美国
证券交易委员会
华盛顿，特区。20549
表格
(马克 一)
截至季度结束
或者
过渡期从至
委员会
文件编号：
（公司章程中指定的准确公司名称）
| （州或其他辖区） 注册或组织的地方公司； |
（美国国税局雇主号码） 识别号码。 |
| (主要 执行人员之地址) | (邮政 编 码) |
注册人的电话号码，包括区号：(585)768-2513
(公司更名、更改地址和更改财年情况的以往名称、以前地址和以前财年，如与上次报告有所改变)
根据法案第12(b)节注册的证券:
| 每一类别的名称 | 交易符号 | 在注册的交易所的名称 | ||
| 股 |
普通股，每股面值$0.001，B级优先参与优先股购股权
无
请勾选标记以指示注册者是否（1）在过去12个月内（或注册者需要提交这些报告的更短时间内）已提交证券交易所法案第13或15（d）节要求提交的所有报告，及 （2）是否已被提交要求过去90天的提交要求所制约。
请用勾选标记指明注册人是否在过去12个月内（或在注册人被要求提交这些文件的较短期限内）电子提交并发布了根据规则405的规定所要求的每一个互动数据文件。
勾选表示公司是大型加速文件提交者、加速文件提交者、非加速文件提交者、小型报告公司还是新兴增长公司。在《交易所法》第120亿.2条中查看“大型加速提交者”、“加速提交者”、“小型报告公司”和“新兴增长公司”的定义。
| 大型加速文件提交人 | ☐ | 加速文件提交人 | ☐ |
| ☒ | 小型报告公司 | ||
| 新兴成长公司 |
如果是新兴成长公司，请勾选，如果注册人已选择不使用根据交易所法案第13(a)条提供的任何新的或修改的财务会计准则的延长过渡期，请勾选。
请在适用的盒子内打勾，表明注册者是壳公司（根据交易所法案第12b-2条规定定义）。
是 ☐ 否
截至2024年11月12日，共有 公司已发行并流通的普通股股份。
目录
| 页面 | ||
| 关于前瞻性声明的警告 | ii | |
| 部分 一. | 财务信息 | F-1 |
| 项目 1. | 2024年9月30日（未经审计）和2023年12月31日（经审计）的简明综合资产负债表 | F-1 |
| 简化版 综合运营及全面收益（亏损）报表，截止至2024年和2023年9月30日的三个月和九个月 （未经审计） | F-2 | |
| 简化版 综合股东权益变动报表，截止至2024年和2023年9月30日的三个月和九个月 （未经审计） | F-3 | |
| 2024年9月30日至2023年9月30日期间的简明合并现金流量表（未经审计） | F-4 | |
| 简明综合财务报表附注（未经审计） | F-5 | |
| 项目 2. | 管理财务状况和运营结果的讨论和分析。 | 1 |
| 项目 3. | 关于市场风险的定量和定性披露。 | 14 |
| 项目 4. | 控制和程序。 | 14 |
| 第二部分。 | 其他信息 | 15 |
| 项目 1. | 法律诉讼。 | 15 |
| Interest expense, net | 风险因素。 | 15 |
| 项目 2. | 未经注册的股票出售和使用得到的收益。 | 15 |
| 项目 3. | 违反优先证券的行为。 | 15 |
| 项目 4. | 矿山安全披露。 | 15 |
| 项目5。 | 其他信息。 | 15 |
| 项目 6. | 附件。 | 16 |
| 签名 | 17 |
| i |
除非另有说明，本10-Q季度报告（以下简称“本报告”）中对“我们”、“我们的”、“我们公司”或“公司”的引用均指内华达州马西莫集团及其子公司。
关于前瞻性声明的注意事项
本报告包含关于我们和我们所在行业的前瞻性声明，涉及重大风险和不确定性。除历史事实陈述外，本报告中的所有陈述，包括关于我们未来业务运营和财务状况、我们的业务策略和计划、预计成本以及我们未来业务运营的目标等，均属前瞻性声明。 在某些情况下，您可以通过这些词语辨识前瞻性声明：“相信”，“可能”，“将”，“估计”，“继续”，“预期”，“应当”，“将会”，“打算”，“目标”，“寻求”，“期待” 等表达方式，或这些词语的否定形式或其他类似词语或表达方式，涉及我们的期望、策略、计划或意图等。我们在很大程度上基于我们对未来事件和趋势的当前期望和预测，相信这些事件和趋势可能影响我们的财务状况、业务运营的结果、业务策略、短期和长期业务运营目标以及财务需求。这些前瞻性声明受到一系列风险、不确定性和假设的影响，其中包括但不限于：
| ● | 我们的 有限运营历史，使我们难以评估我们的业绩和未来成功的前景； |
| ● | 与我们依赖独立经销商和分销商管理我们许多产品的零售分销相关的风险； |
| ● | 我们对第三方制造商和供应商的依赖； |
| ● | 与我们购买的大多数产品由中国供应商制造相关的风险，以及他们的运营 受到与中国的业务运营相关的风险的影响； |
| ● | 我们主要股东和高级管理层在运营上市公司方面缺乏经验； |
| ● | 影响消费支出的经济 条件可能对我们的业务产生重大不利影响； |
| ● | 运营结果或财务 控件； |
| ● | 面临所有产品线的激烈竞争的相关风险，包括来自一些财务和市场 资源更强的竞争对手的竞争； |
| ● | 与我们吸引和留住关键人员的能力相关的风险； |
| ● | 因数据被盗用和网络安全概念的妥协而造成的潜在损害； |
| ● | 法律、监管要求、政府激励和燃料及能源价格的变化； |
| ● | 诉讼、监管程序、投诉、产品责任索赔和/或不利宣发； |
| ● | 我们的经销商、客户和分销商无法获得充足的资金或融资； |
| ● | 未能开发品牌名称和声誉； |
| ● | 因产品保修索赔或产品召回导致的重大产品维修和/或更换； |
| ● | 健康流行病，包括新冠疫情，对我们的业务的影响；以及 |
| ● | 其他 本报告中描述的风险和不确定性，包括在“风险因素”部分中描述的那些。 |
此外，我们在一个竞争激烈且快速变化的环境中运营。新的风险不时出现。我们的管理层不可能预测所有风险，也无法评估所有因素对我们的业务或任何因素或任何组合可能导致实际结果与我们可能提出的任何前瞻性陈述中含有的结果大不相同的影响程度。鉴于这些风险、不确定性和假设，在本报告中讨论的未来事件和趋势可能不会发生，实际结果可能与前瞻性陈述中预期或暗示的结果大不相同并且严重不利。
您不应该依赖前瞻性说明作为未来事件的预测。前瞻性说明中反映的事件和情况可能无法实现或发生。尽管我们相信前瞻性说明中反映的期望是合理的，但我们不能保证未来的结果、活动水平、表现或成就。除非适用法律要求，否则我们不承担在本报告之日后更新任何这些前瞻性说明的义务，或将这些说明调整为实际结果或修订后的期望。
此外，“我们相信”等表态反映我们对相关主题的信念和观点。这些表态基于我们在本报告日期可获得的信息，虽然我们认为这些信息构成对这些表态的合理基础，但这些信息可能是有限的或不完整的，因此不应认为我们已对所有可能获得的相关信息进行了彻底调查或审查，这些表态固有地具有不确定性，因此请注意不要过度依赖这些表态。
您 应该完整阅读本报告及我们在本报告中引用的文件，并作为注册声明的附录提交， 本报告是其一部分，请理解我们的实际未来结果可能与我们的预期有实质性差异。我们通过这些警示声明对本报告中的所有前瞻性陈述做出限制。
| ii |
第I部分 - 财务信息
项目 1. 基本报表
玛西莫 集团及附属公司
汇编简明资产负债表
(未经审计)
| 截至 | ||||||||
2024年9月30日 （未经审计） | 2023年12月31日 (已经审计) | |||||||
| 资产 | ||||||||
| 流动资产 | ||||||||
| 现金及现金等价物 | $ | $ | ||||||
| 应收账款，净额 | ||||||||
| 净存货 | ||||||||
| 预付款项 | ||||||||
| 其他流动资产 | ||||||||
| 总流动资产 | ||||||||
| 非流动资产 | ||||||||
| 资产和设备原值，净额 | ||||||||
| 来源于截至2023年12月31日的审计合并财务报表的金额。 | ||||||||
| 使用权融资租赁资产，净额 | ||||||||
| 递延发售资产 | ||||||||
| 其他非流动资产 | ||||||||
| 递延税款资产 | ||||||||
| 总非流动资产 | ||||||||
| 资产总计 | $ | $ | ||||||
| 负债和股东权益 | ||||||||
| 流动负债 | ||||||||
| 短期贷款 | $ | $ | ||||||
| 应付账款 | ||||||||
| 其他应付款、应计费用和其他流动负债 | ||||||||
| 应计退休责任 | ||||||||
| 应计保修责任 | ||||||||
| 合同责任 | ||||||||
| 经营租赁下的流动部分负债 | ||||||||
| 融资租赁下的流动部分负债 | ||||||||
| 应交所得税 | ||||||||
| 关联方贷款 | ||||||||
| 总流动负债 | ||||||||
| 人形机器人-轴承贷款及借款 | ||||||||
| 非流动经营租赁责任 | ||||||||
| 融资租赁负债，非流动 | ||||||||
| 关联方贷款 | ||||||||
| 总非流动负债 | ||||||||
| 负债合计 | $ | $ | ||||||
| 承诺和事后约定 | ||||||||
| 股东权益 | ||||||||
| 普通股，每股 面值， 授权股份， 和 截至2024年9月30日和2023年12月31日，已发行和流通的股份分别为 | ||||||||
| 优先股，$ 面值， 优先股授权, 股份分别于2024年9月30日和2023年12月31日发行并流通 | ||||||||
| 应收订阅款 | ( | ) | ||||||
| 股本溢价 | ||||||||
| 留存收益 | ||||||||
| 总股本 | ||||||||
| 负债和所有者权益总计 | $ | $ | ||||||
附注是这些精简合并财务报表的一部分。
| F-1 |
玛西莫 集团及附属公司
压缩 综合收益（损失）综合收入陈述
（未经审计）
| 截至三个月 | 九个月结束 | |||||||||||||||
| 9月30日， | 九月30日, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| 收入 | $ | $ | $ | $ | ||||||||||||
| 收入成本 | ||||||||||||||||
| 毛利润 | ||||||||||||||||
| 营业费用： | ||||||||||||||||
| 销售费用 | ||||||||||||||||
| General and administrative | ||||||||||||||||
| 供应商存款的减值损失 | ||||||||||||||||
| 研发 | ||||||||||||||||
| 总营业费用 | ||||||||||||||||
| 营业利润 | ||||||||||||||||
| 其他收入（费用）： | ||||||||||||||||
| 其他收入，净额 | ||||||||||||||||
| 诉讼损失 | ( | ) | ( | ) | ||||||||||||
| 利息支出 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 总其他(收益)费用，净额 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 税前(损失)收入 | ( | ) | ||||||||||||||
| （所得税款）准备金 | ( | ) | ||||||||||||||
| 净(损)收入和综合(损)益 | $ | ( | ) | $ | $ | $ | ||||||||||
| 每股（亏损）收益 - 基本 | $ | ( | ) | $ | $ | $ | ||||||||||
| 基本每股流通股数加权平均数 * | ||||||||||||||||
| 每股收益（亏损）-摊薄 | $ | ( | ) | $ | $ | $ | ||||||||||
| 加权平均外流通股数-摊薄* | ||||||||||||||||
| * |
附注是这些精简合并财务报表的一部分。
| F-2 |
玛西莫 集团及附属公司
股东权益简明合并报表变动表
截至2024年和2023年9月30日的三个月和九个月
(未经审计)
| 普通股 | 认购 | 附加 实收资本 | 留存 | |||||||||||||||||||||
| 分享* | 金额 | 应收款 | 资本 | 收益 | 总计 | |||||||||||||||||||
| 2023年6月30日的余额 | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||
| 已收订阅 | – | |||||||||||||||||||||||
| 净利润 | – | |||||||||||||||||||||||
| 2023年9月30日的余额 | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||
| 2024年6月30日余额 | $ | $ | $ | $ | $ | |||||||||||||||||||
| RSU归属时发行普通股 | ( | ) | ||||||||||||||||||||||
| 基于股票的补偿 | – | |||||||||||||||||||||||
| 净损失 | – | ( | ) | ( | ) | |||||||||||||||||||
| 2024年9月30日的结余 | $ | $ | $ | $ | $ | |||||||||||||||||||
| 普通股 | 认购 | 附加 实收资本 | 留存 | |||||||||||||||||||||
| 股份* | 金额 | 应收账款 | 资本 | 收益 | 总计 | |||||||||||||||||||
| 2022年12月31日的余额 | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||
| 已收订阅 | – | |||||||||||||||||||||||
| 宣布股本股息 | – | ( | ) | ( | ) | |||||||||||||||||||
| 净利润 | – | |||||||||||||||||||||||
| 2023年9月30日的余额 | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||
| 2023年12月31日余额 | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||
| 增资 | – | |||||||||||||||||||||||
| 首次公开发行，扣除股票发行成本后的净额 | ||||||||||||||||||||||||
| 发行普通股 | ||||||||||||||||||||||||
| 基于股票的补偿 | – | |||||||||||||||||||||||
| 净利润 | – | |||||||||||||||||||||||
| 2024年9月30日的结余 | $ | $ | $ | $ | $ | |||||||||||||||||||
| * |
附注是这些精简合并财务报表的一部分。
| F-3 |
玛西莫 集团及附属公司
简明综合现金流量表
(未经审计)
| 截至9月30日的九个月 | ||||||||
| 2024 | 2023 | |||||||
| 经营活动现金流量： | ||||||||
| 净利润 | $ | $ | ||||||
| 调整净利润以计入经营活动现金流量: | ||||||||
| 折旧 | ||||||||
| 非现金租赁费用 | ||||||||
| 融资租赁负债的增值 | ||||||||
| 摊销融资租赁权益资产 | ||||||||
| 坏账核销 | ||||||||
| 预期信用损失准备金(反转)，净额 | ( | ) | ||||||
| 固定资产出售收益 | ( | ) | ||||||
| 资产减值损失 | ||||||||
| 诉讼损失 | ||||||||
| 限制性股票单位补偿 | ||||||||
| 基于股票的服务报酬 | ||||||||
| 递延税款资产 | ( | ) | ( | ) | ||||
| 运营资产和负债的变化： | ||||||||
| 应收账款 | ( | ) | ( | ) | ||||
| 存货 | ( | ) | ( | ) | ||||
| 存货减值的逆转 | ( | ) | ||||||
| 预付款项 | ( | ) | ||||||
| 其他流动资产 | ( | ) | ||||||
| 关联方应付款 | ||||||||
| 应付账款 | ( | ) | ( | ) | ||||
| 其他应付账款、应计费用和其他流动负债 | ( | ) | ||||||
| 应交税费 | ( | ) | ||||||
| 应计保修责任 | ( | ) | ||||||
| 应计退休责任 | ( | ) | ( | ) | ||||
| 合同责任 | ( | ) | ||||||
| 租赁负债 - 操作租赁 | ( | ) | ( | ) | ||||
| 经营活动中提供的净现金流量（流出） | ( | ) | ||||||
| 投资活动现金流量： | ||||||||
| 来自物业和设备出售的收益 | ||||||||
| 购置固定资产和设备 | ( | ) | ( | ) | ||||
| 投资活动中使用的净现金 | ( | ) | ( | ) | ||||
| 融资活动的现金流： | ||||||||
| 偿还其他贷款 | ( | ) | ( | ) | ||||
| 偿还融资租赁负债 | ( | ) | ( | ) | ||||
| 来自普通股发行的收益 | ||||||||
| 延迟募资成本 | ( | ) | ||||||
| 首次公开发行的募集资金净额，扣除股份发行费用 | ||||||||
| 偿还来自关联方的贷款 | ( | ) | ( | ) | ||||
| 认购存款的收益 | ||||||||
| 筹集资金的净现金流量 | ( | ) | ||||||
| 现金及现金等价物净增加额 | ||||||||
| 现金及现金等价物期初余额 | ||||||||
| 10,468,645 | $ | $ | ||||||
| 现金流补充说明： | ||||||||
| 支付的利息现金 | $ | $ | ||||||
| 支付的所得税费用 | $ | $ | ||||||
| 非现金活动 | ||||||||
| 以租赁债务为代价获得的使用权资产 | $ | $ | ||||||
| 因融资租赁而获得的使用权资产 | $ | $ | ||||||
附注是这些精简合并财务报表的一部分。
| F-4 |
玛西莫 集团及附属公司
基本报表附注（未经审计）
注释1 - 组织和业务描述Starbox Group Holdings Ltd.及其子公司（以下简称“Starbox Group”或“公司”）致力于连接零售商户和网络线下消费者（“零售消费者”），通过由零售商户提供的现金回扣促成交易，提供数字广告服务给零售商户，以及向商家提供支付解决方案服务。公司还将业务拓展到营销和软件开发领域，以及在线和线下为企业客户提供广告服务。公司目前的主要业务和地理市场基本上集中在马来西亚。
Massimo集团（以下简称“公司”），是一家成立于2022年10月10日，根据内华达州法律设立的控股公司。公司通过其子公司，主要从事农场和牧场测试的多功能载具（UTV）、休闲全地形车（ATV）、以及平底船和三体船（Pontoon Boats）的制造和销售。2024年4月4日，公司完成了其首次公开发行（“IPO”） ，发行了 美国达拉斯295万股普通股，发行价为$ ，募集总收入约为$
“重组”表示公司交易所提交的权利证券法案第十三号规则下（或其继任规则）的定义，包括但不限于合并、重组、法定股份交易或类似形式的企业交易(但资产销售除外)。
在
2023年6月1日，两位股东转让了他们在Massimo摩托艇体育有限公司（“Massimo摩托艇体育”）的 %股权给Massimo集团（“重组”）。在此次重组后，Massimo集团最终拥有 %在Massimo摩托艇体育和Massimo海洋有限公司（“Massimo海洋”）的股权。
在重组前后，公司及其子公司实质上由相同的控股股东有效控制，因此重组被视为根据会计准则汇编（“ASC”）805-50-25的共同控制实体的资本重组。公司的合并及其子公司的合并已按照历史成本进行核算，并基于假设上述交易自所附合并基本报表中所呈现的第一期开始时生效。
公司及其子公司的详细信息将在重组后列出如下:
| 子公司 | 颁布日期 公司注册 |
管辖权 的 成立地 |
百分比 的 直接/间接 经济 所有权 |
校长 活动范围 | ||||||
| % | ||||||||||
| % | ||||||||||
2023年6月1日，公司与亚洲国际证券交易所有限公司（"AISE"）签订了两份协议，AISE同意向Massimo Motor Sports投资$
| F-5 |
玛西莫 集团及附属公司
基本报表附注（未经审计）
注2-重要会计政策摘要
报告的表述基础和合并原则
附带的未经审计的简明合并基本报表是根据美国公认会计原则（GAAP）为中期财务信息编制的。因此，它们不包括美国公认会计原则（GAAP）要求的所有信息和披露内容，以用于年度合并基本报表。管理层认为，附带的简明合并基本报表包含了所有被认为对于公正呈现截至2024年9月30日公司未经审计的简明合并基本报表所必需的调整，以及截至2024年和2023年9月30日的三个月和九个月的结果。2024年截至9月30日的三个月和九个月的运营结果并不一定代表截至2024年12月31日全年或任何其他期间的运营结果。这些未经审计的简明合并基本报表是根据公司的会计记录得出的，应与公司于2023年12月31日结束的年度报告中包含的合并基本报表及其附注一起阅读，该年度报告通过证券交易委员会（“SEC”）于2024年4月15日提交的10-k表格。
估计和假设的用途
在按照美国通用会计准则编制合并基本报表时，管理层进行估计和假设，这些估计和假设会影响资产和负债的报告金额，以及在基本报表日期，披露相关资产和负债的金额，以及报告期间的收入和费用金额。这些估计是基于合并基本报表日期的信息。管理层需要进行的重大会计估计包括存货减值准备，信用损失准备，销售退货责任，保修成本，以及评估和披露的潜在负债。公司会定期评估其估计和假设，并且这些估计是基于历史经验，当前和预期未来情况以及管理层认为合理的各种其他假设，根据管理层在进行这些估计和假设时可获取的信息。实际结果和结局可能会与这些估计和假设显著不同。
现金及现金等价物
现金
和现金等价物包括手头现金、与银行的余额以及到期三个月或更短的流动投资。公司在美国维持所有账户，最高金额为$
应收账款，净额
应收账款 应收账款代表贸易应收款，最初按公允价值确认，并随后根据预期信用损失的准备金进行调整。公司在正常支付条款下，向客户提供无抵押信用。公司使用损失率方法来估计信用损失的准备金。公司根据客户的财务状况和历史回款信息，调整当前市场经济条件和未来经济表现的预测，评估应收账款的预期信用损失。损失率方法基于历史损失率和对未来条件的预期。如果确定无法收回的应收账款金额，公司会将其从信用损失准备金中冲销。
| F-6 |
玛西莫 集团及附属公司
基本报表附注（未经审计）
注意 2 — 重要会计政策摘要（续）
存货净额
库存
按成本或净可变现价值的较低者计价，使用先进先出（FIFO）法。成本包括原材料成本、
运费和关税。每项库存的成本超过净可变现价值的任何差额均作为存货价值减值准备计入。净可变现价值为在正常业务过程中估计的销售价格减去任何完成和销售产品的成本。截至2024年9月30日和2023年12月31日，公司有库存减值准备$
向供应商提前款项
预付款项
是指支付给供应商的余额，用于购买尚未提供或收到的产品、零部件和配件。预付款项是短期性质的，定期审查以判断其账面价值是否已减值。公司根据具体事实和情况在每个报告日评估个别预付款项的账面价值是否存在减值。在截至2024年和2023年9月30日的三个月和九个月期间，公司记录了预付款项的减值损失$
发行费用
递延发行成本是与公司计划首次公开募股（IPO）直接相关的费用。这些费用包括法律、会计、印刷和申请费，公司对此进行了资本化，包括与发行直接相关的独立注册公共会计师事务所的费用。在首次公开募股完成日期收到募集资金时，递延发行成本被重新分类为额外缴入资本。
固定资产
资产和设备以成本计入。按照直线法提供折旧，数额足以分摊相关资产的成本至其使用寿命结束为止，计算如下：
| 有用寿命 | ||
| 家具和固定装置 | ||
| 机械 设备 | ||
| 电子 设备 | ||
| 交通 设备 | ||
| 租赁改善 |
支出 用于维护和修理，这些支出并未实质性延长资产的使用寿命，按发生时计入费用。用于主要更新和改善的支出，能实质性延长资产的使用寿命，则作为资本化处理。退役或出售资产的成本及相关累计折旧将从各自账户中移除，任何处置的收益或损失是通过比较收益与账面价值确定，并在未经审计的简明合并运营和综合收益报表中的“其他收入（支出）”中确认。
| F-7 |
玛西莫 集团及附属公司
基本报表附注（未经审计）
注意 2 — 重要会计政策摘要（续）
租赁
公司自2020年1月1日起采用了会计准则更新（“ASU”）第2016-02号——租赁（主题842），并使用ASU第2018-11号允许的修改追溯过渡方法。这种过渡方法提供了一种记录现有租赁的方法，仅在采用日期进行记录，无需调整之前报告的余额。公司评估其签订的合同，以判断这些合同是否包含租赁。如果合同传达了在一段时间内以对价控制使用特定财产或设备的权利，则该合同包含租赁。在开始时，包含租赁的合同进一步评估其作为经营租赁或融资租赁的分类，且公司为承租人。
经营租赁
对于经营租赁，公司根据尚未支付的总租金的现值来衡量其租赁负债，现值折现基于租赁中隐含的利率或其增量借款利率中更容易确定的那一个，这个利率是公司需要为等于租期内总租金的有抵押借款支付的估计利率。由于公司大多数租赁没有提供隐含利率，因此公司使用其增量借款利率，根据可用信息在开始日期确定未来付款的现值。公司根据相应的租赁负债来衡量使用权资产（“ROU”），调整为在开始日期或之前支付给出租方的款项，以及其在租赁下发生的初始直接费用。当出租方使基础资产可供公司使用时，公司开始确认租赁费用。
经营租赁的租金费用包括对租赁权益资产的摊销和与经营租赁责任相关的利息费用。对于租期少于一年的租赁（短期租赁），公司按照直线法在合同租期内记录经营租赁费用，并在发生时记录可变租金支付。
金融 租赁
公司作为承租方的融资租赁租金成本包括ROU资产的摊销，按直线法摊销，并记录为“融资租赁资产折旧”和融资租赁负债利息费用，利息费用按利息法计算，并记录为“利息费用，净额”。融资租赁ROU资产摊销期限为其预计使用寿命或各自租约期限中较短的一项，包括公司合理确定会行使的续订期权期间。
非流动资产减值
长期资产主要包括物业和设备，在发生事件或情况变化（例如，市场条件显著不利变动，影响资产未来使用）的情况下，需评估其减值。此类事件发生时，公司通过将资产的账面价值与预计从使用资产及最终处置中生成的未来未折现现金流的估算进行比较，来评估减值。如果预计未来未折现现金流的总和低于资产的账面价值，则公司会确认减值损失，基于资产账面价值超过资产公允价值的部分。截至2024年和2023年9月30日的三个月和九个月期间，没有确认减值费用。
| F-8 |
玛西莫 集团及附属公司
基本报表附注（未经审计）
注意 2 — 重要会计政策摘要（续）
金融工具的公允价值
ASC 825-10要求披露金融工具的公允价值。公允价值定义为在评估日期市场参与者之间进行买卖的交换价格。一个三级公允价值层次结构优先采用用于衡量公允价值的输入。层次结构要求实体最大限度地利用可观察的输入，最小化未观察到的输入。衡量公允价值所使用的三个输入级别如下：
| ● | 级别 1 — 估值方法的输入是活跃市场中相同资产或负债的报价（未经调整）。 |
| ● | 级别 2 — 估值方法的输入包括活跃市场中类似资产和负债的报价，报价 市场中相同或类似资产的市场价格在不活跃的市场中，其他除报价以外的可观察输入 以及来源于或通过可观察市场数据验证的输入。 |
| ● | 级别 3 — 估值方法的输入是不可观察的。 |
除非另有披露，公司的财务工具的公允价值，包括现金及现金等价物、应收账款、被分类为其他流动资产的应收票据、来自关联方的贷款、应付账款、其他应付款、应计费用和其他负债、合同负债，大致等于其账面价值，因为它们具有短期到期性。公司确定租赁负债的账面价值等于其公允价值，因为用于折现合同的利率接近市场利率。公司指出在任何期间内未发生级别之间的转移。截至2024年9月30日和2023年12月31日，公司没有任何在重分类或非重分类基础上按公允价值计量的工具。
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
步骤5：在实体满足履行义务时（或按照履行被满足的时间）确认收入
公司的营业收入主要来自UTV、ATV、电动自行车（"e-bikes"）和浮躁船的销售。营业收入代表公司预期将因交易所承诺的商品而有权获得的金额。当履行义务被认为已满足、控制权转移给我们的客户并将商品交付给客户并得到客户接受时，我们将记录营业收入。
| F-9 |
玛西莫 集团及附属公司
基本报表附注（未经审计）
注意 2 — 重要会计政策摘要（续）
销售 退货
公司提供退款政策，接受来自最终客户的退货申请，该政策因不同产品和客户而异。估计的销售退货是根据历史销售退货分析确定的。退货准备金按照销售额减少的方式记录，相应的销售退货责任包括在“应计退货责任”中。退回库存的成本估计记录为销售成本减少和退货权资产增加，该资产包括在“存货”中。影响公司销售退货责任的因素包括当前处于退货期的产品数量，对这些产品提出退货要求的历史和预期比率，以及在该期间内可能提出退货要求的估计金额。如果实际结果与估计值不符，公司会相应调整其估计的销售退货责任。每个季度，公司都会审查和重新评估其记账的销售退货责任的充足性，并根据需要调整金额。截至2024年9月30日和2023年12月31日，未经审计的简明综合资产负债表中分别记载了与估计产品退货相关的销售退货责任金额为$
产品 保修
公司通常提供为期一年的有限保修，针对与产品销售相关的材料缺陷。公司将保修视为一种保证型保修，因为保修向客户保证产品符合约定规范。预计的未来保修义务包含在相关收入被确认的期间内的产品销售成本中。影响公司的保修因素包括当前在保修期内的产品数量、对这些产品的历史和预期保修索赔率，以及满足公司保修义务的维修和更换成本的估算。预计的保修索赔率是确定保修负债时使用的主要估算参数，并且根据历史故障率的经验，这一估算相对可预测。销售产品的平均剩余累计保修期被计算出来，维修配件通常已经有存货或以预定价格可用，且劳动力费用一般与服务提供商以预设金额安排。如果实际结果与估算有所偏差，公司会修订其估计的保修负债。公司每个季度重新评估其估算，并评估记录的保修负债的充分性，并根据需要调整金额。至2024年9月30日和2023年12月31日，$
合同责任
公司的合同负债主要与客户预收款项有关。合同负债在每个报告期末按客户逐个报告净额。合同负债在公司收到客户由于订单预付款时确认。当产品交付时，合同负债将被确认为营业收入。截至2024年9月30日和2023年12月31日，公司记录的合同负债为$
3,061,868
公司将合同收入按产品分类，因为公司认为这最佳地反映了经济因素如何影响收入和现金流的性质、金额、时机和不确定性。公司截至2024年和2023年9月30日的三个月和九个月的收入分类已在这些未经审计的简明合并基本报表的第19号附注中披露。
| F-10 |
玛西莫 集团及附属公司
基本报表附注（未经审计）
注意 2 — 重要会计政策摘要（续）
营业成本
收入成本包括与生产收入中包含的商品和服务直接相关的所有成本和费用。收入成本主要包括产品成本、运费和关税分配，以及与仓库相关的间接费用，如薪资和福利、租金、仓库用品和折旧费用。
从供应商向公司运输原材料时产生的运输和关税成本包含在收入成本中，总计
运输和处理成本
运输和处理成本，包括产品选择和将其交付给客户的成本，在销售费用中呈现。运输和货运费用发生在向客户交付商品时列入销售费用，总额为$
此处讨论的公允价值估值基于特定市场假设和管理人员截至2021年6月30日和2020年12月31日的相关信息。某些资产和负债的相应账面价值近似其公允价值。这些金融工具包括现金和应付账款。现金和应付账款的公允价值被假定为将现有的现金流量以回报该资产或负债所需的利率折现的结果。
公司将所有广告费用视为发生时的费用。销售费用中呈现的广告费用为$95,509 and $$
401(k)福利计划 福利计划
401(k)福利计划覆盖了几乎所有员工，并允许员工自愿缴纳款项，最多不超过每年调整的国内税务局美元限额。这些自愿款项的数额与
所得税
重组之前，公司选择作为S小单在联邦和州所得税方面征税。作为S小单，
公司不需要支付联邦所得税和德克萨斯州的州税。因此，股东按照其在公司所获收益和扣除的比例进行纳税，
无论是否收到了分配。在重组之后，公司需缴纳美国联邦所得税，
所得税 税款支出是当年应缴或可退的所得税总额以及递延税款资产和负债的变动。递延税款资产和负债是根据颁布的税率计算的资产和负债的账面金额与税基之间的暂时差异的预期未来税额。如有需要，贬值准备会将递延税款资产减少至预计可实现的金额。
| F-11 |
玛西莫 集团及附属公司
基本报表附注（未经审计）
注意 2 — 重要会计政策摘要（续）
所得税 （续）
公司根据财务会计准则委员会（"FASB"）ASC主题740“关于所得税不确定性会计处理”的规定来核算不确定的税收立场。只有在“更可能而不是”该税收立场在税务审查中将被维持，即假定将进行税务审核情况下，才会确认税务立场的好处。确认的金额是在检查中最有可能实现的超过50％的税收收益数额。对于未能符合“更可能而不是”测试的税收立场，不记录税收收益。
在评估公司的不确定所得税位置和所得税准备金时，也需要重大判断。对于不确定所得税位置的负债是基于两步法进行确认的。第一步是评估某个所得税位置是否满足确认阈值，通过判断现有证据的权重是否表明，更可能在审查中得到支持。第二步是对已满足确认阈值的所得税位置进行计量，按照在结算时有超过50%可能实现的最大金额进行计量。公司持续评估潜在调整的可能性和金额，并在相关事实被确认的期间调整所得税准备金、应付所得税和递延所得税。公司将与不确定所得税位置相关的利息和罚款作为利息费用进行确认。
公司根据ASC 260“每股收益”（“ASC 260”）计算每股收益。ASC 260要求具有复杂资本结构的公司报告基本和摊薄后每股收益。基本每股收益以净利润除以该期间权重平均未强制转换的普通股份为基础进行计量。摊薄后每股收益以潜在普通股（例如：可转换证券、期权和认股权证）的具有摊薄效应，仿佛它们在报告期间初期或发行日就被转换一样进行计算。具有抗摊薄效应的潜在普通股（即那些增加每股收益或减少每股亏损的）被排除在摊薄后每股收益的计算之外。截至2024年9月30日的三个月和九个月结束，共有 和 未归属的受限股票单位（“RSU”）被包括在计算摊薄后每股收益时用于计算权重平均普通股数量的人数。截至2023年9月30日的三个月和九个月结束，有 摊薄股份。
股票 基于补偿的薪酬
公司遵循ASC 718《补偿-股票补偿》(“ASC 260”)的规定，建立了员工股份奖励的会计处理。对于员工股份奖励，股票补偿成本在授予日期基于奖励的公允价值进行计量，并按照分段归集的方式在整个奖励的适用服务期内以直线方式确认为费用。
业务部门报告
公司遵循ASC 280，“分部报告”.公司的首席执行官或首席运营决策者在做出资源分配和评估公司绩效方面审查综合财务结果，因此公司仅有一个
| F-12 |
玛西莫 集团及附属公司
基本报表附注（未经审计）
注意 2 — 重要会计政策摘要（续）
集中 和风险
a. 信用风险集中度
资产
可能使公司面临显著信用风险集中度的主要包括现金及现金等价物、应收账款和其他包括在其他流动资产中的应收款项。这些资产面临信用风险的最大敞口是其在资产负债表日的账面价值。公司在美国的金融机构中维持所有银行账户，那里有$
为了限制与存款相关的信用风险，公司主要将现金存款放在美国的大型金融机构中。公司对客户进行信用评估，通常不要求客户提供抵押品或其他安防-半导体。公司建立了会计政策，以根据个别客户的财务控件、信用历史以及当前经济条件提供当前预期的信用损失。
b. 汇率期货风险
我们的大部分原材料都是从中国进口的。人民币对美元的价值受到中国和美国经济状况变化的影响。我们认为我们目前没有重大直接的汇率期货风险，也没有使用任何衍生金融工具来对冲这种风险暴露。
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
对于 截至 2024 年 9 月 30 日和 2023 年 9 月 30 日的三个月， 一 还有一位客户解释了 超过 分别占公司总收入的百分比。在截至2024年9月30日和2023年9月30日的九个月中， 一 而且一位客户占了超过 分别占公司总收入的百分比。截至 2024 年 9 月 30 日和 2023 年 12 月 31 日，两个还有一位客户占了超过 占公司百分比 分别是应收账款。
| F-13 |
玛西莫 集团及附属公司
笔记 至简明的合并财务报表（未经审计）
注意 2 — 重要会计政策摘要（续）
集中 和风险 （续）
f. 重要供应商
截至2024年和2023年9月30日的三个月时间， 两个两家供应商分别占公司总采购的超过10%。截至2024年和2023年9月30日的九个月时间， 两个两家供应商分别占公司总采购的超过10%。截至2024年9月30日和2023年12月31日，四 和三家公司分别占公司总应付款的超过 %
最近的会计声明
公司考虑所有适用和影响ASU。管理层定期审查颁布的新会计准则。
《启动我们业务创业的法案》规定，符合其定义的新兴成长公司（“EGC”）可以利用延长的过渡期，来遵守新的或修订的会计标准。这允许EGC推迟采用某些会计标准，直到这些标准在私人公司中生效。公司已采用延长的过渡期。
在2020年8月，FASB发布了ASU No. 2020-06，“债务-具有转换和其他期权（子课题470-20）和衍生工具及避险-实体在自身权益中的合同（子课题815-40）: 计算可转换工具和实体自身权益中的合同的会计处理”，通过删除目前美国通用会计准则所需的主要分开模型，简化了可转换工具的会计处理。该ASU还删除了某些涉及结算条件，这些条件是要求权益关联合同符合衍生工具范围例外的，简化了特定领域的稀释每股收益计算。新标准将从2024年1月1日开始对我们生效，采用修正追溯法或完全追溯法进行过渡，并允许提前采纳。管理层目前正在评估新标准对我们基本报表的影响。
2023年11月，FASB发布了ASU No. 2023-07，即《有关报告分部披露的改进》（主题280）。该ASU通过要求披露常规提供给首席运营决策者“CODM”的重要报告分部费用的披露，以及将这些费用包括在分部利润或损失的每项报告指标中，更新了报告分部的披露要求。该ASU还要求披露被确定为CODM的个人的头衔和职位，并解释CODM如何使用分部的利润或损失的报告指标来评估分部绩效，并决定如何分配资源。该ASU适用于2023年12月15日后开始的年度期间，以及2024年12月15日后开始的财年内的中间期间。应全面回顾地将ASU的采纳运用于财务报表中呈现的所有之前期间。早期采用也是被允许的。采用该ASU后，我们可能将包括在采用时所需的额外披露。管理层目前正在评估该ASU的规定，并预计将在2024年12月31日年度终了时采用。
在 2023年12月，FASB发布了ASU第2023-09号，标题为“对所得税披露的改进”（主题740）。该ASU要求提供关于报告实体有效税率调节的分项信息，以及关于缴纳的所得税的额外信息。 该ASU自2024年12月15日之后开始的年度期间起生效，采用前瞻性原则。对于尚未发布或尚未提供发行的年度基本报表，也允许提前采用。一旦采用，该ASU可能会导致公司合并基本报表中包含所需的额外披露。
公司不认为其他最近颁布但尚未生效的会计准则，如果目前采纳，将对公司的合并资产负债表、利润表和综合收益表以及现金流量表产生实质影响。
| F-14 |
玛西莫 集团及附属公司
基本报表附注（未经审计）
注意 3 — 应收账款，净额
应收账款包括以下内容:
| 2024年9月30日 | 2023年12月31日 | |||||||
| 应收账款—第三方 | $ | $ | ||||||
| 减：坏账准备 | ( | ) | ( | ) | ||||
| 应收账款，净额 | $ | $ | ||||||
公司记录了2024年和2023年9月30日结束的三个月内信用减值准备倒退$
信用损失准备金的变动如下：
| 2024年9月30日 | 2023年12月31日 | |||||||
| 期初余额 | $ | $ | ||||||
| 核销金额 | (64,584 | ) | - | |||||
| 额外提供条款 | ||||||||
| 结束余额 | $ | $ | ||||||
截至2024年9月30日和2023年12月31日，公司的应收账款余额已质押于其信用额度 在Midfirst银行和国泰银行（见注释12）。
注意 4 — 库存清单
存货构成如下：
| 2024年9月30日 | 2023年12月31日 | |||||||
| 产品 | $ | $ | ||||||
| 零件和配件 | ||||||||
| 在途库存 | ||||||||
| 货运及关税 | ||||||||
| 减：库存准备金 | ( | ) | ( | ) | ||||
| 净存货 | $ | $ | ||||||
一
存货减值准备的反转，记录为成本或可变现净值调整为$
抵押给国泰银行/美富银行作为公司信用额度的存货为$
| F-15 |
玛西莫 集团及附属公司
基本报表附注（未经审计）
注意事项5 —前往供应商
预付款 给供应商包括以下内容：
| 2024年9月30日 | 2023年12月31日 | |||||||
| 预付款项 | $ | $ | ||||||
| 少：由于无法收回的预付款导致减值损失准备 | ||||||||
| 预付供应商账款净额 | $ | $ | ||||||
供应商预付款减值准备为$
2024年6月，我们与一家供应商达成了关于一般结算条款的初步协议，该供应商将使用约$
NOTE 6 — OTHER NON-CURRENT AND CURRENT ASSETS
Other current assets consist of the following:
| September 30, 2024 | December 31, 2023 | |||||||
| Prepayment | $ | $ | ||||||
| Note receivable (Note 5) | ||||||||
| Other receivables | ||||||||
| Less: Other non-current assets | ( | ) | ||||||
| Other current assets | $ | $ | ||||||
NOTE 7 — PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consist of the following:
| September 30, 2024 | December 31, 2023 | |||||||
| Furniture and Fixtures | $ | $ | ||||||
| Machinery equipment | ||||||||
| Vehicles | ||||||||
| Electronic equipment | ||||||||
| Leasehold improvement | ||||||||
| Subtotal | ||||||||
| Less: accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation
expense was $
There
was an addition of $
| 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
Total
operating lease expense for the three months ended September 30, 2024 and 2023 amounted to $
Total
operating lease expense for the nine months ended September 30, 2024 and 2023 amounted to $
Total
accretion of finance lease liabilities for the three months ended September 30, 2024 and 2023 amounted to $
Total
accretion of finance lease liabilities for the nine months ended September 30, 2024 and 2023 amounted to $
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 | $ | $ | ||||||
| Operating lease liabilities - non-current | ||||||||
| Total | $ | $ | ||||||
Financing leases
| September 30, 2024 | December 31, 2023 | |||||||
| Finance lease liabilities - current | $ | $ | ||||||
| Finance lease liabilities - non-current | ||||||||
| Total | $ | $ | ||||||
| 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 | $ | $ | ||||||
| Financing cash flows used in finance leases | $ | $ | ||||||
| Right-of-use assets obtained in exchange for lease obligations: | ||||||||
| Finance lease liabilities | $ | $ | ||||||
| Operating lease liabilities | $ | $ | ||||||
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 | ||||||||
| Operating leases | ||||||||
| Weighted average discount rate: | ||||||||
| Finance leases | % | % | ||||||
| Operating leases | % | % | ||||||
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, | ||||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Total future minimum lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Present value of operating lease liabilities | $ |
Finance leases
| Twelve months ending September 30, | ||||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Total future minimum lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Present value of finance lease liabilities | $ |
| 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 | $ | $ | ||||||
| Actual recognized products return | ( | ) | ( | ) | ||||
| Accruals for product return liabilities | ||||||||
| Ending balance | $ | $ | ||||||
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 | $ | $ | ||||||
| Cost of warranty claims | ( | ) | ( | ) | ||||
| Accruals for product warranty | ||||||||
| Ending balance | $ | $ | ||||||
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 | $ | $ | ||||||
| Sales Tax payable | ||||||||
| Other current liabilities | ||||||||
| Additional accrual on litigation (Note 18) | ||||||||
| Total | $ | $ | ||||||
| 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) | ||||||||
| Other loans – BAC (3) | ||||||||
| Total | $ | $ | ||||||
| (1) |
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) |
|
| (3) | |
| (4) | |
| 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 | ||
| Custom Van Living | ||
| Miller Creek Holdings LLC | ||
| SUNL Technology LLC | ||
| Asia International Securities Exchange Co Ltd |
| 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 | $ | $ | ||||||
| Repayment | ( | ) | ( | ) | ||||
| Capital dividend declared | ||||||||
| Loan from David Shan, ending balance | ||||||||
| Non-current | ( | ) | ||||||
| Current | $ | $ | ||||||
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 $ 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
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
The provision for income tax consists of the following:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Income tax provision – current | $ | $ | $ | $ | ||||||||||||
| Income tax (recovery) provision - deferred | ( | ) | ( | ) | ( | ) | ||||||||||
| Income tax (recovery) provision | $ | ( | ) | $ | $ | $ | ||||||||||
The following table reconciles the statutory tax rate to the Company’s effective tax:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Net (loss) income before income taxes | $ | ( | ) | $ | $ | $ | ||||||||||
| Income tax at the federal statutory rate | % | % | % | % | ||||||||||||
| Statutory U.S. federal income tax (recovery) provision | ( | ) | ||||||||||||||
| S Corporation benefits | ( | ) | ||||||||||||||
| State margin tax | ||||||||||||||||
| Non-deductible expense | ||||||||||||||||
| Other adjustments | ||||||||||||||||
| Total | $ | ( | ) | $ | $ | $ | ||||||||||
| 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 | $ | $ | ||||||
| Property and equipment | ||||||||
| Lease liability – operating | ||||||||
| Lease liability – financing | ||||||||
| Other temporary difference | ||||||||
| Warranty liabilities | ||||||||
| Return liabilities | ||||||||
| Total deferred tax assets | ||||||||
| Deferred tax liabilities: | ||||||||
| Right of use assets – operating | ( | ) | ( | ) | ||||
| Right of use assets – financing | ( | ) | ( | ) | ||||
| Total deferred tax liabilities | ( | ) | ( | ) | ||||
| Deferred tax assets, net | $ | $ | ||||||
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 shares of common stock with par value of $, and common shares were issued on June 1, 2023. The authorized number of preferred stock was shares of preferred stock with par value of $, and 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 and shares of its common stock with par value of $.
As of September 30, 2024 and December 31, 2023, and common shares were outstanding, respectively, with par value of $.
| 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 shares of its common stock at an IPO price of $ per share for aggregate gross
proceeds of approximately $
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 $
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
shares of common stock to TJCM as the prepayment of $
Representative’s Warrants
Pursuant
to the Underwriting Agreement, the Company issued to the Representative and its designee warrants (the “Representative’s
Warrants”) to purchase
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 $
As
of September 30, 2024,
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 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.
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Net (loss) income attributable to the Company | $ | ( | ) | $ | $ | $ | ||||||||||
| Weighted average number of common shares outstanding – basic | ||||||||||||||||
| Dilutive securities – unvested RSU | ||||||||||||||||
| Weighted average number of common shares outstanding – diluted | ||||||||||||||||
| (Loss) earnings per share – basic | $ | ) | $ | $ | $ | |||||||||||
| (Loss) earnings per share – diluted | $ | ) | $ | $ | $ | |||||||||||
| 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 RSUs were granted, RSUs were forfeited and RSUs were exercised under the 2024 Plan.
The Company recorded $, $, $ and $ stock-based compensation expense in connection with RSUs for three and nine months ended September 30, 2024 and 2023, respectively.
Number of RSUs | Weighted Average Grant Date Fair Value | |||||||
| Granted | ||||||||
| Cancelled | ( | ) | ||||||
| Exercised | ( | ) | ||||||
| Outstanding September 30, 2024 | $ | |||||||
| 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 common shares under Incentive Stock Option (“ISO”) plan, at an exercise price of $ per share. . The aggregate fair value of the options granted to Mr. Shan was $. 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 $; risk free rate of % and %; expected term of years; exercise price of the options of $; volatility of %; and expected future dividends of $. These options will expire on .
The Company also granted Mr. Shan options to purchase up to common shares, at an exercise price of $per share under Nonqualified Stock Option (“NSO”) plan. The aggregate fair value of the options granted to Mr. Shan was $. 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 $; risk free rate of % and %; expected term of years; exercise price of the options of $; volatility of %; and expected future dividends of $. These options will expire on .
The Company also granted two executives options to purchase up to common shares, at an exercise price of $ per share under ISO and NSO plans. . The aggregate fair value of the options granted to these two executives was $. 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 $; risk free rate of % and %; expected term of years; exercise price of the options of $; volatility of %; and expected future dividends of $. These options will expire on .
The Company recorded $, $, $ and $ stock-based compensation expense in connection with options for three and nine months ended September 30, 2024 and 2023, respectively.
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Life in Years | ||||||||||
| Granted | ||||||||||||
| Cancelled | - | |||||||||||
| Exercised | - | |||||||||||
| Outstanding September 30, 2024 | $ | |||||||||||
| 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 $
| 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
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:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| UTVs, ATVs and e-bikes | $ | $ | $ | $ | ||||||||||||
| Pontoon Boats | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
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. |
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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.
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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.
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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.
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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.
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Item 6. Exhibits, Financial Statement Schedules.
The following documents are filed as exhibits to this Report.
EXHIBIT INDEX
| * | Filed herewith. |
| ** | Furnished herewith. |
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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) |
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