LEAT 10-K & 10-Q changes, risk factors and insider trading

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

Prolonged turmoil in the global economy,political and economic turmoil, especially in the U.S., the Middle-East, South America and Europe, including the conflict in Ukraine and the Middle East, could have a negative impact on our ability to conduct business outside the U.S. and on our financial condition. Any intensified or widened conflict in Iran and the surrounding region could lead to volatility in energy prices and adversely impact the cost of raw materials and shipping worldwide. Our exposure to such risks may further increase if any of these economic conditions impact levels of consumer spending.

In Europe we have significantly more sales than we do expenses. Since 69%72% of our sales is derived outside the U.S. where the U.S. dollar is not the primary currency, significant fluctuations in exchange ratesrates, such as the strengthening of the dollar versus our customers' local currency can adversely affect our ability to remain competitive in those areas.

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

Although our Cash andcash, cash equivalents and restricted cash at December 31, 20242025 were $12,368,100$13.23 million, and we currently meet our working capital requirements with cash flow provided by our operating activities, we expect to continue doing so for the foreseeable future. Since November 2018, the Company has maintained a revolving line of credit agreement with a bank under which it now has access to a line of credit facility of $1,500,000 which remains available in full for advances through March 1, 2026. However, in the future we may require additional working capital to support our long-term growth strategies, including identifying suitable targets for horizontal or vertical mergers or acquisitionsacquisitions, so as to enhance the overall productivity and benefit from economies of scale. If the uncertainty arising out of domestic and global economic conditions and the ongoing tightening of domestic credit markets persist, we may not be able to generate adequate cash flows or obtain adequate levels of additional financing, whether through equity financing, debt financing or other sources. Even if we are able to get additional financing, it might not be on terms that are favorable to the Company. Furthermore, additional financings could result in significant dilution to our earnings per share or the issuance of securities with rights superior to our current outstanding securities, including registration rights. If we are unable to raise additional financing, we may be unable to implement our long-term growth strategies, develop or enhance our products and services, take advantage of future opportunities or respond to competitive pressures on a timely basis, if at all. In addition, a lack of additional financing could force us to substantially curtail operations.

We are monitoring the outbreak of war in Iran and the potential for a prolonged, intensified, or widened conflict in the surrounding region, including volatility in energy prices. We also continue to monitor any adverse impact that the outbreak of war in Ukraine and the subsequent institution of sanctions against Russia by the U.S. and several European leaders may have on the global economy in general and on our business operations and that of our suppliers and customers, in particular. For example, a prolonged conflictconflicts may have unintended consequences such as increased inflation, fuel and transportation costs and an increase in bad debt expense from doubtful accounts receivable balances owed by affected customers. We will continue to monitor thisthese fluid situationsituations and develop contingencies as necessary to address any disruptions to our business operations as they develop.

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

The Company's research and development efforts are conducted at its research facilities, located at its executive headquarters in Cape Town, South Africa. The Company employs 4 full-time employees who are dedicated exclusively to research, development, and testing. The Company also utilizes consultants, academic institutions and engineering companies as independent contractors or consultants, from time to time, to assist it with its research and development efforts. Leatt products have been tested and reviewed internally and by external bodies. All Leatt products are compliant with applicable European Union directives, or CE certified, where appropriate. Depending on the market we have other certifications outside of CE. Specifically, all our motorcycle helmets comply with Economic Commission for Europe (ECE) UN Regulation No. 22 r06, and our bicycle helmet complies with the European Committee for Standardization (CEN) EN-1078 standard. For the US market, our motorcycle helmets comply with the US Department of Transportation (DOT) FMVSS 218 helmet safety standard and our bicycle helmet complies with the US Consumer Product Safety Commission (CPSC) 1203 standard for helmet safety. Our downhill specific bicycle helmets also comply with the American Society for Testing and Materials (ASTM) F1952 standard for downhill racing safety. For the Australian market, our bicycle helmet complies with Australian/New Zealand Standard (AS/NZS) 2063, for the UK market, substantially all of our motorcycle helmets comply with the Auto Cycle Union (ACU) gold standard, for the Japanese market, our Moto 3.5 helmet with the Japanese Standard Association (JSA) JIS T 8133 standard for protective helmets, and for the Brazilian market our Moto 7.5, Moto 3.5, and Moto 2.5 helmets comply with The Brazilian Association of Technical Standards (ABNT) NBR 7471 safety standard. Moto 9.5, Moto 8.5, Moto 7.5, Moto 3.5 and Moto 2.5 and ADV 9.5, ADV 8.5 and ADV 7.5 have CCC approval for the market in China. Our Enduro 4.0 helmet, All-Mountain 4.0 helmet and All-MountainGravity 4.05.0 helmet have acquired NTA8776 certification, a new e-bike helmet certification required in the Dutch Technical Agreement (NTA) 8776. The Moto 9.5 have been homologated to FRHPhe-02-2023 for us in FIM sanctioned off-road racing events.

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

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

• Trade Restrictions - We engage in international manufacturing and sales which exposes us to trade restrictions and disruptions that could harm our business and competitive position. Most of our products are manufactured in China, and the U.S. administration has announced tariffs on certain products imported into the United States with China as the country of origin. While these tariffs have not had a significant impact on the shipment of our products to international markets as at December 31, 2024,2025, we believe that the future imposition of, or significant increases in, the level of tariffs, custom duties, export quotas and other barriers and restrictions by the U.S. on China or other countries could disrupt our supply chain, increase the cost of our raw materials and therefore our pricing, and impose the burdens of compliance with foreign trade laws, any of which could potentially affect our bottom line and sales. While we are in continuous discussions with our manufacturers to ensure there are contingencies in place, we cannot assure you that we will not be adversely affected by changes in the trade laws of foreign jurisdictions where we sell and seek to sell our products.

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

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

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

• Fluctuations in Foreign Currencies - We are exposed to foreign exchange risk as our revenues and consolidated results of operations may be affected by fluctuations in foreign currency as we translate these currencies into U.S. dollars when we consolidate our financial results. While our reporting currency is the U.S. Dollar, a portion of our consolidated revenues are denominated in South African Rand, or ZAR, certain of our assets are denominated in ZAR, and our research and marketing operations in South Africa utilize South African labor sources. A decrease in the value of the U.S. dollar in relation to the ZAR could increase our cost of doing business in South Africa. If the ZAR depreciates against the U.S. Dollar, the value of our ZAR revenues, earnings and assets as expressed in our U.S. Dollar financial statements will decline. We have not entered into any hedging transactions in an effort to reduce our exposure to foreign exchange risk. Furthermore, since 69%77% of our sales are derived outside the U.S., where the U.S. dollar is not the primary currency, significant fluctuations in exchange rates such as the strengthening of the dollar versus our customers' local currency can adversely affect our ability to remain competitive in those areas.

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

• Impact of Global Conflict - We are exposed to global conflict, such as the ones in Ukraine and the Middle East, that may disrupt our business and reduce consumer demand for our products. A disruption of global shipping routes, the imposition of government sanctions, or other activities resulting from such conflicts could directly affect consumer demand for our products, cause delays in completing sales, shipping of our products, continuing production or performing other critical functions of our business, particularly if a conflict occurs at our primary manufacturing locations or our distributor locations worldwide. Furthermore, prolonged conflict may have unintended global consequences such as increased inflation and volatility in fuel and transportation costs. While we have conducted due diligence on our customers in Russia to ensure that they do not fall into any sanctioned categories, we have seen a delay in the receipt of receivables in our bank account from the distributors of our products in Russia caused by enhanced screening of Russian funds in compliance with global sanctions against Russia for the war in Ukraine. The prolongingprolonging, intensification or expansion of thatthese conflictconflicts into surrounding regions could have an adverse impact on our consumers and on consumer purchasing behavior, and result in delays of new orders and completing sales, order cancellations, or payment and shipping delays. We will continue to monitor thisthese fluid situationsituations and any adverse impact that itthey may have on the global economy in general and on our business operations and especially that of our customers, and we will develop contingencies as necessary to address any disruptions to our business operations as they arise.

Revenues - We earn revenues from the sale of our protective gear comprising of neck braces, body armor, helmets and other products, parts and accessories both in the United States and abroad. Revenues for the year ended December 31, 20242025 were $44.03$61.91 million, a 7%41% decrease,increase, compared to revenues of $47.24$44.03 million, for the year ended December 31, 2023.2024. This decreaseincrease in worldwide revenues is attributable to a $2.73$6.52 million decreaseincrease in body armor sales, a $4.92 million increase in helmet sales, a $0.31$5.99 million decreaseincrease in neckother braceproducts, sales,parts aand $0.12 million decrease in body armoraccessories sales and a $0.06$0.45 million decreaseincrease in otherneck products, part and accessorybrace sales. Revenues associated with international customers for the years ended December 31, 20242025 and 2023,2024, respectivelyrespectively, were $30.41$44.64 million and $33.27$30.41 million, or 69%72% and 70%69% of global revenues. Although, consumerConsumer direct sales increased by 15%44% and dealer direct sales increased by 0.3%22% for the year ended December 31, 2024,2025, with sales to our global distributors decreasedincreasing by 12%48%, when compared to the prior year ended December 31, 2023period, as consumer demand for our distributorproducts orderscontinued reflectedto conservativebuild patternsand insales momentum at the contextdealer oflevel industry-widedomestically inventory dynamics.improved.

Sales of our flagship neck brace accounted for $2.44$2.89 million and $2.75$2.44 million, or 6%5% and 6% of our revenues for the years ended December 31, 20242025 and 2023,2024, respectively. The 11%18% decreaseincrease in neck brace revenues is primarily attributable to a 11%35% decreaseincrease in the volume of neck braces sold during the 20242025 period.

Our body armor products are comprised of chest protectors, full upper body protectors, upper body protection vests, back protectors, knee braces, knee and elbow guards, off-road motorcycle boots and mountain biking shoes. Body armor revenues accounted for $22.46$28.98 million and $22.58$22.46 million, or 51%47% and 48%51% of our revenues for the years ended December 31, 20242025 and 2023,2024, respectively. AlthoughThe revenues29% generated on the sale of upper body and limb protection increased by 14% during the 2024 period, the 1% decreaseincrease in body armor revenues was primarily the result of a 36%22% decreaseincrease in revenuesrevenue generated from the sale of upper body and limb protection and a 40% increase in the volume of footwear, comprising of motorcycle boots and mountain biking shoes, sold during the 20242025 period. Footwear has been a particularly constrained category due to post-Covid stocking dynamics on an industry-wide basis.

Our helmets accounted for $8.39$13.31 million and $11.12$8.39 million, or 19%21% and 23%19% of our revenues for the years ended December 31, 20242025 and 2023,2024, respectively. AlthoughThe strong59% shipments of our ADV helmet, designed for adventure motorcycle riding continued, the 25% decreaseincrease in helmet revenues is primarily due to a 37%33% decreaseincrease in the volume of MOTOMOTO, MTB, and MTBADV helmets sold to our internationalglobal customers during the 20242025 period as our distributors continued to manage elevated inventory levels as a result of post-Covid stocking dynamics that continue to improve as participation remains strong and ordering patterns improve.period.

Our other products, parts and accessories are comprised of goggles, hydrations bags and apparel items including jerseys, pants, shorts and jackets, sunglasses, bicycle components and aftermarket product support items. Other products, parts and accessories sales accounted for $10.74$16.73 million and $10.80$10.74 million, or 24%27% and 23%24% of our revenues for the years ended December 31, 20242025 and 2023,2024, respectively. The 1%56% decreaseincrease in revenues of other products, parts and accessories is primarily due to a 22%54% decreaseincrease in the sales volume of our MOTOMOTO, MTB and MTBADV technical apparel lines, designed for motorcycleoffroad andmotorcycle, mountain biking use that was partially offset by strong sales of ADV technical apparel, designed forand adventure motorcycle ridingriding, respectively during the 20242025 period.

Salaries and Wages - Salaries and wages for the years ended December 31, 20242025 and 20232024 were $7,140,550$7.92 million and $5,443,685$7.14 million, respectively. This 31%11% increase in salaries and wages during the 20242025 period was primarily due to the employment of sales, marketing and brand management professionals in the United States and abroadglobally as the Company continues to invest in building and expandingbuild a strong and diversified multi-channel selling operationorganization globally.and global consumer facing brand. Additionally, share compensation costs relating to the recognition of share grants that were issued during the fourth quarter of 2023 were recognized on a straight-line basis for the year ended December 31, 2025.

Commissions and Consulting Expense - Commissions and consulting expense for the years ended December 31, 20242025 and 20232024 were $535,584$764,602 and $434,657,$535,584, respectively. This 23%43% increase in commissions and consulting expenses during the 20242025 period is dueprimarily tothe result of an increase in consultingcommissions expenditurespaid incurredto assales representatives and management in the CompanyUnited continuesStates toin streamlineline with the increase in domestic sales taxationwhen andcompared operatingto processes.the 2024 period.

Professional Fees - Professional fees consist of costs incurred for audit, tax, regulatory filings and quarterly reporting requirements, as well as patent maintenance, protection and litigation expenses incurred as the Company continues to expand its portfolio of exceptional protective gear. Professional fees for the years ended December 31, 20242025 and 20232024 were $627,659$853,065 and $748,608,$627,659, respectively. The 16%36% decreaseincrease in professional fees is primarily due to aan decreaseincrease in expenditures on patentcorporate litigationlegal, listing and patentaudit maintenancefees expendituresincurred during the 20242025 period.

Advertising and Marketing - The Company primarily places paid advertising on various motorsport and bicycle online platforms and sponsors a number of events, teams and individuals to increase brand and product visibility globally. Advertising and marketing expenses for the years ended December 31, 20242025 and 20232024 were $4,454,906$4.56 million and $4,127,798,$4.45 million, respectively. ThisThe 8%2% increase in advertising and marketing costs during the 20242025 period is primarily due to continuedincreased investmenttrade show, athlete sponsorship and international sales conference expenditures, that were partially offset by a decrease in the production and implementationpoint of marketingsale campaignsmerchandising designed to promote global consumer brand recognition and the Company's expanding product categories to a wider global rider audience, that now includes adventure riders.costs.

Office Lease and Expenses - Office lease and expenses for the years ended December 31, 20242025 and 20232024 were $702,785$923,839 and $596,862,$702,785, respectively. Although,Although lease expenses relating to our offices and warehouseswarehouse in the United States and South Africa decreased when compared to the 20232024 period, the 18%,31%, increase in office lease and expenses is primarily due to the inclusion of consolidation warehousing costs incurred during the 20242025 period in order to facilitate consolidated global shipping.

Research and Development Costs - These costs include the salaries of staff members that are directly involved in the research and development of protective gear, as well as the direct costs associated with developing these products. Research and development costs for the yearsyear ended December 31, 2025, increased to $2,704,071, from $2,523,881, during the same 2024 andperiod. 2023The were7% $2,523,881 and $2,526,550, respectively. This marginal decreaseincrease in research and development costs during the 20242025 period is primarily theas a result of a decrease in external product development costs, that were partially offset by an increase in salariesexpenditure ofon staffproduct directlycertification involvedand inresearch the development processcosts, as the Company continues to builddevelop ana in-house,pipeline globalon teamcutting ofedge developersproducts and engineers.refine its product categories.

Bad Debt Recovery - Bad debt recovery for the years ended December 31, 20242025 and 20232024 were $76,278$65,923 and $10,288,$76,278, respectively. This 641%14% increasedecrease in bad debt recovery is primarily the result of a decrease in bad debts that were considered irrecoverablerecovered during the 20242025 period, when compared to the prior year comparative period.

General and Administrative Expenses - General and administrative costs consist of insurance, travel, merchant fees, communication costs, office and computer equipment with insurance and travel comprising a substantial part of these expenses. General and administrative expenses for the years ended December 31, 20242025 and 2023,2024, were $3,879,553$4.37 million and $3,438,746,$3.88 million, respectively. The 13% increase in general and administrative expenses is primarily due to an increase in fees paid to enhance the Company's global e-commerce selling capabilities, that were partially offset by a decrease in merchant fees associatedpaid withwhen ancompared increase in consumer direct sales, asto the Companycomparative continues2024 to intensify its online selling activities. Additionally, travel costs associated with product development and selling activities in the United States increased as the Company continued to widen its product categories and footprint in the United States.period.

Depreciation Expense - Depreciation expense for the years ended December 31, 20242025 and 20232024 was $1,229,847$1.33 million and $1,174,664,$1.23 million, respectively. The 5%8% increase in depreciation expense is primarily due to software enhancements that were implemented to improve customer and consumer engagement and buying activity across the Company's digital and web-based selling platforms.

OtherImpairment Income (Expenses)Expense - OtherImpairment income (expenses)expense for the years ended December 31, 20242025 and 20232024 was $275,413$234,224 and ($39,138),$0, respectively. The 804%100% increase in otherimpairment incomeexpense is primarily due to anthe impairment of long-lived intangible web assets as a result of web platform enhancements designed to increase indevelopment, interestengagement receivedand duringultimately thee-commerce 2024selling period.abilities.

NetOther Income (Loss) - The net loss afterOther income taxes for the yearyears ended December 31, 2025 and 2024 was ($2,204,664),$397,000 aand decrease$275,413, ofrespectively. $3,007,823,The when44% compared to a net income after income taxes of $803,159. This 374% decreaseincrease in netother income is primarily due to the decrease in sales andan increase in operatinginterest expendituresreceived discussedduring above.the 2025 period.

At December 31, 2024,2025, we had cash andcash, cash equivalents and restricted cash of $12.37$13.23 million, as compared to cash and cash equivalents of $11.35$12.37 million at December 31, 2023.2024. The following table sets forth a summary of our cash flows for the periods indicated:

Cash increased by $1,020,680$864,947 or 9%,7%, for the year ended December 31, 2024.2025. The primary sources of cash during 20242025 were decreasednet inventoryincome of $2,096,711,$3,263,922 increasedand an increase in accounts payable and accrued expenses of $1,704,571, decreased accounts receivable of $746,723 and a decrease in long term accounts receivable amounting to $253,556.$1,654,576. The primary uses of cash for the 20242025 period were aan netincrease lossin inventory of $2,204,664,$2,869,908, increased accounts receivable of $1,197,572 an increase in prepaid expenses and other current assets of $705,239, the repayment of a short-term loan amounting to $401,967, increased payments in advance of $206,166$631,082 and capital expenditures of $1,229,937.$1,081,946.

Dr. Christopher Leatt is compensated in his capacity as our Research and Development consultant, pursuant to our Consulting Agreement, dated November 8, 2021, with Innovation Services Limited, or Innovation, a Jersey limited company in which, Dr. Leatt is an indirect beneficiary. Pursuant to the terms of the agreement, Innovation has agreed to serve as the Company's exclusive research, development and marketing consultant, in exchange for a monthly fee; provided, however, that Dr. Leatt must remain an Innovation director and beneficiary of a majority of its ownership interests during the term of the agreement, and Dr. Leatt must remain the Company's primary point of contact responsible for the oversight, review and delivery of the services to be performed by Innovation under the agreement. FromDuring Januarythe 1,year 2024ended throughDecember June31, 30, 2024,2025, the monthly fee payable by the Company to Innovation was $45,481, and commencing July 1, 2024, this monthly fee increased to $47,072.$$48,437. Innovation may increase its monthly fees, on an annual basis on written notice to the Company, by no greater than the lesser of: (a) five percent (5%) of the prior year's annualized fee; or (b) a percentage equal to then-applicable annual percentage increase in the Consumer Price Index (CPI) published by the United States Department of Labor's bureau of labor statistics, plus one-half percent (0.5%). The parties further agreed that all intellectual property generated in connection with the services provided under the consulting agreement will be the sole property of the Company. The term of the Consulting Agreement will continue unless terminated by either party in accordance with its terms. Either party may terminate the Consulting Agreement upon 6 months' prior written notice, except that the Company may immediately terminate it without notice if the services to be performed by Innovation cease to be performed by Dr. Leatt, if beneficial ownership in Innovation by Dr. Leatt and his immediate family members decreases, or for any other material breach of the agreement. The parties have agreed to settle any dispute under the Consulting Agreement by submission to JAMS for final and binding arbitration pursuant to its Comprehensive Arbitration Rules and Procedures and in accordance with the Expedited Procedures in those Rules. The Company also simultaneously entered into a side letter agreement, dated November 8, 2021, with Dr. Leatt, pursuant to which Dr. Leatt agreed, among other things: (1) not to perform services similar to the services provided under the agreement for any current or future, direct or indirect competitor of the Company or any similar company; (2) not to solicit any current or future employees of the Company for employment with Innovation or any other entity with which he may become affiliated, or to contact or solicit any current or future stockholder or investor of the Company in connection with any matter that is not directly related to the ongoing or future business operations of the Company; and (3) that he will apprise the Company of any business opportunity that he becomes aware of that could benefit the Company so that the Company, can in its sole discretion, make a determination regarding whether to pursue such opportunity in the best interest of the Company and its stockholders. Dr. Leatt further agreed to continue dedicating a majority of his time on matters related to performance of his duties as a director of the Company and to the fulfillment of his obligations to the Company's research and development efforts under the consulting agreement, and the Company will have the right to adjust the amount of the fees payable under the consulting agreement to the extent of any substantial diminution in his fulfillment of such duties and obligations. The foregoing agreements replaced prior agreements in force from June 2018 to November 2021, among the Company, Dr. Leatt and Innovate Services Limited, a Seychelles company, beneficially owned by Dr. Leatt, that wound up operations. The foregoing description of the Consulting Agreement and Side Letter Agreement is qualified in its entirety by reference to the Consulting Agreement and the Side Letter Agreement, copies of which are filed as Exhibits 10.1 and 10.2, respectively, hereto and are incorporated by reference in this report. During the years ended December 31, 2024, and 2023, the Company recognized an aggregate of $555,317 and $538,001, respectively, in consulting fees to Innovation.

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

Since the Company (through its wholly-owned subsidiary) serves as the distributor of Leatt products in the United States, the Company records its revenue and related cost of revenue for its product sales in the United States upon shipment of the merchandise to the dealer or to the ultimate consumer when there is no dealer in the geographic area or the consumer chooses to purchase directly from the Company's e-commerce website and the sales order was received directly from, and paid by, the ultimate consumer. Since the Company (through its South African branch) serves as the distributor of Leatt products in South Africa, the Company records its revenue and related cost of revenue for its product sales in South Africa upon shipment of the merchandise from the branch to the dealer and upon shipment of products direct to end consumersconsumers, which hashave been sold through digital channels. The Company's standard terms and conditions of sale for non-consumer direct or web-based sales do not allow for product returns other than under warranty. Web-based direct sales permit products to be returned or exchanged within 30 days of the purchase date.

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

The Company reviews the reserves for customer returns at each reporting period and adjusts them to reflect data available at that time. To estimate reserves for returns, the Company estimates the expected returns and claims based on historical rates as well as events and circumstances that indicate changes to historical rates of product returns and claims. Historically, returns due to product quality issues have not been material and there have been no distributor terminations that resulted in product returns. The provision for estimated returns at December 31, 2024 and 2023 were $0 and $0, respectively.

Shipping and handling activities associated with outbound freight, after control over a product has transferred to a customer, are accounted for as a fulfilment cost and are included in revenues and cost of revenues in the accompanying consolidated statements of operations and comprehensive income (loss). Revenue recognized from contracts with customers is recorded net of sales taxes, value added taxes, or similar taxes that are collected on behalf of local taxing authorities.

Allowance for Credit Losses - Accounts receivable consist of amounts due to the Company from normal business activities. Credit is granted to distributors on an unsecured basis based on credit risk analysis procedures. We continuously monitor both credit reports andreports, collections, communication and payments from customers and maintainsmaintain an allowance for credit losses based upon the expected credit losses determined utilizing historical experience, the aging of funds outstanding,experience and any specific customer collection issues that have been identified. In determining the amount of the allowance, we are required to make certain estimates and assumptions. Accounts receivable balances that are still outstanding after we have used reasonable collection efforts are written off as uncollectible. While such credit losses have historically been minimal, within our expectations and the provisions established, macro-economic conditions and customer financial positions are fluid, and we cannot guarantee that we will continue to experience the same credit loss rates that we have had in the past. A significant change in the liquidity or financial position of any of our significant customers could have a material adverse effect on the collectability of our accounts receivable and our future operating results. The allowance for short-term credit losses at December 31, 2024 was $500,1642025 and at December 31, 20232024, was $662,612.$205,827 and $500,164, respectively. Additionally, an allowance for long-term credit losses will be included for accounts receivables that are anticipated to be collected over a period that is greater than 12 months. The allowance for long-term credit losses at December 31, 2024 was $3,366,2025 and at December 31, 20232024 was $26,929.$0 and $3,366, respectively.

Inventory Valuation - Inventory is stated at the lower of cost or net realizable value. Cost is determined using the first-in first-out (FIFO) method. Inventory consists primarily of finished goods. Shipping and handling costs are included in the cost of inventory. In assessing the inventory value, we make estimates and judgments regarding reserves required for product obsolescence, aging of inventory and other issues potentially affecting the saleable condition of products. In performing such evaluations, we utilize historical experience as well as current market information. The reserve for obsolescence at December 31, 2024 was $533,9532025 and at December 31, 20232024 was $227,528.$510,576 and $533,953, respectively.

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

This report contains forward-looking statements that are contained principally in the sections entitled "Our Business," "Risk Factors," and "Management's Discussion and Analysis of Financial Condition and Results of Operations." These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, the factors described in the section captioned "Risk Factors" in thisour report.latest annual report on Form 10-K filed with the SEC. In some cases, you can identify forward-looking statements by terms such as "anticipates," "believes," "could," "estimates," "expects," "intends," "may," "plans," "potential," "predicts," "projects," "should," "would" and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. These forward-looking statements include, among other things, statements relating to:

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

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

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

• our expectations with respect to increased revenue growth and our ability to achieve profitability resulting from increases in our production volumes; and our future business development, results of operations and financial condition.

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

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

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

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

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

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

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

• "Two Eleven" refers to Two ElevenTwo-Eleven Distribution, LLC,L.L.C., a Nevada Limited Liability Company;

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

• "South Africa" are to the Republic of South Africa;

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

• "Xceed Holdings" refers to Xceed Holdings CC., a close corporation incorporated under the laws of South Africa, and wholly- owned by The Leatt Family Trust, of which Dr. Christopher J. Leatt, the Company's chairman, is a Trustee and Beneficiary; and "ZAR" refers to the South African Rand, the legal currency of South Africa. For all ZAR amounts reported, the dollar amount has been calculated on the basis that $1 = ZAR 16.4325 for its June 30, 2026 balance sheet.

• "ZARPLN" refers to the SouthPolish African Rand,Zloty, the legal currency of South Africa.Poland. For all ZARPLN amounts reported, the dollar amount has been calculated on the basis that $1 = ZAR17.1511PLN 3.7582 for its MarchJune 31,30, 2026 balance sheet.

The Company's research and development efforts are conducted at its research facilities, located at its executive headquarters in Cape Town, South Africa. The Company employs 4 full-time employees who are dedicated exclusively to research, development, and testing. The Company also utilizes consultants, academic institutions and engineering companies as independent contractors or consultants, from time to time, to assist it with its research and development efforts. Leatt products have been tested and reviewed internally and by external bodies. All Leatt products are compliant with applicable European Union directives, or CE certified, where appropriate. Depending on the market, we have other certifications outside of CE. Specifically, all our motorcycle helmets comply with the Economic Commission for Europe (ECE) UN Regulation No. 22 r06, and our bicycle helmethelmets compliescomply with the European Committee for Standardization (CEN) EN-1078 standard. For the US market, our motorcycle helmets comply with the US Department of Transportation (DOT) FMVSS 218 helmet safety standard and our bicycle helmets comply with the US Consumer Product Safety Commission (CPSC) 1203 standard for helmet safety. Our downhill-specificdownhill specific bicycle helmets also comply with the American Society for Testing and Materials (ASTM) F1952 standard for downhill racing safety. For the UK market, substantially all of our motorcycle helmets comply with the Auto Cycle Union (ACU) gold standard, for the Japanese market, our Moto 3.5 helmet with the Japanese Standard Association (JSA) JIS T 8133 standard for protective helmets, and for the Brazilian market our Moto 9.5, Moto 7.5, Moto 3.5, and Moto 2.5 helmets comply with The Brazilian Association of Technical Standards (ABNT) NBR 7471 safety standard. Moto 9.5, Moto 8.5, Moto 7.5, Moto 3.5 and Moto 2.5 ADV 9.5, ADV 8.5 and ADV 7.5 have CCC approval for the market in China. Our Enduro 4.0 helmet, All-Mountain 4.0 helmet and Gravity 5.0 helmet have acquired NTA8776 certification, a new e-bike helmet certification required in the Dutch Technical Agreement (NTA) 8776. The Moto 9.5 has been homologated to FRHPhe-02-2023 for us in FIM sanctioned off-road racing events. We are also working on getting some of our high-end MTB helmets tested at Virginia Polytechnic Institute and State University (V-Tech) in the United States, according to their rating system. In addition to our helmet portfolio, our goggles and sunglasses undergo certification and testing in accordance with applicable international eyewear standards. Within our goggle range, the Velocity 6.5, 5.5 and 4.5 goggles are certified to EN1938 and are impact-tested on the lenses according to MIL-DTL-43511D. The Velocity 6.5 SNX, 5.5 SNX and 4.5 SNX goggles are certified to EN13178 and are also impact-tested to MIL-DTL-43511D. Our MTB 5.0, 4.0 and 4.0 X-Flow goggles are tested to EN1938 and undergo MIL-DTL-43511D lens impact testing. The Vizion 3.5, 2.5 and 2.5s goggles are certified to EN1938, while our MTB 2.0 goggles are tested to EN1938. Within our sunglass range, the SpeedViz Pro and SpeedViz Lite models are tested to EN ISO 12312, ANSI Z87.1 and AS/NZS 1067.1. Our RideViz Pro, RideViz Lite, RideViz Pro S, RideViz Lite S, TheViz Andes, TheViz Sierra, TheViz Pyrenees and MadViz One sunglasses are tested to EN ISO 12312, ANSI Z80.3 and AS/NZS 1067.1.

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

• Trade Restrictions - We engage in international manufacturing and sales which exposes us to trade restrictions and disruptions that could harm our business and competitive position. Most of our products are manufactured in China, and the U.S. administration has announced tariffs on certain products imported into the United States with China as the country of origin. While these tariffs have not had a significant impact on the shipment of our products to international markets as at MarchJune 31,30, 2026, we believe that the future imposition of, or significant increases in, the level of tariffs, custom duties, export quotas and other barriers and restrictions by the U.S. on China or other countries could disrupt our supply chain, increase the cost of our raw materials and therefore our pricing, and impose the burdens of compliance with foreign trade laws, any of which could potentially affect our bottom line and sales. While we are in continuous discussions with our manufacturers to ensure there are contingencies in place, we cannot assure you that we will not be adversely affected by changes in the trade laws of foreign jurisdictions where we sell and seek to sell our products.

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

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

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

• Fluctuations in Foreign Currencies - We are exposed to foreign exchange risk as our revenues and consolidated results of operations may be affected by fluctuations in foreign currency as we translate these currencies into U.S. dollars when we consolidate our financial results. While our reporting currency is the U.S. Dollar, a portion of our consolidated revenues are denominated in South African Rand, or ZAR, certain of our assets are denominated in ZAR, and our research and marketing operations in South Africa utilize South African labor sources. A decrease in the value of the U.S. dollar in relation to the ZAR could increase our cost of doing business in South Africa. If the ZAR depreciates against the U.S. Dollar, the value of our ZAR revenues, earnings and assets as expressed in our U.S. Dollar financial statements will decline. We have not entered into any hedging transactions in an effort to reduce our exposure to foreign exchange risk. Furthermore, since 76%70% of our sales are derived outside the U.S., where the U.S. dollar is not the primary currency, significant fluctuations in exchange rates such as the strengthening of the dollar versus our customers' local currency can adversely affect our ability to remain competitive in those areas.

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

• Impact of Global Conflict - We are exposed to global conflict, such as the ones in Ukraine and the Middle East, that may disrupt our business and reduce consumer demand for our products. A disruption of global shipping routes, the imposition of government sanctions, or other activities resulting from such conflicts could directly affect consumer demand for our products, cause delays in completing sales, shipping of our products, continuing production or performing other critical functions of our business, particularly if a conflict occurs at our primary manufacturing locations or our distributor locations worldwide. Furthermore, prolonged conflict may have unintended global consequences such as increased inflation and volatility in fuel and transportation costs. While we have conducted due diligence on our customers in Russia to ensure that they do not fall into any sanctioned categories, we have seen a delay in the receipt of receivables in our bank account from the distributors of our products in Russia caused by enhanced screening of Russian funds in compliance with global sanctions against Russia for the war in Ukraine. The prolonging, intensification or expansion of these conflicts into surrounding regions could have an adverse impact on our consumers and on consumer purchasing behavior, and result in delays of new orders and completing sales, order cancellations, or payment and shipping delays. We will continue to monitor these fluid situations and any adverse impact that they may have on the global economy in general and on our business operations and especially that of our customers, and we will develop contingencies as necessary to address any disruptions to our business operations as they arisearise.

The following summary of our results of operations should be read in conjunction with our financial statements and the notes thereto for the three-monththree and six-month periods ended MarchJune 31,30, 2026 and 2025 included herein.

Comparison of ThreeThree-Month MonthsPeriods Ended MarchJune 31,30, 2026 and Three Months Ended March 31, 2025

The following table summarizes the results of our operations during the three-month periods ended MarchJune 31,30, 2026 and 2025 and provides information regarding the dollar and percentage increase or (decrease) in such periods:

Revenues - We earn revenues from the sale of our protective gear comprising of neck braces, body armor, helmets and other products, parts and accessories both in the United States and abroad. Revenues for the three monthsquarter ended MarchJune 31,30, 2026 were $19.51$16.39 million, 27%a 1% increase, compared to revenues of $15.37$16.18 million for the quarter ended MarchJune 31,30, 2025. This increase in worldwide revenues is primarily attributable to a $1.99 million increase in helmet sales, a $1.72 million$462,309 increase in body armor sales, and a $0.38 million$443,803 increase in helmet sales ofthat were partially offset by a $530,016 decrease in other products,product, partspart and accessoriesaccessory sales and a $0.05$161,491 million increasedecrease in neck brace sales. Revenues generated from sales to our customers in the United States wereincreased $4.70from $5.56 million andto $3.60$6.15 million, for the three months ended MarchJune 31,30, 2026 and 2025, respectively. Revenues associated with international customers were $14.80$10.24 million and $11.77,$10.62 million, or 76%62% and 77%66% of revenues,revenues for the three monthsquarters ended MarchJune 31,30, 2026 and 2025, respectively.respectively Consumer demand for Leatt products continued to show strong momentum and consumer direct sales continued to increase strongly increasing by 68% or $0.96 million during the second quarter of 2026. Although international ordering patterns continued to show promising trends and reflect strong sell-through, shipments consisting primarily of MOTO apparel, boots and helmets that were scheduled for shipping during the second quarter of 2026 were delayed due to global supply chain constraints, resulting in a decrease in sales to our global distributors continuedof to6% increaseor strongly$0.65 - increasing by 49% and 24%, respectively,million during the firstsecond quarter of 2026,2026. asShipping consumerto demandour global distributors has resumed and we continue to fulfill global orders. Although, dealer direct revenues decreased marginally by 2% or $0.09 million for Leattthe productssecond andquarter distributorof re-ordering2026 continueddue to improve.the Dealertiming directof salesdomestic increasedinventory by 30%, asreplenishment, our salesinvestments teamsin selling capabilities and dealer outreach programs,programs particularly domestically continuedcontinue to gaingrow momentum.our dealer base and pre-ordering patterns are encouraging.

The following table sets forth our revenues by product line for the three monthsquarter ended MarchJune 31,30, 2026 and 2025:

Sales of our flagship neck brace accounted for $0.73$0.54 million and $0.68$0.70 million, or 4%3% and 4%5% of our revenues for the quarters ended MarchJune 31,30, 2026 and 2025, respectively. The 7%23% increasedecrease in neck brace revenues is primarily attributable to a 11%43% increasedecrease in the volume of neck braces sold when compared to the firstsecond quarter of 2025.

Our body armor products are comprised of chest protectors, full upper body protectors, upper body protection vests, back protectors, knee braces, knee and elbow guards, off-road motorcycle boots and mountain biking shoes. Body armor sales accounted for $8.59$8.75 million and $6.87$8.29 million, or 44%53% and 45%51% of our revenues for the quarters ended MarchJune 31,30, 2026 and 2025, respectively. The 25%6% increase in body armor revenues was primarily the result of a 54%21% increase in revenues generated on the volumesale of footwear,our comprisinginnovative ofMOTO and ADV boot range designed for offroad and adventure motorcycle boots and mountain biking shoes, sold during the 2026 period.riding.

Our helmetshelmet sales accounted for $5.39$3.56 million and $3.11 million or 28%22% and 19% of our revenues for the three monthsquarters ended MarchJune 31,30, 2026,2026 asand compared2025, to $3.40 million or 22% of our revenues for the same 2025 period.respectively. The 59%14% increase in helmet sales during the 2026 second quarter is primarily attributable to a 61%15% increase in revenues generated from the sales volumesale of helmetsoffroad designed for mountain bikingMOTO and adventureADV motorcyclehelmets riding,sold when compared toduring the firstsecond quarter of 2025.2026 as global demand for these exceptional product categories continues to grow.

Our other products, parts and accessories are comprised of goggles, hydrationshydration bags and apparel items including jerseys, pants, shorts andshorts, jackets, sunglasses, bicycle components,components as well asand aftermarket support items required primarily to replace worn or damaged parts through our global distribution network. Other products, parts and accessoryaccessories sales accounted for $4.80$3.54 million and $4.42$4.07 million, or 24%22% and 29%25% of our revenues for the quarters ended MarchJune 31,30, 2026 and 2025, respectively. AlthoughThe sales13% of our MTB apparel line decreased marginally during the first quarter, the 9% increasedecrease in revenues from the sale of other products, parts and accessories isduring the 2026 second quarter was primarily due to a 132%20%decrease in revenues generated on the sale of MTB, ADV and MOTO apparel, that was partially offset by a 16% increase in revenues generated from the salesales of eyewearbicycle comprisingcomponents sunglasseswhen andcompared goggles duringto the firstsecond quarter of 2026.2025.

Cost of Revenues and Gross Profit - Cost of revenues for the quarters ended MarchJune 31,30, 2026 and 2025 were $10.93$8.96 million and $8.65$9.29 million, respectively. Gross Profit for the quarters ended MarchJune 31,30, 2026 and 2025 were $8.57$7.44 million and $6.72$6.89 million, respectively, or 44%45% and 44%43% of revenues, respectively. AlthoughOur geopoliticalneck riskbrace continuedproducts continue to disruptgenerate shippinga higher gross profit margin than our other product categories. Although neck brace revenues accounted for 3% and logistics5% of our revenues for the quarters ended June 30, 2026 and 2025, respectively, the 2% increase in certaingross regions, management continues to implement supply chain efficiencies and improve the cost of goods soldprofit as a percentage of revenues asfor farthe three months ended June 30, 2026, was primarily due to improved margins achieved on domestic and international sales in line with increased demand for Leatt products. Additionally, shipping costs as possible.a percentage of international distributor revenues improved as management continues to develop shipping and logistics efficiencies.

Product Royalty Income - Product royalty income is earned on sales to distributors that have royalty agreements in place, as well as on sales of licensed products by third parties that have licensing agreements in place. Product royalty income for the quarters ended MarchJune 31,30, 2026 and 2025 were $372,819$135,115 and $85,298,$48,306, respectively. The 337%180% increase in product royalty income is due to an increase in the sale of licensed products by licensees during the 2026 period.

Salaries and Wages - Salaries and wages for the quarters ended MarchJune 31,30, 2026 and 2025 were $2.15$2.18 million and $1.86$1.85 million, respectively. The 16%18% increase in salaries and wages during the 2026 period was primarily due to the employment of sales, marketing and digitalbrand management professionals globally as wethe continueCompany continues to build a multi-channel salesselling organization and global consumer facing brand.

Commissions and Consulting Expense - During the quarters ended MarchJune 31,30, 2026 and 2025, commissions and consulting expenses were $235,793$219,661 and $157,722,$187,434, respectively. The 49%17% increase in commissions and consulting expenses is primarily the result of an increase in commissions paid to employees and MTB external sales professionalsrepresentatives in the United States during the period in line with anthe increase in domestic salesselling activity when compared to the priorsecond yearquarter period.of 2025. Additionally, consulting costs relating to the implementation of efficient sales and income tax processes increased when compared to the 2025 second quarter.

Professional Fees - Professional fees consist of costs incurred for audit, tax and regulatory filings, as well as patent protection and product liability litigation expenses incurred as the Company continues to expand. Professional fees for the quarters ended MarchJune 31,30, 2026 and 2025 were $290,492$212,003 and $360,051,$155,345, respectively. The 19%36% decreaseincrease in professional fees is primarily due to aan decreaseincrease in auditpatent maintenance and corporatelitigation legal feescost incurred duringas the 2026Company period.continues to build a pipeline of innovative protective gear.

Advertising and Marketing - The Company places paid advertising in various motorsport and bicycle magazines and onlineonline, digital media and sponsors a number of events, professional teams and individuals to increase product and brand visibility globally. Advertising and marketing expenses for the quarters ended MarchJune 31,30, 2026 and 2025 were $1,061,196$1.43 million and $892,057,$1.15 million, respectively. The 19%24% increase in advertising and marketing expenses isrelates theprimarily result ofto costs associated with the production and implementation of coordinated global marketing campaigns that are designed to increase consumer demand for the Companies growinggrowing, innovative product categories and brand.reach a much wider rider audience globally.

Office Lease and Expenses - Office lease and expenses for the quarters ended MarchJune 31,30, 2026 and 2025 were $240,715$199,053 and $169,176,$176,120, respectively. Although,The lease expenses relating to our offices and warehouses in the United States and South Africa decreased when compared to the 2025 period, the 42%,13% increase in office lease and expenses during the 2026 period is primarily due to the inclusion of consolidation warehousing costs incurred to facilitate consolidated global shipping during the 2026 period.

Research and Development Costs - These costs consist of the salaries of personnel who are directly involved in the research and development of innovative products, as well as the direct costs associated with developing these products. Research and development costs for the quartersquarter ended MarchJune 31,30, 20262026, andincreased to $664,839, from $616,795, during the same 2025 were $797,348 and $664,490, respectively.quarter. The 20%8% increase in research and development costcosts during the 2026 second quarter is primarily dueas toa result of an increase in expenditures on product certification, homologation and product development activities,incurred as the Company continues to refine and build a pipeline of exceptional products.

Bad Debt ExpenseRecovery (Recovery)- Bad debt expense (recovery) for the quarters ended MarchJune 31,30, 2026 and 2025 were $130,082$80,543 and ($63,504),$31,155, respectively. The 305% increase in bad debt expense (recovery) is primarily the result of ana increasedecrease in theamounts badowing debtthat provisionwere relatedconsidered to anbe increaseirrecoverable in accounts receivable balances induring the Unitedquarter States,ended June 30, 2026, when compared to the comparative 2025 period.

General and Administrative Expenses - General and administrative expenses consist of insurance, travel, merchant fees, telephone, office and computer supplies. General and administrative expenses for the quarters ended MarchJune 31,30, 2026 and 2025 were $1,210,233$1.31 million and $1,012,649,$1.10 million, respectively. The 20%19% increase in general and administrative expenses is primarily due to an increase in global travel expenditures incurred and increased product liability insurance premiums incurred in line with anthe increase in global sales in North America. Additionally, digital platform development costs increased asduring the Company2026 continued to optimize and elevate its marketing and sales digital channels.period.

Depreciation Expense - Depreciation expense for the quarters ended MarchJune 31,30, 2026 and 2025 were $514,616$284,244 and $327,008,$332,606, respectively. The 57%15% increasedecrease in depreciation during the 2026 second quarter is primarily due to the accelerated depreciation of long-lived intangible web assets in connection with the impairment and resultant useful life adjustment of these assets.assets during the first quarter of 2026.

Total Operating Expenses - Total operating expenses increased by $1.25$880,245, to $6.42 million, to $6.63 million infor the three monthsquarter ended MarchJune 31,30, 2026, or 62%,16%, compared to $5.38$5.54 million in the 2025 period. This increase is primarily due to the increaseincreases in salaries, advertising and marketing and general and administrative and depreciation expensescosts that were partially offset by a decrease in professionalbad feesdebt discussedexpense above.and depreciation during the 2026 period.

Other Income - Other income for the quarters ended MarchJune 31,30, 2026 and 2025 were $74,496$76,268 and $82,147,$117,737, respectively. The 9%35% decrease in other income is primarily due to a decrease in interest earned during the firstsecond quarter of 2026, when compared to the 2025 firstsecond quarter.

Income taxes - Income taxes for the quarters ended MarchJune 31,30, 2026 and 2025 were $621,947$319,810 and $390,305,$378,921, respectively. The increasedecrease in income taxes is primarily due to ana increasedecrease in the provision for income taxes in line with the increasedecrease in net income when compared to the prior year period.

Net Income - The net income after income taxes for the quarter ended MarchJune 31,30, 2026 was $1.77$0.91 million, as opposedcompared to a net income after income taxes of $1.12$1.14 million for the quarter ended MarchJune 31,30, 2025. This 58%20% increasedecrease in net income is primarily due to the increase in revenuestotal andoperating gross profitexpenses that were partially offset by the increase in totalgross operatingprofit expensesand product royalty income discussed above.