Leo Motors, Inc. - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - Leo Motors, Inc.	Financial_Report.xls
EX-31.1 - Leo Motors, Inc.	ex31-1.htm
EX-32.1 - Leo Motors, Inc.	ex32-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

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

For the transition period from _______ to _______

Commission File Number 000-53525

LEO MOTORS, INC.

(Exact name of Registrant as specified in its charter)

Delaware	95-3909667
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

1291-1 Hasangok-dong, Hunam City, Gyeonggi-do
Republic of Korea	465-250
(Address of principal executive offices)	(Zip Code)

(702) 650-3000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x

No o

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 for such shorter period that the registrant was required to submit and post such files).

Yes x

No o

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

Large accelerated filer 	o	Accelerated filer 	o
Non-accelerated filer	o	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o

As of June 30, 2012 the registrant had 55,550,614 shares of common stock outstanding.

Leo Motors, Inc.

INDEX TO FORM 10-Q

PART I.	FINANCIAL INFORMATION	Page

Item 1.	Condensed Consolidated Financial Statements:

	Condensed Consolidated Balance Sheets at June 30, 2012(unaudited), and December 31, 2011(audited)	4

	Condensed Consolidated Statements of Operations and Comprehensive Income for the Six and Three Months Ended June 30, 2012, and (unaudited) June 30, 2011 (unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2012 (unaudited) and June 30, 2011 (unaudited)	7

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	15

Item 4.	Controls and Procedures	15

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	16

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16

Item 6.	Exhibits	17

SIGNATURES		18

LEO MOTORS, INC.

Consolidated Balance Sheets


ASSETS	As of 6/30/2012		As of 12/31/2011
	Unaudited		Audited
CURRENT ASSETS
Cash	$	19,751	$	880
Accounts Receivable		39,947		86,244
Inventory		421,258		252,584
Short-term loans		0		196,066
Prepaid purchase		138,131		163,185
Other current assets		3,725		2,505

TOTAL CURRENT ASSETS		622,812		701,464

FIXED ASSETS, NET		37,438		48,751

OTHER ASSETS
Deposit		69,838		95,906
Other non-current assets		506		56,905
Long -tern investment in B&T Corp.		4,934,779		4,959,779

TOTAL OTHER ASSETS		5,005,123		5,112,590

TOTAL ASSETS	$	5,665,373	$	5,862,805

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

CURRENT LIABILITIES
Short term borrowings	$	81,675	$	433,651
Accounts payable and accrued expenses		9,293		20,425
Other Payables		1,123,688		995,658
Advance payments		166,776		86,766
Related party payable		664,186		1,434,583
Corporate and business taxes payable		207,472		263,254

TOTAL CURRENT LIABILITIES		2,253,090		3,234,337

LONG-TERM LIABILITIES - Accrued severence benefits		41,753		52,378

TOTAL LIABILITIES		2,294,843		3,286,715

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

LEO MOTORS, INC.

Consolidated Balance Sheets (Continued)


	As of 6/30/2012			As of 12/31/2011
STOCKHOLDERS’ EQUITY (DEFICIT)	Unaudited			Audited
Common Stock 200,000,000 authorized at $0.001 par value; shares issued and outstanding 6/30/2012 55,550,615 shares issued and outstanding 12/31/2011 50,833,115
Total Common Shares issued and outstanding, respectively		55,551			50,233
Additional paid-in capital		11,046,168			10,774,996
Accumulated comprehensive income(loss)		471,422			470,876
Accumulated deficit		(9,309,564	)		(9,934,703	)
Less: Treasury Stock at cost		(107,735	)		0

TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)

ATTRIBUTABLE TO LEO MOTORS, INC.		2,155,842			1,361,402

Noncontroling Interest		1,214,688			1,214,688

TOTAL LIABILITIES, AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	5,665,373		$	5,862,805

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

LEO MOTORS, INC.

Consolidated Statements of Operations

	For the Six Months Ended						For the Three Months Ended
	6/30/2012			6/30/2011			6/30/2012			6/30/2011
	Unaudited			Unaudited			Unaudited			Unaudited

REVENUES	$	24,386		$	252,555		$	18,603		$	4,377

COST OF SALES		15,408			219,112			11,242			40,274

GROSS PROFIT		8,978			33,443			7,361			(35,897	)

OTHER EXPENSES - General and administrative		373,518			296,181			223,982			170,155

TOTAL OTHER EXPENSE		373,518			296,181			223,982			170,155

NET INVESTMENT INCOME(LOSS)		(364,540	)		(262,738	)		(216,621	)		(206,052	)

OTHER INCOME (EXPENSE)
Other income (expense)		7,501			(25,599	)		11,708			(21,273	)
Gain on assets acquisition		286,914			0			286,914			0
Debt Forgiveness		829,645			0			829,645			0
Interest expense		(134,381	)		0			(134,381	)		0

TOTAL OTHER INCOME (EXPENSE)		989,679			(25,599	)		993,886			(21,273	)

INCOME (LOSS) FROM CONTINUING
OPERARION BEFORE INCOME TAXES		625,139			(288,377	)		777,265			(227,325	)

Income taxes		0			0			0			0

NET INCOME (LOSS)	$	625,139		$	(288,337	)	$	777,265		$	(227,325	)

Net income (loss) attributable to noncontroling interest		143,782			(44,000	)		178,771			(58,032	)

NET INCOME (LOSS) ATTRIBUTABLE TO LEO MOTORS, INC.	$	768,921		$	(332,337	)	$	956,036		$	(285,357	)

COMPREHENSIVE INCOME (LOSS):
Net loss		625,139			(288,337	)		777,265			(227,325	)

Unrealized foreign currency transactions gain(loss)		546			572			546			572

COMPREHENSIVE INCOME (LOSS)	$	625,685		$	(287,765	)	$	777,811		$	(226,753	)

BASIC INCOME (LOSS) PER SHARE
Basic & Diluted Income (Loss) Per Share		0.012			(0.006	)		0.015			(0.004	)

WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING		51,758,532			50,833,115			52,683,948			50,833,115

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

LEO MOTORS, INC.

Consolidated Statements of Cash Flows

	For the Six Months Ended
	6/30/2012			6/30/2011
	Unaudited			Unaudited
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) from continuing operations	$	625,139		$	(332,337	)
Adjustments to reconcile net loss to net cash used by operating activities:
Accounting for Non-controling interest
Common stock issued for compensation		144,000			0
Depreciation		13,048			21,496
Forgiveness of debt		(829,645	)		0
Foreign currency translation		546			572
Gain on asset acquisition		(286,914	)		0

(Increase) decrease in accounts receivable		46,297			(12,648	)
(Increase) decrease in inventory		(168,674	)		(285,385	)
(Increase) decrease in short term loans		196,066			0
(Increase) decrease in deposit/prepaid		25,054			(2,843	)
(Increase) decrease in other current assets		(1,220	)		0
Increase (decrease) in accounts payable /accrued expenses		(11,132	)		30,929
Increase (decrease) in other payable		128,030			521,973
Increase (decrease) in advance payments		80,000			12,525
Increase (decrease) in short term borrowings		(351,976	)		0
Increase (decrease) in taxes payable		(55,792	)		0
Increase (decrease) in other liabilities		0			(2,150	)
Increase (decrease) in severence benefits		(10,625	)		30,274

Net Cash Used in Operating Activities		(457,798	)		(17,594	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets		(1,735	)		14,949
Return in investment		25,000			0
Decrease in deposit		26,068			7,485
(Increase) decrease in other non-current assets		56,399			(2,843	)

Net Cash Provided (Used) in Investing Activities		105,732			19,591

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

LEO MOTORS, INC.

Consolidated Statements of Cash Flows (Continued)

	For the Six Months Ended
	6/30/2012		6/30/2011
	Unaudited		Unaudited

CASH FLOWS FROM FINANCING ACTIVITIES
Payments on notes payable		0		0
Contribution of treasury stock		370,937		0
Net Proceeds from borrowings		0		(57,867	)

Net Cash Provided by Financing Activities	$	370,937	$	(57,867	)

NET DECREASE IN CASH	$	18,871	$	(55,870	)

CASH, BEGINNING OF PERIOD		880		71,192

CASH, END OF PERIOD	$	19,751	$	15,322

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid	$	134,381	$	0
Income taxes paid	$	11,029	$	14,487

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES
Common stock issued for services	$	144,000	$	0
Foregiveness of debts included as income	$	829,645	$	0

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

LEO MOTORS, INC.

Notes to the Consolidated Financial Statements

As of June 30, 2012 and 2011

(Unaudited)

NOTE 1 -COMPANY BACKGROUND

Company Business

Company is currently in development, assembly and sales of the specialized electric vehicle.

Background

Leo Motors, Inc, Inc (the “Company”) was originally incorporated as Classic Auto Accessories, a California Corporation on July 2, 1986. The Company then underwent several name changes from FCR Automotive Group, Inc. to 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.

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.

NOTE 2 - SUMMAY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant account policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements and the notes are the representation of the Company’s management, who are responsible for their integrity and objectivity. These accounting policies conform to U.S. generally accepted accounting principles ( “USGAAP”) and have been consistently applied in the preparation of the financial statements.

Basis of Presentation and Consolidation

These financial statements and related notes are expressed in US dollars. The Company’s fiscal year-end is December 31. The consolidated financial statements include the financial statements of the Leo Motors Co. Ltd. Korea where the Company is controlling shareholders with 57.69 % at the end of June 30, 2012 and 2011, respectively. All inter-company transactions and balances have been eliminated upon consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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:

LEO MOTORS, INC.

Notes to the Consolidated Financial Statements

As of June 30, 2012 and 2011

(Unaudited)

NOTE 2 - SUMMAY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

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

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.

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.

LEO MOTORS, INC.

Notes to the Consolidated Financial Statements

As of June 30, 2012 and 2011

(Unaudited)

NOTE 2 - SUMMAY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

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

Stock-Based Compensation

SFAS No. 123, “Accounting for Stock-Based Compensation,” establishes and encourages the use of the fair value based method of accounting for stock-based compensation arrangements under which compensation cost is determined using the fair value of stock-based compensation determined as of the date of grant and is recognized over the periods in which the related services are rendered. For stock based compensation the Company recognizes an expense in accordance with SFAS No. 123 and values the equity securities based on the fair value of the security on the date of grant. Stock option awards are valued using the Black-Scholes option-pricing model.

Recent Accounting Pronouncements and Impact of New Accounting Standards

The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position, or cash flow.

NOTE 3 - EARNINGS PER SHARE

Basic earnings per share are calculated by dividing net loss by the weighted average number of common shares outstanding during the period.

NOTE 4 - DUE TO RELATED PARTY

The company is indebted to its officer for advances. Repayment is on demand without interest. The balance at June 30, 2012 was $ 664,186.

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 June 30, 2012 and December 31, 2011, the balance of payments received in advance was $ 166,776 and $ 86,766, respectively.

NOTE 6 SUBSEQUENT EVENTS

There is no reportable subsequent event.

PART I

ITEM 2. DESCRIPTION OF BUSINESS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

These forward-looking statements are generally located in the material set forth under the headings “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Business”, “Properties” but may be found in other locations as well. These forward-looking statements are subject to risks and uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. You should not unduly rely on these statements. Factors, risks, and uncertainties that could cause actual results to differ materially from those in the forward-looking statements include, among others,

our growth strategies;

anticipated trends in our business;

our ability to make or integrate new technologies; our liquidity and ability to finance our research and development, and commercialization strategies;

market conditions in the electric vehicle, battery storage and related component industry; the timing, cost and procedure for developing new products;

the impact of government regulation;

estimates regarding future net revenues from the sale of our technology and the present value thereof; planned capital expenditures (including the amount and nature thereof);

increases in the demand for electric vehicles and “green” technology in the future;

estimates, plans and projections relating to the commercialization of our technologies;

our financial position, business strategy and other plans and objectives for future operations.

We identify forward-looking statements by use of terms such as “may,” “will,” “expect,” “anticipate,” “estimate,” “hope,” “plan,” “believe,” “predict,” “envision,” “intend,” “will,” “continue,” “potential,” “should,” “confident,” “could” and similar words and expressions, although some forward-looking statements may be expressed differently. You should be aware that our actual results could differ materially from those contained in the forward-looking statements. You should consider carefully the statements under the “Risk Factors” section of this report and other sections of this report which describe factors that could cause our actual results to differ from those set forth in the forward-looking statements, and the following factors:

the possibility that our technology commercialization may involve unexpected costs;

the volatility in world demand for electric vehicles and “green” technologies;

the accuracy of internally estimated market demand for our products and technologies;

the ability to survive as a going concern on limited capital;

the availability and costs of raising sufficient working capital;

environmental and development risks;

competition;

the inability to realize expected value from technology research and development;

the ability of our management team to execute its plans to meet its goals; and

other economic, competitive, governmental, legislative, regulatory, geopolitical and technological factors that may

negatively impact our businesses, operations and pricing.

Forward-looking statements speak only as of the date of this Amendment No. 5 to our Form 10 Registration Statement or the date of any document incorporated by reference in this report. Except to the extent required by applicable law or regulation, we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

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 10-Q REGISTRATION WITH THE “GOING CONCERN” ISSUES IN MIND.

This Management’s Discussion and Analysis should be read in conjunction with the financial statements included in this Quarterly Report on Form 10-Q (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 Delaware 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. The Company.through Leozone is engaged in the research and development (“R&D”) 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.

These Company’s products include (a) Zinc Air Fuel Battery (“ZAFC”); (b) electric vehicles (“EV”) such as cars, trucks, tractors and other commercial/military vehicles; (c) E-Bike or electric scooters; (d) EV components that integrate electric batteries with electric motors such as EV Controllers that use a mini-computer to control torque drive; and the (e) E-Box which is a electric energy storage system for solar and wind power generation devices.

Leo Motors, Inc. (the “Company”) is currently 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”). We have begun sales of our EPTS to auto makers and agricultural machinery manufacturers.

During the last two years, we have been developing 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:

Market e-Boxes in USA, Japan and Australia

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; yatchs 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”).

Recent Business Developments

In the last six months, the Company has focused its marketing and sales efforts on the E-Box. The E-Box is a electric power storage box ranging from 3kW to 50kW for use in homes. This project took on additional importance to the Company because of the unprecedented natural disaster in Japan. Leo is marketing the device in the US and Japan. A recent sales order from a company in the USA in the third quarter of 2011 requires us to demonstrate “proof of concept”.

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.

Results of Operations For the Six Months ended June 30, 2012

Revenues

Sales for the six months ended June 30, 2012 were $24,386 compared to $252,555 for the six months ended June 30, 2011. Costs of sales were $15,408 and gross profit was $8,978 in the six months ended June 30, 2012 compared to $219,112 as costs of sales and gross profit of $33,443 in the same period in 2011.

Expenses

During the six months ended June 30, 2012, we incurred $375,518 in expenses, compared to $296,181 in the period ended June 30, 2011.

Expenses for the period consisted of the following:


	Six Months Ended
	June 30,		June 30,
Expenses:	2012		2011
	$	-
Salaries and Benefits		0	$	0
Consulting and Service Fees		0		0
Selling, General and Administrative		375,518		296,181
Total	$	375,518	$	296,181

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.

Results of Operations - For the Quarter Ended June 30, 2012

Revenues

Sales for the quarter ended June 30, 2012 were $18,603 compared to $4,377 for the quarter ended June 30, 2011. Costs of sales were $11,242 and gross profit was $7,361 in the quarter ended June 30, 2012 compared to $40,274 as costs of sales and gross profit of ($35,897) in the same period in 2011.

Expenses

During the quarter ended June 30, 2012, we incurred $223,982 in expenses, compared to $170,155 in the period ended June 30, 2011.

Expenses for the period quarter consisted of the following:


	Three Months Ended
	June 30,		June 30,
Expenses:	2012		2011
	$	-
Salaries and Benefits		0	$	0
Consulting and Service Fees		0		0
Selling, General and Administrative		223,982		170,155
Total	$	223,982	$	170,155

Consulting and Service Fees consist of consist of accounting, legal, and professional fees.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None.

ITEM 4 CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Our Chief Executive Officer and Chief Financial Officer (the “Certifying Officer”) maintains a system of disclosure controls and procedures that is designed to provide reasonable assurance that information, which is required to be disclosed, is accumulated and communicated to management timely. Under the supervision and with the participation of management, the Certifying Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule [13a-14(c)/15d-14(c)] under the Exchange Act) within 45 days prior to the filing date of this report. Based upon that evaluation, the Certifying Officer concluded that our disclosure controls and procedures are not effective in timely alerting them to material information relative to our company required to be disclosed in our periodic filings with the SEC.

CHANGES IN INTERNAL CONTROLS

During the Quarter ended June 30, 2012, there were no changes made to our internal controls over financial reporting that are reasonably likely to affect the reliability of those controls, or the accuracy of our financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS

The Company had entered to certain loan agreements as referenced in Note 7 of the Financial Statements for the Year Ended December 31, 2010, filed with the Company’s Annual Report on Form 10-K for the Year Ended December 31, 2010 (incorporated herein by this reference). Facts have come to the Company’s attention that causes the Company to believe that the debts have been extinguished. However, the Company cannot offer any assurance that the holders of the debt will not seek to enforce rights that the holders believe they may have under the respective agreements. Our former law firm in the USA has an outstanding bill for approximately $25,000 which has not been satisfied.

ITEM 2. RECENT SALES OF UNREGISTERED SECURITIES

The following is a description of unregistered securities sold by the Company from January 1, 2012 through June 30, 2012 including the date sold, the title of the securities, the amount sold, the identity of the person who purchased the securities, the price or other consideration paid for the securities, and the section of the Securities Act of 1933 under which the sale was exempt from registration as well as the factual basis for claiming such exemption.

•	On May 14, 2012 we issued 1,000,000 shares of restricted common stock to Red Chip Companies, Inc. for services performed. This issuance was intended to be exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated under Regulation D.
•	On June 20, 2012 we issued 2,000,000 shares of restricted common stock to Jung Yong Lee for services performed. This issuance was intended to be exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated under Regulation D.
•	On June 20, 2012 we issued 500,000 shares of restricted common stock to Jeonyou Choi for services performed. This issuance was intended to be exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated under Regulation D.

•	On June 20, 2012 we issued 300,000 shares of restricted common stock to Hak Kyom Kim for services performed. This issuance was intended to be exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated under Regulation D.
•	On June 20, 2012 we issued 100,000 shares of restricted common stock to J. Michael King for services performed. This issuance was intended to be exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated under Regulation D.
•	On June 20, 2012 we issued 100,000 shares of restricted common stock to Trilogy and Associates, Inc. for services performed. This issuance was intended to be exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated under Regulation D.
•	On June 20, 2012 we issued 300,000 shares of restricted common stock to John E. Dolkart for services performed. This issuance was intended to be exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated under Regulation D.
•	On June 20, 2012 we issued 500,000 shares of restricted common stock to Jun Heng Park for services performed. This issuance was intended to be exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated under Regulation D.

ITEM 6. EXHIBITS, REPORTS ON FORM 8-K AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

Exhibits required to be attached by Item 601 of Regulation S-B are listed in the Index to Exhibits and are incorporated herein by this reference.


EXHIBIT

No.		Description

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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.

Dated: August 16, 2012
	Leo Motors, Inc.
	(Registrant)



	By: /s/ Jung Yong (John) Lee
	Jung Yong Lee
	Chief Executive Officer
	and Interim Chief Financial Officer

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Leo Motors, Inc. Reports

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