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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

 

For the quarterly period ended September 30, 2024

 

OR

 

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

 

For the transition period from to

 

Commission File Number: 001-41994

 

Massimo Group

(Exact name of registrant as specified in its charter)

 

Nevada   92-0790263
(State or other jurisdiction
of incorporation or organization)		   (I.R.S. Employer
Identification No.)

 

3101 W Miller Road

Garland, TX

   75041
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (877) 881-6376

 

 

(Former name, former address and former fiscal year, if changed since last report)

 

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

 

Title of each class   Trading Symbol(s)   Name of exchange on which registered
Common stock, $0.001 par value   MAMO   The Nasdaq Stock Market LLC

 

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

None

 

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

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

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

 

Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☒    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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

Yes ☐ No ☒

 

As of November 12, 2024, there were 41,384,791 shares of the Company’s common stock issued and outstanding.

 

 

 

 
 

 

TABLE OF CONTENTS

 

    Page
  Cautionary Note Regarding Forward-Looking Statements ii
     
PART I. FINANCIAL INFORMATION F-1
Item 1. Condensed Consolidated Balance Sheets as of September 30, 2024 (unaudited) and December 31, 2023 (audited) F-1
  Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2024 and 2023 (unaudited) F-2
  Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three and Nine Months Ended September 30, 2024 and 2023 (unaudited) F-3
  Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023 (unaudited) F-4
  Notes to Condensed Consolidated Financial Statements (unaudited) F-5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 1
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 14
Item 4. Controls and Procedures. 14
PART II. OTHER INFORMATION 15
Item 1. Legal Proceedings. 15
Item 1A. Risk Factors. 15
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 15
Item 3. Defaults Upon Senior Securities. 15
Item 4. Mine Safety Disclosures. 15
Item 5. Other Information. 15
Item 6. Exhibits. 16
  Signatures 17

 

i
 

 

Unless otherwise stated in this Quarterly Report on Form 10-Q (this “Report”), references to “we,” “us,” “our,” “Company” or “our Company” are to Massimo Group, a Nevada corporation, and its subsidiaries.

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Report contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements contained in this Report other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, projected costs and our objectives for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “should,” “shall,” “intend,” “goal,” “objective,” “seek,” “expect,” and similar expressions or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including but not limited to:

 

● our limited operating history on which to judge our performance and assess our prospects for future success;
● risks related to our reliance on a network of independent dealers and distributors to manage the retail distribution of many of our products;
● our reliance on third-party manufacturers and supplies for our products;
● risks related to the fact that the majority of the products we purchase are manufactured by suppliers in China and their operations are subject to risks associated with business operations in China;
● the inexperience of our principal shareholder and senior management in operating a publicly traded company;
● economic conditions that impact consumer spending may have a material adverse effect on our business;
● results of operations or financial condition;
● risks related to face intense competition in all product lines, including from some competitors that have greater financial and marketing resources;
● risks related to our ability to attract and retain key personnel;
● potential harm caused by misappropriation of our data and compromises in cybersecurity;
● changes in laws, regulatory requirements, governmental incentives and fuel and energy prices;
● litigation, regulatory proceedings, complaints, product liability claims and/or adverse publicity;
● the inability of our dealers, customers and distributors to secure adequate access to capital or financing;
● failure to develop brand name and reputation;
● the significant product repair and/or replacement due to product warranty claims or product recalls;
● the impact of health epidemics, including the COVID-19 pandemic, on our business; and
● other risks and uncertainties described in this Report, including those described in the “Risk Factors” section.

 

Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

 

You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, we undertake no duty to update any of these forward-looking statements after the date of this Report or to conform these statements to actual results or revised expectations.

 

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely upon these statements.

 

You should read this Report and the documents that we reference in this Report and have filed as exhibits to the registration statement, of which this Report is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in this Report by these cautionary statements.

 

ii
 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

MASSIMO GROUP AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

  

September 30, 2024

(Unaudited)

  

December 31, 2023

(Audited)

 
   As of 
  

September 30, 2024

(Unaudited)

  

December 31, 2023

(Audited)

 
ASSETS          
CURRENT ASSETS          
Cash and cash equivalents  $1,723,783   $765,814 
Accounts receivable, net   11,557,733    9,566,445 
Inventories, net   30,913,746    25,800,912 
Advance to suppliers   323,268    1,589,328 
Other current assets   567,485    637,509 
Total current assets   45,086,015    38,360,008 
           
NON-CURRENT ASSETS          
Property and equipment at cost, net   600,034    399,981 
Right of use operating lease assets, net   10,125,587    1,478,221 
Right of use financing lease assets, net   82,410    113,549 
Deferred offering assets   -    1,457,119 
Other non-current assets   49,500    - 
Deferred tax assets   1,109,292    134,601 
Total non-current assets   11,966,823    3,583,471 
TOTAL ASSETS  $57,052,838   $41,943,479 
           
LIABILITIES AND EQUITY          
CURRENT LIABILITIES          
Short-term loans  $-   $303,583 
Accounts payable   9,764,284    12,678,077 
Other payable, accrued expenses and other current liabilities   4,007,780    98,097 
Accrued return liabilities   163,666    283,276 
Accrued warranty liabilities   608,644    619,113 
Contract liabilities   1,167,161    1,835,411 
Current portion of obligations under operating leases   2,075,541    847,368 
Current portion of obligations under financing leases   42,970    41,647 
Income tax payable   2,031,571    2,121,083 
Loan from a related party   6,416,525    - 
Total current liabilities   26,278,142    18,827,655 
           
NON-CURRENT LIABILITIES          
Obligations under operating leases, non-current   8,186,938    630,853 
Obligations under financing leases, non-current   44,629    77,024 
Loan from a related party   -    7,920,141 
Total non-current liabilities   8,231,567    8,628,018 
TOTAL LIABILITIES  $34,509,709   $27,455,673 
           
Commitments and Contingencies   -    - 
           
EQUITY          
Common shares, $0.001 par value, 100,000,000 shares authorized, 41,329,235 and 40,000,000 issued and outstanding as of September 30, 2024 and December 31, 2023, respectively   41,329    40,000 
Preferred shares, $0.01 par value, 5,000,000 preferred shares authorized, no shares were issued and outstanding as of September 30, 2024 and December 31, 2023, respectively   -    - 
Subscription receivable   -    (832,159)
Additional paid-in-capital   5,720,756    1,994,000 
Retained earnings   16,781,044    13,285,965 
Total equity   22,543,129    14,487,806 
           
TOTAL LIABILITIES AND EQUITY  $57,052,838   $41,943,479 

 

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

 

F-1
 

 

MASSIMO GROUP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

 

   2024   2023   2024   2023 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
                 
Revenues  $25,602,310   $29,907,697   $91,156,640   $75,483,811 
Cost of revenues   18,649,995    19,850,258    62,253,681    51,706,682 
Gross profit   6,952,315    10,057,439    28,902,959    23,777,129 
                     
Operating expenses:                    
Selling expense   2,628,915    2,104,505    7,936,761    6,541,244 
General and administrative   3,895,232    2,716,733    12,096,874    9,038,488 
Impairment loss on supplier deposit   29,883    -    772,780    - 
Research and development   94,771    -    257,021    - 
Total operating expenses   6,648,801    4,821,238    21,063,436    15,579,732 
                     
Income from operations   303,514    5,236,201    7,839,523    8,197,397 
                     
Other income (expense):                    
Other income, net   210,701    41,133    590,538    113,001 
Loss on litigation   (3,573,651)   -    (3,573,651)   - 
Interest expense   (64,462)   (213,901)   (268,803)   (494,011)
Total other (expense) income, net   (3,427,412)   (172,768)   (3,251,916)   (381,010)
                     
(Loss) income before income taxes   (3,123,898)   5,063,433    4,587,607    7,816,387 
                     
(Recovery of ) provision for income taxes   (621,665)   1,106,046    1,092,528    1,236,551 
                     
Net (loss) income and comprehensive (loss) income  $(2,502,233)  $3,957,387   $3,495,079   $6,579,836 
                     
(Loss) Earnings per Share – basic  $(0.06)  $0.10   $0.09   $0.16 
Weighted average shares outstanding – basic *   41,325,388    40,000,000    40,863,370    40,000,000 
(Loss) Earnings per Share –diluted  $(0.06)  $0.10   $0.09   $0.16 
Weighted average shares outstanding –diluted*   41,325,388    40,000,000    41,005,556    40,000,000 

 

* Retroactively restated for effect of reorganization

 

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

 

F-2
 

 

MASSIMO GROUP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

(UNAUDITED)

 

   Shares*   Amount   Receivable   Capital   Earnings   Total 
   Common Share   Subscription   Additional
Paid-in		   Retained     
   Shares*   Amount   Receivable   Capital   Earnings   Total 
                         
Balance at June 30, 2023   40,000,000   $40,000   $(1,414,000)  $1,994,000   $5,493,189   $6,113,189 
Subscription received   –    –    361,841    –    –    361,841 
Net income   –    –    –    –    3,957,387    3,957,387 
Balance at September 30, 2023   40,000,000   $40,000   $(1,052,159)  $1,994,000   $9,450,576   $10,432,417 
                               
Balance at June 30, 2024   41,322,485   $41,322   $-   $5,392,664   $19,283,277   $24,717,263 
Issuance of common stock upon vesting of RSU   6,750    7    –    (7)   –    – 
Stock based compensation   –    –    –    328,099    –    328,099 
Net loss   –    –    –    –    (2,502,233)   (2,502,233)
Balance at September 30, 2024   41,329,235   $41,329   $-   $5,720,756   $16,781,044   $22,543,129 

 

   Common Share   Subscription   Additional
Paid-in		   Retained     
   Shares*   Amount   Receivable   Capital   Earnings   Total 
                         
Balance at December 31, 2022   40,000,000   $40,000   $(2,034,000)  $1,994,000   $5,070,740   $5,070,740 
Subscription received   –    –    981,841    –    –    981,841 
Capital dividend declared   –    –    –    –    (2,200,000)   (2,200,000)
Net income   –    –    –    –    6,579,836    6,579,836 
Balance at September 30, 2023   40,000,000   $40,000   $(1,052,159)  $1,994,000   $9,450,576   $10,432,417 
                               
Balance at December 31, 2023   40,000,000   $40,000   $(832,159)  $1,994,000   $13,285,965   $14,487,806 
                               
Additional Paid-in capital   –    –    832,159    88,172    –    920,331 
Initial public offering, net of share issuance costs   1,300,000    1,300    –    3,000,248    –    3,001,548 
Issuance of common stock   29,235    29    –    79,971    –    

80,000

 
Stock based compensation   –    –    –    558,365    –    558,365 
Net income   –    –    –    –    3,495,079    3,495,079 
Balance at September 30, 2024   41,329,235   $41,329   $-   $5,720,756   $16,781,044   $22,543,129 

 

* Retroactively restated for effect of reorganization

 

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

 

F-3
 

 

MASSIMO GROUP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   2024   2023 
   Nine Months Ended September 30, 
   2024   2023 
         
Cash flows from operating activities:          
Net income  $3,495,079   $6,579,836 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation   98,111    109,765 
Non-cash operating lease expense   1,342,402    793,577 
Accretion of finance lease liabilities   3,672    5,610 
Amortization of finance lease right-of-use assets   31,139    31,733 
Written-off of account receivables   -    420,967 
Provision of (Reversal of) allowance for excepted credit loss, net   223,051    (118,144)
Gain on disposal of fixed asset   (36,001)   - 
Impairment loss of asset   772,780    - 
Loss on litigation   3,573,651    - 
RSU compensation   426,666    - 
Share-based compensation for services   131,699    - 
Deferred tax assets   (974,691)   (65,158)
Changes in operating assets and liabilities:          
Accounts receivable   (2,214,339)   (1,631,919)
Inventories   (5,002,834)   (36,157)
Reversal of inventory impairment   

(110,000

)   - 
Advance to suppliers   493,280    (130,580)
Other current assets   20,524    (818,397)
Related party payable   -    398,700 
Accounts payables   (2,913,793)   (373,314)
Other payable, accrued expense and other current liabilities   336,032    (154,530)
Tax payable   (89,512)   1,237,709 
Accrued warranty liabilities   (10,469)   205,868 
Accrued return liabilities   (119,610)   (341,317)
Contract liabilities   (668,250)   457,936 
Lease liabilities – operating lease   (1,205,510)   (793,577)
Net cash (used in) provided by operating activities   (2,396,923)   5,778,608 
           
Cash flows from investing activities:          
Proceed from sales of property and equipment   162,001    - 
Acquisition of property and equipment   (424,164)   (68,871)
Net cash used in investing activities   (262,163)   (68,871)
           
Cash flows from financing activities:          
Repayment of other loans   (303,583)   (1,600,000)
Repayment of finance lease liabilities   (34,744)   (35,469)
Proceed from common share issuances   80,000    - 
Deferred offering costs   -    (263,162)
Proceeds from initial public offering, net of share issuance costs   4,458,667    - 
Repayment of loan from a related party   (1,503,616)   (3,982,876)
Proceeds from subscription deposits   920,331    381,841 
Net cash provided by (used in) financing activities   3,617,055    (5,499,666)
           
Net increase in cash and cash equivalents   957,969    210,071 
Cash and cash equivalents, beginning of the period   765,814    947,971 
Cash and cash equivalents, end of the period  $1,723,783   $1,158,042 
           
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:          
Cash paid for interest  $244,173   $494,011 
Cash paid for income taxes  $2,156,731   $64,000 
           
NON-CASH ACTIVITIES          
Right of use assets obtained in exchange for operating lease obligations  $9,758,345   $1,113,140 
Right of use assets obtained in exchange for finance lease  $-   $60,805 

 

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

 

F-4
 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION

 

Massimo Group (the “Company”), is a holding company established on October 10, 2022 under the laws of the State of Nevada. The Company, through its subsidiaries, is primarily engaged in the manufacturing and sales of a wide selection of farm and ranch tested utility terrain vehicles (“UTVs”), recreational all-terrain vehicles (“ATVs”), and pontoon and tritoon boats (“Pontoon Boats”). On April 4, 2024, the Company closed its initial public offering (“IPO”) of 1,300,000 shares of its common stock at an IPO price of $4.50 per share for aggregate gross proceeds of approximately $5.85 million from the offering (Note 15). In connection with the offering, the Company’s common shares began trading on the Nasdaq Capital Market under the trading symbol “MAMO.” Mr. David Shan, the Chairman of the Board and Chief Executive Officer (“CEO”), is the controlling shareholder (the “controlling shareholder”) of the Company and owns 77.6% equity interest of Massimo Group as of September 30, 2024.

 

Reorganization

 

On June 1, 2023, the two shareholders transferred their 100% equity interest in Massimo Motor Sports, LLC (“Massimo Motor Sports”) and 100% equity interest in Massimo Marine, LLC (“Massimo Marine”) to Massimo Group (the “Reorganization”). After this Reorganization, Massimo Group ultimately owns 100% equity interests of Massimo Motor Sports and Massimo Marine.

 

Before and after the Reorganization, the Company, together with its subsidiaries, is effectively controlled by the same controlling shareholders, and therefore the Reorganization is considered as a recapitalization of entities under common control in accordance with Accounting Standards Codification (“ASC”) 805-50-25. The consolidation of the Company and its subsidiaries have been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements in accordance with ASC 805-50-45-5.

 

Details of the Company and its subsidiaries are set out below upon the Reorganization:

  

Subsidiaries  

Date of

Incorporation

  

Jurisdiction of

Formation

  

Percentage of

direct/indirect

Economic

Ownership

    

Principal

Activities

Massimo Group   October 10, 2022   Nevada           Holding company
Massimo Motor Sports, LLC   June 30, 2009   Texas     100 %   Manufacture of UTVs and ATVs
Massimo Marine, LLC   January 6, 2020   Texas     100 %   Manufacture of Pontoon Boats

 

On June 1, 2023, the Company entered into two agreements with Asian International Securities Exchange Co., Ltd. (“AISE”) and AISE agreed to invest $1 million to Massimo Motor Sports and $1 million to Massimo Marine to exchange their 15% of equity interest respectively. After Reorganization, the 15% of equity interest in Massimo Motor Marine and Massimo Marine owned by AISE have been exchanged to 15% of equity interest in Massimo Group.

 

F-5
 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation and Principles of Consolidation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for annual consolidated financial statements. In the opinion of management, the accompanying condensed consolidated financial statements include all adjustments which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of September 30, 2024, and for the three and nine months ended September 30, 2024 and 2023. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the operating results for the full year ending December 31, 2024 or any other period. These unaudited condensed consolidated financial statements have been derived from the accounting records of the Company and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on April 15, 2024.

 

Uses of estimates and assumptions

 

In preparing the consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information as of the date of the consolidated financial statements. Significant accounting estimates required to be made by management include allowance for inventories, allowance for credit losses, sales return liabilities, warranty costs and the assessment and the disclosure of contingency liabilities. The Company evaluates its estimates and assumptions on an ongoing basis and its estimates on historical experience, current and expected future conditions and various other assumptions that management believes are reasonable under the circumstances based on the information available to management at the time these estimates and assumptions are made. Actual results and outcomes may differ significantly from these estimates and assumptions.

 

Cash and cash equivalents

 

Cash and cash equivalents consist of cash on hand, the balances with banks and the liquid investments with maturities of three months or less. The Company maintains all its bank accounts in the United States, maximum amounts of $751,585 and $435,457 are insured by Federal Deposit Insurance Corporation (“FDIC”) as of September 30, 2024 and December 31, 2023, respectively.

 

Accounts receivable, net

 

Accounts receivable represent trade receivable and are recognized initially at fair value and subsequently adjusted for any allowance for expected credit loss. The Company grants credit to customers, without collateral, under normal payment terms. The Company uses a loss rate method to estimate the allowance for credit losses. The Company evaluates the expected credit loss of accounts receivable based on customer financial condition and historical collection information adjusted for current market economic conditions and forecasts of future economic performance when appropriate. Loss-rate approach is based on the historical loss rates and expectations of future conditions. The Company writes off potentially uncollectible accounts receivable against the allowance for credit losses if it is determined that the amounts will not be collected.

 

F-6
 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Inventories, net

 

Inventories are stated at the lower of cost or net realizable value, using the first-in, first out (FIFO) method. Costs include the cost of raw materials, freight and duty. Any excess of the cost over the net realizable value of each item of inventories is recognized as a provision for diminution in the value of inventories. Net realizable value is estimated using selling price in the normal course of business less any costs to complete and sell products. As of September 30, 2024 and December 31, 2023, the Company had inventory provision of $329,900 and $439,900, included in inventories, net in the unaudited condensed consolidated balance sheet. Reversal of impairment provision of inventories were $110,000, $110,000, $nil and $nil for the three and nine months ended September 30, 2024 and 2023, respectively, included in cost of revenues in the condensed consolidated statement of operations and comprehensive income.

 

Advances to suppliers

 

Advance to suppliers consists of balances paid to suppliers for purchasing of products, parts and accessories that have not been provided or received. Advances to suppliers are short-term in nature and are reviewed periodically to determine whether their carrying value has become impaired. The Company evaluated the carrying value of individual advances based on specifics facts and circumstances for any impairment at each reporting date. For the three-month period and nine-month period ended September 30, 2024 and 2023, the Company recorded the impairment loss of $29,883, $772,780, $nil and $nil respectively on its advances to suppliers in connection of an expected settlement between the Company and one supplier in September 2024.

 

Deferred offering cost

 

Deferred offering costs were expenses directly related to the Company’s planned IPO. These costs consisted of legal, accounting, printing, and filing fees that the Company capitalized, including fees incurred by the independent registered public accounting firm directly related to the offering. The deferred offering costs are reclassified to additional paid-in capital upon receipts of the capital raised at IPO closing date.

 

Property and equipment

 

Property and equipment are recorded at cost. Depreciation is provided in amounts sufficient to amortize the cost of the related assets over their useful lives using the straight-line method, as follows:

 

    Useful life
Furniture and fixtures   5-7 years
Machinery equipment   5-7 years
Electronic equipment   5 years
Transportation equipment   5 years
Leasehold improvement   Over the shorter of the lease term or estimated useful lives

 

Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gains or losses on disposals are determined by comparing proceeds with carrying amount and are recognized within “other income (expense)” in the unaudited condensed consolidated statements of operations and comprehensive income.

 

F-7
 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Leases

 

The Company adopted Accounting Standards Update (“ASU”) No. 2016-02—Leases (Topic 842) since January 1, 2020, using a modified retrospective transition method permitted under ASU No. 2018-11. This transition approach provides a method for recording existing leases only at the date of adoption and does not require previously reported balances to be adjusted. The Company evaluates the contracts it enters into to determine whether such contracts contain leases. A contract contains a lease if the contract conveys the right to control the use of identified property or equipment for a period of time in exchange for consideration. At commencement, contracts containing a lease are further evaluated for classification as an operating or finance lease where the Company is a lessee.

 

Operating Leases

 

For operating leases, the Company measures its lease liabilities based on the present value of the total lease payments not yet paid discounted based on the more readily determinable of the rate implicit in the lease or its incremental borrowing rate, which is the estimated rate the Company would be required to pay for a collateralized borrowing equal to the total lease payments over the term of the lease. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The Company measures right-of-use (“ROU”) assets based on the corresponding lease liability adjusted for payments made to the lessor at or before the commencement date, and initial direct costs it incurs under the lease. The Company begins recognizing lease expense when the lessor makes the underlying asset available to the Company.

 

Lease cost for operating leases includes the amortization of the ROU asset and interest expense related to the operating lease liability. For leases with lease term less than one year (short-term leases), the Company records operating lease expense in its consolidated statements of operations on a straight-line basis over the lease term and record variable lease payments as incurred.

 

Finance Leases

 

Lease cost for finance leases where the Company is the lessee includes the amortization of the ROU asset, which is amortized on a straight-line basis and recorded to “Depreciation of right-of-use finance asset” and interest expense on the finance lease liability, which is calculated using the interest method and recorded to “Interest expense, net.” Finance lease ROU assets are amortized over the shorter of their estimated useful lives or the terms of the respective leases, including periods covered by renewal options that the Company is reasonably certain of exercising.

 

Impairment of long-lived assets

 

Long-lived assets, primarily consist of property and equipment, are evaluated for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying amount may not be fully recoverable or that the useful life is shorter than the Company had originally estimated. When these events occur, the Company evaluates the impairment by comparing the carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the assets, the Company recognizes an impairment loss based on the excess of the carrying value of the assets over the fair value of the assets. No impairment charge was recognized for the three and nine months ended September 30, 2024 and 2023, respectively.

 

F-8
 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Fair value of financial instruments

 

ASC 825-10 requires certain disclosures regarding the fair value of financial instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

 

● Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
● Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted market prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable and inputs derived from or corroborated by observable market data.
● Level 3 — inputs to the valuation methodology are unobservable.

 

Unless otherwise disclosed, the fair value of the Company’s financial instruments, including cash and cash equivalents, accounts receivables, note receivable which was grouped in other current assets, loan from a related party, accounts payable, other payable, accrued expense and other liabilities, contract liabilities, approximates their recorded values due to their short-term maturities. The Company determined that the carrying value of the lease liabilities approximated their fair value as the interest rates used to discount the contracts approximate market rates. The Company noted no transfers between levels during any of the periods presented. The Company did not have any instruments that were measured at fair value on a recurring nor non-recurring basis as of September 30, 2024 and December 31, 2023.

 

Revenue recognition

 

The Company adopted ASC Topic 606, “Revenue from Contracts with Customers”. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the Company applies the following steps:

 

Step 1: Identify the contract(s) with a customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

 

The Company’s revenue is generated primarily by sales of UTVs, ATVs electric bikes (“e-bikes”), and Pontoon Boats. Revenue represented the amount of consideration to which the Company expects to be entitled in exchange for promised goods. Revenue is recorded when performance obligations are considered to be satisfied when control is transferred to our customers upon goods delivered to customers and acceptance by customers.

 

F-9
 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Sales returns

 

The Company provides a refund policy to accept returns from end customers, which varies and depends on different products and customers. The estimated sales returns are determined based upon an analysis of historical sales returns. Return allowances are recorded as a reduction in sales with corresponding sales return liabilities which are included in “accrued return liabilities.” The estimated cost of returned inventory is recorded as a reduction to cost of sales and an increase of right of return assets which is included in “inventories.” The factors affecting the Company’s sales return liabilities include the number of products currently within the return period, historical and anticipated rates of sales returns claimed on those products, and the estimated amount of returns that may be claimed within this period. If actual results differ from the estimates, the Company revises its estimated sales returns liability accordingly. Each quarter, the Company reviews and reassesses the adequacy of its recorded sales returns liabilities and adjusts the amounts as necessary. As of September 30, 2024 and December 31, 2023, $163,666 and $283,276 of sales return liabilities associated with estimated product returns were recorded in the unaudited condensed consolidated balance sheet, respectively. During the three-month period ended September 30, 2024 and 2023, the Company recorded sales returns of $317,188 and $223,428 respectively. During the nine-month period ended September 30, 2024 and 2023, the Company recorded sales returns of $824,978 and $1,975,270 respectively.

 

Products warranty

 

The Company generally provides a one-year limited warranty against defects in materials related to the sale of products. The Company considers the warranty as an assurance type warranty since the warranty provides the customers the assurance that the product complies with agreed-upon specifications. Estimated future warranty obligations are included in cost of product sales in the period in which the related revenue is recognized. The factors affecting the Company’s warranty include the number of products currently under warranty, historical and anticipated rates of warranty claim on those products, and the estimates of repair and replacement costs to satisfy the Company’s warranty obligation. The anticipated rate of warranty claims is the primary estimate used in determining the warranty liability and is relatively predictable using historical experience of failure rates. The average remaining aggregate warranty period of the products sold is calculated, repair parts are generally already in stock or available at pre-determined prices, and labor rates are generally arranged at pre-established amount with service providers. If actual results differ from the estimates, the Company revises its estimated warranty liability. Each quarter, the Company reevaluates its estimates and assess the adequacy of its recorded warranty liabilities and adjust the amounts as necessary. As of September 30, 2024 and December 31, 2023, $608,644 and $619,113 of product warranty were recorded in the unaudited condensed consolidated balance sheet, respectively. During the three-month period ended September 30, 2024 and 2023, the Company recorded warranty expenses of $234,314 and $576,602, respectively. During the nine-month period ended September 30, 2024 and 2023, the Company recorded warranty expenses of $1,102,494 and $1,521,902, respectively.

 

Contract liabilities

 

The contract liabilities of the Company are primarily related to advances received from customer. The contract liabilities are reported in a net position on a customer-by-customer basis at the end of each reporting period. Contract liabilities are recognized when the Company receives prepayment from customers resulting from purchase order. Contract liabilities will be recognized as revenue when the products are delivered. As of September 30, 2024 and December 31, 2023, the Company records contract liabilities of $1,167,161 and $1,835,411, respectively, which will be recognized as revenue upon delivery of the products sold. For the nine months ended September 30, 2024 and 2023, the amounts transferred from contract liabilities to revenue at the beginning of the fiscal period were $1,160,167 and $696,274, respectively.

 

Disaggregation of revenues

 

The Company disaggregates its revenue from contracts by products, as the Company believes it best depicts how the nature, amount, timing and uncertainty of the revenue and cash flows are affected by economic factors. The Company’s disaggregation of revenues for the three and nine months ended September 30, 2024 and 2023 is disclosed in Note 19 of these unaudited condensed consolidated financial statements.

 

F-10
 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Cost of revenues

 

Cost of revenues includes all of the costs and expenses directly related to the production of goods and services included in revenues. Cost of revenues primarily consists of cost of products, freight and duty allocated and warehouse related overhead, such as salaries and benefits, rent, warehouse supplies and depreciation expenses.

 

The freights and duty costs incurred when shipping raw materials from suppliers to the Company are included in cost of revenues, amounting to $2,406,336 and $1,599,110 for the three months ended September 30, 2024 and 2023, respectively. The freights and duty costs incurred when shipping raw materials from suppliers to the Company are included in cost of revenues, amounting to $8,582,277 and $6,758,360 for the nine months ended September 30, 2024 and 2023, respectively.

 

Shipping and handling costs

 

Shipping and handling costs, which include costs related to the selection of products and their delivery to customers, are presented in selling expenses. The shipping and freight expense incurred upon goods delivery to customers are included in selling expenses, amounting to $1,500,947 and $694,912 for the three months ended September 30, 2024 and 2023, respectively. The shipping and freight expense incurred upon goods delivery to customers are included in selling expenses, amounting to $4,562,815 and $3,130,474 for the nine months ended September 30, 2024 and 2023, respectively.

 

Advertising costs

 

The Company expenses all advertising costs as incurred. Advertising costs presented in selling expenses were $95,509 and $$363,189 for the three months ended September 30, 2024 and 2023, respectively. Advertising costs presented in selling expenses were $499,274 and $825,852 for the nine months ended September 30, 2024 and 2023, respectively.

 

401(k) benefit plan

 

The 401(k) benefit plan covers substantially all employees and allows voluntary employee contributions up to the annually adjusted Internal Revenue Service dollar limit. These voluntary contributions are matched equal to 100% of the employee’s compensation contributed and not to exceed 4% of the total eligible compensation. The employees’ voluntary contributions and the Company’s matching contributions are 100% vested immediately. The Company adopted the 401(k) benefit plan from March 2022.

 

Income taxes

 

Before the Reorganization, the Company elected to be taxed as an S Corporation for federal and state income tax purposes. As an S Corporation, the Company is not subject to federal income tax and state tax in Texas. As such, shareholders are taxed on their pro rata share of earnings and deductions of the Company, regardless of the amount of distributions received. After the Reorganization, the Company is subjected to U.S. federal income tax at 21% and the margin tax in the state of Texas.

 

Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

 

F-11
 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Income taxes (continued)

 

The Company accounts for uncertain tax positions in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic No. 740, “Accounting for Uncertainty in Income Taxes.” A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

 

Significant judgment is also required in evaluating the Company’s uncertain income tax positions and provisions for income taxes. Liabilities for uncertain income tax positions are recognized based on a two-step approach. The first step is to evaluate whether an income tax position has met the recognition threshold by determining if the weight of available evidence indicates that it is more likely than not to be sustained upon examination. The second step is to measure the income tax position that has met the recognition threshold as the largest amount that is more than 50% likely of being realized upon settlement. The Company continually assesses the likelihood and amount of potential adjustments and adjusts the income tax provisions, income taxes payable and deferred income taxes in the period in which the facts that give rise to a revision become known. The Company recognizes interest and penalties related to uncertain income tax positions as interest expense.

 

Earnings per share

 

The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. For the three and nine months ended September 30, 2024 , a total of nil and 142,186 unvested Restricted Stock Units (“RSU”) were included in the computation of weighted average number of common shares for the calculation of diluted EPS. For the three and nine months ended September 30, 2023, there were no dilutive shares.

 

Stock Based compensation

 

The Company follows the provisions of ASC 718, “Compensation - Stock Compensation” (“ASC 260”), which establishes the accounting for employee share-based awards. For employee share-based awards, stock based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense with graded vesting on a straight-line basis over the requisite service period for the entire award.

 

Segment reporting

 

The Company follows ASC 280, “Segment Reporting.” The Company’s Chief Executive Officer or chief operating decision-maker reviews the consolidated financial results when making decisions about allocating resources and assessing the performance of the Company as a whole and hence, the Company has only one reportable segment. The Company operates and manages its business as a single segment. As the Company’s long-lived assets are all located in the United States and substantially all the Company’s revenues are derived from within the United States, no geographical segments are presented.

 

F-12
 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Concentration and risks

 

a. Concentration of credit risk

 

Assets that potentially subject the Company to a significant concentration of credit risk primarily consist of cash and cash equivalents, accounts receivable and other receivable included in other current assets. The maximum exposure of such assets to credit risk is their carrying amounts at the balance sheet dates. The Company maintains all the bank accounts at financial institutions in the United States, where there is $250,000 standard deposit insurance coverage limit per depositor, per FDIC-insured bank and per ownership category. As of September 30, 2024, balances of two banks in Massimo Motor Sports exceeded the insured limits by $145,456 and $826,741, respectively. As of December 31, 2023, balances of one bank in Massimo Motor Sports exceeded the insured limits by $330,357.

 

To limit the exposure to credit risk relating to deposits, the Company primarily places cash deposits with large financial institutions in the United States. The Company conducts credit evaluations of its customers and generally does not require collateral or other security from them. The Company establishes an accounting policy to provide for current expected credit losses based on the individual customer’s financial condition, credit history, and the current economic conditions.

 

b. Foreign Exchange Risk

 

Most of our raw materials are imported from China. The value of the Chinese Yuan against the U.S. dollar is affected by the changes in China and United States economic conditions. We do not believe that we currently have any significant direct foreign exchange risk and have not used any derivative financial instruments to hedge exposure to such risk.

 

c. Interest Rate Risk

 

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. Our exposure to interest rate risk primarily relates to the interest rates from our lessors and our borrowings with banks. The shareholder loans bear no interest. Our leasing obligations’ interest rates are fixed at the commencement date of the leases. We have not been exposed to material risks due to the fact that our borrowing from the bank is not significant. And we have not used any derivative financial instruments to manage our interest risk exposure. However, we cannot provide assurance that we will not be exposed to material risks due to changes in market interest rate in the future.

 

d. Liquidity Risk

 

Liquidity risk arises through the excess of financial obligations over available financial assets due at any point in time. Our objective in managing liquidity risk is to maintain sufficient readily available reserves in order to meet our liquidity requirements at any point in time. We achieve this by maintaining sufficient cash and banking facilities.

 

e. Significant customers

 

For the three months ended September 30, 2024 and 2023, one and one customer accounted for more than 10% of the Company’s total revenues, respectively. For the nine months ended September 30, 2024 and 2023, one and one customer accounted for more than 10% of the Company’s total revenues, respectively. As of September 30, 2024 and December 31, 2023, two and one customers accounted for more than 10% of the Company’s accounts receivable, respectively.

 

F-13
 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Concentration and risks (continued)

 

f. Significant suppliers

 

For the three months ended September 30, 2024 and 2023, two and two suppliers each accounted for more than 10% of the Company’s total purchases respectively. For the nine months ended September 30, 2024 and 2023, two and two suppliers each accounted for more than 10% of the Company’s total purchases respectively. As of September 30, 2024 and December 31, 2023, four and three suppliers each accounted for more than 10% of the Company’s total accounts payable, respectively.

 

Recent accounting pronouncements

 

The Company considers the applicability and impact of all ASUs. Management periodically reviews new accounting standards that are issued.

 

The Jumpstart Our Business Startups Act provides that an emerging growth company (“EGC”) as defined therein can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an EGC to delay adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has adopted the extended transition period.

 

In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity,” which simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. This ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The new standard will become effective for us beginning January 1, 2024, using either a modified retrospective or a fully retrospective method of transition, and early adoption is permitted. Management is currently evaluating the impact of the new standard on our financial statements.

 

In November 2023, the FASB issued ASU No. 2023-07, “Improvements to Reportable Segment Disclosures” (Topic 280). This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment’s profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is also permitted. This ASU will likely result in us including the additional required disclosures when adopted. Management is currently evaluating the provisions of this ASU and expect to adopt them for the year ending December 31, 2024.

 

In December 2023, the FASB issued ASU No. 2023-09, “Improvements to Income Tax Disclosures” (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income tax paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. This ASU will likely result in the required additional disclosures being included in the Company’s consolidated financial statements, once adopted.

 

The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated balance sheets, statements of income and comprehensive income and statements of cash flows.

 

F-14
 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 3 — ACCOUNTS RECEIVABLE, NET

 

Accounts receivable consist of the following:

  

   September 30, 2024   December 31, 2023 
Accounts receivable – third parties  $12,273,560   $10,123,805 
Less: allowance for credit loss   (715,827)   (557,360)
Accounts receivable, net  $11,557,733   $9,566,445 

 

The Company recorded a reversal of allowance for credit loss of $27,779 and $174,231 for the three months ended September 30, 2024 and 2023, respectively. The Company recorded an allowance for credit loss of $223,051 and a reversal of allowance for credit loss $118,144 for the nine months ended September 30, 2024 and 2023, respectively. The Company wrote off uncollectible accounts receivable of $64,584 and $64,584 against allowance for credit loss account for the three and nine months ended September 30, 2024, respectively. The Company wrote off uncollectible accounts receivable of $420,967 and $420,967 in general and administrative expense from customer for the three and nine months ended September 30, 2023, respectively.

 

The movement of allowance for credit loss are as follow:

 

   September 30, 2024   December 31, 2023 
Balance as of beginning  $557,360   $354,059 
Written off   (64,584)   - 
Additional of provision   223,051    203,301 
Ending balance  $715,827   $557,360 

 

The Company’s accounts receivable balances as of September 30, 2024 and December 31, 2023 are pledged for its line of credit facility at Midfirst Bank and Cathay Bank (See Note 12).

 

NOTE 4 — INVENTORIES

 

Inventories consist of the following:

 

   September 30, 2024   December 31, 2023 
Products  $22,898,515   $16,777,928 
Parts and accessories   1,360,713    899,188 
Inventories in transit   2,045,793    5,399,964 
Freight and duty   4,938,625    3,163,732 
Inventory, gross   31,243,646    26,240,812 
Less: inventory allowance   (329,900)   (439,900)
Inventories, net  $30,913,746   $25,800,912 

 

A reversal of impairment provision of inventories recorded for lower of cost or net realizable value adjustments were $110,000, $110,000, $nil and $nil for the three and nine months ended September 30, 2024 and 2023, respectively.

 

The inventories which are pledged for the Company’s line of credit facility at Cathay Bank/Midfirst Bank are $24,741,508 and $19,961,227 as of September 30, 2024 and December 31, 2023, respectively (See Note 12).

 

F-15
 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 5 — ADVANCE TO SUPPLIERS

 

Advance to suppliers consist of the following:

 

   September 30, 2024   December 31, 2023 
Advance to suppliers  $1,096,048   $1,589,328 
Less: impairment loss allowance due to irrecoverable prepayment   772,780    - 
Advance to suppliers, net  $323,268   $1,589,328 

 

An impairment loss allowance of advances to suppliers of $29,883, $772,780, $nil and $nil impairment loss allowance of advances to suppliers was recorded during the three and nine months ended September 30, 2024 and 2023.

 

In June 2024, we reached a tentative agreement regarding general settlement terms with one supplier who would use approximately $312,500 to resolve the claim. Therefore, we wrote off the approximate $773,000 of prepayment to the supplier, reducing it from $1.1 million to $312,500 and reclassified the remaining balance of $312,500 to other current assets on condensed consolidated balance sheet during nine months ended September 30, 2024 (Note 6). The settlement agreement was finalized in August 2024, and relative payment was received in October 2024. During the three and nine months ended September 30, 2023, we had no impairment loss of advance to suppliers.

 

NOTE 6 — OTHER NON-CURRENT AND CURRENT ASSETS

 

Other current assets consist of the following:

 

   September 30, 2024   December 31, 2023 
Prepayment  $145,324   $598,481 
Note receivable (Note 5)   312,500    - 
Other receivables   159,161    39,028 
Less: Other non-current assets   (49,500)   - 
Other current assets  $567,485   $637,509 

 

NOTE 7 — PROPERTY AND EQUIPMENT, NET

 

Property and equipment, net, consist of the following:

 

   September 30, 2024   December 31, 2023 
Furniture and Fixtures  $125,977   $125,977 
Machinery equipment   326,843    89,418 
Vehicles   461,667    670,793 
Electronic equipment   35,303    35,303 
Leasehold improvement   173,286    90,974 
Subtotal   1,123,076    1,012,465 
Less: accumulated depreciation and amortization   (523,042)   (612,484)
Property and equipment, net  $600,034   $399,981 

 

Depreciation expense was $31,127 and $39,473 for the three months ended September 30, 2024 and 2023, respectively. Depreciation expense was $98,111 and $109,765 for the nine months ended September 30, 2024 and 2023, respectively.

 

There was an addition of $82,312 and $44,210 on property and equipment during the three months ended September 30, 2024 and 2023, respectively. There was an addition of $424,164 and $68,871 on property and equipment during the nine months ended September 30, 2024 and 2023, respectively. There was no disposal of property and during the three months ended September 30, 2024 and 2023, respectively. There was a disposal of property and equipment with the net book value of $126,000 and $nil with realized gain on the disposition of $36,001 and $nil during the nine months ended September 30, 2024 and 2023, respectively.

 

No impairment was recorded for the three and nine months ended September 30, 2024 and 2023.

 

F-16
 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 8 — LEASES

 

On August 1, 2018, the Company signed a lease agreement with Miller Creek Holding LLC, a related party owned by the controlling shareholder, to rent the warehouse and office space of total 220,000 square feet for monthly rent of $40,000 used for its operation. The lease expired on July 31, 2021 and was further renewed for another three years and expired on July 31, 2024 with monthly rent of $60,000. On August 1, 2024, the lease was further renewed for another five years and expired on July 31, 2029 with monthly rent of $145,750. On April 29, 2023, the Company signed another lease agreement with Miller Creek Holding LLC, a related party owned by the controlling shareholder, to rent the warehouse and office space of total 66,000 square feet for monthly rent of $35,000 used for its operation. The lease expires on April 30, 2026. On May 1, 2024, the Company signed another two lease agreements with Miller Creek Holding LLC, a related party owned by the controller shareholder, to rent additional warehouse and office space of 60,000 square feet and 30,000 square feet for monthly rent of $33,000 and $16,500 used for its operation, respectively. The leases will expire on August 31, 2029. The Company also had multiple lease agreements for machinery, office equipment and vehicles. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

 

Total operating lease expense for the three months ended September 30, 2024 and 2023 amounted to $624,232 and $311,192, respectively. Amortization of operating lease right-of-use assets amounted to $471,350 and $272,580 for the three months ended September 30, 2024 and 2023, respectively.

 

Total operating lease expense for the nine months ended September 30, 2024 and 2023 amounted to $1,342,402 and $793,577, respectively. Amortization of operating lease right-of-use assets amounted to $1,110,979 and $698,336 for the nine months ended September 30, 2024 and 2023, respectively.

 

Total accretion of finance lease liabilities for the three months ended September 30, 2024 and 2023 amounted to $1,116 and $2,219, respectively. Amortization of finance lease right-of-use assets amounted to $10,379 and $10,380 for the three months ended September 30, 2024 and 2023, respectively.

 

Total accretion of finance lease liabilities for the nine months ended September 30, 2024 and 2023 amounted to $3,672 and $5,610, respectively. Amortization of finance lease right-of-use assets amounted to $31,139 and $31,733 for the nine months ended September 30, 2024 and 2023, respectively.

 

Supplemental balance sheet information related to operating and financing leases was as follows:

  

Operating leases

 

   September 30, 2024   December 31, 2023 
         
Operating lease liabilities - current  $2,075,541   $847,368 
Operating lease liabilities - non-current   8,186,938    630,853 
Total  $10,262,479   $1,478,221 

 

Financing leases

 

   September 30, 2024   December 31, 2023 
         
Finance lease liabilities - current  $42,970   $41,647 
Finance lease liabilities - non-current   44,629    77,024 
Total  $87,599   $118,671 

 

F-17
 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 8 — LEASES (continued)

 

The following table includes supplemental cash flow and non-cash information related to leases:

 

   September 30, 2024   December 31, 2023 
Cash paid of amounts included in the measurement of lease liabilities:          
Operating cash flows used in operating leases  $1,205,510   $1,104,769 
Financing cash flows used in finance leases  $34,744   $47,051 
Right-of-use assets obtained in exchange for lease obligations:          
Finance lease liabilities  $-   $60,805 
Operating lease liabilities  $9,758,345   $1,113,140 

 

The weighted average remaining lease terms and discount rates for all of operating lease and finance leases were as follows:

 

   September 30, 2024   December 31, 2023 
Weighted-average remaining lease term (years):          
Finance lease   2.17 years    2.85 years 
Operating leases   4.62 years    1.82 years 
           
Weighted average discount rate:          
Finance leases   4.74%   4.61%
Operating leases   7.68%   8.61%

 

The following is a schedule of maturities of operating and finance lease liabilities as of September 30, 2024:

 

Operating leases

 

Twelve months ending September 30,     
Operating leases     
2025  $2,866,655 
2026   2,629,915 
2027   2,343,000 
2028   2,343,000 
2029   2,002,000 
Total future minimum lease payments   12,184,570 
Less: imputed interest   (1,922,091)
Present value of operating lease liabilities  $10,262,479 

 

Finance leases

 

Twelve months ending September 30,     
Finance leases     
2025  $46,325 
2026   34,578 
2027   8,701 
2028   3,626 
Total future minimum lease payments   93,230 
Less: imputed interest   (5,631)
Present value of finance lease liabilities  $87,599 

 

F-18
 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 9 — ACCRUED RETURN LIABILITIES

 

The following table shows changes in the Company’s accrued return:

 

   September 30, 2024   December 31, 2023 
Beginning balance  $283,276   $556,538 
Actual recognized products return   (1,535,478)   (3,355,112)
Accruals for product return liabilities   1,415,868    3,081,850 
Ending balance  $163,666   $283,276 

 

NOTE 10 — ACCRUED WARRANTY EXPENSES

 

The following table shows changes in the Company’s accrued warranties and related costs:

 

   September 30, 2024   December 31, 2023 
Beginning balance  $619,113   $260,531 
Cost of warranty claims   (1,080,700)   (1,924,203)
Accruals for product warranty   1,070,231    2,282,785 
Ending balance  $608,644   $619,113 

 

NOTE 11 — OTHER PAYABLE, ACCRUED EXPENSE AND OTHER CURRENT LIABILITY

 

The following table shows breakdown of Company’s other payable, accrued expense and other current liabilities:

 

   September 30, 2024   December 31, 2023 
Credit card liabilities  $22,060   $7,732 
Sales Tax payable   29,859    13,204 
Other current liabilities   382,210    77,161 
Additional accrual on litigation (Note 18)   3,573,651    - 
Total  $4,007,780   $98,097 

 

F-19
 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 12 —LOANS

 

Loan balance consists of the following:

 

   September 30, 2024   December 31, 2023 
Bank loan – Cathay Bank (1)/Midfirst (4)   $    -   $- 
Other loans - Northpoint (2)   -    205,440 
Other loans – BAC (3)   -    98,143 
Total  $-   $303,583 

 

(1)

On May 13, 2024, the Company’s subsidiary Massimo Motor Sports obtained a line of credit from Cathay Bank, pursuant to which the Company has the availability to borrow a maximum $15.0 million out of this line of credit for one year at the U.S. prime rate + 0.75%. Before then, the company had a line of credit of maximum $10.0 million from Midfirst bank, which is cancelled upon the grant of the line of credit from Cathay Bank. As of September 30, 2024 and December 31, 2023, the outstanding balance was $nil million and $nil.

 

This line of credit is also personally guaranteed by Mr. David Shan, the controlling shareholder. This line of credit is pledged by the Company’s accounts receivable and inventories.

   
(2)

On April 19, 2022, the Company’s subsidiary Massimo Marine obtained a $2.0 million pay as sold line of credit from Northpoint Commercial Finance LLC (“Northpoint”) for acquisition, financing and/or refinancing of inventory. This line of credit is also personally guaranteed by Mr. David Shan, the Controlling Shareholder, and Massimo Motor Sports, an affiliated company. As of September 30, 2024 and December 31, 2023, the outstanding balance was $nil and $205,440, respectively.

 

(3) On February 18, 2022, the Company’s subsidiary Massimo Marine obtained a credit facility for Mercury Marine in the amount of $1.75 million from Brunswick Acceptance Company LLC (“BAC”) to finance purchase of inventory. This line of credit is also personally guaranteed by Mr. David Shan. As of September 30, 2024 and December 31, 2023, the outstanding balance was $nil and $98,143, respectively.
   
(4) On January 15, 2021, the Company’s subsidiary Massimo Motor Sports obtained a line of credit from Midfirst Bank, pursuant to which the Company has the availability to borrow a maximum $4.0 million out of this line of credit for two years at the U.S. prime rate + 0.25%. On April 18, 2022, this line of credit was further increased to $10.0 million, and on January 3, 2024, the maturity date was renewed to January 3, 2026.
   
  This line of credit is guaranteed by the Massimo Group, and is also personally guaranteed by Mr. David Shan, the controlling shareholder, and Miller Creek Holdings LLC, a related party controlled by Mr. David Shan. This line of credit is pledged by the Company’s accounts receivable and inventories.
   
  On May 13, 2024, the credit facility was closed due to transferring to Cathay Bank ((1) above), and all guarantees were released and transferred to Cathay Bank.

 

NOTE 13 — RELATED PARTY TRANSACTIONS

 

The relationship of related parties is summarized as follow:

  

Name of Related Party   Relationship to the Company
David Shan   Controlling shareholder of the Company
Custom Van Living   Controlled by David Shan
Miller Creek Holdings LLC   Controlled by David Shan
SUNL Technology LLC   Controlled by David Shan
Asia International Securities Exchange Co Ltd   Principal shareholder of the Company

 

F-20
 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 13 — RELATED PARTY TRANSACTIONS (continued)

 

(a) Loan from a related party

 

Loan from a related party consists of the following:

  

   September 30, 2024   December 31, 2023 
         
Loan from David Shan, opening balance  $7,920,141   $10,984,344 
Repayment    (1,503,616)   (5,264,203)
Capital dividend declared   -    2,200,000 
Loan from David Shan, ending balance   6,416,525    7,920,141 
Non-current   -    (7,920,141)
Current  $6,416,525   $- 

 

On January 3, 2024, the Company entered into an unsecured loan agreement with Mr. David Shan, the Chairman of the Board and CEO, to change the payment term from due on demand to due on January 3, 2029. This unsecured loan was required by MidFirst Bank when the Company renewed the line of credit on January 3, 2024. On May 13, 2024, the line of credit with MdFirst Bank was closed and the Company obtained a new line of credit with Cathay Bank, which did not have no such requirement. As a result, the Company made repayment totaling $1,503,616 towards this loan during the nine months ended September 30, 2024. The Company intends to continue repayments over of the loan from Mr. Shan for the next twelve months. Consequently, the outstanding balance has been reclassified from non-current liabilities to current liabilities as of September 30, 2024.

 

(b) Loan guarantee provided by related parties

 

In connection with the Company’s bank borrowing, Mr. David Shan, the controlling shareholder, Miller Creek Holdings LLC and Massimo Group, the holding company of Massimo Motor provided unlimited guarantee to the Company’s loan (See Note 12).

 

F-21
 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 14 — TAXES

 

Corporate Income Taxes

 

Massimo Motor and Massimo Marine both terminated their status as a Subchapter S Corporation as of June 1, 2023, in connection with the Reorganization and became a taxable C Corporation. Prior to that date, as an S Corporation, the Company had no U.S. federal income tax expense. As such, any periods prior to June 1, 2023 will only reflect a margin tax for the state of Texas and corresponding tax expense. As a C Corporation, the Company combined effective tax rate for federal income taxes of 21% and state margin tax.

 

As of September 30, 2024 and December 31, 2023, the Company did not have an accrued liability for uncertain tax positions and does not anticipate recognition of any significant liabilities for uncertain tax positions during the next 12 months. For the three and nine months ended September 30, 2024 and 2023, no amounts were incurred for income tax uncertainties or interest and penalties. The Company is currently not aware of any issues under review that could result in significant payments, accruals, or material deviation from its position. The Company’s tax years since its formation remain subject to possible income tax examination by its major taxing authorities for all periods. The Company’s effective tax rate for the three months ended September 30, 2024 and 2023 are 19.9% and 22.3% respectively. The Company’s effective tax rate for the nine months ended September 30, 2024 and 2023 are 23.8% and 20.0% respectively.

 

The provision for income tax consists of the following:

  

   2024   2023   2024   2023 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
                 
Income tax provision – current  $55,782   $1,067,639   $2,067,219   $1,301,709 
Income tax (recovery) provision - deferred   (677,447)   38,407    (974,691)   (65,158)
Income tax (recovery) provision  $(621,665)  $1,106,046   $1,092,528   $1,236,551 

 

The following table reconciles the statutory tax rate to the Company’s effective tax:

  

   2024   2023   2024   2023 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
                 
Net (loss) income before income taxes  $(3,123,898)  $5,063,433   $4,587,607   $7,816,387 
Income tax at the federal statutory rate   21%   21%   21%   21%
Statutory U.S. federal income tax (recovery) provision   (656,018)   1,063,321    963,398    1,641,441 
S Corporation benefits   -    -    -    (642,278)
State margin tax   17,736    39,113    101,473    83,349 
Non-deductible expense   16,617   -    27,657   - 
Other adjustments   -    3,612    -    154,039 
Total  $(621,665)  $1,106,046   $1,092,528   $1,236,551 

 

F-22
 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 14 — TAXES (continued)

 

Corporate Income Taxes (continued)

 

The Company’s deferred tax assets and liabilities consist of the following:

 

   September 30, 2024   December 31, 2023 
Deferred tax assets:          
Allowance for credit loss  $16,480   $117,046 
Property and equipment   150,324    16,480 
Lease liability – operating   2,155,121    310,426 
Lease liability – financing   18,395    24,920 
Other temporary difference   750,467    - 
Warranty liabilities   127,814    - 
Return liabilities   34,370    - 
Total deferred tax assets   3,252,971    468,872 
Deferred tax liabilities:          
Right of use assets – operating   (2,126,373)   (310,426)
Right of use assets – financing   (17,306)   (23,845)
Total deferred tax liabilities   (2,143,679)   (334,271)
Deferred tax assets, net  $1,109,292   $134,601 

 

NOTE 15 — SHAREHOLDERS’ EQUITY

 

Common Shares

 

Massimo Group is a company that was established on October 10, 2022 under the laws of the State of Nevada. Based on the Company’s Articles of Incorporation, the authorized number of common stock was 100,000,000 shares of common stock with par value of $0.001, and 40,000,000 common shares were issued on June 1, 2023. The authorized number of preferred stock was 5,000,000 shares of preferred stock with par value of $0.01, and no preferred shares were issued. All share information included in these consolidated financial statements have been retroactively adjusted for the Reorganization as if such reduce par value and common shares issuance occurred on the first day of the first period presented. During the three and nine months ended September 30, 2024 , the Company issued 6,750 and 1,329,235 shares of its common stock with par value of $0.001.

 

As of September 30, 2024 and December 31, 2023, 41,329,235 and 40,000,000 common shares were outstanding, respectively, with par value of $0.001.

 

F-23
 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 15 — SHAREHOLDERS’ EQUITY (continued)

 

Initial Public Offering

 

On April 4, 2024, the Company closed its IPO of 1,300,000 shares of its common stock at an IPO price of $4.50 per share for aggregate gross proceeds of approximately $5.85 million from the offering. The total net proceeds to the Company from the IPO, after deducting discounts, expense allowance, and expenses, were approximately $5.0 million. Pursuant to the terms and conditions of the underwriting agreement, dated as of April 1, 2024, by and between Craft Capital Management LLC (the “Representative”) and the Company (the “Underwriting Agreement”), the underwriters had an overallotment option, exercisable for 45 days by May 19, 2024, to purchase up to an additional 195,000 shares from the Company at the offering price less of $4.50 the underwriting discount and commissions to cover over-allotments. As of the reporting date, all representative options have expired without exercise.

 

Common Shares Issued for Service

 

On June 18, 2024, the Company signed a consulting agreement (the “Consulting Agreement”) with TJCM Asset Management LLC (“TJCM”) to provide strategic consulting and financial advisory services to the Company for twelve months from June 18, 2024. As partial of consideration for the services, TJCM is entitled to receive shares of the Company’s common stock equivalent to a value of $160,000 calculated by the valuation price defined as average closing price of the Company’s shares of common stock for the five consecutive trading days immediately preceding the effective date of the Consulting Agreement. On June 21, 2024, the Company issued 22,485 shares of common stock to TJCM as the prepayment of $80,000 on the services to be provided. For the three and nine months ended September 30, 2024, $40,000 and $40,000 has been recorded as expenses, respectively.

 

Representative’s Warrants

 

Pursuant to the Underwriting Agreement, the Company issued to the Representative and its designee warrants (the “Representative’s Warrants”) to purchase 87,100 shares of common stock. The Representative’s Warrants are exercisable at a per share exercise price equal to $5.625 and are exercisable at any time and from time to time, in whole or in part, during the period commencing on October 4, 2024 and terminating on April 4, 2029. Neither the Representative’s Warrants nor any of the shares issued upon exercise of the Representative’s Warrants may be sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such securities by any person, for a period of six months immediately following the commencement of sales of the offering.

 

Management determined that these warrants meet the requirements for equity classification under ASC 815-40 because they are indexed to their own shares and meet the requirements for equity classification. The warrants were recorded at their fair value on the date of grant as a component of shareholders’ equity. The fair value of these warrants was $220,000, which was considered a direct cost of IPO and included in additional paid-in capital. The fair value has been estimated using the Black-Scholes pricing model with the following weighted-average assumptions: market value of underlying share of $4.00, risk free rate of 4.3%, expected term of five years; exercise price of the warrants of $5.625, volatility of 89%; and expected future dividends of nil.

 

As of September 30, 2024, 87,100 warrants in connection with IPO funding was outstanding, with an exercise price of $5.63 and remaining life of 4.51 years.

 

NOTE 16 — EARNINGS PER SHARE

 

For the three and nine months ended September 30, 2024, the effect of potential shares of common stock from the unexercised options, unexercised warrants, and unvested Restricted Stock Units (“RSU”) are included in the computation of diluted net earnings per share. As a result, a total of 142,186 unvested RSU were included in the computation of weighted average number of common shares for the nine months ended September 30, 2024, and the computation of diluted loss per share does not assume the exercise of the Company’s outstanding unvested RSU impact due to loss position for the three months ended September 30, 2024.

 

For the three and nine months ended September 30, 2023, the Company has no stock options, warrants or RSU issued and no impact on diluted earnings per share.

 

The following table presents a reconciliation of basic and diluted net income per share:

  

   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
                 
Net (loss) income attributable to the Company  $(2,502,233)  $3,957,387   $3,495,079   $6,579,836 
Weighted average number of common shares outstanding – basic   41,325,388    40,000,000    40,863,370    40,000,000 
                     
Dilutive securities – unvested RSU   -    -    142,186    - 
Weighted average number of common shares outstanding – diluted   41,325,388    40,000,000    41,005,556    40,000,000 
(Loss) earnings per share – basic  $(0.06)  $0.10   $0.09   $0.16 
(Loss) earnings per share – diluted  $(0.06)  $0.10   $0.09   $0.16 

 

F-24
 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 17 — EMPLOYEE STOCK PLANS

 

Equity Incentive Plans

 

On May 22, 2024, the Company’s Board approved the 2024 Equity Inventive Plan (“2024 Plan”) and Restricted Stock Units (“RSUs”) Award Agreements. The 2024 Plan and RSUs Adward Agreement authorized the award of stock options, RSUs to employees and directors. As of September 30, 2024 , approximately 300,556 RSUs were granted, 1,000 RSUs were forfeited and 6,750 RSUs were exercised under the 2024 Plan.

 

The Company recorded $256,345, $426,666, $nil and $nil stock-based compensation expense in connection with RSUs for three and nine months ended September 30, 2024 and 2023, respectively.

 

The following table summarized the Company’s RSU activity:

 

  

Number of

RSUs

  

Weighted Average

Grant Date Fair Value

 
Granted   300,556    3.84 
Cancelled   (1,000)   3.88 
Exercised   (6,750)   3.88 
Outstanding September 30, 2024   292,306   $3.84 
Exercisable, September 30, 2024   -   $- 

 

Options

 

On May 22, 2024, the Company signed a stock option agreement with Mr. David Shan, the Chief Executive Officer and two other executives of the Company, in connection with the 2024 Plan.

 

As part of the compensation, the Company agrees to grant Mr. Shan options to purchase up to 46,860 common shares under Incentive Stock Option (“ISO”) plan, at an exercise price of $4.268 per share. The options were granted on May 22, 2024, and the options vest at a rate of 23,430 per year for two years, effective on May 22, 2024. The aggregate fair value of the options granted to Mr. Shan was $73,000. The fair value has been estimated using the Black-Scholes pricing model with the following weighted-average assumptions: market value of underlying common shares at time of grant of $3.88; risk free rate of 5.0% and 4.65%; expected term of 5 years; exercise price of the options of $4.268; volatility of 88.8%; and expected future dividends of $nil. These options will expire on May 21, 2029.

 

The Company also granted Mr. Shan options to purchase up to 103,140 common shares, at an exercise price of $4.0 per share under Nonqualified Stock Option (“NSO”) plan. The options were granted on May 22, 2024, and vest at a rate of 51,570 shares per year for two years, effective on May 22, 2024. The aggregate fair value of the options granted to Mr. Shan was $160,000. The fair value has been estimated using the Black-Scholes pricing model with the following weighted-average assumptions: market value of underlying common shares at time of grant of $3.88; risk free rate of 5.0% and 4.65%; expected term of 10 years; exercise price of the options of $4.0; volatility of 88.8%; and expected future dividends of $nil. These options will expire on May 21, 2034.

 

The Company also granted two executives options to purchase up to 200,000 common shares, at an exercise price of $4.0 per share under ISO and NSO plans. The options were granted on May 22, 2024, and vest at a rate of 100,000 shares per year for two years, effective on May 22, 2024. The aggregate fair value of the options granted to these two executives was $272,000. The fair value has been estimated using the Black-Scholes pricing model with the following weighted-average assumptions: market value of underlying common shares of $3.88; risk free rate of 5.0% and 4.65%; expected term of 10 years; exercise price of the options of $4.0; volatility of 88.8%; and expected future dividends of $nil. These options will expire on May 21, 2034.

 

The Company recorded $71,754, $131,699, $nil and $nil stock-based compensation expense in connection with options for three and nine months ended September 30, 2024 and 2023, respectively.

 

The following table summarized the Company’s share option activity:

  

  

Number of

Options

  

Weighted Average

Exercise Price

  

Weighted Average Remaining

Life in Years

 
Granted   350,000    4.04    9.23 
Cancelled   -    -    - 
Exercised   -    -    - 
Outstanding September 30, 2024   350,000   $4.04    8.97 
Exercisable, September 30, 2024   -   $-    - 

 

NOTE 18 — COMMITMENTS AND CONTINGENCIES

 

Contingencies

 

The Company may be involved in certain legal proceedings, claims and disputes arising from the commercial operations, which, in general, are subject to uncertainties and in which the outcomes are not predictable. The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. Although the Company can give no assurances about the resolution of pending claims, litigation or other disputes and the effect such outcomes may have on the Company, the Company believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided or covered by insurance, will not have a material adverse effect on the Company’s consolidated balance sheets or results of operations or liquidity as at September 30, 2024 and December 31, 2023, except the one discussed below.

 

Litigation

 

On July 8, 2024, the Company received a final judgment from the trial court in the lawsuit filed by Taizhou Nebula Power Co, Ltd. (“Nebula”) on September 15, 2020. The final judgment awarded Nebula $3,334,542 in damages, $1,436,809 in attorneys’ fees and other court costs, and $1,146,169 in interest on balances from September 15, 2020. In connection with this judgment, the Company recorded an additional accrual of $3,573,651 as of September 30, 2024, bringing the total accrual related to this lawsuit to approximately $5.9 million. The Company filed an appeal in August 2024.

 

F-25
 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 19 — SEGMENT REPORTING

 

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, and is identified on the basis of the internal financial reports that are provided to and regularly reviewed by the Company’s chief operating decision maker in order to allocate resources and assess performance of the segment.

 

Management of the Company concludes that it has only one reporting segment. The Company is primarily engaged in the business of manufacturing and sales of a wide selection of farm and ranch tested UTVs, recreational ATVs, and Pontoon Boats.

 

The Company’s CEO reviews consolidated results when making decisions about allocating resources and assessing performance of the Company, rather than by product types or geographic area; hence the Company concluded it has only one reporting segment.

 

The following table presents sales by product categories for the three and nine months ended September 30, 2024 and 2023, respectively:

  

   2024   2023   2024   2023 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
                 
UTVs, ATVs and e-bikes  $25,084,727   $26,953,580   $88,011,145   $65,765,577 
Pontoon Boats   517,583    2,954,117    3,145,495    9,718,234 
Total  $25,602,310   $29,907,697   $91,156,640   $75,483,811 

 

NOTE 20 — SUBSEQUENT EVENTS

 

The Company evaluated all events and transactions that occurred after September 30, 2024 up through the date the Company issued these condensed consolidated financial statements, and unless disclosed below, there are not any material subsequent events that require disclosure in these condensed consolidated financial statements.

 

F-26
 

 

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

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes to those statements included elsewhere in this Report and with the audited financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (“fiscal 2023”), as filed with the Securities and Exchange Commission (the “SEC”), on April 15, 2024. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Some of the numbers included herein have been rounded for the convenience of presentation. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors. See “Cautionary Note Regarding Forward-Looking Statements .”

 

Overview of Company

 

Massimo Group is a holding company established on October 10, 2022 under the laws of the State of Nevada. We, through our subsidiaries, are primarily engaged in the manufacturing and sales of a wide selection of farm and ranch tested UTVs, recreational ATVs, and Pontoon Boats. Mr. David Shan, the Chairman of the Board and Chief Executive Officer, is the controlling shareholder of the Company.

 

A Reorganization of the legal structure was completed on June 1, 2023. The controlling Shareholder transferred his 100% equity interest in Massimo Motor and 100% equity interest in Massimo Marine to Massimo Group. After this Reorganization, we ultimately own 100% equity interests of Massimo Motor Sports and Massimo Marine.

 

Before and after the Reorganization, we, together with our subsidiaries, are effectively controlled by the same controlling Shareholder, and therefore, the Reorganization is considered as a recapitalization of entities under common control in accordance with ASC 805-50-25. The consolidation of the Company and our subsidiaries have been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements in accordance with ASC 805-50-45-5.

 

We listed our common stocks on the Nasdaq Capital Market under the symbol “MAMO” on April 4, 2024 and completed our IPO of 1,300,000 shares of common stock on April 4, 2024, raising approximately $5.0 million in net proceeds after deducting underwriting commissions and the offering expenses payable by us.

 

We currently generate most of our revenues from the sales of UTVs and ATVs, which represented 98.0% and 90.1% of total revenue for the three months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024 and 2023, revenue from sales of UTVs and ATVs represented 96.5% and 87.1% of total revenue, respectively.

 

We also generate revenue from the sales of Pontoon Boats, which represented 2.0% and 9.9% of our revenue for the three months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024 and 2023, revenue from the sales of Pontoon Boats represented 3.5% and 12.9% of our revenue, respectively.

 

Trends and Key Factors that Affect Operating Results 

 

We believe the most significant factors that affect our business and results of operations include the following:

 

●

Risk of intense competition in the industry: The powersports vehicles and boats industry in the United States is highly competitive. Competition in such markets is based upon a number of factors, including price, quality, service, reliability, styling, product features and warranties. At the dealer level, competition is based on a number of factors including sales and marketing support programs (such as financing, joint advertising programs and cooperative advertising). Certain of our competitors are more diversified and have financial and marketing resources which are substantially greater than ours, which allow these competitors to invest more heavily in intellectual property, product development, and sales and marketing support. Failure to compete effectively with rival products, features, or models, or to draw in new dealers, could significantly harm our business, financial condition, or operating results.

 

We are subject to competitive pricing. Such pricing pressure may limit our ability to maintain prices or to increase prices for our products in response to raw material, component and other cost increases and so negatively affect our profit margins.

 

1
 

 

● Risk of economic and policy changes within China: We import our products from various Chinese suppliers. The Chinese government continues to play a significant role in regulating industry within China by imposing industrial policies, providing subsidies and heavily regulating or prohibiting unwanted activities. There is no assurance the Chinese government will not interfere with the operations of Linhai Powersports (with which we have a significant supplier relationship) or any of our other suppliers. In addition, the Chinese government has implemented certain measures, including interest rate adjustments, to control the pace of economic growth in China. These measures, or other economic, political, or social developments in China may affect our China-based suppliers, which may adversely affect our business and operating results. We also import our products from Taiwan. The Taiwan issue is a longstanding point of contention between China and the United States. The U.S. maintains unofficial relations with Taiwan, while also recognizing the One China policy, which acknowledges Beijing as the legitimate government of Taiwan. Both China and the U.S. have engaged in military posturing around the Taiwan Strait. This increases the risk of accidental clashes or misunderstandings that could escalate into conflict, which will affect both our China-mainland-based and Taiwan-based suppliers.
   
● Risk of unavailability of additional capital: We will require significant expenditures to fund future growth. We intend to fund our growth out of the proceeds of the IPO and internal sources of liquidity or through additional financing from external sources. Our ability to obtain external financing in the future at a reasonable cost is subject to a variety of uncertainties, including our future financial condition, results of operations and cash flows and the condition of the global and domestic financial markets. If we require additional funds and cannot obtain them on acceptable terms when required or at all, we may be unable to fulfill our working capital needs, upgrade our existing facilities or expand our business and may have to reduce the level of our operations. These factors may also prevent us from entering into transactions that would otherwise benefit our business or implementing our future strategies. Any debt financing that we undertake may be expensive and might impose covenants that restrict our operations and strategic initiatives, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our capital stock, make investments and engage in mergers, consolidations and asset sale transactions. Equity financings may be on terms that are dilutive or potentially dilutive to our shareholders, and the prices at which new investors would be willing to purchase our equity securities may be lower than the trading prices of such equities. If new sources of financing are required, but are unattractive, insufficient or unavailable, then we could be required to modify our business plans or growth strategy which could have a material adverse effect on our business, results of operations or financial condition.
   
● Risk of uncertainty in the cost and production level of raw materials: We depend on third-party suppliers to manufacture many of the products we sell, in particular, ATVs and UTVs, as opposed to our recreational boats which we manufacture in our Dallas facility. For the three and nine months ended September 30, 2024, we purchased approximately 62% and 64% of our products from three of these suppliers. Competition for the output of these suppliers is intense. If these independent suppliers were unwilling or unable to supply us with products at prices which enable us to maintain our gross margins, it would materially adversely affect our business, results of operations or financial condition. Although we are looking to broaden our supplier base and to reduce our dependence upon a limited number of suppliers, there is no assurance we will be able to do so and increasing the number of suppliers from which we purchase products may increase our costs.
   
● Risk related to overseas freights fluctuation: The inflation rate and supply chain crisis experienced in 2021 and 2022 led to a significant increase in overseas freight costs. However, by December 31, 2023, there was a notable easing in both inflation and freight costs, reflecting an improvement in economic conditions and a stabilization in the supply chain.
   
● Risk related to inflation: In recent years, our China-based suppliers have increased the cost of their products due to inflation. We may not be able to pass along price increases in raw materials, parts, or components to customers. As a result, an increase in the cost of the raw materials, parts, and components our suppliers use in the manufacture of our products could reduce our profitability and have a material adverse effect on our business, results of operations or financial condition.
   
● Risk of fluctuations in the sale of Pontoon Boats: A segment of our sales revenue stemming from Massimo Marine exhibits a seasonal sales pattern. Boat sales are also influenced by the financing arrangements for boat purchases, which are susceptible to fluctuations in interest rates. For the three and nine months ended September 30, 2024 and 2023, our revenue generated from Massimo Marine was approximately 2.0%, 3.5%, 9.9% and 12.9% of our total revenue, respectively.

 

2
 

 

Results of Operations

 

For the Three and Nine Months Ended September 30, 2024 and 2023

 

The following table summarizes the results of condensed consolidated statements of operations and comprehensive income (unaudited) for the three and nine months ended September 30, 2024 and 2023 in U.S. dollars, and provides information regarding the dollar and percentage increase or (decrease) during such periods.

 

   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
                 
Revenues  $25,602,310   $29,907,697   $91,156,640   $75,483,811 
Cost of revenues   18,649,995    19,850,258    62,253,681    51,706,682 
Gross profit   6,952,315    10,057,439    28,902,959    23,777,129 
                     
Operating expenses:                    
Selling expense   2,628,915    2,104,505    7,936,761    6,541,244 
General and administrative   3,895,232    2,716,733    12,096,874    9,038,488 
Impairment loss on supplier deposit   29,883    -    772,780    - 
Research and development   94,771    -    257,021    - 
Total operating expenses   6,648,801    4,821,238    21,063,436    15,579,732 
                     
Income from operations   303,514    5,236,201    7,839,523    8,197,397 
                     
Other income (expense):                    
Other income, net   210,701    41,133    590,538    113,001 
Loss on litigation   (3,573,651)   

-

    (3,573,651)   

-

 
Interest expense   (64,462)   (213,901)   (268,803)   (494,011)
Total other income (expense), net   (3,427,412)   (172,768)   (3,251,916)   (381,010)
                     
(Loss) income before income taxes   (3,123,898)   5,063,433    4,587,607    7,816,387 
                     
(Recovery of ) provision for income taxes   (621,665)   1,106,046    1,092,528    1,236,551 
                     
Net (loss) income and comprehensive (loss) income  $(2,502,233)  $3,957,387   $3,495,079   $6,579,836 
                     
Earnings per Share – basic  $(0.06)  $0.10   $0.09   $0.16 
Weighted average shares outstanding – basic *   41,325,388    40,000,000    40,863,370    40,000,000 
Earnings per Share –diluted  $(0.06)  $0.10   $0.09   $0.16 
Weighted average shares outstanding –diluted*   41,325,388    40,000,000    41,005,556    40,000,000 

 

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

 

   For the Three months ended September 30, 
   2024   2023         
   Amount  

As %

of

Sales

   Amount  

As %

of

Sales

  

Amount

Increase

(Decrease)

  

Percentage

Increase

(Decrease)

 
                         
Sales  $25,602,310    100.0%  $29,907,697    100.0%  $(4,305,387)   (14.4)%
Cost of sales   18,649,995    72.8%   19,850,258    66.4%   (1,200,263)   (6.0)%
Gross profit   6,952,315    27.2%   10,057,439    33.6%   (3,105,124)   (30.9)%
Operating expenses                              
Selling expenses   2,628,915    10.3%   2,104,505    7.0%   524,410    24.9%
General and administrative expenses   3,895,232    15.2%   2,716,733    9.1%   1,178,499    43.4%
Impairment loss on supplier deposit    

29,883

    

0.1

%   

-

    

-

    

29,883

    

100.0

%
Research and development   94,771    0.4%   -    -    94,771    100.0%
Total operating expenses   6,648,801    26.0%   4,821,238    16.1%   1,827,563    37.9%
Income from operations   303,514    1.2%   5,236,201    17.5%   (4,932,687)   (94.2)%
Other income (expenses)                              
Other income, net   210,701    0.8%   41,133    0.1%   169,568    412.2%
Loss on litigation   (3,573,651)   (14.0)%   -    -   (3,573,651)   100.0%
Interest expense   (64,462)   (0.3)%   (213,901)   (0.7)%   149,439    (69.9)%
Total other income (expenses)   (3,427,412)   (13.4)%   (172,768)   (0.6)%   (3,254,644)   (1,883.8)%
(Loss) income before income taxes   (3,123,898)   (12.2)%   5,063,433    16.9%   (8,187,331)   (161.7)%
(Recovery of) provision for income taxes   (621,665)   (2.4)%   1,106,046    3.7%   (1,727,711)   (156.2)%
Net (loss) income  $(2,502,233)   (9.8)%  $3,957,387    13.2%  $(6,459,620)   (163.2)%

 

Revenues

 

Revenues decreased by $4.3 million, or 14.4%, from $29.9 million in the third quarter of fiscal 2023, to $25.6 million in the third quarter of fiscal 2024. The decrease in revenue was primarily due to the significant drop in Pontoon boat sales. The boat category experienced a significant downturn in line with an industry-wide slowdown. This broader trend is in part influenced by the current high interest rates and inflationary pressures that are impacting on consumer spending, particularly on the high-ticket but non-essential markets. The boat category fits the profile. Relatedly, the fact that dealers have faced high rejection rates from floorplan financing providers like Northpoint, has made it challenging for dealers to maintain optimal inventory levels, affecting our performance in the sales of Pontoon Boats. Additionally, there was a decrease in sales of UTV, ATV and e-bikes. Part of this decrease is in line with a slow industry-wide trend, while another factor was our seasonal promotions in the third quarter. Some discounted sales may have affected the performance of our regularly priced items.

 

3
 

 

Revenue by Type

 

   For the three months ended September 30, 
   2024   2023         
Revenue category  Revenue  

% of

total

Revenue

   Revenue  

% of

total

Revenue

  

Amount

Increase

(Decrease)

  

Percentage

Increase

(Decrease)

 
                         
UTVs, ATVs and e-bikes  $25,084,727    98.0%  $26,953,580    90.1%  $(1,868,853)   (6.9)%
Pontoon Boats   517,583    2.0%   2,954,117    9.9%   (2,436,534)   (82.5)%
Total  $25,602,310    100.0%  $29,907,697    100.0%  $(4,305,387)   (14.4)%

 

Revenue from sales of UTVs, ATVs and e-bikes

 

Revenue from sales of UTVs, ATVs and e-bikes decreased by $1.9 million, or 6.9%, from $27.0 million in the third quarter of fiscal 2023, to $25.1 million in the third quarter of fiscal 2024. The decrease in revenue was partially driven by the slow industry-wide trend, and partially by the seasonal promotions we offered in the third quarter of fiscal 2024.

 

Revenue from sales of Pontoon Boats

 

Revenue from sales of Pontoon Boats decreased by $2.4 million, or 82.5%, from $2.9 million in the third quarter of fiscal 2023, to $0.5 million in the third quarter of fiscal 2024. The decrease in revenue was primarily attributable to the significant industry-wide downturn due to the impact of the high interest rate and the inflation as demonstrated in the high rejection rates dealer have encountered from floorplan financing providers such as Northpoint. This trend aligns with the industry-wide challenges that intensified in the third quarter of fiscal 2024. Additionally, economic uncertainty in the U.S. has led to reduced spending on luxury boats, further constraining our Pontoon Boat sales.

 

Gross profit

 

Our gross profit decreased by $3.1 million, or 30.9%, from $10.1 million in the third quarter of fiscal 2023, to $7.0 million in the third quarter of fiscal 2024. The gross profit margin was 27.2% in the third quarter of fiscal 2024, compared with 33.6% in the same period last year. The decrease of 6.5% in the gross profit margin is consistent with (i) reduced sale prices aimed at clearing slow-moving inventory, and (ii) the decline in sales of Pontoon Boat, without a corresponding reduction in fixed overhead costs, such as rent and salaries.

 

Our cost and gross profit by revenue types are as follows:

 

  

For the three months ended

September 30, 2024

  

For the three months ended

September 30, 2023

             
Category 

Cost of

revenue

   Gross profit  

Gross

profit %

  

Cost of

revenue

  

Gross

profit

  

Gross

profit %

  

Variance

in Cost of

revenue

  

Variance

in gross

profit

  

Variance

in gross

profit %

 
                                     
UTVs, ATVs and e-bikes  $18,139,031   $6,945,696    27.7   $17,497,459   $9,456,121    35.1   $641,572   $(2,510,425)   (7.4)
Pontoon Boats   510,964    6,619    1.3    2,352,799    601,318    20.4    (1,841,835)   (594,699)   (19.1)
Total  $18,649,995   $6,952,315    27.2   $19,850,258   $10,057,439    33.6   $(1,200,263)  $(3,105,124)   (6.5)

 

The cost of revenue on UTVs, ATVs and e-bikes increased by $0.6 million, or 3.7%, from $17.5 million in the third quarter of fiscal 2023 to $18.1 million in the third quarter of fiscal 2024, and gross profit decreased by $2.5 million, or 26.5%, from $9.4 million in the third quarter of fiscal 2023 to $6.9 million in the third quarter of fiscal 2024. The gross margin decreased by 7.4%, from 35.1% in the third quarter of fiscal 2023 to 27.7% in the third quarter of fiscal 2024. The increase in the cost of revenue was largely due to higher overhead costs, mainly from research and design input and the additional rent expense as we expand our warehouse space in fiscal 2024. The decrease in gross margin was primarily a result of selling some inventory at lower price at our seasonal promotions in the third quarter of fiscal 2024.

 

The cost of revenue on Pontoon Boats decreased by $1.9 million, or 78.3%, from $2.4 million in the third quarter of fiscal 2023 to $0.5 million in the third quarter of fiscal 2024, and gross profit decreased by $0.6 million, or 98.9%, from $0.6 million in the third quarter of fiscal 2023 to $6,619 in the third quarter of fiscal 2024. The gross margin decreased by 19.1%, from 20.4% in the third quarter of fiscal 2023 to 1.3% in the third quarter of fiscal 2024. The decrease in gross margin was primarily a result of a decline in sales of Pontoon Boat, without a corresponding reduction in fixed overhead costs, such as rent, utilities, and salaries.

 

4
 

 

Selling expenses

 

Our selling expenses mainly include warranty expense, advertising and promotion expense, interest expense incurred for selling products, shipping and handling fee and merchant service fee. Our selling expenses increased by $0.5 million, or 24.9%, from $2.1 million in the third quarter of fiscal 2023 to $2.6 million in the third quarter of fiscal 2024, representing 10.3% and 7.0% of our total revenue in the third quarter of fiscal 2024 and fiscal 2023, respectively. The increase in selling expenses was mainly due to an increase in shipping and handling fees, which were approximately $1.5 million and $0.7 million in the third quarter of fiscal 2024 and fiscal 2023, respectively. The increase was partly offset by a decrease in warranty expense of approximately $0.4 million, due to enhanced quality control and customer service measures. The adoption of a traveling technician team has enabled timely responses to customer requests, reducing repair costs.

 

General and administrative expenses

 

Our general and administrative expenses primarily include salaries and benefits, professional fees, office expenses, travel expenses, insurance expenses, rent expense and depreciation expenses. General and administrative expenses increased by $1.2 million, or 43.4%, from $2.7 million in the third quarter of fiscal 2023 to $3.9 million in the third quarter of fiscal 2024. The increase was mainly due to increased salaries and benefits, travel expense and rent expense. Our general and administrative expenses represented 15.2% and 9.1% of our total revenue in the third quarter of fiscal 2024 and the third quarter of fiscal 2023, respectively.

 

Our salaries and benefits were $1.4 million and $1.1 million, representing 35.2% and 41.6% of our total general and administrative expenses in the third quarter of fiscal 2024 and in the third quarter of fiscal 2023, respectively. The increase in balance was mainly due to stock-based compensation expense of $0.3 million recognized on RSUs and stock option grant.

 

Our rent expenses increased by $0.3 million or 104.0%, from $0.3 million in the third quarter of fiscal 2023 to $0.6 million in the third quarter of fiscal 2024, representing 13.9% and 9.8% of our total general and administrative expenses in the third quarter of fiscal 2024 and 2023, respectively. This increase was due to two new lease agreements signed in May 2024 and a rent increment following the lease renewal.

 

Our professional fee increased by $0.1 million or 15.8%, from $0.7 million in the third quarter of fiscal 2023 to $0.8 million in the third quarter of fiscal 2024, representing 19.4% and 24.0% of our total general and administrative expenses in the third quarter of fiscal 2024 and 2023, respectively. The slight increase was mainly due to public company costs, including audit and investor relation fees.

 

Loss on litigation

 

During the three months ended September 30, 2024, we recorded a one-time loss of approximate $3.6 million on legal judgment on lawsuit with Nebula. The Final Judgment on July 8, 2024 awarded Nebula $3.3 million in damages, $1.4 million in attorneys’ fees and other court cost and $1.1 million in interest on balances since September 15, 2020. We have recorded an additional accrual of $3.6 million as of September 30, 2024, bringing the total accrual related to this lawsuit to approximately $5.9 million. We have filed the appeal in August 2024.

 

Interest expenses

 

Our interest expense decreased by $149,439 or 69.9%, from $213,901 in the third quarter of fiscal 2023 to $64,462 in the third quarter of fiscal 2024. The decrease in interest expense was mainly due to a reduction in the average loan balance in third quarter of fiscal 2024 compared with the same period of last year, in response to higher interest rates. We repaid all bank loans in early August 2024.

 

Other income, net

 

Our other income was $210,701 in the third quarter of fiscal 2024, as compared with $41,133 in the third quarter of fiscal 2023, an increase of $169,568, or 412.2%. The increase was primarily due to the write-off a long outstanding negative balance of account receivable of approximately $100,000 and an increase in insurance claim of approximately $100,000 in third quarter of fiscal 2024 compared to the same period in last year.

 

Income before income taxes

 

We had a decrease of $8.2 million in income before income taxes, from $5.1 million income in the third quarter of fiscal 2023 to approximately $3.1 million loss in the third quarter of fiscal 2024. The decrease was primarily attributable to the decrease in gross profit by $3.1 million, an increase of general and administrative expenses of approximately $1.2 million and a loss of legal judgment of approximately $3.6 million in the third quarter of fiscal 2024, as well as other expenses as discussed above.

 

(Recovery of) provision for income taxes

 

The income tax recovery was approximately $0.6 million in the third quarter of fiscal 2024, compared to $1.1 million expenses in the same period of fiscal 2023. The change was mainly due to a net loss of $3.1 million before income taxes generated in the third quarter of fiscal 2024 compared to the same period in last year.

 

Net (loss) income

 

We had net loss of $2.5 million and net income of $4.0 million in the third quarter of fiscal 2024 and 2023, respectively. The decrease was primarily due to the lower revenues and gross profit as discussed above.

 

5
 

 

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

 

   For the nine months ended September 30, 
   2024   2023         
   Amount  

As %

of

Sales

   Amount  

As %

of

Sales

  

Amount

Increase

(Decrease)

  

Percentage

Increase

(Decrease)

 
                         
Sales  $91,156,640    100.0%  $75,483,811    100.0%   15,672,829    20.8%
Cost of sales   62,253,681    68.3%   51,706,682    68.5%   10,546,999    20.4%
Gross profit   28,902,959    31.7%   23,777,129    31.5%   5,125,830    21.6%
Operating expenses                              
Selling expenses   7,936,761    8.7%   6,541,244    8.7%   1,395,517    21.3%
General and administrative   12,096,874    13.3%   9,038,488    12.0%   3,058,386    33.8%
Impairment loss on supplier deposit    772,780    0.8%   -    -    772,780    100.0%
Research and development   257,021    0.3%   -    -    257,021    100.0%
Total operating expenses   21,063,436    23.1%   15,579,732    20.6%   5,483,704    35.2%
Income from operations   7,839,523    8.6%   8,197,397    10.9%   (357,874)   (4.4)%
Other income (expenses)                              
Other income, net   590,538    0.6%   113,001    0.1%   477,537    422.6%
Loss on litigation   (3,573,651)   (3.9)%   -    -   (3,573,651)   100.0%
Interest expense   (268,803)   (0.3)%   (494,011)   (0.7)%   225,208    (45.6)%
Total other income (expenses)   (3,251,916)   (3.6)%   (381,010)   (0.5)%   (2,870,906)   753.5%
Income before income taxes   4,587,607    5.0%   7,816,387    10.4%   (3,228,780)   (41.3)%
Provision for income taxes   1,092,528    1.2%   1,236,551    1.6%   (144,023)   (11.6)%
Net income  $3,495,079    3.8%  $6,579,836    8.7%  $(3,084,757)   (46.9)%

 

Revenue

 

Revenues increased by $15.7 million, or 20.8%, from $75.5 million for the nine months ended September 30, 2023, to $91.2 million for the nine months ended September 30, 2024. The increase in revenue was primarily due to combined effects of rising demand in the U.S. ATV and UTV market and our modified sales strategy. In 2024, we continued to expand our distribution network with various retailers to increase our products’ market penetration. We strategically focused our efforts on large retail stores in the U.S. (the “big box stores”) that offer their own financing plans, while moving away from retailers that have liberal return policies.

 

Revenue by Type

 

   For the nine months ended September 30, 
   2024   2023         
Revenue category  Revenue  

% of

total

Revenue

   Revenue  

% of

total

Revenue

  

Amount

Increase

(Decrease)

  

Percentage

Increase

(Decrease)

 
                         
UTVs, ATVs and e-bikes  $88,011,145    96.5%  $65,765,577    87.1%  $22,245,568    33.8%
Pontoon Boats   3,145,495    3.5%   9,718,234    12.9%   (6,572,739)   (67.6)%
Total  $91,156,640    100.0%  $75,483,811    100.0%  $15,672,829    20.8%

 

Revenue from sales of UTVs, ATVs and e-bikes

 

Revenue from sales of UTVs, ATVs and e-bikes increased by $22.2 million, or 33.8%, from $65.8 million for the nine months ended September 30, 2023 to $88.0 million for the nine months ended September 30, 2024. The increase in revenue was primarily attributed to the expansion into more big box stores. This surge is consistent with the increasing ranch/farm-work utilization of UTVs across the 1.89 million farms in the U.S. with an average size of 464 acres and the new customer’s rural lifestyle focus. The increase in sales is also due to a shift in our sales strategy, focusing mostly on in-store sales to this retail chain store customer, which generally involve larger volumes and no returns. In addition, sales to this new customer consist of high-turnover inventory products that are of high quality and have a strong customer reputation. This enhances the efficiency of our capital utilization.

 

6
 

 

Revenue from sales of Pontoon Boats

 

Revenue from sales of Pontoon Boats decreased by $6.6 million, or 67.6%, from $9.7 million for the nine months ended September 30, 2023 to $3.1 million for the nine months ended September 30, 2024. The revenue decrease was primarily due to an industry-wide downturn driven by high interest rates and inflation, which are impacting the consumption of non-essential goods. In addition, the fact that the dealers have experienced high rejection rates at the floorplan financing providers such as Northpoint has directly affected the inventory level the dealers maintain and therefore our sales in this category. This is consistent with the industry-wide trend. The challenging economic environment and economic uncertainty in the U.S. has led to reduced spending on luxury boats directly impacting the sales of luxury boats such as our yacht.

 

Gross profit

 

Our gross profit increased by $5.1 million, or 21.6%, from $23.8 million for the nine months ended September 30, 2023 to $28.9 million for the nine months ended September 30, 2024. Gross margin was 31.7% for the nine months ended September 30, 2024, compared with 31.5% in the same period last year. Our gross margin for the nine months ended September 30, 2024 remained constant when compared with the same period in 2023.

 

Our cost and gross profit by revenue types are as follows:

 

  

For the Nine Months Ended

September 30, 2024

  

For the Nine Months Ended

September 30, 2023

             
Category 

Cost of

revenue

   Gross profit  

Gross

profit %

  

Cost of

revenue

  

Gross

profit

  

Gross

profit %

  

Variance

in Cost of

revenue

  

Variance

in gross

profit

  

Variance

in gross

profit %

 
                                     
UTVs, ATVs and e-bikes  $59,598,896   $28,412,249    32.3   $43,547,341   $22,218,236    33.8   $16,051,555   $6,194,013    (1.5)
Pontoon Boats   2,654,785    490,710    15.6    8,159,341    1,558,893    16.0    (5,504,556)   (1,068,183)   (0.4)
Total  $62,253,681   $28,902,959    31.7   $51,706,682   $23,777,129    31.5   $10,546,999   $5,125,830    0.2 

 

Cost of revenue on UTVs, ATVs and e-bikes increased by $16.1 million, or 36.9%, from $43.5 million for the nine months ended September 30, 2023, to $59.6 million for the nine months ended September 30, 2024 and gross profit increased by $6.2 million, or 27.9%, from $22.2 million for the nine months ended September 30, 2023, to $28.4 million for the nine months ended September 30, 2024. Gross margin decreased by 1.5%, from 33.8% for the nine months ended September 30, 2023 to 32.3% for the nine months ended September 30, 2024. The increase in the cost of revenue was in line with the increase in sales. The decrease in gross profit margin was mainly due to reduced sales prices to clear out slow-moving inventory in recent quarter.

 

Cost of revenue on Pontoon Boats decreased by $5.5 million, or 67.5%, from $8.2 million for the nine months ended September 30, 2023, to $2.7 million for the nine months ended September 30, 2024, and gross profit decreased by $1.1 million, or 68.5%, from $1.6 million for the nine months ended September 30, 2023, to $0.5 million for the nine months ended September 30, 2024. Gross margin decreased by 0.4%, from 16.0% for the nine months ended September 30, 2023, to 15.6% for the nine months ended September 30, 2024. Our gross margin for the nine months ended September 30, 2024 remained constant compared to the nine months ended September 30, 2023.

 

Selling expenses

 

Our selling expenses mainly include warranty expense, advertising and promotion expense, interest expense, shipping and handling fee and merchant service fee. These expenses increased by $1.4 million, or 21.3%, from $6.5 million for the nine months ended September 30, 2023, to $7.9 million for the nine months ended September 30, 2024, representing 8.7% and 8.7% of total revenue in both periods. The increase was mainly due to higher shipping and handling fees, which rose from approximately $3.1 million for the nine months ended September 30, 2023 to $4.6 million in the same period in 2024, consistent with the increase in sales. The increase was partly offset by a reduction in warranty expense of approximately $0.5 million, due to enhanced quality control and customer service. The addition of a traveling technician team has enabled us to respond to customer requests promptly, reducing repair costs.

 

7
 

 

General and administrative expenses

 

Our general and administrative expenses primarily include salaries and benefits, professional fees, office expenses, travel expenses, insurance expenses, rent expense and depreciation expenses. General and administrative expenses increased by $3.1 million, or 33.8%, from $9.0 million for the nine months ended September 30, 2023, to $12.1 million for the nine months ended September 30, 2024. The increase was mainly due to higher rent expense, salaries and benefit, and insurance expense. Our general and administrative expenses represented 13.3% and 12.0% of our total revenue for the nine months ended September 30, 2024 and 2023, respectively.

 

Our salaries and benefits were $4.2 million and $3.3 million, representing 34.8% and 36.1% of our total general and administrative expenses for the nine months ended September 30, 2024 and 2023, respectively. The increase was primarily due to $0.5 million severance package following an employment termination and a $0.6 million stock-based compensation expenses recognized for RSUs and stock option grants.

 

Our rent expenses increased by $0.9 million or 95.6%, from $0.9 million for the nine months ended September 30, 2023, to $1.8 million for the nine months ended September 30, 2024, representing 14.6% and 10.0% of our total general and administrative expenses for the nine months ended September 30, 2024 and 2023, respectively. Our rent expense increased because we had two new lease agreements in May 2024 while one lease agreement in May 2023. We also had monthly rent increment upon renewing the lease agreement. Our property taxes included in the rent expenses also increased by $0.4 million for the nine months ended September 30, 2024, compared to the same period last year.

 

Our insurance expense increased by $0.6 million or 88.9%, from $0.7 million for the nine months ended September 30, 2023, to $1.3 million for the nine months ended September 30, 2024, representing 10.7% and 7.6% of our total general and administrative expenses for the nine months ended September 30, 2024 and 2023, respectively. The increase was mainly due to a higher general insurance premium year-over-year in correlation with sales growth, as well as the purchase of directors and officers insurance following our transition to a public company.

 

Impairment loss on supplier deposit

 

During the nine months ended September 30, 2024, we recorded a one-time impairment loss of approximate $772,780 on advanced deposit to one supplier. In June 2024, we reached a tentative agreement regarding general settlement terms with one suppler who would pay approximately $312,500 to resolve the claim. Our prepayment of $1.1 million would be considered irrecoverable. Therefore, we wrote off the approximate $772,780 of prepayment to the supplier during the nine months ended September 30, 2024. The settlement agreement was finalized in August 2024. During the nine months ended September 30, 2023, we had no impairment loss of prepayment.

 

Loss on litigation

 

During the nine months ended September 30, 2024, we recorded a one-time loss of approximate $3.6 million on legal judgment on lawsuit with Nebula. The Final Judgment on July 8, 2024 awarded Nebula $3.3 million in damages, $1.4 million in attorneys’ fees and other court cost and $1.1 million in interest on balances since September 15, 2020. We have recorded an additional accrual of $3.6 million as of September 30, 2024, bringing the total accrual related to this lawsuit to approximately $5.9 million. We have filed the appeal in August 2024.

 

Interest expenses

 

Our interest expense decreased by $225,208 or 45.6%, from $494,011 for the nine months ended September 30, 2023, to $268,803 for the nine months ended September 30, 2024. The decrease was mainly due to a lower average loan balance during the nine months ended September 30, 2024, compared to the same period last year, in response to raising interest rates. All bank loans were repaid in early August 2024.

 

8
 

 

Other income, net

 

Other income increased by $477,537, or 422.6%, from $113,001 for the nine months ended September 30, 2023, to $590,538 for the same period in 2024. The increase was primarily due to the following factors: (i) a $177,147 write-off of a vendor’s accounts payable balance following a settlement with the vendor and us; (ii) a $190,000 write-off of a long outstanding negative balance of account receivable, both of which contributed to higher other income; and (iii) an additional approximately $100,000 in insurance claims in the third quarter of fiscal 2024 compared to the same period last year.

 

Income before income taxes

 

Income before income taxes decreased by $3.2 million, from $7.8 million for the nine months ended September 30, 2023, to approximately $4.6 million for the nine months ended September 30, 2024. The decrease was primarily attributable to a $5.1 million rise in gross profit, partly offset by an approximately $3.1 million increase in general and administrative expenses and an approximately $3.6 million loss on litigation and other expenses as discussed above.

 

Provision for income taxes

 

The income tax expense was approximately $1.1 million and $1.2 million for the nine months ended September 30, 2024 and 2023, respectively. We terminated our S Corporation status as of June 1, 2023, in connection with the Reorganization and became a taxable C Corporation. Accordingly, the income tax provision for the first three quarters of fiscal 2024 combined both federal income tax of 21% and the state margin tax at Texas as a C Corporation, and the income tax provision for the nine months ended September 30, 2023 only reflected state margin tax at Texas as a S Corporation for five months and a federal income tax of 21% for the remaining four month’s operation.

 

Net income

 

Net income was $3.5 million and $6.6 million for the nine months ended September 30, 2024 and 2023, respectively. The decrease was primarily due to higher revenues and gross profit, offset by an increase in general and administrative expense and a loss on litigation, as discussed above

 

Cash Flows

 

For the Periods Ended September 30, 2024 and 2023

 

The following table sets forth summary of our cash flows for the periods indicated:

 

   Periods Ended September 30, 
   2024   2023 
Net cash (used in) provided by operating activities  $(2,396,923)  $5,778,608 
Net cash used in investing activities   (262,163)   (68,871)
Net cash provided by (used in) financing activities   3,617,055    (5,499,666)
Net increase in cash and cash equivalents   957,969    210,071 
Cash and cash equivalents, beginning of the period   765,814    947,971 
Cash and cash equivalents, end of the period  $1,723,783   $1,158,042 

 

9
 

 

Operating Activities

 

Net cash used in operating activities was approximately $2.4 million during the nine months ended September 30, 2024, compared to net cash provided by operating activities of approximately $5.8 million during the nine months ended September 30, 2023, representing an increase in the net cash used in operating activities of $8.2 million during the nine months ended September 30, 2024 compared with the same period in 2023. This is consistent with the Company using part of the IPO proceeds as working capital to grow sales. The increase is primarily due to the following:

 

● Account payable decreased by approximately $2.9 million during the nine months ended September 30, 2024, compared to a decrease of approximately $0.4 million during the nine months ended September 30, 2023, primarily because we paid off undue account payable in the form of Letter of Credit payments from the old bank in order to release the UCC to the new bank during the nine months ended September 30, 2024.
   
● Accounts receivable increased by approximately $2.2 million during the nine months ended September 30, 2024, compared to an increase by approximately $1.6 million during the nine months ended September 30, 2023 due to the timing difference of payments by customers.

 

● Inventory increased by approximately $5.0 million during the nine months ended September 30, 2024, compared to an increase by approximately $0.04 million during the nine months ended September 30, 2023. It is consistent with the fact that we have been building up our inventory in anticipation of the holiday sales.
   
● Contract liabilities decreased by approximately $0.7 million during the nine months ended September 30, 2024, compared to an increase by approximately $0.5 million during the nine months ended September 30, 2023.
   
● The balance was partly offset by an increase in net income after non-cash item by approximately $1.3 million during the nine months ended September 30, 2024 compared with same period in 2023.
   
● Our net income was adjusted for non-cash items, including the write-off of account receivables, non-cash operating lease expense, gain (loss) on disposal of fixed asset, impairment loss of asset, stock-based compensation expense, amortization and depreciation, loss on litigation, deferred tax expense (recovery) and provision (reversal of allowance) for expected credit loss. Non-cash items of approximately $5.6 million during the nine months ended September 30, 2024, compared to non-cash items of approximately $1.2 million during the same period in 2023.

 

Investing Activities

 

Net cash used in investing activities was approximately $262,163 during the nine months ended September 30, 2024, compared to net cash used in investing activities of $68,871 million during the nine months ended September 30, 2023. The increase in net cash used investing activities was primarily attributable to the purchase of property and equipment of $0.4 million, partially offset by a proceed of $0.2 million from sale of property and equipment during the nine months ended September 30, 2024.

 

Financing Activities

 

Net cash provided by financing activities was approximately $3.6 million during the nine months ended September 30, 2024, compared to net cash used in financing activities of approximately $5.5 million during the nine months ended September 30, 2023. The increase in net cash provided by financing activities during the nine months ended September 30, 2024 was primarily attributable to net proceed from IPO of $4.5 million and from the common shares subscription of $0.9 million, offset by the repayment of bank loans of $0.3 million and repayment of loan from a related party of $1.5 million. This compares to 2023, when cash used in financing included, a net repayment of bank loan of $1.6 million, the repayment of $4.0 million to shareholder and payment of IPO related cost.

 

Liquidity and Capital Resources

 

Overview

 

The general objectives of our capital management strategy reside in the preservation of our capacity to continue operating, in providing benefits to our stakeholders and in providing an adequate return on investment to our shareholders by selling our products at a price commensurate with the level of operating risk assumed by us.

 

We thus determine the total amount of capital required consistent with risk levels. This capital structure is adjusted on a timely basis depending on changes in the economic environment and risks of the underlying assets. We are not subject to any externally imposed capital requirements.

 

10
 

 

Working Capital

 

As of September 30, 2024, we had cash and cash equivalents of approximately $1.7 million. Our current assets were approximately $45.1 million, including approximately $11.6 million accounts receivable, approximately $30.9 million inventory, approximately $0.3 million advance to suppliers and approximately $0.6 million prepayment and other receivables, and our current liabilities were approximately $26.3 million, including $9.8 million accounts payable to suppliers, $3.6 million accrued payment on a legal judgment, $1.2 million contract liabilities, $2.1 million income tax payable, $6.4 million from a related party and $2.1 million liabilities from obligations under operating and financing leases, which resulted in a positive working capital of $18.8 million.

 

Our primary source of cash is currently generated from our business and bank borrowings. In the coming years, we will be looking to other sources, such as raising additional capital by issuing shares of stock, to meet our cash needs. While facing uncertainties regarding the size and timing of capital raise, we are confident that we can continue to support our operational needs solely by utilizing cash flows generated from our operating activities organically.

 

Loan Balance

 

Loan balance consists of the following:

 

   September 30, 2024   December 31, 2023 
Bank loan – Cathay Bank (1)  $-   $- 
Other loans - Northpoint (2)   -    205,440 
Other loans – BAC (3)   -    98,143 
Total  $-   $303,583 

 

(1)

On May 13, 2024, the Company’s subsidiary Massimo Motor Sports obtained a line of credit from Cathay Bank, pursuant to which the Company has the availability to borrow a maximum $15.0 million out of this line of credit for one year at the U.S. prime rate + 0.75%. Before then, the company had a line of credit of maximum $10.0 million from Midfirst bank, which is cancelled upon the grant of the line of credit from Cathay Bank. As of September 30, 2024 and December 31, 2023, the outstanding balance was $nil million and $nil.

 

This line of credit is also personally guaranteed by Mr. David Shan, the controlling shareholder. This line of credit is pledged by the Company’s accounts receivable and inventories.

   
(2)

On April 19, 2022, the Company’s subsidiary Massimo Marine obtained a $2.0 million pay as sold line of credit from Northpoint Commercial Finance LLC (“Northpoint”) for acquisition, financing and/or refinancing of inventory. This line of credit is also personally guaranteed by Mr. David Shan, the controlling Shareholder, and Massimo Motor Sports, an affiliated company. As of September 30, 2024 and December 31, 2023, the outstanding balance was $nil and $205,440, respectively.

 

(3) On February 18, 2022, the Company’s subsidiary Massimo Marine obtained a credit facility for Mercury Marine in the amount of $1.75 million from Brunswick Acceptance Company LLC (“BAC”) to finance purchase of inventory. This line of credit is also personally guaranteed by Mr. David Shan. As of September 30, 2024 and December 31, 2023, the outstanding balance was $nil and $98,143, respectively.
   
(4) On January 15, 2021, the Company’s subsidiary Massimo Motor Sports obtained a line of credit from Midfirst Bank, pursuant to which the Company has the availability to borrow a maximum $4.0 million out of this line of credit for two years at the U.S. prime rate + 0.25%. On April 18, 2022, this line of credit was further increased to $10.0 million, and on January 3, 2024, the maturity date was renewed to January 3, 2026.
   
  This line of credit is guaranteed by the Massimo Group, and is also personally guaranteed by Mr. David Shan, the controlling shareholder, and Miller Creek Holdings LLC, a related party controlled by Mr. David Shan. This line of credit is pledged by the Company’s accounts receivable and inventories.
   
  On May 13, 2024, the credit facility was closed due to transferring to Cathay Bank ((1) above), and all guarantees were released and transferred to Cathay Bank.

 

11
 

 

Capital Expenditures

 

Our capital expenditures consist primarily of expenditures for the purchase of fixed assets and equipment leases as a result of our business growth. Our capital expenditures amounted to approximately $424,164 and $68,871 for the nine months ended September 30, 2024 and 2023, respectively.

 

Contractual Commitments

 

As of September 30, 2024 , the Company’s contractual obligations consisted of the following:

 

Contractual Obligations  Total  

Less than

1 year

   1-3 years   3-5 years  

More than

5 years

 
                          
Lease commitment  $12,277,800   $2,912,980   $5,016,194   $4,348,626   $– 

 

Off-balance Sheet Commitments and Arrangements

 

There were no off-balance sheet arrangements for the nine months ended September 30, 2024 and 2023, that have, or that in the opinion of management are likely to have, a current or future material effect on our financial condition or results of operations.

 

Critical Accounting Policies and Estimates

 

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, contingent assets and liabilities, each as of the date of the financial statements, and revenue and expenses during the periods presented. On an ongoing basis, management evaluates their estimates and assumptions, and the effects of any such revisions are reflected in the financial statements in the period in which they are determined to be necessary. Management bases its estimates on historical experience and on various other factors that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual outcomes could differ materially from those estimates in a manner that could have a material effect on our consolidated financial statements.

 

Management has determined that, while there are no critical accounting estimates, the most significant estimates relate to sales returns, products warranty, allowance for credit loss, inventory provision, and the assessment and disclosure of contingent liabilities due to on-going lawsuit. Each of these are discussed below.

 

Sales returns

 

We provide a refund policy to accept returns from end customers, which varies and depends on the different products and customers. The estimated sales returns are determined based upon an analysis of historical sales returns. Return allowances are recorded as a reduction in sales with corresponding sales return liabilities which are included in “accrued return liabilities.” The estimated cost of returned inventory is recorded as a reduction to cost of sales and an increase of right of return assets which is included in “inventories.” As of September 30, 2024 and December 31, 2023, $163,666 and $283,276 of sales return liabilities associated with estimated product returns were recorded in the unaudited condensed consolidated balance sheet, respectively. During the three-month period ended September 30, 2024 and 2023, the Company recorded sales returns of $317,188 and $223,428 respectively. During the nine-month period ended September 30, 2024 and 2023, the Company recorded sales returns of $824,978 and $1,975,270, respectively.

 

12
 

 

Warranty

 

We generally provide a one-year limited warranty against defects in materials related to the sale of products. The Company considers the warranty as an assurance type warranty since the warranty provides the customer the assurance that the product complies with agreed-upon specifications. Estimated future warranty obligations are included in cost of product sales in the period in which the related revenue is recognized. The determination of the Company’s warranty accrual is based on actual historical experience with the product, estimates of repair and replacement costs and any product warranty problems that are identified after shipment. The Company estimates and adjusts these accruals at each balance sheet date in accordance with changes in these factors. As of September 30, 2024 and December 31, 2023, $608,644 and $619,113 of product warranty were recorded in the unaudited condensed consolidated balance sheet, respectively. During the three-month period ended September 30, 2024 and 2023, the Company recorded warranty expenses of $234,314 and $576,602, respectively. During the nine-month period ended September 30, 2024 and 2023, the Company recorded warranty expenses of $1,102,494 and $1,521,902, respectively.

 

Allowance for credit loss

 

We considered various factors, including nature, historical collection experience, the age of the accounts receivable balances and the contract assets, credit quality and specific risk characteristics of its customers, current economic conditions, forecasts of future economic conditions, reversion period, and qualitative and quantitative adjustments to develop an estimate of credit losses. We have adopted loss rate method to calculate the credit loss and considered the relevant factors of the historical and future conditions of the Company to make reasonable estimation of the risk rate. For accounts receivable aged less than one year and non-overdue contract assets, we use the loss rate method, which is a combination of historical rate method and adjustment rate method, to estimate the credit loss. For accounts receivable aged over one year and overdue retainage receivable, we use the individual specific valuation method to estimate the credit loss.

 

We wrote off potentially uncollectible accounts receivable against the allowance for credit losses if it is determined that the amounts will not be collected. As of September 30, 2024 and December 31, 2023, we recorded allowance for credit loss of $0.7 million and $0.6 million in the unaudited condensed consolidated balance sheet, respectively.

 

Inventory provision

 

We assessed the net realizable value of each item of inventories and compared to the cost on the book, which include the cost of raw materials, freight and duty for raw materials, direct labor costs, and the overhead costs for finished goods at the end of each reporting period. In addition, we assessed all slow-moving or obsolete items for inventory valuation purposes. As of September 30, 2024 and December 31, 2023, the Company had inventory provision of $329,900 and $439,900, included in inventories, net in the unaudited condensed consolidated balance sheet. Reversal of impairment provision of inventories were $110,000, $110,000, $nil and $nil for the three and nine months ended September 30, 2024 and 2023, respectively, included in cost of revenues in the unaudited condensed consolidated statement of operations and comprehensive income.

 

Contingencies

 

We may be involved in various legal proceedings, claims and other disputes arising from the commercial operations, projects and other matters which, in general, are subject to uncertainties and in which the outcome are not predictable. We determine whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. Although we can give no assurances about the resolution of pending claims, litigation or other disputes and the effect such outcomes may have on us, we believe that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided or covered by insurance, will not have a material adverse effect on the our unaudited condensed consolidated financial position or results of operations or liquidity as at September 30, 2024 and December 31, 2023, except one litigation discussed below.

 

Litigation

 

On July 8, 2024, the Company received a final judgment from the trial court in the lawsuit filed by Taizhou Nebula Power Co, Ltd. (“Nebula”) on September 15, 2020. The final judgment awarded Nebula $3,334,542 in damages, $1,436,809 in attorneys’ fees and other court costs, and $1,146,169 in interest on balances from September 15, 2020. In connection with this judgment, the Company recorded an additional accrual of $3,573,651 as of September 30, 2024, bringing the total accrual related to this lawsuit to approximately $5.9 million. The Company filed an appeal in August 2024.

 

Although our significant accounting policies are elaborated upon in Note 2 – Summary of Significant Accounting Policies in our consolidated financial statements, we maintain that there were no critical accounting policies.

 

13
 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

As a smaller reporting company, we are not required to provide the information required by this item.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer (together, the “Certifying Officers”), or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

 

Under the supervision and with the participation of our management, including our Certifying Officers, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this Report.

 

A material weakness is a deficiency, or a combination of 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. Specifically, we concluded that our controls over the classification of related party payables, and accounting for related party notes payable was not effectively designed or maintained. Our management performed additional analysis as deemed necessary to ensure that our unaudited financial statements included in this Report were prepared in accordance with U.S. GAAP. Accordingly, management believes that the unaudited financial statements included in this Report present fairly, in all material respects, our financial position, results of operations and cash flows of the periods presented.

 

In light of the material weakness described above, our management team has performed additional accounting and financial analyses and other post-closing procedures. We have enhanced, and will continue to enhance, internal controls and procedures, including access to accounting literature, identification and consideration of third-party professionals with whom to consult regarding complex accounting applications and implementing additional layers of reviews in the financial close process. While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we plan to continue to improve these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards.

 

We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

Changes in Internal Control over Financial Reporting

 

Other than as discussed above, there have been no changes to our internal control over financial reporting during the quarterly period ended September 30, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

14
 

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us or any of our officers or directors in their corporate capacity.

 

Item 1A. Risk Factors

 

As of the date of this Report, there have been no material changes with respect to those risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on April 15, 2024. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risks could arise that may also affect our business. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.

 

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

 

Unregistered Sales of Equity Securities.

 

None.

 

Item 3. Default Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

15
 

 

Item 6. Exhibits, Financial Statement Schedules.

 

The following documents are filed as exhibits to this Report.

 

EXHIBIT INDEX

 

Exhibit

Number

   Description of Document
31.1   Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(*)
31.2   Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(*)
32.1   Certification of the Principal Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(**)
32.2   Certification of the Principal Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(**)
101.INS   Inline XBRL Instance Document(*)
101.SCH   Inline XBRL Taxonomy Extension Schema Document(*)
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document(*)
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document(*)
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document(*)
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document(*)
104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)(*)

 

* Filed herewith.
   
** Furnished herewith.

 

16
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  Massimo Group
     
Date: November 14, 2024   /s/ David Shan
   

David Shan

Chief Executive Officer

    (principal executive officer)

 

Date: November 14, 2024 By: /s/ Yunhao Chen
    Yunhao Chen
    Chief Financial Officer
    (principal financial and accounting officer)

 

17

 

 

Exhibit 31.1

 

CERTIFICATION OF THE

PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO

RULE 13a-14(a) AND RULE 15d-14(a)

UNDER THE

SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, David Shan, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Massimo Group;
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b)

(Paragraph intentionally omitted pursuant to SEC Release Nos. 33-8238/34-47986 and 33-8392/34-49313);

     
  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 14, 2024 By: /s/ David Shan
    David Shan
    Chief Executive Officer
    (Principal Executive Officer)

 

 

 

 

Exhibit 31.2

 

CERTIFICATION OF THE

PRINCIPAL FINANCIAL OFFICER

PURSUANT TO

RULE 13a-14(a) AND RULE 15d-14(a)

UNDER THE

SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Yunhao Chen, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Massimo Group;
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b)

(Paragraph intentionally omitted pursuant to SEC Release Nos. 33-8238/34-47986 and 33-8392/34-49313);

     
  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
     
  c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 14, 2024 By: /s/ Yunhao Chen
    Yunhao Chen
    Chief Financial Officer
    (Principal Financial Officer)

 

 

 

 

 

 

Exhibit 32.1

 

CERTIFICATION OF THE

PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q of Massimo Group (the “Company”) for the quarterly period ended September 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David Shan, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
   
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

 

Date: November 14, 2024 By: /s/ David Shan
    David Shan
    Chief Executive Officer
    (Principal Executive Officer)

 

 

 

 

 

 

Exhibit 32.2

 

CERTIFICATION OF THE

PRINCIPAL FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q of Massimo Group (the “Company”) for the quarterly period ended September 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Yunhao Chen, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
   
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

 

Date: November 14, 2024 By: /s/ Yunhao Chen
    Yunhao Chen
    Chief Financial Officer
    (Principal Financial Officer)

 

 

 

 

v3.24.3
Cover - shares
 9 Months Ended
Sep. 30, 2024
Nov. 12, 2024
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Sep. 30, 2024  
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2024  
Current Fiscal Year End Date --12-31  
Entity File Number 001-41994  
Entity Registrant Name Massimo Group  
Entity Central Index Key 0001952853  
Entity Tax Identification Number 92-0790263  
Entity Incorporation, State or Country Code NV  
Entity Address, Address Line One 3101 W Miller Road  
Entity Address, City or Town Garland  
Entity Address, State or Province TX  
Entity Address, Postal Zip Code 75041  
City Area Code (877)  
Local Phone Number 881-6376  
Title of 12(b) Security Common stock, $0.001 par value  
Trading Symbol MAMO  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company true  
Elected Not To Use the Extended Transition Period false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   41,384,791
v3.24.3
Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
CURRENT ASSETS    
Cash and cash equivalents $ 1,723,783 $ 765,814
Accounts receivable, net 11,557,733 9,566,445
Inventories, net 30,913,746 25,800,912
Advance to suppliers 323,268 1,589,328
Other current assets 567,485 637,509
Total current assets 45,086,015 38,360,008
NON-CURRENT ASSETS    
Property and equipment at cost, net 600,034 399,981
Right of use operating lease assets, net 10,125,587 1,478,221
Right of use financing lease assets, net 82,410 113,549
Deferred offering assets 1,457,119
Other non-current assets 49,500
Deferred tax assets 1,109,292 134,601
Total non-current assets 11,966,823 3,583,471
TOTAL ASSETS 57,052,838 41,943,479
CURRENT LIABILITIES    
Short-term loans 303,583
Accounts payable 9,764,284 12,678,077
Other payable, accrued expenses and other current liabilities 4,007,780 98,097
Accrued return liabilities 163,666 283,276
Accrued warranty liabilities 608,644 619,113
Contract liabilities 1,167,161 1,835,411
Current portion of obligations under operating leases 2,075,541 847,368
Current portion of obligations under financing leases 42,970 41,647
Income tax payable 2,031,571 2,121,083
Loan from a related party 6,416,525
Total current liabilities 26,278,142 18,827,655
NON-CURRENT LIABILITIES    
Obligations under operating leases, non-current 8,186,938 630,853
Obligations under financing leases, non-current 44,629 77,024
Loan from a related party 7,920,141
Total non-current liabilities 8,231,567 8,628,018
TOTAL LIABILITIES 34,509,709 27,455,673
Commitments and Contingencies
EQUITY    
Common shares, $0.001 par value, 100,000,000 shares authorized, 41,329,235 and 40,000,000 issued and outstanding as of September 30, 2024 and December 31, 2023, respectively 41,329 40,000
Preferred shares, $0.01 par value, 5,000,000 preferred shares authorized, no shares were issued and outstanding as of September 30, 2024 and December 31, 2023, respectively
Subscription receivable (832,159)
Additional paid-in-capital 5,720,756 1,994,000
Retained earnings 16,781,044 13,285,965
Total equity 22,543,129 14,487,806
TOTAL LIABILITIES AND EQUITY $ 57,052,838 $ 41,943,479
v3.24.3
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares
Sep. 30, 2024
Dec. 31, 2023
Statement of Financial Position [Abstract]    
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 41,329,235 40,000,000
Common stock, shares outstanding 41,329,235 40,000,000
Preferred stock, par value $ 0.01 $ 0.01
Preferred stock, shares authorized 5,000,000 5,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
v3.24.3
Condensed Consolidated Statement of Operations and Comprehensive Income (Unaudited) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Income Statement [Abstract]        
Revenues $ 25,602,310 $ 29,907,697 $ 91,156,640 $ 75,483,811
Cost of revenues 18,649,995 19,850,258 62,253,681 51,706,682
Gross profit 6,952,315 10,057,439 28,902,959 23,777,129
Operating expenses:        
Selling expense 2,628,915 2,104,505 7,936,761 6,541,244
General and administrative 3,895,232 2,716,733 12,096,874 9,038,488
Impairment loss on supplier deposit 29,883 772,780
Research and development 94,771 257,021
Total operating expenses 6,648,801 4,821,238 21,063,436 15,579,732
Income from operations 303,514 5,236,201 7,839,523 8,197,397
Other income (expense):        
Other income, net 210,701 41,133 590,538 113,001
Loss on litigation (3,573,651) (3,573,651)
Interest expense (64,462) (213,901) (268,803) (494,011)
Total other (expense) income, net (3,427,412) (172,768) (3,251,916) (381,010)
(Loss) income before income taxes (3,123,898) 5,063,433 4,587,607 7,816,387
(Recovery of ) provision for income taxes (621,665) 1,106,046 1,092,528 1,236,551
Net (loss) income and comprehensive (loss) income $ (2,502,233) $ 3,957,387 $ 3,495,079 $ 6,579,836
(Loss) Earnings per Share – basic $ (0.06) $ 0.10 $ 0.09 $ 0.16
Weighted average shares outstanding – basic [1] 41,325,388 40,000,000 40,863,370 40,000,000
(Loss) Earnings per Share –diluted $ (0.06) $ 0.10 $ 0.09 $ 0.16
Weighted average shares outstanding –diluted [1] 41,325,388 40,000,000 41,005,556 40,000,000
[1] Retroactively restated for effect of reorganization
v3.24.3
Condensed Consolidated Statements of Changes in Shareholders' Equity (Unaudited) - USD ($)
Common Stock [Member]
Receivables from Stockholder [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Total
Balance at Dec. 31, 2022 $ 40,000 $ (2,034,000) $ 1,994,000 $ 5,070,740 $ 5,070,740
Balance, shares at Dec. 31, 2022 [1] 40,000,000        
Subscription received 981,841 981,841
Net income (loss) 6,579,836 6,579,836
Capital dividend declared (2,200,000) (2,200,000)
Balance at Sep. 30, 2023 $ 40,000 (1,052,159) 1,994,000 9,450,576 10,432,417
Balance, shares at Sep. 30, 2023 [1] 40,000,000        
Balance at Dec. 31, 2022 $ 40,000 (2,034,000) 1,994,000 5,070,740 5,070,740
Balance, shares at Dec. 31, 2022 [1] 40,000,000        
Balance at Dec. 31, 2023 $ 40,000 (832,159) 1,994,000 13,285,965 14,487,806
Balance, shares at Dec. 31, 2023 [1] 40,000,000        
Balance at Jun. 30, 2023 $ 40,000 (1,414,000) 1,994,000 5,493,189 6,113,189
Balance, shares at Jun. 30, 2023 [1] 40,000,000        
Subscription received 361,841 361,841
Net income (loss) 3,957,387 3,957,387
Balance at Sep. 30, 2023 $ 40,000 (1,052,159) 1,994,000 9,450,576 10,432,417
Balance, shares at Sep. 30, 2023 [1] 40,000,000        
Balance at Dec. 31, 2023 $ 40,000 (832,159) 1,994,000 13,285,965 14,487,806
Balance, shares at Dec. 31, 2023 [1] 40,000,000        
Net income (loss) 3,495,079 3,495,079
Issuance of common stock $ 29 79,971 80,000
Issuance of common stock, shares [1] 29,235        
Stock based compensation 558,365 558,365
Additional Paid-in capital 832,159 88,172 920,331
Initial public offering, net of share issuance costs $ 1,300 3,000,248 $ 3,001,548
Initial public offering, net of share issuance costs, shares 1,300,000 [1]       1,329,235
Balance at Sep. 30, 2024 $ 41,329 5,720,756 16,781,044 $ 22,543,129
Balance, shares at Sep. 30, 2024 [1] 41,329,235        
Balance at Jun. 30, 2024 $ 41,322 5,392,664 19,283,277 24,717,263
Balance, shares at Jun. 30, 2024 [1] 41,322,485        
Net income (loss) (2,502,233) (2,502,233)
Issuance of common stock $ 7 (7)
Issuance of common stock, shares [1] 6,750        
Stock based compensation 328,099 $ 3
Initial public offering, net of share issuance costs, shares         6,750
Balance at Sep. 30, 2024 $ 41,329 $ 5,720,756 $ 16,781,044 $ 22,543,129
Balance, shares at Sep. 30, 2024 [1] 41,329,235        
[1] Retroactively restated for effect of reorganization
v3.24.3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
 3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Dec. 31, 2023
Cash flows from operating activities:          
Net income $ (2,502,233) $ 3,957,387 $ 3,495,079 $ 6,579,836  
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation 31,127 39,473 98,111 109,765  
Non-cash operating lease expense     1,342,402 793,577  
Accretion of finance lease liabilities 1,116 2,219 3,672 5,610  
Amortization of finance lease right-of-use assets 10,379 10,380 31,139 31,733  
Written-off of account receivables     420,967  
Provision of (Reversal of) allowance for excepted credit loss, net 27,779 174,231 223,051 (118,144)  
Gain on disposal of fixed asset     (36,001)  
Impairment loss of asset 29,883 772,780  
Loss on litigation 3,573,651 3,573,651  
RSU compensation     426,666  
Share-based compensation for services     131,699  
Deferred tax assets     (974,691) (65,158)  
Changes in operating assets and liabilities:          
Accounts receivable     (2,214,339) (1,631,919)  
Inventories     (5,002,834) (36,157)  
Reversal of inventory impairment     (110,000)  
Advance to suppliers     493,280 (130,580)  
Other current assets     20,524 (818,397)  
Related party payable     398,700  
Accounts payables     (2,913,793) (373,314)  
Other payable, accrued expense and other current liabilities     336,032 (154,530)  
Tax payable     (89,512) 1,237,709  
Accrued warranty liabilities     (10,469) 205,868  
Accrued return liabilities     (119,610) (341,317)  
Contract liabilities     (668,250) 457,936  
Lease liabilities – operating lease     (1,205,510) (793,577)  
Net cash (used in) provided by operating activities     (2,396,923) 5,778,608  
Cash flows from investing activities:          
Proceed from sales of property and equipment     162,001  
Acquisition of property and equipment (82,312) (44,210) (424,164) (68,871)  
Net cash used in investing activities     (262,163) (68,871)  
Cash flows from financing activities:          
Repayment of other loans     (303,583) (1,600,000)  
Repayment of finance lease liabilities     (34,744) (35,469)  
Proceed from common share issuances     80,000  
Deferred offering costs     (263,162)  
Proceeds from initial public offering, net of share issuance costs     4,458,667  
Repayment of loan from a related party     (1,503,616) (3,982,876)  
Proceeds from subscription deposits     920,331 381,841  
Net cash provided by (used in) financing activities     3,617,055 (5,499,666)  
Net increase in cash and cash equivalents     957,969 210,071  
Cash and cash equivalents, beginning of the period     765,814 947,971 $ 947,971
Cash and cash equivalents, end of the period $ 1,723,783 $ 1,158,042 1,723,783 1,158,042 765,814
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:          
Cash paid for interest     244,173 494,011  
Cash paid for income taxes     2,156,731 64,000  
NON-CASH ACTIVITIES          
Right of use assets obtained in exchange for operating lease obligations     9,758,345 1,113,140 1,113,140
Right of use assets obtained in exchange for finance lease     $ 60,805 $ 60,805
v3.24.3
ORGANIZATION AND BUSINESS DESCRIPTION
 9 Months Ended
Sep. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
ORGANIZATION AND BUSINESS DESCRIPTION

NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION

 

Massimo Group (the “Company”), is a holding company established on October 10, 2022 under the laws of the State of Nevada. The Company, through its subsidiaries, is primarily engaged in the manufacturing and sales of a wide selection of farm and ranch tested utility terrain vehicles (“UTVs”), recreational all-terrain vehicles (“ATVs”), and pontoon and tritoon boats (“Pontoon Boats”). On April 4, 2024, the Company closed its initial public offering (“IPO”) of 1,300,000 shares of its common stock at an IPO price of $4.50 per share for aggregate gross proceeds of approximately $5.85 million from the offering (Note 15). In connection with the offering, the Company’s common shares began trading on the Nasdaq Capital Market under the trading symbol “MAMO.” Mr. David Shan, the Chairman of the Board and Chief Executive Officer (“CEO”), is the controlling shareholder (the “controlling shareholder”) of the Company and owns 77.6% equity interest of Massimo Group as of September 30, 2024.

 

Reorganization

 

On June 1, 2023, the two shareholders transferred their 100% equity interest in Massimo Motor Sports, LLC (“Massimo Motor Sports”) and 100% equity interest in Massimo Marine, LLC (“Massimo Marine”) to Massimo Group (the “Reorganization”). After this Reorganization, Massimo Group ultimately owns 100% equity interests of Massimo Motor Sports and Massimo Marine.

 

Before and after the Reorganization, the Company, together with its subsidiaries, is effectively controlled by the same controlling shareholders, and therefore the Reorganization is considered as a recapitalization of entities under common control in accordance with Accounting Standards Codification (“ASC”) 805-50-25. The consolidation of the Company and its subsidiaries have been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements in accordance with ASC 805-50-45-5.

 

Details of the Company and its subsidiaries are set out below upon the Reorganization:

  

Subsidiaries  

Date of

Incorporation

  

Jurisdiction of

Formation

  

Percentage of

direct/indirect

Economic

Ownership

    

Principal

Activities

Massimo Group   October 10, 2022   Nevada           Holding company
Massimo Motor Sports, LLC   June 30, 2009   Texas     100 %   Manufacture of UTVs and ATVs
Massimo Marine, LLC   January 6, 2020   Texas     100 %   Manufacture of Pontoon Boats

 

On June 1, 2023, the Company entered into two agreements with Asian International Securities Exchange Co., Ltd. (“AISE”) and AISE agreed to invest $1 million to Massimo Motor Sports and $1 million to Massimo Marine to exchange their 15% of equity interest respectively. After Reorganization, the 15% of equity interest in Massimo Motor Marine and Massimo Marine owned by AISE have been exchanged to 15% of equity interest in Massimo Group.

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 
v3.24.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation and Principles of Consolidation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for annual consolidated financial statements. In the opinion of management, the accompanying condensed consolidated financial statements include all adjustments which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of September 30, 2024, and for the three and nine months ended September 30, 2024 and 2023. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the operating results for the full year ending December 31, 2024 or any other period. These unaudited condensed consolidated financial statements have been derived from the accounting records of the Company and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on April 15, 2024.

 

Uses of estimates and assumptions

 

In preparing the consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information as of the date of the consolidated financial statements. Significant accounting estimates required to be made by management include allowance for inventories, allowance for credit losses, sales return liabilities, warranty costs and the assessment and the disclosure of contingency liabilities. The Company evaluates its estimates and assumptions on an ongoing basis and its estimates on historical experience, current and expected future conditions and various other assumptions that management believes are reasonable under the circumstances based on the information available to management at the time these estimates and assumptions are made. Actual results and outcomes may differ significantly from these estimates and assumptions.

 

Cash and cash equivalents

 

Cash and cash equivalents consist of cash on hand, the balances with banks and the liquid investments with maturities of three months or less. The Company maintains all its bank accounts in the United States, maximum amounts of $751,585 and $435,457 are insured by Federal Deposit Insurance Corporation (“FDIC”) as of September 30, 2024 and December 31, 2023, respectively.

 

Accounts receivable, net

 

Accounts receivable represent trade receivable and are recognized initially at fair value and subsequently adjusted for any allowance for expected credit loss. The Company grants credit to customers, without collateral, under normal payment terms. The Company uses a loss rate method to estimate the allowance for credit losses. The Company evaluates the expected credit loss of accounts receivable based on customer financial condition and historical collection information adjusted for current market economic conditions and forecasts of future economic performance when appropriate. Loss-rate approach is based on the historical loss rates and expectations of future conditions. The Company writes off potentially uncollectible accounts receivable against the allowance for credit losses if it is determined that the amounts will not be collected.

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Inventories, net

 

Inventories are stated at the lower of cost or net realizable value, using the first-in, first out (FIFO) method. Costs include the cost of raw materials, freight and duty. Any excess of the cost over the net realizable value of each item of inventories is recognized as a provision for diminution in the value of inventories. Net realizable value is estimated using selling price in the normal course of business less any costs to complete and sell products. As of September 30, 2024 and December 31, 2023, the Company had inventory provision of $329,900 and $439,900, included in inventories, net in the unaudited condensed consolidated balance sheet. Reversal of impairment provision of inventories were $110,000, $110,000, $nil and $nil for the three and nine months ended September 30, 2024 and 2023, respectively, included in cost of revenues in the condensed consolidated statement of operations and comprehensive income.

 

Advances to suppliers

 

Advance to suppliers consists of balances paid to suppliers for purchasing of products, parts and accessories that have not been provided or received. Advances to suppliers are short-term in nature and are reviewed periodically to determine whether their carrying value has become impaired. The Company evaluated the carrying value of individual advances based on specifics facts and circumstances for any impairment at each reporting date. For the three-month period and nine-month period ended September 30, 2024 and 2023, the Company recorded the impairment loss of $29,883, $772,780, $nil and $nil respectively on its advances to suppliers in connection of an expected settlement between the Company and one supplier in September 2024.

 

Deferred offering cost

 

Deferred offering costs were expenses directly related to the Company’s planned IPO. These costs consisted of legal, accounting, printing, and filing fees that the Company capitalized, including fees incurred by the independent registered public accounting firm directly related to the offering. The deferred offering costs are reclassified to additional paid-in capital upon receipts of the capital raised at IPO closing date.

 

Property and equipment

 

Property and equipment are recorded at cost. Depreciation is provided in amounts sufficient to amortize the cost of the related assets over their useful lives using the straight-line method, as follows:

 

    Useful life
Furniture and fixtures   5-7 years
Machinery equipment   5-7 years
Electronic equipment   5 years
Transportation equipment   5 years
Leasehold improvement   Over the shorter of the lease term or estimated useful lives

 

Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gains or losses on disposals are determined by comparing proceeds with carrying amount and are recognized within “other income (expense)” in the unaudited condensed consolidated statements of operations and comprehensive income.

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Leases

 

The Company adopted Accounting Standards Update (“ASU”) No. 2016-02—Leases (Topic 842) since January 1, 2020, using a modified retrospective transition method permitted under ASU No. 2018-11. This transition approach provides a method for recording existing leases only at the date of adoption and does not require previously reported balances to be adjusted. The Company evaluates the contracts it enters into to determine whether such contracts contain leases. A contract contains a lease if the contract conveys the right to control the use of identified property or equipment for a period of time in exchange for consideration. At commencement, contracts containing a lease are further evaluated for classification as an operating or finance lease where the Company is a lessee.

 

Operating Leases

 

For operating leases, the Company measures its lease liabilities based on the present value of the total lease payments not yet paid discounted based on the more readily determinable of the rate implicit in the lease or its incremental borrowing rate, which is the estimated rate the Company would be required to pay for a collateralized borrowing equal to the total lease payments over the term of the lease. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The Company measures right-of-use (“ROU”) assets based on the corresponding lease liability adjusted for payments made to the lessor at or before the commencement date, and initial direct costs it incurs under the lease. The Company begins recognizing lease expense when the lessor makes the underlying asset available to the Company.

 

Lease cost for operating leases includes the amortization of the ROU asset and interest expense related to the operating lease liability. For leases with lease term less than one year (short-term leases), the Company records operating lease expense in its consolidated statements of operations on a straight-line basis over the lease term and record variable lease payments as incurred.

 

Finance Leases

 

Lease cost for finance leases where the Company is the lessee includes the amortization of the ROU asset, which is amortized on a straight-line basis and recorded to “Depreciation of right-of-use finance asset” and interest expense on the finance lease liability, which is calculated using the interest method and recorded to “Interest expense, net.” Finance lease ROU assets are amortized over the shorter of their estimated useful lives or the terms of the respective leases, including periods covered by renewal options that the Company is reasonably certain of exercising.

 

Impairment of long-lived assets

 

Long-lived assets, primarily consist of property and equipment, are evaluated for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying amount may not be fully recoverable or that the useful life is shorter than the Company had originally estimated. When these events occur, the Company evaluates the impairment by comparing the carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the assets, the Company recognizes an impairment loss based on the excess of the carrying value of the assets over the fair value of the assets. No impairment charge was recognized for the three and nine months ended September 30, 2024 and 2023, respectively.

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Fair value of financial instruments

 

ASC 825-10 requires certain disclosures regarding the fair value of financial instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

 

● Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
● Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted market prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable and inputs derived from or corroborated by observable market data.
● Level 3 — inputs to the valuation methodology are unobservable.

 

Unless otherwise disclosed, the fair value of the Company’s financial instruments, including cash and cash equivalents, accounts receivables, note receivable which was grouped in other current assets, loan from a related party, accounts payable, other payable, accrued expense and other liabilities, contract liabilities, approximates their recorded values due to their short-term maturities. The Company determined that the carrying value of the lease liabilities approximated their fair value as the interest rates used to discount the contracts approximate market rates. The Company noted no transfers between levels during any of the periods presented. The Company did not have any instruments that were measured at fair value on a recurring nor non-recurring basis as of September 30, 2024 and December 31, 2023.

 

Revenue recognition

 

The Company adopted ASC Topic 606, “Revenue from Contracts with Customers”. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the Company applies the following steps:

 

Step 1: Identify the contract(s) with a customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

 

The Company’s revenue is generated primarily by sales of UTVs, ATVs electric bikes (“e-bikes”), and Pontoon Boats. Revenue represented the amount of consideration to which the Company expects to be entitled in exchange for promised goods. Revenue is recorded when performance obligations are considered to be satisfied when control is transferred to our customers upon goods delivered to customers and acceptance by customers.

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Sales returns

 

The Company provides a refund policy to accept returns from end customers, which varies and depends on different products and customers. The estimated sales returns are determined based upon an analysis of historical sales returns. Return allowances are recorded as a reduction in sales with corresponding sales return liabilities which are included in “accrued return liabilities.” The estimated cost of returned inventory is recorded as a reduction to cost of sales and an increase of right of return assets which is included in “inventories.” The factors affecting the Company’s sales return liabilities include the number of products currently within the return period, historical and anticipated rates of sales returns claimed on those products, and the estimated amount of returns that may be claimed within this period. If actual results differ from the estimates, the Company revises its estimated sales returns liability accordingly. Each quarter, the Company reviews and reassesses the adequacy of its recorded sales returns liabilities and adjusts the amounts as necessary. As of September 30, 2024 and December 31, 2023, $163,666 and $283,276 of sales return liabilities associated with estimated product returns were recorded in the unaudited condensed consolidated balance sheet, respectively. During the three-month period ended September 30, 2024 and 2023, the Company recorded sales returns of $317,188 and $223,428 respectively. During the nine-month period ended September 30, 2024 and 2023, the Company recorded sales returns of $824,978 and $1,975,270 respectively.

 

Products warranty

 

The Company generally provides a one-year limited warranty against defects in materials related to the sale of products. The Company considers the warranty as an assurance type warranty since the warranty provides the customers the assurance that the product complies with agreed-upon specifications. Estimated future warranty obligations are included in cost of product sales in the period in which the related revenue is recognized. The factors affecting the Company’s warranty include the number of products currently under warranty, historical and anticipated rates of warranty claim on those products, and the estimates of repair and replacement costs to satisfy the Company’s warranty obligation. The anticipated rate of warranty claims is the primary estimate used in determining the warranty liability and is relatively predictable using historical experience of failure rates. The average remaining aggregate warranty period of the products sold is calculated, repair parts are generally already in stock or available at pre-determined prices, and labor rates are generally arranged at pre-established amount with service providers. If actual results differ from the estimates, the Company revises its estimated warranty liability. Each quarter, the Company reevaluates its estimates and assess the adequacy of its recorded warranty liabilities and adjust the amounts as necessary. As of September 30, 2024 and December 31, 2023, $608,644 and $619,113 of product warranty were recorded in the unaudited condensed consolidated balance sheet, respectively. During the three-month period ended September 30, 2024 and 2023, the Company recorded warranty expenses of $234,314 and $576,602, respectively. During the nine-month period ended September 30, 2024 and 2023, the Company recorded warranty expenses of $1,102,494 and $1,521,902, respectively.

 

Contract liabilities

 

The contract liabilities of the Company are primarily related to advances received from customer. The contract liabilities are reported in a net position on a customer-by-customer basis at the end of each reporting period. Contract liabilities are recognized when the Company receives prepayment from customers resulting from purchase order. Contract liabilities will be recognized as revenue when the products are delivered. As of September 30, 2024 and December 31, 2023, the Company records contract liabilities of $1,167,161 and $1,835,411, respectively, which will be recognized as revenue upon delivery of the products sold. For the nine months ended September 30, 2024 and 2023, the amounts transferred from contract liabilities to revenue at the beginning of the fiscal period were $1,160,167 and $696,274, respectively.

 

Disaggregation of revenues

 

The Company disaggregates its revenue from contracts by products, as the Company believes it best depicts how the nature, amount, timing and uncertainty of the revenue and cash flows are affected by economic factors. The Company’s disaggregation of revenues for the three and nine months ended September 30, 2024 and 2023 is disclosed in Note 19 of these unaudited condensed consolidated financial statements.

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Cost of revenues

 

Cost of revenues includes all of the costs and expenses directly related to the production of goods and services included in revenues. Cost of revenues primarily consists of cost of products, freight and duty allocated and warehouse related overhead, such as salaries and benefits, rent, warehouse supplies and depreciation expenses.

 

The freights and duty costs incurred when shipping raw materials from suppliers to the Company are included in cost of revenues, amounting to $2,406,336 and $1,599,110 for the three months ended September 30, 2024 and 2023, respectively. The freights and duty costs incurred when shipping raw materials from suppliers to the Company are included in cost of revenues, amounting to $8,582,277 and $6,758,360 for the nine months ended September 30, 2024 and 2023, respectively.

 

Shipping and handling costs

 

Shipping and handling costs, which include costs related to the selection of products and their delivery to customers, are presented in selling expenses. The shipping and freight expense incurred upon goods delivery to customers are included in selling expenses, amounting to $1,500,947 and $694,912 for the three months ended September 30, 2024 and 2023, respectively. The shipping and freight expense incurred upon goods delivery to customers are included in selling expenses, amounting to $4,562,815 and $3,130,474 for the nine months ended September 30, 2024 and 2023, respectively.

 

Advertising costs

 

The Company expenses all advertising costs as incurred. Advertising costs presented in selling expenses were $95,509 and $$363,189 for the three months ended September 30, 2024 and 2023, respectively. Advertising costs presented in selling expenses were $499,274 and $825,852 for the nine months ended September 30, 2024 and 2023, respectively.

 

401(k) benefit plan

 

The 401(k) benefit plan covers substantially all employees and allows voluntary employee contributions up to the annually adjusted Internal Revenue Service dollar limit. These voluntary contributions are matched equal to 100% of the employee’s compensation contributed and not to exceed 4% of the total eligible compensation. The employees’ voluntary contributions and the Company’s matching contributions are 100% vested immediately. The Company adopted the 401(k) benefit plan from March 2022.

 

Income taxes

 

Before the Reorganization, the Company elected to be taxed as an S Corporation for federal and state income tax purposes. As an S Corporation, the Company is not subject to federal income tax and state tax in Texas. As such, shareholders are taxed on their pro rata share of earnings and deductions of the Company, regardless of the amount of distributions received. After the Reorganization, the Company is subjected to U.S. federal income tax at 21% and the margin tax in the state of Texas.

 

Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Income taxes (continued)

 

The Company accounts for uncertain tax positions in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic No. 740, “Accounting for Uncertainty in Income Taxes.” A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

 

Significant judgment is also required in evaluating the Company’s uncertain income tax positions and provisions for income taxes. Liabilities for uncertain income tax positions are recognized based on a two-step approach. The first step is to evaluate whether an income tax position has met the recognition threshold by determining if the weight of available evidence indicates that it is more likely than not to be sustained upon examination. The second step is to measure the income tax position that has met the recognition threshold as the largest amount that is more than 50% likely of being realized upon settlement. The Company continually assesses the likelihood and amount of potential adjustments and adjusts the income tax provisions, income taxes payable and deferred income taxes in the period in which the facts that give rise to a revision become known. The Company recognizes interest and penalties related to uncertain income tax positions as interest expense.

 

Earnings per share

 

The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. For the three and nine months ended September 30, 2024 , a total of nil and 142,186 unvested Restricted Stock Units (“RSU”) were included in the computation of weighted average number of common shares for the calculation of diluted EPS. For the three and nine months ended September 30, 2023, there were no dilutive shares.

 

Stock Based compensation

 

The Company follows the provisions of ASC 718, “Compensation - Stock Compensation” (“ASC 260”), which establishes the accounting for employee share-based awards. For employee share-based awards, stock based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense with graded vesting on a straight-line basis over the requisite service period for the entire award.

 

Segment reporting

 

The Company follows ASC 280, “Segment Reporting.” The Company’s Chief Executive Officer or chief operating decision-maker reviews the consolidated financial results when making decisions about allocating resources and assessing the performance of the Company as a whole and hence, the Company has only one reportable segment. The Company operates and manages its business as a single segment. As the Company’s long-lived assets are all located in the United States and substantially all the Company’s revenues are derived from within the United States, no geographical segments are presented.

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Concentration and risks

 

a. Concentration of credit risk

 

Assets that potentially subject the Company to a significant concentration of credit risk primarily consist of cash and cash equivalents, accounts receivable and other receivable included in other current assets. The maximum exposure of such assets to credit risk is their carrying amounts at the balance sheet dates. The Company maintains all the bank accounts at financial institutions in the United States, where there is $250,000 standard deposit insurance coverage limit per depositor, per FDIC-insured bank and per ownership category. As of September 30, 2024, balances of two banks in Massimo Motor Sports exceeded the insured limits by $145,456 and $826,741, respectively. As of December 31, 2023, balances of one bank in Massimo Motor Sports exceeded the insured limits by $330,357.

 

To limit the exposure to credit risk relating to deposits, the Company primarily places cash deposits with large financial institutions in the United States. The Company conducts credit evaluations of its customers and generally does not require collateral or other security from them. The Company establishes an accounting policy to provide for current expected credit losses based on the individual customer’s financial condition, credit history, and the current economic conditions.

 

b. Foreign Exchange Risk

 

Most of our raw materials are imported from China. The value of the Chinese Yuan against the U.S. dollar is affected by the changes in China and United States economic conditions. We do not believe that we currently have any significant direct foreign exchange risk and have not used any derivative financial instruments to hedge exposure to such risk.

 

c. Interest Rate Risk

 

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. Our exposure to interest rate risk primarily relates to the interest rates from our lessors and our borrowings with banks. The shareholder loans bear no interest. Our leasing obligations’ interest rates are fixed at the commencement date of the leases. We have not been exposed to material risks due to the fact that our borrowing from the bank is not significant. And we have not used any derivative financial instruments to manage our interest risk exposure. However, we cannot provide assurance that we will not be exposed to material risks due to changes in market interest rate in the future.

 

d. Liquidity Risk

 

Liquidity risk arises through the excess of financial obligations over available financial assets due at any point in time. Our objective in managing liquidity risk is to maintain sufficient readily available reserves in order to meet our liquidity requirements at any point in time. We achieve this by maintaining sufficient cash and banking facilities.

 

e. Significant customers

 

For the three months ended September 30, 2024 and 2023, one and one customer accounted for more than 10% of the Company’s total revenues, respectively. For the nine months ended September 30, 2024 and 2023, one and one customer accounted for more than 10% of the Company’s total revenues, respectively. As of September 30, 2024 and December 31, 2023, two and one customers accounted for more than 10% of the Company’s accounts receivable, respectively.

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Concentration and risks (continued)

 

f. Significant suppliers

 

For the three months ended September 30, 2024 and 2023, two and two suppliers each accounted for more than 10% of the Company’s total purchases respectively. For the nine months ended September 30, 2024 and 2023, two and two suppliers each accounted for more than 10% of the Company’s total purchases respectively. As of September 30, 2024 and December 31, 2023, four and three suppliers each accounted for more than 10% of the Company’s total accounts payable, respectively.

 

Recent accounting pronouncements

 

The Company considers the applicability and impact of all ASUs. Management periodically reviews new accounting standards that are issued.

 

The Jumpstart Our Business Startups Act provides that an emerging growth company (“EGC”) as defined therein can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an EGC to delay adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has adopted the extended transition period.

 

In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity,” which simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. This ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The new standard will become effective for us beginning January 1, 2024, using either a modified retrospective or a fully retrospective method of transition, and early adoption is permitted. Management is currently evaluating the impact of the new standard on our financial statements.

 

In November 2023, the FASB issued ASU No. 2023-07, “Improvements to Reportable Segment Disclosures” (Topic 280). This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment’s profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is also permitted. This ASU will likely result in us including the additional required disclosures when adopted. Management is currently evaluating the provisions of this ASU and expect to adopt them for the year ending December 31, 2024.

 

In December 2023, the FASB issued ASU No. 2023-09, “Improvements to Income Tax Disclosures” (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income tax paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. This ASU will likely result in the required additional disclosures being included in the Company’s consolidated financial statements, once adopted.

 

The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated balance sheets, statements of income and comprehensive income and statements of cash flows.

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 
v3.24.3
ACCOUNTS RECEIVABLE, NET
 9 Months Ended
Sep. 30, 2024
Receivables [Abstract]  
ACCOUNTS RECEIVABLE, NET

NOTE 3 — ACCOUNTS RECEIVABLE, NET

 

Accounts receivable consist of the following:

  

   September 30, 2024   December 31, 2023 
Accounts receivable – third parties  $12,273,560   $10,123,805 
Less: allowance for credit loss   (715,827)   (557,360)
Accounts receivable, net  $11,557,733   $9,566,445 

 

The Company recorded a reversal of allowance for credit loss of $27,779 and $174,231 for the three months ended September 30, 2024 and 2023, respectively. The Company recorded an allowance for credit loss of $223,051 and a reversal of allowance for credit loss $118,144 for the nine months ended September 30, 2024 and 2023, respectively. The Company wrote off uncollectible accounts receivable of $64,584 and $64,584 against allowance for credit loss account for the three and nine months ended September 30, 2024, respectively. The Company wrote off uncollectible accounts receivable of $420,967 and $420,967 in general and administrative expense from customer for the three and nine months ended September 30, 2023, respectively.

 

The movement of allowance for credit loss are as follow:

 

   September 30, 2024   December 31, 2023 
Balance as of beginning  $557,360   $354,059 
Written off   (64,584)   - 
Additional of provision   223,051    203,301 
Ending balance  $715,827   $557,360 

 

The Company’s accounts receivable balances as of September 30, 2024 and December 31, 2023 are pledged for its line of credit facility at Midfirst Bank and Cathay Bank (See Note 12).

 
v3.24.3
INVENTORIES
 9 Months Ended
Sep. 30, 2024
Inventory Disclosure [Abstract]  
INVENTORIES

NOTE 4 — INVENTORIES

 

Inventories consist of the following:

 

   September 30, 2024   December 31, 2023 
Products  $22,898,515   $16,777,928 
Parts and accessories   1,360,713    899,188 
Inventories in transit   2,045,793    5,399,964 
Freight and duty   4,938,625    3,163,732 
Inventory, gross   31,243,646    26,240,812 
Less: inventory allowance   (329,900)   (439,900)
Inventories, net  $30,913,746   $25,800,912 

 

A reversal of impairment provision of inventories recorded for lower of cost or net realizable value adjustments were $110,000, $110,000, $nil and $nil for the three and nine months ended September 30, 2024 and 2023, respectively.

 

The inventories which are pledged for the Company’s line of credit facility at Cathay Bank/Midfirst Bank are $24,741,508 and $19,961,227 as of September 30, 2024 and December 31, 2023, respectively (See Note 12).

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 
v3.24.3
ADVANCE TO SUPPLIERS
 9 Months Ended
Sep. 30, 2024
Advance To Suppliers  
ADVANCE TO SUPPLIERS

NOTE 5 — ADVANCE TO SUPPLIERS

 

Advance to suppliers consist of the following:

 

   September 30, 2024   December 31, 2023 
Advance to suppliers  $1,096,048   $1,589,328 
Less: impairment loss allowance due to irrecoverable prepayment   772,780    - 
Advance to suppliers, net  $323,268   $1,589,328 

 

An impairment loss allowance of advances to suppliers of $29,883, $772,780, $nil and $nil impairment loss allowance of advances to suppliers was recorded during the three and nine months ended September 30, 2024 and 2023.

 

In June 2024, we reached a tentative agreement regarding general settlement terms with one supplier who would use approximately $312,500 to resolve the claim. Therefore, we wrote off the approximate $773,000 of prepayment to the supplier, reducing it from $1.1 million to $312,500 and reclassified the remaining balance of $312,500 to other current assets on condensed consolidated balance sheet during nine months ended September 30, 2024 (Note 6). The settlement agreement was finalized in August 2024, and relative payment was received in October 2024. During the three and nine months ended September 30, 2023, we had no impairment loss of advance to suppliers.

 
v3.24.3
OTHER NON-CURRENT AND CURRENT ASSETS
 9 Months Ended
Sep. 30, 2024
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
OTHER NON-CURRENT AND CURRENT ASSETS

NOTE 6 — OTHER NON-CURRENT AND CURRENT ASSETS

 

Other current assets consist of the following:

 

   September 30, 2024   December 31, 2023 
Prepayment  $145,324   $598,481 
Note receivable (Note 5)   312,500    - 
Other receivables   159,161    39,028 
Less: Other non-current assets   (49,500)   - 
Other current assets  $567,485   $637,509 

 
v3.24.3
PROPERTY AND EQUIPMENT, NET
 9 Months Ended
Sep. 30, 2024
Property, Plant and Equipment [Abstract]  
PROPERTY AND EQUIPMENT, NET

NOTE 7 — PROPERTY AND EQUIPMENT, NET

 

Property and equipment, net, consist of the following:

 

   September 30, 2024   December 31, 2023 
Furniture and Fixtures  $125,977   $125,977 
Machinery equipment   326,843    89,418 
Vehicles   461,667    670,793 
Electronic equipment   35,303    35,303 
Leasehold improvement   173,286    90,974 
Subtotal   1,123,076    1,012,465 
Less: accumulated depreciation and amortization   (523,042)   (612,484)
Property and equipment, net  $600,034   $399,981 

 

Depreciation expense was $31,127 and $39,473 for the three months ended September 30, 2024 and 2023, respectively. Depreciation expense was $98,111 and $109,765 for the nine months ended September 30, 2024 and 2023, respectively.

 

There was an addition of $82,312 and $44,210 on property and equipment during the three months ended September 30, 2024 and 2023, respectively. There was an addition of $424,164 and $68,871 on property and equipment during the nine months ended September 30, 2024 and 2023, respectively. There was no disposal of property and during the three months ended September 30, 2024 and 2023, respectively. There was a disposal of property and equipment with the net book value of $126,000 and $nil with realized gain on the disposition of $36,001 and $nil during the nine months ended September 30, 2024 and 2023, respectively.

 

No impairment was recorded for the three and nine months ended September 30, 2024 and 2023.

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 
v3.24.3
LEASES
 9 Months Ended
Sep. 30, 2024
Leases  
LEASES

NOTE 8 — LEASES

 

On August 1, 2018, the Company signed a lease agreement with Miller Creek Holding LLC, a related party owned by the controlling shareholder, to rent the warehouse and office space of total 220,000 square feet for monthly rent of $40,000 used for its operation. The lease expired on July 31, 2021 and was further renewed for another three years and expired on July 31, 2024 with monthly rent of $60,000. On August 1, 2024, the lease was further renewed for another five years and expired on July 31, 2029 with monthly rent of $145,750. On April 29, 2023, the Company signed another lease agreement with Miller Creek Holding LLC, a related party owned by the controlling shareholder, to rent the warehouse and office space of total 66,000 square feet for monthly rent of $35,000 used for its operation. The lease expires on April 30, 2026. On May 1, 2024, the Company signed another two lease agreements with Miller Creek Holding LLC, a related party owned by the controller shareholder, to rent additional warehouse and office space of 60,000 square feet and 30,000 square feet for monthly rent of $33,000 and $16,500 used for its operation, respectively. The leases will expire on August 31, 2029. The Company also had multiple lease agreements for machinery, office equipment and vehicles. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

 

Total operating lease expense for the three months ended September 30, 2024 and 2023 amounted to $624,232 and $311,192, respectively. Amortization of operating lease right-of-use assets amounted to $471,350 and $272,580 for the three months ended September 30, 2024 and 2023, respectively.

 

Total operating lease expense for the nine months ended September 30, 2024 and 2023 amounted to $1,342,402 and $793,577, respectively. Amortization of operating lease right-of-use assets amounted to $1,110,979 and $698,336 for the nine months ended September 30, 2024 and 2023, respectively.

 

Total accretion of finance lease liabilities for the three months ended September 30, 2024 and 2023 amounted to $1,116 and $2,219, respectively. Amortization of finance lease right-of-use assets amounted to $10,379 and $10,380 for the three months ended September 30, 2024 and 2023, respectively.

 

Total accretion of finance lease liabilities for the nine months ended September 30, 2024 and 2023 amounted to $3,672 and $5,610, respectively. Amortization of finance lease right-of-use assets amounted to $31,139 and $31,733 for the nine months ended September 30, 2024 and 2023, respectively.

 

Supplemental balance sheet information related to operating and financing leases was as follows:

  

Operating leases

 

   September 30, 2024   December 31, 2023 
         
Operating lease liabilities - current  $2,075,541   $847,368 
Operating lease liabilities - non-current   8,186,938    630,853 
Total  $10,262,479   $1,478,221 

 

Financing leases

 

   September 30, 2024   December 31, 2023 
         
Finance lease liabilities - current  $42,970   $41,647 
Finance lease liabilities - non-current   44,629    77,024 
Total  $87,599   $118,671 

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 8 — LEASES (continued)

 

The following table includes supplemental cash flow and non-cash information related to leases:

 

   September 30, 2024   December 31, 2023 
Cash paid of amounts included in the measurement of lease liabilities:          
Operating cash flows used in operating leases  $1,205,510   $1,104,769 
Financing cash flows used in finance leases  $34,744   $47,051 
Right-of-use assets obtained in exchange for lease obligations:          
Finance lease liabilities  $-   $60,805 
Operating lease liabilities  $9,758,345   $1,113,140 

 

The weighted average remaining lease terms and discount rates for all of operating lease and finance leases were as follows:

 

   September 30, 2024   December 31, 2023 
Weighted-average remaining lease term (years):          
Finance lease   2.17 years    2.85 years 
Operating leases   4.62 years    1.82 years 
           
Weighted average discount rate:          
Finance leases   4.74%   4.61%
Operating leases   7.68%   8.61%

 

The following is a schedule of maturities of operating and finance lease liabilities as of September 30, 2024:

 

Operating leases

 

Twelve months ending September 30,     
Operating leases     
2025  $2,866,655 
2026   2,629,915 
2027   2,343,000 
2028   2,343,000 
2029   2,002,000 
Total future minimum lease payments   12,184,570 
Less: imputed interest   (1,922,091)
Present value of operating lease liabilities  $10,262,479 

 

Finance leases

 

Twelve months ending September 30,     
Finance leases     
2025  $46,325 
2026   34,578 
2027   8,701 
2028   3,626 
Total future minimum lease payments   93,230 
Less: imputed interest   (5,631)
Present value of finance lease liabilities  $87,599 

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 
v3.24.3
ACCRUED RETURN LIABILITIES
 9 Months Ended
Sep. 30, 2024
Payables and Accruals [Abstract]  
ACCRUED RETURN LIABILITIES

NOTE 9 — ACCRUED RETURN LIABILITIES

 

The following table shows changes in the Company’s accrued return:

 

   September 30, 2024   December 31, 2023 
Beginning balance  $283,276   $556,538 
Actual recognized products return   (1,535,478)   (3,355,112)
Accruals for product return liabilities   1,415,868    3,081,850 
Ending balance  $163,666   $283,276 

 
v3.24.3
ACCRUED WARRANTY EXPENSES
 9 Months Ended
Sep. 30, 2024
Guarantees and Product Warranties [Abstract]  
ACCRUED WARRANTY EXPENSES

NOTE 10 — ACCRUED WARRANTY EXPENSES

 

The following table shows changes in the Company’s accrued warranties and related costs:

 

   September 30, 2024   December 31, 2023 
Beginning balance  $619,113   $260,531 
Cost of warranty claims   (1,080,700)   (1,924,203)
Accruals for product warranty   1,070,231    2,282,785 
Ending balance  $608,644   $619,113 

 
v3.24.3
OTHER PAYABLE, ACCRUED EXPENSE AND OTHER CURRENT LIABILITY
 9 Months Ended
Sep. 30, 2024
Payables and Accruals [Abstract]  
OTHER PAYABLE, ACCRUED EXPENSE AND OTHER CURRENT LIABILITY

NOTE 11 — OTHER PAYABLE, ACCRUED EXPENSE AND OTHER CURRENT LIABILITY

 

The following table shows breakdown of Company’s other payable, accrued expense and other current liabilities:

 

   September 30, 2024   December 31, 2023 
Credit card liabilities  $22,060   $7,732 
Sales Tax payable   29,859    13,204 
Other current liabilities   382,210    77,161 
Additional accrual on litigation (Note 18)   3,573,651    - 
Total  $4,007,780   $98,097 

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 
v3.24.3
LOANS
 9 Months Ended
Sep. 30, 2024
Debt Disclosure [Abstract]  
LOANS

NOTE 12 —LOANS

 

Loan balance consists of the following:

 

   September 30, 2024   December 31, 2023 
Bank loan – Cathay Bank (1)/Midfirst (4)   $    -   $- 
Other loans - Northpoint (2)   -    205,440 
Other loans – BAC (3)   -    98,143 
Total  $-   $303,583 

 

(1)

On May 13, 2024, the Company’s subsidiary Massimo Motor Sports obtained a line of credit from Cathay Bank, pursuant to which the Company has the availability to borrow a maximum $15.0 million out of this line of credit for one year at the U.S. prime rate + 0.75%. Before then, the company had a line of credit of maximum $10.0 million from Midfirst bank, which is cancelled upon the grant of the line of credit from Cathay Bank. As of September 30, 2024 and December 31, 2023, the outstanding balance was $nil million and $nil.

 

This line of credit is also personally guaranteed by Mr. David Shan, the controlling shareholder. This line of credit is pledged by the Company’s accounts receivable and inventories.

   
(2)

On April 19, 2022, the Company’s subsidiary Massimo Marine obtained a $2.0 million pay as sold line of credit from Northpoint Commercial Finance LLC (“Northpoint”) for acquisition, financing and/or refinancing of inventory. This line of credit is also personally guaranteed by Mr. David Shan, the Controlling Shareholder, and Massimo Motor Sports, an affiliated company. As of September 30, 2024 and December 31, 2023, the outstanding balance was $nil and $205,440, respectively.

 

(3) On February 18, 2022, the Company’s subsidiary Massimo Marine obtained a credit facility for Mercury Marine in the amount of $1.75 million from Brunswick Acceptance Company LLC (“BAC”) to finance purchase of inventory. This line of credit is also personally guaranteed by Mr. David Shan. As of September 30, 2024 and December 31, 2023, the outstanding balance was $nil and $98,143, respectively.
   
(4) On January 15, 2021, the Company’s subsidiary Massimo Motor Sports obtained a line of credit from Midfirst Bank, pursuant to which the Company has the availability to borrow a maximum $4.0 million out of this line of credit for two years at the U.S. prime rate + 0.25%. On April 18, 2022, this line of credit was further increased to $10.0 million, and on January 3, 2024, the maturity date was renewed to January 3, 2026.
   
  This line of credit is guaranteed by the Massimo Group, and is also personally guaranteed by Mr. David Shan, the controlling shareholder, and Miller Creek Holdings LLC, a related party controlled by Mr. David Shan. This line of credit is pledged by the Company’s accounts receivable and inventories.
   
  On May 13, 2024, the credit facility was closed due to transferring to Cathay Bank ((1) above), and all guarantees were released and transferred to Cathay Bank.

 
v3.24.3
RELATED PARTY TRANSACTIONS
 9 Months Ended
Sep. 30, 2024
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

NOTE 13 — RELATED PARTY TRANSACTIONS

 

The relationship of related parties is summarized as follow:

  

Name of Related Party   Relationship to the Company
David Shan   Controlling shareholder of the Company
Custom Van Living   Controlled by David Shan
Miller Creek Holdings LLC   Controlled by David Shan
SUNL Technology LLC   Controlled by David Shan
Asia International Securities Exchange Co Ltd   Principal shareholder of the Company

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 13 — RELATED PARTY TRANSACTIONS (continued)

 

(a) Loan from a related party

 

Loan from a related party consists of the following:

  

   September 30, 2024   December 31, 2023 
         
Loan from David Shan, opening balance  $7,920,141   $10,984,344 
Repayment    (1,503,616)   (5,264,203)
Capital dividend declared   -    2,200,000 
Loan from David Shan, ending balance   6,416,525    7,920,141 
Non-current   -    (7,920,141)
Current  $6,416,525   $- 

 

On January 3, 2024, the Company entered into an unsecured loan agreement with Mr. David Shan, the Chairman of the Board and CEO, to change the payment term from due on demand to due on January 3, 2029. This unsecured loan was required by MidFirst Bank when the Company renewed the line of credit on January 3, 2024. On May 13, 2024, the line of credit with MdFirst Bank was closed and the Company obtained a new line of credit with Cathay Bank, which did not have no such requirement. As a result, the Company made repayment totaling $1,503,616 towards this loan during the nine months ended September 30, 2024. The Company intends to continue repayments over of the loan from Mr. Shan for the next twelve months. Consequently, the outstanding balance has been reclassified from non-current liabilities to current liabilities as of September 30, 2024.

 

(b) Loan guarantee provided by related parties

 

In connection with the Company’s bank borrowing, Mr. David Shan, the controlling shareholder, Miller Creek Holdings LLC and Massimo Group, the holding company of Massimo Motor provided unlimited guarantee to the Company’s loan (See Note 12).

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 
v3.24.3
TAXES
 9 Months Ended
Sep. 30, 2024
Income Tax Disclosure [Abstract]  
TAXES

NOTE 14 — TAXES

 

Corporate Income Taxes

 

Massimo Motor and Massimo Marine both terminated their status as a Subchapter S Corporation as of June 1, 2023, in connection with the Reorganization and became a taxable C Corporation. Prior to that date, as an S Corporation, the Company had no U.S. federal income tax expense. As such, any periods prior to June 1, 2023 will only reflect a margin tax for the state of Texas and corresponding tax expense. As a C Corporation, the Company combined effective tax rate for federal income taxes of 21% and state margin tax.

 

As of September 30, 2024 and December 31, 2023, the Company did not have an accrued liability for uncertain tax positions and does not anticipate recognition of any significant liabilities for uncertain tax positions during the next 12 months. For the three and nine months ended September 30, 2024 and 2023, no amounts were incurred for income tax uncertainties or interest and penalties. The Company is currently not aware of any issues under review that could result in significant payments, accruals, or material deviation from its position. The Company’s tax years since its formation remain subject to possible income tax examination by its major taxing authorities for all periods. The Company’s effective tax rate for the three months ended September 30, 2024 and 2023 are 19.9% and 22.3% respectively. The Company’s effective tax rate for the nine months ended September 30, 2024 and 2023 are 23.8% and 20.0% respectively.

 

The provision for income tax consists of the following:

  

   2024   2023   2024   2023 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
                 
Income tax provision – current  $55,782   $1,067,639   $2,067,219   $1,301,709 
Income tax (recovery) provision - deferred   (677,447)   38,407    (974,691)   (65,158)
Income tax (recovery) provision  $(621,665)  $1,106,046   $1,092,528   $1,236,551 

 

The following table reconciles the statutory tax rate to the Company’s effective tax:

  

   2024   2023   2024   2023 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
                 
Net (loss) income before income taxes  $(3,123,898)  $5,063,433   $4,587,607   $7,816,387 
Income tax at the federal statutory rate   21%   21%   21%   21%
Statutory U.S. federal income tax (recovery) provision   (656,018)   1,063,321    963,398    1,641,441 
S Corporation benefits   -    -    -    (642,278)
State margin tax   17,736    39,113    101,473    83,349 
Non-deductible expense   16,617   -    27,657   - 
Other adjustments   -    3,612    -    154,039 
Total  $(621,665)  $1,106,046   $1,092,528   $1,236,551 

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 14 — TAXES (continued)

 

Corporate Income Taxes (continued)

 

The Company’s deferred tax assets and liabilities consist of the following:

 

   September 30, 2024   December 31, 2023 
Deferred tax assets:          
Allowance for credit loss  $16,480   $117,046 
Property and equipment   150,324    16,480 
Lease liability – operating   2,155,121    310,426 
Lease liability – financing   18,395    24,920 
Other temporary difference   750,467    - 
Warranty liabilities   127,814    - 
Return liabilities   34,370    - 
Total deferred tax assets   3,252,971    468,872 
Deferred tax liabilities:          
Right of use assets – operating   (2,126,373)   (310,426)
Right of use assets – financing   (17,306)   (23,845)
Total deferred tax liabilities   (2,143,679)   (334,271)
Deferred tax assets, net  $1,109,292   $134,601 

 
v3.24.3
SHAREHOLDERS’ EQUITY
 9 Months Ended
Sep. 30, 2024
Equity [Abstract]  
SHAREHOLDERS’ EQUITY

NOTE 15 — SHAREHOLDERS’ EQUITY

 

Common Shares

 

Massimo Group is a company that was established on October 10, 2022 under the laws of the State of Nevada. Based on the Company’s Articles of Incorporation, the authorized number of common stock was 100,000,000 shares of common stock with par value of $0.001, and 40,000,000 common shares were issued on June 1, 2023. The authorized number of preferred stock was 5,000,000 shares of preferred stock with par value of $0.01, and no preferred shares were issued. All share information included in these consolidated financial statements have been retroactively adjusted for the Reorganization as if such reduce par value and common shares issuance occurred on the first day of the first period presented. During the three and nine months ended September 30, 2024 , the Company issued 6,750 and 1,329,235 shares of its common stock with par value of $0.001.

 

As of September 30, 2024 and December 31, 2023, 41,329,235 and 40,000,000 common shares were outstanding, respectively, with par value of $0.001.

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 15 — SHAREHOLDERS’ EQUITY (continued)

 

Initial Public Offering

 

On April 4, 2024, the Company closed its IPO of 1,300,000 shares of its common stock at an IPO price of $4.50 per share for aggregate gross proceeds of approximately $5.85 million from the offering. The total net proceeds to the Company from the IPO, after deducting discounts, expense allowance, and expenses, were approximately $5.0 million. Pursuant to the terms and conditions of the underwriting agreement, dated as of April 1, 2024, by and between Craft Capital Management LLC (the “Representative”) and the Company (the “Underwriting Agreement”), the underwriters had an overallotment option, exercisable for 45 days by May 19, 2024, to purchase up to an additional 195,000 shares from the Company at the offering price less of $4.50 the underwriting discount and commissions to cover over-allotments. As of the reporting date, all representative options have expired without exercise.

 

Common Shares Issued for Service

 

On June 18, 2024, the Company signed a consulting agreement (the “Consulting Agreement”) with TJCM Asset Management LLC (“TJCM”) to provide strategic consulting and financial advisory services to the Company for twelve months from June 18, 2024. As partial of consideration for the services, TJCM is entitled to receive shares of the Company’s common stock equivalent to a value of $160,000 calculated by the valuation price defined as average closing price of the Company’s shares of common stock for the five consecutive trading days immediately preceding the effective date of the Consulting Agreement. On June 21, 2024, the Company issued 22,485 shares of common stock to TJCM as the prepayment of $80,000 on the services to be provided. For the three and nine months ended September 30, 2024, $40,000 and $40,000 has been recorded as expenses, respectively.

 

Representative’s Warrants

 

Pursuant to the Underwriting Agreement, the Company issued to the Representative and its designee warrants (the “Representative’s Warrants”) to purchase 87,100 shares of common stock. The Representative’s Warrants are exercisable at a per share exercise price equal to $5.625 and are exercisable at any time and from time to time, in whole or in part, during the period commencing on October 4, 2024 and terminating on April 4, 2029. Neither the Representative’s Warrants nor any of the shares issued upon exercise of the Representative’s Warrants may be sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such securities by any person, for a period of six months immediately following the commencement of sales of the offering.

 

Management determined that these warrants meet the requirements for equity classification under ASC 815-40 because they are indexed to their own shares and meet the requirements for equity classification. The warrants were recorded at their fair value on the date of grant as a component of shareholders’ equity. The fair value of these warrants was $220,000, which was considered a direct cost of IPO and included in additional paid-in capital. The fair value has been estimated using the Black-Scholes pricing model with the following weighted-average assumptions: market value of underlying share of $4.00, risk free rate of 4.3%, expected term of five years; exercise price of the warrants of $5.625, volatility of 89%; and expected future dividends of nil.

 

As of September 30, 2024, 87,100 warrants in connection with IPO funding was outstanding, with an exercise price of $5.63 and remaining life of 4.51 years.

 
v3.24.3
EARNINGS PER SHARE
 9 Months Ended
Sep. 30, 2024
Earnings Per Share [Abstract]  
EARNINGS PER SHARE

NOTE 16 — EARNINGS PER SHARE

 

For the three and nine months ended September 30, 2024, the effect of potential shares of common stock from the unexercised options, unexercised warrants, and unvested Restricted Stock Units (“RSU”) are included in the computation of diluted net earnings per share. As a result, a total of 142,186 unvested RSU were included in the computation of weighted average number of common shares for the nine months ended September 30, 2024, and the computation of diluted loss per share does not assume the exercise of the Company’s outstanding unvested RSU impact due to loss position for the three months ended September 30, 2024.

 

For the three and nine months ended September 30, 2023, the Company has no stock options, warrants or RSU issued and no impact on diluted earnings per share.

 

The following table presents a reconciliation of basic and diluted net income per share:

  

   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
                 
Net (loss) income attributable to the Company  $(2,502,233)  $3,957,387   $3,495,079   $6,579,836 
Weighted average number of common shares outstanding – basic   41,325,388    40,000,000    40,863,370    40,000,000 
                     
Dilutive securities – unvested RSU   -    -    142,186    - 
Weighted average number of common shares outstanding – diluted   41,325,388    40,000,000    41,005,556    40,000,000 
(Loss) earnings per share – basic  $(0.06)  $0.10   $0.09   $0.16 
(Loss) earnings per share – diluted  $(0.06)  $0.10   $0.09   $0.16 

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 
v3.24.3
EMPLOYEE STOCK PLANS
 9 Months Ended
Sep. 30, 2024
Retirement Benefits [Abstract]  
EMPLOYEE STOCK PLANS

NOTE 17 — EMPLOYEE STOCK PLANS

 

Equity Incentive Plans

 

On May 22, 2024, the Company’s Board approved the 2024 Equity Inventive Plan (“2024 Plan”) and Restricted Stock Units (“RSUs”) Award Agreements. The 2024 Plan and RSUs Adward Agreement authorized the award of stock options, RSUs to employees and directors. As of September 30, 2024 , approximately 300,556 RSUs were granted, 1,000 RSUs were forfeited and 6,750 RSUs were exercised under the 2024 Plan.

 

The Company recorded $256,345, $426,666, $nil and $nil stock-based compensation expense in connection with RSUs for three and nine months ended September 30, 2024 and 2023, respectively.

 

The following table summarized the Company’s RSU activity:

 

  

Number of

RSUs

  

Weighted Average

Grant Date Fair Value

 
Granted   300,556    3.84 
Cancelled   (1,000)   3.88 
Exercised   (6,750)   3.88 
Outstanding September 30, 2024   292,306   $3.84 
Exercisable, September 30, 2024   -   $- 

 

Options

 

On May 22, 2024, the Company signed a stock option agreement with Mr. David Shan, the Chief Executive Officer and two other executives of the Company, in connection with the 2024 Plan.

 

As part of the compensation, the Company agrees to grant Mr. Shan options to purchase up to 46,860 common shares under Incentive Stock Option (“ISO”) plan, at an exercise price of $4.268 per share. The options were granted on May 22, 2024, and the options vest at a rate of 23,430 per year for two years, effective on May 22, 2024. The aggregate fair value of the options granted to Mr. Shan was $73,000. The fair value has been estimated using the Black-Scholes pricing model with the following weighted-average assumptions: market value of underlying common shares at time of grant of $3.88; risk free rate of 5.0% and 4.65%; expected term of 5 years; exercise price of the options of $4.268; volatility of 88.8%; and expected future dividends of $nil. These options will expire on May 21, 2029.

 

The Company also granted Mr. Shan options to purchase up to 103,140 common shares, at an exercise price of $4.0 per share under Nonqualified Stock Option (“NSO”) plan. The options were granted on May 22, 2024, and vest at a rate of 51,570 shares per year for two years, effective on May 22, 2024. The aggregate fair value of the options granted to Mr. Shan was $160,000. The fair value has been estimated using the Black-Scholes pricing model with the following weighted-average assumptions: market value of underlying common shares at time of grant of $3.88; risk free rate of 5.0% and 4.65%; expected term of 10 years; exercise price of the options of $4.0; volatility of 88.8%; and expected future dividends of $nil. These options will expire on May 21, 2034.

 

The Company also granted two executives options to purchase up to 200,000 common shares, at an exercise price of $4.0 per share under ISO and NSO plans. The options were granted on May 22, 2024, and vest at a rate of 100,000 shares per year for two years, effective on May 22, 2024. The aggregate fair value of the options granted to these two executives was $272,000. The fair value has been estimated using the Black-Scholes pricing model with the following weighted-average assumptions: market value of underlying common shares of $3.88; risk free rate of 5.0% and 4.65%; expected term of 10 years; exercise price of the options of $4.0; volatility of 88.8%; and expected future dividends of $nil. These options will expire on May 21, 2034.

 

The Company recorded $71,754, $131,699, $nil and $nil stock-based compensation expense in connection with options for three and nine months ended September 30, 2024 and 2023, respectively.

 

The following table summarized the Company’s share option activity:

  

  

Number of

Options

  

Weighted Average

Exercise Price

  

Weighted Average Remaining

Life in Years

 
Granted   350,000    4.04    9.23 
Cancelled   -    -    - 
Exercised   -    -    - 
Outstanding September 30, 2024   350,000   $4.04    8.97 
Exercisable, September 30, 2024   -   $-    - 

 
v3.24.3
COMMITMENTS AND CONTINGENCIES
 9 Months Ended
Sep. 30, 2024
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES

NOTE 18 — COMMITMENTS AND CONTINGENCIES

 

Contingencies

 

The Company may be involved in certain legal proceedings, claims and disputes arising from the commercial operations, which, in general, are subject to uncertainties and in which the outcomes are not predictable. The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. Although the Company can give no assurances about the resolution of pending claims, litigation or other disputes and the effect such outcomes may have on the Company, the Company believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided or covered by insurance, will not have a material adverse effect on the Company’s consolidated balance sheets or results of operations or liquidity as at September 30, 2024 and December 31, 2023, except the one discussed below.

 

Litigation

 

On July 8, 2024, the Company received a final judgment from the trial court in the lawsuit filed by Taizhou Nebula Power Co, Ltd. (“Nebula”) on September 15, 2020. The final judgment awarded Nebula $3,334,542 in damages, $1,436,809 in attorneys’ fees and other court costs, and $1,146,169 in interest on balances from September 15, 2020. In connection with this judgment, the Company recorded an additional accrual of $3,573,651 as of September 30, 2024, bringing the total accrual related to this lawsuit to approximately $5.9 million. The Company filed an appeal in August 2024.

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 
v3.24.3
SEGMENT REPORTING
 9 Months Ended
Sep. 30, 2024
Segment Reporting [Abstract]  
SEGMENT REPORTING

NOTE 19 — SEGMENT REPORTING

 

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, and is identified on the basis of the internal financial reports that are provided to and regularly reviewed by the Company’s chief operating decision maker in order to allocate resources and assess performance of the segment.

 

Management of the Company concludes that it has only one reporting segment. The Company is primarily engaged in the business of manufacturing and sales of a wide selection of farm and ranch tested UTVs, recreational ATVs, and Pontoon Boats.

 

The Company’s CEO reviews consolidated results when making decisions about allocating resources and assessing performance of the Company, rather than by product types or geographic area; hence the Company concluded it has only one reporting segment.

 

The following table presents sales by product categories for the three and nine months ended September 30, 2024 and 2023, respectively:

  

   2024   2023   2024   2023 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
                 
UTVs, ATVs and e-bikes  $25,084,727   $26,953,580   $88,011,145   $65,765,577 
Pontoon Boats   517,583    2,954,117    3,145,495    9,718,234 
Total  $25,602,310   $29,907,697   $91,156,640   $75,483,811 

 
v3.24.3
SUBSEQUENT EVENTS
 9 Months Ended
Sep. 30, 2024
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

NOTE 20 — SUBSEQUENT EVENTS

 

The Company evaluated all events and transactions that occurred after September 30, 2024 up through the date the Company issued these condensed consolidated financial statements, and unless disclosed below, there are not any material subsequent events that require disclosure in these condensed consolidated financial statements.
v3.24.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
 9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
Basis of Presentation and Principles of Consolidation

Basis of Presentation and Principles of Consolidation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for annual consolidated financial statements. In the opinion of management, the accompanying condensed consolidated financial statements include all adjustments which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of September 30, 2024, and for the three and nine months ended September 30, 2024 and 2023. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the operating results for the full year ending December 31, 2024 or any other period. These unaudited condensed consolidated financial statements have been derived from the accounting records of the Company and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on April 15, 2024.

 
Uses of estimates and assumptions

Uses of estimates and assumptions

 

In preparing the consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information as of the date of the consolidated financial statements. Significant accounting estimates required to be made by management include allowance for inventories, allowance for credit losses, sales return liabilities, warranty costs and the assessment and the disclosure of contingency liabilities. The Company evaluates its estimates and assumptions on an ongoing basis and its estimates on historical experience, current and expected future conditions and various other assumptions that management believes are reasonable under the circumstances based on the information available to management at the time these estimates and assumptions are made. Actual results and outcomes may differ significantly from these estimates and assumptions.

 
Cash and cash equivalents

Cash and cash equivalents

 

Cash and cash equivalents consist of cash on hand, the balances with banks and the liquid investments with maturities of three months or less. The Company maintains all its bank accounts in the United States, maximum amounts of $751,585 and $435,457 are insured by Federal Deposit Insurance Corporation (“FDIC”) as of September 30, 2024 and December 31, 2023, respectively.

 
Accounts receivable, net

Accounts receivable, net

 

Accounts receivable represent trade receivable and are recognized initially at fair value and subsequently adjusted for any allowance for expected credit loss. The Company grants credit to customers, without collateral, under normal payment terms. The Company uses a loss rate method to estimate the allowance for credit losses. The Company evaluates the expected credit loss of accounts receivable based on customer financial condition and historical collection information adjusted for current market economic conditions and forecasts of future economic performance when appropriate. Loss-rate approach is based on the historical loss rates and expectations of future conditions. The Company writes off potentially uncollectible accounts receivable against the allowance for credit losses if it is determined that the amounts will not be collected.

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 
Inventories, net

Inventories, net

 

Inventories are stated at the lower of cost or net realizable value, using the first-in, first out (FIFO) method. Costs include the cost of raw materials, freight and duty. Any excess of the cost over the net realizable value of each item of inventories is recognized as a provision for diminution in the value of inventories. Net realizable value is estimated using selling price in the normal course of business less any costs to complete and sell products. As of September 30, 2024 and December 31, 2023, the Company had inventory provision of $329,900 and $439,900, included in inventories, net in the unaudited condensed consolidated balance sheet. Reversal of impairment provision of inventories were $110,000, $110,000, $nil and $nil for the three and nine months ended September 30, 2024 and 2023, respectively, included in cost of revenues in the condensed consolidated statement of operations and comprehensive income.

 
Advances to suppliers

Advances to suppliers

 

Advance to suppliers consists of balances paid to suppliers for purchasing of products, parts and accessories that have not been provided or received. Advances to suppliers are short-term in nature and are reviewed periodically to determine whether their carrying value has become impaired. The Company evaluated the carrying value of individual advances based on specifics facts and circumstances for any impairment at each reporting date. For the three-month period and nine-month period ended September 30, 2024 and 2023, the Company recorded the impairment loss of $29,883, $772,780, $nil and $nil respectively on its advances to suppliers in connection of an expected settlement between the Company and one supplier in September 2024.

 
Deferred offering cost

Deferred offering cost

 

Deferred offering costs were expenses directly related to the Company’s planned IPO. These costs consisted of legal, accounting, printing, and filing fees that the Company capitalized, including fees incurred by the independent registered public accounting firm directly related to the offering. The deferred offering costs are reclassified to additional paid-in capital upon receipts of the capital raised at IPO closing date.

 
Property and equipment

Property and equipment

 

Property and equipment are recorded at cost. Depreciation is provided in amounts sufficient to amortize the cost of the related assets over their useful lives using the straight-line method, as follows:

 

    Useful life
Furniture and fixtures   5-7 years
Machinery equipment   5-7 years
Electronic equipment   5 years
Transportation equipment   5 years
Leasehold improvement   Over the shorter of the lease term or estimated useful lives

 

Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gains or losses on disposals are determined by comparing proceeds with carrying amount and are recognized within “other income (expense)” in the unaudited condensed consolidated statements of operations and comprehensive income.

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 
Leases

Leases

 

The Company adopted Accounting Standards Update (“ASU”) No. 2016-02—Leases (Topic 842) since January 1, 2020, using a modified retrospective transition method permitted under ASU No. 2018-11. This transition approach provides a method for recording existing leases only at the date of adoption and does not require previously reported balances to be adjusted. The Company evaluates the contracts it enters into to determine whether such contracts contain leases. A contract contains a lease if the contract conveys the right to control the use of identified property or equipment for a period of time in exchange for consideration. At commencement, contracts containing a lease are further evaluated for classification as an operating or finance lease where the Company is a lessee.

 

Operating Leases

 

For operating leases, the Company measures its lease liabilities based on the present value of the total lease payments not yet paid discounted based on the more readily determinable of the rate implicit in the lease or its incremental borrowing rate, which is the estimated rate the Company would be required to pay for a collateralized borrowing equal to the total lease payments over the term of the lease. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The Company measures right-of-use (“ROU”) assets based on the corresponding lease liability adjusted for payments made to the lessor at or before the commencement date, and initial direct costs it incurs under the lease. The Company begins recognizing lease expense when the lessor makes the underlying asset available to the Company.

 

Lease cost for operating leases includes the amortization of the ROU asset and interest expense related to the operating lease liability. For leases with lease term less than one year (short-term leases), the Company records operating lease expense in its consolidated statements of operations on a straight-line basis over the lease term and record variable lease payments as incurred.

 

Finance Leases

 

Lease cost for finance leases where the Company is the lessee includes the amortization of the ROU asset, which is amortized on a straight-line basis and recorded to “Depreciation of right-of-use finance asset” and interest expense on the finance lease liability, which is calculated using the interest method and recorded to “Interest expense, net.” Finance lease ROU assets are amortized over the shorter of their estimated useful lives or the terms of the respective leases, including periods covered by renewal options that the Company is reasonably certain of exercising.

 
Impairment of long-lived assets

Impairment of long-lived assets

 

Long-lived assets, primarily consist of property and equipment, are evaluated for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying amount may not be fully recoverable or that the useful life is shorter than the Company had originally estimated. When these events occur, the Company evaluates the impairment by comparing the carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the assets, the Company recognizes an impairment loss based on the excess of the carrying value of the assets over the fair value of the assets. No impairment charge was recognized for the three and nine months ended September 30, 2024 and 2023, respectively.

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 
Fair value of financial instruments

Fair value of financial instruments

 

ASC 825-10 requires certain disclosures regarding the fair value of financial instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

 

● Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
● Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted market prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable and inputs derived from or corroborated by observable market data.
● Level 3 — inputs to the valuation methodology are unobservable.

 

Unless otherwise disclosed, the fair value of the Company’s financial instruments, including cash and cash equivalents, accounts receivables, note receivable which was grouped in other current assets, loan from a related party, accounts payable, other payable, accrued expense and other liabilities, contract liabilities, approximates their recorded values due to their short-term maturities. The Company determined that the carrying value of the lease liabilities approximated their fair value as the interest rates used to discount the contracts approximate market rates. The Company noted no transfers between levels during any of the periods presented. The Company did not have any instruments that were measured at fair value on a recurring nor non-recurring basis as of September 30, 2024 and December 31, 2023.

 
Revenue recognition

Revenue recognition

 

The Company adopted ASC Topic 606, “Revenue from Contracts with Customers”. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the Company applies the following steps:

 

Step 1: Identify the contract(s) with a customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

 

The Company’s revenue is generated primarily by sales of UTVs, ATVs electric bikes (“e-bikes”), and Pontoon Boats. Revenue represented the amount of consideration to which the Company expects to be entitled in exchange for promised goods. Revenue is recorded when performance obligations are considered to be satisfied when control is transferred to our customers upon goods delivered to customers and acceptance by customers.

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Sales returns

 

The Company provides a refund policy to accept returns from end customers, which varies and depends on different products and customers. The estimated sales returns are determined based upon an analysis of historical sales returns. Return allowances are recorded as a reduction in sales with corresponding sales return liabilities which are included in “accrued return liabilities.” The estimated cost of returned inventory is recorded as a reduction to cost of sales and an increase of right of return assets which is included in “inventories.” The factors affecting the Company’s sales return liabilities include the number of products currently within the return period, historical and anticipated rates of sales returns claimed on those products, and the estimated amount of returns that may be claimed within this period. If actual results differ from the estimates, the Company revises its estimated sales returns liability accordingly. Each quarter, the Company reviews and reassesses the adequacy of its recorded sales returns liabilities and adjusts the amounts as necessary. As of September 30, 2024 and December 31, 2023, $163,666 and $283,276 of sales return liabilities associated with estimated product returns were recorded in the unaudited condensed consolidated balance sheet, respectively. During the three-month period ended September 30, 2024 and 2023, the Company recorded sales returns of $317,188 and $223,428 respectively. During the nine-month period ended September 30, 2024 and 2023, the Company recorded sales returns of $824,978 and $1,975,270 respectively.

 

Products warranty

 

The Company generally provides a one-year limited warranty against defects in materials related to the sale of products. The Company considers the warranty as an assurance type warranty since the warranty provides the customers the assurance that the product complies with agreed-upon specifications. Estimated future warranty obligations are included in cost of product sales in the period in which the related revenue is recognized. The factors affecting the Company’s warranty include the number of products currently under warranty, historical and anticipated rates of warranty claim on those products, and the estimates of repair and replacement costs to satisfy the Company’s warranty obligation. The anticipated rate of warranty claims is the primary estimate used in determining the warranty liability and is relatively predictable using historical experience of failure rates. The average remaining aggregate warranty period of the products sold is calculated, repair parts are generally already in stock or available at pre-determined prices, and labor rates are generally arranged at pre-established amount with service providers. If actual results differ from the estimates, the Company revises its estimated warranty liability. Each quarter, the Company reevaluates its estimates and assess the adequacy of its recorded warranty liabilities and adjust the amounts as necessary. As of September 30, 2024 and December 31, 2023, $608,644 and $619,113 of product warranty were recorded in the unaudited condensed consolidated balance sheet, respectively. During the three-month period ended September 30, 2024 and 2023, the Company recorded warranty expenses of $234,314 and $576,602, respectively. During the nine-month period ended September 30, 2024 and 2023, the Company recorded warranty expenses of $1,102,494 and $1,521,902, respectively.

 

Contract liabilities

 

The contract liabilities of the Company are primarily related to advances received from customer. The contract liabilities are reported in a net position on a customer-by-customer basis at the end of each reporting period. Contract liabilities are recognized when the Company receives prepayment from customers resulting from purchase order. Contract liabilities will be recognized as revenue when the products are delivered. As of September 30, 2024 and December 31, 2023, the Company records contract liabilities of $1,167,161 and $1,835,411, respectively, which will be recognized as revenue upon delivery of the products sold. For the nine months ended September 30, 2024 and 2023, the amounts transferred from contract liabilities to revenue at the beginning of the fiscal period were $1,160,167 and $696,274, respectively.

 

Disaggregation of revenues

 

The Company disaggregates its revenue from contracts by products, as the Company believes it best depicts how the nature, amount, timing and uncertainty of the revenue and cash flows are affected by economic factors. The Company’s disaggregation of revenues for the three and nine months ended September 30, 2024 and 2023 is disclosed in Note 19 of these unaudited condensed consolidated financial statements.

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 
Cost of revenues

Cost of revenues

 

Cost of revenues includes all of the costs and expenses directly related to the production of goods and services included in revenues. Cost of revenues primarily consists of cost of products, freight and duty allocated and warehouse related overhead, such as salaries and benefits, rent, warehouse supplies and depreciation expenses.

 

The freights and duty costs incurred when shipping raw materials from suppliers to the Company are included in cost of revenues, amounting to $2,406,336 and $1,599,110 for the three months ended September 30, 2024 and 2023, respectively. The freights and duty costs incurred when shipping raw materials from suppliers to the Company are included in cost of revenues, amounting to $8,582,277 and $6,758,360 for the nine months ended September 30, 2024 and 2023, respectively.

 
Shipping and handling costs

Shipping and handling costs

 

Shipping and handling costs, which include costs related to the selection of products and their delivery to customers, are presented in selling expenses. The shipping and freight expense incurred upon goods delivery to customers are included in selling expenses, amounting to $1,500,947 and $694,912 for the three months ended September 30, 2024 and 2023, respectively. The shipping and freight expense incurred upon goods delivery to customers are included in selling expenses, amounting to $4,562,815 and $3,130,474 for the nine months ended September 30, 2024 and 2023, respectively.

 
Advertising costs

Advertising costs

 

The Company expenses all advertising costs as incurred. Advertising costs presented in selling expenses were $95,509 and $$363,189 for the three months ended September 30, 2024 and 2023, respectively. Advertising costs presented in selling expenses were $499,274 and $825,852 for the nine months ended September 30, 2024 and 2023, respectively.

 
401(k) benefit plan

401(k) benefit plan

 

The 401(k) benefit plan covers substantially all employees and allows voluntary employee contributions up to the annually adjusted Internal Revenue Service dollar limit. These voluntary contributions are matched equal to 100% of the employee’s compensation contributed and not to exceed 4% of the total eligible compensation. The employees’ voluntary contributions and the Company’s matching contributions are 100% vested immediately. The Company adopted the 401(k) benefit plan from March 2022.

 
Income taxes

Income taxes

 

Before the Reorganization, the Company elected to be taxed as an S Corporation for federal and state income tax purposes. As an S Corporation, the Company is not subject to federal income tax and state tax in Texas. As such, shareholders are taxed on their pro rata share of earnings and deductions of the Company, regardless of the amount of distributions received. After the Reorganization, the Company is subjected to U.S. federal income tax at 21% and the margin tax in the state of Texas.

 

Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Income taxes (continued)

 

The Company accounts for uncertain tax positions in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic No. 740, “Accounting for Uncertainty in Income Taxes.” A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

 

Significant judgment is also required in evaluating the Company’s uncertain income tax positions and provisions for income taxes. Liabilities for uncertain income tax positions are recognized based on a two-step approach. The first step is to evaluate whether an income tax position has met the recognition threshold by determining if the weight of available evidence indicates that it is more likely than not to be sustained upon examination. The second step is to measure the income tax position that has met the recognition threshold as the largest amount that is more than 50% likely of being realized upon settlement. The Company continually assesses the likelihood and amount of potential adjustments and adjusts the income tax provisions, income taxes payable and deferred income taxes in the period in which the facts that give rise to a revision become known. The Company recognizes interest and penalties related to uncertain income tax positions as interest expense.

 
Earnings per share

Earnings per share

 

The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. For the three and nine months ended September 30, 2024 , a total of nil and 142,186 unvested Restricted Stock Units (“RSU”) were included in the computation of weighted average number of common shares for the calculation of diluted EPS. For the three and nine months ended September 30, 2023, there were no dilutive shares.

 
Stock Based compensation

Stock Based compensation

 

The Company follows the provisions of ASC 718, “Compensation - Stock Compensation” (“ASC 260”), which establishes the accounting for employee share-based awards. For employee share-based awards, stock based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense with graded vesting on a straight-line basis over the requisite service period for the entire award.

 
Segment reporting

Segment reporting

 

The Company follows ASC 280, “Segment Reporting.” The Company’s Chief Executive Officer or chief operating decision-maker reviews the consolidated financial results when making decisions about allocating resources and assessing the performance of the Company as a whole and hence, the Company has only one reportable segment. The Company operates and manages its business as a single segment. As the Company’s long-lived assets are all located in the United States and substantially all the Company’s revenues are derived from within the United States, no geographical segments are presented.

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 
Concentration and risks

Concentration and risks

 

a. Concentration of credit risk

 

Assets that potentially subject the Company to a significant concentration of credit risk primarily consist of cash and cash equivalents, accounts receivable and other receivable included in other current assets. The maximum exposure of such assets to credit risk is their carrying amounts at the balance sheet dates. The Company maintains all the bank accounts at financial institutions in the United States, where there is $250,000 standard deposit insurance coverage limit per depositor, per FDIC-insured bank and per ownership category. As of September 30, 2024, balances of two banks in Massimo Motor Sports exceeded the insured limits by $145,456 and $826,741, respectively. As of December 31, 2023, balances of one bank in Massimo Motor Sports exceeded the insured limits by $330,357.

 

To limit the exposure to credit risk relating to deposits, the Company primarily places cash deposits with large financial institutions in the United States. The Company conducts credit evaluations of its customers and generally does not require collateral or other security from them. The Company establishes an accounting policy to provide for current expected credit losses based on the individual customer’s financial condition, credit history, and the current economic conditions.

 

b. Foreign Exchange Risk

 

Most of our raw materials are imported from China. The value of the Chinese Yuan against the U.S. dollar is affected by the changes in China and United States economic conditions. We do not believe that we currently have any significant direct foreign exchange risk and have not used any derivative financial instruments to hedge exposure to such risk.

 

c. Interest Rate Risk

 

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. Our exposure to interest rate risk primarily relates to the interest rates from our lessors and our borrowings with banks. The shareholder loans bear no interest. Our leasing obligations’ interest rates are fixed at the commencement date of the leases. We have not been exposed to material risks due to the fact that our borrowing from the bank is not significant. And we have not used any derivative financial instruments to manage our interest risk exposure. However, we cannot provide assurance that we will not be exposed to material risks due to changes in market interest rate in the future.

 

d. Liquidity Risk

 

Liquidity risk arises through the excess of financial obligations over available financial assets due at any point in time. Our objective in managing liquidity risk is to maintain sufficient readily available reserves in order to meet our liquidity requirements at any point in time. We achieve this by maintaining sufficient cash and banking facilities.

 

e. Significant customers

 

For the three months ended September 30, 2024 and 2023, one and one customer accounted for more than 10% of the Company’s total revenues, respectively. For the nine months ended September 30, 2024 and 2023, one and one customer accounted for more than 10% of the Company’s total revenues, respectively. As of September 30, 2024 and December 31, 2023, two and one customers accounted for more than 10% of the Company’s accounts receivable, respectively.

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Concentration and risks (continued)

 

f. Significant suppliers

 

For the three months ended September 30, 2024 and 2023, two and two suppliers each accounted for more than 10% of the Company’s total purchases respectively. For the nine months ended September 30, 2024 and 2023, two and two suppliers each accounted for more than 10% of the Company’s total purchases respectively. As of September 30, 2024 and December 31, 2023, four and three suppliers each accounted for more than 10% of the Company’s total accounts payable, respectively.

 
Recent accounting pronouncements

Recent accounting pronouncements

 

The Company considers the applicability and impact of all ASUs. Management periodically reviews new accounting standards that are issued.

 

The Jumpstart Our Business Startups Act provides that an emerging growth company (“EGC”) as defined therein can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an EGC to delay adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has adopted the extended transition period.

 

In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity,” which simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. This ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The new standard will become effective for us beginning January 1, 2024, using either a modified retrospective or a fully retrospective method of transition, and early adoption is permitted. Management is currently evaluating the impact of the new standard on our financial statements.

 

In November 2023, the FASB issued ASU No. 2023-07, “Improvements to Reportable Segment Disclosures” (Topic 280). This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment’s profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is also permitted. This ASU will likely result in us including the additional required disclosures when adopted. Management is currently evaluating the provisions of this ASU and expect to adopt them for the year ending December 31, 2024.

 

In December 2023, the FASB issued ASU No. 2023-09, “Improvements to Income Tax Disclosures” (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income tax paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. This ASU will likely result in the required additional disclosures being included in the Company’s consolidated financial statements, once adopted.

 

The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated balance sheets, statements of income and comprehensive income and statements of cash flows.
v3.24.3
ORGANIZATION AND BUSINESS DESCRIPTION (Tables)
 9 Months Ended
Sep. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
SCHEDULE OF SUBSIDIARIES

Details of the Company and its subsidiaries are set out below upon the Reorganization:

  

Subsidiaries  

Date of

Incorporation

  

Jurisdiction of

Formation

  

Percentage of

direct/indirect

Economic

Ownership

    

Principal

Activities

Massimo Group   October 10, 2022   Nevada           Holding company
Massimo Motor Sports, LLC   June 30, 2009   Texas     100 %   Manufacture of UTVs and ATVs
Massimo Marine, LLC   January 6, 2020   Texas     100 %   Manufacture of Pontoon Boats

 

On June 1, 2023, the Company entered into two agreements with Asian International Securities Exchange Co., Ltd. (“AISE”) and AISE agreed to invest $1 million to Massimo Motor Sports and $1 million to Massimo Marine to exchange their 15% of equity interest respectively. After Reorganization, the 15% of equity interest in Massimo Motor Marine and Massimo Marine owned by AISE have been exchanged to 15% of equity interest in Massimo Group.

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 
v3.24.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
 9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
SCHEDULE OF PROPERTY AND EQUIPMENT USEFUL LIFE

Property and equipment are recorded at cost. Depreciation is provided in amounts sufficient to amortize the cost of the related assets over their useful lives using the straight-line method, as follows:

 

    Useful life
Furniture and fixtures   5-7 years
Machinery equipment   5-7 years
Electronic equipment   5 years
Transportation equipment   5 years
Leasehold improvement   Over the shorter of the lease term or estimated useful lives
v3.24.3
ACCOUNTS RECEIVABLE, NET (Tables)
 9 Months Ended
Sep. 30, 2024
Receivables [Abstract]  
SCHEDULE OF ACCOUNTS RECEIVABLE

Accounts receivable consist of the following:

  

   September 30, 2024   December 31, 2023 
Accounts receivable – third parties  $12,273,560   $10,123,805 
Less: allowance for credit loss   (715,827)   (557,360)
Accounts receivable, net  $11,557,733   $9,566,445 
SCHEDULE OF MOVEMENT OF ALLOWANCE FOR CREDIT LOSS

The movement of allowance for credit loss are as follow:

 

   September 30, 2024   December 31, 2023 
Balance as of beginning  $557,360   $354,059 
Written off   (64,584)   - 
Additional of provision   223,051    203,301 
Ending balance  $715,827   $557,360 
v3.24.3
INVENTORIES (Tables)
 9 Months Ended
Sep. 30, 2024
Inventory Disclosure [Abstract]  
SCHEDULE OF INVENTORIES

Inventories consist of the following:

 

   September 30, 2024   December 31, 2023 
Products  $22,898,515   $16,777,928 
Parts and accessories   1,360,713    899,188 
Inventories in transit   2,045,793    5,399,964 
Freight and duty   4,938,625    3,163,732 
Inventory, gross   31,243,646    26,240,812 
Less: inventory allowance   (329,900)   (439,900)
Inventories, net  $30,913,746   $25,800,912 
v3.24.3
ADVANCE TO SUPPLIERS (Tables)
 9 Months Ended
Sep. 30, 2024
Advance To Suppliers  
SCHEDULE OF ADVANCE TO SUPPLIERS

Advance to suppliers consist of the following:

 

   September 30, 2024   December 31, 2023 
Advance to suppliers  $1,096,048   $1,589,328 
Less: impairment loss allowance due to irrecoverable prepayment   772,780    - 
Advance to suppliers, net  $323,268   $1,589,328 
v3.24.3
OTHER NON-CURRENT AND CURRENT ASSETS (Tables)
 9 Months Ended
Sep. 30, 2024
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
SCHEDULE OF OTHER CURRENT ASSETS

Other current assets consist of the following:

 

   September 30, 2024   December 31, 2023 
Prepayment  $145,324   $598,481 
Note receivable (Note 5)   312,500    - 
Other receivables   159,161    39,028 
Less: Other non-current assets   (49,500)   - 
Other current assets  $567,485   $637,509 
v3.24.3
PROPERTY AND EQUIPMENT, NET (Tables)
 9 Months Ended
Sep. 30, 2024
Property, Plant and Equipment [Abstract]  
SCHEDULE OF PROPERTY AND EQUIPMENT, NET

Property and equipment, net, consist of the following:

 

   September 30, 2024   December 31, 2023 
Furniture and Fixtures  $125,977   $125,977 
Machinery equipment   326,843    89,418 
Vehicles   461,667    670,793 
Electronic equipment   35,303    35,303 
Leasehold improvement   173,286    90,974 
Subtotal   1,123,076    1,012,465 
Less: accumulated depreciation and amortization   (523,042)   (612,484)
Property and equipment, net  $600,034   $399,981 
v3.24.3
LEASES (Tables)
 9 Months Ended
Sep. 30, 2024
Leases  
SCHEDULE OF SUPPLEMENTAL BALANCE INFORMATION

Supplemental balance sheet information related to operating and financing leases was as follows:

  

Operating leases

 

   September 30, 2024   December 31, 2023 
         
Operating lease liabilities - current  $2,075,541   $847,368 
Operating lease liabilities - non-current   8,186,938    630,853 
Total  $10,262,479   $1,478,221 

 

Financing leases

 

   September 30, 2024   December 31, 2023 
         
Finance lease liabilities - current  $42,970   $41,647 
Finance lease liabilities - non-current   44,629    77,024 
Total  $87,599   $118,671 
SCHEDULE OF SUPPLEMENTAL CASH FLOW AND NON-CASH INFORMATION

The following table includes supplemental cash flow and non-cash information related to leases:

 

   September 30, 2024   December 31, 2023 
Cash paid of amounts included in the measurement of lease liabilities:          
Operating cash flows used in operating leases  $1,205,510   $1,104,769 
Financing cash flows used in finance leases  $34,744   $47,051 
Right-of-use assets obtained in exchange for lease obligations:          
Finance lease liabilities  $-   $60,805 
Operating lease liabilities  $9,758,345   $1,113,140 
SCHEDULE OF WEIGHTED AVERAGE REMAINING LEASE TERMS AND DISCOUNT RATES

The weighted average remaining lease terms and discount rates for all of operating lease and finance leases were as follows:

 

   September 30, 2024   December 31, 2023 
Weighted-average remaining lease term (years):          
Finance lease   2.17 years    2.85 years 
Operating leases   4.62 years    1.82 years 
           
Weighted average discount rate:          
Finance leases   4.74%   4.61%
Operating leases   7.68%   8.61%
SCHEDULE OF MATURITIES OF OPERATING AND FINANCE LEASE LIABILITIES

The following is a schedule of maturities of operating and finance lease liabilities as of September 30, 2024:

 

Operating leases

 

Twelve months ending September 30,     
Operating leases     
2025  $2,866,655 
2026   2,629,915 
2027   2,343,000 
2028   2,343,000 
2029   2,002,000 
Total future minimum lease payments   12,184,570 
Less: imputed interest   (1,922,091)
Present value of operating lease liabilities  $10,262,479 

 

Finance leases

 

Twelve months ending September 30,     
Finance leases     
2025  $46,325 
2026   34,578 
2027   8,701 
2028   3,626 
Total future minimum lease payments   93,230 
Less: imputed interest   (5,631)
Present value of finance lease liabilities  $87,599 
v3.24.3
ACCRUED RETURN LIABILITIES (Tables)
 9 Months Ended
Sep. 30, 2024
Payables and Accruals [Abstract]  
SCHEDULE OF ACCRUED RETURN LIABILITIES

The following table shows changes in the Company’s accrued return:

 

   September 30, 2024   December 31, 2023 
Beginning balance  $283,276   $556,538 
Actual recognized products return   (1,535,478)   (3,355,112)
Accruals for product return liabilities   1,415,868    3,081,850 
Ending balance  $163,666   $283,276 
v3.24.3
ACCRUED WARRANTY EXPENSES (Tables)
 9 Months Ended
Sep. 30, 2024
Guarantees and Product Warranties [Abstract]  
SCHEDULE OF ACCRUED WARRANTIES AND RELATED COSTS

The following table shows changes in the Company’s accrued warranties and related costs:

 

   September 30, 2024   December 31, 2023 
Beginning balance  $619,113   $260,531 
Cost of warranty claims   (1,080,700)   (1,924,203)
Accruals for product warranty   1,070,231    2,282,785 
Ending balance  $608,644   $619,113 
v3.24.3
OTHER PAYABLE, ACCRUED EXPENSE AND OTHER CURRENT LIABILITY (Tables)
 9 Months Ended
Sep. 30, 2024
Payables and Accruals [Abstract]  
SCHEDULE OF OTHER PAYABLE ACCRUED EXPENSE AND OTHER CURRENT LIABILITIES

The following table shows breakdown of Company’s other payable, accrued expense and other current liabilities:

 

   September 30, 2024   December 31, 2023 
Credit card liabilities  $22,060   $7,732 
Sales Tax payable   29,859    13,204 
Other current liabilities   382,210    77,161 
Additional accrual on litigation (Note 18)   3,573,651    - 
Total  $4,007,780   $98,097 
v3.24.3
LOANS (Tables)
 9 Months Ended
Sep. 30, 2024
Debt Disclosure [Abstract]  
SCHEDULE OF LOAN BALANCE

Loan balance consists of the following:

 

   September 30, 2024   December 31, 2023 
Bank loan – Cathay Bank (1)/Midfirst (4)   $    -   $- 
Other loans - Northpoint (2)   -    205,440 
Other loans – BAC (3)   -    98,143 
Total  $-   $303,583 

 

(1)

On May 13, 2024, the Company’s subsidiary Massimo Motor Sports obtained a line of credit from Cathay Bank, pursuant to which the Company has the availability to borrow a maximum $15.0 million out of this line of credit for one year at the U.S. prime rate + 0.75%. Before then, the company had a line of credit of maximum $10.0 million from Midfirst bank, which is cancelled upon the grant of the line of credit from Cathay Bank. As of September 30, 2024 and December 31, 2023, the outstanding balance was $nil million and $nil.

 

This line of credit is also personally guaranteed by Mr. David Shan, the controlling shareholder. This line of credit is pledged by the Company’s accounts receivable and inventories.

   
(2)

On April 19, 2022, the Company’s subsidiary Massimo Marine obtained a $2.0 million pay as sold line of credit from Northpoint Commercial Finance LLC (“Northpoint”) for acquisition, financing and/or refinancing of inventory. This line of credit is also personally guaranteed by Mr. David Shan, the Controlling Shareholder, and Massimo Motor Sports, an affiliated company. As of September 30, 2024 and December 31, 2023, the outstanding balance was $nil and $205,440, respectively.

 

(3) On February 18, 2022, the Company’s subsidiary Massimo Marine obtained a credit facility for Mercury Marine in the amount of $1.75 million from Brunswick Acceptance Company LLC (“BAC”) to finance purchase of inventory. This line of credit is also personally guaranteed by Mr. David Shan. As of September 30, 2024 and December 31, 2023, the outstanding balance was $nil and $98,143, respectively.
   
(4) On January 15, 2021, the Company’s subsidiary Massimo Motor Sports obtained a line of credit from Midfirst Bank, pursuant to which the Company has the availability to borrow a maximum $4.0 million out of this line of credit for two years at the U.S. prime rate + 0.25%. On April 18, 2022, this line of credit was further increased to $10.0 million, and on January 3, 2024, the maturity date was renewed to January 3, 2026.
   
  This line of credit is guaranteed by the Massimo Group, and is also personally guaranteed by Mr. David Shan, the controlling shareholder, and Miller Creek Holdings LLC, a related party controlled by Mr. David Shan. This line of credit is pledged by the Company’s accounts receivable and inventories.
   
  On May 13, 2024, the credit facility was closed due to transferring to Cathay Bank ((1) above), and all guarantees were released and transferred to Cathay Bank.
v3.24.3
RELATED PARTY TRANSACTIONS (Tables)
 9 Months Ended
Sep. 30, 2024
Related Party Transaction [Line Items]  
SCHEDULE OF RELATIONSHIP OF RELATED PARTIES

The relationship of related parties is summarized as follow:

  

Name of Related Party   Relationship to the Company
David Shan   Controlling shareholder of the Company
Custom Van Living   Controlled by David Shan
Miller Creek Holdings LLC   Controlled by David Shan
SUNL Technology LLC   Controlled by David Shan
Asia International Securities Exchange Co Ltd   Principal shareholder of the Company
Mr David Shan [Member]  
Related Party Transaction [Line Items]  
SCHEDULE OF DUE TO SHAREHOLDER

Loan from a related party consists of the following:

  

   September 30, 2024   December 31, 2023 
         
Loan from David Shan, opening balance  $7,920,141   $10,984,344 
Repayment    (1,503,616)   (5,264,203)
Capital dividend declared   -    2,200,000 
Loan from David Shan, ending balance   6,416,525    7,920,141 
Non-current   -    (7,920,141)
Current  $6,416,525   $- 
v3.24.3
TAXES (Tables)
 9 Months Ended
Sep. 30, 2024
Income Tax Disclosure [Abstract]  
SCHEDULE OF INCOME TAX PROVISION

The provision for income tax consists of the following:

  

   2024   2023   2024   2023 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
                 
Income tax provision – current  $55,782   $1,067,639   $2,067,219   $1,301,709 
Income tax (recovery) provision - deferred   (677,447)   38,407    (974,691)   (65,158)
Income tax (recovery) provision  $(621,665)  $1,106,046   $1,092,528   $1,236,551 
SCHEDULE OF RECONCILIATION OF INCOME TAXES

The following table reconciles the statutory tax rate to the Company’s effective tax:

  

   2024   2023   2024   2023 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
                 
Net (loss) income before income taxes  $(3,123,898)  $5,063,433   $4,587,607   $7,816,387 
Income tax at the federal statutory rate   21%   21%   21%   21%
Statutory U.S. federal income tax (recovery) provision   (656,018)   1,063,321    963,398    1,641,441 
S Corporation benefits   -    -    -    (642,278)
State margin tax   17,736    39,113    101,473    83,349 
Non-deductible expense   16,617   -    27,657   - 
Other adjustments   -    3,612    -    154,039 
Total  $(621,665)  $1,106,046   $1,092,528   $1,236,551 
SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

The Company’s deferred tax assets and liabilities consist of the following:

 

   September 30, 2024   December 31, 2023 
Deferred tax assets:          
Allowance for credit loss  $16,480   $117,046 
Property and equipment   150,324    16,480 
Lease liability – operating   2,155,121    310,426 
Lease liability – financing   18,395    24,920 
Other temporary difference   750,467    - 
Warranty liabilities   127,814    - 
Return liabilities   34,370    - 
Total deferred tax assets   3,252,971    468,872 
Deferred tax liabilities:          
Right of use assets – operating   (2,126,373)   (310,426)
Right of use assets – financing   (17,306)   (23,845)
Total deferred tax liabilities   (2,143,679)   (334,271)
Deferred tax assets, net  $1,109,292   $134,601 
v3.24.3
EARNINGS PER SHARE (Tables)
 9 Months Ended
Sep. 30, 2024
Earnings Per Share [Abstract]  
SCHEDULE OF EARNINGS PER SHARE

The following table presents a reconciliation of basic and diluted net income per share:

  

   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
                 
Net (loss) income attributable to the Company  $(2,502,233)  $3,957,387   $3,495,079   $6,579,836 
Weighted average number of common shares outstanding – basic   41,325,388    40,000,000    40,863,370    40,000,000 
                     
Dilutive securities – unvested RSU   -    -    142,186    - 
Weighted average number of common shares outstanding – diluted   41,325,388    40,000,000    41,005,556    40,000,000 
(Loss) earnings per share – basic  $(0.06)  $0.10   $0.09   $0.16 
(Loss) earnings per share – diluted  $(0.06)  $0.10   $0.09   $0.16 
v3.24.3
EMPLOYEE STOCK PLANS (Tables)
 9 Months Ended
Sep. 30, 2024
Retirement Benefits [Abstract]  
SUMMARY OF RESTRICTED STOCK UNIT ACTIVITY

The following table summarized the Company’s RSU activity:

 

  

Number of

RSUs

  

Weighted Average

Grant Date Fair Value

 
Granted   300,556    3.84 
Cancelled   (1,000)   3.88 
Exercised   (6,750)   3.88 
Outstanding September 30, 2024   292,306   $3.84 
Exercisable, September 30, 2024   -   $- 
SCHEDULE OF SHARE OPTION ACTIVITY

The following table summarized the Company’s share option activity:

  

  

Number of

Options

  

Weighted Average

Exercise Price

  

Weighted Average Remaining

Life in Years

 
Granted   350,000    4.04    9.23 
Cancelled   -    -    - 
Exercised   -    -    - 
Outstanding September 30, 2024   350,000   $4.04    8.97 
Exercisable, September 30, 2024   -   $-    - 
v3.24.3
SEGMENT REPORTING (Tables)
 9 Months Ended
Sep. 30, 2024
Segment Reporting [Abstract]  
SCHEDULE OF SALES BY PRODUCT CATEGORIES

The following table presents sales by product categories for the three and nine months ended September 30, 2024 and 2023, respectively:

  

   2024   2023   2024   2023 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
                 
UTVs, ATVs and e-bikes  $25,084,727   $26,953,580   $88,011,145   $65,765,577 
Pontoon Boats   517,583    2,954,117    3,145,495    9,718,234 
Total  $25,602,310   $29,907,697   $91,156,640   $75,483,811 
v3.24.3
SCHEDULE OF SUBSIDIARIES (Details)
 9 Months Ended
Sep. 30, 2024
Jurisdiction of Formation NV
Massimo Group [Member]  
Subsidiaries Massimo Group
Date of Incorporation Oct. 10, 2022
Jurisdiction of Formation NV
Principal Activities Holding company
Massimo Motor Sports, LLC [Member]  
Subsidiaries Massimo Motor Sports, LLC
Date of Incorporation Jun. 30, 2009
Jurisdiction of Formation TX
Percentage of direct/indirect Economic Ownership 100.00%
Principal Activities Manufacture of UTVs and ATVs
Massimo Marine, LLC [Member]  
Subsidiaries Massimo Marine, LLC
Date of Incorporation Jan. 06, 2020
Jurisdiction of Formation TX
Percentage of direct/indirect Economic Ownership 100.00%
Principal Activities Manufacture of Pontoon Boats
v3.24.3
ORGANIZATION AND BUSINESS DESCRIPTION (Details Narrative) - USD ($)
 9 Months Ended
Apr. 04, 2024
Sep. 30, 2024
Sep. 30, 2023
Jun. 01, 2023
Proceeds from issuance initial public offering   $ 4,458,667  
Massimo Group [Member] | ATIFUS [Member]        
Equity interest ownership percentage       15.00%
Massimo Group [Member] | Controlling Shareholder [Member]        
Equity interest ownership percentage   77.60%    
Massimo Motor Sports, LLC [Member]        
Equity interest ownership percentage   100.00%    
Massimo Motor Sports, LLC [Member] | ATIFUS [Member]        
Investments       $ 1,000,000
Massimo Motor Sports, LLC [Member] | Two Shareholder [Member]        
Equity interest ownership percentage       100.00%
Massimo Marine, LLC [Member]        
Equity interest ownership percentage   100.00%    
Massimo Marine, LLC [Member] | ATIFUS [Member]        
Equity interest ownership percentage       15.00%
Investments       $ 1,000,000
Massimo Marine, LLC [Member] | Shareholder [Member]        
Equity interest ownership percentage       100.00%
Massimo Motor Sports and Massimo Marine [Member]        
Equity interest ownership percentage       100.00%
Massimo Motor Marine [Member] | ATIFUS [Member]        
Equity interest ownership percentage       15.00%
IPO [Member]        
Sale of stock, number of shares issued in transaction 1,300,000      
Sale of stock, price per share $ 4.50      
Proceeds from issuance initial public offering $ 5,850,000      
v3.24.3
SCHEDULE OF PROPERTY AND EQUIPMENT USEFUL LIFE (Details)
Sep. 30, 2024
Furniture and Fixtures [Member] | Minimum [Member]  
Property, Plant and Equipment [Line Items]  
Property and equipment, estimated useful lives 5 years
Furniture and Fixtures [Member] | Maximum [Member]  
Property, Plant and Equipment [Line Items]  
Property and equipment, estimated useful lives 7 years
Machinery and Equipment [Member] | Minimum [Member]  
Property, Plant and Equipment [Line Items]  
Property and equipment, estimated useful lives 5 years
Machinery and Equipment [Member] | Maximum [Member]  
Property, Plant and Equipment [Line Items]  
Property and equipment, estimated useful lives 7 years
Electronic Equipment [Member]  
Property, Plant and Equipment [Line Items]  
Property and equipment, estimated useful lives 5 years
Transportation Equipment [Member]  
Property, Plant and Equipment [Line Items]  
Property and equipment, estimated useful lives 5 years
Leasehold Improvements [Member]  
Property, Plant and Equipment [Line Items]  
Property, Plant, and Equipment, Useful Life, Term, Description [Extensible Enumeration] Useful Life, Lease Term [Member]
v3.24.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative)
 3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2024
USD ($)
shares
Sep. 30, 2023
USD ($)
shares
Sep. 30, 2024
USD ($)
Segment
shares
Sep. 30, 2023
USD ($)
shares
Dec. 31, 2023
USD ($)
Dec. 31, 2022
USD ($)
Product Information [Line Items]            
Cash FDIC insured amount $ 250,000   $ 250,000      
Inventory provision     329,900   $ 439,900  
Impairment provision of inventories 110,000 110,000    
Impairment loss 29,883 772,780    
Sales return liabilities 163,666   163,666   283,276 $ 556,538
Sales return 317,188 223,428 824,978 1,975,270    
Products warranty 608,644   608,644   619,113  
Warranty expenses 2 $ 5 1,102,494 1,521    
Advance from customers $ 1,167,161   1,167,161   1,835,411  
Contract liabilities, revenue recognized     $ 1,160,167 $ 696,274    
Voluntary contribution matching percent     100.00%      
Matching contribution vesting percent     100.00%      
Federal income tax percent 21.00% 21.00% 21.00% 21.00%    
Dilutive shares | shares 0   0      
Number of Reportable Segments | Segment     1      
Cash uninsured amount         $ 330,357  
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | One Customer [Member]            
Product Information [Line Items]            
Concentration risk, percentage 10.00% 10.00% 10.00% 10.00%    
Accounts Receivable [Member] | Customer Concentration Risk [Member] | One Customer [Member]            
Product Information [Line Items]            
Concentration risk, percentage     10.00%   10.00%  
Accounts Payable [Member] | Supplier Concentration Risk [Member] | Four Supplier [Member]            
Product Information [Line Items]            
Concentration risk, percentage     10.00%      
Accounts Payable [Member] | Supplier Concentration Risk [Member] | Three Supplier [Member]            
Product Information [Line Items]            
Concentration risk, percentage         10.00%  
Massimo Motor Sports, LLC [Member]            
Product Information [Line Items]            
Cash uninsured amount $ 145,456   $ 145,456   $ 826,741  
Unvested Restricted Stock Units RSU [Member]            
Product Information [Line Items]            
Weighted average number of common shares, unvested restricted stock | shares 142,186    
Cost of Sales [Member]            
Product Information [Line Items]            
Shipping and freight expense $ 2,406,336 $ 1,599,110 $ 8,582,277 $ 6,758,360    
Selling Expense [Member]            
Product Information [Line Items]            
Shipping and freight expense 1,500,947 694,912 4,562,815 3,130,474    
Advertising costs   $ 363,189 499,274 $ 825,852    
Maximum [Member]            
Product Information [Line Items]            
Cash FDIC insured amount $ 751,585   $ 751,585      
Maximum contributions percent     4.00%      
Minimum [Member]            
Product Information [Line Items]            
Cash FDIC insured amount         $ 435,457  
v3.24.3
SCHEDULE OF ACCOUNTS RECEIVABLE (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Dec. 31, 2022
Defined Benefit Plan Disclosure [Line Items]      
Less: allowance for credit loss $ (715,827) $ (557,360) $ (354,059)
Accounts receivable, net 11,557,733 9,566,445  
Nonrelated Party [Member]      
Defined Benefit Plan Disclosure [Line Items]      
Accounts receivable – third parties $ 12,273,560 $ 10,123,805  
v3.24.3
SCHEDULE OF MOVEMENT OF ALLOWANCE FOR CREDIT LOSS (Details) - USD ($)
 9 Months Ended 12 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Dec. 31, 2023
Receivables [Abstract]      
Balance as of beginning $ 557,360 $ 354,059 $ 354,059
Additional of provision 223,051 $ (118,144) 203,301
Ending balance $ 715,827   $ 557,360
v3.24.3
ACCOUNTS RECEIVABLE, NET (Details Narrative) - USD ($)
 3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Dec. 31, 2023
Defined Benefit Plan Disclosure [Line Items]          
Allowance for credit loss $ 27,779 $ 174,231 $ 223,051 $ (118,144)  
Allowance for credit loss     223,051 (118,144) $ 203,301
Allowance for credit loss     (223,051) 118,144 $ (203,301)
Wrote off uncollectible accounts receivable     420,967  
One Customer [Member]          
Defined Benefit Plan Disclosure [Line Items]          
Wrote off uncollectible accounts receivable $ 64,584 $ 420,967 $ 64,584 $ 420,967  
v3.24.3
SCHEDULE OF INVENTORIES (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Inventory Disclosure [Abstract]    
Products $ 22,898,515 $ 16,777,928
Parts and accessories 1,360,713 899,188
Inventories in transit 2,045,793 5,399,964
Freight and duty 4,938,625 3,163,732
Inventory, gross 31,243,646 26,240,812
Less: inventory allowance (329,900) (439,900)
Inventories, net $ 30,913,746 $ 25,800,912
v3.24.3
INVENTORIES (Details Narrative) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Dec. 31, 2023
Defined Benefit Plan Disclosure [Line Items]          
Inventory provision $ 110,000 $ 110,000  
MidFirst Bank [Member]          
Defined Benefit Plan Disclosure [Line Items]          
Line of credit facility $ 24,741,508   $ 24,741,508   $ 19,961,227
v3.24.3
SCHEDULE OF ADVANCE TO SUPPLIERS (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Advance To Suppliers    
Advance to suppliers $ 1,096,048 $ 1,589,328
Less: impairment loss allowance due to irrecoverable prepayment 772,780
Advance to suppliers, net $ 323,268 $ 1,589,328
v3.24.3
ADVANCE TO SUPPLIERS (Details Narrative) - USD ($)
 1 Months Ended 3 Months Ended 9 Months Ended
Jun. 30, 2024
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Advance To Suppliers          
Impairment loss on supplier deposit   $ 29,883 $ 772,780
Supplier Finance Program, Obligation $ 312,500        
Supplier Finance Program, Obligation, Period Increase (Decrease) 773,000        
Supplier Finance Program, Obligation, Settlement $ 1,100,000        
Supplier Finance Program, Obligation, Current   $ 312,500   $ 312,500  
v3.24.3
SCHEDULE OF OTHER CURRENT ASSETS (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]    
Prepayment $ 145,324 $ 598,481
Note receivable (Note 5) 312,500
Other receivables 159,161 39,028
Less: Other non-current assets (49,500)
Other current assets $ 567,485 $ 637,509
v3.24.3
SCHEDULE OF PROPERTY AND EQUIPMENT, NET (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Property, Plant and Equipment [Line Items]    
Subtotal $ 1,123,076 $ 1,012,465
Less: accumulated depreciation and amortization (523,042) (612,484)
Property and equipment, net 600,034 399,981
Furniture and Fixtures [Member]    
Property, Plant and Equipment [Line Items]    
Subtotal 125,977 125,977
Machinery and Equipment [Member]    
Property, Plant and Equipment [Line Items]    
Subtotal 326,843 89,418
Vehicles [Member]    
Property, Plant and Equipment [Line Items]    
Subtotal 461,667 670,793
Electronic Equipment [Member]    
Property, Plant and Equipment [Line Items]    
Subtotal 35,303 35,303
Leasehold Improvements [Member]    
Property, Plant and Equipment [Line Items]    
Subtotal $ 173,286 $ 90,974
v3.24.3
PROPERTY AND EQUIPMENT, NET (Details Narrative) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Property, Plant and Equipment [Abstract]        
Depreciation expense $ 31,127 $ 39,473 $ 98,111 $ 109,765
Payments to Acquire Property, Plant, and Equipment 82,312 44,210 424,164 68,871
Property plant and equipment disposals     126,000
Gain (Loss) on Disposition of Assets     36,001
Asset impairment charges $ 0 $ 0 $ 0 $ 0
v3.24.3
SCHEDULE OF SUPPLEMENTAL BALANCE INFORMATION (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Leases    
Operating lease liabilities - current $ 2,075,541 $ 847,368
Operating lease liabilities - non-current 8,186,938 630,853
Total 10,262,479 1,478,221
Finance lease liabilities - current 42,970 41,647
Finance lease liabilities - non-current 44,629 77,024
Total $ 87,599 $ 118,671
v3.24.3
SCHEDULE OF SUPPLEMENTAL CASH FLOW AND NON-CASH INFORMATION (Details) - USD ($)
 9 Months Ended 12 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Dec. 31, 2023
Leases      
Operating cash flows used in operating leases $ 1,205,510   $ 1,104,769
Financing cash flows used in finance leases 34,744   47,051
Finance lease liabilities $ 60,805 60,805
Operating lease liabilities $ 9,758,345 $ 1,113,140 $ 1,113,140
v3.24.3
SCHEDULE OF WEIGHTED AVERAGE REMAINING LEASE TERMS AND DISCOUNT RATES (Details)
Sep. 30, 2024
Dec. 31, 2023
Leases    
Finance lease, Weighted-average remaining lease term (years) 2 years 2 months 1 day 2 years 10 months 6 days
Operating leases, Weighted-average remaining lease term (years) 4 years 7 months 13 days 1 year 9 months 25 days
Finance leases, Weighted average discount rate 4.74% 4.61%
Operating leases, Weighted average discount rate 7.68% 8.61%
v3.24.3
SCHEDULE OF MATURITIES OF OPERATING AND FINANCE LEASE LIABILITIES (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Operating leases    
2025 $ 2,866,655  
2026 2,629,915  
2027 2,343,000  
2028 2,343,000  
2029 2,002,000  
Total future minimum lease payments 12,184,570  
Less: imputed interest (1,922,091)  
Present value of operating lease liabilities 10,262,479 $ 1,478,221
Finance leases    
2025 46,325  
2026 34,578  
2027 8,701  
2028 3,626  
Total future minimum lease payments 93,230  
Less: imputed interest (5,631)  
Present value of finance lease liabilities $ 87,599 $ 118,671
v3.24.3
LEASES (Details Narrative)
 3 Months Ended 9 Months Ended
Aug. 01, 2024
USD ($)
May 01, 2024
USD ($)
ft²
Apr. 29, 2023
USD ($)
ft²
Aug. 01, 2021
USD ($)
Aug. 01, 2018
USD ($)
ft²
Sep. 30, 2024
USD ($)
Sep. 30, 2023
USD ($)
Sep. 30, 2024
USD ($)
Sep. 30, 2023
USD ($)
Defined Benefit Plan Disclosure [Line Items]                  
Operating lease expense           $ 624,232 $ 311,192 $ 1,342,402 $ 793,577
Amortization of operating lease right of use assets           471,350 272,580 1,110,979 698,336
Accretion of lease liabilities           1,116 2,219 3,672 5,610
Amortization of finance lease right of use assets           $ 10,379 $ 10,380 $ 31,139 $ 31,733
Miller Creek Holding LLC [Member] | Mr David Shan [Member]                  
Defined Benefit Plan Disclosure [Line Items]                  
Area of land | ft²     66,000   220,000        
Payments for monthly rent $ 145,750   $ 35,000 $ 60,000 $ 40,000        
Lease expiration date     Apr. 30, 2026 Jul. 31, 2024 Jul. 31, 2021        
Lease renewal term 5 years     3 years          
Miller Creek Holding LLC [Member] | Mr David Shan [Member] | Two Lease Agreements [Member] | Warehouse [Member]                  
Defined Benefit Plan Disclosure [Line Items]                  
Area of land | ft²   60,000              
Payments for monthly rent   $ 33,000              
Miller Creek Holding LLC [Member] | Mr David Shan [Member] | Two Lease Agreements [Member] | Office Space [Member]                  
Defined Benefit Plan Disclosure [Line Items]                  
Area of land | ft²   30,000              
Payments for monthly rent   $ 16,500              
v3.24.3
SCHEDULE OF ACCRUED RETURN LIABILITIES (Details) - USD ($)
 9 Months Ended 12 Months Ended
Sep. 30, 2024
Dec. 31, 2023
Payables and Accruals [Abstract]    
Beginning balance $ 283,276 $ 556,538
Actual recognized products return (1,535,478) (3,355,112)
Accruals for product return liabilities 1,415,868 3,081,850
Ending balance $ 163,666 $ 283,276
v3.24.3
SCHEDULE OF ACCRUED WARRANTIES AND RELATED COSTS (Details) - USD ($)
 9 Months Ended 12 Months Ended
Sep. 30, 2024
Dec. 31, 2023
Guarantees and Product Warranties [Abstract]    
Beginning balance $ 619,113 $ 260,531
Cost of warranty claims (1,080,700) (1,924,203)
Accruals for product warranty 1,070,231 2,282,785
Ending balance $ 608,644 $ 619,113
v3.24.3
SCHEDULE OF OTHER PAYABLE ACCRUED EXPENSE AND OTHER CURRENT LIABILITIES (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Payables and Accruals [Abstract]    
Credit card liabilities $ 22,060 $ 7,732
Sales Tax payable 29,859 13,204
Other current liabilities 382,210 77,161
Additional accrual on litigation (Note 18) 3,573,651
Total $ 4,007,780 $ 98,097
v3.24.3
SCHEDULE OF LOAN BALANCE (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Defined Benefit Plan Disclosure [Line Items]    
Total $ 303,583
Cathay And Midfirst Bank [Member]    
Defined Benefit Plan Disclosure [Line Items]    
Total [1],[2]
Northpoint Commercial Finance LLC [Member]    
Defined Benefit Plan Disclosure [Line Items]    
Total [3] 205,440
Brunswick Acceptance Company LLC [Member]    
Defined Benefit Plan Disclosure [Line Items]    
Total [4] $ 98,143
[1] On January 15, 2021, the Company’s subsidiary Massimo Motor Sports obtained a line of credit from Midfirst Bank, pursuant to which the Company has the availability to borrow a maximum $4.0 million out of this line of credit for two years at the U.S. prime rate + 0.25%. On April 18, 2022, this line of credit was further increased to $10.0 million, and on January 3, 2024, the maturity date was renewed to January 3, 2026.
[2] On May 13, 2024, the Company’s subsidiary Massimo Motor Sports obtained a line of credit from Cathay Bank, pursuant to which the Company has the availability to borrow a maximum $15.0 million out of this line of credit for one year at the U.S. prime rate + 0.75%. Before then, the company had a line of credit of maximum $10.0 million from Midfirst bank, which is cancelled upon the grant of the line of credit from Cathay Bank. As of September 30, 2024 and December 31, 2023, the outstanding balance was $nil million and $nil.
[3] On April 19, 2022, the Company’s subsidiary Massimo Marine obtained a $2.0 million pay as sold line of credit from Northpoint Commercial Finance LLC (“Northpoint”) for acquisition, financing and/or refinancing of inventory. This line of credit is also personally guaranteed by Mr. David Shan, the Controlling Shareholder, and Massimo Motor Sports, an affiliated company. As of September 30, 2024 and December 31, 2023, the outstanding balance was $nil and $205,440, respectively.
[4] On February 18, 2022, the Company’s subsidiary Massimo Marine obtained a credit facility for Mercury Marine in the amount of $1.75 million from Brunswick Acceptance Company LLC (“BAC”) to finance purchase of inventory. This line of credit is also personally guaranteed by Mr. David Shan. As of September 30, 2024 and December 31, 2023, the outstanding balance was $nil and $98,143, respectively.
v3.24.3
SCHEDULE OF LOAN BALANCE (Details) (Parenthetical) - USD ($)
May 13, 2024
Jan. 03, 2024
Jan. 15, 2021
Sep. 30, 2024
May 12, 2024
Dec. 31, 2023
Apr. 19, 2022
Apr. 18, 2022
Feb. 18, 2022
MidFirst Bank [Member]                  
Line of credit facility, total increase company access       $ 24,741,508   $ 19,961,227      
Massimo Motor Sports, LLC [Member] | Cathay Bank [Member]                  
Line of credit facility, total increase company access $ 15,000,000.0                
Line of credit facility, expiration period 1 year                
Line of credit facility, prime rate 0.75%                
Line of credit outstanding              
Massimo Motor Sports, LLC [Member] | MidFirst Bank [Member]                  
Line of credit facility, total increase company access     $ 4,000,000.0   $ 10,000,000.0     $ 10,000,000.0  
Line of credit facility, expiration period     2 years            
Line of credit facility, prime rate     0.25%            
Line of credit facility, maturity date   Jan. 03, 2026              
Massimo Marine, LLC [Member] | Northpoint Commercial Finance LLC [Member]                  
Line of credit facility, total increase company access             $ 2,000,000.0    
Line of credit outstanding         205,440      
Massimo Marine, LLC [Member] | Brunswick Acceptance Company LLC [Member]                  
Line of credit facility, total increase company access                 $ 1,750,000
Line of credit outstanding         $ 98,143      
v3.24.3
SCHEDULE OF RELATIONSHIP OF RELATED PARTIES (Details)
 9 Months Ended
Sep. 30, 2024
Mr David Shan [Member]  
Related Party Transaction [Line Items]  
Relationship to the Company Controlling shareholder of the Company
Custom Van Living LLC [Member]  
Related Party Transaction [Line Items]  
Relationship to the Company Controlled by David Shan
Miller Creek Holdings LLC [Member]  
Related Party Transaction [Line Items]  
Relationship to the Company Controlled by David Shan
SUNL Technology LLC [Member]  
Related Party Transaction [Line Items]  
Relationship to the Company Controlled by David Shan
Asia International Securities Exchange Co Ltd [Member]  
Related Party Transaction [Line Items]  
Relationship to the Company Principal shareholder of the Company
v3.24.3
SCHEDULE OF DUE TO SHAREHOLDER (Details) - USD ($)
 9 Months Ended 12 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Dec. 31, 2023
Related Party Transaction [Line Items]      
Repayment $ 1,503,616    
Capital dividend declared   $ 2,200,000  
Non-current   $ (7,920,141)
Current 6,416,525  
Mr David Shan [Member]      
Related Party Transaction [Line Items]      
Loan from David Shan, opening balance 7,920,141 $ 10,984,344 10,984,344
Repayment (1,503,616)   (5,264,203)
Capital dividend declared   2,200,000
Loan from David Shan, ending balance 6,416,525   7,920,141
Non-current   (7,920,141)
Current $ 6,416,525  
v3.24.3
RELATED PARTY TRANSACTIONS (Details Narrative)
 9 Months Ended
Sep. 30, 2024
USD ($)
Related Party Transactions [Abstract]  
Repayment $ 1,503,616
v3.24.3
SCHEDULE OF INCOME TAX PROVISION (Details) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Income Tax Disclosure [Abstract]        
Income tax provision – current $ 55,782 $ 1,067,639 $ 2,067,219 $ 1,301,709
Income tax (recovery) provision - deferred (677,447) 38,407 (974,691) (65,158)
Income tax (recovery) provision $ (621,665) $ 1,106,046 $ 1,092,528 $ 1,236,551
v3.24.3
SCHEDULE OF RECONCILIATION OF INCOME TAXES (Details) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Income Tax Disclosure [Abstract]        
Net (loss) income before income taxes $ (3,123,898) $ 5,063,433 $ 4,587,607 $ 7,816,387
Income tax at the federal statutory rate 21.00% 21.00% 21.00% 21.00%
Statutory U.S. federal income tax (recovery) provision $ (656,018) $ 1,063,321 $ 963,398 $ 1,641,441
S Corporation benefits (642,278)
State margin tax 17,736 39,113 101,473 83,349
Non-deductible expense 16,617 27,657
Other adjustments 3,612 154,039
Income tax (recovery) provision $ (621,665) $ 1,106,046 $ 1,092,528 $ 1,236,551
v3.24.3
SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Deferred tax assets:    
Allowance for credit loss $ 16,480 $ 117,046
Property and equipment 150,324 16,480
Lease liability – operating 2,155,121 310,426
Lease liability – financing 18,395 24,920
Other temporary difference 750,467
Warranty liabilities 127,814
Return liabilities 34,370
Total deferred tax assets 3,252,971 468,872
Deferred tax liabilities:    
Right of use assets – operating (2,126,373) (310,426)
Right of use assets – financing (17,306) (23,845)
Total deferred tax liabilities (2,143,679) (334,271)
Deferred tax assets, net $ 1,109,292 $ 134,601
v3.24.3
TAXES (Details Narrative)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Income Tax Disclosure [Abstract]        
Effective tax rate for federal income taxes 21.00% 21.00% 21.00% 21.00%
Effective income tax rate 19.90% 22.30% 2.00% 20.00%
v3.24.3
SHAREHOLDERS’ EQUITY (Details Narrative)
 3 Months Ended 9 Months Ended
Jun. 21, 2024
USD ($)
shares
Jun. 18, 2024
shares
Apr. 04, 2024
USD ($)
$ / shares
shares
Sep. 30, 2024
$ / shares
shares
Sep. 30, 2024
USD ($)
$ / shares
shares
Sep. 30, 2023
USD ($)
Dec. 31, 2023
$ / shares
shares
Jun. 01, 2023
$ / shares
shares
Subsidiary, Sale of Stock [Line Items]                
Common stock, shares authorized       100,000,000 100,000,000   100,000,000 100,000,000
Common stock, par value | $ / shares       $ 0.001 $ 0.001   $ 0.001 $ 0.001
Common stock, shares issued       41,329,235 41,329,235   40,000,000 40,000,000
Preferred stock, shares authorized       5,000,000 5,000,000   5,000,000  
Preferred stock, par value | $ / shares       $ 0.01 $ 0.01   $ 0.01  
Preferred stock, shares issued       0 0   0  
Number of shares issued       6,750 1,329,235      
Common stock, shares outstanding       41,329,235 41,329,235   40,000,000  
Proceeds from issuance initial public offering | $         $ 4,458,667    
Representatives Warrant [Member]                
Subsidiary, Sale of Stock [Line Items]                
Number of warrants issued     87,100          
Exercise price of warrants | $ / shares       $ 5.63 $ 5.63      
Fair value warrants | $         $ 220,000      
Warrants measurement input | $ / shares       4.00 4.00      
Warrants term       4 years 6 months 3 days 4 years 6 months 3 days      
Warrants outstanding       87,100 87,100      
Representatives Warrant [Member] | Measurement Input, Risk Free Interest Rate [Member]                
Subsidiary, Sale of Stock [Line Items]                
Warrants measurement input       4.3 4.3      
Representatives Warrant [Member] | Measurement Input, Expected Term [Member]                
Subsidiary, Sale of Stock [Line Items]                
Warrants term       5 years 5 years      
Representatives Warrant [Member] | Measurement Input, Exercise Price [Member]                
Subsidiary, Sale of Stock [Line Items]                
Warrants measurement input | $ / shares       5.625 5.625      
Representatives Warrant [Member] | Measurement Input, Option Volatility [Member]                
Subsidiary, Sale of Stock [Line Items]                
Warrants measurement input       89 89      
Representatives Warrant [Member] | Measurement Input, Expected Dividend Rate [Member]                
Subsidiary, Sale of Stock [Line Items]                
Warrants measurement input            
TJCM Asset Management LLC [Member]                
Subsidiary, Sale of Stock [Line Items]                
Number of shares for service 22,485 160,000   40,000 40,000      
Number of shares for service, value | $ $ 80,000              
IPO [Member]                
Subsidiary, Sale of Stock [Line Items]                
Sale of stock, number of shares issued in transaction     1,300,000          
Sale of stock, price per share | $ / shares     $ 4.50          
Proceeds from issuance initial public offering | $     $ 5,850,000          
Total net proceeds | $     $ 5,000,000.0          
Over-Allotment Option [Member]                
Subsidiary, Sale of Stock [Line Items]                
Sale of stock, price per share | $ / shares     $ 4.50          
Over-Allotment Option [Member] | Representatives Warrant [Member]                
Subsidiary, Sale of Stock [Line Items]                
Exercise price of warrants | $ / shares     $ 5.625          
Maturity date     Apr. 04, 2029          
Over-Allotment Option [Member] | Underwriting Agreement [Member]                
Subsidiary, Sale of Stock [Line Items]                
Number of shares issued     195,000          
v3.24.3
SCHEDULE OF EARNINGS PER SHARE (Details) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]        
Net income and comprehensive income $ (2,502,233) $ 3,957,387 $ 3,495,079 $ 6,579,836
Weighted average number of common shares outstanding - basic [1] 41,325,388 40,000,000 40,863,370 40,000,000
Weighted average number of common shares outstanding - diluted [1] 41,325,388 40,000,000 41,005,556 40,000,000
Earnings per share - basic $ (0.06) $ 0.10 $ 0.09 $ 0.16
Earnings per share - diluted $ (0.06) $ 0.10 $ 0.09 $ 0.16
Unvested Restricted Stock Units RSU [Member]        
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]        
Dilutive securities - unvested RSU 142,186
[1] Retroactively restated for effect of reorganization
v3.24.3
EARNINGS PER SHARE (Details Narrative) - shares
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Unvested Restricted Stock Units RSU [Member]        
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]        
Weighted Average Number of Shares, Restricted Stock 142,186
v3.24.3
SUMMARY OF RESTRICTED STOCK UNIT ACTIVITY (Details)
 9 Months Ended
Sep. 30, 2024
$ / shares
shares
Retirement Benefits [Abstract]  
Number of RSUs, Granted | shares 300,556
Weighted Average Grant Date Fair Value, Granted | $ / shares $ 3.84
Number of RSUs, Cancelled | shares (1,000)
Weighted Average Grant Date Fair Value, Cancelled | $ / shares $ 3.88
Number of RSUs, Exercised | shares (6,750)
Weighted Average Grant Date Fair Value, Exercised | $ / shares $ 3.88
Number of RSUs, Outstanding | shares 292,306
Weighted Average Grant Date Fair Value, Outstanding | $ / shares $ 3.84
Number of RSUs, Exerciseable | shares
Weighted Average Grant Date Fair Value, Exerciseable | $ / shares
v3.24.3
SCHEDULE OF SHARE OPTION ACTIVITY (Details) - $ / shares
 9 Months Ended 12 Months Ended
Sep. 30, 2024
Dec. 31, 2023
Retirement Benefits [Abstract]    
Number of Options, Granted 350,000  
Weighted Average Exercise Price Outstanding Granted $ 4.04  
Weighted Average Remaining Life in Years 8 years 11 months 19 days 9 years 2 months 23 days
Number of Options, Cancelled  
Weighted Average Exercise Price Outstanding Cancelled  
Number of Options, Exercised  
Weighted Average Exercise Price Outstanding Exercised  
Number of Options, Outstanding 350,000  
Weighted Average Exercise Price Outstanding $ 4.04  
Number of Options, Exerciseable  
Weighted Average Exercise Price Outstanding Exerciseable  
v3.24.3
EMPLOYEE STOCK PLANS (Details Narrative) - USD ($)
 3 Months Ended 9 Months Ended
May 22, 2024
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]          
Granted and available for issuance       300,556  
Forfeited and available for issuance       1,000  
Share based compensation   $ 71,754 $ 131,699
Shares granted       350,000  
Shares granted exercise price       $ 4.04  
Incentive Stock Option Plan [Member]          
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]          
Shares granted 46,860        
Shares granted exercise price $ 4.268        
Shares granted description The options were granted on May 22, 2024, and the options vest at a rate of 23,430 per year for two years, effective on May 22, 2024        
Aggregate fair value $ 73,000        
Share price $ 3.88        
Risk-free interest rate maximum 5.00%        
Risk-free interest rate 4.65%        
Expected term 5 years        
Exercise price $ 4.268        
Volatility rate 88.80%        
Dividend rate        
Expiration date May 21, 2029        
Non Qualified Stock Option Plan [Member]          
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]          
Shares granted 103,140        
Shares granted exercise price $ 4.0        
Shares granted description The options were granted on May 22, 2024, and vest at a rate of 51,570 shares per year for two years, effective on May 22, 2024.        
Aggregate fair value $ 160,000        
Share price $ 3.88        
Risk-free interest rate maximum 5.00%        
Risk-free interest rate 4.65%        
Expected term 10 years        
Exercise price $ 4.0        
Volatility rate 88.80%        
Dividend rate        
Expiration date May 21, 2034        
Incentive Stock Option and Non Qualified Stock Option Plan [Member]          
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]          
Shares granted 200,000        
Shares granted exercise price $ 4.0        
Shares granted description The options were granted on May 22, 2024, and vest at a rate of 100,000 shares per year for two years, effective on May 22, 2024        
Aggregate fair value $ 272,000        
Share price $ 3.88        
Risk-free interest rate maximum 5.00%        
Risk-free interest rate 4.65%        
Expected term 10 years        
Exercise price $ 4.0        
Volatility rate 88.80%        
Dividend rate        
Expiration date May 21, 2034        
Restricted Stock Units (RSUs) [Member]          
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]          
Granted and available for issuance       300,556  
Forfeited and available for issuance       1,000  
Exercised and available for issuance       6,750  
Share based compensation   $ 256,345 $ 426,666
v3.24.3
COMMITMENTS AND CONTINGENCIES (Details Narrative)
Jul. 08, 2024
USD ($)
Commitments and Contingencies Disclosure [Abstract]  
Litigation settlement $ 3,334,542
Litigation settlement, fee expense 1,436,809
Interest litigation 1,146,169
Litigation settlement accrual 3,573,651
Litigation accrual $ 5,900,000
v3.24.3
SCHEDULE OF SALES BY PRODUCT CATEGORIES (Details) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Revenue from External Customer [Line Items]        
Total $ 25,602,310 $ 29,907,697 $ 91,156,640 $ 75,483,811
UTVs and ATVs Electric Bikes [Member]        
Revenue from External Customer [Line Items]        
Total 25,084,727 26,953,580 88,011,145 65,765,577
Pontoon Boats [Member]        
Revenue from External Customer [Line Items]        
Total $ 517,583 $ 2,954,117 $ 3,145,495 $ 9,718,234
v3.24.3
SEGMENT REPORTING (Details Narrative)
 9 Months Ended
Sep. 30, 2024
Segment
Segment Reporting [Abstract]  
Number of reportable segments 1
Massimo (NASDAQ:MAMO)
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