EX-99.1 2 exhibit99_1.htm EXHIBIT 99.1 exhibit99_1.htm
Exhibit 99.1
 
LGM CO., LTD

FINANCIAL STATEMENTS

 
December 31, 2013 and 2012
 (Audited)

 

 
1

 

             
 
BALANCE SHEETS
 
(AMOUNTS EXPRESSED IN US DOLLAR)
 
             
 
Balance at
 
 
12/31/2013
 
12/31/2012
 
 
(Audited)
 
(Audited)
 
Assets
 
Current Assets
           
Cash and cash equivalents
  $ 260,014     $ 2,630  
Accounts receivable
    423,361       254,367  
Inventories
    105,199       103,335  
Other current assets
    177,534       7,739  
Total Current Assets
    966,108       368,071  
Fixed assets, net
    19,299       15,164  
Other non-current assets
    21,720       20,133  
Total Assets
  $ 1,007,127     $ 403,368  
                 
Liabilities and Equity
 
Current Liabilities:
               
Accounts payable and accrued expenses
  $ 51,782     $ 28,281  
Notes Payable  current portion
    260,030       0  
Advance from customers
    0       3,123  
Taxes payable
    39,927       4,507  
Total Current Liabilities
    351,739       35,911  
Notes payable net of current portion
    145,316       210,977  
Total Liabilities
    497,055       246,888  
Commitments(Note 5)
    -       -  
LGM Co., LTD Equity:
               
Common stock ($.35 par value; 1,000,000,000 shares authorized); 813,747  and 144,375 shares issued and outstanding at December 31,  2013 and December 31, 2012
    284,870       50,531  
Accumulated other comprehensive income
    42,612       44,547  
Accumulated loss
    182,590       61,402  
Total Equity
    510,072       156,480  
Total Liabilities and Equity
  $ 1,007,127     $ 403,368  
                 
"See accompanying notes to consolidated financial statements"
 
 
 
2

 
 
   
 
STATEMENTS OF OPERATIONS
 
(AMOUNTS EXPRESSED IN US DOLLAR)
 
             
   
For the Years Ended December 31,
 
   
2013
   
2012
 
   
(Audited)
   
(Audited)
 
Revenues
  $ 579,071     $ 398,025  
                 
Cost of Revenues
    173,259       141,063  
                 
Gross Profit
    405,812       256,962  
                 
Operating Expenses
    279,489       235,300  
                 
Income(loss) from Continuing Operations
    126,323       21,662  
                 
Other Income (Expenses)
               
Interest expense
    (13,301 )     (6,120 )
Non-Operating (expense) income
    8,166       15,301  
                 
Total Other Income (Expenses)
    (5,135 )     9,181  
                 
Income(loss) from Continuing Operations Before Income Taxes
    121,188       30,843  
                 
Income Tax Expense
    0       0  
                 
Net Income(Loss)
  $ 121,188     $ 30,843  
                 
Other Comprehensive Income:
               
Net Income(loss)
  $ 121,188     $ 30,843  
Unrealized foreign currency translation loss
    1,935       425  
                 
Comprehensive Income(loss)
  $ 123,123     $ 31,268  
Net Loss per Common Share:
               
Basic & Diluted
  $ 0.00     $ 0.00  
Weighted Average Common Shares Outstanding:
               
Basic& Diluted
  $ 122,260,000     $ 51,885,750  
                 
"See accompanying notes to consolidated financial statements"
         

 
3

 
 
             
 
STATEMENTS OF CASH FLOWS
 
(AMOUNTS EXPRESSED IN US DOLLAR)
 
   
For the Years Ended December 31,
 
   
2013
   
2012
 
   
(Audited)
   
(Audited)
 
Cash flows from operating activities:
           
Net loss
  $ 121,188     $ 30,843  
Adjustments to reconcile net loss to net cash
used in operating activities:
               
Depreciation and amortization
    4,906       12,829  
Foreign currency translation
    1,935       425  
Changes in assets and liabilities:
               
Accounts receivable
    (168,994 )     (196,389 )
Inventories
    (1,864 )     (30,648 )
Other current assets
    (171,382 )     2,111  
Accounts payable, other payables and accrued expenses
    23,501       8,000  
Advances from customers
    (3,123 )     3,123  
Taxes payable
    35,420       (2,385 )
Net cash used in operating activities:
    (162,283 )     (172,091 )
Cash flows from investing activities:
               
Investment in equipment
    (9,041 )     0  
Net cash provided(used) in investing activities:
    (9,041 )     0  
Cash flows from financing activities:
               
Proceeds from loans
    194,369       123,181  
Common stock issuance
    234,339       26,704  
Net cash provided(used) by financing activities:
    428,708       149,885  
                 
Net change in cash and cash equivalents
    257,384       (22,206 )
Cash and cash equivalents - beginning of year
    2,630       24,836  
Cash and cash equivalents - end of year
  $ 260,014     $ 2,630  
Supplemental disclosure of cash flow activities:
               
Interest
  $ 0     $ 0  
Income taxes
  $ 0     $ 0  
Supplemental disclosures of non cash activities:
               
None
  $ 0     $ 0  
                 
"See accompanying notes to consolidated financial statements"
 

 
4

 
 
                                     
 
STATEMENT OF STOCKHOLDER'S EQUITY(DEFICIT)
 
FOR THE YEARS ENDED DECEMBER 21, 2012, THROUGH DECEMBER 31, 2013 (Audited)
 
(AMOUNTS EXPRESSED IN US DOLLAR)
 
                                     
                                     
   
Common Stock
   
Common Stock
         
Other Comprehensive
   
Accumulated
       
   
Shares
   
Amount
   
APIC
   
Income
   
Deficit
   
Total
 
                                     
Initial Balances January 1, 2012
    50,100,000     $ 43,986     $ 18,312     $ 5,651     $ 30,559     $ 98,508  
Capital stock issuance
    7,143,000       6,545       20,159       0       0       26,704  
Unrealized currency gain(loss)
    0       0       0       425       0       425  
Net Income 2012
    0       0       0       0       30,843       30,843  
                                                 
Balances December 31, 2012
    57,243,000       50,531       38,471       6,076       61,402       156,480  
Capital stock issuance
    251,639,000       234,339       0       0       0       234,339  
Unrealized currency gain(loss)
    0       0       0       541       0       541  
Net Income 2013
    0       0       0       0       121,188       121,188  
                                                 
Balances December 31, 2013
    308,882,000     $ 284,870     $ 38,471     $ 6,617     $ 182,590     $ 512,548  
                                                 
"The accompanying notes are an integral part of these financial statements"
 
 
 
5

 
LGM Co., LTD
Notes to the Consolidated Financial Statements
As of December 31, 2013 and 2012
(Audited)

NOTE 1 - COMPANY BACKGROUND  
  
LGM Co., LTD or "the Company" was incorporated in Korea in July of 2010 by researchers of electric vehicles as a startup company.  The Company is a pioneer in developing electric motor systems and high speed electric fishing boats in Korea.
 
NOTE 2 - SUMMARY 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 functional currency is the Korean Won. and its fiscal year-end is December 31.
  
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 applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the sales price is fixed or determinable, (iii) collectability is reasonably assured and (iv) goods have been shipped and/or services rendered.
 
Accounts Receivable, Bad Debts and Allowance for Doubtful Accounts

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.
 
 
6

 
LGM Co., LTD
Notes to the Consolidated Financial Statements
As of December 31, 2013 and 2012
(Audited)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

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.

 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, 2011, the Company had not experienced impairment losses on its long-lived assets.
 
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.
 
 
7

 
LGM Co., LTD
Notes to the Consolidated Financial Statements
As of December 31, 2013 and 2012
(Audited)
 
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Earnings 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.
 
Foreign Currency Translation And Comprehensive Income

The reporting currency of the Company is the US$. The functional currency of the company is the Korean Won (“KRW”). The Company’s results of operations and cash flows are translated at average exchange rates during the year, assets and liabilities are translated at the unified exchange rate at the end of the year, and equity is translated at historical exchange rates. Translation adjustments resulting from the process of translating the functional currency financial statements into US$ 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 anti-dilutive) 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 anti-dilutive. 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, 2013 and December 31, 2012:
 
 
8

 
LGM Co., LTD
Notes to the Consolidated Financial Statements
As of December 31, 2013 and 2012
(Audited)
 
NOTE 3 - EARNINGS PER SHARE - Continued

   
For the Years Ended
 
   
12/31/2013
   
12/31/2012
 
             
Net Income (Loss)
  $ 121,188     $ 30,843  
                 
                 
Weighted-average common stock Outstanding -  basic
    122,260,000       51,885,750  
Equivalents
               
  Stock options
    -       -  
  Warrants
    -       -  
  Convertible Notes
    -       -  
Weighted-average common shares
               
outstanding-  Diluted
    122,260,000       51,885,750  
  
NOTE 4 - 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, 2013 and December 31, 2012, the balance of payments received in advance was $ 174,678 and $ 4,721, respectively.
 
NOTE 5 - COMMITMENTS AND CONTINGENCIES

(a) Commitments


                   
Twelve
       
Lease
       
months ending
 
Debt
   
Obligations
   
Total
 
                   
12/31/2014
  $ 260,030     $ 11,340     $ 271,370  
12/31/2015
    145,316       0       145,316  
12/31/2016
    0       0       0  
12/31/2017
    0       0       0  
12/31/2018 & Beyond
    0       0       0  
                         
Totals
  $ 405,346     $ 11,340     $ 416,686  
 
 
9

 
LGM Co., LTD
Notes to the Consolidated Financial Statements
As of December 31, 2013 and 2012
(Audited)
 
NOTE 6 -  ACCOUNTS RECEIVABLE

At December 31, 2013 and 2012, accounts receivable consisted of the following:

 
31-Dec-13
 
31-Dec-12
 
 
US$
 
US$
 
Accounts receivable
  $ 427,637     $ 427,637  
Less: Allowance for doubtful debts
    (4,276 )     (4,276 )
Accounts receivable, net
  $ 423,361     $ 423,361  


NOTE 7 -  INVENTORIES

Inventories at December 31, 2013 and 2012 consist of the following:
 
   
31-Dec-13
   
31-Dec-12
 
   
US$
   
US$
 
Raw material
  $ 63,525     $ 63,525  
Work in process
    0       0  
Finished goods
    41,674       41,674  
    $ 105,199     $ 105,199  

NOTE 8 - PROPERTY AND EQUIPMENT
 

Property and equipment consisted of the following at December 31, 2013 and December 31, 2012:

   
31-Dec-13
   
31-Dec-12
 
Vehicles
  $ 20,853     $ 20,853  
Equipment
    3,412       3,412  
Office
    2,881       2,881  
Facility equipment
    16,081       7,040  
 Total property and equipment
    43,227       34,186  
                 
Accumulated depreciation
    (23,928 )     (19,022 )
Property and equipment, net
  $ 19,299     $ 15,164  
  
 
Depreciation expense for the years ended December 31, 2013 and 2012 amounted to $4,906 and $12,829, respectively.
 
 
10

 
LGM Co., LTD
Notes to the Consolidated Financial Statements
As of December 31, 2013 and 2012
(Audited)

NOTE 9 - NOTES PAYABLE

Notes payable consist of the following for the periods ended;
 
12/31/2013
   
12/31/2012
 
             
Original one year note extended to two years  with an interest rate stated at 3.73%. Interest per year and principal due at  maturity April 4, 2014.
           
           
  $ 66,300     $ 66,100  
                 
One year note  with an interest rate stated at 7.00%. Interest per year with a six month adjustable rate and principal due at  maturity on September 30, 2014.
               
               
    47,356       0  
                 
One year note  with an interest rate stated at 5.92%. Interest per year with a six month adjustable rate and principal due at  maturity on July 31, 2014.
               
               
    94,715       0  
`
               
One year note  with an interest rate stated at 5.92%. Interest per year with a six month adjustable rate and principal due at  maturity on December 26, 2015.
               
               
    51,658       0  
                 
One year note  with an interest rate stated at 5.40%. Interest per year with a six month adjustable rate and principal due at  maturity on March 4, 2015.
               
               
    145,316       144,877  
                 
Total Notes Payable
    405,346       210,977  
                 
Less Current Portion
    260,030       0  
                 
Long Term Notes Payable
  $ 145,316     $ 210,977  
                 
 
NOTE 10 - SEGMENT INFORMATION

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, 2013 and 2012, the Company operated in one reportable business segment.

NOTE 11 - SUBSEQUENT EVENTS
  
Management has evaluated events through September 15, 2014, the date on which the financial statements were available to be issued.
 
 
11

 
LGM Co., LTD
Notes to the Consolidated Financial Statements
As of December 31, 2013 and 2012
(Audited)
 
NOTE 11 - SUBSEQUENT EVENTS - Continued

Merger Agreement

On July 1, 2014, Leo Motors, Inc., a Nevada Corporation (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 (the “Transaction”) pursuant to the Share Swap Agreement entered into by and between LGM and the Company (the “Agreement”). Pursuant to the Agreement, LGM became a wholly-owned subsidiary of the Company.

 
12

 
 
CERTIFIED PUBLIC ACCOUNTING FIRM
 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Stockholders of
 
LGM Co., LTD
 
We have audited the accompanying consolidated balance sheets of LGM Co., LTD as of December 31, 2013 and 2012 and the related consolidated statements of operations, changes in stockholders’ equity, comprehensive income and cash flows for the years then ended.. These financial statements are the responsibility of the Company management. Our responsibility is to express an opinion on these financial statements based on our audit.
 
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated 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 audits 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 consolidated 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 financial statements referred to above present fairly, in all material respects, the financial position of LGM Co., LTD at December 31, 2013 and 2012, and the results of their changes in stockholders' equity, operations, comprehensive income and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
 
/s/ John Scrudato CPA
 
 
Califon, New Jersey
 
September 15, 2014
 
 
7 Valley View Drive Califon, New Jersey 07830
Registered Public Company Oversight Board

 
13

 
 
LGM CO., LTD

FINANCIAL STATEMENTS
 
For the Six Months ended June 30, 2014

 
 
1

 


             
 
BALANCE SHEETS
 
(AMOUNTS EXPRESSED IN US DOLLAR)
 
             
 
Balance at
 
 
30-Jun-14
 
31-Dec-13
 
         
Assets
 
Current Assets
           
Cash and cash equivalents
  $ 215,458     $ 260,014  
Accounts receivable
    242,352       423,361  
Inventories
    118,955       105,199  
Other current assets
    192,012       177,534  
Total Current Assets
    768,777       966,108  
Fixed assets, net
    16,846       19,299  
Other non-current assets
    22,637       21,720  
Total Assets
  $ 808,260     $ 1,007,127  
                 
Liabilities and Equity(Deficit)
 
Current Liabilities:
               
Accounts payable and accrued expenses
  $ 97,595     $ 49,306  
Notes Payable  current portion
    271,106       260,030  
Advance from customers
    9,872       0  
Taxes payable
    3,133       39,927  
Total Current Liabilities
    381,706       349,263  
Notes payable net of current portion
    151,456       145,316  
Total Liabilities
    533,162       494,579  
Commitments(Note 5)
    -       -  
LGM Co., LTD Equity(Deficit):
               
Common stock ($0.35 par value; 1,000,000,000 shares authorized); 813,747  and 813,747 shares issued and outstanding at June 30, 2014 and December 31, 2013
    284,870       284,870  
Accumulated other comprehensive income
    72,945       6,617  
Accumulated loss
    (82,717 )     182,590  
Total Equity(Deficit)
    275,098       512,548  
Total Liabilities and Equity(Deficit)
  $ 808,260     $ 1,007,127  
                 
"See accompanying notes to consolidated financial statements"
 
 
 
2

 

             
 
 
(AMOUNTS EXPRESSED IN US DOLLAR)
 
   
For the Three Months Ended
   
For the Six Months Ended
 
 
   
30-Jun-14
   
30-Jun-14
 
             
Revenues
  $ 0     $ 885  
                 
Cost of Revenues
    0       266  
                 
Gross Profit
    0       619  
                 
Operating Expenses
    117,957       254,355  
                 
Income(loss) from Continuing Operations
    (117,957 )     (253,736 )
                 
Other Income (Expenses)
               
Interest expense
    (10,872 )     (13,290 )
Non-Operating (expense) income
    2,541       1,719  
                 
Total Other Income (Expenses)
    (8,331 )     (11,571 )
                 
Income(loss) from Continuing Operations Before Income Taxes
    (126,288 )     (265,307 )
                 
Income Tax Expense
    0       0  
                 
Net Income(Loss)
  $ (126,288 )   $ (265,307 )
Other Comprehensive Income:
               
Net Income(loss)
  $ (126,288 )   $ (265,307 )
Unrealized foreign currency translation gain
    14,101       30,333  
                 
Comprehensive Income(loss)
  $ (112,187 )   $ (234,974 )
Net Loss per Common Share:
               
Basic & Diluted
  $ (0.16 )   $ (0.33 )
Weighted Average Common Shares Outstanding:
               
Basic & Diluted
  $ 813,747     $ 813,747  
                 
"See accompanying notes to consolidated financial statements"
 

 
3

 
 
       
 
STATEMENTS OF CASH FLOWS
 
(AMOUNTS EXPRESSED IN US DOLLAR)
 
   
For the Six Months Ended
 
 
   
2014
 
       
Cash flows from operating activities:
     
Net loss
  $ (265,307 )
Adjustments to reconcile net loss to net cash
used in operating activities:
       
Depreciation and amortization
    2,453  
Unrealized Foreign currency translation
    30,333  
Changes in assets and liabilities:
       
Accounts receivable
    181,009  
Inventories
    (13,756 )
Other current assets
    (15,395 )
Accounts payable, other payables and accrued expenses
    45,813  
Advances from customers
    9,872  
Other current liabilities
    (19,578 )
Net cash used in operating activities:
    (44,556 )
Cash flows from investing activities:
       
None
    0  
Net cash provided(used) in investing activities:
    0  
Cash flows from financing activities:
       
None
    0  
Net cash provided(used) by financing activities:
    0  
         
Net change in cash and cash equivalents
    (44,556 )
Cash and cash equivalents - beginning of year
    260,014  
Cash and cash equivalents - end of year
  $ 215,458  
Supplemental disclosure of cash flow activities:
       
Interest
  $ 0  
Income taxes
  $ 0  
Supplemental disclosures of non cash activities:
       
None
  $ 0  
         
"See accompanying notes to consolidated financial statements"
 

 
4

 

Notes to the Consolidated Financial Statements
As of June 30, 2014
 
NOTE 1 - COMPANY BACKGROUND  
  
LGM Co., LTD or "the Company" was incorporated in Korea in July of 2010 by researchers of electric vehicles as a startup company.  The Company is a pioneer in developing electric motor systems and high speed electric fishing boats in Korea.
 
NOTE 2 - SUMMARY 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 and its fiscal year-end is December 31.
  
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 applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the sales price is fixed or determinable, (iii) collectability is reasonably assured and (iv) goods have been shipped and/or services rendered.

Accounts Receivable, Bad Debts and Allowance for Doubtful Accounts

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.
 
 
5

 
LGM Co., LTD
Notes to the Consolidated Financial Statements
As of June 30, 2014

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

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.

 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, 2011, the Company had not experienced impairment losses on its long-lived assets.
 
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.

 
6

 
LGM Co., LTD
Notes to the Consolidated Financial Statements
As of June 30, 2014

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Earnings 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.
 
Foreign Currency Translation And Comprehensive Income

The reporting currency of the Company is the US$. The functional currency of the company is the Korean Won (“KRW”). The Company’s results of operations and cash flows are translated at average exchange rates during the year, assets and liabilities are translated at the unified exchange rate at the end of the year, and equity is translated at historical exchange rates. Translation adjustments resulting from the process of translating the functional currency financial statements into US$ 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 anti-dilutive) 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 anti-dilutive. 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 six months ended June 30, 2014:
 
 
7

 
LGM Co., LTD
Notes to the Consolidated Financial Statements
As of June 30, 2014

NOTE 3 - EARNINGS PER SHARE - Continued


       
   
For the Six Months Ended
 
   
6/30/2014
 
       
Net Income (Loss)
  $ (265,307 )
         
         
Weighted-average common stock Outstanding -  basic
    813,747  
Equivalents
       
  Stock options
    -  
  Warrants
    -  
  Convertible Notes
    -  
Weighted-average common shares
       
outstanding-  Diluted
    813,747  
  
NOTE 4 - 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, 2014 and December 31, 2013, the balance of payments received in advance was $ 182,058 and $ 174,678, respectively.
 
NOTE 5 - COMMITMENTS AND CONTINGENCIES

(a) Commitments
 
Lease Obligations
                   
                     
     
Long
   
Capital
       
 
Twelve
 
Term
   
Lease
       
 
months ending
 
Debt
   
Obligation
   
Total
 
                     
 
6/30/2014
  $ 271,106     $ 5,670     $ 276,776  
 
6/30/2015
    151,456       0       151,456  
 
6/30/2016
    0       0       0  
 
6/30/2017
    0       0       0  
 
6/30/2018 & Beyond
    0       0       0  
                           
 
Totals
  $ 422,562     $ 5,670     $ 428,232  

 
8

 
LGM Co., LTD
Notes to the Consolidated Financial Statements
As of June 30, 2014
NOTE 6. ACCOUNTS RECEIVABLE

At June 30, 2014 and December 31, 2013, accounts receivable consisted of the following:

 
30-Jun-14
 
31-Dec-13
 
 
US$
 
US$
 
Accounts receivable
  $ 246,809     $ 427,637  
Less: Allowance for doubtful debts
    (4,457 )     (4,276 )
Accounts receivable, net
  $ 242,352     $ 423,361  
 
NOTE 7. INVENTORIES

Inventories at June 30, 2014 and December 31, 2013 consist of the following:
 
   
30-Jun-14
   
31-Dec-13
 
   
US$
   
US$
 
Raw material
  $ 75,520     $ 63,525  
Work in process
    0       0  
Finished goods
    43,435       41,674  
    $ 118,955     $ 105,199  
 
NOTE 8 - PROPERTY AND EQUIPMENT
 
Property and equipment consisted of the following at June 30, 2014 and December 31, 2013:

   
30-Jun-14
   
31-Dec-13
 
Vehicles
  $ 20,853     $ 20,853  
Equipment
    3,412       3,412  
Office
    2,881       2,881  
Facility equipment
    16,081       16,081  
 Total property and equipment
    43,227       43,227  
                 
Accumulated depreciation
    (26,381 )     (23,928 )
Property and equipment, net
  $ 16,846     $ 19,299  
  
Depreciation expense for the years ended June 30, 2014 and December 31, 2013 amounted to $2,453 and $4,906, respectively.
 
 
9

 
LGM Co., LTD
Notes to the Consolidated Financial Statements
As of June 30, 2014
 
NOTE 9 - NOTES PAYABLE

Notes payable consist of the following for the periods ended;
 
6/30/2014
   
12/31/2013
 
             
Original one year note extended to two years with an interest rate stated at 3.73%. Interest per year and principal due at  maturity April 4, 2014.
           
           
  $ 69,103     $ 66,300  
                 
One year note with an interest rate stated at 7.00%. Interest per year with a six month adjustable rate and principal due at  maturity on September 30, 2014.
               
               
    49,446       47,356  
                 
One year note with an interest rate stated at 5.92%. Interest per year with a six month adjustable rate and principal due at  maturity on July 31, 2014.
               
               
    98,717       94,715  
`
               
One year note with an interest rate stated at 5.92%. Interest per year with a six month adjustable rate and principal due at  maturity on December 26, 2015.
               
               
    53,840       51,658  
                 
One year note with an interest rate stated at 5.40%. Interest per year with a six month adjustable rate and principal due at  maturity on March 4, 2015.
               
               
    151,456       145,316  
                 
Total Notes Payable
    422,562       405,346  
                 
Less Current Portion
    271,106       260,030  
                 
Long Term Notes Payable
  $ 151,456     $ 145,316  
 
NOTE 10 - SEGMENT INFORMATION

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 six months ended June 30, 2014, the Company operated in one reportable business segment.

NOTE 11 - SUBSEQUENT EVENTS
  
Management has evaluated events through September 15, 2014, the date on which the financial statements were available to be issued.
 
 
10

 
LGM Co., LTD
Notes to the Consolidated Financial Statements
As of June 30, 2014
NOTE 11 - SUBSEQUENT EVENTS - Continued

Merger Agreement

On July 1, 2014, Leo Motors, Inc., a Nevada Corporation (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 (the “Transaction”) pursuant to the Share Swap Agreement entered into by and between LGM and the Company (the “Agreement”). Pursuant to the Agreement, LGM became a wholly-owned subsidiary of the Company.

 
11