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 RegisteredNone

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.







-1-


LEO MOTORS, INC.


TABLE OF CONTENTS








PART IForward-Looking Statements
3Item 1.     Business
4Item 1A.    Risk Factors
7Item 1B.    Unresolved Staff Comments
7Item 2.     Properties
7Item 3.     Legal Proceedings
7Item 4.     (Removed and Reserved)
7PART IIItem 5.     Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
8Item 6.     Selected Financial Data
9Item 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations
9Item 7A.    Quantitative and Qualitative Disclosures About Market Risk
12Item 8.     Financial Statements and Supplementary Data
12Item 9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
12Item 9A.    Controls and Procedures
12Item 9B.    Other Information
14PART IIIItem 10.    Directors, Executive Officers and Corporate Governance
15Item 11.    Executive Compensation
17Item 12.    Security Ownership of Certain Beneficial Owners and Management and related stockholder matters
20Item 13.    Certain Relationships and Related Transactions, and Director Independence
21Item 14.    Principal Accounting Fees and Services
21PART IVItem 15.    Exhibits, Financial Statement Schedules
22Signatures
23
 -2-


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.


-3-
 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.





-4-


“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.


-5-





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.





-6-


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.  RISKFACTORS





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)


-7-


PART  II





ITEM  5.     MARKET  FOR REGISTRANT'S COMMON EQUITY, RELATEDSTOCKHOLDER 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


LowFirst Quarter

$
0.56


$
0.10Second Quarter

$
0.27


$
0.05Third Quarter

$
1.01


$
0.07Fourth Quarter

$
0.40


$
0.15Fiscal 2009First Quarter

$
1.01


$
0.11Second Quarter

$
1.05


$
0.10Third Quarter

$
0.80


$
0.39Fourth Quarter

$
3.42


$
0.50Fiscal  2010First  Quarter

$
2.75


$
1.20Second  Quarter

$
2.20


$
0.70Third  Quarter

$
1.65


$
0.55Fourth  Quarter

$
1.00


$
0.25Fiscal 2011First Quarter

$
0.95


$
0.31Second Quarter

$
0.80


$
0.13Third Quarter

$
0.30


$
0.16Fourth Quarter

$
0.18


$
0.08
 -8-





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.  SELECTEDFINANCIAL  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.


-9-





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.





-10-





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


2010Salaries and Benefits

$
184,679


$
410,955Service Fees

$
231,000


$
2,399,500General and Administrative

$
242,846


$
751,802Depreciation & Amortization

$
294,240


$
358,555Bad 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  ANDQUALITATIVE  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  ACCOUNTANTSON  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.





-13-


(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.





(c)     Change  in  Internal  Controls


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





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.  OTHERINFORMATION





None.





-14-


PART  III





ITEM  10.  DIRECTORS  AND  EXECUTIVEOFFICERS  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
POSITIONJung Yong ("John") Lee
46
Chief Executive Officer, PresidentInterim CFO and DirectorYoung Il Kim
55
DirectorJenongyoul Choi

DirectorJunhyung 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.


-15-


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.





-16-


ITEM  11.  EXECUTIVECOMPENSATION





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.





-17-


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.


-18-





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

TotalJohn Lee (1)
2011

$
200,000


$
Nil


$
Nil

$

$
200,000President, CEO and Interim
2010


200,000







-




200,000Chief Financial OfficerRobert Kang (2)
2011

$
35,714


$
Nil


$
Nil

$

$
35,714Former 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.


-19-





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 DateJohn Lee
Nil
Nil


n/a



n/aRobert 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 CompensationFees earned or


Stock


OptionName

paid in cash


awards


awards


TotalJung Yong Lee

$



$



$



$Yong Il KimShi Chul Kang





ITEM  12.  SECURITY  OWNERSHIP  OF  CERTAINBENEFICIAL  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.




-20-


AMOUNT OF


PERCENT OFSHARES


SHARESIDENTITY OF

BENEFICIALLY


BENEFICIALLYPERSON OR GROUP

OWNED


OWNED(1,2)

CLASSJung Yong LeeCEO and Interim CFO


6,500,000



13.40
%
CommonYoung Il KimDirector


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


2011Audit 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.


-21-





PART  IV





ITEM  15.  EXHIBITSAND  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).





-22-


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 LeeJung Yong LeeChief Executive Officer, President and Interim Chief Financial Officer








-23-


LEO MOTORS, INC.
 
 
 CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
 December 31, 2011 and 2010
 (Audited)
 
 
 
 
 
 CONSOLIDATED FINANCIAL STATEMENTSReport of Independent Registered Public Accounting Firm
F-1Consolidated Balance Sheets
F-2Consolidated Statements of Operations
F-3Consolidated Statements of Stockholders' Equity
F-4Consolidated Statements of Cash Flows
F-5Notes 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


2010ASSETSCash and cash equivalents


880



71,192Accounts receivable, net


86,244



-Inventories


252,584



1,054,833Short term loans


196,066



196,066Prepayment to suppliers


163,185



131,850Other current assets


2,505



54,693Total Current Assets


701,464



1,508,634Fixed assets, net


48,751



135,227Deposit


95,906



141,089Other non-current assets


56,905



65,719Investment in an unconsolidated affiliate


4,959,779



5,286,175Total Non-Current Assets


5,161,341



5,628,210Total Assets

$
5,862,805


$
7,136,844LIABILITIES AND STOCKHOLDERS' EQUITYCurrent Liabilities:Short term borrowings


433,651



1,127,209Accounts payable


20,425



494,983Advance from customers


86,766



544,224Due to related parties


1,434,583



1,040,142Other payables and accrued liability


995,658



497,164Taxes payable


263,254



135,054Total Current Liabilities


3,234,337



3,838,776Accrued severance benefits


52,378



52,167Total Liabilities


3,286,715



3,890,943Commitments


-



-Stockholders' Equity:Common stock ($0.001 par value; 100,000,000 shares authorized;50,233,115 and 50,833,115 shares issued and outstandingat December 31, 2011 and 2010, respectively)


50,233



50,833Additional paid-in capital


10,774,996



10,543,396Accumulated other comprehensive income


470,876



426,910Accumulated loss


(9,934,703
)


(9,148,579
)Total Stockholders' Equity attributable to LEO MOTORS, INC.


1,361,402



1,872,560Non-controlling interest


1,214,688



1,373,341Total Stockholders' Equity


2,576,090



3,245,901Total Liabilities and Stockholders' Equity

$
5,862,805


$
7,136,844See 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


2010NET REVENUES

$
920,587


$
2,605,066COST OF REVENUES


828,034



2,528,435GROSS PROFIT


92,553



76,631OPERATING EXPENSES:Stock-based compensation


231,000



2,399,500Salaries and benefits


184,679



410,955Research and development


213,517



53,105Depreciation and amortization


294,240



358,555Selling, general and administrative


242,846



654,581Total Operating Expenses


1,166,282



3,876,696LOSS 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



20,434COMPREHENSIVE 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



49,723,457Diluted


50,909,827



49,723,457See accompanying notes to consolidated financial statements.
 
 F-3
 
 LEO MOTORS, INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITYFor the Years Ended December 31, 2011 and 2010(AMOUNTS EXPRESSED IN US DOLLAR)Common Stock


Additional





Accumulated Other


Non-


TotalNumber of





Paid-in


Accumulated


Comprehensive


Controlling


Stockholders'Stocks


Amount


Capital


Loss


Income


Interest


EquityBalance, January 1, 2010


40,708,115


$
40,708


$
3,964,160


$
(6,795,454
)

$
406,476


$
3,099,129


$
715,019Common stock issued foracquisition of Leo B&T Corp.


7,000,000



7,000



5,493,000



-



-



-



5,500,000Stock-based compensation


3,000,000



3,000



2,247,000



-



-



-



2,250,000Common stock issued for consulting and other service


125,000



125



149,375



-



-



-



149,500GAAP 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







20,434Balance, December 31, 2010


50,833,115



50,833



10,543,396



(9,148,579
)


426,910



1,373,341



3,245,901Common stock issued for consulting and other services


1,400,000



1,400



229,600



-



-



-



231,000Common 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



-



43,966Balance, December 31, 2011


50,233,115


$
50,233


$
10,774,996


$
(9,934,703
)

$
470,876


$
1,214,688


$
2,576,090See 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


2010CASH FLOWS FROM OPERATING ACTIVITIES:Net loss

$
(944,777
)

$
(4,078,913
)Adjustments to reconcile net loss to net cashused in operating activities:Depreciation and amortization


294,240



272,354Share of loss of an unconsolidated affiliate


326,396



213,825Stock-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
)


244,670Inventories


802,249



(659,832
)Short term loans


-



(196,066
)Prepayment to suppliers


(31,335
)


(131,850
)Other current assets


52,188



96,374Accounts payable, other payables and accrued liability


(279,644
)


553,296Accrued severance benefits


211



22,137Advances from customers


(457,458
)


248,057Taxes payable


128,200



135,142NET 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


-



698,980Advances from related parties


394,441



1,040,142Increase in minority interest


-



352,913Issuance of common stock


-



7,899,500NET CASH PROVIDED BY FINANCING ACTIVITIES


394,441



9,991,535EFFECT OF EXCHANGE RATE ON CASH


43,966



20,434NET DECREASE IN CASH AND CASH EQUIVALENTS


(70,312
)


(427,833
)CASH AND CASH EQUIVALENTS - beginning of year


71,192



499,025CASH AND CASH EQUIVALENTS - end of year

$
880


$
71,192SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid for:Interest

$
2,267


$
53,966Income 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, 2010US$

US$Accounts receivable


134,605



8,780Less: Allowance for doubtful debts


48,361



8,780Accounts receivable, net


86,244



-
 
 NOTE 4. INVENTORIES
 
 Inventories at December 31, 2011 and 20010 consist of the following:
 
 December 31, 2011


December 31, 2010US$


US$Raw material


235,477



975,301Work in process


32,107



99,531Finished goods


-



10,002267,584



1,084,834Provision 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, 2010US$


US$Equipment and furniture


164,754



203,316Tools


3,469



37,154Vehicles


-



4,741168,223



245,211Accumulated 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, 2010US$


US$Other payables


625,760



8,150Accrued payroll


300,000



300,000Accrued warranty expense


132,118



52,101Accrued other expense


-



136,913995,658



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.
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 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.
 
 (c) Product risk
 
 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.
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