Leatt Corp Reports Second Quarter Results Neck Braces Up Year-To-Year; Margins Increase 600 Basis Points

RELEASED: 14 Aug 2014

CAPE TOWN, South Africa, August 14, 2014 – Leatt Corporation (OTCQB: LEAT) today announced its financial results for the second quarter and six months ended June 30, 2014. Leatt Corporation develops and markets protective equipment and ancillary products for all forms of sports, especially extreme high-velocity sports. All financial numbers are in US dollars.

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Financial Performance
Revenue growth accelerated by 15% during the second quarter, to $4.2 million, compared to $3.6 million in the second quarter of 2013. Gross profit margin increased year-to-year by 600 basis points, to 55%. The net loss of $29, 834 was lower by 95%, compared to the net loss in the second quarter of 2013 of $636,264. On a per-share basis, the net loss was $0.01 versus the prior-year loss of $0.12. The improvement in numbers during the 2014 period is attributable to careful management of our financial resources, as well as higher sales in the neck brace product line, particularly with respect to the 2013 debut of the Company’s new Fusion 2.0 Junior, it’s first product designed specifically for children that includes upper-body and neck protection, and its 5.5 Neck Brace, a new generation of the classic Leatt neck brace. The improvement follows a strengthening trend that emerged last autumn, and continued in the fourth quarter of 2013 and through the first quarter of this year.

Our product research and development (“R&D”) expense was up by 20% during the 2014 period, partly due to our work on tailoring our new Knee Brace to a wider range of sports and uses. Additionally, our development team continued to focus on widening our innovative product offering to include new product categories for Leatt, including our technologically advanced helmet range. The increase in R&D expense during the period was balanced by decreases in selling, general and administrative (“SG&A”), consulting, professional fees and advertising/marketing expense. Overall, SG&A expense declined to $2.4 million, from $2.6 million in the 2013 second quarter.

For the 2014 six-month period, revenue increased by 12% to $7.7 million, from $6.9 million in the first half of 2013, and gross profit margin was 55%, compared to 49% in the prior year period. Net loss was $370,720, compared to a loss of $1.4 million last year, which is a 73% improvement over the prior period. The six-month SG&A trends were equivalent to those seen in the quarterly periods, with overall SG&A expense at $4.7 million for the first half of 2014, compared to $5.0 million last year. On a per-share basis, the net loss for the first six months of 2014 was $0.07, versus $0.27 last year. Our current ratio was 3.54:1 at June 30, and although cash was down to $640,184 as of June 30, compared to $835,012 at December 31, we are confident in our ability to profitably fund the ongoing increase in sales.

CEO Sean Macdonald commented, “The rise in sales for the neck brace product line was largely attributable to the successful market acceptance of the Fusion 2.0 Junior and 5.5 Neck Brace products, both introduced in the fourth quarter of 2013. Sales were good for neck brace products both in the United States and abroad. The decrease in the sale of body armor products during the 2014 period was primarily due to the fact that our distributors completed their initial stocking and pipeline filling during 2013 which boosted body armor product sales during that period, but this process typically does not recur the following year. Product royalty income decreased primarily because during 2013 the Company settled various intellectual property cases and were paid licensing fees for sales of infringing products from inception.

“We keep an eagle eye on expenses,” Macdonald added, “and we are proud that our SG&A decreased in the second quarter year-over-year, to $2.4 million, compared to $2.6 million last year. We accomplished notable reductions in professional fees (due to lower spending on litigation), while we accelerated our R&D and product development activities and added new senior staff in that area and on our US sales and distribution team. We also note that at $69,989, the 2014 second quarter depreciation expense, which is a non-cash charge, was greater than the dollar amount of our loss. So, but for depreciation expense, we would have realized an operating profit for the period.
Business Outlook

“We began shipments of salesman samples of our new knee brace for motorcyclists and motocross athletes in June,” Macdonald said, “and we expect to ship our first production units of knee braces before the end of the third quarter. Furthermore, our knee brace for winter sports is nearing completion and we expect to ship initial orders during the fourth quarter of 2014. We are optimistic that our knee braces will gain market acceptance but we will not be able to assess its performance in the marketplace until the critical fourth quarter holiday shopping season. We are also continuing our collaboration with leading knee specialists in South Africa to tailor our knee brace for rehabilitation and to obtain CE approval for the knee brace as a medical rehabilitation device.”

“Our transition from being a one-product company to being an across-the-board designer and supplier of protective gear for athletes is moving forward,” continued Macdonald. “Dr. Leatt and our R&D team are progressing with the design of the first ever Leatt helmet that everyone expects will be, like other Leatt premium products, smaller, more light-weight, more comfortable and more technologically advanced than those currently available in the marketplace. A prototype of the helmet was favorably received at a recent showing to certain industry dealers and distributors in Mallorca, California and Singapore, and the Company is looking forward to introducing the finished product to the marketplace. While salesman samples of the helmet should be available by the fourth quarter, helmets are not expected to be available for consumer purchase until early next year. We plan to officially launch the bicycle version of the helmet in the EU at the 2014 Eurobike show in Friedrichshafen, Germany, in late August, and in the US at the 2014 Interbike show in Las Vegas, Nevada, in mid-September. We expect to launch the motorcycle version of the helmet at the 2014 Intermot show in Cologne, Germany, in early October.”

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Earnings Call
Leatt’s management team will host a conference call to discuss the Company’s financial results at 10 am ET today. Participants should dial in to the call ten minutes before the scheduled time, using the following numbers: 1-877-300-8521 (USA) or +1-412-317-6026 (international) to access the call. There will also be a simultaneous live webcast through the Company’s website, www.leatt-corp.com. Participants should register on the website approximately ten minutes prior to the start of the webcast.

For those unable to attend the call, an audio replay of the conference call will be available for seven days and can be accessed by dialing 1-877-870-5176 (USA) or +1-858-384-5517 (international) and using passcode 10050911. A recording of the live webcast will also be archived for 30 days on the Company’s website.

About Leatt Corporation
Leatt Corporation develops and sells protective equipment and ancillary products for all forms of sports, especially extreme high-velocity sports. The Leatt-Brace® is an award-winning neck brace system considered to be the gold standard in neck protection for anyone wearing a crash helmet as a form of protection. The latest generation of the Leatt-Brace, the Five.Five neck brace, is also designed for participants in high-velocity sports such as motorcycling, bicycling, mountain bicycling, driving all-terrain vehicles, snowmobiles and other vehicles, and have potential applications in any downhill or freestyle high-velocity sports. For more information, visit: www.leatt-corp.com | www.leatt.com

Forward-looking Statements
This press release may contain forward-looking statements regarding Leatt Corporation (the “Company”) within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact included herein are “forward-looking statements” including statements regarding: the financial outlook of the Company and the likelihood that gross margins will continue to increase; the likelihood that there will be market acceptance of the Company’s new knee brace and planned helmet, and that demand for the Company’s innovative new products will continue to increase; the general ability of the Company to achieve its commercial objectives, including its plan to develop additional brace and protection lines that will protect more people in more sports, and to tailor and seek CE certification of its new knee brace as a medical device; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as “believes,” “expects,” “anticipates,” “seeks,” “should,” “could,” “intends,” or “projects” or similar expressions, and involve known and unknown risks and uncertainties. These statements are based upon the Company’s current expectations and speak only as of the date hereof. Any indication of the merits of a claim does not necessarily mean the claim will prevail at trial or otherwise. Financial performance in one period does not necessarily mean continued or better performance in the future. The Company’s actual results in any endeavor may differ materially and adversely from those expressed in any forward-looking statements as a result of various factors and uncertainties, which factors or uncertainties may be beyond our ability to foresee or control. Other risk factors include the status of the Company’s common stock as a “penny stock” and those listed in other reports posted on The OTC Markets Group, Inc.


Leatt Corporation
Sean Macdonald
Chief Executive Officer
+ (27) 21 557 7257

Allen & Caron, Inc.
Michael Mason (Investors)
(212) 691-8087

Len Hall (Media)
(949) 474-4300

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