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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-K
(Mark One)
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[ X ]
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ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31, 2016
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[ ]
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
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For the transition period from ________________ to _______________
000-53525
(Commission file number)
Leo Motors, Inc.
(Exact name of registrant as specified in its charter)
Nevada
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814108026
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(State or other jurisdiction of incorporation or organization)
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(IRS Employer Identification No.)
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ES Tower 7F, Teheranro 52 Gil 17
Gangnamgu, Seoul
06212
Republic of Korea
82-70-4699-3583
(Address and telephone number of principal executive offices)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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 Exchange Act. Yes [_] No [X]
Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or 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 the registrant's knowledge, in the definitive proxy or information statement incorporated by reference in Part III of this Form 10-K or amendment to Form 10-K. Yes [X] No [_]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller Reporting Company
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
The aggregate market value of the voting and non-voting common equity held by non-affiliates as of June 30, 2016, was $34,834,951.24. For purposes of the above statement only, all directors, executive officers and 10% shareholders are assumed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for any other purpose.
As of April 14, 2017, there were 172,528,016 shares of common stock outstanding
LEO MOTORS, INC.
TABLE OF CONTENTS
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Page
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PART I
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Forward-Looking Statements
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1
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Item 1.
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Business
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1
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Item 1A.
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Risk Factors
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9
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Item 1B.
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Unresolved Staff Comments
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15
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Item 2.
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Properties
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15
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Item 3.
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Legal Proceedings
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15
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Item 4.
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Mine Safety Disclosures
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15
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PART II
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Item 5.
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Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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15
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Item 6.
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Selected Financial Data
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18
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Item 7.
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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18
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Item 7A.
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Quantitative and Qualitative Disclosures About Market Risk
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22
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Item 8.
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Financial Statements and Supplementary Data
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22
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Item 9.
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
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22
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Item 9A.
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Controls and Procedures
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22
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Item 9B.
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Other Information
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23
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PART III
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Item 10.
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Directors, Executive Officers and Corporate Governance
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23
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Item 11.
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Executive Compensation
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26
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management and related stockholder matters
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28
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Item 13.
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Certain Relationships and Related Transactions, and Director Independence
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29
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Item 14.
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Principal Accounting Fees and Services
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29
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PART IV
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Item 15.
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Exhibits, Financial Statement Schedules
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30
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Signatures
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32
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (including the section regarding Management's Discussion and Analysis or Plan of Operation) contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this Annual Report on Form 10-K. Additionally, statements concerning future matters are forward-looking statements.
Although forward-looking statements in this Annual Report on Form 10-K reflect the good faith judgment of our Management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the heading "Risks Factors" below, as well as those discussed elsewhere in this Annual Report on Form 10-K. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. We file reports with the Securities and Exchange Commission ("SEC"). Our electronic filings with the United States Securities and Exchange Commission (including our Annual Reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to these reports) are available free of charge on the Securities and Exchange Commission's website at http://www.sec.gov. You can also read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.
We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Annual Report on Form 10-K, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this Annual Report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
SPECIAL NOTICE ABOUT GOING CONCERN AUDIT OPINION
OUR AUDITOR HAS ISSUED AN OPINION EXPRESSING DOUBT AS TO OUR ABILITY TO CONTINUE IN BUSINESS AS A GOING CONCERN. YOU SHOULD READ THIS FORM 10-K WITH THE "GOING CONCERN" ISSUES IN MIND.
ITEM 1. Description of Business
Overview
Leo Motors, Inc. (the "Company") is a Nevada Corporation incorporated on September 8, 2004. The Company established a wholly-owned operating subsidiary in Korea named Leo Motors Co. Ltd. ("Leozone") on July 1, 2006. Through Leozone, the Company is engaged in the research and development ("R&D") of multiple products, prototypes, and conceptualizations based on proprietary, patented and patent pending electric power generation, drive train and storage technologies. Leozone operates through four unincorporated divisions: new product research & development ("R&D"), post R&D development such as product testing, production, and sales.
The Company's products include (i) E-Box electric energy storage system for solar and wind power generation devices; and (ii) EV components that integrate electric batteries with electric motors such as EV Controllers that use a mini-computer to control torque drive.
The Company was previously actively engaged in the process of development and production of Electric Power Train Systems ("EPTS") encompassing electric scooters, electric sedans/SUVs/sports cars, and electric buses/trucks as well as several models of Electric Vehicle ("EV"). Our EPTS can replace internal combustion engines ("ICEs"). Company began sales of EPTS to auto makers and agricultural machinery manufacturers.
The Company has developed eight EPTS of increasing power rating: 3kW, 5kW, 7.5kW, 15kW, 30kW, 60kW, 120kW, and 240kW systems. Each EPTS consists of a motor, a controller, and a battery power pack with a battery management system ("BMS").
The Company has successfully converted existing models of small cars (ICEs under 2,000cc), and also a 24 seat bus. The Company has begun marketing its 60kW power train kits (for compact passenger cars and small trucks) and its 120kW kits (for ICE passenger cars, buses, and trucks under 5,000cc). The Company has developed a 240kW kit (for up to 10,000cc buses and trucks) as well, and is attempting to locate a strategic partner to fund the testing and production.
The specific goals of the Company over the next twelve months include:
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Focus on the capitalization of the Company;
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Focus on the sale of the E-Boats, connected EV’s, intelligent poles, and smart parking tower system and E-Box;
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Business development in China and in America by establishing a joint venture companies;
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·
Continue with R&D of our EV's, E-Boats, connected car, products for smart cities and related products as capital permits.
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The E-Box can be used as an energy supplying device in an emergency situations or as a energy storage device for use by the military; municipal and industry; corporate; solar/wind power storage; electric coolers and heaters; yachts or small ships. The E-Box is offered in three power classes: 1kw, 3kw and 5kw. E-Boxes for 10kw and 550kw will be developed in the future. The E-Box is environmentally friendly with high energy density due to the use of lithium-polymer battery. The E-Box uses a multiple cell voltage balancing system via a battery management system ("BMS").
The Company is developing new battery exchange system using its patented cartridge battery exchange system which will solve the cost barriers of the electric vehicle to make them less expensive than their Internal Combustion Engine (ICE) counterparts and to help solve battery charging problems. With evolutionary batter exchange system, the Company's EV's can exchange battery within one minute using simple and low cost equipment. This technology can be best used in fleet managed vehicles such as city buses, taxis, and garbage trucks because it can be used any road sides. The Company is developing EV Ecosystem using connected car solution to provide the battery swap services for fleet operators such as rental cars, public companies, delivery companies, and post offices.
2
The Company acquired Leo AIC (former name was Lelcon) on June 3, 2016. With the acquisition, the Company was engaged in connected car and artificial intelligence (AI) related businesses for smart city. Leo AIC has developed tele-diagnosing and tele-operation system for cars and things such as smart street lights and intelligent parking tower system. Leo AIC has been selling these systems and products to several cities in China and in Korea. Solutions from Leo AIC will be provided to EV’s and E-Boats provided by the Company, thus, all vehicles are connected to the cloud server and AI, thus they provide organized battery swap services as well as better riding experiences.
The Company acquired Leo Members which integrates Leo Factory 1 and 2, and Leo Trade. Leo Members will start used luxury car trading business through affiliation with car repairing garages (car centers) in Korea. Leo Members is developing used car recommendation solution including car history tracking using AIC’s vehicle diagnosing manager, financing through fintech financing services provided by its affiliated financial company, and connected repairing services.
Our principal executive offices are located at ES Tower 7F, Teheranro 52 Gil 17, Gangnamgu, Seoul 06212 Republic of Korea and our telephone number is +82 70-4699-3583. Our web site address is www.leomotors.com. Information contained in or accessible through our website does not constitute part of this Annual Report on Form 10-K.
Recent Business Developments
On June 3, 2016, the Company acquired Leo AIC (fka ‘Lelcon’). With the acquisition, the Company was engaged in connected car and artificial intelligence (AI) related businesses for smart city. Leo AIC has developed tele-diagnosing and tele-operation system for cars and things such as smart street lights and intelligent parking tower system. Leo AIC has been selling these systems and products to several cities in China and in Korea. Solutions from Leo AIC will be provided to EV’s and E-Boats provided by the Company, thus, all vehicles are connected to the cloud server and AI, thus they provide organized battery swap services as well as better riding experiences.
On March 8, 2017, the Company acquired 100% of Leo Members, Inc. (“Leo Members”) which integrates Leo Factory 1 and 2, and Leo Trade. Leo Members will start used luxury car trading and repairing businesses. Based on the connected car platform, Leo Members is developing prescriptive car care and trading services.
Corporate History
Leo Motors, Inc. (the "Company") was originally incorporated as Classic Auto Accessories of North America, a California Corporation on July 2, 1986. The Company then underwent several name changes from FCR Automotive Group, Inc. to Shini Precision Machinery, Inc. to Simco America Inc. and then to Leo Motors. The Company had been dormant since 1989, and effectuated a reverse merger on November 12, 2007 with Leozone Inc., a South Korean Company, which is the maker of electrical transportation devices. The merger essentially exchanges shares in Leo Motors, Inc. for shares in Leozone. As this is a reverse merger the accounting treatment of such is that of a combination of the two entities with the activity of Leozone, Inc. the surviving entity, going forward. The financial statements reflect the activity for all periods presented as if the merger had occurred January 1, 2007. Leozone has continued to operate as a separate subsidiary (Leo Motors Co. Ltd. of Korea) since that time.
On February 11, 2010, the Company acquired 50% of Leo B&T Corp., ("B&T") a Korean Corporation, from two shareholders of B&T in exchange for 7,000,000 shares of the Company's common stock. This percentage was reduced to 30% in 2011. Additionally, this investment was written down through an impairment expense during 2011 and the remaining investment was exchanged in 2012 for a return of Leo Motors stock.
3
On July 1, 2014, the Company acquired all of the outstanding common stock of LGM Co. Ltd., a corporation incorporated in the Republic of Korea ("LGM"), from LGM's shareholders, which represents 813,747 shares of LGM common stock, in exchange for 47,352,450 shares of the Company's common stock pursuant to the Share Swap Agreement entered into by and between LGM and the Company. Pursuant to the Agreement, LGM became a wholly-owned subsidiary of the Company.
On March 31, 2015, the Company acquired 50% of the outstanding common stock of Leo Motors Factory 1, Leo Motors Factory 2, and Leo Trading. These three companies became subsidiaries of the Company.
On June 3, 2016, the Company acquired 50% of Leo AIC (fka ‘Lelcon’). With the acquisition, the Company was engaged in connected car and artificial intelligence (AI) related businesses for smart city. Leo AIC has developed tele-diagnosing and tele-operation system for cars and things such as smart street lights and intelligent parking tower system.
On March 8, 2017, the Company acquired 100% of Leo Members, Inc. (“Leo Members”) which integrates Leo Factory 1 and 2, and Leo Trade. Leo Members will start used luxury car trading and repairing businesses. Based on the connected car platform, Leo Members is developing prescriptive car care and trading services.
Product Candidates
The Company's products include (i) E-Box electric energy storage system (ESS) for solar and wind power generation devices; (ii) EV components that integrate electric battery power packages with electric motors with EV Controllers that use a mini-computer to control torque drive, and (iii) E-Boat power trains including motor, controller, and cartridge battery power packs.
The Company has developed eight Electric Power Train Systems (EPTS): 3kW, 5kW, 7.5kW, 15kW, 30kW, 60kW, 120kW, and 240kW systems. Each EPTS consists of a motor, a controller, and a battery power pack with a battery management system ("BMS").
The Company has successfully converted existing models of small cars (ICEs under 2,000cc), and also a 24 seat bus. The Company has begun marketing its 60kW power train kits (for compact passenger cars and small trucks) and its 120kW kits (for ICE passenger cars, buses, and trucks under 5,000cc). The Company has developed a 240kW kit (for up to 10,000cc buses and trucks) as well, and is attempting to locate a strategic partner to fund the testing and production.
The E-Box can be used as an energy supplying device in an emergency situations or as an energy storage device for use by the military; municipal and industry; corporate; solar/wind power storage; electric coolers and heaters; yachts or small boats. The Company markets intelligent 3kW ESS of Off-Grid or Micro Grid Solar . Encaging the solar module and battery power packs in all-in-one box, Company’s Intelligent ESS gets rid of redundant components in the system. Being connected through mesh network using block chain, the traffic in Company’s Micro Grid is directly made without going through the central server in the cloud. In this way, the Company will minimize maintenance costs while maximizing grid management efficiency and system security. Company’s ESS Artificial Intelligence (AI) is connected in Company’s Micro Grid continuously to optimize charging and storing of electricity through deep learning of energy usage patterns of the users.
The Company markets EV based on Battery Swap Ecosystem which includes cartridge battery system, battery swap centers, telemetry and teleoperation system based on connected car platform. The Company set up control center and battery swap centers through zoning their business areas. Company’s mobile fleet networks are strongly secured by distributed ledgers of block chain technology.
4
The Company markets various electric power propulsion systems Ranging 40 Horse Power (HP) to 640Hp for Sport Boat / Fishing Boat / Sailing Yacht / Excursion Boat. The Company is providing an electric power train conversion services which convert Internal Combustion Engines (ICEs) into equivalent electric power trains which substantially reduces noise while traveling, an inherent problem for ICE boats and do not produce any stench from oil or gas. The electrification kits include Sailing Generation System that uses wind to recharge batteries while under way, eliminating conventional charging processes.
The Company markets its Intelligent poles, vehicle managers, digital cluster, and vehicles and parking system. Connecting the Artificial Intelligence with car, boats, street lights, buildings, and homes, the Company innovated tower parking system, street lamps, and clusters in cars and boats. The Company’s AI products use voice interfaces which can listen and talk to the users using cloud AI chatbot services.
Business Strategy
The specific goals of the Company over the next twelve months include:
• Start electrification business for old yachts and boats in the U.S.;
• Successful deploy of an EV ecosystem in Korea;
• Sales of intelligent poles and smart parking systems in China by establishing a joint venture company; and
• Continue with R&D of our EV's, electric boats, AI connected products, smart car trading system, and related products as capital permits.
There can be no assurance that the Company will adhere to any of the above goals.
Marketing
The Company tries to set up Chinese companies to market intelligent poles and smart parking systems to the cities in China. The newly set up Chinese companies are to be joint ventures introduced by city governments in China.
The Company will go to trade shows in China to market digital clusters which integrated vehicle diagnosis, information and entertainment, navigation, and intelligent systems into one vehicle cockpit. The target markets are small and medium Chinese auto makers which do not have technology and capabilities to develop such clusters.
The Company will relaunch the ESS with Intelligent ESS (IESS) micro grid system which gets rid of redundant components in the system. Incorporated with network safety through mesh network using block chain, the traffic in Company’s Micro Grid is directly made without going through the central server in the cloud. In this way, the Company will minimize maintenance costs while maximizing grid management efficiency and system security.
The Company will enter into the U.S. market this year by providing electric conversion services. The Company will replace old internal combustion engine yachts and powerboats to the electric power system. The Company is communicating with potential partners in America for its conversion enterprise
The Company has marketed electric fishing boats with 120 kW power trains. The 120W power train boat was registered to the National Federation of Fisheries Cooperatives as first marketed electric boat product in Korea. With the registration, our customers of e-Fishing Boats can receive government subsidy when they purchase the 120kW power train boat from us.
Competition
We expect to compete with several companies including GS Yuasa, BYD, Eliiy Power, zubis, Ocean Marine, Torqueedo, etc, and our competitors may:
5
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develop and market products that are less expensive or more effective than our future products;
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commercialize competing products before we, or our partners, can launch any products developed from our product candidates;
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operate larger research and development programs or have substantially greater financial resources than we do;
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have greater success in recruiting skilled technical and scientific workers from the limited pool of available talent;
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more effectively negotiate third-party licenses and strategic relationships; and
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take advantage of acquisition or other opportunities more readily than we can.
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Intellectual Property
Registration date
|
Registration number
|
Name
|
Country
|
2015.08.31
|
1550568
|
motor control system of boat
|
Rep. of Korea
|
2015.04.27
|
1517017
|
battery cooling system and boat using it
|
Rep. of Korea
|
2015.02.11
|
1494524
|
battery connection system
|
Rep. of Korea
|
2014.11.11
|
1462575
|
REFRIGERATING APPARATUS FOR REFERIGERATING VEHICLE
|
Rep. of Korea
|
2014.11.11
|
1462576
|
REFRIGERATING APPARATUS FOR REFERIGERATING VEHICLE
|
Rep. of Korea
|
2013.01.25
|
1228434
|
Zinc-air fuel cell assembly for ocean
|
Rep. of Korea
|
2013.01.25
|
1228435
|
Zinc-air fuel cell assembly for ocean
|
Rep. of Korea
|
2012.4.17
|
1140345
|
Electric vehicle power development apparatus
|
Rep. of Korea
|
2012.11.26
|
1206784
|
Zinc-air fuel cell system, and control method for the same
|
Rep. of Korea
|
2012.10.05
|
1187829
|
Zinc-air fuel cell assembly having zinc oxide secession means
|
Rep. of Korea
|
2012.10.05
|
1187866
|
Zinc-air fuel cell reaction cell structure
|
Rep. of Korea
|
2012.10.05
|
1187870
|
Zinc-air fuel cell reaction cell unit enabling simultaneous supply and emission of zinc-ball
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Rep. of Korea
|
2012.09.26
|
662002
|
Scooter
|
Rep. of Korea
|
2012.09.26
|
662003
|
Scooter
|
Rep. of Korea
|
2012.09.26
|
662004
|
Scooter
|
Rep. of Korea
|
2012.09.13
|
1184335
|
Motor
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Rep. of Korea
|
2012.09.06
|
1182336
|
Cell voltage balancing control method of battery management system
|
Rep. of Korea
|
2012.07.25
|
1170001
|
Motor
|
Rep. of Korea
|
2012.07.25
|
1170002
|
Battery stack assembly
|
Rep. of Korea
|
2012.07.19
|
1168597
|
Zinc-ball supplying apparatus
|
Rep. of Korea
|
2012.07.19
|
1168598
|
Zinc-air fuel cell assembly of radial shape stack structure
|
Rep. of Korea
|
6
2012.07.02
|
1163537
|
Electric vehicle fuel cell duality system
|
Rep. of Korea
|
2012.06.27
|
1161613
|
Electric automobile driving mode control method
|
Rep. of Korea
|
2012.06.07
|
1155993
|
Electric vehicle battery housing
|
Rep. of Korea
|
2012.05.29
|
1152790
|
Zinc-ball supplying apparatus
|
Rep. of Korea
|
2012.05.29
|
1152793
|
Zinc-ball supplying apparatus
|
Rep. of Korea
|
2012.05.24
|
1151779
|
Electric vehicle motor cooling apparatus
|
Rep. of Korea
|
2012.05.24
|
1151783
|
Zinc-ball supplying apparatus
|
Rep. of Korea
|
2012.05.16
|
1148980
|
Electric vehicle battery charging apparatus
|
Rep. of Korea
|
2012.04.30
|
1143406
|
Electric truck battery mounting structure
|
Rep. of Korea
|
2011.04.05
|
1028773
|
Electric vehicle powertrain gear apparatus
|
Rep. of Korea
|
2011.04.05
|
1028758
|
Electric automobile driving mode automatic control method
|
Rep. of Korea
|
2011.04.05
|
1028755
|
Electric vehicle motor cooling apparatus
|
Rep. of Korea
|
2011.04.05
|
1028756
|
Power input control circuit for battery management system
|
Rep. of Korea
|
2011.03.18
|
1024663
|
Zinc-Air fuel cell stack assembly
|
Rep. of Korea
|
2011.02.09
|
1015138
|
Battery stack assembly
|
Rep. of Korea
|
2011.01.17
|
1010235
|
Zinc-air fuel cell assembly
|
Rep. of Korea
|
2011.01.17
|
1010236
|
Zinc-air fuel cell assembly
|
Rep. of Korea
|
2011.01.05
|
1007554
|
Zinc-Air fuel cell stack assembly
|
Rep. of Korea
|
2011.01.05
|
1007593
|
Car velocity control method to electric vehicle battery charging state
|
Rep. of Korea
|
2010.12.22
|
1004621
|
Motor magnetic position fixing apparatus
|
Rep. of Korea
|
2010.12.15
|
1002963
|
Zinc-air fuel cell assembly
|
Rep. of Korea
|
2010.12.15
|
1002965
|
Zinc-ball supplying apparatus
|
Rep. of Korea
|
2010.12.10
|
1001982
|
Battery stack assembly
|
Rep. of Korea
|
2010.11.09
|
994438
|
Zinc-air fuel cell electrolyte emission system
|
Rep. of Korea
|
2010.09.29
|
985521
|
Battery stack assembly
|
Rep. of Korea
|
7
2010.08.11
|
977018
|
Zinc-air fuel cell reaction cell structure
|
Rep. of Korea
|
2010.08.11
|
976504
|
Zinc-air fuel cell assembly
|
Rep. of Korea
|
2010.07.30
|
831435
|
Hilless
|
Rep. of Korea
|
2008.05.06
|
490413
|
Vehicle
|
Rep. of Korea
|
2007.07.24
|
744057
|
Embedded system and a graphic user interface displaying method thereof
|
Rep. of Korea
|
2007.05.30
|
725405
|
WIRELESS RECEIVING DEVICE WITHOUT PLL FREQUENCYSYTHESIZER AND WIRELESS RECEIVING METHOD USING THE SAME
|
Rep. of Korea
|
2007.02.07
|
682489
|
A Multi Motor Device for Electric Vehicle
|
Rep. of Korea
|
2006.07.05
|
599667
|
Separator for fuel cell using the metal coated with TiN, method to prepare there it, and polymer electrolyte membrane fuel cell comprising the same
|
Rep. of Korea
|
Employees
We currently have 73 employees to manage our ongoing operation, though it is expected that selective hires will be made to allow us to manage ongoing clinical trials.
Available Information
We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission, referred to herein as the SEC. Our SEC filings, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act are available to the public free of charge over the Internet at our website at http://www.leomotors.com or at the SEC's web site at http://www.sec.gov. Our SEC filings will be available on our website as soon as reasonably practicable after we have electronically filed or furnished them to the SEC.
ITEM 1A. RISK FACTORS
Investing in our Common Stock involves a high degree of risk. You should carefully consider the risks described below with all of the other information included in this prospectus before making an investment decision. If any of the possible adverse events described below actually occurs, our business, results of operations or financial condition would likely suffer. In such an event, the market price of our Common Stock could decline and you could lose all or part of your investment.
Risks Related to Our Business
Products that fail to meet specifications, are defective, or that are otherwise incompatible with end uses could impose significant costs on us.
Products that do not meet specifications or that contain, or are perceived by our customers to contain, defects or that are otherwise incompatible with end uses could impose significant costs on us or otherwise materially adversely affect our business, results of operations or financial condition. If problems with nonconforming, defective or incompatible products occur after we have shipped such products, we could be adversely affected in several ways, including the following:
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we may be required to replace product or otherwise compensate customers for costs incurred or damages caused by defective or incompatible product, and
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•
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we may encounter adverse publicity, which could cause a decrease in sales of our products.
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The limited availability of raw materials or supplies could materially adversely affect our business, our results of operations, or our financial condition.
Our operations require raw materials that meet exacting standards. We generally have multiple sources of supply for our raw materials. However, only a limited number of suppliers are capable of delivering certain raw materials that meet our standards. Shortages may occur from time to time in the future. In addition, disruptions in transportation lines could delay our receipt of raw materials. Lead times for the supply of raw materials have been extended in the past. If our supply of raw materials is disrupted or our lead times extended, our business, results of operations or financial condition could be materially adversely affected.
Our proprietary rights may not adequately protect our intellectual property and product candidates and if we cannot obtain adequate protection of our intellectual property and product candidates, we may not be able to successfully market our product candidates.
Our commercial success will depend in part on obtaining and maintaining intellectual property protection for our technologies and product candidates. We will only be able to protect our technologies and product candidates from unauthorized use by third parties to the extent that valid and enforceable patents cover them, or that other market exclusionary rights apply.
The patent positions of companies, like ours, can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in such companies' patents has emerged to date in the United States. The general patent environment outside the United States also involves significant uncertainty. Accordingly, we cannot predict the breadth of claims that may be allowed or that the scope of these patent rights would provide a sufficient degree of future protection that would permit us to gain or keep our competitive advantage with respect to these products and technology.
In addition, others may independently develop similar or alternative compounds and technologies that may be outside the scope of our intellectual property. Should third parties obtain patent rights to similar compounds or technology, this may have an adverse effect on our business.
If we fail to attract and retain senior management, consultants, advisors, and scientific and technical personnel, our product development and commercialization efforts could be impaired.
Our performance is substantially dependent on the performance of our senior management and key scientific and technical personnel. The loss of the services of any member of our senior management or our scientific or technical staff may significantly delay or prevent the development of our product candidates and other business objectives by diverting management's attention to transition matters and identification of suitable replacements, if any, and could have a material adverse effect on our business, operating results and financial condition.
In addition, we believe that we will need to recruit additional executive management and scientific and technical personnel. There is currently intense competition for skilled executives and employees with relevant scientific and technical expertise, and this competition is likely to continue. The inability to attract and retain sufficient scientific, technical and managerial personnel could limit or delay our product development efforts, which would adversely affect the development of our product candidates and commercialization of our potential products and growth of our business.
9
We expect to expand our research, development, clinical research and marketing capabilities and, as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.
We expect to have significant growth in expenditures, the number of our employees and the scope of our operations, in particular with respect to those potential products that we elect to commercialize independently or together with others. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to train qualified personnel. Due to our limited resources, we may not be able to effectively manage the expansion of our operations or train additional qualified personnel. The physical expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plan or disrupt our operations.
We have a history of losses and expect to continue to incur losses and may not achieve or maintain profitability.
We expect to incur additional losses for at least the next several years and cannot be certain that we will ever achieve profitability. As a result, our business is subject to all of the risks inherent in the development of a new business enterprise, such as the risk that we may not obtain substantial additional capital needed to support the expenses of developing our technology and commercializing our potential products; develop a market for our potential products; and/or attract and retain qualified management, technical and scientific staff.
Risks Related to Doing Business in Korea
The movement of the Korean Won against the U.S. dollar and other currencies may have a material adverse effect on us.
The Korean Won has fluctuated significantly against major currencies in recent years, especially as a result of the recent global financial crisis and the relatively speedy recovery of Korean economy therefrom. The depreciation of the Won against U.S. dollar and other foreign currencies typically results in a material increase in the cost of fuel and equipment purchased from overseas and the cost of servicing our foreign currency-denominated debt as the prices for substantially all of the fuel materials and a significant portion of the equipment we purchase are stated in currencies other than the Won, generally in U.S. dollars. As a result, any significant depreciation of Won against the U.S. dollar or other major foreign currencies will have a material adverse effect on our profitability and results of operations
The movement of the Won against the U.S. dollar and other currencies may have a material adverse effect on us.
The Won has fluctuated significantly against major currencies in recent years, especially as a result of the recent global financial crisis and the relatively speedy recovery of Korean economy therefrom. The depreciation of Won against U.S. dollar and other foreign currencies typically results in a material increase in the cost of fuel and equipment purchased from overseas and the cost of servicing our foreign currency-denominated debt as the prices for substantially all of the fuel materials and a significant portion of the equipment we purchase are stated in currencies other than Won, generally in U.S. dollars. As a result, any significant depreciation of Won against the U.S. dollar or other major foreign currencies will have a material adverse effect on our profitability and results of operations.
Escalations in tensions with North Korea could have an adverse effect on us.
10
Relations between Korea and North Korea have been tense throughout Korea's modern history. The level of tension between the two Koreas has fluctuated and may increase abruptly as a result of current and future events. In recent years, there have been heightened security concerns stemming from North Korea's nuclear weapon and long- range missile programs and increased uncertainty regarding North Korea's actions and possible responses from the international community. In December 2002, North Korea removed the seals and surveillance equipment from its Yongbyon nuclear power plant and evicted inspectors from the United Nations International Atomic Energy Agency. In January 2003, North Korea renounced its obligations under the Nuclear Non-Proliferation Treaty. Since the renouncement, Korea, the United States, North Korea, China, Japan and Russia have held numerous rounds of six party multi-lateral talks in an effort to resolve issues relating to North Korea's nuclear weapons program.
There can be no assurance that the level of tension on the Korean peninsula will not escalate in the future. Any further increase in tensions, which may occur, for example, if North Korea experiences a leadership crisis, high-level contacts break down or military hostilities occur, could have a material adverse effect on our operations and the market value of our common stock.
You may not be able to enforce a judgment of a foreign court against us.
A significant portion of the assets of our directors and officers named in this Form 10-K, and substantially all of our assets are located in Korea. As a result, it may not be possible for you to enforce judgments, against either our assets or us, obtained in United States based on the civil liability provisions of the United States federal securities laws. There is doubt as to the enforceability in Korea, either in original actions or in actions for enforcement of judgments of United States courts, of civil liabilities predicated on the United States federal securities laws.
Risks Related to Our Industry
Our competitors may develop products that are less expensive, are safer or more effective, and thus may diminish or eliminate the commercial success of any potential products that we may commercialize.
If our competitors' market products that are less expensive, safer or more effective than our future products developed from our product candidates, or that reach the market before our product candidates, we may not achieve commercial success. The market may choose to continue utilizing the existing products for any number of reasons, including familiarity with or pricing of these existing products. The failure of any of our product candidates to compete with products marketed by our competitors would impair our ability to generate revenue, which would have a material adverse effect on our future business, financial condition and results of operations.
We expect to compete with several companies and our competitors may:
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develop and market products that are less expensive or more effective than our future products;
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commercialize competing products before we or our partners can launch any products developed from our product candidates;
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operate larger research and development programs or have substantially greater financial resources than we do;
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initiate or withstand substantial price competition more successfully than we can;
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•
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have greater success in recruiting skilled technical and scientific workers from the limited pool of available talent;
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11
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more effectively negotiate third-party licenses and strategic relationships; and
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take advantage of acquisition or other opportunities more readily than we can.
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Risks Related to Our Common Stock
The stock market, particularly in recent years, has experienced significant volatility. Factors that could cause this volatility in the market price of our Common Stock include:
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•
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failure or discontinuation of any of our research;
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•
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delays in establishing new strategic relationships;
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•
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delays in the development or commercialization of our potential products;
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•
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market conditions and issuance of new or changed securities analysts' reports or recommendations;
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•
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actual and anticipated fluctuations in our financial and operating results;
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•
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developments or disputes concerning our intellectual property or other proprietary rights;
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•
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introduction of technological innovations or new commercial products by us or our competitors;
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issues in manufacturing our potential products;
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third-party healthcare reimbursement policies;
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litigation or public concern about the safety of our product candidates; and
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•
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additions or departures of key personnel.
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These and other external factors may cause the market price and demand for our Common Stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of Common Stock and may otherwise negatively affect the liquidity of our Common Stock. In the past, when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management.
We have not and do not anticipate paying any dividends on our common stock.
We have paid no dividends on our common stock to date and it is not anticipated that any dividends will be paid to holders of our common stock in the foreseeable future. While our future dividend policy will be based on the operating results and capital needs of the business, it is currently anticipated that any earnings will be retained to finance our future expansion and for the implementation of our business plan. As an investor, you should take note of the fact that a lack of a dividend can further affect the market value of our stock, and could significantly affect the value of any investment in our Company.
12
We are subject to the reporting requirements of federal securities laws, this can be expensive and may divert resources from other projects, thus impairing its ability grow.
We are subject to the information and reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and other federal securities laws, including compliance with the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"). The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders will cause our expenses to be higher than they would have been if we had remained privately held.
If we fail to establish and maintain an effective system of internal control, we may not be able to report our financial results accurately or to prevent fraud. Any inability to report and file our financial results accurately and timely could harm our reputation and adversely impact the trading price of our Common Stock.
Effective internal control is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed. As a result, our small size and any current internal control deficiencies may adversely affect our financial condition, results of operation and access to capital. We have not performed an in-depth analysis to determine if historical un-discovered failures of internal controls exist, and may in the future discover areas of our internal control that need improvement.
Public company compliance may make it more difficult to attract and retain officers and directors.
The Sarbanes-Oxley Act and new rules subsequently implemented by the SEC have required changes in corporate governance practices of public companies. As a public company, we expect these new rules and regulations to increase our compliance costs in 2017 and beyond and to make certain activities more time consuming and costly. As a public company, we also expect that these new rules and regulations may make it more difficult and expensive for us to obtain director and officer liability insurance in the future and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers.
The limited trading market for our common stock results in limited liquidity for shares of our common stock and significant volatility in our stock price.
Although prices for our shares of common stock are quoted on the OTCQB, there is little current trading and no assurance can be given that an active public trading market will develop or, if developed, that it will be sustained. The OTCQB is generally regarded as a less efficient and less prestigious trading market than other national markets. There is no assurance if or when our common stock will be quoted on another more prestigious exchange or market. Active trading markets generally result in lower price volatility and more efficient execution of buy and sell orders. The absence of an active trading market reduces the liquidity of our common stock.
The market price of our stock is likely to be highly volatile because for some time there will likely be a thin trading market for the stock, which causes trades of small blocks of stock to have a significant impact on our stock price. As a result of the lack of trading activity, the quoted price for our common stock on the OTCQB is not necessarily a reliable indicator of its fair market value. Further, if we cease to be quoted, holders of our common stock would find it more difficult to dispose of, or to obtain accurate quotations as to the market value of, our common stock, and the market value of our common stock would likely decline.
Our Common Stock is currently deemed a "penny stock," which makes it more difficult for our investors to sell their shares.
13
Our Common Stock is subject to the "penny stock" rules adopted under Section 15(g) of the Exchange Act. The penny stock rules generally apply to companies whose common stock is not listed on The NASDAQ Stock Market or other national securities exchange and trades at less than $4.00 per share, other than companies that have had average revenue of at least $6,000,000 for the last three years or that have tangible net worth of at least $5,000,000 ($2,000,000 if the company has been operating for three or more years). These rules require, among other things, that brokers who trade penny stock to persons other than "established customers" complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading in the security, including a risk disclosure document and quote information under certain circumstances. Many brokers have decided not to trade penny stocks because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. If we remain subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for our securities. If our securities are subject to the penny stock rules, investors will find it more difficult to dispose of our securities.
Offers or availability for sale of a substantial number of shares of our Common Stock may cause the price of our Common Stock to decline.
If our stockholders sell substantial amounts of our Common Stock in the public market upon the expiration of any statutory holding period, under Rule 144, or issued upon the exercise of outstanding options or warrants, it could create a circumstance commonly referred to as an "overhang" and in anticipation of which the market price of our Common Stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We operate out of a workshop and warehouse building located at 228-50 Sanup-ro 155 Gil, Kwonsun Gu, Suwon City, Kyunggi Do, Republic of Korea, and an office located at ES Tower 7F, Teheran-ro 52 Gil 17, Gangnam-Gu, Seoul, Republic of Korea. The lease is for two-years, renewable every two years, and the operating rents of both sites are approximately $300,000 annually.
ITEM 3. LEGAL PROCEEDINGS
We are not currently a party to any legal proceedings that, individually or in the aggregate, are deemed to be material to our financial condition or results of operations.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
14
MARKET INFORMATION
Our common stock is quoted in the United States on the OTCQB, maintained by the OTC Markets Group. There can be no assurance that a regular trading market will develop or if developed, may not be sustained. The following table sets forth, for the calendar periods indicated the range of the high and low last reported of the Company's common stock, as reported by the OTCQB. The quotations represent inter-dealer prices without retail mark-ups, mark-downs or commissions, and may not necessarily represent actual transactions. The quotations may be rounded for presentation.
MARKET PRICE
Period
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High
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Low
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First Quarter 2016
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$
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0.35
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$
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0.19
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Second Quarter 2016
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$
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0.31
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$
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0.21
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Third Quarter 2016
|
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$
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0.28
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$
|
0.10
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Fourth Quarter 2016
|
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$
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0.20
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$
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0.06
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|
|
|
|
|
|
|
|
|
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Period
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High
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Low
|
|
First Quarter 2015
|
|
$
|
0.07
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|
|
$
|
0.07
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|
Second Quarter 2015
|
|
$
|
0.43
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|
|
$
|
0.41
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|
Third Quarter 2015
|
|
$
|
0.39
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|
|
$
|
0.37
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Fourth Quarter 2015
|
|
$
|
0.31
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|
|
$
|
0.29
|
|
As of April 14, 2017, we had approximately 952 stockholders of record.
Transfer Agent
Our transfer agent is Colonial Stock Transfer Company, Inc. in Salt Lake City, Utah
Dividend Policy
The Company has not issued any dividends on the common stock to date, and does not intend to issue any dividends on the common stock in the near future. We currently intend to use all profits to further the growth and development of the Company.
Unregistered Sales of Equity Securities
During the year ended December 31, 2016, and in the subsequent period through the date hereof the Company made the following issuances of unregistered securities:
Third Party Agreements
• On January 6, 2016 the Company issued 50,000 shares for Investment Banking Engagement services Trevor Michael Saliba of NMS Capital Advisors, LLC. This issuance was completed in accordance with Section 4(2) of the Securities Act in an offering without any public offering or distribution. These shares are restricted securities and include an appropriate restrictive legend.
15
• On January 6, 2016 the Company issued 92,880 shares for consulting services to Eul Hyung Choi. This issuance was completed in accordance with Section 4(2) of the Securities Act in an offering without any public offering or distribution. These shares are restricted securities and include an appropriate restrictive legend.
• On January 19, 2016 the Company issued 132,890 shares for Investor Relations services to Mike King of Princeton Research. This issuance was completed in accordance with Section 4(2) of the Securities Act in an offering without any public offering or distribution. These shares are restricted securities and include an appropriate restrictive legend.
•On February 12, 2016, the Company issued 25,000 shares for consulting services to Darrin M. Ocasio. This issuance was completed in accordance with Section 4(2) of the Securities Act in an offering without any public offering or distribution. These shares are restricted securities and include an appropriate restrictive legend.
•On March 14, 2016, the Company issued 30,987 shares for consulting services to Darrin M. Ocasio. This issuance was completed in accordance with Section 4(2) of the Securities Act in an offering without any public offering or distribution. These shares are restricted securities and include an appropriate restrictive legend.
• On April 4, 2016, the Company canceled 60,000 shares for services to Huai Yang. This issuance was completed in accordance with Section 4(2) of the Securities Act in an offering without any public offering or distribution. These shares are restricted securities and include an appropriate restrictive legend
• On April 14, 2016, the Company issued 29,252 shares for consulting services to Darrin M. Ocasio. This issuance was completed in accordance with Section 4(2) of the Securities Act in an offering without any public offering or distribution. These shares are restricted securities and include an appropriate restrictive legend.
• On May 12, 2016, the Company issued 24,964 shares for consulting services to Darrin M. Ocasio. This issuance was completed in accordance with Section 4(2) of the Securities Act in an offering without any public offering or distribution. These shares are restricted securities and include an appropriate restrictive legend.
On June 6, 2016, the Company entered into a Share Swap Agreement with an accredited investor (the "Investor"), pursuant to which the Company acquired shares held by the Investor, which, in the aggregate, represent fifty percent (50%) of Lelcon Co., Ltd. a Korean corporation, in exchange for the issuance of 1,414,828 shares of the Company's common stock to Yun Ho Kim. As a result of the Share Swap Agreement, Lelcon Co., Ltd. became a subsidiary of the Company.
• On December 29, 2016 the Company issued 461,904 shares for Investor Relations services to Mike King of Princeton Research. This issuance was completed in accordance with Section 4(2) of the Securities Act in an offering without any public offering or distribution. These shares are restricted securities and include an appropriate restrictive legend.
Capital Increases
• On February 11, 2016 the Company issued 297,886 shares to Mr. Chae Yong Lim for the exercise of warrant of 50,000,000 KRW. This issuance was completed in accordance with Section 4(2) of the Securities Act in an offering without any public offering or distribution. These shares are restricted securities and include an appropriate restrictive legend.
16
• On February 11, 2016 the Company issued 297,886 shares to Mr. Ho Seok Kim for the exercise of warrant of 50,000,000 KRW. This issuance was completed in accordance with Section 4(2) of the Securities Act in an offering without any public offering or distribution. These shares are restricted securities and include an appropriate restrictive legend.
• On February 11, 2016 the Company issued 744,711 shares to Mr. Myong Yong Jung for the exercise of warrant of 125,000,000 KRW. This issuance was completed in accordance with Section 4(2) of the Securities Act in an offering without any public offering or distribution. These shares are restricted securities and include an appropriate restrictive legend.
• On February 11, 2016 the Company issued 744,711 shares to Mr. Mok Kang for the exercise of warrant of 125,000,000 KRW. This issuance was completed in accordance with Section 4(2) of the Securities Act in an offering without any public offering or distribution. These shares are restricted securities and include an appropriate restrictive legend.
• On April 7, 2016 the Company issued 893,656 shares to Lisheng Chou, for the exercise of warrant of 150,000,000 KRW. This issuance was completed in accordance with Section 4(2) of the Securities Act in an offering without any public offering or distribution. These shares are restricted securities and include an appropriate restrictive legend.
Other than the sales outline above, the Company has previously disclosed all recent sales of unregistered securities on Current Reports on Form 8-K. Such Current Reports are incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Not required by smaller reporting companies.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
This report contains forward-looking statements. These forward-looking statements include, without limitation, statements containing the words "believes," "anticipates," "expects," "intends," "projects," "will," and other words of similar import or the negative of those terms or expressions. Forward-looking statements in this report include, but are not limited to, expectations of future levels of research and development spending, general and administrative spending, levels of capital expenditures and operating results, sufficiency of our capital resources, our intention to pursue and consummate strategic opportunities available to us, including sales of certain of our assets. Forward-looking statements subject to certain known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to those described in "Risk Factors" of the reports filed with the Securities and Exchange Commission.
SPECIAL NOTICE ABOUT GOING CONCERN AUDIT OPINION
OUR AUDITOR HAS ISSUED AN OPINION EXPRESSING DOUBT AS TO OUR ABILITY TO CONTINUE IN BUSINESS AS A GOING CONCERN. YOU SHOULD READ THIS ANNUAL REPORT ON FORM 10-K WITH THE "GOING CONCERN" ISSUES IN MIND.
17
This Management's Discussion and Analysis should be read in conjunction with the financial statements included in this Annual Report on Form 10-K (the "Financial Statements"). The financial statements have been prepared in accordance with generally accepted accounting policies in the United States ("GAAP"). Except as otherwise disclosed, all dollar figures included therein and in the following management discussion and analysis are quoted in United States dollars.
Overview
Leo Motors, Inc. (the "Company") is a Nevada Corporation incorporated on September 8, 2004. The Company established a wholly-owned operating subsidiary in Korea named Leo Motors Co. Ltd. ("Leozone") on July 1, 2006. Through Leozone, the Company is engaged in the research and development ("R&D") of multiple products, prototypes, and conceptualizations based on proprietary, patented and patent pending electric power generation, drive train and storage technologies. Leozone operates through four unincorporated divisions: new product research & development ("R&D"), post R&D development such as product testing, production, and sales.
The Company's products include (i) E-Box electric energy storage system for solar and wind power generation devices; and (ii) EV components that integrate electric batteries with electric motors such as EV Controllers that use a mini-computer to control torque drive.
The Company was previously actively engaged in the process of development and production of Electric Power Train Systems ("EPTS") encompassing electric scooters, electric sedans/SUVs/sports cars, and electric buses/trucks as well as several models of Electric Vehicle ("EV"). Our EPTS can replace internal combustion engines ("ICEs"). Company began sales of EPTS to auto makers and agricultural machinery manufacturers.
The Company has developed eight EPTS of increasing power rating: 3kW, 5kW, 7.5kW, 15kW, 30kW, 60kW, 120kW, and 240kW systems. Each EPTS consists of a motor, a controller, and a battery power pack with a battery management system ("BMS").
The Company has successfully converted existing models of small cars (ICEs under 2,000cc), and also a 24 seat bus. The Company has begun marketing its 60kW power train kits (for compact passenger cars and small trucks) and its 120kW kits (for ICE passenger cars, buses, and trucks under 5,000cc). The Company has developed a 240kW kit (for up to 10,000cc buses and trucks) as well, and is attempting to locate a strategic partner to fund the testing and production.
The specific goals of the Company over the next twelve months include:
·
Focus on the capitalization of the Company;
|
·
Focus on the sale of the E-Boats, connected EV’s, intelligent poles, and smart parking tower system and E-Box;
|
·
Business development in China and in America by establishing a joint venture companies; and
|
·
Continue with R&D of our EV's, E-Boats, connected car, products for smart cities and related products as capital permits.
|
The E-Box can be used as an energy supplying device in an emergency situations or as a energy storage device for use by the military; municipal and industry; corporate; solar/wind power storage; electric coolers and heaters; yachts or small ships. The E-Box is offered in three power classes: 1kw, 3kw and 5kw. E-Boxes for 10kw and 550kw will be developed in the future. The E-Box is environmentally friendly with high energy density due to the use of lithium-polymer battery. The E-Box uses a multiple cell voltage balancing system via a battery management system ("BMS").
18
The Company is developing new battery exchange system using its patented cartridge battery exchange system which will solve the cost barriers of the electric vehicle to make them less expensive than their Internal Combustion Engine (ICE) counterparts and to help solve battery charging problems. With evolutionary batter exchange system, the Company's EV's can exchange battery within one minute using simple and low cost equipment. This technology can be best used in fleet managed vehicles such as city buses, taxis, and garbage trucks because it can be used any road sides. The Company is developing EV Ecosystem using connected car solution to provide the battery swap services for fleet operators such as rental cars, public companies, delivery companies, and post offices.
The Company acquired Leo AIC (former name was Lelcon) on June 3, 2016. With the acquisition, the Company was engaged in connected car and artificial intelligence (AI) related businesses for smart city. Leo AIC has developed tele-diagnosing and tele-operation system for cars and things such as smart street lights and intelligent parking tower system. Leo AIC has been selling these systems and products to several cities in China and in Korea. Solutions from Leo AIC will be provided to EV’s and E-Boats provided by the Company, thus, all vehicles are connected to the cloud server and AI, thus they provide organized battery swap services as well as better riding experiences.
The Company acquired Leo Members which integrates Leo Factory 1 and 2, and Leo Trade. Leo Members will start used luxury car trading business through affiliation with car repairing garages (car centers) in Korea. Leo Members is developing used car recommendation solution including car history tracking using AIC’s vehicle diagnosing manager, financing through fintech financing services provided by its affiliated financial company, and connected repairing services.
Recent Business Developments
The Company has marketed electric fishing boats with 120 kW power trains. The 120W power train boat was registered to the National Federation of Fisheries Cooperatives as the first marketable electric boat product in Korea. With the registration, our customers of electric fishing boats can receive a government subsidy when they purchase the 120kW power train boat from us. On May 4, 2016, the Company sold its first fishing boat to the Korean government. The Korean government is renting Company's electric fishing boats to the fishermen who are interested in electrifying their fishing boats.
On June 3, 2016, the Company acquired 50% ownership of Leo AIC (fka Lelcon). The Company will issue 1,414,828 shares of its common stock at $0.30 per share in exchange for 50% equity in Lelcon. With the acquisition, the Company was engaged in connected car and artificial intelligence (AI) related businesses for smart city. Leo AIC has developed tele-diagnosing and tele-operation system for cars and things such as smart street lights and intelligent parking tower system.
On September 9, 2016, LGM increased it capital of $3,656,011 (4,156,885,000 Korean Won) through funding. With the increase of capital the Company’s ownership to LGM changed from 91.3% to 81.8%.
On December 9, 2016 the Company completed an order from one of the world’s largest home electronics brands to develop a mobile Internet connect product based on Internet of Things platform. The Company worked with Leo AIC, its subsidiary to fulfill the order, and the order was delivered. The client name, date, and specific project title cannot be disclosed because of non-disclosure agreement with the client.
On March 8, 2017, the Company acquired 100% of Leo Members, Inc. (“Leo Members”) which integrates Leo Factory 1 and 2, and Leo Trade. Leo Members will start used luxury car trading and repairing businesses. Based on the connected car platform, Leo Members is developing prescriptive car care and trading services.
Results of Operations for the Twelve Months Ended December 31, 2016 compared to the Twelve Months Ended Decembers 31, 2015
19
Revenues
Sales for the year ended December 31, 2016 were $2,956,749 compared to $4,299,187 for the year ended December 31, 2015, reflecting a decrease of $1,342,438. The Company has been targeting long range plans and organization of its subsidiaries in 2016 which has slowed down the current year sales growth.
Cost of Sales
Costs of sales were $2,213,539 for the year ended December 31, 2016 compared to $3,275,587 for the year ending December 31, 2015. This is consistent with our normal operations and cost of sales percentages.
Operating Expenses
During the year ended December 31, 2016, we incurred $6,120,167 in expenses, compared to $5,421,508 in the period ended December 31, 2015. With an additional operating subsidiary in 2016 the increase in expenses for this current year is mostly resulting from our increased operating base in the current year. The detail is provided in the table below.
Expenses for the fiscal year 2016 and 2015 consisted of the following:
|
|
Year Ended
|
|
Expenses:
|
|
December 31,
2016
|
|
|
December 31
2015
|
|
|
|
|
|
|
|
|
Salaries and Benefits
|
|
$
|
3,427,855
|
|
|
$
|
1,706,968
|
|
Consulting and Service Fees
|
|
$
|
428,855
|
|
|
$
|
758,702
|
|
Research and Development
|
|
$
|
638,084
|
|
|
$
|
1,278,402
|
|
Selling, General and Administrative
|
|
$
|
1,625,373
|
|
|
$
|
1,677,436
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,120,167
|
|
|
$
|
5,421,508
|
|
Salaries and Benefits
consist of total of common stock issued to our executive officers as compensation for their services as officers of the Company and cash compensation paid to our employees during the year and the cost of all benefits provided to our employees.
Consulting and Service Fees
consist of consist of accounting, legal, and professional fees.
Selling, General and Administrative
consists of travel expenses, entertainment expenses, communication expenses, utilities, taxes & dues, depreciation expenses, rent, repairs, vehicle maintenance, ordinary development expenses, shipping, education & training, printing, storage, advertising, insurance, office supplies and expense, payroll expenses, investor referral fees and other miscellaneous expenses.
20
Other Income (Expenses)
During the year ended December 31, 2016 the company had net non-operating expense of $1,032,755 and for the year ended December 31, 2015 net non-operating income of $93,064, an increase of $939,691. During the 2016 fiscal year the Company had an impairment of goodwill expense of $1,104,445 which was the majority of the increase in other expenses.
Liquidity and Capital Resources
Our liquidity and capital resources are limited. Accordingly, our ability to initiate our plan of operations and continue as a going concern is currently dependent on our ability to either generate significant new revenues or raise external capital through additional borrowing or the sale of additional equity.
The Company's total current assets at December 31, 2016 were $2,531,790 and total current liabilities were $6,800,665.. Significant losses from operations have been incurred since inception and there is an accumulated deficit of $(29,776,217) as of December 31, 2016. Continuation as a going concern is dependent upon attaining capital to achieve profitable operations while maintaining current fixed expense levels.
Off-Balance Sheet Arrangements
None.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements are included herein commencing on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
ITEM 9A. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and our principal financial officer of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our chief executive officer and our principal financial officer concluded that our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. There was no change in our internal controls or in other factors that could affect these controls during our last fiscal year that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
21
Evaluation of Disclosure Controls and Procedures.
Our management, with the participation of our CEO and our CFO, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our CEO and our CFO concluded that our disclosure controls and procedures as of the end of the period covered by this report were not effective such that material information required to be disclosed is made known to management and others, as appropriate, to allow timely decision regarding required disclosure and that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
Management's Annual Report on Internal Control over Financial Reporting
. Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.
Our management, with the participation of the CEO, evaluated the effectiveness of the Company's internal control over financial reporting as of December 31, 2016. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on this evaluation, our management, with the participation of the CEO, concluded that, as of December 31, 2016, our internal control over financial reporting was ineffective and there are material weaknesses in our internal control over financial reporting.
A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
The material weaknesses relate to the limited number of persons responsible for the recording and reporting of financial information, the lack of separation of financial reporting duties, and the limited size of our management team in general. We are in the process evaluating methods of improving our internal control over financial reporting, including the possible addition of financial reporting staff and the increased separation of financial reporting responsibility, and intend to implement such steps as are necessary and possible to correct these material weaknesses.
This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permits us to provide only management's report in this annual report.
Changes in Internal Control over Financial Reporting
. There were no changes in our internal control over financial reporting that occurred during the fourth quarter of the year ended December 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
22
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTOR AND EXECUTIVE OFFICER SUMMARY
The following persons are our executive officers and directors as of April 14, 2017, and hold the positions set forth opposite their respective names.
NAME OF DIRECTOR OR OFFICER
|
AGE
|
POSITION
|
|
|
|
Shi Chul (Robert) Kang
|
56
|
Co-Chief Executive Officer, Chairman
|
Jun Heng Park
|
46
|
Co-Chief Executive Officer
,
President and Director
|
Jeong Youl Choi
|
47
|
Chief Financial Officer
and Director
|
EXECUTIVE OFFICER AND DIRECTOR BIOS
Shi Chul (Robert) Kang
– Co-Chief Executive Officer and Chairman
Dr. Kang has been the co-Chief Executive Officer and Chairman since November 4, 2013. Dr. Kang holds a Ph. D. degree in marketing and has worked in international advertising and corporate marketing areas for more than 30 years. He began his career at Oricom, the largest advertising agency in Korea and a McCann Ericson affiliate. He founded Ad Express and On&Off and managed the firms for 11 years. He served as president of Pico North Asian, a multinational global event marketing company in Hong Kong. Dr. Kang previously served as the Company's CEO and interim CFO from 2008 to 2011. Currently, he is working as the chairman of Talent Donation Consultant Association and Head Professor of Business Consultant Starter School of the City Government of Seoul. Dr. Kang will focus on business development and financing of Leo Motors. Dr. Kang received his BS in literature from Korea University, his MA in advertising from University of Oregon, and his Ph. D. in marketing from Dongguk University in Korea.
Jun Heng Park
– Co-Chief Executive Officer, President, Director
Mr. Park has been a director of the Company since October 15, 2012,
and has led the Company with regards to its business planning and strategy since his appointment as Co-Chief Executive Officer since October 15, 2012. Mr. Park has managed several businesses including as Chief Executive Officer of the World Cyber Games in 2002. Mr. Park was Chief Executive Officer of IAG KOREA Co. Ltd, Major Insurance Company in 2006. Mr. Park was Chief Executive Officer of Unitech Co. Ltd., a computer assembly company in Korea from 2009 to 2010. Mr. Park received his bachelor's degree at Centennial College, Toronto, Canada and his business degree from George Brown College, Toronto, Canada.
Jeong Youl Choi
– Chief Financial Officer, Director
Mr. Choi joined the Company in January of 2012 and became Chief Financial Officer on July 17, 2014. Mr. Choi was Chief Executive Officer of Neo solar, a solar power company, from 2006 to 2007. Mr. Choi was Chief Executive Officer of Good EMG, total entertainment company, from 2007 to 2008. Mr. Choi helped lead the A1 Grand prix Korea, World Motor Racing Challenge for National team, 2007 while at Good EMG.
23
Family Relationships
There are no family relationships between any of our directors and our executive officers.
Involvement in Certain Legal Proceedings
To the Company's knowledge, during the past ten (10) years, none of the Company's directors, executive officers, promoters, control persons, or nominees has been:
24
·
|
the subject of any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
|
·
|
convicted in a criminal proceeding or is subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
|
·
|
subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
|
·
|
found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law
|
Code of Ethics
We have not adopted a code of ethics to date. We are in the process of evaluating the standards of conduct necessary for the deterrence of malfeasance and the promotion of ethical conduct and accountability, and will determine whether a code of ethics is necessary based on our evaluation.
Director independence
As all of the Company's directors are employees of the Company, the Company does not have any independent directors on its Board, as defined by the rules of the NASDAQ Stock Market.
Corporate Governance
The Company does not have a standing Nominating Committee. There have been no changes to the procedures whereby security holders may recommend nominees to the registrant's board of directors.
The Company does not have a standing Audit Committee. We do not have a financial expert serving on our board of directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires that our officers and directors, and persons who own more than ten percent of a registered class of our equity securities, file reports of ownership and changes in ownership with the Securities and Exchange Commission and with any exchange on which the Company's securities are traded. Officers, directors and persons owning more than ten percent of such securities are required by Commission regulation to file with the Commission and furnish the Company with copies of all reports required under Section 16(a) of the Exchange Act. To our knowledge, based solely upon our review of the copies of such reports furnished to us, during the fiscal year ended December 31, 2016, all Section 16(a) filing requirements applicable to our officers, directors and greater than 10% beneficial owners were complied with.
25
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the annual and long-term compensation paid to our Chief Executive Officer and the other executive officers who earned more than $100,000 per year at the end of the last two completed fiscal years. We refer to all of these officers collectively as our "named executive officers."
Position
|
Year
|
|
Salary
|
|
Awards
|
Awards
|
|
Comp
|
|
|
Total
|
|
Shi Chul Knag (1)
|
2016
|
|
$
|
400,000
|
|
$ Nil
|
$ Nil
|
|
$
|
|
|
|
$
|
400,000
|
|
|
2015
|
|
$
|
400,000
|
|
$ Nil
|
$ Nil
|
|
$
|
|
|
|
$
|
400,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jun Heng Park (2)
|
2016
|
|
$
|
400,000
|
|
$ Nil
|
$ Nil
|
|
$
|
|
|
|
$
|
400,000
|
|
|
2015
|
|
$
|
400,000
|
|
$ Nil
|
$ Nil
|
|
$
|
|
|
|
$
|
400,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeong Yoel Choi (3)
|
2016
|
|
$
|
300,000
|
|
$ Nil
|
$ Nil
|
|
$
|
|
|
|
$
|
300,000
|
|
|
2015
|
|
$
|
300,000
|
|
$ Nil
|
$ Nil
|
|
$
|
|
|
|
$
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Jun Heng Park was appointed the Company's Co-CEO and President on October 15, 2012.
(2) Shi Chul Kang was appointed Co-CEO and Chairman on November 4, 2013.
(3) Jeong Youl Choi was appointed the Company's CFO on July 17, 2014.
Employment Agreements with Executive Officers
On January 1, 2014, Co-CEO Jun Heng Park agreed to enter into a continuous employment agreement with the Company. The agreed annual compensation is $400,000 for services.
On November 4, 2013, Co-CEO Shi Chul Kang agreed to enter into a continuous employment agreement with the Company. The agreed annual compensation is $400,000 for services.
On January 1, 2014, CFO Jong Youl Choi agreed to enter into a continuous employment agreement with the Company. The agreed annual compensation is $300,000 for services.
26
Outstanding Equity Awards at Fiscal Year End
The following table sets forth information with respect to grants of options to purchase our common stock to the named executive officers at December 31, 2016.
|
Options awards
|
Stock awards
|
Name
|
Number of
securities
underlying
unexercised
options (#)
exercisable
|
Number of
securities
underlying
unexercised
options (#)
unexercisable
|
Equity
incentive
plan
awards:
Number of
securities
underlying
unexercised
unearned
options (#)
|
Option
exercise
price ($)
|
Option
expiration
date
|
Number
of shares
or units
of stock
that have
not
vested (#)
|
Market
value of
shares of
units of
stock that
have not
vested ($)
|
Equity
incentive
plan
awards:
Number
of
unearned
shares,
units or
other
rights that
have not
vested (#)
|
Equity
incentive
plan
awards:
Market or
payout
value of
unearned
shares,
units or
other
rights
that have
not
vested ($)
|
|
|
|
|
|
|
|
|
|
|
Shi Chul Kang
|
|
|
|
|
|
|
|
|
$ Nil
|
|
|
|
|
|
|
|
|
|
|
Jun Heng Park
|
|
|
|
|
|
|
|
|
$ Nil
|
|
|
|
|
|
|
|
|
|
|
Jeong Yeol Choi
|
|
|
|
|
|
|
|
|
$ Nil
|
27
Director Compensation
The following table sets forth certain information concerning compensation paid or accrued to our non-executive directors during the year ended December 31, 2016.
Name
|
Fees Earned
or Paid in
Cash ($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan
Compensation
($)
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
|
All Other
Compensation
($)
|
|
Total ($)
|
|
Shi Chul Kang
|
|
|
|
|
|
|
|
Nil
|
|
Jun Heng Park
|
|
|
|
|
|
|
|
Nil
|
|
Jeong Youl Choi
|
|
|
|
|
|
|
|
Nil
|
|
Compensation Committee Interlocks and Insider Participation
We do not currently have a standing Compensation Committee. Our entire board of directors participated in deliberations concerning executive officer compensation.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows the beneficial ownership of our common stock as of April 14, 2017. The table shows the amount of shares owned by:
(1) each person known to us who owns beneficially more than five percent of the outstanding shares of any class of the Company's stock, based on the number of shares outstanding as of April 14, 2017;
(2) Each of the Company's Directors and Executive Officers; and
(3) all of its Directors and Executive Officers as a group.
28
IDENTITY OF
PERSON OR GROUP
|
|
AMOUNT OF
SHARES
BENEFICIALLY
OWNED
|
|
|
PERCENT OF
SHARES
BENEFICIALLY
OWNED(1,2)
|
|
CLASS
|
|
|
|
|
|
|
|
|
Jun Heng Park(2)
|
|
|
|
|
|
|
|
Co-CEO and President
|
|
|
7,600,000
|
|
|
|
4.405
|
%
|
Common
|
|
|
|
|
|
|
|
|
|
|
Jun Hee Won
|
|
|
|
|
|
|
|
|
|
Director
|
|
|
20,396,223
|
|
|
|
11.82
|
%
|
Common
|
|
|
|
|
|
|
|
|
|
|
Shi Chul Kang (2)
|
|
|
|
|
|
|
|
|
|
Co-CEO and Chairman
|
|
|
2,185,000
|
|
|
|
1.266
|
%
|
Common
|
|
|
|
|
|
|
|
|
|
|
Jeon Youl Choi (
2
)
|
|
|
|
|
|
|
|
|
|
CFO
|
|
|
3,600,000
|
|
|
|
2.086
|
%
|
Common
|
Officers and Directors as a group (4 persons)
|
|
|
33,781,223
|
|
|
|
19.58
|
%
|
Common
|
(1) The percentage of shares owned is based on 172,528,016 shares being outstanding as of
April 14, 2017. If
the beneficially
owned shares of any individual or group in the above table include any options, warrants, or other rights to purchase shares in the Company's stock, such right to purchase share is disclosed by footnote below and the percentage of shares owned includes such shares as if the right to purchase had been duly exercised.
(2) BENEFICIAL OWNERSHIP OF SECURITIES: Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, involving the determination of beneficial owners of securities, a beneficial owner of securities is person who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has, or shares, voting power and/or investment power with respect to the securities, and any person who has the right to acquire beneficial ownership of the security within sixty days through means including the exercise of any option, warrant or conversion of a security.
ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Except as set forth below, during the past three years, there have been no transactions, whether directly or indirectly, between the Company and any of its officers, directors, or their family members.
The Company does not have any independent directors on its Board, as defined by the NASDAQ Stock Market.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
29
The following table sets forth fees billed to us by our independent auditors for the years ended 2016 and 2015 for (i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements, (ii) services rendered that are reasonably related to the performance of the audit or review of our financial statements that are not reported as Audit Fees, and (iii) services rendered in connection with tax preparation, compliance, advice and assistance.
On January 5, 2017, Leo Motors, Inc. (the "Company") was notified that Scrudato & Co., PA ("Scrudato"), the Company's independent registered public accounting firm, had had its PCAOB license revoked. The Company therefore terminated its engagement of Scrudato and notified Scrudato of its dismissal. On January 5, 2017, the Company engaged DLL CPAs, LLC ("DLL") to serve as the Company's independent registered public accounting firm, effective January 5, 2017.
The reports of Scrudato on the Company's consolidated financial statements as of and for the fiscal year ended December 31, 2015 did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles.
SERVICES
|
|
2016
|
|
|
2015
|
|
Audit fees
|
|
$
|
40,000
|
|
|
$
|
35,000
|
|
Audit-related fees
|
|
|
|
|
|
|
|
|
Tax fees
|
|
|
|
|
|
|
|
|
All other fees
|
|
$
|
20,000
|
|
|
$
|
14,100
|
|
|
|
|
|
|
|
|
|
|
Total fees
|
|
$
|
60,000
|
|
|
$
|
49,100
|
|
Item 15. Exhibits, Financial Statement Schedules
Exhibit No.
|
|
Description
|
3.1
|
|
Amended Articles of Incorporation (Incorporated by reference to the Company's Registration Statement on Form 10 filed on December 10, 2008)
|
3.2
|
|
Restates Bylaws (Incorporated by reference to the Company's Registration Statement on Form 10 filed on December 10, 2008)
|
10.1
|
|
Purchase Agreement between Leo Motors, Inc. and PDI C&D/RDC SPRL, dated August 10, 2012 (incorporated by reference from the Company's Quarterly Report on From 10-Q filed November 23, 2012)
|
10.2
|
|
Amendment to Purchase Agreement between Leo Motors, Inc. and PDI C&D/RDC SPRL, dated October 13, 2012 (incorporated by reference from the Company's Quarterly Report on From 10-Q filed November 23, 2012)
|
10.3
|
|
2010 Employee Stock Option Plan (incorporated by reference from the Company's Current Report on Form 8-K filed February 3, 2010)
|
10.4
|
|
Purchase Agreement between Leo Motors, Inc. and Leo B&T Co. Ltd. (incorporated by reference from the Company Current Report on Form 8-K filed on February 16, 2010)
|
10.5
|
|
Agreement between Leo Motors, Inc. and M&M Corp. dated March 26, 2010 (incorporated by reference from the Company's Current Report on Form 8-K filed March 26, 2010)
|
10.6
|
|
Employment Agreement between Leo Motors, Inc. and Jung Yong Lee dated January 1, 2012 (incorporated by reference from the Company Annual Report on Form 10-K filed on April 16, 2013)
|
30
10.7
|
|
Investor Relations Program Agreement between Leo Motors, Inc. and JSR Partners Limited, dated April 15, 2014 (incorporated by reference from the Company's Current Report on Form 8-K filed on July 8, 2015)
|
10.8
|
|
Share Swap Agreement by and between Leo Motors, Inc. and LGM Co. Ltd., dated as of July 1, 2014(incorporated by reference from the Company's Current Report on Form 8-K filed on April 25, 2014)
|
10.9
|
|
Form of Securities Purchase Agreement(incorporated by reference from the Company's Current Report on Form 8-K filed on August 6, 2015)
|
10.10
|
|
Non-exclusive Execution Rights on Patent Technology Settl
e
ment
& Registration Contract, dated September 19, 2014, by and between Leo Motors, Inc. and TPT, Co., Ltd. (incorporated by reference from the Company's Current Report on Form 8-K filed on September 25, 2014)
|
10.11
|
|
Cash Investment Agreement, dated April 19, 2016, by and between the Company and Sang Hyun Shim. (incorporated by reference from the Company's Current Report on Form 8-K filed on April 29, 2016)
|
10.12
|
|
Cash Investment Agreement, dated April 19, 2016, by and between the Company and Moon Su Goh.
(incorporated by reference from the Company's Current Report on Form 8-K filed on April 29, 2016)
|
10.13
|
|
Management and Voting Rights Agreement, dated April 25, 2016, by and between the Company and Leo Motors Korea, Inc. (incorporated by reference from the Company's Current Report on Form 8-K filed on April 29, 2016)
|
10.14
|
|
Form of Securities Purchase Agreement (incorporated by reference from the Company's Current Report on Form 8-K filed on May 20, 2016)
|
10.15
|
|
Form of Registration Rights Agreement (incorporated by reference from the Company's Current Report on Form 8-K filed on May 20, 2016)
|
10.16
|
|
Form of Convertible Debenture (incorporated by reference from the Company's Current Report on Form 8-K filed on May 23, 2016)
|
10.17
|
|
Form of Securities Purchase Agreement (incorporated by reference from the Company's Current Report on Form 8-K filed on May 23, 2016)
|
10.18
|
|
Share Swap Agreement, by and between the Company and the Investor, dated June 3, 2016
(incorporated by reference from the Company's Current Report on Form 8-K filed on June 9, 2016)
|
10.19
|
|
Form of Purchase Agreement (incorporated by reference from the Company's Current Report on Form 8-K filed on March 13, 2017)
|
10.20
|
|
Form of Purchase Agreement
(incorporated by reference from the Company's Current Report on Form 8-K filed on March 13, 2017)
|
21*
|
|
List of Subsidiaries
|
31.1*
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934
|
31.2*
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934
|
32.1*
|
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 1350
|
101.INS
|
|
XBRL Instance Document
|
101.SCH
|
|
XBRL Taxonomy Extention Schema
|
101.CAL
|
|
XBRL Taxonomy Extention Calculation Linkbase
|
101.DEF
|
|
XBRL Taxonomy Extention Definition Linkbase
|
101.LAB
|
|
XBRL Taxonomy Extention Label Linkbase
|
101.PRE
|
|
XBRL Taxonomy Extention Presentation Linkbase
|
31
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, thereunto duly authorized.
|
LEO MOTORS, INC.
|
|
|
|
|
|
April 17, 2017
|
By:
|
/s/ Shi Chul Kang
|
|
|
|
Shi Chul Kang
|
|
|
|
Chief Executive Officer (Principal Executive Officer) and Director
|
|
|
|
|
|
April 17, 2017
|
By:
|
/s/ Jeong Youl Choi
|
|
|
|
Jeong
Youl Choi
|
|
|
|
Chief Financial Officer (Principal Financial and Accounting Officer) and Director
|
|
Pursuant to the requirements of Section 13 or 15(d) of 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.
/s/ Shi Chul Kang
|
|
|
|
|
Shi Chul Kang
|
|
Co-Chief Executive Officer (Principal Executive Officer) and Director
|
|
April 17, 2017
|
|
|
|
|
|
/s/ Jeong Youl Choi
|
|
|
|
|
Jeong
Youl Choi
|
|
Chief Financial Officer (Principal Financial and Accounting Officer) and Director
|
|
April 17, 2017
|
|
|
|
|
|
/s/ Jun Heng Park
|
|
|
|
April 17, 2017
|
Jun Heng Park
|
|
Co-Chief Executive Officer and Director
|
|
|
32
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Leo Motors, Inc.
We have audited the accompanying consolidated balance sheets of Leo Motors, Inc. as of December 31, 2016 and 2015, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2016. Leo Motors, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Leo Motors, Inc. as of December 31, 2016 and 2015, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the company will continue as a going concern. As discussed in Note 6 to the consolidated financial statements, the Company has suffered recurring losses from operations and negative cash flows from operations the past two years. These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 6. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/DLL CPAS LLC
|
|
|
Savannah, GA
|
|
|
April 14, 2017,
|
|
|
|
33
LEO MOTORS, INC.
|
CONSOLIDATED BALANCE SHEETS
|
(AMOUNTS EXPRESSED IN US DOLLAR)
|
|
|
Balance at
|
|
|
12/31/2016
|
|
|
12/31/2015
|
|
|
(Audited)
|
|
|
(Audited)
|
Current Assets
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
460,671
|
|
$
|
243,809
|
Accounts receivable
|
|
433,205
|
|
|
1,565,114
|
Inventories
|
|
1,088,298
|
|
|
496,971
|
Prepayment to suppliers
|
|
457,643
|
|
|
279,229
|
Other current assets
|
|
91,973
|
|
|
32,107
|
Total Current Assets
|
|
2,531,790
|
|
|
2,617,230
|
Fixed assets, net
|
|
129,157
|
|
|
163,001
|
Deposit
|
|
346,255
|
|
|
346,659
|
Intangible assets
|
|
88,503
|
|
|
63,831
|
Goodwill
|
|
2,613,486
|
|
|
3,057,003
|
Total Assets
|
$
|
5,709,191
|
|
$
|
6,247,724
|
|
|
|
|
|
|
Liabilities and Equity(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
Accounts payable
|
$
|
1,527,967
|
|
$
|
1,753,287
|
Accrued expenses
|
|
4,228,935
|
|
|
2,328,911
|
Advance from customers
|
|
386,624
|
|
|
795,431
|
Due to related parties
|
|
358,680
|
|
|
194,857
|
Taxes payable
|
|
29,635
|
|
|
99,584
|
Notes Payable current portion
|
|
268,824
|
|
|
276,243
|
Total Current Liabilities
|
|
6,800,665
|
|
|
5,448,313
|
Accrued retirement benefits
|
|
216,195
|
|
|
92,948
|
Other long term liabilities
|
|
72,851
|
|
|
129,748
|
Total Liabilities
|
|
7,089,711
|
|
|
5,671,009
|
Commitments (Note 8)
|
|
-
|
|
|
-
|
Leo Motors, Inc.("LEOM") Equity(Deficit):
|
|
|
|
|
|
Common stock ($0.001 par value; 300,000,000 shares authorized); 172,528,016 and 158,948,604 shares issued and outstanding at December 31, 2016 and December 31, 2015
|
|
172,528
|
|
|
158,949
|
Additional paid-in capital
|
|
21,411,832
|
|
|
20,367,272
|
Accumulated other comprehensive income
|
|
1,184,443
|
|
|
1,251,120
|
Accumulated loss
|
|
(29,776,217)
|
|
|
(24,564,383)
|
Total Equity(Deficit) Leo Motors, Inc.
|
|
(7,007,414)
|
|
|
(2,787,042)
|
Non-controlling interest
|
|
5,626,894
|
|
|
3,363,757
|
Total Equity(Deficit)
|
|
(1,380,520)
|
|
|
576,715
|
Total Liabilities and Equity(Deficit)
|
$
|
5,709,191
|
|
$
|
6,247,724
|
|
|
|
|
|
|
"
See accompanying notes to consolidated financial statements"
34
LEO MOTORS, INC.
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(AMOUNTS EXPRESSED IN US DOLLAR)
|
|
|
For the Year Ended December 31,
|
|
|
2016
|
|
|
2015
|
|
|
(Audited)
|
|
|
(Audited)
|
Revenues
|
$
|
2,956,749
|
|
$
|
4,299,187
|
|
|
|
|
|
|
Cost of Revenues
|
|
2,213,539
|
|
|
3,275,587
|
Gross Profit
|
|
743,210
|
|
|
1,023,600
|
|
|
|
|
|
|
Operating Expenses
|
|
6,120,167
|
|
|
5,421,508
|
Income(loss) from Continuing Operations
|
|
(5,376,957)
|
|
|
(4,397,908)
|
|
|
|
|
|
|
Other Income (Expenses)
|
|
|
|
|
|
Interest expense
|
|
(35,309)
|
|
|
(319,054)
|
Goodwill impairment
|
|
(1,104,445)
|
|
|
0
|
Derivative income
|
|
0
|
|
|
0
|
Non-Operating (expense) income
|
|
106,999
|
|
|
225,990
|
Total Other Income (Expenses)
|
|
(1,032,755)
|
|
|
(93,064)
|
|
|
|
|
|
|
Income(loss) from Continuing Operations Before Income Taxes
|
|
(6,409,712)
|
|
|
(4,490,972)
|
|
|
|
|
|
|
Income Tax Expense
|
|
438
|
|
|
0
|
Net Income (Loss)
|
$
|
(6,410,150)
|
|
$
|
(4,490,972)
|
|
|
|
|
|
|
Income(loss) attributable to non-controlling interest
|
$
|
(1,198,316)
|
|
$
|
(1,283,800)
|
|
|
|
|
|
|
Net Income(Loss) Attributable To Leo Motors, Inc.
|
|
(5,211,834)
|
|
|
(3,207,172)
|
|
|
|
|
|
|
Other Comprehensive Income:
|
|
|
|
|
|
Net Income (Loss)
|
$
|
(6,410,150)
|
|
$
|
(4,490,972)
|
Unrealized foreign currency translation gain
|
|
66,677
|
|
|
739,891
|
|
|
|
|
|
|
Comprehensive Income(loss) Attributable to Leo Motors, Inc.
|
$
|
(6,343,473)
|
|
$
|
(3,751,081)
|
Net Loss per Common Share:
|
|
|
|
|
|
Basic
|
$
|
(0.04)
|
|
$
|
(0.02)
|
Diluted
|
$
|
(0.04)
|
|
$
|
(0.02)
|
Weighted Average Common Shares Outstanding:
|
|
|
|
|
|
Basic
|
$
|
164,298,953
|
|
$
|
155,866,313
|
Diluted
|
$
|
164,298,953
|
|
$
|
155,866,313
|
|
|
|
|
|
|
"
See accompanying notes to consolidated financial statements"
35
LEO MOTORS, INC.
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(AMOUNTS EXPRESSED IN US DOLLAR)
|
|
For theYears Ended December 31,
|
|
|
2016
|
|
|
2015
|
|
|
(Audited)
|
|
|
(Audited)
|
Cash flows from Operating Activities:
|
|
|
|
|
|
Net loss
|
$
|
(5,211,834)
|
|
$
|
(3,207,172)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
136,864
|
|
|
207,837
|
Amortization debt discount
|
|
0
|
|
|
275,176
|
Foreign currency translation
|
|
66,677
|
|
|
(739,891)
|
Net loss attributed to NCI
|
|
(1,198,316)
|
|
|
(1,283,800)
|
Impairment charge
|
|
1,104,445
|
|
|
0
|
Stock-based compensation
|
|
281,485
|
|
|
903,704
|
Changes in assets and liabilities:
|
|
|
|
|
|
Accounts Receivable
|
|
1,119,720
|
|
|
(1,022,904)
|
Inventories
|
|
(480,682)
|
|
|
(217,188)
|
Prepayment to suppliers
|
|
(178,414)
|
|
|
27,740
|
Other assets
|
|
(59,462)
|
|
|
17,598
|
Accounts payable, other payables and accrued expenses
|
|
1,532,521
|
|
|
1,929,247
|
Accrued retirement benefits
|
|
123,247
|
|
|
90,798
|
Advances from customers
|
|
(311,333)
|
|
|
883,658
|
Taxes payable
|
|
(28,464)
|
|
|
(59,894)
|
Net cash used in operating activities:
|
|
(3,103,546)
|
|
|
(2,195,091)
|
Cash flows from investing activities:
|
|
|
|
|
|
Investment in assets
|
|
(845,855)
|
|
|
(1,195,421)
|
Payments on deposits
|
|
0
|
|
|
(295,058)
|
Net cash provided(used) in investing activities:
|
|
(845,855)
|
|
|
(1,490,479)
|
Cash flows from financing activities:
|
|
|
|
|
|
Proceeds on related party debt net
|
|
208,496
|
|
|
0
|
Payments on notes payable
|
|
(12,054)
|
|
|
(4,459)
|
Payments on notes payable - related party
|
|
(7,661)
|
|
|
(10,241)
|
Proceeds from investments NCI
|
|
3,466,156
|
|
|
844,812
|
Proceeds from issuance of stock & warrants
|
|
511,326
|
|
|
2,882,089
|
Net cash provided(used) by financing activities:
|
|
4,166,263
|
|
|
3,712,201
|
Net Increase in cash and cash equivalents:
|
|
216,862
|
|
|
26,631
|
|
|
|
|
|
|
Cash and cash equivalents - beginning of year
|
|
243,809
|
|
|
217,178
|
|
|
|
|
|
|
Cash and cash equivalents - end of period
|
$
|
460,671
|
|
$
|
243,809
|
Supplemental disclosure of cash flow activities:
|
|
|
|
|
|
Interest
|
$
|
35,309
|
|
$
|
43,878
|
Income taxes
|
$
|
0
|
|
$
|
0
|
Supplemental disclosures of non cash activities:
|
|
|
|
|
|
Conversion of derivative liability
|
$
|
0
|
|
$
|
819,922
|
Goodwill on acquisition
|
$
|
660,928
|
|
$
|
612,445
|
Conversion of debt for common stock
|
$
|
0
|
|
$
|
1,901,433
|
Common stock issued for services
|
$
|
281,485
|
|
$
|
903,704
|
"See accompanying notes to consolidated financial statements"
36
LEO MOTORS, INC.
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(AMOUNTS EXPRESSED IN US DOLLAR)
|
FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (AUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Stocks
|
|
Amount
|
|
Additional Paid-in Capital
|
|
Accumulated Loss
|
|
Accumulated Other Comprehensive Income
|
|
Non-Controlling Interest
|
|
Total Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2014
|
|
138,624,206
|
$
|
138,624
|
$
|
17,723,248
|
$
|
(21,357,211)
|
$
|
511,229
|
$
|
2,532,102
|
$
|
(452,008)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
2,698,000
|
|
2,698
|
|
901,006
|
|
-
|
|
-
|
|
-
|
|
903,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in stock
|
|
17,626,398
|
|
17,627
|
|
894,059
|
|
-
|
|
-
|
|
-
|
|
911,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement of derivatives
|
|
-
|
|
-
|
|
819,922
|
|
-
|
|
-
|
|
-
|
|
819,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued for investment
|
|
-
|
|
-
|
|
29,037
|
|
-
|
|
-
|
|
-
|
|
29,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest contributions
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
2,115,455
|
|
2,115,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
-
|
|
-
|
|
-
|
|
(3,207,172)
|
|
-
|
|
(1,283,800)
|
|
(4,490,972)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
-
|
|
-
|
|
-
|
|
-
|
|
739,891
|
|
|
|
739,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2015
|
|
158,948,604
|
$
|
158,949
|
$
|
20,367,272
|
$
|
(24,564,383)
|
$
|
1,251,120
|
$
|
3,363,757
|
$
|
576,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
1,591,000
|
|
1,591
|
|
279,894
|
|
-
|
|
-
|
|
-
|
|
281,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in stock
|
|
4,338,412
|
|
4,338
|
|
772,316
|
|
-
|
|
-
|
|
-
|
|
776,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants converted
|
|
7,650,000
|
|
7,650
|
|
(7,650)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest contributions
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
3,461,453
|
|
3,461,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
-
|
|
-
|
|
-
|
|
(5,211,834)
|
|
-
|
|
(1,198,316)
|
|
(6,410,150)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(66,677)
|
|
-
|
|
(66,677)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2016
|
|
172,528,016
|
$
|
172,528
|
$
|
21,411,832
|
$
|
(29,776,217)
|
$
|
1,184,443
|
$
|
5,626,894
|
$
|
(1,380,520)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
"See accompanying notes to consolidated financial statements"
37
NOTE 1 - COMPANY BACKGROUND
Leo Motors, Inc. (the “Company,” or “we”) is currently in development, assembly and sales of the energy storage devices and electric vehicle components.
The Company was originally incorporated in California as N. Org., Inc. on December 12, 1983. The Company then underwent several name changes from Natural Organics Corporation to Classic Auto Accessories of North America and then to FCR Automotive Group, Inc. On September 20, 2004, the Company reincorporated in Delaware by merging into FCR Group, Inc., a Delaware Automotive corporation, which was organized on September 8, 2004. On July 26, 2005, the Company acquired Shinil Precision Co., Ltd., a Korean Company, as its operating business and on July 18, 2005, changed its name to Shinil Precision Machinery, Inc. to reflect its anticipated new business. Upon failure of certain terms and conditions of the acquisition agreement, the Company returned the shares of Shinil and recovered and cancelled the Company's shares issued in the acquisition. In 2012, the Company changed its domicile to Nevada.
The Company had been dormant since 1989, and consummated a reverse merger on November 12, 2007 with Leozone Inc., a South Korean company, which is the maker of electrical transportation devices. The merger essentially exchanges shares in Leo Motors, Inc. for shares in Leozone. As this is a reverse merger the accounting treatment of such is that of a combination of the two entities with the activity of Leozone, Inc. the surviving entity, going forward. The financial statements reflect the activity for all periods presented as if the merger had occurred January 1, 2007. Leozone has continued to operate as a separate subsidiary Leo Motors Co. Ltd. of Korea since that time.
On February 11, 2010, the Company acquired 50% of Leo B&T Corp., a South Korean corporation (“B&T”), from two shareholders of B&T in exchange for 7,000,000 shares of the Company’s common stock. Our ownership in B&T was reduced to 30% in 2011. Additionally, this investment was written down as impairment expense during 2011 and the remaining investment was exchanged in 2012 for a return of Leo Motors stock.
On November 10, 2012, the Company signed an agreement withPDI C&D/RDC SPRL Inc. ("PDI"), an affiliate of PDI Global LLC, a major architectural design company in the U.S., to supply an independent solar power system grafted with the Company’s E-Box power storage device for a housing project in the Democratic Republic of the Congo ("DRC"). The Company will have a 10% interest in the overall project. This project has incurred an impairment charge as details in these footnotes.
On July 1, 2014, the Company acquired all of the outstanding common stock of LGM Co. Ltd., a corporation incorporated in the Republic of Korea (“LGM”), from LGM’s shareholders, which represents 813,747 shares of LGM common stock, in exchange for 47,352,450 shares of the Company's common stock pursuant to the Share Swap Agreement entered into by and between LGM and the Company. Upon closing of the Share Swap Agreement, LGM became a wholly-owned subsidiary of the Company.
On March 31, 2015, the Company acquired 50% interest in each of
Leo Motors Factory, Inc. (“Leo Factory 1”) and Leo Motors Factory 2, Inc. (“Leo Factory 2”)
which are auto repair shops that specialize in repairing hand-made luxury cars such as Ferrari, Lamborghini, Bentley, Porsche, and Rolls Royce. The Company also acquired 50% interest in Leo Trading Inc.(formerly Erum Motors, Inc.) (“Leo Trade”) specializing in the trading of luxury cars. These acquired entities will be presented on a consolidated basis as the parent company has significant control of the business through the Board of Directors which can decide decisions split on strictly on common share ownership percentages.
The Company acquired Leo AIC (former name was Lelcon) on June 3, 2016. With the acquisition, the Company was engaged in connected car and artificial intelligence (AI) related businesses for smart city.
NOTE 2 - POLICIES
38
This summary of significant account policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements and the notes are the representation of the Company’s management, who are responsible for their integrity and objectivity. These accounting policies conform to U.S. generally accepted accounting principles (“USGAAP”) and have been consistently applied in the preparation of the financial statements.
Basis of Presentation and Consolidation
These financial statements and related notes are expressed in US dollars. The Company’s fiscal year-end is December 31. The consolidated financial statements include the financial statements of the Leo Motors Co. Ltd. Korea, LGM Co. LTD, Leo Factory Motors #1, Leo Factory Motors #2, Leo Trading and Leo AIC. The company has significant control of all subsidiaries thru direct as well as indirect stock ownership and voting board control from parent board members at the subsidiary level. All inter-company transactions and balances have been eliminated upon consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
For certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable inventory and prepaid expenses, accounts payable and deferred revenues, the carrying amounts approximate fair value due to their short maturities.
Revenue Recognition
The Company follows the guidance of the Securities and Exchange Commission’s Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements”. In general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. The following policies reflect specific criteria for the various revenues streams of the Company.
The Company generates revenue from the delivery of goods and records revenues when the sales are completed, already collected or collectability is reasonably assured, there is no future obligation and there is remote chance of future claim or refund to the customers.
Revenue is recognized when risk of ownership and title pass to the buyer, generally upon the delivery of professional services. Pricing is fixed and determinable according to the Company’s published brochures and price lists.
Accounts Receivables
Accounts receivables of the Company are reviewed to determine if their carrying value has become impaired. The Company considers the assets to be impaired if the balances are greater than one-year old. Management regularly reviews accounts receivable and will establish an allowance for potentially uncollectible amounts when appropriate. When accounts are written off, they will be charged against the allowance.
Receivables are not collateralized and do not bear interest.
Cash Equivalents
39
For purposes of reporting cash flows, the Company considers all short-term investments with an original maturity of three months or less to be cash equivalent.
Fixed Assets
Fixed assets are stated at cost, less accumulated depreciation. Depreciation is provided principally on the straight-line method over the estimated useful lives of the assets, which is generally 3 to 10 years. The cost of repairs and maintenance is charged to expense as incurred. Expenditures for property betterments and renewals are capitalized. Upon sale or other disposition of a depreciable asset, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in other income (expense).
The Company will periodically evaluate whether events and circumstances have occurred that may warrant revision of the estimated useful lives of fixed assets or whether the remaining balance of fixed assets should be evaluated for possible impairment. We use an estimate of the related undiscounted cash flows over the remaining life of the fixed assets in measuring their recoverability.
Intangible and Long Lived Assets
The Company follows ASC 360-10,
“Property, Plant, and Equipment,”
which established a “primary asset” approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. Through December 31, 2016, the Company has impaired goodwill on three of its acquisitions reflected by their recurring losses for those entities.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC 740-10, “Accounting for Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year; and, (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if, based on the weight of available positive and negative evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
ASC 740-10 prescribes a recognition threshold and measurement attribute for the financial statement recognition of a tax position taken or expected to be taken on a tax return. Under ASC 740-10, a tax benefit from an uncertain tax position taken or expected to be taken may be recognized only if it is “more likely than not” that the position is sustainable upon examination, based on its technical merits. The tax benefit of a qualifying position under ASC 740-10 would equal the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all the relevant information. A liability (including interest and penalties, if applicable) is established to the extent a current benefit has been recognized on a tax return for matters that are considered contingent upon the outcome of an uncertain tax position. Related interest and penalties, if any, are included as components of income tax expense and income taxes payable.
Loss per Share
Basic earnings (loss) per share is computed by dividing net income, or loss, by the weighted average number of shares of common stock outstanding for the period. Diluted earnings (loss) per share is computed by dividing net income, or loss, by the weighted average number of shares of both common and preferred stock outstanding for the period.
40
Stock-Based Compensation
SFAS No. 123, “Accounting for Stock-Based Compensation,” establishes and encourages the use of the fair value based method of accounting for stock-based compensation arrangements under which compensation cost is determined using the fair value of stock-based compensation determined as of the date of grant and is recognized over the periods in which the related services are rendered. For stock based compensation the Company recognizes an expense in accordance with SFAS No. 123 and values the equity securities based on the fair value of the security on the date of grant. Stock option awards are valued using the Black-Scholes option-pricing model.
Reclassifications
Certain reclassifications have been made to prior year balances to conform to the current year presentation.
Foreign Currency Translation And Comprehensive Income
The reporting currency of the Company is the US$. The functional currency of the parent company is the US$ and the functional currency of the Company’s operating subsidiary is Korean Won (“KRW”). The subsidiary’s results of operations and cash flows are translated at average exchange rates during the year, assets and liabilities are translated at the unified exchange rate at the end of the year, and equity is translated at historical exchange rates. Translation adjustments resulting from the process of translating the functional currency financial statements into US$ are included in determining comprehensive income. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. The Company does not enter any material transaction in foreign currencies and accordingly, transaction gains or losses have not had, and are not expected to have, a material effect on the results of operations of the Company.
Recent Accounting Pronouncements
The Company continually assesses any new accounting pronouncements to determine their applicability to the Company. Where it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequence of the change to its financial statements and assures that there are proper controls in place to ascertain that the Company’s financials properly reflect the change. The Company currently does not have any recent accounting pronouncements that they are studying and feel may be applicable.
NOTE 3 - EARNINGS PER SHARE
The Company reports basic and diluted earnings per share (EPS) according to the provisions of ASC Topic 260, which requires the presentation of basic EPS and, for companies with complex capital structures, diluted EPS. Basic EPS excludes dilution and is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS is computed by dividing net income (loss) available to common stockholders, adjusted by other changes in income or loss that would result from the assumed conversion of those potential common shares, by the weighted number of common shares and common share equivalents (unless their effect is antidilutive) outstanding. Common stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be antidilutive. Thus, these equivalents are not included in the calculation of diluted loss per share, resulting in basic and diluted loss per share being equal.
The following is a reconciliation of the computation for basic and diluted EPS for the years ended December 31, 2016 and 2015:
41
|
|
For the periods ended
|
|
|
12/31/2016
|
|
|
12/31/2015
|
Net Income (Loss)
|
$
|
(6,410,150)
|
|
$
|
(4,490,972)
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common stock Outstanding - basic
|
|
164,298,953
|
|
|
155,866,313
|
Equivalents
|
|
|
|
|
|
Stock options
|
|
-
|
|
|
0
|
Warrants
|
|
-
|
|
|
0
|
Convertible Notes
|
|
0
|
|
|
0
|
Weighted-average common shares outstanding- Diluted
|
|
164,298,953
|
|
|
155,866,313
|
|
|
|
|
|
|
NOTE 4 - DUE TO RELATED PARTY
The company is indebted to its officer for advances. There are various advances and repayments throughout the periods in small amounts. They are all short term in nature and provide working capital to the various subsidiaries. Repayment is on demand without interest. The balance was $358,680 at December 31, 2016 and $148,057 at December 31, 2015. There are no other related party transactions.
NOTE 5 - PAYMENTS RECEIVED IN ADVANCE
The Company during the periods received payments from potential customers, or deposits, on future orders. The Company’s policy is to record these payments as a liability until the product is completed and shipped to the customer at which the Company recognizes revenue. As of December 31, 2016 and December 31, 2015, the balance of payments received in advance was $386,624 and $ 795,431, respectively.
NOTE 6 - GOING CONCERN
As reported in the consolidated financial statements, the Company has accumulated deficits of $29,776,217 as of December 31, 2016 and its current liabilities exceeded its current assets. These negative trends have been consistent over the last few years except for asset sales.
These factors create uncertainty about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable and to create operations that contribute capital from normal operations. If the Company cannot obtain adequate capital it could be forced to cease operations.
In order to continue as a going concern, develop and generate revenues and achieve a profitable level of operations, the Company will need, among other things, additional capital resources. Management's plans to obtain such resources for the Company include (1) raising additional capital through sales of common stock, (2) converting promissory notes into common stock and (3) entering into acquisition agreements with profitable entities with significant operations. In addition, management is continually seeking to streamline its operations and expand the business through a variety of industries, including real estate and financial management.
However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.
42
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
(a) Lease Commitments
The Company leases its office space in Ha-Nam City in Korea which expires on December 31, 2017. The minimum obligations under such commitments for the years ending December 31, 2017 through December 31, 2019 are listed on the table below.
For the Year Ending
|
|
|
Amount
|
|
|
|
|
2017
|
|
$
|
150,000
|
2018
|
|
|
0
|
2019 and beyond
|
|
|
0
|
|
|
|
|
Total Commitment
|
|
$
|
150,000
|
(b) Loss Contingencies
The company currently has no loss contingencies.
NOTE 8 - INVENTORIES
Inventories consist of the following:
|
|
31-Dec-16
|
|
|
31-Dec-15
|
|
|
US$
|
|
|
US$
|
Raw material
|
$
|
420,768
|
|
$
|
303,054
|
Work in process
|
|
155,778
|
|
|
133,831
|
Finished goods
|
|
511,752
|
|
|
60,086
|
|
$
|
1,088,298
|
|
$
|
496,971
|
NOTE 9 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
43
|
|
|
31-Dec-16
|
|
|
31-Dec-15
|
Property and equipment consisted of the following:
|
|
|
|
|
|
|
Vehicles
|
|
$
|
87,218
|
|
$
|
146,268
|
Tools
|
|
|
71,818
|
|
|
95,771
|
Office
|
|
|
179,791
|
|
|
109,447
|
Facility equipment
|
|
|
202,168
|
|
|
210,502
|
Total property and equipment
|
|
|
540,995
|
|
|
561,988
|
Accumulated depreciation
|
|
|
(411,838)
|
|
|
(398,987)
|
Property and equipment, net
|
|
$
|
129,157
|
|
$
|
163,001
|
Depreciation expense for the years ended December 31, 2016 and 2015 amounted to $136,684 and $179,191, respectively.
NOTE 10 - SHORT TERM BORROWINGS AND NOTES PAYABLE
The Company continues to fund itself through borrowing and equity sales until sales return to historical levels.
At December 31, 2016 and 2015, the Company had short term borrowings of $268,824 and $276,243. The notes are short term working capital advances that have been advanced to their Korean Subsidiary from various local parties. These advances are due on demand, interest free and unsecured.
Additionally the company borrowed $819,922 in short term convertible notes at a 4% interest rate. These funds were used to fund expansion of our LGM acquisition in 2014. The derivative components are detailed in footnote 15 and these loans were completely converted in February 2015 into 14,924,263 shares of our common stock.
As of December 31, 2015 the major components of our notes and borrowings consisted of the following:
44
|
|
|
12/31/16
|
|
12/31/15
|
Bank loan six month note extended with 12 month term
|
|
|
|
|
|
renewable periods with a variable interest rate currently at 3.21%
|
|
|
|
|
|
interest only payable monthly and securred by the company.
|
|
$
|
47,258
|
|
45,505
|
|
|
|
|
|
|
Bank loan six month note extended with 12 month term
|
|
|
|
|
|
renewable periods with a variable interest rate currently at 3.28%
|
|
|
|
|
|
interest only payable monthly.
|
|
|
69,319
|
|
75,775
|
|
|
|
|
|
|
Bank loan six month note extended with 12 month term
|
|
|
|
|
|
renewable periods with a variable interest rate currently at 13.00%
|
|
|
|
|
|
interest only payable monthly and securred by the company
|
|
|
86,648
|
|
85,245
|
|
|
|
|
|
|
Bank loan six month note extended with 12 month term
|
|
|
|
|
|
renewable periods with a variable interest rate currently at 3.30%
|
|
|
|
|
|
interest only payable monthly.
|
|
|
34,406
|
|
35,718
|
|
|
|
|
|
|
Bank loan six month note extended with 12 month term
|
|
|
|
|
|
renewable periods with a variable interest rate currently at 9.14%
|
|
|
|
|
|
interest only payable monthly.
|
|
|
31,193
|
|
34,000
|
|
|
|
|
|
|
Notes Payable current portion
|
|
|
268,824
|
|
276,243
|
|
|
|
|
|
|
Long Term Notes
|
|
|
0
|
|
49,397
|
|
|
|
|
|
|
Notes Payable
|
|
$
|
268,824
|
|
226,846
|
NOTE 11 - INCOME TAXES
The Company has experienced losses during most years since its inception. As a result, it has incurred no Federal income tax. The Internal Revenue Code allows net operating losses (NOL’s) to be carried forward and applied against future profits for a period of twenty years; an NOL of $29,776,217 had accumulated at December 31, 2016 on U.S. operations and has been carried forward. The potential tax benefit of the NOL’s has been recognized on the books of the Company, and is offset by a valuation allowance.
Under current accounting guidance, recognition of deferred tax assets is permitted unless it is more likely than not that the assets will not be realized. The Company has recorded deferred tax assets using statutory rates, as presented below. The valuation reserve increased by $5,211,834 during the year ended December 31, 2016.
45
|
31-Dec-16
|
|
31-Dec-15
|
|
|
|
|
Opening Balance
|
(24,564,383)
|
|
(21,357,211)
|
Current
|
(5,211,834)
|
|
(3,207,172)
|
Year end NOL
|
(29,776,217)
|
|
(24,564,383)
|
|
|
|
|
|
Total
|
|
Total
|
Deferred Tax Assets
|
(10,123,914)
|
|
(8,351,890)
|
Realization Allowance
|
10,123,914
|
|
8,351,890
|
Balance Recognized
|
$ -
|
|
$ -
|
The effective tax rate is as follows:
|
|
Statutory Federal Rate
|
34%
|
Effect of Valuation Allowance
|
(34%)
|
Effective Rate
|
0%
|
NOTE 12 - INTANGIBLE ASSETS
The Company accounts for its long-lived assets in accordance with Accounting Standards Codification (“ASC”) Topic 360-10-05, “Accounting for the Impairment or Disposal of Long-Lived Assets.” ASC Topic 360-10-05 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and fair value or disposable value. The Company increased goodwill as a result of its 2016 first quarter acquisition by $612,445 but also impaired the goodwill on its 2015 acquisitions. The company has retained the goodwill from its LGM acquisition which has substantial assets in excess of carrying cost.
|
|
|
31-Dec-16
|
|
|
31-Dec-15
|
Patents
|
|
$
|
88,226
|
|
$
|
63,554
|
Trademarks
|
|
|
277
|
|
|
277
|
Goodwill
|
|
|
3,717,931
|
|
|
3,057,003
|
Intangible assets
|
|
|
3,806,434
|
|
|
3,120,834
|
Less impairments
|
|
|
(1,104,445)
|
|
|
0
|
Intangible assets, net
|
|
$
|
2,701,989
|
|
$
|
3,120,834
|
NOTE 13 - SEGMENT INFORMATION
46
ASC Topic 280 requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. During the years ended December 31, 2016 and 2015, the Company operated in one reportable business segment: the sale and manufacture of specialized electric vehicle. The Company's reportable segment is a strategic business unit that offers its product.
NOTE 14 – DERIVATIVE LIABILITY
The Company accounts for derivative financial instruments in accordance with ASC 815, which requires that all derivative financial instruments be recorded in the balance sheets either as assets or liabilities at fair value. There were no transactions through 2016.
The Company’s derivative liability is an embedded derivative associated with one of the Company’s convertible promissory notes. The convertible promissory note was issued on July 31, 2014, (the "Note"), is a hybrid instruments which contain an embedded derivative feature which would individually warrant separate accounting as a derivative instrument under Paragraph 815-10-05-4. The embedded derivative feature includes the conversion feature to the Note. Pursuant to Paragraph 815-10-05-4, the value of the embedded derivative liability have been bifurcated from the debt host contract and recorded as a derivative liability resulting in a reduction of the initial carrying amount (as unamortized discount) of the notes, which are amortized as debt discount to be presented in other (income) expenses in the statements of operations using the effective interest method over the life of the notes.
The embedded derivative within the note have been valued using the Black Scholes approach, recorded at fair value at the date of issuance; and marked-to-market at each reporting period end date with changes in fair value recorded in the Company’s statements of operations as “change in the fair value of derivative instrument”.
As of December 31, 2016 and December 31, 2015, the estimated fair value of derivative liability was determined to be $0 and $0, respectively. On July 31, 2014, the derivative liability was recognized with a debt discount of $825,529. During the year ended December 31, 2015, the loan was converted to common stock and the remaining unamortized debt discount of $275,176 was recorded against as a charge to interest expense.
Summary of Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis
Financial assets and liabilities measured at fair value on a recurring basis are summarized below and disclosed on the balance sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement Using
|
|
|
Carrying Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
-0-
|
|
|
|
|
-0-
|
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
|
-0-
|
|
|
|
|
$
|
-0-
|
|
|
|
$
|
-
|
|
|
|
$
|
-
|
|
|
$
|
-0-
|
|
|
|
$
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of the Changes in Fair Value of Level 3 Financial Liabilities
The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during year ended December 31, 2015.
|
Derivative Liability
|
Fair value, December 31, 2015
|
|
$
|
-0-
|
|
Additions
|
|
|
-0-
|
|
Change in fair value
|
|
|
-0-
|
|
Transfers in and/or out of Level 3
|
|
|
-0-
|
|
Fair value, December 31, 2016
|
|
$
|
-0-
|
|
NOTE 15 - ACQUISITIONS
On March 29, 2015, the Company acquired a 50% interest in each of Leo Motors Factory 1 and 2 which are auto repair shops that specialize in repairing hand-made luxury cars such as Ferrari, Lamborghini, Bentley, Porsche, and Rolls Royce. The Company also acquired a 50% interest in Leo Trade specializing in trading luxury cars.
The consolidation of these acquisitions is presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leo Motors consolidation
|
LEO Motors
|
|
LEO Motors
|
|
LGM
|
|
LEO Motors
|
|
LEO Motors
|
|
LEO Trade
|
|
ELIM
|
|
Consolidated
|
31-Mar-15
|
|
|
US
|
|
Korea
|
|
|
|
Factory 1
|
|
Factory 2
|
|
(f/k/a/ Erum)
|
|
ENTRIES
|
|
Statements
|
All numbers shown in US Dollars
|
|
|
|
|
|
|
|
|
|
DR(CR)
|
|
3/31/2015
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
374
|
|
67853
|
|
211,957
|
|
91,187
|
|
2914
|
|
92173
|
|
0
|
|
466,458
|
Accounts receivable
|
|
|
0
|
|
0
|
|
476,777
|
|
8,754
|
|
48,425
|
|
418,422
|
|
0
|
|
952,378
|
Inventories
|
|
|
0
|
|
0
|
|
295,159
|
|
0
|
|
0
|
|
0
|
|
0
|
|
295,159
|
Prepayment to suppliers
|
|
|
0
|
|
137,236
|
|
160,484
|
|
0
|
|
0
|
|
0
|
|
0
|
|
297,720
|
Other current assets
|
|
|
0
|
|
7,297
|
|
57,403
|
|
1,595
|
|
125,212
|
|
36,685
|
|
0
|
|
228,192
|
Total Current Assets
|
|
|
374
|
|
212,386
|
|
1,201,780
|
|
101,536
|
|
176,551
|
|
547,280
|
|
|
|
2,239,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed assets, net
|
|
|
6,744
|
|
10,530
|
|
16,846
|
|
63,683
|
|
88,181
|
|
0
|
|
0
|
|
185,984
|
Deposit
|
|
|
0
|
|
46,234
|
|
22,637
|
|
4,804
|
|
145,196
|
|
9,025
|
|
0
|
|
227,896
|
Intangible assets
|
|
|
0
|
|
63,831
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
63,831
|
Goodwill
|
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
3,057,003
|
|
3,057,003
|
Investment in subsidiaries
|
|
|
8,089,368
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
-8,089,368
|
|
0
|
Total Non-Current Assets
|
|
|
8,096,112
|
|
120,595
|
|
39,483
|
|
68,487
|
|
233,377
|
|
9,025
|
|
|
|
3,534,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
8,096,486
|
|
332,981
|
|
1,241,263
|
|
170,023
|
|
409,928
|
|
556,305
|
|
-5,032,365
|
|
5,774,621
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
1,139,889
|
|
1,060,342
|
|
291,900
|
|
97,840
|
|
307,112
|
|
416,183
|
|
0
|
|
3,313,266
|
Short term borrowings
|
|
|
0
|
|
256,392
|
|
183,245
|
|
32,052
|
|
0
|
|
0
|
|
0
|
|
471,689
|
Advance from customers
|
|
|
0
|
|
30,381
|
|
9,141
|
|
0
|
|
4,513
|
|
0
|
|
0
|
|
44,035
|
Due to related parties
|
|
|
0
|
|
116,617
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
116,617
|
Taxes payable
|
|
|
0
|
|
137,780
|
|
10,673
|
|
13,559
|
|
78,783
|
|
226
|
|
0
|
|
241,021
|
Notes Payable current portion
|
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
353,747
|
|
0
|
|
353,747
|
Total Current Liabilities
|
|
|
1,139,889
|
|
1,601,512
|
|
494,959
|
|
143,451
|
|
390,408
|
|
770,156
|
|
|
|
4,540,375
|
Long Term Notes
|
|
|
0
|
|
36,698
|
|
117,075
|
|
0
|
|
173,928
|
|
0
|
|
0
|
|
327,701
|
Accrued severance benefits
|
|
|
0
|
|
2,075
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
2,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
1,139,889
|
|
1,640,285
|
|
612,034
|
|
143,451
|
|
564,336
|
|
770,156
|
|
|
|
4,870,151
|
Stockholders' Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
154,144
|
|
2,831,276
|
|
284,870
|
|
90,253
|
|
135,379
|
|
180,505
|
|
-3,522,283
|
|
154,144
|
Additional paid-in capital
|
|
|
21,253,084
|
|
1,831,184
|
|
1,285,902
|
|
0
|
|
0
|
|
0
|
|
-4,973,230
|
|
19,396,940
|
Accumulated other comprehensive income
|
|
|
277,678
|
|
225,403
|
|
4,893
|
|
0
|
|
0
|
|
0
|
|
0
|
|
507,974
|
Accumulated loss
|
|
|
-14,728,309
|
|
-6,195,167
|
|
-946,436
|
|
-63,681
|
|
-289,787
|
|
-394,356
|
|
733,773
|
|
-21,883,963
|
Total Stockholders' Deficit attributable to LEO MOTORS, INC.
|
|
|
6,956,597
|
|
-1,307,304
|
|
629,229
|
|
26,572
|
|
-154,408
|
|
-213,851
|
|
|
|
-1,824,905
|
Non-controlling interest
|
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
2,729,375
|
|
2,729,375
|
Total Stockholders' Deficit
|
|
|
6,956,597
|
|
-1,307,304
|
|
629,229
|
|
26,572
|
|
-154,408
|
|
-213,851
|
|
|
|
904,470
|
Total Liabilities and Stockholders' Deficit
|
|
$
|
8,096,486
|
|
332,981
|
|
1,241,263
|
|
170,023
|
|
409,928
|
|
556,305
|
|
-5,032,365
|
|
5,774,621
|
47
On June 3, 2016 the Company acquired a 50% interest in Leo AIC (former name was Lelcon), with the acquisition, the Company was engaged in connected car and artificial intelligence (AI) related businesses for smart city. The consolidation of these acquisitions is presented below.
LEO MOTORS, INC.
|
CONSOLIDATED PRO FORMA BALANCE SHEETS
|
BALANCE AT MARCH 31, 2016
|
UNAUDITED
|
(AMOUNTS EXPRESSED IN US DOLLAR)
|
|
|
Leo Motors
|
|
LELC
|
|
Pro Forma
|
|
Pro Forma
|
|
|
3/31/2016
|
|
3/31/2016
|
|
AJE
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
130,874
|
|
$
|
998
|
|
|
|
|
$
|
131,872
|
Accounts Receivable
|
|
|
1,015,447
|
|
|
14,031
|
|
|
|
|
|
1,029,478
|
Inventories
|
|
|
838,785
|
|
|
37,879
|
|
|
|
|
|
876,664
|
Prepayment to suppliers
|
|
|
382,545
|
|
|
0
|
|
|
|
|
|
382,545
|
Stockholder loans
|
|
|
0
|
|
|
129,066
|
|
|
|
|
|
129,066
|
Other current assets
|
|
|
199,073
|
|
|
2,905
|
|
|
|
|
|
201,978
|
Total Current Assets
|
|
|
2,566,724
|
|
|
184,879
|
|
|
|
|
|
2,751,603
|
Fixed assets, net
|
|
|
142,137
|
|
|
33,242
|
|
|
|
|
|
175,379
|
Deposit
|
|
|
346,255
|
|
|
0
|
|
|
|
|
|
346,255
|
Other non-current assets
|
|
|
87,275
|
|
|
1,228
|
|
|
|
|
|
88,503
|
Investments
|
|
500,000
|
|
|
0
|
|
$
|
(500,000)
|
|
|
0
|
Goodwill
|
|
|
3,057,003
|
|
|
0
|
|
|
470,559
|
|
|
3,527,562
|
Total Assets
|
|
$
|
6,699,394
|
|
$
|
219,349
|
|
|
|
|
$
|
6,889,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity(Deficit)
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
3,748,487
|
|
$
|
50,193
|
|
|
|
|
$
|
3,798,680
|
Current portion notes payable
|
|
|
264,158
|
|
|
85,034
|
|
|
|
|
|
349,192
|
Advance from customers
|
|
|
496,385
|
|
|
0
|
|
|
|
|
|
496,385
|
Due to related parties
|
|
|
136,887
|
|
|
0
|
|
|
|
|
|
136,887
|
Taxes payable
|
|
|
155,151
|
|
|
4,429
|
|
|
|
|
|
159,580
|
Total Current Liabilities
|
|
4,801,068
|
|
|
139,656
|
|
|
|
|
|
4,940,724
|
Accrued retirement benefits
|
|
96,518
|
|
|
0
|
|
|
|
|
|
96,518
|
Other long term liabilities
|
|
|
196,579
|
|
|
0
|
|
|
|
|
|
196,579
|
Long term debt net of current portion
|
|
|
95,599
|
|
|
0
|
|
|
|
|
|
95,599
|
Total Liabilities
|
|
|
5,189,764
|
|
|
139,656
|
|
|
|
|
|
5,329,420
|
Commitments
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
Leo Motors, Inc.("LEOM") Equity(Deficit):
|
|
|
|
|
|
|
|
|
|
|
|
Common stock ($0.001 par value; 300,000,000 shares authorized); 163,198,512 shares issued and outstanding at March 31, 2016
|
164,614
|
|
|
169,348
|
|
|
(169,348)
|
|
|
164,614
|
Additional paid-in capital
|
|
|
21,488,871
|
|
|
0
|
|
|
|
|
|
21,488,871
|
Accumulated other comprehensive income
|
|
1,329,240
|
|
|
1,805
|
|
|
|
|
|
1,331,045
|
Accumulated loss
|
|
|
(25,827,119)
|
|
|
(91,460)
|
|
|
55,233
|
|
|
(25,863,346)
|
Total Equity(Deficit) Leo Motors, Inc.
|
|
(2,844,394)
|
|
|
79,693
|
|
|
|
|
|
(2,878,816)
|
Non-controlling interest
|
|
|
4,354,024
|
|
|
0
|
|
|
84,674
|
|
|
4,438,698
|
Total Equity(Deficit)
|
|
1,509,630
|
|
|
79,693
|
|
|
|
|
|
1,475,208
|
Total Liabilities and Equity(Deficit)
|
$
|
6,699,394
|
|
$
|
219,349
|
|
|
0
|
|
$
|
6,804,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
"See accompanying notes to consolidated financial statements"
|
48