美國
證券交易委員會
華盛頓，特區。20549
表格
(馬克 一)
截至季度結束
或者
過渡期從至
委員會
文件編號：
（公司章程中指定的準確公司名稱）
| （州或其他轄區） 註冊或組織的地方公司； |
（美國國稅局僱主號碼） 識別號碼。 |
| (主要 執行人員之地址) | (郵政 編 碼) |
註冊人的電話號碼，包括區號：(585)768-2513
(公司更名、更改地址和更改財年情況的以往名稱、以前地址和以前財年，如與上次報告有所改變)
根據法案第12(b)節註冊的證券:
| 每一類別的名稱 | 交易符號 | 在註冊的交易所的名稱 | ||
| 股 |
普通股，每股面值$0.001，B級優先參與優先股購股權
無
請勾選標記以指示註冊者是否（1）在過去12個月內（或註冊者需要提交這些報告的更短時間內）已提交證券交易所法案第13或15（d）節要求提交的所有報告，及 （2）是否已被提交要求過去90天的提交要求所制約。
請用勾選標記指明註冊人是否在過去12個月內（或在註冊人被要求提交這些文件的較短期限內）電子提交併發佈了根據規則405的規定所要求的每一個互動數據文件。
指示 勾選註冊人是否爲大型加速申報人、加速申報人、非加速申報人、小型申報人 公司，或新興成長型公司。請參閱 「大型加速文件管理器」、「加速文件管理器」、「較小文件管理器」 的定義 《交易法》第12b-2條中的 「申報公司」 和 「新興成長型公司」。
| 大型加速文件提交人 | ☐ | 加速文件提交人 | ☐ |
| ☒ | 小型報告公司 | ||
| 新興成長公司 |
如果是新興成長公司，請勾選，如果註冊人已選擇不使用根據交易所法案第13(a)條提供的任何新的或修改的財務會計準則的延長過渡期，請勾選。
請在適用的盒子內打勾，表明註冊者是殼公司（根據交易所法案第12b-2條規定定義）。
是 ☐ 否
截至2024年11月12日，共有 公司已發行並流通的普通股股份。
目錄
| 頁面 | ||
| 關於前瞻性聲明的警告 | ii | |
| 部分 一. | 財務信息 | F-1 |
| 項目 1. | 2024年9月30日（未經審計）和2023年12月31日（經審計）的簡明綜合資產負債表 | F-1 |
| 簡化版 綜合運營及全面收益（虧損）報表，截止至2024年和2023年9月30日的三個月和九個月 （未經審計） | F-2 | |
| 簡化版 綜合股東權益變動報表，截止至2024年和2023年9月30日的三個月和九個月 （未經審計） | F-3 | |
| 2024年9月30日至2023年9月30日期間的簡明合併現金流量表（未經審計） | F-4 | |
| 簡明綜合財務報表附註（未經審計） | F-5 | |
| 項目 2. | 管理財務狀況和運營結果的討論和分析。 | 1 |
| 項目 3. | 關於市場風險的定量和定性披露。 | 14 |
| 項目 4. | 控制和程序。 | 14 |
| 第二部分。 | 其他信息 | 15 |
| 項目 1. | 法律訴訟。 | 15 |
| Interest expense, net | 風險因素。 | 15 |
| 項目 2. | 未經註冊的股票出售和使用得到的收益。 | 15 |
| 項目 3. | 違反優先證券的行爲。 | 15 |
| 項目 4. | 礦山安全披露。 | 15 |
| 項目5。 | 其他信息。 | 15 |
| 項目 6. | 附件。 | 16 |
| 簽名 | 17 |
| i |
除非另有說明，本10-Q季度報告（以下簡稱「本報告」）中對「我們」、「我們的」、「我們公司」或「公司」的引用均指內華達州馬西莫集團及其子公司。
關於前瞻性聲明的注意事項
本報告包含關於我們和我們所在行業的前瞻性聲明，涉及重大風險和不確定性。除歷史事實陳述外，本報告中的所有陳述，包括關於我們未來業務運營和財務狀況、我們的業務策略和計劃、預計成本以及我們未來業務運營的目標等，均屬前瞻性聲明。 在某些情況下，您可以通過這些詞語辨識前瞻性聲明：「相信」，「可能」，「將」，「估計」，「繼續」，「預期」，「應當」，「將會」，「打算」，「目標」，「尋求」，「期待」 等表達方式，或這些詞語的否定形式或其他類似詞語或表達方式，涉及我們的期望、策略、計劃或意圖等。我們在很大程度上基於我們對未來事件和趨勢的當前期望和預測，相信這些事件和趨勢可能影響我們的財務狀況、業務運營的結果、業務策略、短期和長期業務運營目標以及財務需求。這些前瞻性聲明受到一系列風險、不確定性和假設的影響，其中包括但不限於：
| ● | 我們的 有限運營歷史，使我們難以評估我們的業績和未來成功的前景； |
| ● | 與我們依賴獨立經銷商和分銷商管理我們許多產品的零售分銷相關的風險； |
| ● | 我們對第三方製造商和供應商的依賴； |
| ● | 與我們購買的大多數產品由中國供應商製造相關的風險，以及他們的運營 受到與中國的業務運營相關的風險的影響； |
| ● | 我們主要股東和高級管理層在運營上市公司方面缺乏經驗； |
| ● | 影響消費支出的經濟 條件可能對我們的業務產生重大不利影響； |
| ● | 運營結果或財務 控件； |
| ● | 面臨所有產品線的激烈競爭的相關風險，包括來自一些財務和市場 資源更強的競爭對手的競爭； |
| ● | 與我們吸引和留住關鍵人員的能力相關的風險； |
| ● | 因數據被盜用和網絡安全概念的妥協而造成的潛在損害； |
| ● | 法律、監管要求、政府激勵和燃料及能源價格的變化； |
| ● | 訴訟、監管程序、投訴、產品責任索賠和/或不利宣發； |
| ● | 我們的經銷商、客戶和分銷商無法獲得充足的資金或融資； |
| ● | 未能開發品牌名稱和聲譽； |
| ● | 因產品保修索賠或產品召回導致的重大產品維修和/或更換； |
| ● | 健康流行病，包括新冠疫情，對我們的業務的影響；以及 |
| ● | 其他 本報告中描述的風險和不確定性，包括在「風險因素」部分中描述的那些。 |
此外，我們在一個競爭激烈且快速變化的環境中運營。新的風險不時出現。我們的管理層不可能預測所有風險，也無法評估所有因素對我們的業務或任何因素或任何組合可能導致實際結果與我們可能提出的任何前瞻性陳述中含有的結果大不相同的影響程度。鑑於這些風險、不確定性和假設，在本報告中討論的未來事件和趨勢可能不會發生，實際結果可能與前瞻性陳述中預期或暗示的結果大不相同並且嚴重不利。
您不應該依賴前瞻性說明作爲未來事件的預測。前瞻性說明中反映的事件和情況可能無法實現或發生。儘管我們相信前瞻性說明中反映的期望是合理的，但我們不能保證未來的結果、活動水平、表現或成就。除非適用法律要求，否則我們不承擔在本報告之日後更新任何這些前瞻性說明的義務，或將這些說明調整爲實際結果或修訂後的期望。
此外，「我們相信」等表態反映我們對相關主題的信念和觀點。這些表態基於我們在本報告日期可獲得的信息，雖然我們認爲這些信息構成對這些表態的合理基礎，但這些信息可能是有限的或不完整的，因此不應認爲我們已對所有可能獲得的相關信息進行了徹底調查或審查，這些表態固有地具有不確定性，因此請注意不要過度依賴這些表態。
您 應該完整閱讀本報告及我們在本報告中引用的文件，並作爲註冊聲明的附錄提交， 本報告是其一部分，請理解我們的實際未來結果可能與我們的預期有實質性差異。我們通過這些警示聲明對本報告中的所有前瞻性陳述做出限制。
| ii |
第I部分 - 財務信息
項目 1. 基本報表
瑪西莫 集團及附屬公司
彙編簡明資產負債表
（未經審計）
| 截至 | ||||||||
2024年9月30日 （未經審計） | 2023年12月31日 (已經審計) | |||||||
| 資產 | ||||||||
| 流動資產 | ||||||||
| 現金及現金等價物 | $ | $ | ||||||
| 應收賬款，淨額 | ||||||||
| 淨存貨 | ||||||||
| 預付款項 | ||||||||
| 其他流動資產 | ||||||||
| 總流動資產 | ||||||||
| 非流動資產 | ||||||||
| 資產和設備原值，淨額 | ||||||||
| 來源於截至2023年12月31日的審計合併財務報表的金額。 | ||||||||
| 使用權融資租賃資產，淨額 | ||||||||
| 遞延發售資產 | ||||||||
| 其他非流動資產 | ||||||||
| 遞延稅款資產 | ||||||||
| 總非流動資產 | ||||||||
| 資產總計 | $ | $ | ||||||
| 負債和股東權益 | ||||||||
| 流動負債 | ||||||||
| 短期貸款 | $ | $ | ||||||
| 應付賬款 | ||||||||
| 其他應付款、應計費用和其他流動負債 | ||||||||
| 應計退休責任 | ||||||||
| 應計保修責任 | ||||||||
| 合同責任 | ||||||||
| 經營租賃下的流動部分負債 | ||||||||
| 融資租賃下的流動部分負債 | ||||||||
| 應交所得稅 | ||||||||
| 關聯方貸款 | ||||||||
| 總流動負債 | ||||||||
| 人形機器人-軸承貸款及借款 | ||||||||
| 非流動經營租賃責任 | ||||||||
| 融資租賃負債，非流動 | ||||||||
| 關聯方貸款 | ||||||||
| 總非流動負債 | ||||||||
| 負債合計 | $ | $ | ||||||
| 承諾和事後約定 | ||||||||
| 股東權益 | ||||||||
| 普通股，每股 面值， 授權股份， 和 截至2024年9月30日和2023年12月31日，已發行和流通的股份分別爲 | ||||||||
| 優先股，$ 面值， 優先股授權, 股份分別於2024年9月30日和2023年12月31日發行並流通 | ||||||||
| 應收訂閱款 | ( | ) | ||||||
| 股本溢價 | ||||||||
| 留存收益 | ||||||||
| 總股本 | ||||||||
| 負債和所有者權益總計 | $ | $ | ||||||
附註是這些精簡合併財務報表的一部分。
| F-1 |
馬西莫 集團和子公司
壓縮 綜合收益（損失）綜合收入陳述
（未經審計）
| 截至三個月 | 九個月結束 | |||||||||||||||
| 9月30日， | 九月30日, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| 收入 | $ | $ | $ | $ | ||||||||||||
| 收入成本 | ||||||||||||||||
| 毛利潤 | ||||||||||||||||
| 營業費用： | ||||||||||||||||
| 銷售費用 | ||||||||||||||||
| General and administrative | ||||||||||||||||
| 供應商存款的減值損失 | ||||||||||||||||
| 研發 | ||||||||||||||||
| 總營業費用 | ||||||||||||||||
| 營業利潤 | ||||||||||||||||
| 其他收入（費用）： | ||||||||||||||||
| 其他收入，淨額 | ||||||||||||||||
| 訴訟損失 | ( | ) | ( | ) | ||||||||||||
| 利息支出 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 總其他(收益)費用，淨額 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 稅前(損失)收入 | ( | ) | ||||||||||||||
| （所得稅款）準備金 | ( | ) | ||||||||||||||
| 淨(損)收入和綜合(損)益 | $ | ( | ) | $ | $ | $ | ||||||||||
| 每股（虧損）收益 - 基本 | $ | ( | ) | $ | $ | $ | ||||||||||
| 基本每股流通股數加權平均數 * | ||||||||||||||||
| 每股收益（虧損）-攤薄 | $ | ( | ) | $ | $ | $ | ||||||||||
| 加權平均外流通股數-攤薄* | ||||||||||||||||
| * |
附註是這些精簡合併財務報表的一部分。
| F-2 |
瑪西莫 集團及附屬公司
股東權益簡明合併報表變動表
截至2024年和2023年9月30日的三個月和九個月
(未經審計)
| 普通股 | 認購 | 附加 實收資本 | 留存 | |||||||||||||||||||||
| 分享* | 金額 | 應收款 | 資本 | 收益 | 總計 | |||||||||||||||||||
| 2023年6月30日的餘額 | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||
| 已收訂閱 | – | |||||||||||||||||||||||
| 淨利潤 | – | |||||||||||||||||||||||
| 2023年9月30日的餘額 | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||
| 2024年6月30日餘額 | $ | $ | $ | $ | $ | |||||||||||||||||||
| RSU歸屬時發行普通股 | ( | ) | ||||||||||||||||||||||
| 基於股票的補償 | – | |||||||||||||||||||||||
| 淨損失 | – | ( | ) | ( | ) | |||||||||||||||||||
| 2024年9月30日的結餘 | $ | $ | $ | $ | $ | |||||||||||||||||||
| 普通股 | 認購 | 附加 實收資本 | 留存 | |||||||||||||||||||||
| 股份* | 金額 | 應收賬款 | 資本 | 收益 | 總計 | |||||||||||||||||||
| 2022年12月31日的餘額 | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||
| 已收訂閱 | – | |||||||||||||||||||||||
| 宣佈股本股息 | – | ( | ) | ( | ) | |||||||||||||||||||
| 淨利潤 | – | |||||||||||||||||||||||
| 2023年9月30日的餘額 | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||
| 2023年12月31日餘額 | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||
| 增資 | – | |||||||||||||||||||||||
| 首次公開發行，扣除股票發行成本後的淨額 | ||||||||||||||||||||||||
| 發行普通股 | ||||||||||||||||||||||||
| 基於股票的補償 | – | |||||||||||||||||||||||
| 淨利潤 | – | |||||||||||||||||||||||
| 2024年9月30日的結餘 | $ | $ | $ | $ | $ | |||||||||||||||||||
| * |
附註是這些精簡合併財務報表的一部分。
| F-3 |
瑪西莫 集團及附屬公司
簡明綜合現金流量表
(未經審計)
| 截至9月30日的九個月 | ||||||||
| 2024 | 2023 | |||||||
| 經營活動現金流量： | ||||||||
| 淨利潤 | $ | $ | ||||||
| 調整淨利潤以計入經營活動現金流量: | ||||||||
| 折舊 | ||||||||
| 非現金租賃費用 | ||||||||
| 融資租賃負債的增值 | ||||||||
| 攤銷融資租賃權益資產 | ||||||||
| 壞賬覈銷 | ||||||||
| 預期信用損失準備金(反轉)，淨額 | ( | ) | ||||||
| 固定資產出售收益 | ( | ) | ||||||
| 資產減值損失 | ||||||||
| 訴訟損失 | ||||||||
| 限制性股票單位補償 | ||||||||
| 基於股票的服務報酬 | ||||||||
| 遞延稅款資產 | ( | ) | ( | ) | ||||
| 運營資產和負債的變化： | ||||||||
| 應收賬款 | ( | ) | ( | ) | ||||
| 存貨 | ( | ) | ( | ) | ||||
| 存貨減值的逆轉 | ( | ) | ||||||
| 預付款項 | ( | ) | ||||||
| 其他流動資產 | ( | ) | ||||||
| 關聯方應付款 | ||||||||
| 應付賬款 | ( | ) | ( | ) | ||||
| 其他應付賬款、應計費用和其他流動負債 | ( | ) | ||||||
| 應交稅費 | ( | ) | ||||||
| 應計保修責任 | ( | ) | ||||||
| 應計退休責任 | ( | ) | ( | ) | ||||
| 合同責任 | ( | ) | ||||||
| 租賃負債 - 操作租賃 | ( | ) | ( | ) | ||||
| 經營活動中提供的淨現金流量（流出） | ( | ) | ||||||
| 投資活動現金流量： | ||||||||
| 來自物業和設備出售的收益 | ||||||||
| 購置固定資產和設備 | ( | ) | ( | ) | ||||
| 投資活動中使用的淨現金 | ( | ) | ( | ) | ||||
| 融資活動的現金流： | ||||||||
| 償還其他貸款 | ( | ) | ( | ) | ||||
| 償還融資租賃負債 | ( | ) | ( | ) | ||||
| 來自普通股發行的收益 | ||||||||
| 延遲募資成本 | ( | ) | ||||||
| 首次公開發行的募集資金淨額，扣除股份發行費用 | ||||||||
| 償還來自關聯方的貸款 | ( | ) | ( | ) | ||||
| 認購存款的收益 | ||||||||
| 籌集資金的淨現金流量 | ( | ) | ||||||
| 現金及現金等價物淨增加額 | ||||||||
| 現金及現金等價物期初餘額 | ||||||||
| 10,468,645 | $ | $ | ||||||
| 現金流補充說明： | ||||||||
| 支付的利息現金 | $ | $ | ||||||
| 支付的所得稅費用 | $ | $ | ||||||
| 非現金活動 | ||||||||
| 以租賃債務爲代價獲得的使用權資產 | $ | $ | ||||||
| 因融資租賃而獲得的使用權資產 | $ | $ | ||||||
附註是這些精簡合併財務報表的一部分。
| F-4 |
瑪西莫 集團及附屬公司
基本報表附註（未經審計）
註釋1 - 組織和業務描述Starbox Group Holdings Ltd.及其子公司（以下簡稱「Starbox Group」或「公司」）致力於連接零售商戶和網絡線下消費者（「零售消費者」），通過由零售商戶提供的現金回扣促成交易，提供數字廣告服務給零售商戶，以及向商家提供支付解決方案服務。公司還將業務拓展到營銷和軟件開發領域，以及在線和線下爲企業客戶提供廣告服務。公司目前的主要業務和地理市場基本上集中在馬來西亞。
Massimo集團（以下簡稱「公司」），是一家成立於2022年10月10日，根據內華達州法律設立的控股公司。公司通過其子公司，主要從事農場和牧場測試的多功能載具（UTV）、休閒全地形車（ATV）、以及平底船和三體船（Pontoon Boats）的製造和銷售。2024年4月4日，公司完成了其首次公開發行（「IPO」） ，發行了 美國達拉斯295萬股普通股，發行價爲$ ，募集總收入約爲$
「重組」表示公司交易所提交的權利證券法案第十三號規則下（或其繼任規則）的定義，包括但不限於合併、重組、法定股份交易或類似形式的企業交易(但資產銷售除外)。
在
2023年6月1日，兩位股東轉讓了他們在Massimo摩托艇體育有限公司（「Massimo摩托艇體育」）的 %股權給Massimo集團（「重組」）。在此次重組後，Massimo集團最終擁有 %在Massimo摩托艇體育和Massimo海洋有限公司（「Massimo海洋」）的股權。
在重組前後，公司及其子公司實質上由相同的控股股東有效控制，因此重組被視爲根據會計準則彙編（「ASC」）805-50-25的共同控制實體的資本重組。公司的合併及其子公司的合併已按照歷史成本進行覈算，並基於假設上述交易自所附合並基本報表中所呈現的第一期開始時生效。
公司及其子公司的詳細信息將在重組後列出如下:
| 子公司 | 頒佈日期 公司註冊 |
管轄權 的 成立地 |
百分比 的 直接/間接 經濟 所有權 |
校長 活動範圍 | ||||||
| % | ||||||||||
| % | ||||||||||
2023年6月1日，公司與亞洲國際證券交易所有限公司（"AISE"）簽訂了兩份協議，AISE同意向Massimo Motor Sports投資$
| F-5 |
瑪西莫 集團及附屬公司
基本報表附註（未經審計）
注2-重要會計政策摘要
報告的表述基礎和合並原則
附帶的未經審計的簡明合併基本報表是根據美國公認會計原則（GAAP）爲中期財務信息編制的。因此，它們不包括美國公認會計原則（GAAP）要求的所有信息和披露內容，以用於年度合併基本報表。管理層認爲，附帶的簡明合併基本報表包含了所有被認爲對於公正呈現截至2024年9月30日公司未經審計的簡明合併基本報表所必需的調整，以及截至2024年和2023年9月30日的三個月和九個月的結果。2024年截至9月30日的三個月和九個月的運營結果並不一定代表截至2024年12月31日全年或任何其他期間的運營結果。這些未經審計的簡明合併基本報表是根據公司的會計記錄得出的，應與公司於2023年12月31日結束的年度報告中包含的合併基本報表及其附註一起閱讀，該年度報告通過證券交易委員會（「SEC」）於2024年4月15日提交的10-k表格。
估計和假設的用途
在按照美國通用會計準則編制合併基本報表時，管理層進行估計和假設，這些估計和假設會影響資產和負債的報告金額，以及在基本報表日期，披露相關資產和負債的金額，以及報告期間的收入和費用金額。這些估計是基於合併基本報表日期的信息。管理層需要進行的重大會計估計包括存貨減值準備，信用損失準備，銷售退貨責任，保修成本，以及評估和披露的潛在負債。公司會定期評估其估計和假設，並且這些估計是基於歷史經驗，當前和預期未來情況以及管理層認爲合理的各種其他假設，根據管理層在進行這些估計和假設時可獲取的信息。實際結果和結局可能會與這些估計和假設顯著不同。
現金及現金等價物
現金
和現金等價物包括手頭現金、與銀行的餘額以及到期三個月或更短的流動投資。公司在美國維持所有帳戶，最高金額爲$
應收賬款，淨額
應收賬款 應收賬款代表貿易應收款，最初按公允價值確認，並隨後根據預期信用損失的準備金進行調整。公司在正常支付條款下，向客戶提供無抵押信用。公司使用損失率方法來估計信用損失的準備金。公司根據客戶的財務狀況和歷史回款信息，調整當前市場經濟條件和未來經濟表現的預測，評估應收賬款的預期信用損失。損失率方法基於歷史損失率和對未來條件的預期。如果確定無法收回的應收賬款金額，公司會將其從信用損失準備金中沖銷。
| F-6 |
瑪西莫 集團及附屬公司
基本報表附註（未經審計）
注意 2 — 重要會計政策摘要（續）
存貨淨額
庫存
按成本或淨可變現價值的較低者計價，使用先進先出（FIFO）法。成本包括原材料成本、
運費和關稅。每項庫存的成本超過淨可變現價值的任何差額均作爲存貨價值減值準備計入。淨可變現價值爲在正常業務過程中估計的銷售價格減去任何完成和銷售產品的成本。截至2024年9月30日和2023年12月31日，公司有庫存減值準備$
向供應商提前款項
預付款項
是指支付給供應商的餘額，用於購買尚未提供或收到的產品、零部件和配件。預付款項是短期性質的，定期審查以判斷其賬面價值是否已減值。公司根據具體事實和情況在每個報告日評估個別預付款項的賬面價值是否存在減值。在截至2024年和2023年9月30日的三個月和九個月期間，公司記錄了預付款項的減值損失$
發行費用
遞延發行成本是與公司計劃首次公開募股（IPO）直接相關的費用。這些費用包括法律、會計、印刷和申請費，公司對此進行了資本化，包括與發行直接相關的獨立註冊公共會計師事務所的費用。在首次公開募股完成日期收到募集資金時，遞延發行成本被重新分類爲額外繳入資本。
固定資產
資產和設備以成本計入。按照直線法提供折舊，數額足以分攤相關資產的成本至其使用壽命結束爲止，計算如下：
| 有用壽命 | ||
| 傢俱和固定裝置 | ||
| 機械 設備 | ||
| 電子 設備 | ||
| 交通 設備 | ||
| 租賃改善 |
支出 用於維護和修理，這些支出並未實質性延長資產的使用壽命，按發生時計入費用。用於主要更新和改善的支出，能實質性延長資產的使用壽命，則作爲資本化處理。退役或出售資產的成本及相關累計折舊將從各自帳戶中移除，任何處置的收益或損失是通過比較收益與賬面價值確定，並在未經審計的簡明合併運營和綜合收益報表中的「其他收入（支出）」中確認。
| F-7 |
瑪西莫 集團及附屬公司
基本報表附註（未經審計）
注意 2 — 重要會計政策摘要（續）
租賃
公司自2020年1月1日起採用了會計準則更新（「ASU」）第2016-02號——租賃（主題842），並使用ASU第2018-11號允許的修改追溯過渡方法。這種過渡方法提供了一種記錄現有租賃的方法，僅在採用日期進行記錄，無需調整之前報告的餘額。公司評估其簽訂的合同，以判斷這些合同是否包含租賃。如果合同傳達了在一段時間內以對價控制使用特定財產或設備的權利，則該合同包含租賃。在開始時，包含租賃的合同進一步評估其作爲經營租賃或融資租賃的分類，且公司爲承租人。
經營租賃
對於經營租賃，公司根據尚未支付的總租金的現值來衡量其租賃負債，現值折現基於租賃中隱含的利率或其增量借款利率中更容易確定的那一個，這個利率是公司需要爲等於租期內總租金的有抵押借款支付的估計利率。由於公司大多數租賃沒有提供隱含利率，因此公司使用其增量借款利率，根據可用信息在開始日期確定未來付款的現值。公司根據相應的租賃負債來衡量使用權資產（「ROU」），調整爲在開始日期或之前支付給出租方的款項，以及其在租賃下發生的初始直接費用。當出租方使基礎資產可供公司使用時，公司開始確認租賃費用。
經營租賃的租金費用包括對租賃權益資產的攤銷和與經營租賃責任相關的利息費用。對於租期少於一年的租賃（短期租賃），公司按照直線法在合同租期內記錄經營租賃費用，並在發生時記錄可變租金支付。
金融 租賃
公司作爲承租方的融資租賃租金成本包括ROU資產的攤銷，按直線法攤銷，並記錄爲「融資租賃資產折舊」和融資租賃負債利息費用，利息費用按利息法計算，並記錄爲「利息費用，淨額」。融資租賃ROU資產攤銷期限爲其預計使用壽命或各自租約期限中較短的一項，包括公司合理確定會行使的續訂期權期間。
非流動資產減值
長期資產主要包括物業和設備，在發生事件或情況變化（例如，市場條件顯著不利變動，影響資產未來使用）的情況下，需評估其減值。此類事件發生時，公司通過將資產的賬面價值與預計從使用資產及最終處置中生成的未來未折現現金流的估算進行比較，來評估減值。如果預計未來未折現現金流的總和低於資產的賬面價值，則公司會確認減值損失，基於資產賬面價值超過資產公允價值的部分。截至2024年和2023年9月30日的三個月和九個月期間，沒有確認減值費用。
| F-8 |
瑪西莫 集團及附屬公司
基本報表附註（未經審計）
注意 2 — 重要會計政策摘要（續）
金融工具的公允價值
ASC 825-10要求披露金融工具的公允價值。公允價值定義爲在評估日期市場參與者之間進行買賣的交換價格。一個三級公允價值層次結構優先採用用於衡量公允價值的輸入。層次結構要求實體最大限度地利用可觀察的輸入，最小化未觀察到的輸入。衡量公允價值所使用的三個輸入級別如下：
| ● | 級別 1 — 估值方法的輸入是活躍市場中相同資產或負債的報價（未經調整）。 |
| ● | 級別 2 — 估值方法的輸入包括活躍市場中類似資產和負債的報價，報價 市場中相同或類似資產的市場價格在不活躍的市場中，其他除報價以外的可觀察輸入 以及來源於或通過可觀察市場數據驗證的輸入。 |
| ● | 級別 3 — 估值方法的輸入是不可觀察的。 |
除非另有披露，公司的財務工具的公允價值，包括現金及現金等價物、應收賬款、被分類爲其他流動資產的應收票據、來自關聯方的貸款、應付賬款、其他應付款、應計費用和其他負債、合同負債，大致等於其賬面價值，因爲它們具有短期到期性。公司確定租賃負債的賬面價值等於其公允價值，因爲用於折現合同的利率接近市場利率。公司指出在任何期間內未發生級別之間的轉移。截至2024年9月30日和2023年12月31日，公司沒有任何在重分類或非重分類基礎上按公允價值計量的工具。
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
步驟5：在實體滿足履行義務時（或按照履行被滿足的時間）確認收入
公司的營業收入主要來自UTV、ATV、電動自行車（"e-bikes"）和浮躁船的銷售。營業收入代表公司預期將因交易所承諾的商品而有權獲得的金額。當履行義務被認爲已滿足、控制權轉移給我們的客戶並將商品交付給客戶並得到客戶接受時，我們將記錄營業收入。
| F-9 |
瑪西莫 集團及附屬公司
基本報表附註（未經審計）
注意 2 — 重要會計政策摘要（續）
銷售 退貨
公司提供退款政策，接受來自最終客戶的退貨申請，該政策因不同產品和客戶而異。估計的銷售退貨是根據歷史銷售退貨分析確定的。退貨準備金按照銷售額減少的方式記錄，相應的銷售退貨責任包括在「應計退貨責任」中。退回庫存的成本估計記錄爲銷售成本減少和退貨權資產增加，該資產包括在「存貨」中。影響公司銷售退貨責任的因素包括當前處於退貨期的產品數量，對這些產品提出退貨要求的歷史和預期比率，以及在該期間內可能提出退貨要求的估計金額。如果實際結果與估計值不符，公司會相應調整其估計的銷售退貨責任。每個季度，公司都會審查和重新評估其記賬的銷售退貨責任的充足性，並根據需要調整金額。截至2024年9月30日和2023年12月31日，未經審計的簡明綜合資產負債表中分別記載了與估計產品退貨相關的銷售退貨責任金額爲$
產品 保修
公司通常提供爲期一年的有限保修，針對與產品銷售相關的材料缺陷。公司將保修視爲一種保證型保修，因爲保修向客戶保證產品符合約定規範。預計的未來保修義務包含在相關收入被確認的期間內的產品銷售成本中。影響公司的保修因素包括當前在保修期內的產品數量、對這些產品的歷史和預期保修索賠率，以及滿足公司保修義務的維修和更換成本的估算。預計的保修索賠率是確定保修負債時使用的主要估算參數，並且根據歷史故障率的經驗，這一估算相對可預測。銷售產品的平均剩餘累計保修期被計算出來，維修配件通常已經有存貨或以預定價格可用，且勞動力費用一般與服務提供商以預設金額安排。如果實際結果與估算有所偏差，公司會修訂其估計的保修負債。公司每個季度重新評估其估算，並評估記錄的保修負債的充分性，並根據需要調整金額。至2024年9月30日和2023年12月31日，$
合同責任
公司的合同負債主要與客戶預收款項有關。合同負債在每個報告期末按客戶逐個報告淨額。合同負債在公司收到客戶由於訂單預付款時確認。當產品交付時，合同負債將被確認爲營業收入。截至2024年9月30日和2023年12月31日，公司記錄的合同負債爲$
分解 的收入
公司將合同收入按產品分類，因爲公司認爲這最佳地反映了經濟因素如何影響收入和現金流的性質、金額、時機和不確定性。公司截至2024年和2023年9月30日的三個月和九個月的收入分類已在這些未經審計的簡明合併基本報表的第19號附註中披露。
| F-10 |
瑪西莫 集團及附屬公司
基本報表附註（未經審計）
注意 2 — 重要會計政策摘要（續）
營業成本
收入成本包括與生產收入中包含的商品和服務直接相關的所有成本和費用。收入成本主要包括產品成本、運費和關稅分配，以及與倉庫相關的間接費用，如薪資和福利、租金、倉庫用品和折舊費用。
從供應商向公司運輸原材料時產生的運輸和關稅成本包含在收入成本中，總計
運輸和處理成本
運輸和處理成本，包括產品選擇和將其交付給客戶的成本，在銷售費用中呈現。運輸和貨運費用發生在向客戶交付商品時列入銷售費用，總額爲$
此處討論的公允價值估值基於特定市場假設和管理人員截至2021年6月30日和2020年12月31日的相關信息。某些資產和負債的相應賬面價值近似其公允價值。這些金融工具包括現金和應付賬款。現金和應付賬款的公允價值被假定爲將現有的現金流量以回報該資產或負債所需的利率折現的結果。
公司將所有廣告費用視爲發生時的費用。銷售費用中呈現的廣告費用爲$95,509 and $$
401(k)福利計劃 福利計劃
401(k)福利計劃覆蓋了幾乎所有員工，並允許員工自願繳納款項，最多不超過每年調整的國內稅務局美元限額。這些自願款項的數額與
所得稅
重組之前，公司選擇作爲S小單在聯邦和州所得稅方面徵稅。作爲S小單，
公司不需要支付聯邦所得稅和德克薩斯州的州稅。因此，股東按照其在公司所獲收益和扣除的比例進行納稅，
無論是否收到了分配。在重組之後，公司需繳納美國聯邦所得稅，
所得稅 稅款支出是當年應繳或可退的所得稅總額以及遞延稅款資產和負債的變動。遞延稅款資產和負債是根據頒佈的稅率計算的資產和負債的賬面金額與稅基之間的暫時差異的預期未來稅額。如有需要，貶值準備會將遞延稅款資產減少至預計可實現的金額。
| F-11 |
瑪西莫 集團及附屬公司
基本報表附註（未經審計）
注意 2 — 重要會計政策摘要（續）
所得稅 （續）
公司根據財務會計準則委員會（"FASB"）ASC主題740「關於所得稅不確定性會計處理」的規定來覈算不確定的稅收立場。只有在「更可能而不是」該稅收立場在稅務審查中將被維持，即假定將進行稅務審核情況下，才會確認稅務立場的好處。確認的金額是在檢查中最有可能實現的超過50％的稅收收益數額。對於未能符合「更可能而不是」測試的稅收立場，不記錄稅收收益。
在評估公司的不確定所得稅位置和所得稅準備金時，也需要重大判斷。對於不確定所得稅位置的負債是基於兩步法進行確認的。第一步是評估某個所得稅位置是否滿足確認閾值，通過判斷現有證據的權重是否表明，更可能在審查中得到支持。第二步是對已滿足確認閾值的所得稅位置進行計量，按照在結算時有超過50%可能實現的最大金額進行計量。公司持續評估潛在調整的可能性和金額，並在相關事實被確認的期間調整所得稅準備金、應付所得稅和遞延所得稅。公司將與不確定所得稅位置相關的利息和罰款作爲利息費用進行確認。
公司根據ASC 260「每股收益」（「ASC 260」）計算每股收益。ASC 260要求具有複雜資本結構的公司報告基本和攤薄後每股收益。基本每股收益以淨利潤除以該期間權重平均未強制轉換的普通股份爲基礎進行計量。攤薄後每股收益以潛在普通股（例如：可轉換證券、期權和認股權證）的具有攤薄效應，彷彿它們在報告期間初期或發行日就被轉換一樣進行計算。具有抗攤薄效應的潛在普通股（即那些增加每股收益或減少每股虧損的）被排除在攤薄後每股收益的計算之外。截至2024年9月30日的三個月和九個月結束，共有 和 未歸屬的受限股票單位（「RSU」）被包括在計算攤薄後每股收益時用於計算權重平均普通股數量的人數。截至2023年9月30日的三個月和九個月結束，有 攤薄股份。
股票 基於補償的薪酬
公司遵循ASC 718《補償-股票補償》(「ASC 260」)的規定，建立了員工股份獎勵的會計處理。對於員工股份獎勵，股票補償成本在授予日期基於獎勵的公允價值進行計量，並按照分段歸集的方式在整個獎勵的適用服務期內以直線方式確認爲費用。
業務部門報告
公司遵循ASC 280，「分部報告」.公司的首席執行官或首席運營決策者在做出資源分配和評估公司績效方面審查綜合財務結果，因此公司僅有一個
| F-12 |
馬西莫 集團和子公司
基本報表附註（未經審計）
注意 2 — 重要會計政策摘要（續）
集中 和風險
a. 信用風險集中度
資產
可能使公司面臨顯著信用風險集中度的主要包括現金及現金等價物、應收賬款和其他包括在其他流動資產中的應收款項。這些資產面臨信用風險的最大敞口是其在資產負債表日的賬面價值。公司在美國的金融機構中維持所有銀行帳戶，那裏有$
爲了限制與存款相關的信用風險，公司主要將現金存款放在美國的大型金融機構中。公司對客戶進行信用評估，通常不要求客戶提供抵押品或其他安防-半導體。公司建立了會計政策，以根據個別客戶的財務控件、信用歷史以及當前經濟條件提供當前預期的信用損失。
b. 匯率期貨風險
我們的大部分原材料都是從中國進口的。人民幣對美元的價值受到中國和美國經濟狀況變化的影響。我們認爲我們目前沒有重大直接的匯率期貨風險，也沒有使用任何衍生金融工具來對沖這種風險暴露。
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
對於 截至 2024 年 9 月 30 日和 2023 年 9 月 30 日的三個月， 一 還有一位客戶解釋了 超過 分別佔公司總收入的百分比。在截至2024年9月30日和2023年9月30日的九個月中， 一 而且一位客戶佔了超過 分別佔公司總收入的百分比。截至 2024 年 9 月 30 日和 2023 年 12 月 31 日，兩個還有一位客戶佔了超過 佔公司百分比 分別是應收賬款。
| F-13 |
瑪西莫 集團及附屬公司
筆記 至簡明的合併財務報表（未經審計）
注意 2 — 重要會計政策摘要（續）
集中 和風險 （續）
f. 重要供應商
截至2024年和2023年9月30日的三個月時間， 兩個兩家供應商分別佔公司總採購的超過10%。截至2024年和2023年9月30日的九個月時間， 兩個兩家供應商分別佔公司總採購的超過10%。截至2024年9月30日和2023年12月31日，四 和三家公司分別佔公司總應付款的超過 %
最近的會計聲明
公司考慮所有適用和影響ASU。管理層定期審查頒佈的新會計準則。
《啓動我們業務創業的法案》規定，符合其定義的新興成長公司（「EGC」）可以利用延長的過渡期，來遵守新的或修訂的會計標準。這允許EGC推遲採用某些會計標準，直到這些標準在私人公司中生效。公司已採用延長的過渡期。
在2020年8月，FASB發佈了ASU No. 2020-06，「債務-具有轉換和其他期權（子課題470-20）和衍生工具及避險-實體在自身權益中的合同（子課題815-40）: 計算可轉換工具和實體自身權益中的合同的會計處理」，通過刪除目前美國通用會計準則所需的主要分開模型，簡化了可轉換工具的會計處理。該ASU還刪除了某些涉及結算條件，這些條件是要求權益關聯合同符合衍生工具範圍例外的，簡化了特定領域的稀釋每股收益計算。新標準將從2024年1月1日開始對我們生效，採用修正追溯法或完全追溯法進行過渡，並允許提前採納。管理層目前正在評估新標準對我們基本報表的影響。
2023年11月，FASB發佈了ASU No. 2023-07，即《有關報告分部披露的改進》（主題280）。該ASU通過要求披露常規提供給首席運營決策者「CODM」的重要報告分部費用的披露，以及將這些費用包括在分部利潤或損失的每項報告指標中，更新了報告分部的披露要求。該ASU還要求披露被確定爲CODM的個人的頭銜和職位，並解釋CODM如何使用分部的利潤或損失的報告指標來評估分部績效，並決定如何分配資源。該ASU適用於2023年12月15日後開始的年度期間，以及2024年12月15日後開始的財年內的中間期間。應全面回顧地將ASU的採納運用於財務報表中呈現的所有之前期間。早期採用也是被允許的。採用該ASU後，我們可能將包括在採用時所需的額外披露。管理層目前正在評估該ASU的規定，並預計將在2024年12月31日年度終了時採用。
在 2023年12月，FASB發佈了ASU第2023-09號，標題爲「對所得稅披露的改進」（主題740）。該ASU要求提供關於報告實體有效稅率調節的分項信息，以及關於繳納的所得稅的額外信息。 該ASU自2024年12月15日之後開始的年度期間起生效，採用前瞻性原則。對於尚未發佈或尚未提供發行的年度基本報表，也允許提前採用。一旦採用，該ASU可能會導致公司合併基本報表中包含所需的額外披露。
公司不認爲其他最近頒佈但尚未生效的會計準則，如果目前採納，將對公司的合併資產負債表、利潤表和綜合收益表以及現金流量表產生實質影響。
| F-14 |
瑪西莫 集團及附屬公司
基本報表附註（未經審計）
注意 3 — 應收賬款，淨額
應收賬款包括以下內容:
| 2024年9月30日 | 2023年12月31日 | |||||||
| 應收賬款—第三方 | $ | $ | ||||||
| 減：壞賬準備 | ( | ) | ( | ) | ||||
| 應收賬款，淨額 | $ | $ | ||||||
公司記錄了2024年和2023年9月30日結束的三個月內信用減值準備倒退$
信用損失準備金的變動如下：
| 2024年9月30日 | 2023年12月31日 | |||||||
| 期初餘額 | $ | $ | ||||||
| 覈銷金額 | (64,584 | ) | - | |||||
| 額外提供條款 | ||||||||
| 結束餘額 | $ | $ | ||||||
截至2024年9月30日和2023年12月31日，公司的應收賬款餘額已質押於其信用額度 在Midfirst銀行和國泰銀行（見註釋12）。
注意 4 — 庫存清單
存貨構成如下：
| 2024年9月30日 | 2023年12月31日 | |||||||
| 產品 | $ | $ | ||||||
| 零件和配件 | ||||||||
| 在途庫存 | ||||||||
| 貨運及關稅 | ||||||||
| 減：庫存準備金 | ( | ) | ( | ) | ||||
| 淨存貨 | $ | $ | ||||||
一
存貨減值準備的反轉，記錄爲成本或可變現淨值調整爲$
抵押給國泰銀行/美富銀行作爲公司信用額度的存貨爲$
| F-15 |
瑪西莫 集團及附屬公司
基本報表附註（未經審計）
注意事項5 —前往供應商
預付款 給供應商包括以下內容：
| 2024年9月30日 | 2023年12月31日 | |||||||
| 預付款項 | $ | $ | ||||||
| 少：由於無法收回的預付款導致減值損失準備 | ||||||||
| 預付供應商賬款淨額 | $ | $ | ||||||
供應商預付款減值準備爲$
2024年6月，我們與一家供應商達成了關於一般結算條款的初步協議，該供應商將使用約$
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.
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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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