KeyEmployeesAndOutsideDirectorMemberus-gaap:RestrictedStockMember 2021-12-01 2021-12-29 0001456189leat:TwoZeroOneOneEquityIncentivePlanMemberleat:KeyEmployeesAndOutsideDirectorMemberus-gaap:RestrictedStockMember 2022-12-01 2022-12-22 0001456189us-gaap:RestrictedStockMember 2023-01-01 2023-12-31 0001456189us-gaap:RestrictedStockMember 2022-01-01 2022-12-31 0001456189us-gaap:RestrictedStockMember 2023-12-31 0001456189leat:EmployeeMember 2022-01-01 2022-01-31 0001456189leat:EmployeeMember 2022-03-01 2022-03-31 0001456189leat:EmployeeMember 2022-05-01 2022-05-31 0001456189leat:EmployeeMember 2023-01-01 2023-12-31 0001456189leat:TwoZeroOneOneEquityIncentivePlanMemberleat:KeyEmployeesAndOutsideDirectorMemberus-gaap:RestrictedStockMember 2021-12-01 2021-12-22 0001456189leat:TwoZeroOneOneEquityIncentivePlanMemberleat:KeyEmployeesAndOutsideDirectorMemberus-gaap:RestrictedStockMember 2022-06-01 2022-06-30 0001456189leat:TwoZeroOneOneEquityIncentivePlanMemberleat:KeyEmployeesAndOutsideDirectorMemberus-gaap:RestrictedStockMember 2022-09-01 2022-09-30 0001456189leat:TwoZeroOneOneEquityIncentivePlanMemberleat:KeyEmployeesAndOutsideDirectorMemberus-gaap:RestrictedStockMember 2021-12-01 2021-12-31 0001456189leat:TwoZeroOneOneEquityIncentivePlanMemberleat:KeyEmployeesAndOutsideDirectorMemberus-gaap:RestrictedStockMember 2022-03-01 2022-03-31 0001456189leat:TwoZeroOneOneEquityIncentivePlanMemberleat:KeyEmployeesAndOutsideDirectorMemberus-gaap:RestrictedStockMember 2022-12-01 2022-12-30 0001456189leat:TwoZeroOneOneEquityIncentivePlanMemberleat:KeyEmployeesAndOutsideDirectorMemberus-gaap:RestrictedStockMember 2023-12-01 2023-12-21 0001456189leat:TwoZeroOneOneEquityIncentivePlanMember 2023-05-31 0001456189leat:TwoZeroOneOneEquityIncentivePlanMemberleat:KeyEmployeesAndOutsideDirectorMemberus-gaap:RestrictedStockMember 2023-12-01 2023-12-22 0001456189leat:TwoZeroOneOneEquityIncentivePlanMemberleat:KeyEmployeesAndOutsideDirectorMemberus-gaap:RestrictedStockMember 2023-01-01 2023-12-31 0001456189us-gaap:RestrictedStockMember 2022-12-31 0001456189srt:MinimumMember 2021-12-31 0001456189srt:MaximumMember 2021-12-31 0001456189srt:MinimumMember 2022-12-31 0001456189srt:MaximumMember 2022-12-31 0001456189srt:MinimumMember 2023-12-31 0001456189 2023-01-20 0001456189us-gaap:NotesPayableToBanksMember 2021-12-17 0001456189us-gaap:NotesPayableToBanksMember 2023-01-01 2023-12-31 0001456189us-gaap:NotesPayableToBanksMember 2023-12-31 0001456189leat:NotesPayableToBanks1Member 2022-12-01 0001456189leat:NotesPayableToBanks1Member 2023-01-01 2023-12-31 0001456189leat:NotesPayableToBanks1Member 2023-12-31 0001456189us-gaap:NotesPayableToBanksMember 2022-12-31 0001456189leat:NotesPayableToBanks1Member 2022-12-31 0001456189us-gaap:LineOfCreditMember 2018-11-19 0001456189us-gaap:LineOfCreditMember 2018-11-01 2018-11-19 0001456189us-gaap:LineOfCreditMember 2023-12-31 0001456189us-gaap:LineOfCreditMember 2020-10-01 2020-10-27 0001456189us-gaap:LineOfCreditMember 2022-12-31 0001456189us-gaap:SubsequentEventMember 2022-02-28 iso4217:USD iso4217:USDxbrli:shares xbrli:pure xbrli:shares

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2023

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

For the transition period from _____________ to _____________

Commission File No.000-54693

LEATT CORPORATION
(Exact name of registrant as specified in its charter)

Nevada

20-2819367

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

12 Kiepersol Drive, Atlas Gardens
Contermanskloof Road,
Durbanville, Western Cape
South Africa, 7550
(Address of Principal Executive Offices; Zip Code)

+(27) 21-557-7257
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class trading   Name of each exchange on which
registered
  Symbol(s)
--   --    

Securities registered pursuant to Section 12(g) of the Exchange Act:

Common Stock


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [  ] No [X]

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 [  ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X] No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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. [X]

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

Large accelerated filer [_]

Accelerated filer [_]

Non-accelerated filer [_]

Smaller reporting company [X]

 

 

 

 

Emerging growth company [X]

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial standards provided pursuant to Section 13(a) of the Exchange Act. [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [_] No [X]

As of June 30, 2023 (the last business day of the registrant's most recently completed second fiscal quarter), the aggregate market value of the shares of the registrant's common stock held by non-affiliates was approximately $35,848,257. Shares of the registrant's common stock held by each executive officer and director and by each person who owns 10% or more of the outstanding common stock have been excluded from the calculation, in that such persons may be deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

Common Stock, $0.001 par value per share: 6,215,440 outstanding as of March 7, 2024.

DOCUMENTS INCORPORATED BY REFERENCE

None.


 

Annual Report on Form 10-K
For the Year Ended December 31, 2023

TABLE OF CONTENTS

 PART I 
   
Item 1.Business5
Item 1A.Risk Factors22
Item 1B.Unresolved Staff Comments32
Item IC.Cybersecurity33
Item 2.Properties34
Item 3.Legal Proceedings35
Item 4.Mine Safety Disclosures35
   
 PART II 
   
Item 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities35
Item 6.Selected Financial Data37
Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations37
Item 7A.Quantitative and Qualitative Disclosures About Market Risk49
Item 8.Financial Statements and Supplementary Data

49

Item 9.Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.

49

Item 9A.Controls and Procedures

49

Item 9B.Other Information50
   
 PART III 
   
Item 10.Directors, Executive Officers and Corporate Governance51
Item 11.Executive Compensation

54

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters61
Item 13.Certain Relationships and Related Transactions, and Director Independence62
Item 14.Principal Accounting Fees and Services64
   
 PART IV 
   
Item 15.Exhibits, Financial Statement Schedules65
 

Special Note Regarding Forward Looking Statements

This report contains forward-looking statements that are contained principally in the sections entitled "Our Business," "Risk Factors," and "Management's Discussion and Analysis of Financial Condition and Results of Operations." These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, the factors described in the section captioned "Risk Factors" in this report. In some cases, you can identify forward-looking statements by terms such as "anticipates," "believes," "could," "estimates," "expects," "intends," "may," "plans," "potential," "predicts," "projects," "should," "would" and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. These forward-looking statements include, among other things, statements relating to:

 our expectations regarding growth in the motor sports and bicycle market;

 our expectation regarding increasing demand for protective equipment used in the motor sports and bicycle market;

 our belief that we will be able to effectively compete with our competitors and increase our market share;

 our expectations with respect to increased revenue growth and our ability to achieve profitability resulting from increases in our production volumes; and

 our future business development, results of operations and financial condition.

Also, forward-looking statements represent our estimates and assumptions only as of the date of this annual report. You should read this annual report and the documents that we reference and filed as exhibits to the annual report completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.

Use of Certain Defined Terms

Except as otherwise indicated by the context, references in this annual report to:

 "Leatt," "we," "us," "our," the "Registrant" or the "Company" are to the combined business of Leatt Corporation, a Nevada corporation, its South African branch, Leatt SA, and its direct, wholly-owned subsidiary, Two Eleven;

 "Leatt Prop" refers to Leatt Prop (Pty) Ltd, a South African Company incorporated under the laws of South Africa with registration number: 2022/523867/07;

 "Leatt SA" are to the Company's branch office known as 'Leatt Corporation (Incorporated in the State of Nevada)' incorporated under the laws of South Africa with registration number: 2007/032780/10;

 "Leatt USA" are to Leatt USA, LLC, a Nevada Limited Liability Company;

 "PRC", and "China" are to the People's Republic of China;

 "Two Eleven" refers to Two Eleven Distribution, LLC, a Nevada Limited Liability Company;

 "Securities Act" are to the Securities Act of 1933, as amended, and to "Exchange Act" are to Securities Exchange Act of 1934, as amended;

 "South Africa" are to the Republic of South Africa.

4


 "U.S. dollar," "$" and "US$" are to the legal currency of the United States.

 "Xceed Holdings" refers to Xceed Holdings CC., a close corporation incorporated under the laws of South Africa, and wholly owned by The Leatt Family Trust, of which Dr. Christopher J. Leatt, the Company's chairman, is a Trustee and Beneficiary; and

 "ZAR" refers to the South African Rand, the legal currency of South Africa. For all ZAR amounts reported, the dollar amount has been calculated on the basis that $1 = ZAR18.2818 for its December 31, 2023 balance sheet.

PART I

ITEM 1. BUSINESS

Business Overview

Leatt designs, develops, markets and distributes personal protective equipment for participants in all forms of motor sports and leisure activities, including riders of motorcycles, bicycles, snowmobiles and ATVs. The Company sells its products to customers worldwide through a global network of distributors, retailers, and direct to end consumers through digital channels. Leatt also acts as the original equipment manufacturer for personal protective equipment sold by other international brands.

The Company's flagship products are based on the Leatt-Brace® system, a patented injection molded neck protection system owned by Xceed Holdings, designed to prevent potentially devastating injuries to the cervical spine and neck. The Company has the exclusive global manufacturing, distribution, sale and use rights to the Leatt-Brace®, pursuant to a license agreement between the Company and Xceed Holdings, a company owned and controlled by the Company's Chairman and founder, Dr. Christopher Leatt. The Company also has the right to use apparatus embodying, employing, and containing the Leatt-Brace® technology and has designed, developed, marketed and distributed other personal protective equipment using this technology, as well as its own developed technology, including the Company's body protection products, and helmets which it markets under the Leatt® brand.

The Company's research and development efforts are conducted at its research facilities, located at its executive headquarters in Cape Town, South Africa. The Company employs 4 full-time employees who are dedicated exclusively to research, development, and testing. The Company also utilizes consultants, academic institutions and engineering companies as independent contractors or consultants, from time to time, to assist it with its research and development efforts. Leatt products have been tested and reviewed internally and by external bodies. All Leatt products are compliant with applicable European Union directives, or CE certified, where appropriate. Depending on the market we have other certifications outside of CE. Specifically, all our motorcycle helmets comply with Economic Commission for Europe (ECE) UN Regulation No. 22 r06, and our bicycle helmets complies with the European Committee for Standardization (CEN) EN-1078 standard. For the US market, our motorcycle helmets comply with the US Department of Transportation (DOT) FMVSS 218 helmet safety standard and our bicycle helmets complies with the US Consumer Product Safety Commission (CPSC) 1203 standard for helmet safety. Our downhill specific bicycle helmets also comply with the American Society for Testing and Materials (ASTM) F1952 standard for downhill racing safety. For the Australian market, our bicycle helmet complies with Australian/New Zealand Standard (AS/NZS) 2063, for the UK market, substantially all of our motorcycle helmets comply with the Auto Cycle Union (ACU) gold standard, for the Japanese market, our Moto 3.5 helmet with the Japanese Standard Association (JSA) JIS T 8133 standard for protective helmets, and for the Brazilian market our Moto 7.5, Moto 3.5, and Moto 2.5 helmets comply with The Brazilian Association of Technical Standards (ABNT) NBR 7471 safety standard. Our Enduro 4.0 helmet and All-Mountain 4.0 helmet have acquired NTA8776 certification in compliance with new e-bike helmet certification required in the Dutch Technical Agreement (NTA) 8776.

Our products are predominately manufactured in China in accordance with our manufacturing specifications, pursuant to outsourced manufacturing arrangements with third-party manufacturers located there, based on agreed terms. We continue building manufacturing capacity outside China, namely, in Thailand and Bangladesh. The Company utilizes outside consultants and its own employees to ensure the quality of its products through regular on-site product inspections. Products sold to our international customers are usually shipped directly from our consolidation warehouse or manufacturers' warehouses to customers or their import agents.

5


Leatt earns revenues through the sale of its products through approximately 49 distributors worldwide, who in turn sell its products to retailers. Leatt distributors are required to follow certain standard business terms and guidelines for the sale and distribution of Leatt products. Two Eleven and Leatt SA directly distribute Leatt products to dealers and direct to end consumers through digital channels in the United States and South Africa, respectively.

Our Corporate History and Structure

We were incorporated in the State of Nevada on March 11, 2005, under the name Treadzone, Inc. Until March 2006, we were a shell company with little or no operations. Effective as of March 1, 2006, we acquired the exclusive global manufacturing, distribution, sale and use rights to the Leatt-Brace®, pursuant to a license agreement between the Company and Xceed Holdings, a company owned and controlled by the Company's Chairman and founder, Dr. Christopher Leatt. On May 25, 2005, we changed our name to Leatt Corporation in connection with our anticipated acquisition of the Leatt-Brace® rights.

Leatt South Africa

The Company conducts business in South Africa as a foreign registered branch known as 'Leatt Corporation (Incorporated in the State of Nevada)' registered under the laws of South Africa with registration number: 2007/032780/10. Based in Cape Town, South Africa, Leatt SA was formed on November 14, 2007, for conducting the Company's business and operations in South Africa. Our corporate headquarters and our research and development efforts are based at Leatt SA.

Establishment of Two Eleven, Leatt Prop and Leatt USA

On August 17, 2007, the Company established Two Eleven Distribution, a California limited liability company, as its wholly-owned subsidiary. Located in Santa Clarita, California, Two Eleven was formed to serve as the Company's executive offices in the United States, as well as the exclusive distributor of Leatt® products in the United States. On March 8, 2021, the Company's Board of Directors approved the redomicile of Two-Eleven Distribution to the State of Nevada, pursuant to a Plan of Conversion, effective upon the filing of Articles of Conversion with the Nevada Secretary of State on April 5, 2021.

Leatt Prop (Proprietary) Limited, a South African company, was established on June 24, 2022, by the Company, as its wholly-owned subsidiary, for the purpose of purchasing immoveable property in South Africa. The Company has not moved forward with its original plan to date and Leatt Prop remains dormant.

On June 26, 2010, the Company established Leatt USA, LLC, a Nevada Limited Liability Company, as our wholly-owned subsidiary and for the purpose of holding Two Eleven Distribution, our wholly-owned subsidiary. However, as of the date of this annual report the Company had not moved forward with its original plan and Leatt USA remains dormant.

Settlement Agreement

As consideration for their founding of the Company's operations in South Africa, we agreed to issue 20,000,000 shares of our common stock, and 19,200,000 shares of our preferred stock to Dr. Leatt, 5,000,000 shares of our common stock and 4,800,000 shares of our preferred stock to Jean-Pierre De Villiers, and 50,000 shares of our common stock to Ervian Jarrett. We issued the common stock to Dr. Leatt, Mr. De Villiers and Ms. Jarrett in accordance with the agreement, but we did not issue any preferred shares to Dr. Leatt or Mr. De Villiers. On September 25, 2008, in settlement of our obligation to issue Dr. Leatt and Mr. De Villiers shares of preferred stock, we entered into a Settlement Agreement with them, pursuant to which they agreed to release us from any and all liability arising out of or related to our failure to satisfy our prior obligation to them, and we issued 16,800,000 shares of our common stock and 2,400,000 shares of our Series A Preferred Stock to Dr. Leatt, and 4,200,000 shares of our common stock and 600,000 shares of our Series A Preferred Stock to Mr. De Villiers. The Series A Preferred Stock entitles Dr. Leatt and Mr. De Villiers to one hundred votes for each share of Series A Preferred Stock held (voting with the common stock as a single class). The Series A Preferred Stock converts into common stock, on a one-for-one basis, has a liquidation preference equal to $0.001 par value per share and is redeemable by us at $0.001 par value per share upon the occurrence of specified events, but it is subject to transfer limitations and it does not entitle Dr. Leatt and Mr. De Villiers to dividends. On September 20, 2012, we effected a 1-for-25 reverse stock split which reduces the foregoing issuances on a 1:25 ratio.

6


Our Corporate Structure

The following chart reflects our organizational structure as of the date of this annual report.

form10kx001.jpg

Our corporate headquarters are located at 12 Kiepersol Drive, Atlas Gardens, Contermanskloof Road, Durbanville, Western Cape, South Africa, 7550. Our telephone number is +(27) 21-557-7257. We maintain a website at www.leatt.com that contains information about our Company, but that information is not incorporated into, or otherwise considered a part of, this annual report.

Our Industry and Market Trends

Off-Road Motorcycle Market

Our products have their roots in the off-road motorcycle market. Our revolutionary neck brace was invented by Dr. Leatt to protect from catastrophic neck injuries after he witnessed the death of a fellow off-road motorcycle rider the weekend after his son's riding debut. As a result, our original products target participants in off-road cycling activities such as BMX racing and downhill racing.

We believe that we have gained our market share largely due to the innovation and quality of our products, the growth of the market, growth of our product range, our increased marketing efforts, and our steps to secure our international patents and protect our patents from infringement.

Cycling Market

We design and sell neck braces, helmets, protective gear, shoes and clothing for the downhill and a wider cycling market. We entered this market focusing on downhill cycling, which requires a full-face helmet. We have since expanded our protective gear range to address the needs of mountain biking, cross-country biking, gravel biking and a wider cycling audience. The cycling market is now our second largest market.

Adventure Market

We design and sell technical apparel including jackets, pants, boots, and gloves for the off-road adventure segment of the motorcycle market. Our expansion into this market in 2023 was a strategic decision in our drive to reach a wider community of riders globally. Our expanding line of Adventure gear has been well accepted by our distributors and dealers and represents an important growing source of revenue.

Other Recreational Markets

7


We also design and sell neck braces for use by participants in other recreational sports such as ATV, go-kart, snowmobile users and participants in other sports where a full-face helmet should be worn. As a result, our overall performance in the market is also affected by the performance of these industries, especially in jurisdictions where the use of helmets is compulsory.

Our Products

The Company designs, develops, distributes, and markets protective gear, parts and accessories. The Company currently mainly markets its products under the two main categories addressing the two main markets, namely bicycle and powersports. The Company began the process of changing its naming convention of its motorcycle range of products from GPX to MOTO and the bicycle range of products from DBX to MTB during 2020. During 2023, the Company launched a new range of products for the Adventure or ADV market.

Neck Braces

The Leatt-Brace® is a prophylactic neck bracing system composed of various combinations of carbon fiber, glass fiber, polycarbonate or Glass Filled Nylon, which was designed to help prevent potentially devastating sports injuries to the cervical spine (neck). The first Leatt-Brace® was designed for motorcycle, high speed motor vehicle and ATV use, where there is little means of protecting the neck in the event of an accident, but the Leatt-Brace® has been designed in such a way as to offer neck protection to all who utilize a crash helmet as a form of protection, including soldiers, law enforcement officers and other professionals whose activities could result in cervical spine injury.

The latest range of Neck Braces are designed for both the powersports market and bicycle markets, includes the Neck Brace 6.5 which is a full carbon brace, Neck Brace 5.5, which is fully adjustable, the Neck Brace 5.5 Junior, which is fully adjustable and designed for junior riders, Neck Brace 4.5, is the latest addition to the range and mid-way between the 3.5 and 5.5 in the way of adjustment and pricing, the award-winning Neck Brace 3.5, which is competitively priced, and the Neck Brace 3.5 Junior, designed for junior athletes at a very competitive price.

Furthermore, there is a range of SNX models under the powersports category. These neck braces are designed for snow mobile riders, which includes the SNX 5.5 and Neck Brace SNX trophy. These neck braces feature the AFC - Arctic Fusion Compound-designed for extreme temperatures.

The range of STX neck braces are designed for street commuters and includes the ultra-light carbon Neck Brace STX RR and Neck Brace STX Road.

The Fusion is a unique invention that combines neck, chest, back, flank and shoulder protection in one piece of body armor for powersports enthusiasts. This product combines Leatt-Brace® technology together with CE certified back, shoulder and chest impact protection. The Fusion models include the Fusion 3.0, which incorporates hard shell and 3DF AirFit ventilated soft impact foam to protect riders, the Fusion SNX 3.0, which is designed specifically for snowmobile riders and is made from a special blend referred to as Arctic Fusion Compound (AFC™), this material is designed to withstand extremely cold conditions, and the Fusion 2.0 Junior which is designed for junior athletes.

Another product found under the neck brace category is the Neck Brace Kart, specifically designed for go-kart riders. This neck brace features a special Kart angle for improved function and fit. It features bio foam lycra padding and has fully adjustable front and rear tables.

The Company offers various versions, sizes, and colors of these products to appeal to different clients and to address different price points. All these neck braces are CE certified as Personal Protective Equipment 89/686/EEC. To view a detailed listing of these products please see our website; www.leatt.com .

Helmets

8


In 2015 the Company launched its helmet range and commenced shipment with a limited helmet range. The Company expanded its off-road helmet range in 2016 to include two junior helmets and its award-winning MTB range for downhill and BMX bicycle use. The Company currently sells various models of helmet products which the Company believes redefines head and brain protection with its ground-breaking 360-degree Turbine technology for concussion and brain rotation safety.

The Moto helmet range, designed for off-road motorcycle riders, consists of the award-winning Moto 9.5 Carbon Helmet, a race-ready, premium carbon shell helmet; the Moto 7.5 Helmet, a lightweight helmet with a super-ventilated injected polymer compound shell; the Moto 3.5 Helmet, a polymer helmet with 360-degree turbine technology and multi-density impact foam at a competitive price point (with a competitively priced version for young riders, the Moto 3.5 Junior, Helmet); and the latest addition, the Moto 2.5 Helmet, a polymer compound helmet with 360-degree turbine technology at the most competitive price point in the range. All these helmets meet U.S. DOT and ECE 22.06 standards.

The MTB helmet range consists of the premium MTB Gravity 8.0 Helmet, a well-ventilated composite helmet made specifically to suit downhill and BMX riders' requirements which has passed Motorcycle ECE standard and ASTM certified; the MTB 6.0 Carbon Gravity Helmet, a DH certified lightweight M-Forge® carbon shell helmet with a composite chin bar; the Helmet MTB Gravity 4.0, a DH certified lightweight polymer shell helmet with maximized ventilation; the Helmet MTB Gravity 2.0, a DH certified ASTM polymer shell helmet with stainless steel mesh vents for added protection against debris; the Helmet MTB Gravity 1.0, a polymer helmet with 360-degree turbine technology at a competitive price point, and its junior version, the Helmet MTB Gravity 1.0 Junior, certified ASTM downhill for use by younger riders.

The MTB helmet range also has helmets designed for Enduro rider's requirements: the MTB Enduro 4.0 Helmet, which has a DH certified lightweight polymer shell with removable chin bar with easy-fit attachment system. The award-winning MTB 3.0 Enduro Helmet is a lightweight polymer shell with a three-in-one helmet design, with the option of a half-shell face helmet, removeable chin bar and optional over-the-ear guards. The MTB 2.0 Enduro Helmet is lightweight polymer shell with a removable chin bar, and the MTB 2.0 Junior Enduro Helmet is adapted for junior riders which is certified and tested: AS/NZS 2063:2008, EN1078, CPSC 1203.

The Company also has a range of half shell helmets for MTB riders which incorporates the 360-degree Turbine technology for concussion and brain rotation safety. The MTB All-Mountain 4.0 Helmet, this helmet is the premium lightweight polymer half shell helmet with in-molded EPS and EPO impact foam for superior energy absorption, the MTB All-Mountain 3.0 Helmet, which is a half shell polymer compound helmet for cyclists, the MTB Trail 3.0 Helmet, is a new lightweight all-purpose MTB helmet with PowerBridge in-molded force absorber is designed for trail riding, cross country training and back country or gravel adventures, the MTB Trail 2.0 Helmet, is a lightweight polymer shell with MaxiFlow impact foam air channels, the MTB 2.0 All-Mountain Helmet is a lightweight polymer half shell with sunglasses dock port for easy, secure storage, the MTB 1.0 All-Mountain Helmet, which is the most competitively priced helmet in this range which offers protection around the head and a deeper rear coverage, and the MTB All-Mountain 1.0 Junior Helmet, is the lightweight junior helmet at a competitive price which offers protection around the head and a deeper rear coverage.

In 2023, the Company launched the MTB 4.0 Endurance Helmet and the MTB 3.0 Endurance Helmet both designed for endurance cyclists. Both helmets incorporate the 360-degree Turbine technology for concussion and brain rotation safety, and the PowerBridge in-molded force absorber, eyewear docking port with anti-slip function. The MTB 4.0 Endurance Helmet is more ventilated than the 3.0 model, and is worn by the Company's sponsored athletes, and the MTB 3.0 Endurance Helmet is priced more competitively for the everyday rider.

In 2020, the Company introduced the Urban range designed for riding on the busy streets. This range includes: the MTB 2.0 Urban Helmet, a stylish helmet with a fit system for improved individual fitment and stability; and the MTB 1.0 Urban Helmet, a competitively priced helmet with optimized casual fit without compromising safety. Both helmets incorporate 360-degree Turbine technology, are available in several colors, and are now available in a junior model, the MTB 2.0 Junior Urban Helmet and MTB 1.0 Junior Urban Helmet.

9


The Company offers various versions, sizes and colors of these products to appeal to different clients in different disciplines and to address different price points. All our helmets have achieved CE certification and other certifications as necessary, depending on market requirements. For the US market our motorcycle helmets comply with the DOT (FMVSS 218) helmet safety standard and our bicycle helmets comply with EN1078, as well as CPSC 1203. Our downhill specific bicycle helmets also comply with ASTM F1952. For our Australian Market our bicycle helmets comply with AS/NZS 2063, for the UK market substantially all of our motorcycle helmets comply with the ACU Gold standard, for the Japanese market our Moto 3.5 helmet complies with the JIS T 8133 standard, and for the Brazilian market our Moto 7.5, Moto 3.5, and Moto 2.5 helmets comply with the NBR 7471 standard. Our Enduro 4.0 helmet and All-Mountain 4.0 helmet have also acquired NTA8776 certification, to meet the new e-bike helmet certification requirements of the Dutch Technical Agreement (NTA) 8776. We are currently in the process of applying to certify all our helmets to the CCC standard in China. To view a detailed listing of these products please see our website: www.leatt.com.

Body Armor

In 2010, we launched the Leatt body armor range with our introduction of the Leatt Adventure Chest Protector, a hard-shell chest protector. The following year we introduced junior protectors, body vests and full body protectors. Since then, we have further extended our range to include more body protectors and vests, back protectors, elbow guards, knee guards, impact shorts and cooling vests. These products come in a variety of soft- and hard-shell options for both adult and junior riders. Our expanded body armor product range has also gained us entry into new markets.

In 2014, we expanded into shoulder and knee-brace markets with the addition of our shoulder brace and C-Frame knee brace to our range of body protection products. In the 2015 first quarter our Knee Brace was accepted for registration by both the United States Food and Drug Administration (FDA) and the UK's Medicine and Healthcare Regulatory Products Agency (MHRA), and our Shoulder Brace was accepted by the FDA, as Class 1 Medical Devices. FDA and MHRA registration allow us to take these products directly to market as medical devices for patients (not just athletes) recuperating from injuries, surgery, muscle tears or strains, dislocations, breaks or fractures. The Company has expanded its knee brace range to include: the Moto C-Frame Pro Knee Brace Carbon, which is the premium knee protection in the range; the Moto C-Frame Hybrid Knee Brace Carbon, which is slimmer than the Pro Carbon model to fit race pants while retaining the stiff chassis of the mono hinge; the Moto X-Frame Knee Brace Carbon, which is injected carbon cage-type knee protection; the Moto X-Frame Hybrid Knee Brace Carbon , which includes a sleeve with Airflex impact gel knee cup with hard shell for ultimate knee brace comfort; and the Moto Z-Frame Knee Brace, which is a glass-filled nylon knee protection product at a competitive price point. The Company has expanded the junior knee-brace range to include the Moto Z-Frame Knee Brace Junior and Moto C-Frame Knee Brace Junior, both of which are designed for younger athletes.

In 2019, we launched our innovative Moto 5.5 FlexLock Boot range, consisting of the Moto 5.5 Flexlock Boot and the Moto 5.5 Flexlock Enduro Boot. These Boots are designed to be an essential part of any rider's motocross riding kit. Our Boots feature the SlideLock system for an outstanding first-class fit, a low-profile toe box for easy gear shifting, and an incredible FlexLock system that is proven to reduce ankle forces by up to 37% and knee forces by up to 35% upon impact, when compared to an industry leading competitor boot. The Moto 4.5 Boot range, consisting of the Moto 4.5 Boot, the Moto 4.5 Enduro Boot and the Moto 4.5 HydraDri® Boot, all of which include a SlideLock system, auto-locking one way sliding closure for great seal at top of boot, extended foot peg riding zone for arch and on the toes riding style, and a reinforced steel shank. Other additions to the Moto 3.5 Boot range consist of the Moto 3.5 Boot, the Moto 3.5 HydraDri® Boot and the Moto 3.5 Junior Boot, which also features the SlideLock system at a competitive price point. The latest boot to be added to our product line, the ADV HydraDri® 7.5 Boot, has been designed for the Adventure market, is waterproof, protective and provides all-day comfort for riders. All boot ranges are CE tested and certified and are available in a range of colors.

In 2020, we launched our MTB shoes. The MTB shoe range has since expanded to include at least 13 different models of MTB shoes designed to satisfy any rider's needs, including a variety of clip-on shoes and flat shoes in various colours. The Clip range includes various styles of shoes with the ClipGrip SPD channels. All our shoe soles include the RideGripTM PRO Compound for traction and enhanced bike control. The entry-level MTB 1.0 Flat Shoe and MTB Hi Flat Shoe can be used as an everyday casual shoe.

10


The Company also introduced MTB shoes designed for female and junior riders. The 6.0 Clip Women Shoe and 2.0 Flat Women Shoe has the same features as the men's offering but is sized and styled for the female consumers. The 2.0 Flat Junior Shoe features the same FlatGrip Sole with optimized waffle grip pattern and mud flow channels designed for junior riders.

Our team is committed to consistently expanding, updating and refining these products based on consumer feedback and demand on an annual basis. The Company offers various versions, sizes and colors of these products to appeal to different clients in different disciplines and to address different price points. All our products have achieved CE certification when necessary. To view a detailed listing of these products please see our website: www.leatt.com.

Other Products, Parts and Accessories

Goggles

In 2019, we launched our Leatt Goggle range, developed with WideVision anti-glare, anti-fog technology and bullet-proof tested to military ballistic standards for durability. The goggles also feature a detachable nose piece for multi-purpose use, easy clip-in / clip-out and self-draining frames, and nine anti-fog lenses that provide the same fit for the entire line-up, ranging from 20-83% Visible Light Transmission (VLT). Currently, our full range of goggles has grown to include over fifteen models of goggles with a variety of interchangeable lenses and color options to meet all our riders' requirements.

Leatt Apparel Range

The Leatt Apparel Range is the fastest growing product category in the Leatt range of products. In 2015, we introduced a new product category of gloves to our apparel products and expanded our offering of cooling apparel products. We have since added a variety of apparel products for off-road motorcycle riders and bicycle riders, including our award-winning mono suits, jackets, jerseys, pants, shorts, socks, and gloves. The latest addition to this range is our ADV specific range of pants and jackets for the Adventure market, to suit a variety of climates. All products in this range come in a variety of trendy colors and are designed in line with the latest international fashion trends. We are continuously expanding our range to appeal to a wider range of consumers.

Casual Clothing and Accessories

We also sell a variety of casual clothing and caps which we have expanded to include sunglasses. We sell accessories that complement our expanding range of products including toolbelt bags, duffel bags, gear bags, helmet bags, hats and hydration kits. The products are designed in line with the latest international fashion trends.

Spare Parts

We also provide aftermarket support to users of our protective products primarily for the replacement of worn or damaged parts through our global distribution network. The nature of many of our products is such that certain components collapse and fail in a controlled mode to help prevent further bodily injury. As such, specific parts of a product or the entire product may need to be replaced after a significant impact.

Our team is committed to consistently updating and refining these products based on consumer feedback and demand on an annual basis. To view a detailed listing of these products please see our website: www.leatt.com.

Accolades

The Leatt products have won a series of awards and accolades since 2007, including the following:

 Motocross Action: Leatt-Brace GPX awarded 5/5 Star Product Rating (2007) and Decade's Most Significant Product (awarded by an industry magazine based on comfort, fit and safety)

11


 ISPO Brandnew Awards: Leatt-Brace DBX awarded Best Protection at Bike Expo (2010) (Bike Expo is an annual gathering of industry participants)

 Motocrossgear.com: Perfect Score to New 2012 Leatt-Brace Chest Protector Adventure Pro (selected by an industry website, based on looks, comfort and safety)

 PPS Moto: This Motocross Product review website awarded the Company the 2014 PPS Moto Protective Gear Company of the Year Award.

 2015 Vital MX Audience Survey: The Leatt Neck Brace was voted the number one Neck Brace to buy in the Vital MX Audience Survey.

 Decline Magazine: awarded Leatt Knee Guards a five-star rating based on the products' fit, impact testing, breathability and overall appeal (July 2016).

 Eurobike Award 2017: In 2017, the Leatt DBX 3.5 neck brace won a Eurobike Award. Eurobike is the world's leading trade fair where international bike industry exhibitors present their products and services. The prestigious Eurobike Award honors innovative products and is a highlight of the annual exposition.

 The MTB Lab Best of 2017 Award: In 2017, The MTB Lab, an online publication on mountain bikes and outdoor gear, named the Leatt DBX 3.0 All-Mountain Helmet one of the best products for 2017.

 2017 Crankjoy Gear of the Year: The Leatt DBX 3.0 helmet was listed by the Editors of Crankjoy, an online publication on mountain bike lifestyle and gear, as among its favorite riding gears for 2017.

 2020 Gear Of The Year Award: The Moto 9.5 Helmet was named 2020 Gear of the Year award by German Cross Magazine. The award winner is selected on an annual basis by the Editors of the magazine.

 Mountain Biking UK Magazine: The Airflex Stealth Body Tee was selected as the winner of the "6 of the Best Body Protection" (October 2021).

 Mountainbike Magazine: In 2015, the Leatt F4 Hydration System won the Mountainbike Magazine Design and Innovation Award, as selected from among 100 products by an international jury featuring top athletes, including Enduro World Series Winner, Nico Lau. In 2017, the Leatt DBX 3.0 helmet was one of ten winners in the Editor's Choice Innovations category reserved for innovations that the Editors believe most shaped the mountain bike world during the prior year.

 Vital MX Audience Survey: The Leatt Neck Brace was voted the number one Neck Brace to buy in the Vital MX Audience Survey for two years running in 2019 and 2020.

 Interbike Innovation Award Winner: The Interbike International Bicycle Exposition is the largest bicycle industry trade event in North America and their awards are aimed at recognizing excellence and innovation in product, retail and advocacy. The Leatt DBX 3.5 neck brace was named an Interbike Innovation Award winner in 2017, the Leatt DBX 4.0 Helmet won the same Innovation Award in 2018.

 Transworld MX: In 2009, the Leatt Brace Adventure was won the Editors' Choice award for 2009 Best New Product of Year, in 2011, the Leatt GPX Pro won the Editors' 2011 Best Product of the Year award, based on comfort and safety, and in 2012, the Leatt Pro Lite chest protector was awarded 2012 "Product of the Year" based on testing and appearance.

 Racer X Readers' Choice Award: The Leatt Brace has been selected as the number one worn Neck Brace by readers of Racer X magazine, for three years running from 2019, 2020, and 2021.

 Powersports Business Nifty 50 Award: The Nifty 50 Award is conferred by the editors of Powersports Business, an industry publication that selects aftermarket products and services that they believe will help boost dealer profitability. To be eligible for an award, products have to be new or substantially improved from previous years and must be ready for delivery in calendar year of the award. Leatt received the Nifty 50 Award in 2018 for the Leatt GPX 4.5 Helmet and the Leatt GPX 3.5 Neck Brace, in 2021, for the Leatt X-Frame Hybrid Knee Braces, and in 2022 for the Leatt 8.5 Moto Helmet Kit.

12


 Design & Innovation Award: Leatt is a frequent winner of this award conferred each year by the Design & Innovation jury of bicycle industry experts in recognition of bicycles and bicycle products. The Leatt DBX 5.0 Composite Helmet and the Leatt DBX Enduro Lite WP 2.0 each won a Design and Innovation Award for 2016; the Leatt DBX 2.0 Helmet and the Leatt DBX 3.5 Neck Brace each won a Design and Innovation Award for 2018; the Leatt DBX 4.0 Helmet won a 2019 Design & Innovation Award; the Leatt 4.0 Velocity Goggles won a 2021 Design and Innovation Award; the Mono Suit MTB HydraDri® 5.0 and the Leatt MTB 3.0 Enduro helmet each won a 2023 Design and Innovation Award; and the new Leatt All-Mountain 5.0 Jersey and the Leatt All-Mountain 4.0 Pants each won a 2024 Design and Innovation Award.

We believe that the premium quality of the Leatt® neck brace has resulted in increased sales since inception. We have sold in excess of 960,000 units of the Leatt® neck brace products worldwide to date.

Manufacturing.

Our products are predominately manufactured in China by third-party manufactures in accordance with our manufacturing specifications, pursuant to outsourced manufacturing arrangements based on agreed standard operating terms. We continue to build manufacturing capacity outside of China and currently have manufacturing partners in Thailand and Bangladesh. We do not currently have any material written agreements with our neck brace third-party manufacturers but will include any such future material written agreement with our periodic filings. We offer a warranty on our products based on the legal requirements of the specific geographical region that our customers reside in. Products purchased through international sales channels are usually shipped directly from our consolidation warehouse or manufacturers' warehouses to customers or their import agents globally.

Upon our determination of order quantities, we issue periodic purchase orders for products to our third-party manufacturers at negotiated prices. A security deposit of between 10 - 30% of the total purchase order value is made with such manufacturers upon receipt of a manufacturer's invoice reflecting confirmation of quantities ordered and the negotiated price for the products. The standard lead time from purchase order date to ship-ready date varies between 90 and 120 days, and our standard supplier shipping terms are FOB (Port).

During production, we measure the manufacturer's quality and on-time performance to determine whether to continue our relationship. We utilize outside consultants and our own employees based in Asia to ensure the quality of our products through regular on-site product inspections. Such quality inspections are conducted in conformance with ISO/IEC 17025 specifications at the manufacturer's premises. Penalties and expedited shipping costs may be levied against a manufacturer if there are excessive delays in shipment to customers or customer rejection is caused by quality issues. The balance of open invoices is paid to the manufacturer based on agreed terms post successful inspection.

Raw Materials and Suppliers

Our products are manufactured from generally available engineering materials, such as thermoset carbon fiber, glass fiber reinforced nylon and high impact polycarbonate resin. The cost of materials used in our products varies depending on the technical and safety specifications as well as the target market for, and the price of, our products. The prices of these raw materials are determined based upon prevailing market conditions and supply and demand. Global conditions may impact the supply of these raw materials and adversely affect the supply of our products. We have not experienced any significant interruptions to our production due to shortage of our raw materials.

Our third-party manufacturers arrange for the purchase of most of the raw materials that are used to manufacture our products and they pay for the cost of such materials. We may occasionally directly source and pay for highly specialized protection materials, for use in the production of our products. These protection materials are generally available. We also occasionally acquire raw materials on behalf of a third-party manufacturer to secure and maintain a specified production capacity. The expenses incurred for such materials for the years ended December 31, 2023, and 2022, were not material and we do not foresee these amounts being material in the near future.

13


We have implemented certain protocols to check the quality of incoming raw materials used in the production process where necessary. Our third-party manufacturers are required to perform prescribed strength testing on critical parts of certain products. In addition, certain materials are tested by our research and development employees at Leatt SA and by independent material laboratories for compliance to manufacturing and material specification.

Our Customers

Leatt earns revenues through the sale of its products to customers worldwide through a global network of distributors and retailers. Leatt also acts as the original equipment manufacturer for personal protective equipment sold by certain international brands. Leatt sells its products directly to dealers and direct to end consumers through digital channels in South Africa (through Leatt SA), in the USA (through Two Eleven), and through a network of approximately 49 third-party distributors worldwide. Our distributors are required to follow certain standard business terms and guidelines for the sale and distribution of our products. Two Eleven also sells our products directly to consumers through our online store available at www.leatt.com.

Products purchased through international sales are usually shipped directly from our consolidation warehouse or manufacturers' warehouses to customers or their import agents. Revenue and related cost of revenue is recognized at the time of shipment from the manufacturer's port when shipping terms are Free on Board (FOB) shipping point, Cost and Freight (CFR) or Cost and Insurance to named place (CIP) as legal title and risk of loss to the product pass to the customer.

We generate revenue both in the United States and abroad. For the years ended December 31, 2023 and 2022, annual revenues associated with international customers were $33,271,920 and $59,020,266, or 70% and 77% of total revenue, respectively.

We have derived a significant portion of our revenue from a limited number of customers, however none of our customers account for more than 10% of our consolidated revenues for the year ended December 31, 2023. For the years ended December 31, 2023 and 2022, our largest customer accounted for approximately 6% and 9% of our annual U.S. revenue, respectively. As of December 31, 2023 and 2022, $370,027 or 5% and $45,030 or 0.3% of our accounts receivable, was due from this customer.

For both years ended December 31, 2023, and 2022, one customer accounted for approximately 8% and 12% of our annual international revenue, respectively. As of December 31, 2023, and 2022, $0 or 0% and $1,812,924 or 11% of our accounts receivable, was due from this international customer.

Advertising and Marketing

Initially we gained market recognition through customer word-of-mouth and then subsequently through third-party articles and reviews of the Leatt-Brace® in motorcycle and racing magazines with unsolicited and unpaid endorsements from current and former celebrity motocross (and other) riders supporting these sports, but we now implement global marketing campaigns that incorporate web and print based advertising, social media engagement, sponsorship of sporting events and athlete sponsorships that are designed to promote the Company's growing product range and consumer brand on a global basis by increasing product and brand visibility.

We believe that, as a result of our marketing efforts, and based on our internal marketing estimates, we have approximately 758 active distributors and dealers who stock Leatt products in the U. S. and approximately 209 active dealers in South Africa. We expect that the number of our distributors and dealers will also grow as the market segments that we sell to, and our product offering grows but we cannot guarantee that this will be the case.

Our advertising and marketing expenses for the years ended December 31, 2023, and 2022 were $4,127,798 and $3,342,791, respectively, representing approximately 9% and 4% of our revenues, respectively.

Our Growth Strategy

14


We are committed to growing our business in the coming years. The key elements of our growth strategy are summarized below:

 Regional Distribution. Our product range has attracted the interest of global retailers and distributors of protective gear for motor and extreme sports, as well as motorcycle manufacturers and racing teams. The resultant interest and the expected demand for our products prompted us to change our production and distribution strategy in order to cater to this demand. In November 2007, we established Two Eleven, our wholly owned Nevada subsidiary, to manage and control the distribution of our products, particularly in the United States. We distribute products to international consumers through a network of international third-party distributors who are selected by our management team based on their financial status, distribution abilities and creditworthiness, their location in major geographic territories, their marketing and media presence and their portfolio of leading motorcycle brands and accessories as well as their reputation among industry players. We are working on developing our global bicycle distribution network by appointing new distributors and dealers with a specific focus on the bicycle market. We believe that regional distributors will better promote our products in the designated regions and expand our global customer base. In the U.S. we are expanding and upgrading our dealer network and sales management team.

 Strategic Alliances. We are actively researching and evaluating strategic alliances that will enable the Company to grow into markets outside of its core markets in an efficient manner. We are also working with our OEM partners to develop more mutually beneficial, sustainable, long-term relationships in line with the Company's goals.

 Industry Accreditation and Endorsements. We are pursuing accreditation and endorsements of our products from global motor sports governing and homologation bodies as well as industry organizations. We believe that these accreditations and endorsements will increase sales of our products and solidify our position as a leader in safety products. Should neck protection in two wheeled sports become compulsory we believe that such accreditations and endorsements will additionally increase our sales.

 Developing Brand Awareness and Brand Loyalty. We are continuing with our efforts to develop brand loyalty by refining our marketing strategy and by engaging in more targeted communication with current and potential consumers of our products. We are working to build loyalty among more consumers in our core bicycle and moto markets by introducing more price points for our products and addressing more consumer needs in more segments, while remaining true to our mission-pioneering functional safety gear.

 Expanding our Portfolio of Products. We are always looking for opportunities to introduce new products to reach a wider audience and penetrate new markets. This will include extending our product range to include both innovative protection products, as well as peripheral or accessory products such as clothing. In the 2015 first quarter our Knee Brace was accepted for registration by both the United States Food and Drug Administration (FDA) and the UK's Medicine and Healthcare Regulatory Products Agency (MHRA), and our Shoulder Brace was accepted by the FDA, as Class 1 Medical Devices. FDA and MHRA registration allow us to take these products directly to market as medical devices for patients (not just athletes) recuperating from injuries, surgery, muscle tears or strains, dislocations, breaks or fractures. In 2015, we launched two additions to our body armor product range, namely helmets and gloves. We also added two full apparel lines to our product range, one line designed for the off-road motorcycle market and the other designed for the bicycling market. In 2019, we added motorcycle Boots and Goggles, and in 2020, we added cycling shoes to our product range, which has made the company a head-to-toe brand for both motorcycle and bicycling protection. We expect that our sales of peripheral products and accessories will increase in line with increased brand awareness.

Our Research and Development Efforts

Our Chairman and Founder, Dr. Christopher Leatt, is our primary research and development consultant and heads the research and development efforts conducted at our research facility, or Leatt Lab, located at our executive headquarters in Cape Town, South Africa. The facility houses a team of a biomedical engineer, consultants and designers who ensure products are scientifically and mechanically sound. This facility features state of the art testing and prototyping equipment and sophisticated simulation models. Leatt also utilizes other consultants, academic institutions, and engineering companies from time to time to assist us with our research and development efforts.

15


We believe that the development of new products and new technology is critical to our success. We are continuously working to improve the quality, efficiency and cost-effectiveness of our existing products. All our helmets have achieved CE certification and other certifications as necessary, depending on market requirements. For the US market our motorcycle helmets comply with the DOT (FMVSS 218) helmet safety standard and our bicycle helmets comply with EN1078, as well as CPSC 1203. Our downhill specific bicycle helmets also comply with ASTM F1952. For our Australian Market our bicycle helmets comply with AS/NZS 2063, for the UK market substantially all of our motorcycle helmets comply with the ACU Gold standard, for the Japanese market our Moto 3.5 helmet complies with the JIS T 8133 standard, and for the Brazilian market our Moto 7.5, Moto 3.5, and Moto 2.5 helmets comply with the NBR 7471 standard. Our Enduro 4.0 helmet and All-Mountain 4.0 helmet have also acquired NTA8776 certification, to meet the new e-bike helmet certification requirements of the Dutch Technical Agreement (NTA) 8776. We are currently in the process of applying to certify all our helmets to the CCC standard in China. We are continuously working to expand our range of products with further technological innovation, comfort, ergonomics and market appeal. We believe that our scientific and medical approach to product development gives our products a competitive edge.

Our research and development expenses for the fiscal years ended December 31, 2023, and 2022 amounted to $2,526,550 and $2,179,996, respectively. These expenses included salaries for research and development employees as well as other direct product development and research costs.

Competition

We compete with a small number of dominant competitors in the neck brace and body protection market, some of whom have substantially greater financial and other resources than we currently have. In the United States, according to the 2023 Racer X Readers' Choice Survey discussed elsewhere herein and available at https://rx.iscdn.net/media-kit/2024/01/329_readers-choice-survey-results-2023-1.pdf , our major competitors in the neck brace market is Atlas Brace USA, LLC, and EVS Sports; our major competitor in the knee brace market is EVS Sports; and our major competitor in the body protection, apparel and helmet market is Fox Racing.

Competition is based on quality, price, reputation, industry endorsements and certifications, as well as, on product design, brand names, marketing support and distribution strategies. We believe that our products can be distinguished from the products offered by our competitors because our products are innovative, safety tested, versatile, aesthetically appealing, priced competitively and comfortable without compromising quality and performance.

Our Competitive Strengths

We believe that our competitive strengths include the following:

 Intellectual Property. Both our patents and licensed patented technology allows us to provide a product that cannot easily be duplicated by our competitors. We have invested extensive resources to patent our products worldwide and have taken legal action to protect our intellectual property rights from infringement.

 Diverse Multi-Cultural Skilled Management Team. Our management team is knowledgeable and experienced in the personal protective equipment industry, sports medicine, and business development. Our executive corporate management team consists of Mr. Sean Macdonald, Dr. Christopher Leatt, Mr. Erik Olsson and Mr. Todd Repsher. Mr. Macdonald is our Chief Executive Officer, Chief Financial Officer, President and Director, and is a Chartered Accountant with over 15 years' experience in the financial and operational aspects of running sports orientated growth companies. Dr. Leatt is our Founder, Chairman and Research and Development consultant, who developed the Leatt-Brace® from his study of the benefits and viability of a neck protection system for helmet clad sport and recreational users. Mr. Olsson is our General Manager and Head of International Distribution and has served for over 20 years as a Sales and Product Manager for various companies in the power sports industry. Mr. Repsher is our US General Manager, who is an award-winning sales executive with over 15 years' experience in the marketing and sales of sports orientated companies in North America.

16


 Sale and Distribution Channels: Our ability to attract top tier distribution and retail sales channels for the sale of our products is a competitive advantage. These distributors have the financial and distribution resources and relationships to penetrate existing product categories within dealerships and reach a wide geographical dealer network and ultimately consumer base. The Company sells its products to consumers through a global network of approximately 49 global distributors, including the Company's U.S. subsidiary, Two Eleven, and its South African subsidiary, Leatt SA. The Company exercises control over this distribution network through its establishment of standard business terms and guidelines for the sale and distribution of its products to retailers worldwide, and through its direct control of Two Eleven and Leatt SA, the exclusive distributors of Leatt products to retailers in the US and South Africa, respectively. Our research and development and marketing teams also work closely with distributors to educate their sales forces about technical innovations in our products, and to provide support in the marketing and other promotion of our products. We believe that our increase in worldwide sales and our continued expansion into global markets is a testament to the efficiency and effectiveness of our worldwide distribution channels.

 Outsourced Manufacturing. We outsource our manufacturing to third-party manufacturers in order to produce large volumes of our products. The manufacturing process remains subject to our strict quality control guidelines safeguarded by our employees and the third-party inspectors who we hire as consultants to ensure that these guidelines are being implemented at the production point. While such manufacturing arrangements pose a risk to our ability to safeguard our proprietary technologies and may lead to increased costs, as discussed under the "Risk Factors" heading in this report, we expect that the increase in expected sales volumes will contribute to a lower production cost per unit and that this will translate to better margins for our distributors and retailers.

 Research, Development, Certification and Marketing Capabilities. We have in-house know-how in the areas of product development, testing and accreditation, particularly in the field of personal protective equipment. With the experience and capabilities developed and established in taking our product to market, we believe that we are well positioned to develop, manufacture and market additional products. With our medical and mechanical expertise, demonstrated research and development capabilities, established outsource manufacturing capacity, established brand and our dedicated, loyal and enthusiastic distribution network, we believe that we have the components necessary to bring new successful products to market.

 Industry Accreditation, Testing Standards and Regulations. We are pursuing accreditation and endorsements of our products from global motor sports governing and homologation bodies as well as industry organizations. We have obtained homologations of our products from various global racing authorities where objective standards have been set and we are in discussions with governing racing bodies, such as the FIM, to have the Leatt-Brace® accredited. Should industry accreditation become compulsory, we would be ahead of our competitors in the marketplace.

 Brand Recognition. We believe that public recognition of the Leatt® brand drives the sales of our products, regardless of the action of competitors and competitive products. We expect that the reputation of our brand in the marketplace, particularly our product testing and applicable CE certification, will continue to ensure market acceptance and facilitate market penetration of our new products. In order to bolster and grow the Leatt® brand, stringent quality control and assurance are our highest priority, and our ongoing marketing, advertising and public relations efforts continue to stress the quality, safety and innovation of our products.

Our Intellectual Property

We believe that the continued success of our business is dependent on our intellectual property portfolio consisting of globally registered trademarks, design patents and utility patents related to the Leatt-Brace®. Most of these initial intellectual property rights are held by Xceed Holdings, a corporation controlled by our Chairman, Dr. Christopher Leatt and the rest of these rights are held by the Company. We license most of our intellectual property from Xceed Holdings, pursuant to a patent and royalty license agreement, or Licensing Agreement, dated March 1, 2006, between the Company and Xceed Holdings. Under the terms of the Licensing Agreement, we are obligated to pay Xceed Holdings 4% of all our revenues billed and received from the Leatt-Brace®. In addition, pursuant to a separate license agreement between us and Mr. De Villiers, we are obligated to pay a royalty fee of 1% of all our billed and received sales revenue, in quarterly installments, based on sales of the previous quarter, to a trust that is beneficially owned and controlled by Mr. De Villiers. We also rely on nondisclosure agreements and other methods to protect our intellectual property rights. However, the steps we have taken may be inadequate to prevent the misappropriation of our technology.

17


Xceed has licensed to us thirty-five utility patents registered in various countries for the Neck Brace. Thirty-four expire in 2024 and one is renewable in 2025. Furthermore, we have a license for five European and U.S. patent designs covering various Neck Brace designs, two expire in 2025, while the remainder have renewal dates in 2025 and 2027.

We hold one South African patent for the shoulder brace, and one South African patent for the Chest protector, both have renewal dates in 2024. We hold knee brace patents in both U.K and Germany with renewal dates in 2024. We hold one design patent in Europe for our MTB shoe sole design which is renewable in 2025.

We hold patents for goggles in both U.K and Germany with renewal dates in 2024. We hold one patent application for goggles pending in the U.S.A, where patents are only renewable once they are granted. We filed a PCT patent application for goggles in 2023 which is currently pending. We hold four design patents for goggles in Europe, with renewal dates in 2025, 2027, and 2029. We hold one design patent for goggles in the U.S.A, we also hold four design patent applications for goggles pending in the U.S.A.

We hold patents for our Turbine helmet in Australia, Hong Kong, Germany, and the U.K. which all have renewal dates in 2024. The European patent application for our Turbine helmet on which the U.K. and German patents are based is opposed. We hold two patents for our Turbine Helmet in the U.S.A, with renewal dates in 2025 and 2027, and another patent application currently pending in the U.S.A. We hold two U.S.A. design patents, one for our visor screw and the other for our hydration system, these patents expire in 2031 and 2030, respectively. We hold one European design patent for our visor screw and hydration system that is renewable in 2024.

We hold design patents for the STX Neck Brace in Japan, Europe, and the U.S.A. The design patents in Japan and Europe are renewable in 2024 and 2025, respectively. The design patent in the U.S.A. expires in 2026. We hold a design patent for a Neck Brace sock kit in the U.S.A. which expires in 2024.

We hold a Flexlock Boot patent in the U.S.A., U.K., Germany, Italy, and Thailand, the U.S.A. patent is renewable in 2025 and the remainder in 2024. We hold a patent for boots in the U.K which is renewable in 2025. We hold two patent applications for boots in both U.S.A. and Germany which are currently pending. The renewal date for the boot patent application in Germany is 2025. We hold a boot design patent in Europe which is renewable in 2024 and a boot design patent in the U.S.A.

We hold three patents for a jacket in Germany, U.K., and U.S.A., the patents for Germany and the U.K are up for renewal in 2025 and U.S.A in 2024. We hold patents for our hoodies with a magnetic fixture in Germany, U.K., and U.S.A. The patents for Germany and the U.K are up for renewal in 2024 and U.S.A in 2026.

We hold a design patent for a team sport product in the U.S.A. We filed two patent applications for airbag products in the U.K, both are currently pending with renewal dates in 2027.

Patents applicable to specific products extend for varying periods according to the date of patent application filing or patent grant and the legal term of patents in the various countries where patent protection is obtained. The actual protection afforded by a patent, which can vary from country to country, depends upon the type of patent, the scope of its coverage and the availability of legal remedies in the country. Issued patents or patents based on pending patent applications or any future patent applications may not exclude competitors or may not provide a competitive advantage to us. In addition, patents issued or licensed to us may not be held valid if subsequently challenged and others may claim rights in or ownership of such patents. In addition, the validity and breadth of claims in protective gear technology patents involve complex legal and factual questions and, therefore, the extent of their enforceability and protection is highly uncertain.

18


We have extensive licensed and registered trademarks. Leatt® is trademarked in Argentina, Australia, Brazil, Canada, Chile, China, the European Union, Indonesia, Japan, Mexico, New Zealand, South Africa, Taiwan, U.S.A and the U.K. in multiple classes depending on the jurisdiction. These multiple trademarks have renewal dates between 2026 and 2034. We also have a pending application for Leatt in Malaysia, Philippines, the Russian Federation, Singapore, Thailand and Vietnam. Leatt-Brace® has been trademarked in China, the European Union, South Africa, U.K. and U.S.A. with renewal dates between 2024 and 2031. ALPT® and Alternative Load Path Technology® trademark is registered in U.S.A. in class 9 renewable in 2031 and 2030 respectively. Leatt® has also been trademarked in special script in Brazil and China with renewal dates in 2032. The Leatt Devices and/or Icons have been trademarked in Brazil, the European Union, South Africa, U.K. and U.S.A. with renewal dates between 2027 and 2032 in multiple classes depending on the jurisdiction.

We have expanded our trademark portfolio to accommodate our expanding product categories. Brace On® is registered in class 9 in Australia, the European Union, U.K. and U.S.A. with renewal dates between 2031 and 2033. RIDEVIZ® is registered in class 9 in Australia, China, the European Union, U.K. and U.S.A. with renewal dates between 2030 and 2032. RideGrip® is registered in class 25 in China, the European Union, and U.K. and U.S.A. with renewal dates between 2030 and 2032. FirstTurn® is registered in class 9 in China, the European Union, U.K. and USA with renewal dates between 2030 and 2032. CeraMag® is registered in class 12 in the European Union, U.K. and Taiwan with renewal dates in 2031 and 2032. We have CeraMag trademark pending in class 12 in U.S.A. HydraDri® is registered in classes 25 and 28 in the European Union, U.S.A and U.K. with renewal dates between 2031 and 2033. We have Three L Device® trademarked in the European Union, U,K and U.S.A with renewal dates between 2024 and 2027. We have a ReaflexTM trademark pending in the U.S.A. We have FlexMeshTM trademark pending in the European Union and U.S.A in class 28. We have SlidelockTM trademark pending in the European Union and U.S.A in class 25.

From time to time, we have had to enforce our intellectual property rights through litigation, and we may be required to do so in the future. Reverse engineering, unauthorized copying or other misappropriation of our technologies could enable third parties to benefit from our technologies without paying us. We cannot assure you that our competitors have not developed or will not develop similar products, will not duplicate our products, or will not design around any patents issued to or licensed by us. We believe that a loss of these rights would harm or cause a material disruption to our business and, our corporate strategy is to aggressively take legal action against any violators of our intellectual property rights, regardless of where they may be.

Our Employees

As of December 31, 2023, we employed 89 full-time employees and 36 independent contractors. The following table sets forth the number of our full-time employees and contractors by function as of December 31, 2023.

Employee & Contractor FunctionNumber
Executive4
Internet & Technology2
Marketing23
Finance5
Operations and Distribution/Logistics23
Research and Development/Leatt Lab21
Legal & Compliance4
Sales & Customer Services40
Support Staff3
Total125

19


We employ 4 full-time employees who are dedicated exclusively to research, development, and testing. We also utilize consultants, academic institutions and engineering companies as independent contractors or consultants, from time to time, to assist us with our research and development efforts where specific and specialized knowledge is needed.

Our Company employs the majority of its employees at its offices in Durbanville, South Africa and in Reno, Nevada. We are required to pay UIF, or unemployment insurance, for each of our South African employees. We are also required to withhold income taxes for our South African and U.S. based employees. We generally provide health care benefits and other standard benefits to our employees. Effective January 1, 2019, we implemented a 401k plan for the benefit of all our U.S. based employees and effective June 1, 2019, we implemented a provident fund for the benefit of all our permanent S.A. based employees.

We value retaining employees long term and developing our human capital, which is evident in the length of tenure of many of our most senior personnel. We are continually evaluating our staffing requirements, working conditions, employee benefit programs and compensation packages that include medium- and long-term incentives through equity compensation plans to retain staff long term. We have established and continue to enhance and refine a comprehensive set of practices for recruiting, managing, and optimizing the global human resources of our organization. In many cases, we utilize objective benchmarking and other tools in our efforts. We aim to instill a passion to protect riders around the world with exceptional products in our workforce which provides purpose.

We believe that we maintain a professional and productive working relationship with our employees, and we have not experienced any significant labor disputes or any difficulty in recruiting staff for our operations.

Regulations

The 2012 JOBS Act

We qualify as an "emerging growth company," as defined in Title I of the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company is defined as an issuer, including a foreign private issuer, with less than $1 billion of total annual gross revenues during the most recently completed fiscal year. The SEC has interpreted "total annual gross revenues" to mean total revenues as presented on the income statement presentation under U.S. GAAP, which for the Company was $47.24 million for the fiscal year ended December 31, 2023. We will retain our status as an emerging growth company until the earlier of: (1) the fifth anniversary of the date we first sell securities pursuant to an IPO registration statement; (2) the last day of the fiscal year in which we first exceed $1 billion in annual gross revenues; (3) the time we become a large accelerated filer (an SEC registered company with a public float of at least $700 million); or (4) the date on which we have issued, within the previous three years, $1 billion of nonconvertible debt, whether issued in a registered or unregistered offering and whether or not it is still outstanding at the determination date.

The JOBS Act provides scaled disclosure provisions for us, including, among other things: (a) permitting us to include only two years of audited financial statements in a registration statement filed under the Securities Act of 1933 for an IPO of common equity securities; (b) allowing us to comply with the smaller reporting company version of Item 402 of Regulation S-K (Executive Compensation); and (c) removing the requirement that our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting in accordance with Section 404(b) of the Sarbanes-Oxley Act of 2002. The JOBS Act also exempts us from the following additional compensation-related disclosure provisions that were imposed on U.S. public companies pursuant to the Dodd-Frank Act: the advisory "say-on-pay" vote on executive compensation required under Section 14A(a) of the Exchange Act; the Section 14A(b) requirements relating to shareholder advisory votes on golden parachute compensation; the Section 14(i) requirements for disclosure relating to the relationship between executive compensation and financial performance of the issuer; and the requirement of Dodd-Frank Act Section 953(b)(1), which will require disclosure as to the relationship between CEO and median employee pay.

Under Section 102(b)(1) of the JOBS Act, "emerging growth companies" can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. However, we have irrevocably elected not to avail ourselves of this extended transition period for compliance with new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not "emerging growth companies."

20


European Union Directives 

Our products are compliant with all applicable harmonized European Union Regulations. Leatt Personal Protective Equipment products are EU Type Certified showing compliance with European Union Personal Protective Equipment Regulation (EU) 2016/425 and/or the Medical Device Regulation (EU) 2017/745 for hybrid PPE/Medical products. The harmonized PPE Regulation (EU) 2016/425 lays down essential health and safety requirements (EHSRs) and leaves it to standards, primarily European harmonized standards, to give technical expression of the relevant requirements contained in the Regulation. For Leatt this includes the Company's Leatt-Brace® and body protection products.

It means that as a minimum these products must comply with: the basic Health and Safety requirements of the PPE regulation; certain chemical innocuousness tests prescribed in EN ISO 13688:2013 "Protective clothing - General Requirements"; and the requirements relating to usage, care, cleaning, sizing and other information to be supplied with the product. Accordingly, all Leatt-Braces®, chest protectors and body protection products are CE certified. Only our peripheral products such as jackets, clothing, and caps are not covered.

In addition to the minimum requirements some products require compliance with the European Standards, or EN (European Norm), specific to certain categories of PPE in order to achieve certification. An EN is a standard that has been adopted by one of the three recognized European Standardization Organizations (ESOs): CEN, CENELEC or ETSI. It is produced by all interested parties (including manufacturers, users, consumers and regulators of a particular material, product, process or service) through a transparent, open and consensus-based process. In the Company's case these are the applicable EN standards: EN 14021 Stone Shields; EN 1621-1 Limb Protectors; EN 1621-2 Back Protectors; EN1621-3 Chest Protectors; EN 21420:2020 Protective Gloves; EN 13594:2015 Protective gloves for motorcycle riders; EN1078:1997 Helmets for pedal cyclists and for users of skateboards and roller skates; EN 13634: 2017 Protective footwear for motorcycle riders; EN1938:2010 Personal eye protection - Goggles for motorcycle and moped users; EN 13595-3:2020 - "Protective garments for motorcycle riders - Parts 3: Class AA Garments". These standards are more performance related and, among other things, measure the performance of PPE at various intensity levels and under different environmental conditions. They also prescribe product labeling, tests for user comfort and ease of use. Where no specific standards exist in the EU, such as with the neck brace, wrist brace or specialized protective equipment for juniors, the Notifying Body will be responsible for interpreting the requirements based on the intended use and environment, develop appropriated testing protocols and perform the technical evaluation necessary for certification.

The PPE Regulation (EU) 2016/425 is total harmonization and a "New Approach" legislation aligned to the "New Legislative Framework". It lays down essential health and safety requirements (EHSRs) and leaves it to standards, primarily European harmonized standards, to give technical expression of the relevant requirements contained in the Regulation.

FDA and MHRA Registration

In the 2015 first quarter our Knee Brace was accepted for registration by both the FDA and the MHRA, and our Shoulder Brace was accepted by the FDA, as Class 1 Medical Devices. FDA and MHRA registration allow us to take these products directly to market as medical devices for patients (not just athletes) recuperating from injuries, surgery, muscle tears or strains, dislocations, breaks or fractures. The Company's FDA registration included the contract manufacturer of the braces, a Good Manufacturing Practices (GMP) vendor. For the registration period, which currently expires on December 31, 2024, we will be required to maintain logs of complaints or problems, and to provide appropriate labelling for medical uses. We have renewed our registration until December 31, 2024. The MHRA registration of the knee brace is open-ended, subject to the Company's continued monitoring of product performance in the marketplace and delivery of prompt responses to the MHRA as necessary.

Other Accreditation

21


We have also obtained certifications for our helmets depending on the market, all Leatt products are compliant with applicable European Union directives, or CE certified, where appropriate. Depending on the market we have other certifications outside of CE. For the US market our motorcycle helmets comply with the DOT (FMVSS 218) helmet safety standard and our bicycle helmet complies with EN1078, as well as CPSC 1203. Our downhill specific bicycle helmets also comply with ASTM F1952. For our Australian Market, our bicycle helmet complies with AS/NZS 2063, for the UK market substantially all of our motorcycle helmets comply with ACU Gold and for the Japanese market our Moto 3.5 helmet complies with JIS T 8133. For the Brazilian market our Moto 7.5, Moto 3.5, and Moto 2.5 helmets complies with NBR 7471. We are currently in the process of applying to certify all our helmets to the CCC standard in China. Our Enduro 4.0 helmet and All-Mountain 4.0 helmet have acquired NTA8776 certification, this is a new e-bike helmet certification which confirms that a helmet complies with the requirements in the Dutch Technical Agreement (NTA) 8776.

We also voluntarily submitted our Moto GPX neck brace to be tested by the in-house engineers of BMW Motorrad (Germany) and to be reviewed by KTM (Austria). We believe that such testing, while not mandatory, provides validation for our product's performance.

Environmental Matters

Our products are primarily designed for outdoor use and unseasonable weather or physical changes associated with climate change could lead to increased expenses and a reduction in our sales revenue. Unseasonable weather and prolonged, extreme temperatures, such as hurricanes, winter storms, earthquakes, floods, heatwaves, and other natural disasters may affect consumer participation in outdoor sporting activities and adversely impact their demand for our products. In addition, severe weather could disrupt the operation of our facilities and cause service outages, production delays and property damage that require us to incur additional expenses. Such weather conditions may also affect our ability to deliver our products to our customers or may require them to close certain stores temporarily, thereby reducing sales. As a result, unseasonable weather in any of our markets could negatively impact our net revenues.

Legal and regulatory developments related to climate change or other initiatives could also potentially increase costs and affect our ability to deliver our products. We have begun to utilize eco-friendly and sustainably sourced materials for the packaging of our products and have recently introduced a new range of MTB products made from biodegradable, plastic-free materials that maintain their high-performance edge and durability. We are continually considering and implementing steps to sustainably reduce the Company's carbon footprint and we are currently evaluating various environmental certification body's with the intent of certifying our efforts to reduce our impact on the environment over the last few years. There were no material capital expenditures for environmental matters in the year ended December 31, 2023.

ITEM 1A. RISK FACTORS

An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this report, before making an investment decision. If any of the following risks actually occurs, our business, financial condition or results of operations could suffer. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. You should read the section entitled "Special Note Regarding Forward-Looking Statements" above for a discussion of what types of statements are forward-looking statements, as well as the significance of such statements in the context of this report.

RISKS RELATED TO OUR BUSINESS

Our business and financial performance may be adversely affected if our information technology systems fail to perform adequately or if they are the subject of a security breach or cyberattack.

We are a multinational company and rely on a variety of information technology systems in the ordinary course of business to manage business data, communications, supply chain, order entry and fulfilment, customer support, billing and payments. Our system and processes are potentially vulnerable to cybersecurity incidents, such as terrorist or hacker attacks, the introduction of malicious computer viruses, ransomware, falsification of banking and other information, insider risk, or other security breaches, including individual or advanced persistent cyber-attacks on our information technology infrastructure and attempts by others to gain access to our proprietary or sensitive information regarding our employees, suppliers and customers.

22


If there is a cybersecurity incident, we may suffer interruptions to our business and service, loss of assets or data, or reduced functionality, which could materially adversely affect our financial condition, business and results of operations. Many of our systems are not redundant, and our disaster recovery planning is not sufficient for every eventuality a cybersecurity incident could cause. Security breaches of our systems which allow inappropriate access to or inadvertent transfer of information and misappropriation or unauthorized disclosure of confidential information belonging to us or to our employees, customers, or suppliers could have an adverse impact on our results of operation. If a customer, supplier or employee alleges that a cyberattack caused or contributed to a loss or compromise of critical information, we could face significant harm to our reputation and financial condition. Any remedial costs or other liabilities related to information security system failures and cybersecurity incidents may not be fully insured or indemnified by other means.

While we attempt to mitigate cybersecurity risks by employing a number of proactive measures, including, technical security controls, enhanced data protection, advanced intrusion detection, targeted threat protection, maintenance of backup, protective systems and disaster recovery procedures, our systems remain potentially vulnerable to cybersecurity threats, any of which could have a material adverse effect on our business. We believe our mitigation measures reduce, but cannot eliminate, the risk of a cybersecurity incident. Despite any precautions we may take, a cybersecurity incident could harm our reputation and financial condition and cause us to incur legal liability and increased costs to respond to such events. Our cyber liability insurance may not be sufficient to compensate us for losses that may result from interruptions in our services or asset or data loss as a result of cybersecurity incidents.

Global economic turmoil could negatively affect our domestic and international sales, results of operations, and financial condition.

Prolonged turmoil in the global economy, especially in the U.S., South America and Europe, including the conflict in Ukraine and the Middle East, could have a negative impact on our ability to conduct business outside the U.S. and on our financial condition. Our exposure to such risks may further increase if any of these economic conditions impact levels of consumer spending.

We sell our products through a global network of distributors and dealers who may have difficulty clearing elevated stock, previously stockpiled in response to industry wide supply chain challenges, which in turn could slow new orders and affect our financial performance. If our customers were to experience slow growth or recession, we could see a drop-in demand for our products, difficulty in obtaining materials and supplies, difficulty in collecting accounts receivables, an increase in accounts receivable write-offs, and greater foreign exchange rate volatility affecting our profitability and cash flow. Customers may also purchase lower-cost products made by competitors and not resume purchasing our products even after economic conditions improve. While we employ comprehensive controls regarding global cash management to guard against cash or investment loss and to ensure our ability to fund our operations and commitments, a material disruption to the counterparties with whom we transact business could expose us to financial loss.

For the years ended December 31, 2023 and 2022, annual revenues from sales to international customers were $33,271,920 and $59,020,266, or 70% and 77% of our total revenue, respectively. While we do not expect to see any significant material adverse impact on our distribution channels (discussed elsewhere in this report), if demand for our products fluctuates as a result of these economic conditions or otherwise, our revenue and gross margin could be harmed.

Our international operations expose us to foreign exchange risk and currency fluctuations affect our operating profits.

23


We are exposed to foreign exchange risk as our revenues and consolidated results of operations may be affected by fluctuations in foreign currency as we translate these currencies into U.S. dollars when we consolidate our financial results. Operating outside of the United States further exposes us to foreign exchange risk, which we monitor. We are most sensitive to changes in the exchange rates of the South African Rand (or ZAR), the Renminbi, the Euro and the U.S. dollar. Because of our primary operations in South Africa, a portion of our consolidated revenues are denominated in ZAR, certain of our assets are denominated in ZAR, and our research and marketing operations in South Africa utilize South African labor sources, so we have more ZAR expenses than we do sales in South Africa. A decrease in the value of the U.S. dollar in relation to the ZAR could increase our cost of doing business in South Africa. Alternatively, if the ZAR depreciates against the U.S. dollar, the value of our ZAR revenues, earnings and assets as expressed in our U.S. dollar financial statements will decline. In China we have more Renminbi expenses than we do sales, because we manufacture our products in China that we sell globally. A decrease in the value of the U.S. dollar in relation to the Renminbi could increase our cost of purchasing products in China. We have not entered into any hedging transactions in an effort to reduce our exposure to foreign exchange risk.

In Europe we have significantly more sales than we do expenses. Since 70% of our sales is derived outside the U.S. where the U.S. dollar is not the primary currency, significant fluctuations in exchange rates such as the strengthening of the dollar versus our customers' local currency can adversely affect our ability to remain competitive in those areas.

We engage in international manufacturing and sales which exposes us to trade restrictions and disruptions that could harm our business and competitive position.

We derive 70% of our revenues from international sales and we develop and primarily manufacture our products outside of the U.S. As a result, we are subject to risks associated with shipping products across borders, including shipping delays, customs duties, export quotas and other trade restrictions that could have a significant impact on our revenue and profitability.

Although there is more certainty regarding the outcome of BREXIT due to the withdrawal agreement that was concluded between the European Union and the United Kingdom on January 24, 2020, we continue to evaluate the potential effect of the United Kingdom's (UK) departure from the European Union (EU) (commonly referred to as "Brexit") on our business operations and financial results. We anticipate that Brexit may have adverse tax effects on movement of products or sustainment activities between the UK and EU. Additionally, Brexit may still have an impact the value of the pound sterling. If the pound sterling were to depress significantly against the U.S. dollar, this could negatively impact the ability of our UK customers to afford our products. Currently, we do not anticipate that Brexit will have a material impact on our operations or our financial results.

If we cannot deliver our products on a competitive and timely basis, our relationships with international customers will be damaged and our financial condition could also be harmed. The future imposition of, or significant increases in, the level of tariffs, custom duties, export quotas and other barriers and restrictions by the U.S. on China or other countries could disrupt our supply chain, increase the cost of our raw materials and therefore our pricing, and impose the burdens of compliance with foreign trade laws, any of which could potentially affect our bottom line and sales. While we are in continuous discussions with our manufacturers to ensure there are contingencies in place, we cannot assure you that we will not be adversely affected by changes in the trade laws of foreign jurisdictions where we sell and seek to sell our products.

In order to grow at the pace expected by management, we may require additional capital to support our long-term growth strategies. If we are unable to obtain additional capital in future years, we may be unable to proceed with our plans and we may be forced to curtail our operations.

We currently meet our working capital requirements with cash flow provided by our operating activities, and we expect to continue doing so for the foreseeable future. Since November 2018, the Company has maintained a revolving line of credit agreement with a bank under which it now has access to a line of credit facility of $1,500,000 which remains available in full for advances through March 1, 2025. However, in the future we may require additional working capital to support our long-term growth strategies, including identifying suitable targets for horizontal or vertical mergers or acquisitions so as to enhance the overall productivity and benefit from economies of scale. If the uncertainty arising out of domestic and global economic conditions and the ongoing tightening of domestic credit markets persist, we may not be able to generate adequate cash flows or obtain adequate levels of additional financing, whether through equity financing, debt financing or other sources. Even if we are able to get additional financing, it might not be on terms that are favorable to the Company. Furthermore, additional financings could result in significant dilution to our earnings per share or the issuance of securities with rights superior to our current outstanding securities, including registration rights. If we are unable to raise additional financing, we may be unable to implement our long-term growth strategies, develop or enhance our products and services, take advantage of future opportunities or respond to competitive pressures on a timely basis, if at all. In addition, a lack of additional financing could force us to substantially curtail operations.

24


A substantial amount of our sales revenue is derived from sales to a limited number of customers, and our business will suffer if sales to these customers decline.

We have derived a significant portion of our revenue from a limited number of customers, however none of our customers account for more than 10% of our consolidated revenues. For the years ended December 31, 2023 and 2022, our largest customer accounted for approximately 6% and 9% of our annual U.S. revenue, respectively. As of December 31, 2023 and 2022, $370,027 or 5% and $45,030 or 0.3% of our accounts receivable, was due from this customer. For both the years ended December 31, 2023 and 2022, our international revenue derived outside of the U.S. was earned from one customer that accounted for approximately 8% and 12% of our annual international revenue. As of December 31, 2023 and 2022, $0 or 0% and $1,812,924 or 11% of our accounts receivable, respectively, was due from this international customer. We do not have long term contractual arrangements with most of these wholesale customers. The loss of one or more of these customers could damage our business, financial condition and results of operations.

Significant fluctuations in fuel prices could have an adverse impact on our business and operations.

A significant portion of our revenue is derived from international sales and so significant fluctuations in fuel prices could adversely affect our business and operations. While fluctuations in fuel prices could lead to higher commuter costs which may encourage the increased use of motorcycles and bicycles as alternative modes of transportation and lead to an increase in the market for our protection products, significant fluctuations in world fuel prices could significantly increase the price of shipping or transporting our products which we may not be able to pass on to our customers.

Expansion of our business may put added pressure on our management, financial resources and operational infrastructure impeding our ability to meet any increased demand for our products and possibly hurting our operating results.

Our business plan is to significantly grow our operations to meet anticipated growth in demand for existing products, and by the introduction of new product offerings. Our planned growth includes the construction of several new production lines to be put into operation over the next five years. Growth in our business may place a significant strain on our personnel, management, financial systems and other resources. We may be unable to successfully and rapidly expand sales to potential customers in response to potentially increasing demand or control costs associated with our growth. To accommodate any such growth and compete effectively, we may need to obtain additional funding to improve information systems, procedures and controls and expand, train, motivate and manage our employees, and such funding may not be available in sufficient quantities, if at all. If we are not able to manage these activities and implement these strategies successfully to expand to meet any increased demand, our operating results could suffer.

We rely on patent and trade secret laws that are complex and difficult to enforce and we may not be able to prevent others from unauthorized use of our intellectual property. If we are not able to adequately secure and protect our patent, trademark and other proprietary rights our business may be materially affected.

The continued success of our business is dependent on our intellectual property portfolio consisting of globally registered trademarks, design patents and utility patents related to the Leatt-Brace®. We also rely on nondisclosure agreements and other methods to protect our intellectual property rights. However, the steps we have taken may be inadequate to prevent the misappropriation of our technology. In addition, the validity and breadth of claims in protective gear technology patents involve complex legal and factual questions and, therefore, the extent of their enforceability and protection is highly uncertain. Issued patents or patents based on pending patent applications or any future patent applications may not exclude competitors or may not provide a competitive advantage to us. In addition, patents issued or licensed to us may not be held valid if subsequently challenged and others may claim rights in or ownership of such patents. Reverse engineering, unauthorized copying or other misappropriation of our technologies could enable third parties to benefit from our technologies without paying us. We cannot assure you that our competitors have not developed or will not develop similar products, will not duplicate our products, or will not design around any patents issued to or licensed by us. We believe that a loss of these rights would harm or cause a material disruption to our business and, our corporate strategy is to aggressively take legal action against any violators of our intellectual property rights, regardless of where they may be.

25


We depend on key personnel, and turnover of key employees and senior management could harm our business.

Our future business and results of operations depend in significant part upon the continued contributions of our key technical and senior management personnel, including specifically, Dr. Christopher Leatt, our Chairman and Research and Development Consultant and the licensor of some of our intellectual property, Sean Macdonald, our Chief Executive Officer and President, Erik Olsson, our International General Manager and Todd Repsher, our U.S. General Manager (collectively, "Key Personnel"). Our future also depends in significant part upon our ability to attract and retain additional qualified management, technical, marketing and sales and support personnel for our operations. To address this risk, we have taken out key man insurance on our Key Personnel. However, if we lose any of our Key Personnel, if any of them fails to perform in their current position, or if we are unable to attract and retain skilled personnel as needed to support business operations from time to time, our business could suffer. In addition, significant turnover of Key Personnel in our senior management could significantly deplete our institutional knowledge held by them. We depend on the skills and abilities of these Key Personnel in managing the development, manufacturing, technical, marketing and sales aspects of our business, any part of which could be harmed by further turnover.

We face an inherent business risk of exposure to product liability claims that could have a material adverse effect on our operating results.

Because of the nature of our products, we face an inherent business risk of exposure to product liability claims arising from the claimed failure of our products to prevent the types of personal injury or death against which they are designed to protect. Plaintiffs may also advance other legal theories supporting claims that our products or actions resulted in harm to them. We maintain product liability insurance policies with a self-insured retention to attempt to manage this risk worldwide. But although we maintain product liability insurance coverage, there can be no absolute assurance that our coverage limits will be sufficient to cover any successful product liability claims made against us now or in the future. Furthermore, our insurance coverage does not include damages which may be assessed against us for willful and/or intentional injury, or for exemplary or punitive damages. Any claim or aggregation of claims substantially in excess of our insurance coverage, or any substantial claim not covered by insurance, could have a material adverse effect on our financial condition and results of operations. These claims also have a negative impact on the renewal our product liability insurance policy and the premiums.

We may not be able to adequately finance the significant costs associated with the development of new protective equipment products.

The products in the protective equipment market can change dramatically with new technological advancements. We are currently conducting research and development on new products, which requires a substantial outlay of capital. To remain competitive, we must continue to incur significant costs in product development, equipment, facilities and invest in research and development of new products. These costs may increase, resulting in greater fixed costs and operating expenses. In addition to research and development costs, we could be required to expend substantial funds for and commit significant resources to the following: additional engineering and other technical personnel; advanced design, production and test equipment; manufacturing services that meet changing customer needs; technological changes in manufacturing processes; working capital and manufacturing capacity. Our future operating results will depend, to a significant extent, on our ability to continue to provide new and competitive products that compare favorably based on cost and performance with the design and manufacturing capabilities of competitive third-party technologies. We will need to sufficiently increase our net sales to offset these increased costs, the failure of which would negatively affect our operating results.

26


We may be exposed to potential risks relating to our internal controls over financial reporting and our ability to have those controls attested to by our independent auditors.

As directed by Section 404 of the Sarbanes-Oxley Act of 2002, or SOX 404, the SEC adopted rules requiring public companies to include a report of management on the company's internal controls over financial reporting in their annual reports, including Form 10-K. Under current law, we became subject to the requirements of SOX 404 beginning with our annual report for the fiscal year ended December 31, 2012 and since becoming a U.S. public company, we have evaluated our internal control systems in order to allow our management to meet these requirements, including for this annual report for the fiscal year ended December 31, 2023. We can provide no assurance that we will comply with all of the requirements imposed thereby in the coming years. In the event that we ever identify significant deficiencies or material weaknesses in our internal controls that we cannot remediate in a timely manner, investors and others may lose confidence in the reliability of our financial statements.

We are an "emerging growth company," and have availed ourselves of scaled public company reporting requirements and requirements for stockholder approval and advice applicable to emerging growth companies, which could make our common stock less attractive to investors.

We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. For as long as we remain an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies, including not being required to comply with the independent auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We intend to take advantage of these reporting exemptions and requirements of stockholder advisory votes and approvals until we are no longer an emerging growth company.

We could be an "emerging growth company" for up to five years after the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act, which we expect will be pursuant to a Registration Statement on Form S-8 or on Form S-1. However, if certain events occur prior to the end of such five-year period, including if we become a "large accelerated filer," our annual gross revenues exceed $1 billion or we issue more than $1 billion of non-convertible debt in any three-year period, we would cease to be an "emerging growth company" prior to the end of such five-year period. We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. If some investors find our common stock less attractive as a result of any choice we make to reduce future disclosure, there may be a less active trading market for our common stock and our stock price may be more volatile.

Unseasonable weather may disrupt our operations and may reduce consumer demand for our products.

Our products are primarily designed for outdoor use and unseasonable weather could lead to increased expenses and a reduction in our sales revenue. Unseasonable weather and prolonged, extreme temperatures, such as hurricanes, winter storms, earthquakes, floods, heat waves, and other natural disasters may affect consumer participation in outdoor sporting activities and adversely impact their demand for our products. In addition, severe weather could disrupt operation of our facilities and cause service outages, production delays and property damage that require us to incur additional expenses. Such weather conditions may also affect our ability to deliver our products to our customers or may require them to close certain stores temporarily, thereby reducing sales. As a result, unseasonable weather in any of our markets could negatively impact our net revenues.

Natural or man-made catastrophic events may disrupt our business and negatively impact our results of operation.

27


We are exposed to natural or man-made catastrophic events that may disrupt our business and may reduce consumer demand for our products. A disruption or failure of our systems or operations in the event of a natural disaster, health pandemic, such as the outbreak and global spread of COVID-19 or the coronavirus, or a man-made catastrophic event could cause delays in completing sales, continuing production, or performing other critical functions of our business, particularly if a catastrophic event occurred at our primary manufacturing locations or our distributor locations worldwide. Any of these events could severely affect our ability to conduct normal business operations and, as a result, our operating results could be adversely affected. There may also be secondary impacts that are unforeseeable, such as impacts on our consumers and on consumer purchasing behavior, which could cause delays in new orders, delays in completing sales or even order cancellations.

Due to strong consumer demand for outdoor product categories, we did not see any significant material negative impact of the COVID-19 pandemic on the Company's results of operations for the year ended December 31, 2023. We remain cautiously optimistic that ongoing efforts to increase the availability and use of COVID-19 vaccines and other precautions worldwide will neutralize any future impact of the virus and its mutations throughout Europe and the U.S. (our largest markets). The continued mutation and spread of deadly viruses, economic headwinds caused by global quarantines, or the occurrence of any other catastrophic events, could have a negative impact on our sales revenue for the coming periods and beyond.

RISKS RELATED TO OUR INDUSTRY

We may not be able to maintain or improve our competitive position because of strong competition in the personal protective equipment industry, and we expect this competition to continue to intensify.

We face competition from other global manufacturers and distributors who provide personal protective equipment to users of motorcycles, ATVs, snowmobiles, motor racing cars and other helmeted sports. Some of our international competitors are larger than we and possess greater name recognition, assets, personnel, sales and financial resources. These entities may be able to respond more quickly to changing market conditions by developing new products and services that meet customer requirements or are otherwise superior to our products and services and may be able to market their products more effectively than we can because they have significantly greater financial, technical and marketing resources than we do. They may also be able to devote greater resources than we can to the development, promotion and sale of their products. Increased competition could require us to reduce our prices, result in our receiving fewer customer orders, and result in our loss of market share. We cannot assure you that we will be able to distinguish ourselves in a competitive market. To the extent that we are unable to successfully compete against existing and future competitors, our business, operating results, and financial condition would be materially adversely affected.

If we are unable to develop competitive new products our future results of operations could be adversely affected.

Our future revenue stream depends to a large degree on our ability to utilize our technology in a way that will allow us to offer new types of safety products to a broader client base. We will be required to make investments in research and development to continue to develop new products, enhance our products and achieve market acceptance. We may incur problems in the future in innovating and introducing new and innovative products or, if developed, such products may not achieve significant customer acceptance. If we are unable to successfully define, develop and introduce competitive new products or improve on existing ones, our future results of operations would be adversely affected.

The value of our brand and sales of our products could be diminished if we, the individuals who use our products or the sport and activity categories in which our products are used, are associated with negative publicity.

Our success depends on the value of our brand. Our brand could be adversely affected if our public image or reputation were to be tarnished by negative publicity. Many athletes and other public individuals use our products and actions taken by such persons that harm the reputations of activities they participate in could also harm our brand image and result in a material decrease in our revenues and net income, which could have a negative effect on our financial condition and liquidity. In addition, negative publicity resulting from severe injuries or death occurring in the sports or activities in which our products are used and negatively impacts the popularity of such sport or activity, could have a subsequent negative effect on our net sales of products used in that sport or activity.

28


We may not be able to receive certain industry certifications and accreditation for our products.

We have obtained certification and approvals for certain of our products, including approval of our new knee brace as a Class 1 medical device by both the U.S. FDA and the UK's Medicine and Healthcare Regulatory Products Agency (MHRA), and approval of our shoulder brace as a Class 1 medical device by the U.S. FDA. All our products are compliant with applicable European Union directives, or CE certified, where appropriate. All Leatt Personal Protective Equipment (PPE) products are CE Certified showing compliance with European Economic Community (EEC) directive 89/686/EEC that imposes mandatory accreditation of all Personal Protective Equipment products offered for sale in the EEC. This includes the Company's Leatt-Brace® and body protection products. We have also obtained certifications for our helmets depending on the market, for the U.S. market our motorcycle helmets comply with the DOT (FMVSS 218) helmet safety standard and our bicycle helmets comply with EN1078, as well as CPSC 1203. Our downhill specific bicycle helmets also comply with ASTM F1952. For our Australian Market our bicycle helmet complies with AS/NZS 2063. For the UK market substantially all of our motorcycle helmets comply with ACU Gold and our Moto 3.5 helmets comply with JIS T 8133 for the Japanese Market. For the Brazilian market our Moto 7.5, Moto 3.5, and Moto 2.5 helmets complies with NBR 7471. Both our Enduro 4.0 helmet and All-Mountain 4.0 helmet have acquired NTA8776 certification, which is new e-bike helmet certification. We are currently in the process of applying to certify all our helmets for the CCC standard in China. We also voluntarily submitted our GPX neck brace to be tested by the in-house engineers of BMW Motorrad (Germany) and to be reviewed by KTM (Austria).

We believe that such testing, while not mandatory, will provide validation for our product's performance, however, there is no guarantee that our products will receive DOT, EN1078, CPSC 1203, ASTM F1952, AS/NZS 2063, NTA8776, ECE 22.06, ACU Gold, CE Certification or meet BMW testing standards. Our failure to meet testing standards could cause reputational harm and have a negative effect on net sales of products.

Economic disruption caused by the COVID-19 pandemic has resulted in supply chain abnormalities that could have an adverse effect on our results of operations.

The global shipping and other supply chain disruption resulting from the COVID-19 pandemic has resulted in certain inflated stock levels industry wide and in abnormal customer ordering patterns. Our customers who changed their ordering patterns to ensure the availability of inventory during the global shipping and supply chain disruptions, are delaying new orders in order to digest stock levels. The impact of this abnormality on our customers is compounded by the global economic slowdown caused by the current geo-political instability, a high inflationary environment and resulting foreign exchange rate volatility. Elevated industry wide inventory levels coupled with these adverse economic conditions that may impact levels of consumer spending may result in slower inventory digestion patterns in the short term, which could have a negative impact on our results of operations for the coming periods and beyond.

RISKS RELATED TO DOING BUSINESS IN NON-US JURISDICTIONS

We face risks associated with doing business in non-US jurisdictions.

We have affiliates, and our products are manufactured in and distributed from facilities, located in foreign countries, including countries in Asia and South Africa. International operations are subject to certain risks inherent in doing business abroad, including: exposure to political, social and economic instability; expropriation and nationalization; withholding and other taxes on remittances and other payments by subsidiaries; difficulties in enforcement of contract and intellectual property rights; exposure to foreign current exchange rates, interests rates and inflation; investment restrictions or requirements; and export and import restrictions.

We continue to monitor any adverse impact that the outbreak of war in Ukraine and the subsequent institution of sanctions against Russia by the U.S. and several European leaders may have on the global economy in general and on our business operations and that of our suppliers and customers, in particular. For example, a prolonged conflict may have unintended consequences such as increased inflation, fuel and transportation costs and an increase in bad debt expense from doubtful accounts receivable balances owed by affected customers. We will continue to monitor this fluid situation and develop contingencies as necessary to address any disruptions to our business operations as they develop.

29


We are highly dependent on our foreign affiliates for their production capabilities and increasing our foreign operations and business relationships are important elements of our strategy. As a result, our exposure to the risks described above may be greater in the future. The likelihood of such occurrences and their potential impact on us varies from country to country and are unpredictable.

Our operations and assets in China are subject to significant political and economic uncertainties.

Changes in PRC laws and regulations, or their interpretation, or the imposition of confiscatory taxation, restrictions on currency conversion, imports and sources of supply, devaluations of currency or the nationalization or other expropriation of private enterprises could have a material adverse effect on our business, results of operations and financial condition. Under its current leadership, the Chinese government has been pursuing economic reform policies that encourage private economic activity and greater economic decentralization. There is no assurance, however, that the Chinese government will continue to pursue these policies, or that it will not significantly alter these policies from time to time without notice.

We may have limited legal recourse under PRC law if disputes arise under our outsourcing manufacturing arrangements with third parties.

The Chinese government has enacted some laws and regulations dealing with matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. However, their experience in implementing, interpreting and enforcing these laws and regulations is limited, and our ability to enforce commercial claims or to resolve commercial disputes is unpredictable. If our outsourcing manufacturing arrangements are unsuccessful or other adverse circumstances arise from these arrangements, we face the risk that our third-party manufacturers may dishonor our purchase orders or unwritten arrangements. The resolution of these matters may be subject to the exercise of considerable discretion by agencies of the Chinese government and forces unrelated to the legal merits of a particular matter or dispute may influence their determination. Any rights we may have to specific performance, or to seek an injunction under PRC law, in either of these cases, are severely limited, and without a means of recourse by virtue of the Chinese legal system, we may be unable to prevent these situations from occurring. The occurrence of any such events could have a material adverse effect on our business, financial condition, and results of operations.

Our potential inability to adequately protect our intellectual property during the outsource manufacturing of our products in China could negatively impact our performance.

Our products are manufactured predominantly in China through third-party outsource manufacturing arrangements. We rely on our third-party manufacturers to implement customary manufacturer safeguards onsite, such as the use of confidentiality agreements with employees, to protect our proprietary information and technologies during the manufacturing process, however, these safeguards may not effectively prevent unauthorized use of such information and technical knowhow or prevent such manufacturers from retaining them. The legal regime governing intellectual property rights in China is relatively weak and it is often difficult to create and enforce intellectual property rights or protect trade secrets there. We face risks that our proprietary information may not be afforded the same protection in China as it is in countries with well-developed intellectual property laws, and local laws may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights in China, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

We may be exposed to liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption laws, and any determination that we violated these laws could have a material adverse effect on our business.

We are subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute, for the purpose of obtaining or retaining business. We have operations and agreements with third parties worldwide and such activities create the risk of unauthorized payments or offers of payments by the employees, consultants, sales agents, or distributors of our Company, even though they may not always be subject to our control. It is our policy to implement safeguards to discourage these practices by our employees. However, our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants, sales agents, or distributors of our Company may engage in conduct for which we might be held responsible. Violations of the FCPA or Chinese anti-corruption laws may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results, and financial condition. In addition, the U.S. government may seek to hold our Company liable for successor liability in connection with FCPA violations committed by companies in which we invest or that we acquire.

30


Your ability to bring an action against us, and those of our officers and directors who are based in South Africa, or to enforce a judgment against us or recover assets in our possession may be difficult since any such action or recovery of assets would be an international matter, involving South African laws and geographic and temporal disparities.

We conduct substantial operations in South Africa through our foreign registered branch and a substantial portion of our assets are located outside of the United States. In addition, all but two of our management personnel reside in South Africa. As a result, it may be difficult or impossible for you to bring an action against us or these individuals in the United States in the event that you believe that your rights have been violated under applicable law or otherwise. Even if an action of this type is successfully brought, the laws of the United States and of South Africa may render a judgment unenforceable.

RISKS RELATING TO OUR COMMON STOCK

We cannot assure you that our common stock will be listed on a national securities exchange.

Our common stock is quoted on the QB tier of the over-the-counter electronic bulletin board maintained by the OTC Markets Group Inc. (OTC), which is not a national securities exchange. We plan to list our common stock on a national exchange as soon as practicable, however, we cannot assure you that we will be able to meet the initial listing standards of any national exchange, or that we will be able to maintain any such listing. Until our common stock is listed on a national exchange, we expect that it would be eligible to continue being quoted in the OTC, where trading of our common stock may be sporadic and a more active market for our common stock may not develop.

Our holding company structure may limit the payment of dividends.

We have no direct business operations, other than our ownership of our subsidiaries. While we have no immediate intention of paying dividends, should we decide in the future to do so, as a holding company, our ability to pay dividends and meet other obligations depends upon the receipt of dividends or other payments from our operating subsidiaries and other holdings and investments. In addition, our operating subsidiaries, from time to time, may be subject to restrictions on their ability to make distributions to us, including as a result of restrictive covenants in loan agreements, restrictions on the conversion of local currency into U.S. dollars or other hard currency and other regulatory restrictions as discussed below. If we determine that we will pay dividends to the holders of our common stock, we cannot assure that such dividends will be paid on a timely basis. As a result, you will not receive any return on your investment prior to selling your shares in our company and, for the other reasons discussed in this "Risk Factors" section, you may not receive any return on your investment even when you sell your shares in our company and your shares may become worthless. If future dividends are paid in ZAR, fluctuations in the exchange rate for the conversion of ZAR into U.S. dollars may reduce the amount received by U.S. stockholders upon conversion of the dividend payment into U.S. dollars.

The Company's officers, directors and affiliates collectively have the power to make all major decisions regarding the Company without the need to get consent from any stockholder or other person. This discretion could lead to decisions that are not necessarily in the best interests of minority shareholders.

Our Company's officers, directors and affiliates collectively own 47.84% of our common stock (including our preferred stock which converts on a one-for-one basis to common stock but vote on a one-for-one hundred basis to common stock). Our officers and directors, therefore, has the power to make all major decisions regarding our affairs, including decisions regarding whether or not to issue stock and for what consideration, whether or not to sell all or substantially all of our assets and for what consideration and whether or not to authorize more stock for issuance or otherwise amend our charter or bylaws. Our officers and directors are in a position to elect all of our directors and to dictate all of our policies.

31


ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

32


ITEM 1C. CYBERSECURITY

Risk Management and Strategy. 

We rely on information technology and data to operate our business and develop, market, and deliver our products to our customers. We have implemented and maintain various information security processes designed to identify, assess and manage material risks from cybersecurity threats to critical computer networks, third party hosted services, communications systems, hardware, software, and our critical data includes confidential, personal, proprietary, and sensitive data, collectively our "Information Assets". Accordingly, we maintain certain risk assessment processes intended to identify cybersecurity threats, determine their likelihood of occurring, and assess potential material impact to our business. Based on our assessment, we implement and maintain risk management processes designed to protect the confidentiality, integrity, and availability of our Information Assets and mitigate harm to our business.

The Company's general risk management program is designed to manage identified material risks, which would include material cybersecurity risks. We engage in processes designed to identify such threats by, among other things, monitoring the threat environment using manual and automated tools, subscribing to reports and services that identify cybersecurity threats, analyzing reports of threats and actors, conducting scans of the threat environment, evaluating our and our industry's risk profile, evaluating threats reported to us, coordinating with law enforcement concerning threats, conducting threat assessments for internal and external threats, and conducting vulnerability assessments to identify vulnerabilities. We rely on a multidisciplinary team (including from our information security function, management, and third-party service providers, as described further below) to assess how identified cybersecurity threats could impact our business. These assessments may leverage, among other processes, industry tools and metrics designed to assist in the assessment of risks from such cybersecurity threats.

Depending on the environment, we implement and maintain various technical, physical and organizational measures designed to manage and mitigate material risks from cybersecurity threats to our Information Assets. The cybersecurity risk management and mitigation measures we implement for certain of our Information Assets include: policies and procedures designed to address cybersecurity threats, including an incident response plan, vulnerability management policy, and disaster recovery/business continuity plans; incident detection and response tools; internal and/or external audits to assess our exposure to cybersecurity threats, environment, compliance with risk mitigation procedures, and effectiveness of relevant controls; documented risk assessments; implementation of security standards/certifications; encryption of data; network security controls; threat modeling; data segregation; physical and electronic access controls; physical security; asset management, tracking and disposal; systems monitoring; vendor risk management program; employee security training; penetration testing; cyber insurance.

We work with third parties from time to time to identify, assess, and manage cybersecurity risks, including professional services firms, threat intelligence service providers, cybersecurity consultants, cybersecurity software providers, managed cybersecurity service providers, and penetration testing. To operate our business, we utilize certain third-party service providers to perform a variety of functions, such as outsourced business critical functions, clinical research, professional services, SaaS platforms, managed services, IT asset management, cloud-based infrastructure, data center facilities, content delivery, encryption and authentication technology, corporate productivity services, and other functions.

We have certain vendor management processes designed to help to manage cybersecurity risks associated with our use of certain of these providers. Depending on the nature of the services provided, the sensitivity and quantity of information processed, and the identity of the service provider, our vendor management process may include reviewing the cybersecurity practices of such provider, contractually imposing obligations on the provider related to the services they provide and/or the information they process, conducting security assessments, conducting on-site inspections, requiring their completion of written questionnaires regarding their services and data handling practices, and conducting annual re-assessments during their engagement.

33


To date, risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected us, including our business strategy, results of operations or financial condition, and we do not believe that such risks are reasonably likely to have such an effect over the long term. However, due to evolving cybersecurity threats, we may not be able to protect all information systems. Additional information on cybersecurity risks we face is discussed in Item 1A of Part I, "Risk Factors," which should be read in conjunction with the foregoing information.

Governance. 

Our cybersecurity risk assessment and management processes are implemented and maintained by certain Company management, including a dedicated information technology manager, who reports to the CEO. Management is also responsible for hiring appropriate personnel, integrating cybersecurity considerations into the company's overall risk management strategy, and for communicating key priorities to employees, as well as for approving budgets, helping prepare for cybersecurity incidents, approving cybersecurity processes, and reviewing security assessments and other security-related reports. Our cybersecurity incident response and vulnerability management processes involve management, who participates in our disclosure controls and procedures.

Our cybersecurity incident response and vulnerability management processes are designed to escalate certain cybersecurity incidents and vulnerabilities to members of management depending on the circumstances, including work with the company's incident response team to help the company mitigate and remediate cybersecurity incidents of which they are notified. In addition, the company's incident response processes include reporting to the Board of Directors for certain cybersecurity incidents.

Management is involved with the Company's efforts to prevent, detect, and mitigate cybersecurity incidents by overseeing preparation of cybersecurity policies and procedures, testing of incident response plans, engagement of vendors to conduct penetration tests. Management participates in cybersecurity incident response efforts by being a member of the incident response team and helping direct the company's response to cybersecurity incidents. The Board of Directors is responsible for overseeing the company's cybersecurity risk management processes, including oversight and mitigation of risks from cybersecurity threats.

ITEM 2. PROPERTIES.

Our corporate headquarters are located in a 948 square meter space located at 12 Kiepersol Drive, Atlas Gardens, Contermanskloof Road, Durbanville, Western Cape, South Africa, 7550. Approximately 20% of the space is used by our finance, legal and operations teams, 10% is used for warehousing and South African distribution 35% is used by marketing and the remaining 35% is used by Leatt Lab and our research and development team. We purchased this property during the course of 2023.

We lease extra warehouse space to store inventory located at Unit 2, Stand no. 37, Sycamore Crescent, Atlas Gardens, Durbanville, Western Cape, South Africa, 7550. We occupy these premises pursuant to a lease agreement, dated May 25, 2023, between Leatt SA and FC Rust Theron Inc, which expires on February 28, 2025. The lease agreement requires us to pay a monthly rent of ZAR 15,615 (or $854) for first twelve months, and ZAR 16,864 (or $922) for the following eight months.

We entered into a lease agreement for extra warehouse space to store inventory located at Unit 9, 36 Sycamore Crescent, Atlas Gardens, Durbanville, Western Cape, South Africa, 7550. We occupy these premises pursuant to a lease agreement, dated February 24, 2022, between Leatt SA and Montprop Beleggings (Pty) Ltd, which commenced April 1, 2022 and was scheduled to expire on August 31, 2023. On May 23, 2023, we renewed the original lease agreement, effective September 1, 2023, and it is now scheduled to expire on February 28, 2025. The renewed lease agreement requires us to pay a monthly rent of ZAR 29,835 (or $1,632) for first six months, and ZAR 31,924 (or $1,746) for the following twelve months. The rent payable excludes VAT, water, electricity, and other associated costs.

34


Our newly redomiciled Nevada subsidiary, Two Eleven, entered into a Lease Agreement, dated December 14, 2020, with CP Logistics NVCC IV, LLC, to lease warehouse and office space comprising approximately 43,056 square foot in Reno, Nevada. The lease commenced upon the date of substantial completion of the landlord's work, as defined in the Lease Agreement, August 2, 2021, and the term will continue for a period of sixty-six (66) months from such commencement date, subject to renewal, at Two Eleven's option, for an additional five (5) year term. The rent payable from the 3rd month following the commencement date through to the 14th month will be $21,959 and thereafter the rent payable will escalate in subsequent months in accordance with the terms of the Lease Agreement, up to a monthly payment of $25,455 in the 63rd through 66th month. The rent payable will exclude other associated costs, such as real estate taxes, association dues, insurance, and other fees.

We also lease extra warehouse space from time to time to store inventory. These agreements are on a month-to-month basis and vary during the year.

We believe that all premises used by the Company and its subsidiaries are in good condition, and that the property located there are adequately insured.

ITEM 3. LEGAL PROCEEDINGS.

From time to time, we may become involved in various lawsuits and legal proceedings in the ordinary course of our business. We are currently not aware of any legal proceedings the ultimate outcome of which, in our judgment based on information currently available, would have a material adverse effect on our business, financial condition or operating results.

ITEM 4. MINING SAFETY DISCLOSURES.

Not Applicable.

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 on the QB tier of the over-the-counter electronic bulletin board maintained by the OTC Markets Group Inc. under the symbol LEAT. The CUSIP number for our common stock is 522132 10 9.

The following table sets forth, for the periods indicated, the high and low closing prices of our common stock as reported by Yahoo Finance at https://finance.yahoo.com for the periods indicated. These prices reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.

 Closing Prices 
 HighLow 
Year Ended December 31, 2024   
1st Quarter (January 1, 2024 to March 4, 2024)$9.90$7.60 
Year Ended December 31, 2023   
1st Quarter$19.25$10.85 
2nd Quarter$12.55$10.95 
3rd Quarter$14.57$11.05 
4th Quarter$ 11.99$ 9.11 
Year Ended December 31, 2022   
1st Quarter$ 32.50$ 22.72 
2nd Quarter$ 28.75$ 20.03 
3rd Quarter$ 26.95$ 19.45 
4th Quarter$ 21.20$ 18.00 
 

35


Holders

As of March 4, 2024, there were approximately164 stockholders of record of our common stock. The number of record holders does not include persons who held our common stock in nominee or "street name" accounts through brokers.

Dividend Policy

We have never declared dividends or paid cash dividends. Our board of directors will make any future decisions regarding dividends. We currently intend to retain a significant majority of current and future earnings for the development and expansion of our business.

Our board of directors has complete discretion on whether to pay dividends, subject to the approval of our shareholders. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.

Securities Authorized for Issuance under Equity Compensation Plans

Our officers and directors are eligible for equity awards in the form of stock options and restricted stock under the Leatt Corporation Amended and Restated 2011 Equity Incentive Plan (the "2011 Plan"), pursuant to which the Company is authorized to issue and sell up to 1,520,000 shares of common stock of the Company, par value $0.001 per share. Equity awards under the 2011 Plan are granted at the discretion of the Board. The size of an award to any individual, including named executive officers, depends in part on individual performance, company performance, and any other indicators of the impact that such employee's productivity may have on stockholder value over time. Other factors include salary level and competitive data. In addition, in determining the awards granted to each named executive officer, or other individual, the Board considers the future benefits potentially available to the named executive officers or individuals from existing awards. We have no program, plan or practice of granting equity awards that coincide with the release by the Company of material non-public information.

The following table includes the information as of December 31, 2023 for each category of our equity compensation plan.

36


Plan categoryNumber of securities
to be issued upon exercise of
outstanding options, warrants
and rights
(a)
Weighted-average exercise
price of outstanding options,
warrants and rights
(b)
Number of securities remaining
available for future issuance under
equity compensation plans (excluding
securities reflected in column (a))
(c)
Equity
compensation plans
approved by
security holders
0$1.00191,400
52,000$2.60
52,000$1.60
117,000$2.30
Equity compensation plans not approved by security holders0--0
Total221,000-- 

Recent Sales of Unregistered Securities

We have not sold any equity securities during 2023 that were not previously disclosed in a quarterly report on Form 10-Q or a current report on Form 8-K that was filed during the period.

Purchases of Equity Securities

No repurchases of our common stock were made during the fourth quarter of 2023.

ITEM 6. SELECTED FINANCIAL DATA.

Not Applicable.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following management's discussion and analysis should be read in conjunction with our financial statements and the notes thereto and the other financial information appearing elsewhere in this report. In addition to historical information, the following discussion contains certain forward-looking information. See "Special Note Regarding Forward Looking Statements" above Part I, for certain information concerning those forward-looking statements. Our financial statements are prepared in U.S. dollars and in accordance with U.S. GAAP.

Overview of our Business

We were incorporated in the State of Nevada on March 11, 2005, under the name Treadzone, Inc. We were a shell company with little or no operations until March 1, 2006, when we acquired the exclusive global manufacturing, distribution, sale and use rights to the Leatt-Brace®, pursuant to a license agreement between the Company and Xceed Holdings, a company controlled by the Company's Chairman and founder, Dr. Christopher Leatt. On May 25, 2005, we changed our name to Leatt Corporation in connection with our anticipated acquisition of the Leatt-Brace® rights. Leatt designs, develops, markets and distributes personal protective equipment for participants in all forms of motor sports and leisure activities, including riders of motorcycles, bicycles, snowmobiles and ATVs. The Company sells its products to customers worldwide through a global network of distributors and retailers. Leatt also acts as the original equipment manufacturer for personal protective equipment sold by other international brands.

The Company's flagship products are based on the Leatt-Brace® system, a patented injection molded neck protection system owned by Xceed Holdings, designed to prevent potentially devastating injuries to the cervical spine and neck. The Company has the exclusive global manufacturing, distribution, sale and use rights to the Leatt-Brace®, pursuant to a license agreement between the Company and Xceed Holdings, a company owned and controlled by the Company's Chairman and founder, Dr. Christopher Leatt. The Company also has the right to use apparatus embodying, employing and containing the Leatt-Brace® technology and has designed, developed, marketed and distributed other personal protective equipment using this technology, as well as its own developed technology, including the Company's body protection products, and helmets which it markets under the Leatt® brand.

37


The Company's research and development efforts are conducted at its research facilities, located at its executive headquarters in Cape Town, South Africa. The Company employs 4 full-time employees who are dedicated exclusively to research, development, and testing. The Company also utilizes consultants, academic institutions and engineering companies as independent contractors or consultants, from time to time, to assist it with its research and development efforts. Leatt products have been tested and reviewed internally and by external bodies. All Leatt products are compliant with applicable European Union directives, or CE certified, where appropriate. Depending on the market we have other certifications outside of CE. Specifically, all our motorcycle helmets comply with Economic Commission for Europe (ECE) UN Regulation No. 22 r06, and our bicycle helmet complies with the European Committee for Standardization (CEN) EN-1078 standard. For the US market, our motorcycle helmets comply with the US Department of Transportation (DOT) FMVSS 218 helmet safety standard and our bicycle helmet complies with the US Consumer Product Safety Commission (CPSC) 1203 standard for helmet safety. Our downhill specific bicycle helmets also comply with the American Society for Testing and Materials (ASTM) F1952 standard for downhill racing safety. For the Australian market, our bicycle helmet complies with Australian/New Zealand Standard (AS/NZS) 2063, for the UK market, substantially all of our motorcycle helmets comply with the Auto Cycle Union (ACU) gold standard, for the Japanese market, our Moto 3.5 helmet with the Japanese Standard Association (JSA) JIS T 8133 standard for protective helmets, and for the Brazilian market our Moto 7.5, Moto 3.5, and Moto 2.5 helmets comply with The Brazilian Association of Technical Standards (ABNT) NBR 7471 safety standard. Our Enduro 4.0 helmet and All-Mountain 4.0 helmet have acquired NTA8776 certification, a new e-bike helmet certification required in the Dutch Technical Agreement (NTA) 8776.

Our products are predominately manufactured in China in accordance with our manufacturing specifications, pursuant to outsourced manufacturing arrangements with third-party manufacturers located there, based on agreed terms. We continue to build manufacturing capacity outside China, namely, in Thailand and Bangladesh. The Company utilizes outside consultants and its own employees to ensure the quality of its products through regular on-site product inspections. Products sold to our international customers are usually shipped directly from our consolidation warehouse or manufacturers' warehouses to customers or their import agents.

Leatt earns revenues through the sale of its products through approximately 49 distributors worldwide, who in turn sell its products to retailers. Leatt distributors are required to follow certain standard business terms and guidelines for the sale and distribution of Leatt products. Two Eleven and Leatt SA directly distribute Leatt products to dealers and direct to end consumers through digital channels in the United States and South Africa, respectively.

Principal Factors Affecting Our Financial Performance

We believe that the following factors will continue to affect our financial performance:

 Global Economic Fragility - The ongoing turmoil in the global economy, especially in the U.S., Asia and Europe, may have an impact on our business and our financial condition if economic conditions do not improve. We sell our products through a global network of distributors and dealers who may have difficulty clearing elevated multi-brand stock, previously ordered in response to industry wide supply chain challenges, which in turn could slow new orders and affect our financial performance. If our customers were to experience prolonged slow growth or recession as a result of these conditions or otherwise, we could see a drop-in demand for our products and potentially difficulty in collecting accounts receivables.

 Trade Restrictions - We engage in international manufacturing and sales which exposes us to trade restrictions and disruptions that could harm our business and competitive position. Most of our products are manufactured in China, and the U.S. administration has announced tariffs on certain products imported into the United States with China as the country of origin. While these tariffs have not had a significant impact on the shipment of our products to international markets as at December 2023, we believe that the future imposition of, or significant increases in, the level of tariffs, custom duties, export quotas and other barriers and restrictions by the U.S. on China or other countries could disrupt our supply chain, increase the cost of our raw materials and therefore our pricing, and impose the burdens of compliance with foreign trade laws, any of which could potentially affect our bottom line and sales. While we are in continuous discussions with our manufacturers to ensure there are contingencies in place, we cannot assure you that we will not be adversely affected by changes in the trade laws of foreign jurisdictions where we sell and seek to sell our products.

38


 Fuel Prices - Significant fluctuations in fuel prices could have both a positive and negative effect on our business and operations. A significant portion of our revenue is derived from international sales and significant fluctuations in world fuel prices could significantly increase the price of shipping or transporting our products which we may not be able to pass on to our customers. On the other hand, fluctuations in fuel prices lead to higher commuter costs which may encourage the increased use of motorcycles and bicycles as alternative modes of transportation and lead to an increase in the market for our protection products.

 Product Liability Litigation - We face an inherent business risk of exposure to product liability claims arising from the claimed failure of our products to help prevent the types of personal injury or death against which they are designed to help protect. Therefore, we have acquired very costly product liability insurance worldwide. We have not experienced any material uninsured losses due to product liability claims, but it is possible that we could experience material losses in the future. After a two-week trial in the United States District Court for the Northern District of Ohio (Eastern) ending on April 17, 2014, a federal jury returned a defense verdict for the Company in the first Leatt-Brace® product liability lawsuit to be tried in the United States. The plaintiffs in that case had alleged that defective product design and failure to warn had caused a motocross rider to suffer multiple mid-thoracic spine fractures, causing immediate and permanent paraplegia, when he crashed at a relatively low speed on February 13, 2011. When the accident occurred, he was wearing a helmet and other safety gear from several different companies, including the Company's acclaimed Leatt-Brace®. The Company produced evidence at trial showing that his thoracic paraplegia was an unavoidable consequence of his fall, not the result of wearing a Leatt-Brace®, and that the neck brace likely saved his life (or saved him from quadriplegia) by preventing cervical spine injury. The Company had maintained from the onset that this and a small handful of other lawsuits are without merit and that it would vigorously defend itself in each case. In this case, the plaintiffs subsequently appealed the court's decision, and the parties reached an amicable settlement. Although we carry product liability insurance, a successful claim brought against us could significantly harm our business and financial condition and have an adverse impact on our ability to renew our product liability insurance or secure new coverage.

 Protection of Intellectual Property - We believe that the continued success of our business is dependent on our intellectual property portfolio consisting of globally registered trademarks, design patents and utility patents related to the Leatt-Brace®. We believe that a loss of these rights would harm or cause a material disruption to our business and, our corporate strategy is to aggressively take legal action against any violators of our intellectual property rights, regardless of where they may be. From time to time, we have had to enforce our intellectual property rights through litigation, and we may be required to do so in the future. Such litigation may result in substantial costs and could divert resources and management attention from the operations of our business.

 Fluctuations in Foreign Currencies - We are exposed to foreign exchange risk as our revenues and consolidated results of operations may be affected by fluctuations in foreign currency as we translate these currencies into U.S. dollars when we consolidate our financial results. While our reporting currency is the U.S. Dollar, a portion of our consolidated revenues are denominated in South African Rand, or ZAR, certain of our assets are denominated in ZAR, and our research and marketing operations in South Africa utilize South African labor sources. A decrease in the value of the U.S. dollar in relation to the ZAR could increase our cost of doing business in South Africa. If the ZAR depreciates against the U.S. Dollar, the value of our ZAR revenues, earnings and assets as expressed in our U.S. Dollar financial statements will decline. We have not entered into any hedging transactions in an effort to reduce our exposure to foreign exchange risk. Furthermore, since 70% of our sales are derived outside the U.S., where the U.S. dollar is not the primary currency, significant fluctuations in exchange rates such as the strengthening of the dollar versus our customers' local currency can adversely affect our ability to remain competitive in those areas.

 Natural or Man-made Catastrophic Events - We are exposed to natural or man-made catastrophic events that may disrupt our business and may reduce consumer demand for our products. A disruption or failure of our systems or operations in the event of a natural disaster, health pandemic, such as the outbreak and global spread of COVID-19 or the coronavirus, or a man-made catastrophic event could cause delays in completing sales, continuing production, or performing other critical functions of our business, particularly if a catastrophic event occurred at our primary manufacturing locations or our distributor locations worldwide. Any of these events could severely affect our ability to conduct normal business operations and, as a result, our operating results could be adversely affected. There may also be secondary impacts that are unforeseeable, such as impacts on our consumers and on consumer purchasing behavior, which could cause delays in new orders, delays in completing sales or even order cancellations. The continued mutation and spread of deadly viruses, economic headwinds caused by global quarantines, or the occurrence of any other catastrophic events, could have a negative impact on our sales revenue for the coming periods and beyond.

39


 Impact of Global Conflict - We are exposed to global conflict, such as the ones in Ukraine and the Middle East, that may disrupt our business and reduce consumer demand for our products. A disruption of global shipping routes, the imposition of government sanctions or other activities resulting from such conflicts could directly affect consumer demand for our products, cause delays in completing sales, shipping of our products, continuing production or performing other critical functions of our business, particularly if a conflict occurs at our primary manufacturing locations or our distributor locations worldwide. Furthermore, prolonged conflict may have unintended global consequences such as increased inflation, fuel and transportation costs.

While we have conducted due diligence on our customers in Russia to ensure that they do not fall into any sanctioned categories, we have seen a delay in the receipt of receivables in our bank account from the distributors of our products in Russia caused by enhanced screening of Russian funds in compliance with global sanctions against Russia for the war in Ukraine. The prolonging or expansion of that conflict could have an adverse impact on our consumers and on consumer purchasing behavior, and result in delays of new orders and completing sales, order cancellations, or payment and shipping delays. We will continue to monitor this fluid situation and any adverse impact that it may have on the global economy in general and on our business operations and especially that of our customers, and we will develop contingencies as necessary to address any disruptions to our business operations as they arise.

Results of Operations

Year ended December 31, 2023, compared to the year ended December 31, 2022

The following table summarizes the results of our operations during the years ended December 31, 2023 and 2022 and provides information regarding the dollar and percentage of year-over-year increase or (decrease).

40


    Fiscal Year Ended December 31,           Percentage  
    2023     2022     Increase     Increase  
Item               (Decrease)     (Decrease)  
                         
REVENUES $ 47,241,187   $ 76,335,539   $ (29,094,352 )   -38%  
COST OF REVENUES   27,435,115     45,202,712   $ (17,767,597 )   -39%  
GROSS PROFIT   19,806,072     31,132,827   $ (11,326,755 )   -36%  
PRODUCT ROYALTY INCOME   93,696     240,044   $ (146,348 )   -61%  
OPERATING EXPENSES                        
Salaries and Wages   5,443,685     6,148,179   $ (704,494 )   -11%  
Commissions and Consulting   434,657     563,689   $ (129,032 )   -23%  
Professional Fees   748,608     586,474   $ 162,134     28%  
Advertising and Marketing   4,127,798     3,342,791   $ 785,007     23%  
Office Lease and Expenses   596,862     689,068   $ (92,206 )   -13%  
Research and Development Costs   2,526,550     2,179,996   $ 346,554     16%  
Bad Debt Expense (Recovery)   (10,288 )   474,019   $ (484,307 )   -102%  
General and Administrative   3,438,746     3,273,346   $ 165,400     5%  
Depreciation   1,174,664     1,098,433   $ 76,231     7%  
Total Operating Expenses   18,481,282     18,355,995   $ 125,287     1%  
INCOME FROM OPERATIONS   1,418,486     13,016,876   $ (11,598,390 )   -89%  
Other Expenses   (39,138 )   (13,550 ) $ (25,588 )   189%  
INCOME BEOFRE INCOME TAXES   1,379,348     13,003,326   $ (11,623,978 )   -89%  
Income Taxes   576,189     3,042,873   $ (2,466,684 )   -81%  
NET INCOME $ 803,159   $ 9,960,453   $ (9,157,294 )   -92%  

Revenues - We earn revenues from the sale of our protective gear comprising of neck braces, body armor, helmets and other products, parts and accessories both in the United States and abroad. Revenues for the year ended December 31, 2023 were $47.24 million, a 38% decrease, compared to revenues of $76.34 million, for the year ended December 31, 2022. This decrease in global revenues is attributable to a $2.64 million decrease in neck brace sales, a $3.36 million decrease in helmet sales, a $6.81 million decrease in other products, parts and accessory sales and a $16.29 million decrease in body armor sales, during the year ended December 31, 2023. Revenues associated with international customers for the years ended December 31, 2023 and 2022, respectively were $33.27 million and $59.02 million, or 70% and 77% of global revenues.

The following table sets forth our revenues by product line for the years ended December 31, 2023 and 2022:

    Year Ended December 31,  
    2023     % of Revenues     2022     % of Revenues  
Neck braces $ 2,748,533     6%   $ 5,389,672     7%  
Body armor   22,576,722     48%     38,864,312     51%  
Helmets   11,117,109     23%     14,477,472     19%  
Other products, parts and accessories   10,798,823     23%     17,604,083     23%  
  $ 47,241,187     100%   $ 76,335,539     100%  

Sales of our flagship neck brace accounted for $2.75 million and $5.39 million, or 6% and 7% of our revenues for the years ended December 31, 2023 and 2022, respectively. The 49% decrease in neck brace revenues was primarily due to a 49% decrease in the volume of neck braces sold to our customers worldwide during the 2023 period, as dealers and distributors continued to adjust ordering patterns and digest industry wide inventory levels.

41


Our body armor products are comprised of chest protectors, full upper body protectors, upper body protection vests, back protectors, knee braces, knee and elbow guards, off-road motorcycle boots and mountain biking shoes. Body armor revenues accounted for $22.58 million and $38.86 million, or 48% and 51% of our revenues for the years ended December 31, 2023 and 2022, respectively. The 42% decrease in body armor revenues was primarily due to a 43% decrease in the volume of upper body armor sold during the 2023 period. Additionally, sales volumes of off-road motorcycle boots decreased by 48%, when compared to the 2022 period, which was an exceptionally strong period for motorcycle boots sales. Motorcycle boot revenues increased by 58% for the year ended December 31, 2022, when compared to the prior year period.

Our helmets accounted for $11.12 million and $14.48 million, or 23% and 19% of our revenues for the years ended December 31, 2023 and 2022, respectively. Although sales volumes of our MOTO helmet line up for off-road motorcycle use increased by 45% during the period, the 23% decrease in helmet revenues is primarily due to a 49% decrease in the volume of MTB helmets sold during the 2023 period as dealers and distributors, particularly in the cycling industry continue to manage ordering and industry wide inventory levels cautiously.

Our other products, parts and accessories are comprised of goggles, hydrations bags and apparel items including jerseys, pants, shorts and jackets, as well as aftermarket product support items. Other products, parts and accessories sales accounted for $10.80 million and $17.60 million, or 23% and 23% of our revenues for the years ended December 31, 2023 and 2022, respectively. The 39% decrease in revenues of other products, parts and accessories is primarily due to a 47% decrease in the global sales volume of technical apparel designed for off-road motorcycle and mountain biking use when compared to the prior year period.

Costs of Revenues and Gross Profit - Cost of revenues for the years ended December 31, 2023 and 2022 were $27.44 million and $45.20 million, respectively. Gross Profit for the years ended December 31, 2023 and 2022 were $19.81 million or 42% of revenues, and $31.13 million or 41% of revenues, respectively. Our neck brace products continue to generate a higher gross margin than our other product categories. Although neck brace revenues continue to generate a higher gross margin than our other product categories and accounted for 6% and 7% of our revenues for the years ended December 31, 2023 and 2022, respectively, revenues associated with international customers were 70% and 77% of our revenues for the twelve months ended December 31, 2023 and 2022, respectively, with revenues associated with international distributors continuing to generate a lower gross profit as a percentage of revenues than direct dealer sales in the United States.

Product Royalty Income - Product royalty income is earned on sales to distributors that have royalty agreements in place, as well as sales of licensed products by third parties that have licensing agreements in place. Product royalty income for the years ended December 31, 2023 and 2022 were $93,696 and $240,044, respectively. The 61% decrease in product royalty income is primarily due to a decrease in the sale of licensed products by licensees during the 2023 period.

Salaries and Wages - Salaries and wages for the years ended December 31, 2023 and 2022 were $5,443,685 and $6,148,179, respectively. This 11% decrease in salaries and wages during the 2023 period was primarily due to a decrease in share compensation costs relating to a share issuance made to key personnel during the 2022 period, that was partially offset by the employment of sales, marketing and business development personnel in the United States and abroad as the Company continues to invest in its global sales and marketing capabilities.

Commissions and Consulting Expense - Commissions and consulting expense for the years ended December 31, 2023 and 2022 were $434,657 and $563,689, respectively. This 23% decrease in commissions and consulting expenses during the 2023 period is primarily due to a decrease in commissions and performance incentives paid to external sales personnel in the United States in line with the decrease in sales revenues and continued employment of in-house employee sales personnel in the region during the 2023 period.

Professional Fees - Professional fees consist of costs incurred for audit, tax, regulatory filings and quarterly reporting requirements, as well as patent maintenance, protection and litigation expenses incurred as the Company continues to expand its portfolio of exceptional protective gear. Professional fees for the years ended December 31, 2023 and 2022 were $748,608 and $586,474, respectively. Although product liability litigation costs continued to decrease, the 28% increase in professional fees is primarily due to an increase in patent maintenance and litigations expenses as the Company continues to build, maintain and defend a strong portfolio of intellectual property.

42


Advertising and Marketing - The Company primarily places paid advertising on various motorsport and bicycle online platforms and sponsors a number of events, teams and individuals to increase brand and product visibility globally. Advertising and marketing expenses for the years ended December 31, 2023 and 2022 were $4,127,798 and $3,342,791, respectively. This 23% increase in advertising and marketing expenditures is in-line with continued production and implementation of global, co-ordinated marketing campaigns that incorporate athlete sponsorships, industry trade show activation and event attendance and advertising activities undertaken with the support of our distribution partners and designed to market the Company's growing product offering and increase global consumer brand engagement. The Company actively intensified product sponsorships to athletes, media and a wider audience of riders around the world in order to create product awareness and utilize on-hand inventory efficiently.

Office Lease and Expenses - Office lease and expenses for the years ended December 31, 2023 and 2022 were $596,862 and $689,068, respectively. The 13% decrease in office lease and expenses during the 2023 period is primarily due to a decrease in additional warehousing rented in the United States as the Company continues to improve warehouse operations and optimize stock levels at its Reno, Nevada warehouse.

Research and Development Costs - These costs include the salaries of staff members that are directly involved in the research and development of protective gear, as well as the direct costs associated with developing these products. Research and development costs for the years ended December 31, 2023 and 2022 were $2,526,550 and $2,179,996, respectively. This 16% increase in research and development costs during the 2023 period is primarily the result of the employment of specialist product development professionals with strong industry competence and product certification costs incurred as the Company continues to widen and refine its product categories and build a pipeline of cutting-edge products designed to reach a wider rider audience.

Bad Debt Expense (Recovery) - Bad debt expense (recovery) for the years ended December 31, 2023 and 2022 were ($10,288) and $474,019, respectively. This 102% decrease in bad debt expense is primarily due to a decrease in the provision for doubtful accounts relating to our customers in the United States during the 2023 period, in line with a decrease in domestic accounts receivable balances at December 31, 2023, when compared to December 31, 2022.

General and Administrative Expenses - General and administrative costs consist of insurance, travel, merchant fees, communication costs, office and computer equipment with insurance and travel comprising a substantial part of these expenses. General and administrative expenses for the years ended December 31, 2023 and 2022, were $3,438,746 and $3,273,346, respectively. The 5% increase in general and administrative expenses is primarily due to an increase in travel expenditure globally in line with a relaxation of COVID-19 related travel restrictions and an increase in marketing, tradeshow and sales activation travel as the Company continues to build global multi-channel sales and distribution channels.

Depreciation Expense - Depreciation expense for the years ended December 31, 2023 and 2022 was $1,174,664 and $1,098,433, respectively. The 7% increase in depreciation expense is primarily due to the addition of digital and web based enhancements to the Company's online assets in order to drive consumer engagement and selling activities. Additionally, moulds and tooling assets utilized in the production of the Company's expanding product categories were commissioned.

Total Operating Expenses - Total operating expenses increased by $125,287 to $18,481,282 or 1% for the year ended December 31, 2023, when compared to $18,355,995 in the 2022 period. This increase during the 2023 period is primarily due to increased expenditures on advertising and marketing and research and development costs that were partially offset by decreases in salaries and wages, bad debt and commission expenses incurred during the period.

Other Expenses - Other expenses for the years ended December 31, 2023 and 2022 was $39,138 and $13,550, respectively. Although interest received increased during the 2023 period, the increase in other expenses is primarily due to interest paid on short term debt during the 2023 period.

43


Net Income - The net income after income taxes for the year ended December 31, 2023 was $803,159, a decrease of $9,157,294, when compared to a net income after income taxes of $9,960,453 for the year ended December 31, 2022. This 92% decrease in net income is primarily due to the 38% decrease in revenues discussed above.

Liquidity and Capital Resources

At December 31, 2023, we had cash and cash equivalents of $11.35 million, as compared to cash and cash equivalents of $7.10 million at December 31, 2022. The following table sets forth a summary of our cash flows for the periods indicated:

    December 31,  
    2023     2022  
Net cash provided by operating activities $ 6,657,212   $ 3,086,982  
Net cash used in investing activities $ (1,996,252 ) $ (1,042,442 )
Net cash provided by (used in) financing activities $ (1,290 ) $ 288,817  
Effect of exchange rate changes on cash and cash equivalents $ (415,195 ) $ (252,848 )
Net increase in cash and cash equivalents $ 4,244,475   $ 2,080,509  
Cash and cash equivalents at the beginning of period $ 7,102,945   $ 5,022,436  
Cash and cash equivalents at the end of period $ 11,347,420   $ 7,102,945  

Cash increased by $4,244,475 or 60%, for the year ended December 31, 2023. The primary sources of cash during 2023 were a net income of $803,159, a decrease in accounts receivable of $5,923,355, a decrease in inventory of $2,291,133 and a decrease in deferred asset of $1,105,885. The primary uses of cash during calendar year 2023 were a decrease in accounts payable and accrued expenses of $809,022, a decrease in income taxes payable of $3,382,700 and capital expenditures amounting to $1,999,500.

The Company is currently meeting its working capital needs through cash on hand, a revolving line of credit with a bank as well, as internally generated cash from operations. Management believes that its current cash and cash equivalent balances, along with the net cash generated by operations are sufficient to meet its anticipated operating cash requirements for at least the next twelve months. There are currently no plans for any major capital expenditures in the next twelve months. Our long-term financing requirements depend on our growth strategy, which relates primarily to our desire to increase revenue both domestically as well as internationally.

Obligations under Material Contracts

Pursuant to our Licensing Agreement with Xceed Holdings, a company controlled by Dr. Christopher Leatt, our founder, chairman and head of research and development, we pay Xceed Holdings 4% of all neck brace sales revenue billed and received by the Company on a quarterly basis based on sales of the previous quarter. During the years ended December 30, 2023 and 2022, the Company paid an aggregate of $124,061 and $243,822, in licensing fees to Xceed Holdings. In addition, pursuant to a separate license agreement between the Company and Mr. J. P. De Villiers, our former director, the Company is obligated to pay a royalty fee of 1% of all our billed and received neck brace sales revenue, in quarterly installments, based on sales of the previous quarter, to a trust that is beneficially owned and controlled by Mr. De Villiers. During the years ended December 31, 2023 and 2022, the Company paid an aggregate of $31,015 and $60,957, in licensing fees to Mr. De Villiers.

Dr. Christopher Leatt is compensated in his capacity as our Research and Development consultant, pursuant to our Consulting Agreement, dated November 8, 2021, with Innovation Services Limited, or Innovation, a Jersey limited company in which, Dr. Leatt is an indirect beneficiary. Pursuant to the terms of the agreement, Innovation has agreed to serve as the Company's exclusive research, development and marketing consultant, in exchange for a monthly fee; provided, however, that Dr. Leatt must remain an Innovation director and beneficiary of a majority of its ownership interests during the term of the agreement, and Dr. Leatt must remain the Company's primary point of contact responsible for the oversight, review and delivery of the services to be performed by Innovation under the agreement. From January 1 through June 30, 2023, the monthly fee payable by the Company to Innovation was $44,371, and commencing July 1, 2023, this monthly fee increased to $45,463. Innovation may increase its monthly fees, on an annual basis on written notice to the Company, by no greater than the lesser of: (a) five percent (5%) of the prior year's annualized fee; or (b) a percentage equal to then-applicable annual percentage increase in the Consumer Price Index (CPI) published by the United States Department of Labor's bureau of labor statistics, plus one-half percent (0.5%). The parties further agreed that all intellectual property generated in connection with the services provided under the consulting agreement will be the sole property of the Company. The term of the Consulting Agreement will continue unless terminated by either party in accordance with its terms. Either party may terminate the Consulting Agreement upon 6 months' prior written notice, except that the Company may immediately terminate it without notice if the services to be performed by Innovation cease to be performed by Dr. Leatt, if beneficial ownership in Innovation by Dr. Leatt's and his immediate family members decreases, or for any other material breach of the agreement. The parties have agreed to settle any dispute under the Consulting Agreement by submission to JAMS for final and binding arbitration pursuant to its Comprehensive Arbitration Rules and Procedures and in accordance with the Expedited Procedures in those Rules. The Company also simultaneously entered into a side letter agreement, dated November 8, 2021, with Dr. Leatt, pursuant to which Dr. Leatt agreed, among other things: (1) not to perform services similar to the services provided under the agreement for any current or future, direct or indirect competitor of the Company or any similar company; (2) not to solicit any current or future employees of the Company for employment with Innovation or any other entity with which he may become affiliated, or to contact or solicit any current or future stockholder or investor of the Company in connection with any matter that is not directly related to the ongoing or future business operations of the Company; and (3) that he will apprise the Company of any business opportunity that he becomes aware of that could benefit the Company so that the Company, can in its sole discretion, make a determination regarding whether to pursue such opportunity in the best interest of the Company and its stockholders. Dr. Leatt further agreed to continue dedicating a majority of his time on matters related to performance of his duties as a director of the Company and to the fulfillment of his obligations to the Company's research and development efforts under the consulting agreement, and the Company will have the right to adjust the amount of the fees payable under the consulting agreement to the extent of any substantial diminution in his fulfillment of such duties and obligations. The foregoing agreements replaced prior agreements in force from June 2018 to November 2021, among the Company, Dr. Leatt and Innovate Services Limited, a Seychelles company, beneficially owned by Dr. Leatt, that wound up operations. The foregoing description of the Consulting Agreement and Side Letter Agreement is qualified in its entirety by reference to the Consulting Agreement and the Side Letter Agreement, copies of which are filed as Exhibits 10.1 and 10.2, respectively, hereto and are incorporated by reference in this report. During the years ended December 31, 2023, and 2022, the Company recognized an aggregate of $538,001 and $519,468, respectively, in consulting fees to Innovation.

44


Pursuant to a Premium Finance Agreement, dated October 26, 2023, between the Company and Aon Premium Finance, the Company is obligated to pay APF an aggregate sum of $1,520,667 in eleven payments of $132,515 at a 9.880% annual interest rate, commencing on November 1, 2023, and ending on September 1, 2024. Any late payment during the term of the agreement will be assessed a late penalty of 5% on the payment amount due, and in the event of default APF has the right to accelerate the payment due under the agreement. As of December 31, 2023, the Company has not defaulted on its payment obligations under this agreement.

On November 19, 2018, the Company entered into a $1,000,000 revolving line of credit agreement with a bank. Payments for the advances under the line bear interest at the LIBOR Daily Floating Rate plus 2.5 percentage points commencing January 1, 2019. The line of credit matured on November 19, 2020, at which time the unpaid principal, interest, or other charges outstanding under the agreement are due and payable. On November 5, 2020, the Company executed an amendment to the line of credit to extend the line of credit facility through November 19, 2021. The amendment took retroactive effect to October 27, 2020, and introduced an index floor so that payments for any future advances will bear interest at the greater of the LIBOR Daily Floating Rate or an Index Floor of 1.25 percentage points plus 2.5 percentage points. Obligations under the line of credit are secured by equipment and fixtures in the United States of America, accounts receivable and inventory of Leatt Corporation and Two-Eleven Distribution, LLC. On March 1, 2021, we executed a second amendment to the line of credit. The amendment took retroactive effect to February 17, 2021, extended the line of credit facility through February 28, 2022, and increased the revolving line of credit to $1,500,000. Effective January 21, 2022, the Company executed an amendment to the line of credit to extend the line of credit facility through February 29, 2023, and to replace interest determined by LIBOR Daily Floating Rate with the Bloomberg Short-Term Bank Yield Index rate. Effective January 20, 2023, the Company executed an amendment to the line of credit to extend the line of credit facility through February 29, 2024, which has subsequently been extended to March 1, 2025. As of December 31, 2023, there were no advances of the line of credit leaving $1,500,000 of the line of credit available for advance.

45


On December 29, 2021, Two Eleven entered into a Loan and Security agreement with a bank, effective December 17, 2021, to finance equipment. The Equipment Note financed under the Loan and Security Agreement has a total value of $272,519, payable in 36 consecutive monthly installments commencing February 5, 2022, and continuing to January 5, 2025. Interest shall accrue on the entire principal amount of this Equipment Note outstanding from time to time at a fixed rate of 3.5370% per annum. The principal and interest amount of each payment shall be $7,990. As of December 31, 2023, and 2022, respectively, $101,755 and $192,290 of the Equipment Note was outstanding.

On December 20, 2022, Two Eleven entered into a Loan and Security Agreement with a bank, effective December 1, 2022, to finance certain equipment owned by Two Eleven. The note issued under the agreement, the Equipment Note, has a total value of $58,075, payable by Two Eleven in 36 consecutive monthly installments, commencing on February 5, 2023, and continuing through to January 5, 2026. Interest will accrue on the entire principal amount of the Equipment Note outstanding from time to time at a fixed rate of 7.8581% per annum, and the principal and interest amount of each installments payment will be $1,816. As of December 31, 2023, and 2022, respectively, $41,755 and $58,075 of the Equipment Note was outstanding.

Critical Accounting Policies

Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting period. We have identified the following as the items that require the most significant judgment and often involve complex estimation: revenue recognition, estimating allowances for doubtful accounts receivable, inventory valuation, impairment of long-lived assets, leases and accounting for income taxes.

Revenue and Cost Recognition - The Company recognizes revenue in accordance with ASC 606 "Revenues from Contracts with Customers". As such the Company has and will continue to review its performance obligations in terms of material customer contractual arrangements in order to verify that revenue is recognized when performance obligations are satisfied on a periodic basis.

All manufacturing of Leatt products is performed by third party subcontractors that are predominately based in China.

The Company's products are sold worldwide to a global network of distributors and dealers, and directly to consumers when there are no dealers or distributors in their geographic area or where consumers choose to purchase directly via the Company's e-commerce website (collectively the "customers").

Revenues from product sales are recognized when earned, net of applicable provisions for discounts and returns and allowances in the event of product defect where no exchange of product is possible. Revenues are recognized when our performance obligations are satisfied as evidenced by transfer of control of promised goods to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Product royalty income, representing less than 1% of total revenues, is recorded as the underlying product sales occur, in accordance with the related licensing arrangements.

Our standard distributor payment terms range from pre-payment in full to sixty (60) days after shipment and subsequent sales of our products by distributors have no effect on the amount and timing of payments due to us, however, in limited instances, qualified distributors and dealers may be granted extended payment terms during selected order periods. In performing such evaluations, the Company utilizes historical experience, sales performance, and credit risk requirements. Furthermore, products purchased by distributors may not be returned to the Company in the event that any such distributor relationship is terminated.

46


Since the Company (through its wholly-owned subsidiary) serves as the distributor of Leatt products in the United States, the Company records its revenue and related cost of revenue for its product sales in the United States upon shipment of the merchandise to the dealer or to the ultimate consumer when there is no dealer in the geographic area or the consumer chooses to purchase directly from the Company's e-commerce website and the sales order was received directly from, and paid by, the ultimate consumer. Since the Company (through its South African branch) serves as the distributor of Leatt products in South Africa, the Company records its revenue and related cost of revenue for its product sales in South Africa upon shipment of the merchandise from the branch to the dealer. The Company's standard terms and conditions of sale for non-consumer direct or web-based sales do not allow for product returns other than under warranty.

Sales totaling $31,671 and $2,509,534 were deferred as all the requirements to have a contract with the customer in accordance with ASC 606 had not been met as of December 31, 2023 and 2022, respectively. The shipped goods associated with these deferred sales are included in the caption deferred asset, net of an allowance for potential loss of $6,400 and $105,071 for December 31, 2023 and 2022, respectively.

International sales (other than in the United States and South Africa) are generally drop-shipped directly from our consolidation warehouse or third-party manufacturer to the international distributors. Revenue and related cost of revenue is recognized at the time of shipment from the manufacturer's port when the shipping terms are Free On Board ("FOB") shipping point, Cost and Freight ("CFR") or Cost and Insurance to named place ("CIP") as legal title and risk of loss to the product pass to the distributor. Sales to all customers (distributors, dealers and consumers) are generally final; however, in limited instances, product may be returned and exchanged due to product quality issues. Historically, returns due to product quality issues have not been material and there have been no distributor terminations that resulted in product returns. Cost of revenues also includes royalty fees associated with sales of Leatt-Brace products. Product royalty income is recorded as the underlying product sales occur, in accordance with the related licensing arrangements.

The Company reviews the reserves for customer returns at each reporting period and adjusts them to reflect data available at that time. To estimate reserves for returns, the Company estimates the expected returns and claims based on historical rates as well as events and circumstances that indicate changes to historical rates of product returns and claims. Historically, returns due to product quality issues have not been material and there have been no distributor terminations that resulted in product returns. The provision for estimated returns at December 31, 2023 and 2022 were $0 and $0, respectively.

Sales commissions are expensed when incurred, which is generally at the time of sale or cash received from customers, because the amortization period would have been one year or less. These costs are recorded in commissions and consulting expenses within operating expenses in the accompanying consolidated statements of operations and comprehensive income.

Shipping and handling activities associated with outbound freight, after control over a product has transferred to a customer, are accounted for as a fulfilment cost and are included in revenues and cost of revenues in the accompanying consolidated statements of operations and comprehensive income.

Revenue recognized from contracts with customers is recorded net of sales taxes, value added taxes, or similar taxes that are collected on behalf of local taxing authorities.

Allowance for Doubtful Accounts Receivable - Accounts receivable consist of amounts due to the Company from normal business activities. Credit is granted to distributors on an unsecured basis based on credit risk analysis procedures. We continuously monitor both credit reports and collections, communication and payments from customers and maintains an allowance for doubtful accounts receivable based upon the expected credit losses determined utilizing historical experience and any specific customer collection issues that have been identified. In determining the amount of the allowance, we are required to make certain estimates and assumptions. Accounts receivable balances that are still outstanding after we have used reasonable collection efforts are written off as uncollectible. While such credit losses have historically been minimal, within our expectations and the provisions established, macro-economic conditions and customer financial positions are fluid, and we cannot guarantee that we will continue to experience the same credit loss rates that we have in the past. A significant change in the liquidity or financial position of any of our significant customers could have a material adverse effect on the collectability of our accounts receivable and our future operating results. The allowance for short-term doubtful accounts at December 31, 2023 was $662,612, and at December 31, 2022 was $743,621. Additionally, an allowance for long-term doubtful accounts will be included for accounts receivables that are anticipated to be collected over a period that is greater than 12 months. The allowance for long-term doubtful accounts at December 31, 2023 was $26,929, and at December 31, 2022 was $0.

47


Inventory Valuation - Inventory is stated at the lower of cost or net realizable value. Cost is determined using the first-in first-out (FIFO) method. Inventory consists primarily of finished goods. Shipping and handling costs are included in the cost of inventory. In assessing the inventory value, we make estimates and judgments regarding reserves required for product obsolescence, aging of inventory and other issues potentially affecting the saleable condition of products. In performing such evaluations, we utilize historical experience as well as current market information. The reserve for obsolescence at December 31, 2023 was $227,528, and at December 31, 2022 was $105,072.

Impairment of Long-Lived Assets - Our long-lived assets include property and equipment. We evaluate our long-lived assets for recoverability whenever events or changes in circumstances indicate that an asset may be impaired. In evaluating an asset for recoverability, we estimate the future cash flow expected to result from the use of the asset and eventual disposition. If the expected future undiscounted cash flow is less than the carrying amount of the asset, an impairment loss, equal to the excess of the carrying amount over the fair value of the asset, is recognized. We have determined there were no impairment charges during the years ended December 31, 2023 and 2022.

Operating Leases - The Company determines if an arrangement is a lease at contract inception. Operating leases are included in the right-of-use assets ("ROU''), and lease liability obligations are included in the Company's consolidated balance sheets. ROU assets represent the Company's right to use an underlying asset of the lease term and lease liability obligations represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date, based on the present value of lease payments over the lease term. As the Company's leases typically do not provide an implicit rate, the Company estimates its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The ROU asset also includes any lease payments made and excludes lease incentives and lease direct costs. The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense is recognized on a straight-line basis over the lease term.

Income Taxes - As part of the process of preparing our consolidated financial statements, we are required to estimate our income tax provision (benefit) in each of the jurisdictions in which we operate. This process involves estimating our current income tax provision (benefit) together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheets. We regularly evaluate our ability to recover the reported amount of our deferred income taxes considering several factors, including our estimate of the likelihood of the Company generating sufficient taxable income in future years during the period over which the temporary differences reverse.

Recent Accounting Pronouncements

See Note 2, "Summary of Significant Accounting Policies" in the Notes to Consolidated Financial Statements for a full description of recent accounting pronouncements, including the respective dates of adoption, or expected adoption and effects on our consolidated financial position, results of operations and cash flows.

Off-Balance Sheet Arrangements

48


We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to its stockholders.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Some of our operations are carried out in the Republic of South Africa, or RSA, and we are subject to specific considerations and significant risks not typically associated with companies in North America and Western Europe. Accordingly, our business, financial condition and results of operations may be influenced by the political, economic and legal environments in the RSA, and by the general state of the RSA economy. Our results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

Foreign Exchange Risk

We are exposed to foreign exchange risk as our revenues and consolidated results of operations may be affected by fluctuations in foreign currency as we translate these currencies into U.S. dollars when we consolidate our financial results. Operating outside of the United States further exposes us to foreign exchange risk, which we monitor. We are most sensitive to changes in the exchange rates of the South African rand, the renminbi, the euro and the U.S. dollar. We have more ZAR expenses than we do sales in South Africa. Furthermore, a portion of our consolidated revenues are denominated in South African Rand, or ZAR, certain of our assets are denominated in ZAR, and our research and marketing operations in South Africa utilize South African labor sources. A decrease in the value of the U.S. dollar in relation to the ZAR could increase our cost of doing business in South Africa. Alternatively, if the ZAR depreciates against the U.S. Dollar, the value of our ZAR revenues, earnings and assets as expressed in our U.S. Dollar financial statements will decline. In China we have more renminbi expenses than we do sales, because we manufacture our products in China that we sell globally. A decrease in the value of the U.S. dollar in relation to the renminbi could increase our cost of purchasing products in China. We have not entered into any hedging transactions in an effort to reduce our exposure to foreign exchange risk. In Europe we have significantly more sales than we do expenses. Since 70% of our sales is derived outside the U.S. where the U.S. dollar is not the primary currency, significant fluctuations in exchange rates such as the strengthening of the dollar versus our customers' local currency can adversely affect our ability to remain competitive in those areas.

Inflation

Inflationary factors such as increases in the cost of our sales, salaries, wages and overhead costs may adversely affect our operating results. During the year ended December 31, 2023, the Company experienced inflationary cost increases that had an impact on both cost of sales, gross margins, salaries and selling, general and administrative expenses. A prolonged high rate of inflation in the future may have a significant adverse effect on our ability to maintain current levels of gross margin as a percentage of net sales if the selling prices of our products are not increased due to market dynamics. Additionally, prolonged inflationary pressure on salaries, selling, general and administrative expenses may have an impact on Net Income.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The full text of our audited consolidated financial statements as of December 31, 2023 and 2022 begins on page F-1 of this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES.

49


Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information that would be required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time period specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15 under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, Mr. Sean Macdonald, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2023. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer determined that, as of December 31, 2023, and as of the date that the evaluation was completed, our disclosure controls and procedures were effective.

Internal Controls over Financial Reporting

Management's Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP, and includes those policies and procedures that:

1. pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

2. provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and

3. provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023 In making this assessment, management used the framework set forth in the report entitled Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our management concluded that our internal control over financial reporting, as of December 31, 2023 was effective.

Because the Company is a smaller reporting company, this annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our independent registered public accounting firm.

Changes in Internal Controls over Financial Reporting

There were no changes in its internal controls over financial reporting in 2023 that would materially affect, or are reasonably likely to materially affect our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

50


We have no information to disclose that was required to be in a report on Form 8-K during the period covered by this report but was not reported. There have been no material changes to the procedures by which security holders may recommend nominees to our board of directors.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Directors, Executive Officers, Promoters and Control Persons

The following sets forth the name and position of each of our current executive officers, directors and significant employees and their ages and titles as of March 4, 2024.

Name Age Title
Dr. Christopher James Leatt 55 Founder, Chairman and Research & Development Consultant
Sean Macdonald 46 CEO, CFO, President and Director
Jeffrey Joseph Guzy 72 Director

DR. CHRIS LEATT: Dr. Leatt, aged 55, has served as the Company's Chairman since 2005 and as the Company's Research and Development consultant since July 2015. He studied medicine at the University of Cape Town and interned in the United Kingdom. He worked briefly as a General Practitioner and in General Surgery and Orthopaedics before taking up a Registrar's position in Neurosurgery at the Tygerberg Academic Hospital. He resigned from his post in Neurosurgery in order to develop and study the benefits and viability of a neck protection system (the Leatt-Brace®) for helmet clad sport and recreational users in an attempt to reduce devastating neck injuries. Dr. Leatt is a fixed wing PPL pilot, Commercial helicopter pilot and Grade II instructor. He has been an active participant in competitive cross-country motorcycle endurance races, as well as Super Sport and Battle of the Twins (BOTTS) track racing events. He won the Western Province BOTTS championship in 2011.

SEAN MACDONALD: Mr. Macdonald, CA (SA), aged 46, has served as the Company's Chief Executive Officer and President since November 2010, as its Chief Financial Officer since August 2009, and as a Director since May 2010. Prior to joining the Company, Mr. Macdonald served from August 2004 to December 2009, as the Chief Financial Officer of Cyclelab, the largest bicycle retailer in South Africa, where he was responsible for operational, financial and strategic leadership of the business including the implementation of a franchise model in order to grow the business. Mr. Macdonald holds a Bachelor of Commerce Degree in Finance and Information Systems from the University of Cape Town, as well as a Post-Graduate Diploma in Accounting, which included 3 years of articles at KPMG Cape Town. Mr. Macdonald is also a South Africa registered Chartered Accountant.

JEFFREY GUZY: Mr. Guzy, aged 72, has served as a director since April 2007 and serves as a business development consultant and entrepreneur in Arlington, Virginia. Mr. Guzy is currently working as Chairman and CEO of CoJax Oil and Gas Corporation (OTC.CJAX). Prior to that, Mr. Guzy served, from October 2007 to August 2010 as our President. Mr. Guzy has a MBA in Strategic Planning and Management from The Wharton School of the University of Pennsylvania; a M.S. in Systems Engineering from the University of Pennsylvania; a B.S. in Electrical Engineering from Penn State University; and a Certificate in Theology from Georgetown University. Mr. Guzy has served as an executive manager with IBM Corp., Sprint International, Bell Atlantic Video Services, Loral CyberStar and FaciliCom International. Mr. Guzy has also started his own telecommunications company providing Internet services in Western Africa. He continues to work with emerging private companies and middle-market public companies. He serves as an independent director and chairman of the audit committee of public companies, Capstone Industries (OTC.CAPC) and Purebase Corporation (OTC.PUBC), and as an independent director and chairman of the audit committee and the corporate governance committee of Blue Star Foods Corporation (NASDAQ.BSFC) a public company.

There are no agreements or understandings for any of our executive officers, directors or significant employees to resign at the request of another person and no officer or director is acting on behalf of nor will any of them act at the direction of any other person.

51


Qualifications, Attributes, Skills and Experience Represented on the Board

The Board has identified particular qualifications, attributes, skills and experience that are important to be represented on the board as a whole, in light of our current needs and business priorities. The Board believes that each director is a recognized person of high integrity with a proven record of success in his or her field. Each director demonstrates innovative thinking, familiarity with and respect for corporate governance requirements and practices, an appreciation of multiple cultures and a commitment to the business and operations of the Company. In addition to the foregoing qualifications, the Board has assessed the intangible qualities including the director's ability to ask difficult questions and, simultaneously, to work collegially. The Board also considers diversity of age, cultural background and professional experiences in evaluating candidates for Board membership. Diversity is important because a variety of points of view contribute to a more effective decision-making process.

Set forth below is a tabular disclosure summarizing some of the specific qualifications, attributes, skills and experiences of our directors.

Name Title Qualifications
Dr. Christopher James Leatt Founder, Chairman and Head of Research & Development Dr. Leatt holds a Bachelor of Medicine and Bachelor of Surgery Degree and is the inventor of the Leatt Brace® and the Founder of the Company.
He supports the Company's research and development department and has an intimate knowledge of the Company's innovative products.
He contributes invaluable long-term knowledge of the Company's business and operations and extensive experience in the industry.
Sean Macdonald CEO, CFO, President and Director Mr. Macdonald is a registered Chartered Accountant and holds a Bachelor of Commerce Degree in Finance and Information Systems and a Post-Graduate Diploma in Accounting.
His invaluable experience in finance and accounting provides insight for the implementation of effective operational, financial and strategic leadership of the Company.
Jeffrey Joseph Guzy Director Through his MBA in Strategic Planning & Management and his knowledge of U.S. capital markets, Mr. Guzy provides invaluable guidance and perspective to the Board.
He has also served as the Company's President and has invaluable long-term knowledge of the Company's business and operations.

Family Relationships

52


There are no family relationships among our directors or officers.

Involvement in Certain Legal Proceedings

To the best of our knowledge, none of our directors or executive officers has, during the past ten years:

 been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);

 had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;

 been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;

 been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

 been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

 been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self- regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Except as set forth in our discussion below in "Certain Relationships and Related Transactions, and Director Independence - Transactions with Related Persons," none of our directors, director nominees or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.

Significant Employees

Name Age Position
Erik Olsson 56 International General Manager and Head of International Distribution
Todd Repsher 53 U.S. General Manager

ERIK OLSSON: Mr. Olsson, aged 56, has served as our International General Manager and Head of International Distribution since January 2012. Prior to that, Mr. Olsson served from January 2010 to December 2011, as European General Manager and later as General Manager of Asia, Europe, the Middle-East and the Central Pacific (Oceania). Mr. Olsson has over 20 years' experience as a sales and product manager for various companies in the power sports industry. Prior to joining us he served from January 2003 to December 2009 as Area Manager for Jofrab Ab, a Swedish distributor of motorcycles and recreational vehicles.

53


TODD REPSHER: Mr. Repsher, aged 53, has served as our U.S. General Manager since 2016 and served as our US National Sales Manager since March 2014. Mr. Repsher is an award-winning sales executive with over 20 years' experience in the marketing and sales of sports orientated companies in North America. Prior to joining us he was the National Sales Manager for Switzerland-based Scott Sports, Inc. from 2011 to 2013, where he managed the sale and distribution of all North American motorsports (off-road, on-road, snowmobile) apparel and accessories for Scott Sports. Prior to that, Mr. Repsher served, from 2002 to 2011, as the Outside Sales Territory Manager for California-based Fox Racing, Inc.

Stockholder Communication with the Board of Directors

Stockholders may communicate with the Board by sending a letter to our Board of Directors, c/o Corporate Secretary, 12 Kiepersol Drive, Atlas Gardens, Contermanskloof Road, Durbanville, Western Cape, South Africa, 7550 for submission to the board or committee or to any specific director to whom the correspondence is directed. Stockholders communicating through this means should include with the correspondence evidence, such as documentation from a brokerage firm, that the sender is a current record or beneficial stockholder of the Company. All communications received as set forth above will be opened by the Corporate Secretary or his designee for the sole purpose of determining whether the contents contain a message to one or more of our directors.

Any contents that are not advertising materials, promotions of a product or service, patently offensive materials or matters deemed, using reasonable judgment, inappropriate for the Board will be forwarded promptly to the chairman of the Board, the appropriate committee or the specific director, as applicable.

Code of Ethics

We have adopted a written code of ethics that applies to all of our officers, directors and employees, including our principal executive officer and principal financial officer, or persons performing similar functions, a copy of which is attached as an exhibit to this report.

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table Update

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the following persons for services rendered in all capacities during the indicated periods. No other executive officers received total annual salary and bonus compensation in excess of $100,000.

Name and
Principal
Position
Year Salary
($)
Bonus
($)
Stock
Awards
($)
Option
Awards
($)(1)
Non-Equity
Incentive
Plan
Compensation
Earnings
($)
Non-
qualified
Deferred
Compensation
Earnings
($)
All Other
Compensation
($)
Total
($)
Dr. Christopher James Leatt,
Chairman and Head of
Research and
Development(2)
2021 71,730 -- 164,666 11,446 -- -- 506,796 754,638
2022 70,179 -- 239,432 17,166 -- -- 519,468 846,245
2023 61,743 -- 21,105 -- -- -- 538,001 620,849
Sean Macdonald,
President, CEO, CFO
and Director
2021 309,393 150,000 242,206 17,166 -- -- -- 718,765
2022 350,699 140,000 352,156 25,749 -- -- -- 868,604
2023 342,262 62,500 26,968 -- -- -- -- 431,730
Todd Repsher
U.S. National sales manager
2021 213,600 40,000 82,084 6,602 -- -- 1,712 343,998
2022 230,700 28,500 58,036 9,904 -- -- 1,985 329,125
2023 246,000 10,500 -- -- -- -- 1,550 258,050

 

54


1. The option awards reflect a 1-for-25 reverse split effected by the Company on September 20, 2012.

2. Also reflects compensation to Dr. Leatt in his capacity as our Research and Development consultant as discussed under the Summary of Employment Agreements heading below. Compensation received by Dr. Leatt in his role as Chairman of the Company's board of directors is separately reflected under the Compensation heading below.

3. The stock awards reflect stock awards from previous issuances that vested during the period as well as stock awards that were issued during the period.

Summary of Employment Agreements

We have entered into an employment agreement, effective as of January 1, 2014, with Sean Macdonald our President, CEO and CFO, pursuant to which, as amended, we were obligated to pay him a base salary of R3,849,000 (approximately $226,764) and $101,400 per annum. Mr. Macdonald further received a travel allowance of R114,010 (approximately, $6,717), medical and life insurance benefits, participation in the Company's new provident fund, the right to participate in the Company's executive wellness program and he is entitled to an annual performance-based bonus at the sole discretion of the Company's Board of Directors. Effective January 1, 2024, the Company and Mr. Macdonald agreed to amend the employment agreement to increase his base salary to ZAR4,099,185 (approximately $224,222) and $107,991 per annum, subject to guaranteed minimum exchange rate, and to increase his travel allowance to ZAR121,420 (approximately, $6,642). Mr. Macdonald may not sell any stock issued to him by the Company without prior written consent of the Board of Directors. Mr. Macdonald is also subject to the customary confidentiality covenants and South African Labor Laws which entitle Mr. Macdonald to one week's severance pay for each year of service to the Company. The agreement may be terminated by either party with six months' written notice; provided that Mr. Macdonald will be obligated to assist in the appointment and orientation of his successor during such six-month period. Mr. Macdonald may also be terminated by the Company with no notice for gross misconduct, incapacity or for breach of the employment agreement.

We have entered into an employment agreement, effective as of March 3, 2014, with Todd Repsher, our U.S. General Manager, pursuant to which, as amended, we were obligated to pay him a base salary from $246,000 per annum. Effective January 1, 2024, his base salary increased to $254,610 per annum. Mr. Repsher also receives coverage under the Company's employment benefit plans and is subject to customary confidentiality and indemnification requirements. The agreement may be terminated at any time by the Company and upon three months' written notice by Mr. Repsher, however, in advance of any termination based on neglect of duty or breach of the employment agreement, the Company may, in its sole discretion, give Mr. Repsher 15 days' advance notice with an opportunity to cure the deficiency. The agreement is subject to California law and disputes under the agreement are subject to resolution by arbitration.

Dr. Christopher Leatt is compensated in his capacity as our Research and Development consultant, pursuant to our Consulting Agreement, dated November 8, 2021, with Innovation Services Limited, or Innovation, a Jersey limited company in which, Dr. Leatt is an indirect beneficiary. Pursuant to the terms of the agreement, Innovation has agreed to serve as the Company's exclusive research, development and marketing consultant, in exchange for a monthly fee; provided, however, that Dr. Leatt must remain an Innovation director and beneficiary of a majority of its ownership interests during the term of the agreement, and Dr. Leatt must remain the Company's primary point of contact responsible for the oversight, review and delivery of the services to be performed by Innovation under the agreement. From January 1 through June 30, 2023, the monthly fee payable by the Company to Innovation was $44,371, and commencing July 1, 2023, this monthly fee increased to $45,463. Innovation may increase its monthly fees, on an annual basis on written notice to the Company, by no greater than the lesser of: (a) five percent (5%) of the prior year's annualized fee; or (b) a percentage equal to then-applicable annual percentage increase in the Consumer Price Index (CPI) published by the United States Department of Labor's bureau of labor statistics, plus one-half percent (0.5%). The parties further agreed that all intellectual property generated in connection with the services provided under the consulting agreement will be the sole property of the Company. The term of the Consulting Agreement will continue unless terminated by either party in accordance with its terms. Either party may terminate the Consulting Agreement upon 6 months' prior written notice, except that the Company may immediately terminate it without notice if the services to be performed by Innovation cease to be performed by Dr. Leatt, if beneficial ownership in Innovation by Dr. Leatt's and his immediate family members decreases, or for any other material breach of the agreement. The parties have agreed to settle any dispute under the Consulting Agreement by submission to JAMS for final and binding arbitration pursuant to its Comprehensive Arbitration Rules and Procedures and in accordance with the Expedited Procedures in those Rules. The Company also simultaneously entered into a side letter agreement, dated November 8, 2021, with Dr. Leatt, pursuant to which Dr. Leatt agreed, among other things: (1) not to perform services similar to the services provided under the agreement for any current or future, direct or indirect competitor of the Company or any similar company; (2) not to solicit any current or future employees of the Company for employment with Innovation or any other entity with which he may become affiliated, or to contact or solicit any current or future stockholder or investor of the Company in connection with any matter that is not directly related to the ongoing or future business operations of the Company; and (3) that he will apprise the Company of any business opportunity that he becomes aware of that could benefit the Company so that the Company, can in its sole discretion, make a determination regarding whether to pursue such opportunity in the best interest of the Company and its stockholders. Dr. Leatt further agreed to continue dedicating a majority of his time on matters related to performance of his duties as a director of the Company and to the fulfillment of his obligations to the Company's research and development efforts under the consulting agreement, and the Company will have the right to adjust the amount of the fees payable under the consulting agreement to the extent of any substantial diminution in his fulfillment of such duties and obligations. The foregoing agreements replaced prior agreements in force from June 2018 to November 2021, among the Company, Dr. Leatt and Innovate Services Limited, a Seychelles company, beneficially owned by Dr. Leatt, that wound up operations.

55


Grants of Plan-Based Awards

The following table sets forth information regarding equity grants to named executive officers during the fiscal year ended December 31, 2023, including prior year grants that vested during the period. 




Name



Grant Date
All other stock
awards: Number of
shares of stock
or units
All other option
awards: Number of
securities underlying
options
Exercise or
base price of
option awards
($/Share)
Grant date
fair value of
stock and
option awards ($)
Dr. Christopher Leatt 12/22/2023 51,000   $9.38 $478,380
Sean Macdonald 12/22/2023 76,000   $9.38 $712,880

On December 21, 2023, the Board approved the award of 51,000 restricted shares of the Company's common stock to Dr. Leatt, pursuant to a Restricted Stock Award Agreement, under the Company's 2011 Plan. On December 22, 2023, 2,250 Restricted Stock vested, 5,000 shall vest on December 22, 2024, 8,750 Restricted Stock shall vest on December 22, 2025, 10,000 Restricted Stock shall vest on December 22, 2026, 12,500 Restricted Stock shall vest on December 22, 2027, and lastly 12,500 Restricted Stock shall vest on December 22, 2028, provided, however, that one hundred percent (100%) of Grantee's nonvested Restricted Stock shall become fully vested upon a Change of Control (as defined in the Agreement).

On December 21, 2023, the Board approved the award of 76,000 restricted shares of the Company's common stock to Mr. Macdonald, pursuant to a Restricted Stock Award Agreement, under the Company's 2011 Plan. On December 22, 2023, 2,875 Restricted Stock vested, 7,500 shall vest on December 22, 2024, 13,125 Restricted Stock shall vest on December 22, 2025, 15,000 Restricted Stock shall vest on December 22, 2026, 18,750 Restricted Stock shall vest on December 22, 2027, and lastly 18,750 Restricted Stock shall vest on December 22, 2028, provided, however, that one hundred percent (100%) of Grantee's nonvested Restricted Stock shall become fully vested upon a Change of Control (as defined in the Agreement). 

Outstanding Equity Awards at Fiscal Year End

The following table sets forth the equity awards outstanding at December 31, 2023 for each of our named executive officers.

 

56


OPTION AWARDS 



Name
Number of
securities
underlying
unexercised
options exercisable
Number of
securities
underlying
unexercised
options
unexercisable
Equity
incentive plan
awards;
number of
securities
underlying
unexercised
unearned
options
Option
exercise
price
($)
Option
expiration
date
Dr. Christopher Leatt 52,000 -- -- $2.60 March 28, 2026
Dr. Christopher Leatt 52,000 -- -- $1.60 August 23, 2027
Dr. Christopher Leatt 52,000 -- -- $2.30 February 24, 2029
Jeffrey Guzy 15,000 -- -- $2.30 February 24, 2029
Todd Repsher 30,000 -- -- $2.30 February 24, 2029

On March 29, 2016, the Board of Directors of the Company approved the grant to Dr. Christopher Leatt, the Company's Chairman, of a 10-year option under the Company's 2011 Plan, to purchase 52,000 shares of the Company's common stock at an exercise price of $2.60 a share, 15,600 of which immediately vested. The initial option grant to Dr. Leatt had vesting scheduled for the remaining underlying shares on December 31, 2017 (30%), March 29, 2017 (20%) and March 29, 2018 (20%), however on November 22, 2016, the Company's board of directors modified the option award to push out the vesting period in line with the Company's expected 2016 fourth quarter performance. As a result of the modification, the option will now expire on March 28, 2026 and the December 31, 2017 vesting date was eliminated. The option to purchase 15,600 of the shares vested on March 29, 2017, and the remaining options to purchase 20,800 shares vested in two equal portions on March 29, 2018 and 2019, respectively. The foregoing modification did not affect the exercise price as the fair market value of the underlying shares on the initial grant date was the same as the fair market value on the modification date. This option to purchase 52,000 shares will expire on March 28, 2026. On August 24, 2017, the Board approved a grant to Dr. Leatt of another 10-year option to purchase 52,000 shares of common stock at an exercise price of $1.60 a share under the 2011 Plan, 20,800 of which vested on December 31, 2017, 15,600 of which vested on December 31, 2018, and the remaining 15,600 of which vested on December 31, 2019. This option will expire on August 23, 2027. On February 25, 2019, the Board approved a grant to Dr. Leatt of another 10-year option to purchase 52,000 shares of common stock at an exercise price of $2.30 a share under the 2011 Plan, 15,600 (30%) of which vested on February 25, 2019, another 10,400 of which vested on February 25, 2020, another 10,400 of which vested on February 25, 2021, and the remaining 15,600 (30%) shares vested on February 25, 2022. This option to purchase 52,000 shares will expire on February 24, 2029.

On February 25, 2019, the Board approved a grant to Mr. Guzy of another 10-year option to purchase 15,000 shares of common stock at an exercise price of $2.30 a share under the 2011 Plan, 30% or 4,500 of which vested February 25, 2019. Options to purchase another 20% or 3,000 shares, vested on February 25, 2020, options to purchase another 20% or 3,000 shares, vested on February 25, 2021 and options to purchase the remaining 30% or 4,500 shares vested February 25, 2022. This option to purchase 15,000 shares will expire on February 24, 2029.

On February 25, 2019, the Board approved a grant to Mr. Repsher of a 10-year option to purchase 30,000 shares of common stock at an exercise price of $2.30 a share under the 2011 Plan, 9,000 (30%) of which vested on February 25, 2019, another 6,000 of which vested on February 25, 2020, and another 6,000 of which vested on February 25, 2021. The remaining 9,000 (30%) shares vested on February 25, 2022. This option to purchase 30,000 shares will expire on February 24, 2029.

Option Exercises and Stock Vested

Except as set forth below, no named executive officers exercised stock options, stock appreciation rights or similar instruments or had vesting stock during the fiscal year ended December 31, 2023.

57


On December 21, 2023, the Board approved the award of 51,000 restricted shares of the Company's common stock to Dr. Leatt, pursuant to a Restricted Stock Award Agreement, under the Company's 2011 Plan. On December 22, 2023, 2,250 Restricted Stock vested, 5,000 shall vest on December 22, 2024, 8,750 Restricted Stock shall vest on December 22, 2025, 10,000 Restricted Stock shall vest on December 22, 2026, 12,500 Restricted Stock shall vest on December 22, 2027, and lastly 12,500 Restricted Stock shall vest on December 22, 2028, provided, however, that one hundred percent (100%) of Grantee's nonvested Restricted Stock shall become fully vested upon a Change of Control (as defined in the Agreement).

On December 21, 2023, the Board approved the award of 76,000 restricted shares of the Company's common stock to Mr. Macdonald, pursuant to a Restricted Stock Award Agreement, under the Company's 2011 Plan. On December 22, 2023, 2,875 Restricted Stock vested, 7,500 shall vest on December 22, 2024, 13,125 Restricted Stock shall vest on December 22, 2025, 15,000 Restricted Stock shall vest on December 22, 2026, 18,750 Restricted Stock shall vest on December 22, 2027, and lastly 18,750 Restricted Stock shall vest on December 22, 2028, provided, however, that one hundred percent (100%) of Grantee's nonvested Restricted Stock shall become fully vested upon a Change of Control (as defined in the Agreement).

On December 21, 2023, the Board approved the award of 1,000 restricted shares of the Company's common stock to Mr. Guzy, pursuant to a Restricted Stock Award Agreement, under the Company's 2011 Plan, all of which vested on December 22, 2023.

Pension Benefits

The Company and its U.S. employees participate in a defined contribution plan under Section 401(k) of the Internal Revenue Code (IRC). None of the named executive officers received or held benefits under a defined pension benefit plan and the Company did not maintain a defined pension benefit plan during the fiscal year ended December 31, 2023.

Nonqualified Deferred Compensation

No nonqualified deferred compensation was offered or issued to any named executive officer during the fiscal year ended December 31, 2023.

Potential Payments upon Termination or Change in Control

Our named executive officers are not entitled to severance payments or other benefit upon the termination of their employment agreements or following a change in control.

Compensation of Directors

The following table sets forth the total director compensation earned by our directors during our fiscal year ended December 31, 2023:

Name Fees earned
or
paid in cash
($)
Stock
awards
($)
Option
awards
($)
All other
compensation
($)
Total
($)
Dr. Christopher James Leatt 61,743 21,105 - - 82,848
Jeffrey J. Guzy 24,000 9,380 - - 33,380
Sean Macdonald 18,000 26,968 - - 44,968

Narrative to Director Compensation Table

58


During the 2023 calendar year, we paid Jeff Guzy and Sean Macdonald $2,000 and $1,500 per month, respectively, for their services as directors. Effective January 1, 2024, Jeff Guzy and Sean Macdonald's compensation increased to $2,068 and $1,599 per month, respectively for their services. In the future, we may adopt a policy of paying independent directors a fee for their attendance at board and committee meetings. We also reimburse our directors for reasonable travel expenses related to their duties as our directors.

On July 8, 2015, the Company entered into a Director Agreement with Board Chairman, Dr. Christopher Leatt, pursuant to which, as amended, in addition to his duties with the Company's Research and Development department, Dr. Leatt agreed to devote as much time as is necessary to perform the duties of a director of the Company, including duties as a member of any committees that he may be appointed to by the Board of Directors, including but not limited to assisting the Company with the development of business and new business strategies relating to the objectives of the Company, participation in the Company's investor relations activities, including road shows and shareholder communication activities, and participation in corporate strategy decisions of the Company. During the 2023 calendar, we paid Dr. Leatt a base fee of ZAR95,000 as compensation for his services, approved expenses for travel, medical and life insurance benefits and participation in the Company's Senior Executive Wellness Program, and the Company has agreed to indemnify him to the full extent allowed by law except where such indemnification is prohibited due to intentional misconduct, fraud or knowing violation of law. Effective January 1, 2024, Dr. Leatt's base fee increased to ZAR100,225 per month, and remainder of the compensation remained the same. Either party may terminate the Director Agreement at any time upon six months' written notice unless he resigns from his position or is removed by shareholders of the Company prior to such termination.

On March 29, 2016, the Board of Directors of the Company approved the grant to Dr. Leatt, of a 10-year option under the Company's 2011 Plan, to purchase 52,000 shares of the Company's common stock at an exercise price of $2.60 a share, 15,600 of which immediately vested. The initial option grant to Dr. Leatt had vesting scheduled for the remaining underlying shares on December 31, 2017 (30%), March 29, 2017 (20%) and March 29, 2018 (20%), however on November 22, 2016, the Company's board of directors modified the option award to push out the vesting period in line with the Company's expected 2016 fourth quarter performance. As a result of the modification, the option will now expire on March 28, 2026 and the December 31, 2017 vesting date was eliminated. The option to purchase 15,600 of the shares vested on March 29, 2017, and the remaining options to purchase 20,800 shares vested in two equal portions on March 29, 2018 and 2019, respectively. The foregoing modification did not affect the exercise price as the fair market value of the underlying shares on the initial grant date was the same as the fair market value on the modification date. This option to purchase 52,000 shares will expire on March 28, 2026. On August 24, 2017, the Board approved a grant to Dr. Leatt of another 10-year option to purchase 52,000 shares of common stock at an exercise price of $1.60 a share under the 2011 Plan, 20,800 of which vested on December 31, 2017, 15,600 of which vested on December 31, 2018, and the remaining 15,600 of which vested on December 31, 2019. This option to purchase 52,000 shares will expire on August 23, 2027. On February 25, 2019, the Board approved a grant to Dr. Leatt of another 10-year option to purchase 52,000 shares of common stock at an exercise price of $2.30 a share under the 2011 Plan, 15,600 (30%) of which vested on February 25, 2019, another 10,400 of which vested on February 25, 2020, and another 10,400 of which vested on February 25, 2021. The remaining 15,600 (30%) shares vested February 25, 2022. This option to purchase 52,000 shares will expire on February 24, 2029. On December 29, 2020, the Company's Board approved the award of 8,000 restricted shares of the Company's common stock to Dr. Leatt, pursuant to a Restricted Stock Award Agreement, under the Company's 2011 Plan. Sixty percent (4,800 shares) of the restricted stock vested immediately, on the date of the award, twenty percent (1,600 shares) vested on December 29, 2021, and the remaining 20% (1,600 shares) vested on December 29, 2022. On December 22, 2021, the Company's Board approved the award of 8,500 restricted shares of the Company's common stock to Dr. Leatt, pursuant to a Restricted Stock Award Agreement, under the Company's 2011 Plan, sixty percent (5,100 shares) of which vested on December 31, 2021, and the remaining 40% (3,400 shares) of which vested in equal parts on March 31, 2022, June 30, 2022, September 30, 2022 and December 31, 2022. On December 20, 2022, the Board approved the award of 6,800 restricted shares of the Company's common stock to Dr. Leatt, pursuant to a Restricted Stock Award Agreement, under the Company's 2011 Plan, all of which vested on December 31, 2022. On December 21, 2023, the Board approved the award of 51,000 restricted shares of the Company's common stock to Dr. Leatt, pursuant to a Restricted Stock Award Agreement, under the Company's 2011 Plan.On December 22, 2023, 2,250 Restricted Stock vested, 5,000 shall vest on December 22, 2024, 8,750 Restricted Stock shall vest on December 22, 2025, 10,000 Restricted Stock shall vest on December 22, 2026, 12,500 Restricted Stock shall vest on December 22, 2027, and lastly 12,500 Restricted Stock shall vest on December 22, 2028, provided, however, that one hundred percent (100%) of Grantee's nonvested Restricted Stock shall become fully vested upon a Change of Control (as defined in the Agreement).

59


On February 25, 2019, the Board approved a grant to Mr. Guzy of another 10-year option to purchase 15,000 shares of common stock at an exercise price of $2.30 a share under the 2011 Plan, 30% or 4,500 of which vested February 25, 2019. Options to purchase another 20% or 3,000 shares, vested on February 25, 2020, options to purchase another 20% or 3,000 shares, vested on February 25, 2021 and options to purchase the remaining 30% or 4,500 shares vested February 25, 2022. This option to purchase 15,000 shares will expire on February 24, 2029. On December 21, 2023, the Board approved the award of 1,000 restricted shares of the Company's common stock to Mr. Guzy, pursuant to a Restricted Stock Award Agreement, under the Company's 2011 Plan, all of which vested on December 22, 2023.

On December 21, 2023, the Board approved the award of 76,000 restricted shares of the Company's common stock to Mr. Macdonald, pursuant to a Restricted Stock Award Agreement, under the Company's 2011 Plan. On December 22, 2023, 2,875 Restricted Stock vested, 7,500 shall vest on December 22, 2024, 13,125 Restricted Stock shall vest on December 22, 2025, 15,000 Restricted Stock shall vest on December 22, 2026, 18,750 Restricted Stock shall vest on December 22, 2027, and lastly 18,750 Restricted Stock shall vest on December 22, 2028, provided, however, that one hundred percent (100%) of Grantee's nonvested Restricted Stock shall become fully vested upon a Change of Control (as defined in the Agreement).

Limitation of Liability and Indemnification

Section 78.138 of the NRS provides that a director or officer will not be individually liable unless it is proven that (i) the director's or officer's acts or omissions constituted a breach of his or her fiduciary duties, and (ii) such breach involved intentional misconduct, fraud or a knowing violation of the law.

Section 78.7502 of NRS permits a company to indemnify its directors and officers against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with a threatened, pending or completed action, suit or proceeding if the officer or director (i) is not liable pursuant to NRS 78.138 or (ii) acted in good faith and in a manner the officer or director reasonably believed to be in or not opposed to the best interests of the corporation and, if a criminal action or proceeding, had no reasonable cause to believe the conduct of the officer or director was unlawful.

Section 78.751 of NRS permits a Nevada company to indemnify its officers and directors against expenses incurred by them in defending a civil or criminal action, suit or proceeding as they are incurred and in advance of final disposition thereof, upon receipt of an undertaking by or on behalf of the officer or director to repay the amount if it is ultimately determined by a court of competent jurisdiction that such officer or director is not entitled to be indemnified by the company. Section 78.751 of NRS further permits the company to grant its directors and officers additional rights of indemnification under its articles of incorporation or bylaws or otherwise.

Section 78.752 of NRS provides that a Nevada company may purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director, officer, employee or agent of the company, or is or was serving at the request of the company as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise, for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee or agent, or arising out of his status as such, whether or not the company has the authority to indemnify him against such liability and expenses.

Our Articles of Incorporation provide that no director or officer of the Company will be personally liable to the Company or any of its stockholders for damages for breach of fiduciary duty as a director or officer; provided, however, that the foregoing provision shall not eliminate or limit the liability of a director or officer (i) for acts or omissions which involve intentional misconduct, fraud or knowing violation of law, or (ii) the payment of dividends in violation of Section 78.300 of NRS. In addition, our Bylaws implement the indemnification and insurance provisions permitted by Chapter 78 of the NRS by providing that:

  • The Company shall indemnify its directors to the fullest extent permitted by the NRS and may, if and to the extent authorized by the board of directors, so indemnify its officers and any other person whom it has the power to indemnify against liability, reasonable expense or other matter whatsoever.

60


  • The Company may at the discretion of the board of directors' purchase and maintain insurance on behalf of any person who holds or who has held any position identified in the paragraph above against any and all liability incurred by such person in any such position or arising out of his status as such.

Insofar as indemnification by us for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling the company pursuant to provisions of our articles of incorporation and bylaws, or otherwise, we have been advised that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification by such director, officer or controlling person of us in the successful defense of any action, suit or proceeding is asserted by such director, officer or controlling person in connection with the securities being offered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

Other than as disclosed herein, there is no pending litigation or proceeding involving any of our directors or executive officers to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth, as of March 4, 2024, the stock ownership of (i) each of our executive officers and directors, (i) of all our executive officers and directors as a group, and (iii) of each person known by us to be a beneficial owner of 5% or more of our common stock. Except as otherwise noted, each person listed below is the sole beneficial owner of the shares and has sole investment and voting power of such shares. No person listed below has any option, warrant or other right to acquire additional securities of the Company, except as may be otherwise noted. Unless otherwise specified, the address of each of the persons set forth below is in care of Leatt Corporation, 12 Kiepersol Drive, Atlas Gardens, Contermanskloof Road, Durbanville, Western Cape, South Africa, 7550.

Title of Class Name & Address of
Beneficial Owner
Office,
If Any
Amount and Nature
of Beneficial Ownership (2)
Percent
of Class (3)
Common
Stock, $0.001
par value
Class A
Voting Convertible Preferred
Stock, $0.001 par value(1)
       
Officers and Directors
X - Dr. Christopher J. Leatt (4) Founder, Innovation Officer and 2,011,164 31.57%
- X   Chairman 96,000 80.00%
X - Jeffrey J. Guzy(5) Director 71,717 1.15%
- - Sean Macdonald(6) Chief Executive Officer, President and Director 290,684 4.68%
X - All officers
and directors as
a group
(persons named above)
  2,373,565 37.17%
- X 96,000 80.00%
5% Shareholders
X - Jean-Pierre De Villiers(7)   388,762 6.25%
- X 24,000 20.00%

 

61


(1) The Preferred Stock votes with the Common Stock at a vote of 100-for-one, subject to adjustments resulting from any future stock splits. The Preferred Stock has priority over the Common Stock in any liquidation preferences but no dividend rights (except as may be declared by the Board). The Common Stock has dividend rights in respect of any dividend distributions when and if declared and paid by the Company. The Common Stock has a claim to any liquidation distribution, subject to the priority claim of the Preferred Stock. No dividends have been paid to date on any securities. There are no other classes of equity securities authorized and issued.
   
(2) Beneficial Ownership is determined in accordance with the rules of the U.S. Securities and Exchange Commission or "SEC" and generally includes voting or investment power with respect to securities. Each of the beneficial owners listed above has direct ownership of and sole voting power and investment power with respect to the shares of our common stock.
   
(3) As of the date of this report and after giving effect to the Company's 1-for-25 reverse stock split effected on September 20, 2012 (the "Reverse Split"), the Company has 28,000,000 shares of common stock authorized with 6,215,440 shares issued and outstanding, and 1,120,000 shares of Preferred Stock authorized with 120,000 shares issued and outstanding. For each Beneficial Owner above, any options exercisable or restricted shares vesting within 60 days have been included in the denominator.
   
(4) Represents (a) 1,850,157 shares of common stock directly held by Dr. Leatt and 5,007 shares of common stock held by members of his immediate family, (b) a vested option to purchase 52,000 shares of common stock at $2.60 per share which expires on March 28, 2026, (c) a vested option to purchase 52,000 shares of common stock at $1.60 per share which will expire on August 23, 2027, (d) a vested option to purchase 52,000 shares of common stock at $2.30 per share which will expire on February 24, 2029.
   
(5) Represents (a) 56,717 shares of common stock directly held by Mr. Guzy, and (b) a vested option to purchase 15,000 shares of common stock at $2.30 per share which will expire on February 24, 2029.
   
(6) Represents (a) 290,684 shares of common stock directly held by Mr. Macdonald.
   
(7) Represents 366,950 shares of common stock directly held by Mr De Villiers and 21,812 shares of common stock held by members of his immediate family.

Changes in Control

We do not currently have any arrangements which if consummated may result in a change of control of our Company.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Transactions with Related Persons

62


The following includes a summary of transactions since the beginning of the last fiscal year, or any currently proposed transaction, in which we were or are to be a participant and the amount involved exceeded or exceeds $120,000, and in which any related person had or will have a direct or indirect material interest (other than compensation described under "Executive Compensation"). We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm's-length transactions.

On March 1, 2006, the Company entered into a Licensing Agreement with Xceed Holdings (formerly, Leatt Brace Holdings), a South African company that is controlled by Dr. Leatt, the Company's Chairman, and by Mr. De Villiers until his resignation on August 29, 2006. Under the terms of the Licensing Agreement, we are obligated to pay Xceed Holdings 4% of neck brace sales revenue billed and received by us, on a quarterly basis based on sales of the previous quarter. During the years ended December 31, 2023, and 2022, the Company paid an aggregate of $124,061 and $243,822, in licensing fees to Xceed Holdings. In addition, pursuant to a separate license agreement between us and Mr. De Villiers, the Company is obligated to pay a royalty fee of 1% of all our billed and received neck brace sales revenue, in quarterly installments, based on sales of the previous quarter, to a trust that is beneficially owned and controlled by Mr. De Villiers. Royalties paid to Mr. De Villiers totaled $31,015 and $60,957 for the years ended December 31, 2023 and 2022, respectively.

On November 8, 2021, the Company entered into a consulting agreement with Innovation Services Limited, a Jersey limited company in which, Dr. Christopher Leatt, the Company's founder and chairman, is an indirect beneficiary. Pursuant to the terms of the agreement, Innovation has agreed to serve as the Company's exclusive research, development and marketing consultant, in exchange for a monthly fee; provided, however, that Dr. Leatt must remain an Innovation director and beneficiary of a majority of its ownership interests during the term of the agreement, and Dr. Leatt must remain the Company's primary point of contact responsible for the oversight, review and delivery of the services to be performed by Innovation under the agreement. From January 1 through June 30, 2023, the monthly fee payable by the Company to Innovation was $44,371, and commencing July 1, 2023, this monthly fee increased to $45,463. Innovation may increase its monthly fees, on an annual basis on written notice to the Company, by no greater than the lesser of: (a) five percent (5%) of the prior year's annualized fee; or (b) a percentage equal to then-applicable annual percentage increase in the Consumer Price Index (CPI) published by the United States Department of Labor's bureau of labor statistics, plus one-half percent (0.5%). The parties further agreed that all intellectual property generated in connection with the services provided under the consulting agreement will be the sole property of the Company. The term of the Consulting Agreement will continue unless terminated by either party in accordance with its terms. Either party may terminate the Consulting Agreement upon 6 months' prior written notice, except that the Company may immediately terminate it without notice if the services to be performed by Innovation cease to be performed by Dr. Leatt, if beneficial ownership in Innovation by Dr. Leatt's and his immediate family members decreases, or for any other material breach of the agreement. The parties have agreed to settle any dispute under the Consulting Agreement by submission to JAMS for final and binding arbitration pursuant to its Comprehensive Arbitration Rules and Procedures and in accordance with the Expedited Procedures in those Rules. The Company also simultaneously entered into a side letter agreement, dated November 8, 2021, with Dr. Leatt, pursuant to which Dr. Leatt agreed, among other things: (1) not to perform services similar to the services provided under the agreement for any current or future, direct or indirect competitor of the Company or any similar company; (2) not to solicit any current or future employees of the Company for employment with Innovation or any other entity with which he may become affiliated, or to contact or solicit any current or future stockholder or investor of the Company in connection with any matter that is not directly related to the ongoing or future business operations of the Company; and (3) that he will apprise the Company of any business opportunity that he becomes aware of that could benefit the Company so that the Company, can in its sole discretion, make a determination regarding whether to pursue such opportunity in the best interest of the Company and its stockholders. Dr. Leatt further agreed to continue dedicating a majority of his time on matters related to performance of his duties as a director of the Company and to the fulfillment of his obligations to the Company's research and development efforts under the consulting agreement, and the Company will have the right to adjust the amount of the fees payable under the consulting agreement to the extent of any substantial diminution in his fulfillment of such duties and obligations. The foregoing agreements replaced prior agreements in force from June 2018 to November 2021, among the Company, Dr. Leatt and Innovate Services Limited, a Seychelles company, beneficially owned by Dr. Leatt, that wound up operations. During the years ended December 31, 2023 and 2022, the Company recognized an aggregate of $538,001 and $519,468, respectively, in consulting fees to Innovation.

63


Except as set forth in our discussion above, none of our directors, director nominees or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.

Policies and Procedures for Review, Approval or Ratification of Transactions with Related Persons

As we increase the size of our board of directors to include additional independent directors, we expect to prepare and adopt a written related-person transactions policy that sets forth our policies and procedures regarding the identification, review, consideration and approval or ratification of "related-persons transactions." For purposes of our policy only, a "related-person transaction" will be a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we and any "related person" are participants involving an amount that exceeds $120,000. Transactions involving compensation for services provided to us as an employee, director, consultant or similar capacity by a related person will not be covered by this policy. A related person will be any executive officer, director or a holder of more than five percent of our common stock, including any of their immediate family members and any entity owned or controlled by such persons.

We anticipate that, where a transaction has been identified as a related-person transaction, the policy will require management to present information regarding the proposed related-person transaction to our audit committee (or, where approval by our audit committee would be inappropriate, to another independent body of our board of directors) for consideration and approval or ratification. Management's presentation will be expected to include a description of, among other things, the material facts, the direct and indirect interests of the related persons, the benefits of the transaction to us and whether any alternative transactions are available.

To identify related-person transactions in advance, we are expected to rely on information supplied by our executive officers, directors and certain significant stockholders. In considering related-person transactions, our board of directors will take into account the relevant available facts and circumstances including, but not limited to:

• the risks, costs and benefits to us;

• the impact on a director's independence in the event the related person is a director, immediate family member of a director or an entity with which a director is affiliated;

• the terms of the transaction;

• the availability of other sources for comparable services or products; and

• the terms available to or from, as the case may be, unrelated third parties or to or from our employees generally.

We also expect that the policy will require any interested director to excuse himself from deliberations and approval of the transaction in which the interested director is involved.

Promoters and Certain Control Persons

We did not have any promoters at any time during the past five fiscal years.

Director Independence

Our Board of Directors has determined that our director, Mr. Jeffrey Guzy, is an independent director, as the term "independent" is defined by the rules of the Nasdaq Stock Market.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

Independent Auditors' Fees

The following is a summary of the fees billed to the Company for professional services rendered for the fiscal years ended December 31, 2023 and 2022:

64


 

    Year Ended December 31,  
    2023     2022  
Audit Fees $ 225,500   $ 175,000  
Audit-Related Fees   24,000     19,820  
Tax Fees   17,690     14,600  
Other fees   72     50  
TOTAL $ 267,262   $ 209,470  

"Audit Fees" consisted of fees billed for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our Form 10-K and 10-Qs or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements.

"Audit-Related Fees" consisted of fees billed for assurance and related services by the principal accountant that were reasonably related to the performance of the audit or review of our financial statements and are not reported under the paragraph captioned "Audit Fees" above.

"Tax Fees" consisted of fees billed for professional services rendered by the principal accountant for tax returns preparation.

"All Other Fees" consisted of fees billed for products and services provided by the principal accountant, other than the services reported above under other captions of this Item 14.

Pre-Approval Policies and Procedures

Under the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by our auditors must be approved in advance by our board of directors to assure that such services do not impair the auditors' independence from us. In accordance with its policies and procedures, our board of directors pre-approved the audit and non-audit services performed by Fitzgerald & Co, CPAs, P.C. for our financial statements as of and for the year ended December 31, 2023.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

Financial Statements and Schedules

The financial statements are set forth under Item 8 of this annual report on Form 10-K. Financial statement schedules have been omitted since they are either not required, not applicable, or the information is otherwise included.

Exhibit Exhibit Title
Number  
2.1 Settlement Agreement, dated as of September 25, 2008, between Leatt Corp., Christopher J. Leatt and J. P. De Villiers
2.2 Amendment No. 1 to Settlement Agreement, dated February 4, 2010, between Leatt Corp., Christopher J. Leatt and Jean- Pierre De Villiers
3.1 Amended and Restated Articles of Incorporation, as filed with the Secretary of State of Nevada on October 28, 2008
3.2 Amended and Restated Bylaws, adopted on October 28, 2008
4.1 Certificate of Designation of Series A Voting Convertible Preferred Stock, as filed with the Secretary of State of Nevada on October 29, 2008
4.2 Leatt Corp. Amended and Restated 2011 Equity Incentive Plan as amended
4.3 Stock Option Agreement, dated March 29, 2016, between Leatt Corp. and Dr. Christopher Leatt

 

65


4.7 Stock Option Agreement, dated February 25, 2019, between Leatt Corp. and Jeffrey Guzy.
4.9 Stock Option Agreement, dated August 24, 2017, between Leatt Corp. and Dr. Christopher Leatt
4.12 Stock Option Agreement, dated February 25, 2019, between Leatt Corp. and Dr. Christopher Leatt
4.14 Stock Option Agreement, dated February 25, 2019, between Leatt Corp. and Todd Repsher
4.30* Restricted Stock Award Agreement, dated December 22, 2023, between Leatt Corp. and Erik Olsson
4.31* Restricted Stock Award Agreement, dated December 22, 2023, between Leatt Corp. and Jeffrey Guzy
4.32* Restricted Stock Award Agreement, dated December 22, 2023, between Leatt Corp. and Sean Macdonald
4.33* Restricted Stock Award Agreement, dated December 22, 2023, between Leatt Corp. and Dr. Christopher Leatt
10.1 Consulting Agreement, dated November 8, 2021, between Innovation Services Limited and Leatt Corporation
10.2 Side Letter Agreement, dated November 8, 2021, between Leatt Corporation and Dr. Christopher Leatt
10.3 2022-23 Leatt Corporation General Business Terms and Conditions, effective November 1, 2021
10.4 Lease Agreement, dated February 24, 2022, between Leatt Corp. and Montprop Beleggings (Pty) Ltd
10.5* Lease Agreement, dated May 24, 2023, between Leatt Corp. and Montprop Beleggings (Pty) Ltd Addendum
10.5 Lease Agreement, dated January 12, 2023, between Leatt Corp. and AJ Brutus Investments cc.
10.6 Lease Agreement, dated May 24, 2022, between Leatt Corp. and FC Rust Theron Incorporated.
10.7 Lease Agreement, dated December 14, 2020, between Two Eleven Distribution, LLC, and CP Logistics NVCC IV, LLC.
10.8* Second Amended and Restated Employment Agreement, effective as of January 1, 2022, between Leatt Corp. and Sean Macdonald (as amended)
10.12* Director Agreement, dated July 8, 2015, between Leatt Corporation and Dr. Christopher Leatt (as amended)
10.13* Director Agreement, dated June 29, 2017, between Leatt Corporation and Sean Macdonald (as amended)
10.14* Director Agreement, dated January 1, 2017, between Leatt Corporation and Jeffrey Guzy (as amended)
   
14.1 Code of Ethics
21 List of Subsidiaries
31.1* Certifications of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2* Certifications of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1* Certifications of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2* Certifications of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101** Interactive data files pursuant to Rule 405 of Regulation S-T
101.INS** Inline XBRL Instance Document-the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document
101.SCH** Inline XBRL Taxonomy Extension Schema Document
101.CAL** Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF** Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB** Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE** Inline XBRL Taxonomy Extension Presentation Linkbase Document
104** Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

________________________

* Filed herewith

66


** Pursuant to Rule 405 of Regulation S-T, the following financial information from the Company's Annual Report on Form 10-K for the period ended December 31, 2023 is formatted in XBRL interactive data files: (i) Consolidated Balance Sheets at December 31, 2023 and 2022; (ii) Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2023 and 2022; (iii) Consolidated Statements of Changes in Shareholders' Equity as of and for the years ended December 31, 2023 and 2022; (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022; and (vi) Notes to Consolidated Financial Statements. Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, or for purposes of Section 18 of the Securities Act of 1934, as amended, and otherwise are not subject to liability under those sections.

67


SIGNATURES

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

Dated: March 13, 2024

  LEATT CORPORATION
   
   
  By: /s/ Sean Macdonald
  Sean Macdonald, Chief Executive
  Officer and Chief Financial Officer
  (Principal Executive Officer and
  Principal Financial and Accounting Officer)

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Title Date
     
/s/ Sean Macdonald Chief Executive Officer, Chief March 13, 2024
Sean Macdonald Financial Officer and Director  
  (Principal Executive Officer)  
     
/s/ Dr. Christopher J. Leatt Chairman March 13, 2024
Dr. Christopher J. Leatt    
     
/s/ Jeffrey J. Guzy Director March 13, 2024
Jeffrey J. Guzy    

 

68


 

LEATT CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

 

 

 


LEATT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Stockholders of Leatt Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of LEATT CORPORATION (the Company) as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2023, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023 and 2022, and the consolidated results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, 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.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.yyy

We have served as the Company’s auditor since 2008.

leatt.jpg

Vienna, Virginia
March 13, 2024

 

PCAOB: 58
 

8150 Leesburg Pike Suite 500 Vienna, VA 22182

Phone: 703.847.4600 Fax: 703.356.4821 Email: fc@fcocpas.com Website: http://www.fcocpas.com

Members of: American Institute of Certified Public Accountants PCPS/CAQ Virginia Society of Certified Public Accountants CPA
Associates International, Inc., a consortium of independent CPA firms with members in Principal U.S. and International Cities

 

F-2


 

LEATT CORPORATION

 

CONSOLIDATED BALANCE SHEETS

 

DECEMBER 31, 2023 and 2022

ASSETS  
             
    December 31, 2023     December 31, 2022  
    Audited     Audited  
Current Assets            
  Cash and cash equivalents $ 11,347,420   $ 7,102,945  
  Accounts receivable, net   6,970,322     12,839,597  
  Inventory, net   20,391,873     22,805,462  
  Payments in advance   664,754     1,047,137  
  Deferred asset, net   9,601     1,016,815  
  Income tax refunds receivable   623,081     -  
  Prepaid expenses and other current assets   2,297,934     2,878,112  
    Total current assets   42,304,985     47,690,068  
             
Property and equipment, net   4,026,821     3,104,336  
Operating lease right-of-use assets, net   845,209     1,092,170  
Accounts receivable, net   309,947     -  
Deferred tax asset, net   84,200     -  
             
Other Assets            
  Deposits   36,210     40,796  
             
Total Assets $ 47,607,372   $ 51,927,370  
             
LIABILITIES AND STOCKHOLDERS' EQUITY  
             
Current Liabilities            
   Accounts payable and accrued expenses $ 5,202,368   $ 6,011,390  
  Notes payable, current   112,858     108,398  
  Operating lease liabilities, current   299,432     280,743  
  Deferred compensation, current   -     400,000  
  Income taxes payable   -     3,382,700  
  Short term loan, net of finance charges   1,135,761     1,030,196  
    Total current liabilities   6,750,419     11,213,427  
             
Notes payable, net of current portion   30,652     141,967  
Operating lease liabilities, net of current portion   545,777     811,427  
Deferred tax liability, net   -     66,200  
             
Commitments and contingencies        
             
Preferred stock, $.001 par value, 1,120,000 sharesauthorized, 120,000 shares issued and outstanding   3,000     3,000  
Common stock, $.001 par value, 28,000,000 shares authorized, 6,215,440 and 5,971,340 shares issued and outstanding   130,553     130,309  
Additional paid - in capital   10,745,384     10,645,497  
Accumulated other comprehensive loss   (1,398,258 )   (1,081,143 )
Retained earnings   30,799,845     29,996,686  
Total stockholders' equity   40,280,524     39,694,349  
             
Total Liabilities and Stockholders' Equity $ 47,607,372   $ 51,927,370  

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

F-3


 

LEATT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2023 and 2022

 
    2023     2022  
Revenues $ 47,241,187   $ 76,335,539  
             
Cost of Revenues   27,435,115     45,202,712  
             
Gross Profit   19,806,072     31,132,827  
             
Product Royalty Income   93,696     240,044  
             
Operating Expenses            
   Salaries and wages   5,443,685     6,148,179  
   Commissions and consulting expenses   434,657     563,689  
   Professional fees   748,608     586,474  
   Advertising and marketing   4,127,798     3,342,791  
   Office lease and expenses   596,862     689,068  
   Research and development costs   2,526,550     2,179,996  
   Bad debt expense (recovery)   (10,288 )   474,019  
   General and administrative expenses   3,438,746     3,273,346  
   Depreciation   1,174,664     1,098,433  
       Total operating expenses   18,481,282     18,355,995  
             
Income from Operations   1,418,486     13,016,876  
             
Other Expenses            
    Interest and other expenses, net   (39,138 )   (13,550 )
      Total other expenses   (39,138 )   (13,550 )
             
Income Before Income Taxes   1,379,348     13,003,326  
             
Income Taxes   576,189     3,042,873  
             
Net Income Available to Common Shareholders $ 803,159   $ 9,960,453  
             
Net Income per Common Share            
   Basic $ 0.13   $ 1.71  
   Diluted $ 0.13   $ 1.62  
             
Weighted Average Number of Common Shares Outstanding            
   Basic   5,992,072     5,821,119  
   Diluted   6,287,849     6,136,781  
             
Comprehensive Income            
    Net Income $ 803,159   $ 9,960,453  
Other comprehensive income, net of ($18,000) and ($14,700)
deferred income taxes in 2023 and 2022
           
Foreign currency translation   (317,115 )   (301,875 )
             
Total Comprehensive Income $ 486,044   $ 9,658,578  

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

F-4


 

LEATT CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2023 and 2022

 
                                  Accumulated              
                                  Other              
    Preferred Stock A     Common Stock     Additional     Comprehensive     Retained        
    Shares     Amount     Shares     Amount     Paid - In Capital     Loss     Earnings     Total  
                                                 
Balance, January 1, 2022   120,000   $ 3,000     5,673,683   $ 130,162   $ 9,230,847   $ (779,268 ) $ 20,036,233   $ 28,620,974  
                                                 
Compensation cost recognized in connection with stock options   -     -     -     -     82,530     -     -     82,530  
                                                 
Exercise of stock options   -     -     118,000     118     255,682     -     -     255,800  
                                                 
Options exercised on a cashless basis   -     -     150,657     -     -     -     -     -  
                                                 
Restricted stock awards   -     -     29,000     29     1,076,438     -     -     1,076,467  
                                                 
Net income   -     -     -     -     -     -     9,960,453     9,960,453  
                                                 
Foreign currency translation adjustment   -     -     -     -     -     (301,875 )   -     (301,875 )
                                                 
Balance, December 31, 2022   120,000   $ 3,000     5,971,340   $ 130,309   $ 10,645,497   $ (1,081,143 ) $ 29,996,686   $ 39,694,349  
                                                 
Restricted stock awards   -     -     244,100     244     99,887     -     -     100,131  
                                                 
Net income   -     -     -     -     -     -     803,159     803,159  
                                                 
Foreign currency translation adjustment   -     -     -     -     -     (317,115 )   -     (317,115 )
                                                 
Balance, December 31, 2023   120,000   $ 3,000     6,215,440   $ 130,553   $ 10,745,384   $ (1,398,258 ) $ 30,799,845   $ 40,280,524  

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

F-5


 

LEATT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2023 and 2022

 
    2023     2022  
Cash flows from operating activities            
   Net income $ 803,159   $ 9,960,453  
   Adjustments to reconcile net income to net cash provided by operating activities:            
     Depreciation   1,174,664     1,098,433  
     Deferred income taxes   (150,400 )   (162,400 )
     Stock-based compensation   100,131     1,158,997  
     Bad debts reserve   (54,080 )   452,037  
     Inventory reserve   122,456     (11,111 )
     Deferred asset allowance   (98,671 )   105,071  
     Gain on sale of property and equipment   (2,817 )   (23,006 )
     (Increase) decrease in:            
       Accounts receivable   5,923,355     (630,698 )
       Deferred asset   1,105,885     (1,121,886 )
       Inventory   2,291,133     (1,712,870 )
       Payments in advance   382,383     563,503  
       Prepaid expenses and other current assets   580,178     1,300,315  
       Income tax refunds receivable   (623,081 )   -  
       Long-term accounts receivable   (309,947 )   -  
       Deposits   4,586     (7,457 )
     Increase (decrease) in:            
       Accounts payable and accrued expenses   (809,022 )   (8,606,281 )
       Income taxes payable   (3,382,700 )   643,882  
      Deferred compensation   (400,000 )   80,000  
         Net cash provided by operating activities   6,657,212     3,086,982  
             
Cash flows from investing activities            
    Capital expenditures   (1,999,500 )   (1,144,173 )
    Proceeds from sale of property and equipment   3,248     43,469  
    (Increase) decrease in short-term investments, net   -     58,262  
         Net cash used in investing activities   (1,996,252 )   (1,042,442 )
             
Cash flows from financing activities            
    Issuance of common stock   -     255,800  
    Proceeds from note payable   -     58,075  
    Repayment of notes payable to bank   (106,855 )   (80,229 )
    Proceeds from short-term loan, net   105,565     55,171  
         Net cash provided by (used in) financing activities   (1,290 )