Leo Motors, Inc. - FORM 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2011

______________________

Commission file number 000-53525

____________________

Leo Motors, Inc.

(Exact name of registrant as specified in its charter)

Delaware		95-3909667
(State or other jurisdiction of		(I. R. S. Employer Identification No.)
incorporation or organization)

291-1, Hasangok-dong, Hanam City, Gyeonggi-do, Republic of Korea		465-250
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code+82 31 796 8805

Copy to:

Jung (“John”) Yong Lee

291-1, Hasangok-dong, Hanam City

Gyenggi-do, Republic of Korea 465-250

Fax: 702-697-8944

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Name of Each Exchange on which Registered
None		None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes x No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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

Large accelerated filer o Accelerated filer o

Non-accelerated filer o Smaller reporting company x

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o Yes x No

The aggregate market value of the common equity held by non-affiliates of the registrant as of December 30, 2012 (the last business day of the registrant's most recently completed fiscal quarter) was $6,460,000.

The number of shares of the registrant's common stock outstanding as of December 31, 2011 was 50,833,115 shares.

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LEO MOTORS, INC.

TABLE OF CONTENTS

PART I

Forward-Looking Statements	3
Item 1. Business	4
Item 1A. Risk Factors	7
Item 1B. Unresolved Staff Comments	7
Item 2. Properties	7
Item 3. Legal Proceedings	7
Item 4. (Removed and Reserved)	7

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	8
Item 6. Selected Financial Data	9
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations	9
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	12
Item 8. Financial Statements and Supplementary Data	12
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	12
Item 9A. Controls and Procedures	12
Item 9B. Other Information	14

PART III

Item 10. Directors, Executive Officers and Corporate Governance	15
Item 11. Executive Compensation	17
Item 12. Security Ownership of Certain Beneficial Owners and Management and related stockholder matters	20
Item 13. Certain Relationships and Related Transactions, and Director Independence	21
Item 14. Principal Accounting Fees and Services	21

PART IV

Item 15. Exhibits, Financial Statement Schedules	22

Signatures	23

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). These forward-looking statements are generally located in the material set forth under the headings “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Business”, “Properties” but may be found in other locations as well. These forward-looking statements are subject to risks and uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. You should not unduly rely on these statements. Factors, risks, and uncertainties that could cause actual results to differ materially from those in the forward-looking statements include, among others,

●	our growth strategies;
●	anticipated trends in our business;
●	our ability to make or integrate acquisitions; our liquidity and ability to finance our exploration, acquisition and development strategies;
●	market conditions in the electric vehicle and related industry; the timing, cost and procedure for proposed acquisitions;
●	the impact of government regulation;
●	estimates regarding future net revenues from the sale of our technology and the present value thereof; planned capital expenditures (including the amount and nature thereof);
●	increases in the demand for electric vehicles and “green” technology in the future;
●	estimates, plans and projections relating to the commercialization of our technologies;
●	our financial position, business strategy and other plans and objectives for future operations.

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

●	the possibility that our technology commercialization may involve unexpected costs;
●	the volatility in world demand for electric vehicles and “green” technologies;
●	the accuracy of internally estimated market demand for our products and technologies;
●	the ability to survive as a going concern on limited capital;
●	the availability and costs of raising sufficient working capital;
●	environmental and development risks;
●	competition;
●	the inability to realize expected value from technology research and development;
●	the ability of our management team to execute its plans to meet its goals; and
●	other economic, competitive, governmental, legislative, regulatory, geopolitical and technological factors that may negatively impact our businesses, operations and pricing.

Forward-looking statements speak only as of the date of this report or the date of any document incorporated by reference in this report. Except to the extent required by applicable law or regulation, we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

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PART I

ITEM 1. BUSINESS

A. BUSINESS DEVELOPMENT

Leo Motors, Inc., a Delaware Corporation, through its wholly-owned operating subsidiary Leo Motors, Co. Ltd., a Korean Company ("Leozone"), is engaged in the business of developing multiple products based on proprietary, patented and patent pending electric technology. These products include (a) Zinc Air Fuel Battery (“ZAFC”); (b) electric vehicles ("EV") such as cars, trucks, tractors and other commercial vehicles; (c) E-Bike; (d) EV components that integrate electric batteries with electric motors such as EV Controllers that use a mini-computer to control torque drive; and the (e) E-Box electric energy storage system for solar and wind power generation devices.

There were no fundamental changes to the Company’s business during the year ended December 31, 2011. However, the Company has reacted to market conditions by focusing on the sale of its e-Box which is a “green” storage device suitable electrical output from wind and solar power platforms.

Through out this Form 10-K the following technical terms are used as follows:

“AC” means alternating current where the direction of current flowing in a circuit is constantly being reversed back and forth. This is done with any type of AC current/voltage source. The electrical current in your house is alternating current.

“BMS” or “MC BMS” means LEOM’s battery management system and multi-channel battery management system used during charging and discharging batteries.

“Charger” means a device used to provide electric power to a storage device like a battery.

“Conversion Kit” means LEOM’s products used to convert internal combustion engines to electric vehicle.

“Cycle Time” means how long it takes a battery to be recharged when depleted. The cycle life is the number of charge, discharge, or rest cycles a cell or battery can provide. Cycle life is usually expressed by the number of cycles available before duration of discharge decreases to a half of the initial value.

“DC” means direct current which is the unidirectional flow of electric charge. Direct current is produced by such sources as batteries, thermocouples, solar cells, and commutator-type electric machines of the dynamo type. Direct current may flow in a conductor such as a wire, but can also flow through semiconductors, insulators, or even through a vacuum as in electron or ion beams. The electric charge flows in a constant direction, distinguishing it from alternating current (AC). A term formerly used for direct current was “galvanic” current.

“Demonstration Model” means a prototype model of EV’s produced by the Company in a limited quantity (sometimes only one model) for tradeshow or other marketing events. Demonstration Models are intended to showcase the Company’s EV technology capabilities. The commercial value of these prototype models is dependent on global financial conditions and continued dependence on fossil fuels.

“e-Bike” means LEOM’s electric scooter (sometimes referred to as “motorcycle”).

“e-Box” means LEOM’s electric energy storage system.

“Eco-Friendly” means LEOM’s battery types which do not use lead, cadmium and mercury substances which cause environmental pollution.

“Electric Power Train” means the integrated components of an electric motor, EV controllers, and related parts necessary to deliver electric power to wheels.

“EV” means electric vehicle.

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“EV Components” means electric vehicle components necessary to integrate electric batteries with electric motors.

“EV Controllers” means LEOM’s mini-computer that controls torque drive of the electric motors used in EV’s.

“Higher Energy Density” means LEOM’s batteries suitable for bulk energy storage.

“Hz” or “hertz” is a term used in the electric industry. One hertz is one cycle per second. When generating AC power, the generator winding actually spins to create a magnetic field, and thus, electricity. One cycle is defined as the time it takes for voltage to start at zero, reach maximum positive, return to zero, reach maximum negative, and return to zero again. The U.S. power system operates at 60Hz, and many other countries operate at 50Hz.

“ICE” means an Internal Combustion Engine.

“Inverter” means a device that changes electric power from DC power or direct current to standard AC power or alternating current.

“Just in time” means an inventory management tool whereby parts and components are ordered by the Company only when needed for a customer’s purchase order.

“km/p” means kilometers per hour is a unit of speed, expressing the number of kilometers traveled in onehour.

“kw” means kilowatt which is a standard measurement of electric power. One kilowatt is equal to 1000 watts: 1kW = 1000W

“Korean Won” means the currency of the Republic of Korea.

“Lead-Acid Battery” means batteries that use lead and sulfuric acid which are explosive and environmentally destructive. Lead–acid batteries which were invented in 1859 by French physicist Gaston Planté are the oldest type of rechargeable battery. Despite having a very low energy-to-weight ratio and a low energy-to-volume ratio, their ability to supply high surge currents means that the cells maintain a relatively large power-to-weight ratio. These features, along with their low cost, make them attractive for use in motor vehicles to provide the high current required by automobile starter motors.

“Lithium-polymer” means a type of rechargeable battery that is smaller, lighter and more efficient than conventional batteries using lead-acid reactive materials.

“Ni-MH Battery” means nickel-metal hydride batteries which leaves environmentally destructive residues.

“Plug-in Hybrid Electric Vehicle” or “PHEV” means a vehicle that has both an Internal Combustion Engine and a rechargeable battery motor which are integrated.

“Power Pack” means LEOM’s batteries used in EV’s.

“USD” means the currency of the United States of America.

“Torque” means the twisting power of a drive train as connected to an ICE or EV.

“Voltage”, otherwise known as electrical potential difference or electric tension (denoted ∆V and measured in volts, or joules per coulomb) is the potential difference between two points or the difference in electric potential energy per unit charge between two points. Voltage is equal to the work which would have to be done, per unit charge, against a static electric field to move the charge between two points. A voltage may represent either a source of energy (electromotive force), or it may represent lost or stored energy (potential drop). A voltmeter can be used to measure the voltage (or potential difference) between two points in a system; usually a common reference potential such as the ground of the system is used as one of the points. Voltage can be caused by static electric fields, by electric current through a magnetic field, by time-varying magnetic fields, or a combination of all three

“ZAFC” means Zinc Air Fuel Battery.

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B. FINANCIAL INFORMATION ABOUT SEGMENTS

As defined by generally accepted accounting principles ("GAAP"), we do not have any segments separate and apart from our business as a whole. Accordingly, there are no measures of revenue from external customers, profit and loss, or total assets aside from what is reported in the Financial Statements attached to this Form 10-K.

C. BUSINESS OF THE COMPANY

OVERVIEW

Leo Motors, Inc., a Delaware Company (the "Company"), through its operating subsidiary Leo Motors, Co. Ltd., a Korean Company ("Leozone"), is in the business of developing and marketing Electric Vehicles ("EVs") and EV components. Our current operations consist of developing the designs and prototypes of our EV models, testing, establishing relationships with potential customers, small scale sales of our EVs, and developing our business plan. Our ultimate goal is to begin full scale manufacture of our designs, enter the Global EV market and establish ourselves as a reputable provider of EVs and EV components.

Our overarching strategy is to gain an initial foothold in the EV market as a niche supplier, build our reputation as a technology leader and a socially responsible company, and develop our catalog of products and technology while the market for EV develops.

We conduct all of our research and development ("R&D") in-house at our workshop and offices in South Korea. Prototypes begin as a technical design and then a 3D computer model. We use computer simulation testing before making a working model which is assembled in-house from component parts manufactured by OEM’s in Korea. We use a variety of dynamic testing equipment which is readily available from the Korean government. EV’s are tested for durability using a 60,000 kilometer distance cycle. We believe the testing of our EV prototypes is a highly important function with rigorous standards.

CHANGES TO OUR BUSINESS

The most significant change to our business during 2011, and through the date hereof, is that we have focused our marketing efforts on the e-Box due to its lowered production costs versus EV’s and our related products. The e-Box is composed of batteries that store energy, an integrated DC-to-AC inverter, display board and control module. The purpose of the e-Box is to provide needed emergency energy power during power disconnection (i.e. earthquake, hurricane, typhoon etc.) and as a surplus storage mechanism for solar and wind power applications. Without significant income during the preceding development stage, the Company invested a significant amount of capital in realizing and developing its technology. But the Company has since begun generated revenues, and has received purchase orders from globally recognizable companies for the e-Box.

While our business plan remains to become a technology provider in the global EV market, however, due to the need to generate revenues in short term we decided to focus our efforts in 2011 on the development and marketing of the e-Box. In 2010, we experienced sales of almost 1,000 of our electric scooters, but we were unable to sustain sales beyond the initial orders. We attribute this to the negative global economy generally and the fact that gasoline scooters still remain much cheaper than our electric scooters in most markets. This is despite the fact that our electric scooters are both more robust and environmentally superior to the gasoline scooters (which emit unacceptable levels of carbon emissions).

SALES AND DISTRIBUTION ARRANGEMENTS

To date, we continue to develop long-term sales and distribution arrangements for our EV’s and other products. The Plug-in Hybrid EVs ("PHEVs") or EVs remains dominated by big global manufactures. Our PHEVs and EVs are customized vehicles or vehicles to test our power trains. We believe that a smaller company may have an advantage over bigger automotive companies, because of the larger companies' scale and labor unions. We believe their solution is to make alliances with smaller companies like us when they have such needs.

Despite our limited capital, we can build upon our historic research and development, as follows:

The Company has developed many key technologies for EVs and is now focused on commercializing these breakthroughs. The company has a long list of potential buyers of customized vehicles, electric bikes, parts, and components, and is currently in negotiations to secure a number of contracts.

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We have developed and delivered an e-SUV to a Korean Car Manufacturer using our 100kW E-Power Train which the company developed in 2010. The test vehicle was exhibited at and made a demonstration run to the public in the 2011 Seoul Motors Show. When final testing of the test vehicle is successful, we intend to supply and incorporate our EV power trains into their body and chassis and market the completed vehicle to the public.

The Company delivered a prototype of electric tractor using our 60kW power train. After the proper tests, we intend to supply power trains and engineering services to that project.

The Company has received a Zinc Air Generator (ZAG) Development Order from an oil development equipment company. We received a purchase order to develop ZAG to be used in the unmanned environment in the ocean. With a written commitment from the client, the Company has started the Phase 1 development. The total project consists of 3 Phases to be completed by 2013.

MARKETING

We continue with our initial marketing strategy which was based on individual sales to fleets, EV Manufacturers, power trains and ZAG. With the e-Box, we have directed our marketing to companies involved in the sustainable housing segment that requires efficient electric storage solutions based on wind and solar power.

ITEM 1A. RISK FACTORS

Not required by smaller reporting companies.

ITEM 1B. UNRESOLVED STAFF COMMENTS

We filed a registration statement on Form 10 on December 10, 2008, and Amendments to the Form 10 on March 3, 2009, April 27, 2009, September 9, 2009, and May 5, 2010. We have received comments from the SEC on the latest Amendment and are in the process of responding to them. Until the Form 10 has cleared comments, we and our shareholders cannot rely on the Form 10 or our subsequent periodic reports to satisfy a requirement of current adequate information for any securities transactions.

In addition to comments on our form 10, we are subject to a continuing requirement to update our Quarterly and Annual Reports to be consistent with any changes made to our Form 10.

We have unresolved staff comments to our Form 10 Amendment No. 4. We have been delayed in our filing of Amendment No. 5 to Form 10 due to change in our accountants.

ITEM 2. PROPERTIES

We operate out of an office , workshop and warehouse building located at 291-1, Hasangok-dong, Hanam City, Gyeonggi-do, Republic of Korea 465-250.

At this time we do not intend to establish any manufacturing facilities ourselves for EVs. Instead, we will either outsource manufacturing of our products, or enter into joint ventures with partners who will provide the manufacturing facilities. However, a new e-Box plant is being built for us with the assistance of the Korean government.

As the market for our product develops, we may decide to establish our own facilities in various locations, outsource manufacturing of our other products, or enter into additional joint ventures for the manufacturing of our EVs.

ITEM 3. LEGAL PROCEEDINGS

We have received notice from our former attorneys in Houston, TX that we owe them $25,429.13 in past due invoices for several years of work continuing through December 3, 2011. We are currently in negotiations to settle this dispute.

ITEM 4. (REMOVED AND RESERVED)

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

MARKET INFORMATION

Our common stock is quoted in United States markets on the Pink Sheets, maintained by Pink OTC Markets, Inc., a privately owned company headquartered in New York City, under the symbol "LEOM." There is no assurance that the common stock will continue to be traded on the Pink Sheets or that any liquidity exists for our shareholders.

MARKET PRICE

The following table shows the high and low per share price quotations of the Company's common stock as reported by the Pink Sheets for the periods presented. These quotations reflect inter-dealer prices, without retail mark-up, mark-down

or commissions, and may not necessarily represent actual transactions. The Pink Sheets market is extremely limited and the prices quoted by brokers are not a reliable indication of the value of the common stock. The periods presented

represent fiscal quarters, with the fourth quarter of each year ending on December 31st.

Fiscal 2008	High		Low

First Quarter	$	0.56	$	0.10
Second Quarter	$	0.27	$	0.05
Third Quarter	$	1.01	$	0.07
Fourth Quarter	$	0.40	$	0.15

Fiscal 2009

First Quarter	$	1.01	$	0.11
Second Quarter	$	1.05	$	0.10
Third Quarter	$	0.80	$	0.39
Fourth Quarter	$	3.42	$	0.50

Fiscal 2010

First Quarter	$	2.75	$	1.20
Second Quarter	$	2.20	$	0.70
Third Quarter	$	1.65	$	0.55
Fourth Quarter	$	1.00	$	0.25


Fiscal 2011

First Quarter	$	0.95	$	0.31
Second Quarter	$	0.80	$	0.13
Third Quarter	$	0.30	$	0.16
Fourth Quarter	$	0.18	$	0.08

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As of December 31, 2011, the Company had 200,000,000 shares of common stock authorized and 20,000,000 preferred shares of stock. As of December 31, 2011, we had 50,883,115 common shares issued and outstanding, and approximately 9,294,694 freely tradable shares in the public float. These shares were held by approximately 941 shareholders of record and Company estimates by over 1,000 beneficial shareholders. No preferred shares have been issued to date.

PENNY STOCK REGULATIONS

Our common stock is quoted in United States markets on the OTCQB, maintained by OTC Markets Group Inc., a privately owned company headquartered in New York City, under the symbol "LEOM." On Dec 30, 2011 the last reported sale price of our common stock was $0.17 per share. As such, the Company's common stock may be subject to provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly referred to asthe "penny stock rule."

Section 15(g) and Rule 15g-9 sets forth certain requirements for transactions in penny stocks, in particular that either (1) the transaction meets one of a few specific exemptions, or (2) the broker dealer executing the transaction for a customer (a) obtain informed consent from the customer and (b) make an individualized determination of the customer's suitability for trading in penny stocks based on personal financial information. Rule 15g-9(d) incorporates the definition of "penny stock" that is found in Rule 3a51-1 of the Exchange Act. The SEC generally defines "penny stock" to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. As long as the Company's common stock is deemed to be a penny stock, trading in the shares will be subject to additional sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors.

DIVIDENDS

The Company has not issued any dividends on the common stock to date, and does not intend to issue any dividends on the common stock in the near future. We currently intend to use all profits to further the growth and development of the

Company.

RECENT SALES OF UNREGISTERED SECURITIES

During 2011, we issued shares to consultants in the amount of $231,000 _. These shares are restricted securities and include an appropriate restrictive legend.

PURCHASES OF EQUITY SECURITIES

None.

ITEM 6. SELECTED FINANCIAL DATA

Not required by smaller reporting companies.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

FORWARD-LOOKING STATEMENTS

Statements about our future expectations are "forward-looking statements" within the meaning of applicable Federal Securities Laws, and are not guarantees of future performance. When used herein, the words "may," "will," "should," "anticipate," "believe," "appear," "intend," "plan," "expect," "estimate," "approximate," and similar expressions are intended to identify such forward-looking statements. These statements involve risks and uncertainties inherent in our business, including those set forth in Item 1A under the caption "Risk Factors," in this Annual Report on Form 10-K for the year ended December 31, 2008, and other filings with the SEC, and are subject to change at any time. Our actual results could differ materially from these forward-looking statements. We undertake no obligation to update publicly any forward-looking statement.

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OVERVIEW

Leo Motors, Inc. (the "Company") is in the process of development and production of Electric Power Train Systems (EPTS) encompassing electric scooters, electric sedan/SUV/sports cars, and electric buses/trucks as well as several models of Electric Vehicle ("EV"). Our EPTS can replace internal combustion engines (ICE). Our EPTS for passenger cars and agricultural tractors have been sold to car makers and agricultural machinery manufacturers. During the last two years, we have been developing eight EPTS: 3kW, 5kW, 7.5kW, 15kW, 30kW, 60kW, 100kW, 120kW, and 240kW systems. Each EPTS consists of a motor, controller, and battery power pack controlled by a Battery Management System (BMS).

The Company has successfully converted existing models of small cars (internal combustion engines under 2,000cc), and also a 24 seat bus. The Company launched 60kW power train (for compact passenger cars and small trucks) kits and 120kW

(for under 5,000cc ICE passenger cars, buses, and trucks) kits. The Company developed 240kW kit (for 10,000cc buses and trucks) as well. The 240kW kit was scheduled to be tested by October of 2010, but the Company postponed the test because it found unexpected problems in procuring the electric lines and inverters for high ampere power.

The Company has also developed Low Speed EV ("LSV"), four-wheeled electric scooter, and electric bikes. This year, the company launched electric bikes, and is now selling them to the distributors. The company also has developed the Zinc Air Fuel Cell Generator to be used as a range extender for EV.

In 2010, we believed the company had successfully made a turning point based on the sale of 1,000 electric scooters, however we were not able to continue sales beyond that point. We attribute this failure to the global turndown in the economy and the fact that gas powered scooters are cheaper. This is despite our superior environmental technology. Prior to that time the Company had been in the development stage in both technology and as a business. The Company spent a lot of money without any meaningful sales. The first mass sales were made in 2010. The Company sold almost 1,000 units of electric scooters last year to its national dealer in Korea. It was the largest sales performance in the electric two wheeler market in Korea. But we were not able to get any re-orders in 2011. We believe that future sales of electric scooters will have to be based on government incentives to consumers based on environmental concerns coupled with increases in gas prices.

The specific goals of the Company over the next twelve months include:

·	Focus on the capitalization of the Company;

·	Focus on the sale of the e-Box;

·	Complete the build out of the manufacturing plant for the e-Box;

·	Continue with R&D of our EV’s and related products as capital permits.

SUMMARY OF RECENT BUSINESS DEVELOPMENTS

The greatest achievements in 2011 were that the Company has made many value references which can be a strong platform for future sales as well as proofs of technical competencies of the Company. Our 100kW EPTS was chosen for the electric car project of one large car manufacturer. We have made one electric test car for the client using body of the client's car model. The newly developed test EV of the client has been publicly demonstrated, and tested in the 2011 Seoul Motor Show. The development was very successful. The Company expects to make another test EV. After developing these test EVs, the Company may make many prototypes for final testing before jumping beginning mass production.

We have developed an electric tractor using our 60kW power train. The new development was made using the body and chassis provided by Tong Yang, the major Agricultural Machinery Brand in Korea. The development was made by an order

from Tong Yang. The newly developed electric Tractor is under tests, and will be exhibited in the major International Agricultural Machinery Show in 2011. If tests are successful, we expect to receive orders for our 60kW EPTS and our

engineering services.

After the development of our 1kW Zinc Air Fuel Cell Generator ("ZAFCG") and a seminar which announced the unprecedented development, the Company exerted itself in commercialization of the development. In the end of 2010, the Company received an order to develop the ZAFCG which will be used in the ocean from an oil development company. The Company has successfully finished the feasibility study of the development, and received the development fees of the first phase.

The Company is going to make a pilot test and engineering design in 2011, and will finalize the development by making the final prototype and tests in 2012.

The Company received a request to develop and supply high capacity battery power pack from a major company in the military industry. The Company is preparing a test power pack for delivery to the client. If the test is successful, the

Company will market its power packs to the client.

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LIQUIDITY AND CAPITAL RESOURCES

Our liquidity requirements arise principally from our plans to develop EV production capability, additional product development, and marketing costs. Although in the future we intend to fund our liquidity requirements through a combination of cash on hand and revenues from operations, during the fiscal year 2011, the Company had incurred $935,282 in operating expenses, not including salary and consulting expense paid by stock, and had realized $920,587 in revenues. Accordingly, our ability to fully develop and market our technologies and products is currently dependent on our ability to either generate significant new revenues or raise external capital.

Our monthly operating cost including salaries and general expense is currently approximately $150,000, as we focus on our e-Box.

Our long term survival will depend on the growth of our operations towards full scale manufacturing and sales of our EVs, which in turn will depend on our ability to raise sufficient financing. If our fund raising efforts should fail or fall short of our goal, we will have to restructure our business plan in order to sustain our operations. However, in that event we may be unable to implement our business plan or continue operations.

RESULTS OF OPERATIONS

Revenues

Sales for year ended December 31, 2011 were $_920,587 compared to $2,605,066 for year ended Dec 31, 2010. Costs of sales were $828,034 and gross profit was $92,553 in 2011 compared to $2,528,435 and $76,631 as costs of sales and gross profit in the same period in 2010. The sales from 2011 were mainly battery and assembly of electric parts.

The sales during the period 2010 were mainly generated from the electric scooters business. The order of 1,187 electric scooters was received from M&M Co., Ltd which is our domestic distributor, for total revenues of 4.2 billion Korean Won (approximately $ 3.73 million USD) and 870 units were delivered by the end of the period. No units were reordered in 2011.

Expenses

During 2011, we incurred $1,166,282 in expenses, compared to $3,771,092 in 2010. The primary decrease was due to reduction of Salaries and Benefits to the Board Director paid in Stock We also hired R&D and sales staff to activate our business. The company rented another building near the existing office to function for the sales and administration divisions. .

Expenses for the quarter consisted of the following:

EXPENSES:	2011		2010

Salaries and Benefits	$	184,679	$	410,955
Service Fees	$	231,000	$	2,399,500
General and Administrative	$	242,846	$	751,802
Depreciation & Amortization	$	294,240	$	358,555
Bad Debt	$	0	$	8,780

Salaries and Benefits - consist of total cash compensation paid to our employees during the year and the cost of all benefits provided to our employees.

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

-11-

General and Administrative - consists of travel expenses, entertainment expenses, communication expenses, utilities, taxes & dues, depreciation expenses, rent, repairs, vehicle maintenance, ordinary development expenses, shipping, education & training, printing, storage, advertising, insurance, office supplies and expense, payroll expenses, investor referral fees and other miscellaneous expenses

OFF-BALANCE SHEET ARRANGEMENTS

None.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements as of December 31, 2011 and 2010 and for the fiscal years ended December 31, 2011 and 2010 have been audited by Stan Lee CPA, an independent registered public accounting firm, and have been prepared in accordance with generally accepted accounting principles pursuant to Regulation S-X as promulgated by the SEC. The aforementioned consolidated financial statements are included herein starting with page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

On April 4, 2011, Leo Motors, Inc. (the "Company") accepted the resignation of Gruber & Company LLC as the Company's Independent Registered Public Accounting Firm. Gruber & Company informed the Company on January 25, 2011 that it may not be able to continue as Auditor because Mr. Gruber, its principal, does not speak Korean. From then until April 4, 2011, the Company attempted to determine whether Gruber & Company could continue as the Company's principal auditor under PCAOB rules and regulations. It was determined on April 4, 2011 that the PCAOB

rules and regulations required Gruber & Company to resign.

On April 7, 2011, the Company engaged Stan Jeong-Ha Lee as its Independent Registered Public Accounting Firm. Mr. Lee has been engaged to audit our 2010 annual financial statements; and to provide review and auditing services for the Company going forward. Mr. Lee, who speaks Korean, has assisted with the audit since the beginning of the audit process, and has assisted with the auditor review of the 1st, 2nd and 3rd Quarter 2010 quarterly financial statements.

The decision to change accountants was recommended, approved and ratified by the Company's Board of Directors effective April 7, 2011. Gruber & Company's reports on the financial statements of the Company for the years ended December 31, 2009 and 2008 did not contain any adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles other than the inclusion of an explanatory paragraph discussing the Company's ability to continue as a going concern.

During the years ended December 31, 2010, 2009 and 2008, and any subsequent interim periods through the date of Gruber & Company's resignation, there were no disagreements between Gruber & Company and the Company on a matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement, if not resolved to the satisfaction of Gruber & Company would have caused Gruber & Company to make reference to the subject matter of the disagreement in connection with its report on the Company's financial statements.

-12-

There have been no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K during the years ended December 31, 2010, 2009, and 2008, and any subsequent interim periods through the date the Company was informed of Gruber & Company's status.

The Company has requested that Gruber & Company respond to any inquiries of any new auditors hired by the Company relating to their engagement as the Company's independent accountant. The Company has requested that Gruber & Company review the Item 4.01 disclosure in this report and has provided Gruber & Company with an opportunity to provide a letter addressed to the Commission containing any new information, clarification of the Company's expression of its views, or the respect in which Gruber & Company does not agree with the statements made by the Company herein. Gruber & Company provided the letter filed as Exhibit 16.1 to the Company's Current Report on Form 8-K filed on April 14, 2011.

The Company has not previously consulted with Mr. Lee regarding either (i) the application of accounting principles to a specific completed or contemplated transaction; (ii) the type of audit opinion that might be rendered on the Company's financial statements; or (iii) a reportable event (as provided in Item 304(a)(1)(v) of Regulation S-K) during the years ended December 31, 2010, 2009, and 2008, and any later interim period,

including the interim period up to and including the date of Gruber & Company's resignation.

Mr. Lee has reviewed the disclosure required by Item 304 (a) before it was filed with the Commission and has been provided an opportunity to furnish the Company with a letter addressed to the Commission containing any new information, clarification of the Company's expression of its views, or the respects in which it does not agree with the statements made by the Company in response to Item 304 (a). Mr. Lee did not furnish a letter to the Commission.

ITEM 9A. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures

-----------------------------------------------------

Our management, including our Principal Executive and Principal Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2010. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized, and reported, within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive and Principal Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2010.

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(b) Management's Report on Internal Control over Financial Reporting

-----------------------------------------------------------------------

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-a5(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use of disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance

with the policies or procedures may deteriorate.

Under the supervision of our Chief Executive Officer, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2010. In making this assessment, management used the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, our management has concluded that our internal control over financial reporting was ineffective as of December 31, 2010 and there are material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

The material weaknesses relate to the limited number of persons responsible for the recording and reporting of financial information, the lack of separation of financial reporting duties, and the limited size of our management team in general. We are in the process evaluating methods of improving our internal control over financial reporting, including the possible addition of financial reporting staff and the increased separation of financial reporting responsibility, and intend to implement such steps as are necessary and possible to correct these material weaknesses.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management's report in this Annual Report on Form 10-K. Our registered public accounting firm will not be required to opine on internal controls until fiscal 2010.

------------------------------

There were no changes in our internal control over financial reporting during the quarter ended December 31, 2011, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTOR AND EXECUTIVE OFFICER SUMMARY

The following table sets forth the names, ages, and principal offices and positions of our current directors, executive officers, and persons we consider to be significant employees. The Board of Directors elects our executive officers annually. Our directors serve one-year terms or until their successors are elected, qualified and accept their positions. The executive officers serve terms of one year or until their death, resignation or removal by the Board of Directors. There are no family relationships or understandings between any of

the directors and executive officers. In addition, there was no arrangement or understanding between any executive officer and any other person pursuant to which any person was selected as an executive officer.

NAME OF DIRECTOR OR OFFICER	AGE	POSITION

Jung Yong ("John") Lee	46	Chief Executive Officer, President
		Interim CFO and Director
Young Il Kim	55	Director
Jenongyoul Choi		Director
Junhyung Park		Director

EXECUTIVE OFFICER AND DIRECTOR BIOS

Jung Yong (John) Lee, Chief Executive Officer, President and Interim Chief Financial Officer

Mr. Lee joined the Company's operating subsidiary as its CEO and President in June 2006, and joined the Company upon its acquisition on September 3, 2007. In November 2008 he resigned as CEO and President but remained with the Company as CTO and Director. Prior to joining the Company, Mr. Lee has held several positions in EV design and projects. He lead the Research and Development Department for Geo EV beginning in 2002, and for Pyeonghwa Motors, a Korean car manufacturer and dealer, beginning in February 2004. His experience includes heading projects that have incorporated the Polymer Battery, Dual Motor System, and alternative energy vehicle design. He has also worked on the Ford SUV Concept Project for 1997's Melbourne Motor show, the City Car Project, and the Limousine Project.

Mr. Lee received his Masters of Industrial Design (Vehicle Styling) from RMIT University in Melbourne, Australia, and his PhD in Industrial Design from the University of New South Wales in Sydney, Australia. He has taught Engineering Industrial Design at Dankook University in Seoul, South Korea.

Young Il Kim, Director

Dr. Kim joined the Company on October 11, 2009. Dr. Kim began his career in the auto industry in 1988, at Panther Sports Car as Senior Designer and Manager. He later served as Chief Designer of commercial vehicles and concept vehicles at Sang-Yong Motor Company before joining the Hyundai Motor Group in 1995.

From 1995 through 2007, Dr. Kim held various positions of increasing responsibility under the Hyundai and Kia Motors Group umbrella, including Chief Designer at Hyundai Precision through March 2005, Chief Designer and Senior Vice President at Hyundai and Kia Marketing Division from March 2005 to September 2006, and Executive Vice President in the Marketing Division in charge of Brand and Design Differentiation between Hyundai and Kia Motors from September 2006 to February 2007. From then until March 2009 he was

CEO and President of Innocean Worldwide, a Marketing and Advertising Company of the Hyundai and Kia Group.

Dr. Kim, who holds an Industrial Designer of Product Design degree from Wuppertal University, Germany, and a PhD in Design from Kook-Min University, Seoul, Korea, has enjoyed a distinguished academic career as well, having lectured at various colleges and universities on the subjects of design and marketing since 2000. Dr. Kim was a visiting professor at Gothenburg University, Sweden during the 2004/05 academic year, and is currently serving as a visiting professor at Kyung-hee University, where he began in August 2009.

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Jeongyoul Choi

Mr. Choi graduated Sungnam High School, Gyeonggi-do, Korea. Mr. Choi joined the Company on January, 2012. He was Chief Executive Officer of various company Ltd.s. As a representative Company Ltd, Mr. Choi was Chief Executive Officer of Good EMG, total entertainment company, from 2007 to 2008. he arranged A1 Grand prix Korea, World Motor Racing Challenge for National team, 2007. When he was in Good EMG. Also Mr. Choi was Chief Executive Officer of Neo solar, Solar power company, from 2006 to 2007.

Junhyung Park.

Mr. Park has a diploma of Centennial College, Toronto, Canada. Mr. Park has a degree of business of George Brown College, Toronto, Canada. Also, Mr. Park’s business management skills are excellent so, he has applied his skills to various industry areas. For example, Mr. Park arranged World Cyber Game Olympic in Canada as Chief Executive Officer of WCG(World Cyber Games) in 2002. Mr. Park was Chief Executive Officer of IAG KOREA Co. Ltd, Major Insurance Company 2006. Also, Mr. Park was Chief Executive Officer of Unitech Co. Ltd. The largest Computer Assembly Company, Korea from 2009 to 2010. Mr. Park is charge of Business Planning and Strategy for the Company.

LEGAL AND DISCIPLINARY HISTORY

No officer, director or control person of the Company has been the subject of:

1. A conviction in a criminal proceeding or named as a defendant in a pending criminal proceeding (excluding traffic violations and other minor offenses);

2. The entry of an order, judgment, or decree, not subsequently reversed, suspended or vacated, by a court of competent jurisdiction that permanently or temporarily enjoined, barred, suspended or otherwise limited such person's involvement in any type of business, securities, commodities, or banking activities;

3. A finding or judgment by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission, the Commodity Futures Trading Commission, or a state securities regulator of a violation of federal or state securities or commodities law, which finding or judgment has not been reversed,

suspended, or vacated; or

4. The entry of an order by a self-regulatory organization that permanently or temporarily barred, suspended or otherwise limited such person's involvement in any type of business or securities activities.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act") requires our directors and officers, and persons who own more than ten percent of the Common Stock to file reports of ownership and changes in ownership with the Securities and Exchange Commission ("SEC") and the American Stock Exchange.

SEC regulations require reporting persons to furnish us with copies of all Section 16(a) forms they file.

Based solely on our review of the copies of the Forms 3, 4 and 5 and amendments thereto furnished to us by the persons required to make such filings during fiscal 2010 and our own records, we believe that Dr. Kang, Mr. Lee and Mr. Kim each failed to file timely a Form 3, 4 or 5 during the year ending December 31, 2010.

CORPORATE GOVERNANCE.

We have not adopted a code of ethics do date. We are in the process of evaluating the standards of conduct necessary for the deterrence of malfeasance and the promotion of ethical conduct and accountability, and will determine whether a code of ethics is necessary based on our evaluation.

The Company does not have a standing Nominating Committee. There have been no changes to the procedures whereby security holders may recommend nominees to the registrant's board of directors.

The Company is not a "listed issuer" as defined by Rule 10A-3, and does not have a standing Audit Committee. We do not have a financial expert serving on our board of directors.

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ITEM 11. EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

Objectives and Philosophy of our Executive Compensation Program

We do not have a standing compensation committee. Our board of directors as a whole makes the decisions as to employee benefit programs and officer and employee compensation. The primary objectives of our executive compensation programs are to:

●	attract, retain and motivate skilled and knowledgeable individuals;
●	ensure that compensation is aligned with our corporate strategies and business objectives;
●	promote the achievement of key strategic and financial performance measures by linking short-term and long-term cash and equity incentives to the achievement of measurable corporate and individual performance goals; and
●	align executives' incentives with the creation of stockholder value.

To achieve these objectives, our board of directors evaluates our executive compensation program with the objective of setting compensation at levels they believe will allow us to attract and retain qualified executives. In addition, a portion of each executive's overall compensation is tied to key strategic, financial and operational goals set by our board of directors. We also generally provide a portion of our executive compensation in the form of options that vest over time, which we believe helps us retain our executives and align their interests with those of our stockholders by allowing the executives to participate in our longer term success as reflected in asset growth and stock price appreciation.

Named Executive Officers

--------------------------

The following table identifies our principal executive officer, our principal financial officer and our most highly paid executive officers during the last full fiscal period reported herein, who, for purposes of this Compensation Disclosure and Analysis only, are referred to herein as the "named executive officers."

Name Corporate Office

---------------------- ------------------------------

Jung Yong ("John") Lee President, CEO and Interim CFO

Components of our Executive Compensation Program

At this time, the primary elements of our executive compensation program are base salaries and option grant incentive awards, although the board of directors has the authority to award cash bonuses, benefits and other forms of compensation as it sees fit.

We do not have any formal or informal policy or target for allocating compensation between short-term

and long-term compensation, between cash and non-cash compensation or among the different forms of non-cash compensation. Instead, we have determined subjectively on a case-by-case basis the appropriate level and mix of the various compensation components. Similarly, we do not rely extensively on benchmarking against our competitors in making compensation related decisions, although we may consider industry compensation trends as one of many factors in our case-by-case determination of proper compensation.

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Base salaries

Base salaries are used to recognize the experience, skills, knowledge and responsibilities required of our named executive officers. Base salary, and other components of compensation, may be evaluated by our board of directors for adjustment based on an assessment of the individual's performance and compensation trends in our industry.

Equity Awards

Our stock option award program is the primary vehicle for offering long-term incentives to our executives. Our equity awards to executives have typically been made in the form of warrants. We believe that equity grants in the form of warrants provide our executives with a direct link to our long-term performance, create an ownership culture, and align the interests of our executives and our stockholders.

Cash bonuses

Our board of directors has the discretion to award cash bonuses based on our financial performance and individual objectives. The corporate financial performance measures (revenues and profits) will be given the greatest weight in this bonus analysis. We have not yet granted any cash bonuses to any named executive officer nor have we yet developed any specific individual objectives while we wait to attain revenue and profitability levels sufficient to undertake any such bonuses.

Benefits and other compensation

Our named executive officers are permitted to participate in such health care, disability insurance, bonus and other employee benefits plans as may be in effect with the Company from time to time to the extent the executive is eligible under the terms of those plans. As of the date of this 10-K, we have not implemented any such employee benefit plans.

CURRENT EXECUTIVE COMPENSATION

Summary Annual Salary

As discussed above, we have agreed to pay the Named Executive Officers an annual salary. Base salary may be increased from time to time with the approval of the board of directors. The following table summarizes the agreed annual salary of each of the named executive officers.

Name Annual Salary

Jung Yong ("John") Lee $ 200,000

Agreed Compensation

--------------------

Jung Yong ("John") Lee, Chief Executive Officer and Interim Chief Financial Officer - Mr. Lee will earn an annual Salary of $ 200,000 as compensation for his services as president and CEO.

GRANTS OF PLAN-BASED AWARDS TABLE FOR FISCAL YEAR 2011

On January 15, 2010, the Company adopted an employee stock option plan, designated as the "2010 Employee Stock Option Plan. 10,000,000 options were issued to our CEO on February 1, 2010 and it was cancelled at January 19, 2011. During fiscal year ended December 31, 2011, we did not grant any other equity awards under any equity award plan.

OPTION EXERCISES FOR FISCAL 1009

During fiscal 2011, none of the named executive officers exercised options.

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NONQUALIFIED DEFERRED COMPENSATION

We currently offer no defined contribution or other plan that provides for the deferral of compensation on a basis that is not tax-qualified to any of our employees, including the named executive officers.

COMPENSATION OF DIRECTORS

We intend to use a combination of cash and equity-based compensation to attract and retain candidates to serve on our board of directors. We issued 2,000,000 shares of common stock to Shi Chul Kang, 500,000 shares of common stock to Jung Yong Lee and 500,000 shares of common stock to Young Il Kim as the board of

directors on Jan 1, 2010. No additional equity-based compensation was paid to our board of directors in fiscal year 2011.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

We do not currently have a standing Compensation Committee. Our entire board of directors participated in deliberations concerning executive officer compensation.

COMPENSATION COMMITTEE REPORT

The board of directors has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the board of directors has recommended that this Compensation Discussion and Analysis be included in this 10-K.

SUMMARY COMPENSATION TABLE

The following table sets forth the total compensation paid to, or accrued by, the Company's highest paid executive officers during the fiscal years ended December 31, 2011 and December 31, 2010. No restricted stock awards, long-term incentive plan payout or other types of compensation, other than the compensation identified in the chart below and its accompanying notes, were paid to these executive officers during that fiscal year.

Position	Year	Salary		Awards		Awards		Comp	Total
John Lee (1)	2011	$	200,000	$	Nil	$	Nil	$	$	200,000
President, CEO and Interim	2010		200,000				-			200,000
Chief Financial Officer

Robert Kang (2)	2011	$	35,714	$	Nil	$	Nil	$	$	35,714
Former President, CEO and Interim Chief Financial Officer

(1) Jung Yong Lee was the Company's President and CEO from September 19, 2007 to November 18, 2008. Mr. Lee became President and CEO on March 11, 2011.

(2) Robert Kang was the Company's President and CEO from November 18, 2008 to Mar 14 2011.

(3) Number represents Dec 31, 2011 exchange rate between US$ and Korean Won.

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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END TABLE

The following table sets forth information regarding the outstanding warrants held by our named officers as of December 31, 2011.

The following table summarizes certain information regarding unexercised stock options outstanding as of March 31, 2011 for each of the Named Officers.

Name	Number of Securities Underlying Unexercised Stock Options Exercisable	Number of Securities Underlying Unexercised Stock Options Unexercisable	Stock Option Exercise Price		Stock Option Expiration Date
John Lee	Nil	Nil		n/a		n/a
Robert Kang	Nil	Nil		n/a		n/a

The Company does not currently have in place or provide retirement, disability or other benefits to its employees.

DIRECTOR COMPENSATION

The following table sets forth compensation information with respect to our Directors during our fiscal year ended March 31, 2011.

Director Compensation

Fees earned or

Stock

Option

Name

paid in cash

awards

Total

Jung Yong Lee

Yong Il Kim

Shi Chul Kang

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table shows the beneficial ownership of our common stock as of December 31, 2011. The table shows the amount of shares owned by:

(1) each person known to us who owns beneficially more than five percent of the outstanding shares of any class of the Company's stock, based on the number of shares outstanding as of December 31, 2011;

(2) each of the Company's Directors and Executive Officers; and

(3) all of its Directors and Executive Officers as a group.

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	AMOUNT OF		PERCENT OF
	SHARES		SHARES
IDENTITY OF	BENEFICIALLY		BENEFICIALLY
PERSON OR GROUP	OWNED		OWNED(1,2)			CLASS
Jung Yong Lee
CEO and Interim CFO		6,500,000		13.40	%	Common
Young Il Kim
Director		1,800,000		3.7	%	Common

(1) The percentage of shares owned is based on 50,833,115 shares being outstanding as of December 31, 2011. If the beneficially owned shares of any individual or group in the above table include any options, warrants, or other rights to purchase shares in the Company's stock, such right to purchase shares (if any) is disclosed by footnote below and the percentage of shares owned includes such shares as if the right to purchase had been duly exercised.

(2) BENEFICIAL OWNERSHIP OF SECURITIES: Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, involving the determination of beneficial owners of securities, a beneficial owner of securities is person who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has, or shares, voting power and/or investment power with respect to the securities, and any person who has the right to acquire beneficial ownership of the security within sixty days through means including the exercise of any option, warrant or conversion of a security.

ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The Company is not listed on any national exchange, or quoted on any inter-dealer quotation service, that imposes independence requirements on any committee of the Company's directors, such as an audit, nominating or compensation committee. As all of the Company's directors are employees of the Company, the Company does not have any independent directors on its Board, as defined by the New York Stock Exchange.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The following is a summary of the fees paid to Stan Jeong-Ha LeeLee LLC, the Company's independent public accounting firm, during the fiscal years ended December 31, 2010 and 2011.

	2010		2011
Audit fees	$		$
Audit-related fees		-		-
Tax fees		-		-
All other fees		-		-
TOTAL	$		$

AUDIT COMMITTEE PRE-APPROVAL OF SERVICES OF PRINCIPAL ACCOUNTANTS

The Company does not have a standing audit committee. The Board as a whole has the authority and responsibility to select, evaluate, determine the compensation of, and, where appropriate, replace the independent auditor. After determining that providing the non-audit services is compatible with maintaining the auditor's independence, the board pre-approves all audits and permitted non-audit services to be performed by the independent auditor, except for de minimus amounts. If it is not practical for the board to meet to approve fees for permitted non-audit services, the board has authorized its chairman to approve them and to review such pre-approvals with the Board at its next meeting.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES FINANCIAL STATEMENTS AND SCHEDULES.

The following consolidated financial statements of Leo Motors, Inc. and Subsidiaries are included herein by reference to the pages listed in "Item 8. Financial Statements and Supplementary Data":

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2011 and 2010

Consolidated Statements of Operations for the years ended December 31, 2011, and 2010

Consolidated Statements of Changes in Shareholders' Interest for the years ended December 31, 2011 and 2010

Consolidated Statements of Cash Flows for the years ended December 31, 2011 and 2010

Notes to Consolidated Financial Statements

EXHIBITS

The following Exhibits are included herein:

31.1 Certification of the Principal Executive and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).

32.1 Certification by the Principal Executive and Principal Financial Officer of Leo Motors, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	LEO MOTORS, INC.

Date: April 15, 2012	By:	/s/ Jung Yong Lee
		Jung Yong Lee
		Chief Executive Officer, President and Interim Chief Financial Officer

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LEO MOTORS, INC.

CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011 and 2010

(Audited)

CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	F-1

Consolidated Balance Sheets	F-2

Consolidated Statements of Operations	F-3

Consolidated Statements of Stockholders' Equity	F-4
Consolidated Statements of Cash Flows	F-5
Notes to Consolidated Financial Statements	F-6

Stan J.H. Lee, CPA

2160 North Central Rd, Suite 209 * Fort Lee * NJ 07024

P.O. Box 436402 * San Diego * CA * 92143-9402

619-623-7799 Fax 619-564-3408 E-mail) stan2u@gmail.com

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Leo Motors, Inc.

We have audited the accompanying consolidated balance sheets of LEO MOTORS, INC. (the Company) as of December 31, 2011 and 2010, and the related consolidated statements of operations, consolidated statements of stockholders' equity and consolidated statements of cash flows for the years then ended. These consolidated financial statements are the representation of the management. Our responsibility is to express an opinion on these consolidated 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. An audit includes 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of LEO MOTORS, INC. as of December 31, 2011 and 2010, and the results of its operation and its cash flows for the years aforementioned in conformity with U.S. generally accepted accounting principles.

__________________

Stan J.H. Lee, CPA

Fort Lee, NJ

April 11, 2012

F-1

LEO MOTORS, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS EXPRESSED IN US DOLLAR)

	As of December 31,
	2011			2010

ASSETS
Cash and cash equivalents		880			71,192
Accounts receivable, net		86,244			-
Inventories		252,584			1,054,833
Short term loans		196,066			196,066
Prepayment to suppliers		163,185			131,850
Other current assets		2,505			54,693

Total Current Assets		701,464			1,508,634

Fixed assets, net		48,751			135,227
Deposit		95,906			141,089
Other non-current assets		56,905			65,719
Investment in an unconsolidated affiliate		4,959,779			5,286,175

Total Non-Current Assets		5,161,341			5,628,210

Total Assets	$	5,862,805		$	7,136,844

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Short term borrowings		433,651			1,127,209
Accounts payable		20,425			494,983
Advance from customers		86,766			544,224
Due to related parties		1,434,583			1,040,142
Other payables and accrued liability		995,658			497,164
Taxes payable		263,254			135,054

Total Current Liabilities		3,234,337			3,838,776

Accrued severance benefits		52,378			52,167

Total Liabilities		3,286,715			3,890,943

Commitments		-			-

Stockholders' Equity:
Common stock ($0.001 par value; 100,000,000 shares authorized;
50,233,115 and 50,833,115 shares issued and outstanding
at December 31, 2011 and 2010, respectively)		50,233			50,833
Additional paid-in capital		10,774,996			10,543,396
Accumulated other comprehensive income		470,876			426,910
Accumulated loss		(9,934,703	)		(9,148,579	)

Total Stockholders' Equity attributable to LEO MOTORS, INC.		1,361,402			1,872,560

Non-controlling interest		1,214,688			1,373,341

Total Stockholders' Equity		2,576,090			3,245,901

Total Liabilities and Stockholders' Equity	$	5,862,805		$	7,136,844

See accompanying notes to consolidated financial statements

F-2

LEO MOTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS EXPRESSED IN US DOLLAR)

	For the Years Ended December 31,
	2011			2010

NET REVENUES	$	920,587		$	2,605,066

COST OF REVENUES		828,034			2,528,435

GROSS PROFIT		92,553			76,631

OPERATING EXPENSES:
Stock-based compensation		231,000			2,399,500
Salaries and benefits		184,679			410,955
Research and development		213,517			53,105
Depreciation and amortization		294,240			358,555
Selling, general and administrative		242,846			654,581

Total Operating Expenses		1,166,282			3,876,696

LOSS FROM OPERATIONS		(1,073,729	)		(3,800,065	)

SHARE OF LOSS OF AN UNCONSOLIDATED AFFILIATE		(326,396	)		(213,825	)

OTHER INCOME (EXPENSES)
Assets disposal gain, net		463,486			-
Interest expense, net		(2,267	)		(53,620	)
Miscellaneous loss, net		(5,871	)		(11,403	)

Total Other Income (Expenses)		455,348			(65,023	)

LOSS BEFORE INCOME TAXES AND NON-CONTROLLING INTEREST		(944,777	)		(4,078,913	)

INCOME TAX EXPENSE		-			-

NET LOSS	$	(944,777	)	$	(4,078,913	)

Less: loss attributable to non-controlling interest		(158,653	)		(1,725,788	)

LOSS ATTRIBUTABLE TO LEO MOTORS, INC.	$	(786,124	)	$	(2,353,125	)

OTHER COMPREHENSIVE INCOME:
Unrealized foreign currency translation gain		43,966			20,434

COMPREHENSIVE LOSS ATTRIBUTABLE TO LEO MOTORS, INC.	$	(742,158	)	$	(2,332,691	)

NET LOSS PER COMMON SHARE:
Basic	$	(0.02	)	$	(0.05	)
Diluted	$	(0.02	)	$	(0.05	)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		50,233,115			49,723,457
Diluted		50,909,827			49,723,457

See accompanying notes to consolidated financial statements.

F-3

LEO MOTORS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended December 31, 2011 and 2010
(AMOUNTS EXPRESSED IN US DOLLAR)

	Common Stock						Additional						Accumulated Other		Non-			Total
	Number of						Paid-in			Accumulated			Comprehensive		Controlling			Stockholders'
	Stocks			Amount			Capital			Loss			Income		Interest			Equity

Balance, January 1, 2010		40,708,115		$	40,708		$	3,964,160		$	(6,795,454	)	$	406,476	$	3,099,129		$	715,019

Common stock issued for acquisition of Leo B&T Corp.		7,000,000			7,000			5,493,000			-			-		-			5,500,000

Stock-based compensation		3,000,000			3,000			2,247,000			-			-		-			2,250,000

Common stock issued for consulting and other service		125,000			125			149,375			-			-		-			149,500

GAAP conversion adjustment, net		-			-			(1,310,139	)		-			-		-			(1,310,139	)

Net loss for the year		-			-			-			(2,353,125	)		-		(1,725,788	)		(4,078,913	)

Foreign currency translation adjustment		-			-			-			-			20,434					20,434

Balance, December 31, 2010		50,833,115			50,833			10,543,396			(9,148,579	)		426,910		1,373,341			3,245,901

Common stock issued for consulting and other services		1,400,000			1,400			229,600			-			-		-			231,000

Common stock cancelled for		(2,000,000	)		(2,000	)		2,000			-			-		-			-

Net loss for the year		-			-			-			(786,124	)		-		(158,653	)		(944,777	)

Foreign currency translation adjustment		-			-			-			-			43,966		-			43,966

Balance, December 31, 2011		50,233,115		$	50,233		$	10,774,996		$	(9,934,703	)	$	470,876	$	1,214,688		$	2,576,090

See accompanying notes to consolidated financial statements

F-4

LEO MOTORS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(AMOUNTS EXPRESSED IN US DOLLAR)

		For the Year Ended December 31,
		2011			2010

CASH FLOWS FROM OPERATING ACTIVITIES:
	Net loss	$	(944,777	)	$	(4,078,913	)
	Adjustments to reconcile net loss to net cash
	used in operating activities:
	Depreciation and amortization		294,240			272,354
	Share of loss of an unconsolidated affiliate		326,396			213,825
	Stock-based compensation		231,000			-
	Non-current assets disposal gain		(493,937	)		-
	GAAP conversion adjustment		-			(1,310,768	)
	Changes in assets and liabilities:
	Accounts receivable		(134,605	)		244,670
	Inventories		802,249			(659,832	)
	Short term loans		-			(196,066	)
	Prepayment to suppliers		(31,335	)		(131,850	)
	Other current assets		52,188			96,374
	Accounts payable, other payables and accrued liability		(279,644	)		553,296
	Accrued severance benefits		211			22,137
	Advances from customers		(457,458	)		248,057
	Taxes payable		128,200			135,142
NET CASH USED IN OPERATING ACTIVITIES			(507,272	)		(4,591,574	)

CASH FLOWS FROM INVESTING ACTIVITIES:
	Acquisition of an unconsolidated affiliate		-			(5,500,000	)
	Purchase of equipment		(1,447	)		(249,600	)
	Outlay for deposit		-			(33,449	)
	Increase in other non-current assets		-			(65,179	)
NET CASH USED IN INVESTING ACTIVITIES			(1,447	)		(5,848,228	)

CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from short-term borrowing		-			698,980
	Advances from related parties		394,441			1,040,142
	Increase in minority interest		-			352,913
	Issuance of common stock		-			7,899,500
NET CASH PROVIDED BY FINANCING ACTIVITIES			394,441			9,991,535

EFFECT OF EXCHANGE RATE ON CASH			43,966			20,434

NET DECREASE IN CASH AND CASH EQUIVALENTS			(70,312	)		(427,833	)

CASH AND CASH EQUIVALENTS - beginning of year			71,192			499,025

CASH AND CASH EQUIVALENTS - end of year		$	880		$	71,192

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
	Cash paid for:
	Interest	$	2,267		$	53,966
	Income taxes		-			-

See accompanying notes to consolidated financial statements.

F-5

LEO MOTORS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011 and 2010

(AUDITED)

NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS

Business

Leo Motors, Inc, Inc (the "Company") is currently in development, assembly and sales of the specialized electric vehicle.

Background

Leo Motors, Inc, Inc (the "Company") was originally incorporated as Classic Auto Accessories, a California corporation on July 2, 1986. The Company then underwent several name changes from FCR Automotive Group, Inc. to Shinil Precision Machinery, Inc. to Simco America Inc. and then to Leo Motors. The Company had been dormant since 1989, and effectuated a reverse merger on November 12, 2007 with Leozone Inc., a South Korean Company, which is the maker of electrical transportation devices. The merger essentially exchanges shares in Leo Motors, Inc. for shares in Leozone. As this is a reverse merger the accounting treatment of such is that of a combination of the two entities with the activity of Leozone, Inc. the surviving entity, going forward. The financial statements reflect the activity for all periods presented as if the merger had occurred January 1, 2007.

On February 11, 2010, the Company acquired 50% shares of Leo B&T Corp.,("B&T") a Korean corporation, from two shareholders of B&T in exchange for 7,000,000 shares of the Company's common stock.

Going Concern

The Company has a net loss of $944,777 and $4,078,913 for the year ended December 31, 2011 and 2010, respectively and has a working capital deficiency of $2,532,873 and $2,330,142 at December 31, 2011 and 2010, respectively and accrued but not paid Delaware franchise taxes for 2010 and 2011 of approximately $25,282.70 on a combined basis. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company's ability to generate profitability and/or obtain continuous funding source. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). These consolidated financial statements and related notes are expressed in U.S. dollars (“US$”). The Company's fiscal year-end is December 31. The consolidated financial statements include the financial statements of the Leo Motors Co. Ltd. Korea where the Company is a controlling shareholder with 57.69 % at the end of December 31, 2011 and 2010, respectively. All inter-company transactions and balances have been eliminated upon consolidation.

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. In the opinion of management, all adjustments necessary in order to make the consolidated financial statements not misleading have been included. Actual results could differ from those estimates.

F-6

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with maturity of three months or less when purchased to be cash equivalents.

CONCENTRATIOIN OF CREDIT RISK

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents and accounts receivable. The Company places its cash with high credit quality financial institutions in Korea and US. The Company has not experienced any losses in such bank accounts through December 31, 2011. At December 31, 2011 and 2010, our bank deposits were $880 and $71,192, respectively.

The Company extends credit based on an evaluation of the customer's financial condition, generally without collateral. Exposure to losses on receivables is principally dependent on each customer's financial condition. The Company monitors its exposure for credit losses and maintains allowances for anticipated losses, as required.

ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES

The Company has a policy of reserving for uncollectible accounts based on its best estimate of the amount of probable credit losses in its existing receivables. The Company periodically reviews its receivables to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Accounts receivable are not collateralized and do not bear interest. The Company has established an allowance on accounts receivable of $8,673 and $8,780 as of December 31, 2011 and 2010, respectively .

Other receivables are primarily related to advances made to various vendors and other parties in the normal course of business and an allowance was established when those parties are deemed to be unlikely to repay the amounts.

INVENTORIES

Inventories are stated at the lower of cost or market value. Cost is determined using moving weighted average method. Cost of finished goods comprises direct material, direct production cost and an allocated portion of production overheads based on normal operating capacity.

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.

F-7

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

REVENUE RECOGNITION

The Company follows the guidance of the Securities and Exchange Commission's Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial Statements". In general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales rice to the customer is fixed or determinable, and collectability is reasonably assured. The following policies reflect specific criteria for the various revenues streams of the Company. The Company generates revenue from the delivery of goods and records revenues when the sales are completed, already collected or collectability is reasonably assured, there is no future obligation and there is remote chance of future claim or refund to the customers.

Revenue is recognized when risk of ownership and title pass to the buyer, generally upon the delivery of professional services. Pricing is fixed and determinable according to the Company's published brochures and price lists.

ADVERTISING COSTS

Advertising costs are expensed as incurred. The total advertising expense was $4,638 and $42,360 for the years ended December 31, 2011 and 2010, respectively and have been included as part of operating expenses.

RESEARCH AND DEVELOPMENT

The Company sponsored research and development costs, related to both present and future products, are charged to operations when incurred and are included in operating expenses.

STOCK-BASED COMPENSATION

The Company accounts for stock issued to employees in accordance with ASC Topic 718. ASC Topic 718 requires companies to recognize in the statements of income the grant-date fair value of stock and other equity based compensation issued. There were no options outstanding as of December 31, 2011 and 2010. The Company accounts for non-employee stock-based awards in accordance with ASC Topic 505-50.

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.

F-8

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

LOSS PER SHARE

Basic loss per share is computed by dividing net loss, by the weighted average number of shares of common stock outstanding for the year. Diluted loss per share is computed by dividing net loss, by the weighted average number of shares of common, common stock equivalents and potentially dilutive securities outstanding during each year. Potentially dilutive common shares consist of the common shares issuable upon the exercise of common stock warrants (using the treasury stock method).

FAIR VALUE OF FINANCIAL INSTRUMENTS

For certain of the Company's financial instruments, including cash and cash equivalents, accounts receivable inventory and prepaid expenses and accounts payable, the carrying amounts approximate fair value due to their short maturities.

FOREIGN CURRENCY TRANSLATIOIN AND COMPREHENSIVE INCOME

The reporting currency of the Company is the US$. The functional currency of the parent company is the US$ and the functional currency of the Company’s operating subsidiary is Korean Won (“KRW”). The subsidiary’s results of operations and cash flows are translated at average exchange rates during the year, assets and liabilities are translated at the unified exchange rate at the end of the year, and equity is translated at historical exchange rates. Translation adjustments resulting from the process of translating the functional currency financial statements into US$ are included in determining comprehensive income. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. The Company does not enter any material transaction in foreign currencies and accordingly, transaction gains or losses have not had, and are not expected to have, a material effect on the results of operations of the Company.

IMPACT OF NEW ACCOUNTING STANDARDS

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

NOTE 3. ACCOUNTS RECEIVABLE

At December 31, 2011 and 2010, accounts receivable consisted of the following:


	December 31, 2011		December 31, 2010
	US$		US$
Accounts receivable		134,605		8,780
Less: Allowance for doubtful debts		48,361		8,780
Accounts receivable, net		86,244		-

NOTE 4. INVENTORIES

Inventories at December 31, 2011 and 20010 consist of the following:

	December 31, 2011			December 31, 2010
	US$			US$
Raw material		235,477			975,301
Work in process		32,107			99,531
Finished goods		-			10,002
		267,584			1,084,834
Provision for Inventory		(15,000	)		(30,000	)
		252,584			1,054,834

F-9

NOTE 5. FIXED ASSETS

Fixed assets at December 31, 2011 and 2010 consist of the following:

	December 31, 2011			December 31, 2010
	US$			US$
Equipment and furniture		164,754			203,316
Tools		3,469			37,154
Vehicles		-			4,741
		168,223			245,211
Accumulated depreciation		(119,472	)		(109,984	)
		48,751			135,227

Depreciation is provided using the straight-line method. For the years ended December 31, 2011 and 2010, depreciation expense amounted to $251,337 and $272,354, respectively.

NOTE 6. SHORT TERM BORROWINGS

The Company is indebted to Shin Han Bank at December 31, 2010 and 2009 for $433,651 and $1,127,209, payable in May 2012, interest at 6.57 % per annum. The loan is secured by guarantee issued by 'KIBO", a Korean government agency created to guarantee loans to small-to-medium technology companies.

NOTE 7. OTHER PAYABLES AND ACCRUED LIABILITY

At December 31, 2011 and 2010, other payables and accrued liability consisted of the following:


	December 31, 2011		December 31, 2010
	US$		US$
Other payables		625,760		8,150
Accrued payroll		300,000		300,000
Accrued warranty expense		132,118		52,101
Accrued other expense		-		136,913

		995,658		497,164

NOTE 8. CAPITAL STOCK

The Company’s capitalization is 100,000,000 common shares with a par value of US$0.001 per share. No preferred shares have been authorized or issued.

The Company issued 7,000,000 shares of common stock with US$0.79 per share to acquire 50% equity of Leo B&T Corp. in February 2010 resulting in purchase price of US$5,500,000. On February 8, 2010, 3,000,000 shares of common stock were issued to officers of the Company as compensation which was valued at $0.75 per share. In 2010, 125,000 shares of common stock were issued to settle the consulting fee and IR service with price ranging from US$0.48 to US$1.45 per share.

For the year ended December 31, 2011, the Company issued 1,400,000 shares of common stock to settle the consulting fee, IR service and other professional service. The shares were valued US$231,000 with price ranging from US$0.14 to US$0.43 per share.

F-10

NOTE 9. OPERATING RISK

(a) Concentration of credit risk

Financial instruments that potentially expose the Company to concentration of credit risk consist primarily of cash. The Company places its cash with financial institutions with high credit ratings.

(b) Country risk

Revenues of the Company are mainly derived from the sale in Korea. The Company hopes to expand its operations to other countries, however, such expansion has not been commenced and there are no assurances that the Company will be able to achieve such an expansion successfully. Therefore, a downturn or stagnation in the economic environment of Korea could have a material adverse effect on the Company's financial condition.

The Company might have to compete with larger companies who have greater funds available for expansion, marketing, research and development and the ability to attract more qualified personnel. There can be no assurance that Company will remain competitive should this occur.

(d) Exchange risk

The Company cannot guarantee that the current exchange rate will remain steady, therefore there is a possibility that the Company could post the same amount of profit for two comparable years and because of a fluctuating exchange rate actually post higher or lower profit depending on exchange rate of Korean Won were converted to U.S. dollars on that date. The exchange rate could fluctuate depending on changes in the political and economic environments without notice.

(e) Key personnel risk

The Company's future success depends on the continued services of few individuals and loss of one or several of their service would be detrimental to the Company and could have an adverse effect on business development. The Company does not currently maintain key staff insurance on their life but plan to implement it in near future. Future success is also dependent on the ability to identify, hire, train and retain other qualified managerial and other employees.

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, 2011 and 2010, the Company operated in one reportable business segment: the sale and manufacture of specialized electric vehicle. The Company's reportable segment is a strategic business unit that offers its product.

NOTE 11. COMMITMENT AND CONTIGENCIES

(a) Lease Commitments

The Company leases its office space in Ha-Nam City in Korea which expires on March 31, 2011. The minimum obligations under such commitments for the years ending December 31, 2011 and 2010 until its expiration are nil and US$20,625, respectively.

Rental expense for the years ended December 31, 2011 and 2011 were US$46,211 and US$44,634, respectively.

(b) Litigation

The Company has a disagreement with its former law firm about past due invoices in the amount of $25,429.13 for services rendered through December 3, 2011. The Company is in discussions with its former law firm to satisfy the outstanding invoices, but there is no agreement to date. There is no other threatened, pending or unsettled litigation as of April 11, 2012, the date the financial statement is available for issuance.

NOTE 12. SUBSEQUENT EVENTS

On January 3, 2012, the Company entered into an agreement with Kim Young-il (“Kim”), a holder of 1,800,000 shares of the Company’s common stock (“Kim Shares”). In accordance with the agreement, Kim and the Company will swap respective holding of Kim Shares and the shares of B&T. The Kim Shares and the shares of B&T enjoy a same valuation of Korean Won 540,000,000. As of April 6, 2012, the agreement is not executed and closed.

F-11

Leo Motors, Inc. Reports

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Leo Motors, Inc. - FORM 10-K - April 12, 2012

Leo Motors, Inc. Reports

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