MAMO 10-Q
Massimo Group (MAMO)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
OR
For the transition period from to
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s
telephone number, including area code:
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of exchange on which registered | ||
| The
|
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
☐ No
As of September 30, 2025, there were shares of the Company’s common stock issued and outstanding.
TABLE OF CONTENTS
| i |
Unless otherwise stated in this Quarterly Report on Form 10-Q (this “Report”), references to “we,” “us,” “our,” “Company” or “our Company” are to Massimo Group, a Nevada corporation, and its subsidiaries.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Report contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements contained in this Report other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, projected costs and our objectives for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “should,” “shall,” “intend,” “goal,” “objective,” “seek,” “expect,” and similar expressions or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including but not limited to:
| ● | We have a limited operating history on which to judge our performance and assess our prospects for future success. |
| ● | We rely on independent dealers and distributors to manage the retail distribution of many of our products, and their inability to secure adequate access to capital could materially and adversely affect our business. |
| ● | The majority of the products we purchase are manufactured in China and their operations are subject to risks associated with business operations in China. Any disruption of these manufacturers to supply us with appropriately priced products on a timely basis could have a material adverse effect on our business. |
| ● | Economic conditions that impact consumer spending, along with rising U.S.-China trade tensions and tariffs, may increase costs, disrupt our supply chain, and have a material adverse effect on our business and that of our partners. |
| ● | We currently maintain all our cash and cash equivalents with three financial institutions. |
| ● | We face intense competition in all product lines, including from some competitors that have greater financial and marketing resources. |
| ● | Our future expansion plans are subject to uncertainties and risks, and distribution centers we intend to open may not result in increased sales or efficiencies. |
| ● | Our limited investment in R&D of new products may adversely affect our ability to enhance existing products and develop and market new products. |
| ● | The high cost of delivering our Pontoon Boats may limit the geographic market for these products. |
| ● | Higher fuel costs can materially and adversely affect our business. |
| ● | We may require additional capital which may not be available. |
| ● | Our business depends on the efforts of our management, and our business may be severely disrupted if we lose their services. |
| ● | We may be unable to protect our intellectual property or may incur substantial costs as a result of litigation or other proceedings relating to our intellectual property. |
| ● | Significant product repair and/or replacement due to product warranty claims, liability claims or product recalls could have a material adverse impact on our business. |
| ii |
| ● | We are subject to laws, rules and regulations regarding product safety, health, environmental and noise pollution, and other issues. |
| ● | Our insurance may not be sufficient. |
| ● | We have been in the past, and may be, in the future subject to litigation relating to defective products that have caused property damage, physical injury, and death. |
| ● | We have not made use of confidentiality agreements in the past and, although we intend to rely on such agreements in future dealings with suppliers, employees, consultants, and other parties, the prior lack of or the breach of such agreements could adversely affect our business and results of operations. |
| ● | The market price of our common stock is likely to be highly volatile, and you could lose all or part of your investment. |
| ● | We have no current plans to pay cash dividends on our common stock for the foreseeable future. |
| ● | As an “emerging growth company” under applicable law, we are subject to lessened disclosure requirements, which could leave our stockholders with less information or fewer rights available to stockholders of more mature companies. |
| iii |
| ● | If securities or industry analysts do not publish or cease publishing research or reports about us, our business, or our market, or if they change their recommendations regarding our common stock adversely, the price of our common stock and trading volume could decline. |
| ● | Anti-takeover provisions in our Articles of Incorporation and Bylaws and Nevada law could discourage, delay, or prevent a change in control of our company and may affect the trading price of our common stock. |
| ● | Failure to establish and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price. |
| ● | Our Bylaws provide that the Second Judicial District Court of Washoe County of the State of Nevada is the sole and exclusive forum for certain stockholder litigation matters. |
| ● | Other risks and uncertainties described in this Report, including those described in the “Risk Factors” section. |
Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, we undertake no duty to update any of these forward-looking statements after the date of this Report or to conform these statements to actual results or revised expectations.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely upon these statements.
We qualify all of the forward-looking statements in this Report by these cautionary statements.
| iv |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MASSIMO GROUP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2025 (UNAUDITED) AND DECEMBER 31, 2024
| As of | ||||||||
September 30, 2025 (unaudited) | December 31,2024 (restated) | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories, net | ||||||||
| Advance to suppliers | ||||||||
| Due from a related party | ||||||||
| Prepaid and other current assets | ||||||||
| Total current assets | ||||||||
| NON-CURRENT ASSETS | ||||||||
| Property and equipment at cost, net | ||||||||
| Right of use operating lease assets, net | ||||||||
| Right of use financing lease assets, net | ||||||||
| Other non-current assets | ||||||||
| Deferred tax assets | ||||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Other payable, accrued expenses and other current liabilities | ||||||||
| Return liabilities | ||||||||
| Warranty liabilities | ||||||||
| Contract liabilities | ||||||||
| Current portion of obligations under operating leases | ||||||||
| Current portion of obligations under financing leases | ||||||||
| Income tax payable | ||||||||
| Due to a shareholder | ||||||||
| Total current liabilities | ||||||||
| NON-CURRENT LIABILITIES | ||||||||
| Obligations under operating leases, non-current | ||||||||
| Obligations under financing leases, non-current | ||||||||
| Total non-current liabilities | ||||||||
| TOTAL LIABILITIES | $ | $ | ||||||
| Commitments and Contingencies | ||||||||
| EQUITY | ||||||||
| Common shares, $ par value, shares authorized, and issued and outstanding as of September 30, 2025 and December 31, 2024, respectively | ||||||||
| Additional paid-in-capital | ||||||||
| Retained earnings | ||||||||
| Total equity | ||||||||
| TOTAL LIABILITIES AND EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-1 |
MASSIMO GROUP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHESIVE INCOME(LOSS)
(UNAUDITED)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling expense | ||||||||||||||||
| General and administrative expense | ||||||||||||||||
| Impairment loss on supplier deposit due to lawsuit | ||||||||||||||||
| Research and development expense | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Income from operations | ( | ) | ||||||||||||||
| Other income (expense): | ||||||||||||||||
| Other income, net | ||||||||||||||||
| Loss on litigation | ( | ) | ( | ) | ||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ||||||||||
| Total other income (expense), net | ( | ) | ( | ) | ||||||||||||
| (Loss) Income before income taxes | ( | ) | ( | ) | ||||||||||||
| (Recovery of ) Provision for income taxes | ( | ) | ( | ) | ||||||||||||
| Net (loss) income and comprehensive (loss) income | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||
| (Loss) Earnings per Share – basic | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||
| Weighted average shares outstanding – basic | ||||||||||||||||
| (Loss) Earnings per Share –diluted | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||
| Weighted average shares outstanding –diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-2 |
MASSIMO GROUP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(UNAUDITED)
| Common Share | Subscription | Additional Paid-in | Retained | |||||||||||||||||||||
| Shares* | Amount | Receivable | Capital | Earnings | Total | |||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | $ | $ | |||||||||||||||||||
| Common stock issued upon vesting of RSUs | ( | ) | ||||||||||||||||||||||
| Stock based compensation | – | |||||||||||||||||||||||
| Net income for the three months ended September 30, 2024 | – | ( | ) | ( | ) | |||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | $ | ||||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | $ | $ | |||||||||||||||||||
| Stock based compensation | ||||||||||||||||||||||||
| Net income for the three months ended September 30, 2025 | – | |||||||||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | $ | ||||||||||||||||||||
| Common Share | Subscription | Additional Paid-in | Retained | |||||||||||||||||||||
| Shares* | Amount | Receivable | Capital | Earnings | Total | |||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||
| Additional Paid-in capital | – | |||||||||||||||||||||||
| Initial public offering, net of share issuance costs | ||||||||||||||||||||||||
| Common stock issued upon vesting of RSUs | ||||||||||||||||||||||||
| Stock based compensation | – | |||||||||||||||||||||||
| Net income for the nine months ended September 30, 2024 | – | |||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | $ | $ | |||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | $ | |||||||||||||||||||
| Common stock issued upon vesting of RSUs | ( | ) | ||||||||||||||||||||||
| Stock based compensation | – | |||||||||||||||||||||||
| Amortization of share-based compensation related to RSU granted | – | |||||||||||||||||||||||
| Net income for the nine months ended September 30, 2025 | – | ( | ) | ( | ) | |||||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | $ | $ | |||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-3 |
MASSIMO GROUP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Nine Months Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | - | |||||||
| Depreciation | ||||||||
| Non-cash operating lease expense | ||||||||
| Accretion of finance lease liabilities | ||||||||
| Amortization of finance lease right-of-use assets | ||||||||
| Inventories reserve | ( | ) | ||||||
| Provision for expected credit loss, net | ( | ) | ||||||
| Gain on disposal of fixed asset | ( | ) | ||||||
| Impairment loss of asset | ||||||||
| Loss on litigation | ||||||||
| RSU compensation | ||||||||
| Share-based compensation for services | ||||||||
| Deferred tax assets | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | - | |||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventories | ( | ) | ||||||
| Due from a related party | ||||||||
| Advance to suppliers | ( | ) | ||||||
| Other current assets | ( | ) | ||||||
| Related party payable | ||||||||
| Accounts payables | ( | ) | ( | ) | ||||
| Other payable, accrued expense and other current liabilities | ( | ) | ||||||
| Tax payable | ( | ) | ||||||
| Accrued warranty liabilities | ( | ) | ( | ) | ||||
| Accrued return liabilities | ( | ) | ( | ) | ||||
| Contract liabilities | ( | ) | ( | ) | ||||
| Lease liabilities – operating lease | ( | ) | ( | ) | ||||
| Net cash (used in) provided by operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | - | |||||||
| Proceed from sales of property and equipment | ||||||||
| Purchase of short-term investment | ( | ) | ||||||
| Proceeds from short-term investment | ||||||||
| Acquisition of property and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Repayment of other loans | ( | ) | ||||||
| Repayment of finance lease liabilities | ( | ) | ( | ) | ||||
| Proceed from common share issuances | ||||||||
| Due to shareholders | ( | ) | ||||||
| Proceeds from initial public offering, net of share issuance costs | ||||||||
| Repayment of loan from a related party | ( | ) | ||||||
| Proceeds from subscription deposits | ||||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Net increase in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents, beginning of the period | ||||||||
| Cash and cash equivalents, end of the period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | - | |||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| NON-CASH ACTIVITIES | - | |||||||
| Right of use assets obtained in exchange for operating lease obligations | $ | $ | ||||||
| Right of use assets obtained in exchange for finance lease | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-4 |
MASSIMO GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION
Massimo
Group (the “Company”), is a holding company established on October 10, 2022 under the laws of the State of Nevada. The Company,
through its subsidiaries, is primarily engaged in the manufacturing and sales of a wide selection of farm and ranch tested utility terrain
vehicles (“UTVs”), recreational all-terrain vehicles (“ATVs”), and pontoon and tritoon boats (“Pontoon
Boats”). On April 4, 2024, the Company closed its initial public offering (“IPO”) of shares of its common
stock at an IPO price of $ per share for aggregate gross proceeds of approximately $
Reorganization
On
June 1, 2023, the two shareholders transferred their % equity interest in Massimo Motor Sports, LLC (“Massimo Motor Sports”)
and % equity interest in Massimo Marine, LLC (“Massimo Marine”) to Massimo Group (the “Reorganization”). After
this Reorganization, Massimo Group ultimately owns
Before and after the Reorganization, the Company, together with its subsidiaries, is effectively controlled by the same Controlling Shareholders, and therefore the Reorganization is considered as a recapitalization of entities under common control in accordance with Accounting Standards Codification (“ASC”) 805-50-25. The consolidation of the Company and its subsidiaries have been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements in accordance with ASC 805-50-45-5.
Details of the Company and its subsidiaries are set out below upon the Reorganization:
| Subsidiaries | Date of Incorporation | Jurisdiction of Formation | Percentage of direct/indirect Economic Ownership | Principal Activities | ||||||||
| % | ||||||||||||
| % | ||||||||||||
| % | ||||||||||||
| F-5 |
MASSIMO GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements, which include the accounts of Massimo Group and its wholly owned subsidiaries, have been prepared in conformity with generally accepted accounting principles in the United States of America (GAAP). All intercompany balances and transactions have been eliminated in consolidation.
Uses of estimates and assumptions
In preparing the consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information as of the date of the consolidated financial statements. Significant accounting estimates required to be made by management include allowance for inventories, allowance for credit losses, sales return liabilities, warranty costs and the assessment and the disclosure of contingency liabilities. The Company evaluates its estimates and assumptions on an ongoing basis and its estimates on historical experience, current and expected future conditions and various other assumptions that management believes are reasonable under the circumstances based on the information available to management at the time these estimates and assumptions are made. Actual results and outcomes may differ significantly from these estimates and assumptions.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, the balances with banks and the liquid investments with maturities of three months or less. The Company maintains all its bank accounts in the United States, which are insured by Federal Deposit Insurance Corporation (“FDIC”).
Accounts receivable, net
Accounts receivable represents trade receivable and are recognized initially at fair value and subsequently adjusted for any allowance for expected credit loss. The Company grants credit to customers, without collateral, under normal payment terms. The Company uses a loss rate method to estimate the allowance for credit losses. The Company evaluates the expected credit loss of accounts receivable based on customer financial condition and historical collection information adjusted for current market economic conditions and forecasts of future economic performance when appropriate. Loss-rate approach is based on the historical loss rates and expectations of future conditions. The Company writes off potentially uncollectible accounts receivable against the allowance for credit losses if it is determined that the amounts will not be collected.
| F-6 |
MASSIMO GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Inventories, net
Inventories
are stated at the lower of cost or net realizable value, using the first-in, first out (FIFO) method. Costs include the cost of raw materials,
freight and duty. Any excess of the cost over the net realizable value of each item of inventories is recognized as a provision for diminution
in the value of inventories. Net realizable value is estimated using selling price in the normal course of business less any costs to
complete and sell products. As of September 30, 2025 and December 31, 2024, the Company had inventory provision of $
Advances to suppliers
Advance
to suppliers consists of balances paid to suppliers for purchasing of products, parts and accessories that have not been provided or
received. Advances to suppliers are short-term in nature and are reviewed periodically to determine whether their carrying value has
become impaired. The Company evaluated the carrying value of individual advances based on specifics facts and circumstances for any impairment
at each reporting date. An impairment loss allowance of advances to suppliers of , , $
Property and equipment
Property and equipment are recorded at cost. Depreciation is provided in amounts sufficient to amortize the cost of the related assets over their useful lives using the straight-line method, as follows:
| Useful life | ||
| Furniture and fixtures | ||
| Machinery equipment | ||
| Electronic equipment | ||
| Transportation equipment | ||
| Leasehold improvement |
Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gains or losses on disposals are determined by comparing proceeds with carrying amount and are recognized within “other income (expense)” in the unaudited condensed consolidated statements of operations and comprehensive income.
| F-7 |
MASSIMO GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Leases
The Company adopted Accounting Standards Update (“ASU”) No. 2016-02—Leases (Topic 842) since January 1, 2020, using a modified retrospective transition method permitted under ASU No. 2018-11. This transition approach provides a method for recording existing leases only at the date of adoption and does not require previously reported balances to be adjusted. The Company evaluates the contracts it enters into to determine whether such contracts contain leases. A contract contains a lease if the contract conveys the right to control the use of identified property or equipment for a period of time in exchange for consideration. At commencement, contracts containing a lease are further evaluated for classification as an operating or finance lease where the Company is a lessee.
Operating Leases
For operating leases, the Company measures its lease liabilities based on the present value of the total lease payments not yet paid discounted based on the more readily determinable of the rate implicit in the lease or its incremental borrowing rate, which is the estimated rate the Company would be required to pay for a collateralized borrowing equal to the total lease payments over the term of the lease. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The Company measures right-of-use (“ROU”) assets based on the corresponding lease liability adjusted for payments made to the lessor at or before the commencement date, and initial direct costs it incurs under the lease. The Company begins recognizing lease expense when the lessor makes the underlying asset available to the Company.
Lease cost for operating leases includes the amortization of the ROU asset and interest expense related to the operating lease liability. For leases with lease term less than one year (short-term leases), the Company records operating lease expense in its consolidated statements of operations on a straight-line basis over the lease term and record variable lease payments as incurred.
Finance Leases
Lease cost for finance leases where the Company is the lessee includes the amortization of the ROU asset, which is amortized on a straight-line basis and recorded to “Depreciation of right-of-use finance asset” and interest expense on the finance lease liability, which is calculated using the interest method and recorded to “Interest expense, net.” Finance lease ROU assets are amortized over the shorter of their estimated useful lives or the terms of the respective leases, including periods covered by renewal options that the Company is reasonably certain of exercising.
Impairment of long-lived assets
Long-lived
assets, primarily consist of property and equipment, are evaluated for impairment whenever events or changes in circumstances (such as
a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying amount may
not be fully recoverable or that the useful life is shorter than the Company had originally estimated. When these events occur, the Company
evaluates the impairment by comparing the carrying value of the assets to an estimate of future undiscounted cash flows expected to be
generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less
than the carrying value of the assets, the Company recognizes an impairment loss based on the excess of the carrying value of the assets
over the fair value of the assets.
| F-8 |
MASSIMO GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair value of financial instruments
ASC 825-10 requires certain disclosures regarding the fair value of financial instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
| ● | Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| ● | Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted market prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable and inputs derived from or corroborated by observable market data. |
| ● | Level 3 — inputs to the valuation methodology are unobservable. |
Unless otherwise disclosed, the fair value of the Company’s financial instruments, including cash and cash equivalents, accounts receivables, short-term loans which was grouped in other current assets, accounts payable, other payable, accrued expense and other liabilities, contract liabilities, due to shareholder and current portion of lease liabilities, approximates their recorded values due to their short-term maturities. The Company determined that the carrying value of the lease liabilities approximated their fair value as the interest rates used to discount the contracts approximate market rates. The Company noted no transfers between levels during any of the periods presented. The Company did not have any instruments that were measured at fair value on a recurring nor non-recurring basis as of September 30, 2025 and December 31, 2024.
Revenue recognition
The Company adopted ASC Topic 606, “Revenue from Contracts with Customers”. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the Company applies the following steps:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation
The Company’s revenue is generated primarily by sales of UTVs, ATVs electric bikes (“e-bikes”), and Pontoon Boats. Revenue represented the amount of consideration to which the Company expects to be entitled in exchange for promised goods. Revenue is recorded when performance obligations are considered to be satisfied when control is transferred to our customers upon goods delivered to customers and acceptance by customers.
| F-9 |
MASSIMO GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Sales returns
The
Company provides a refund policy to accept returns from end customers, which varies and depends on 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, 2025 and December 31, 2024, $
Products warranty
The
Company generally provides a one-year limited warranty against defects in materials related to the sale of products. The Company considers
the warranty as an assurance type warranty since the warranty provides the 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, 2025 and December 31, 2024,
$
Contract liabilities
The
contract liabilities of the Company are primarily related to advances received from customer. The contract liabilities are reported in
a net position on a customer-by-customer basis at the end of each reporting period. Contract liabilities are recognized when the Company
receives prepayment from customers resulting from purchase order. Contract liabilities will be recognized as revenue when the products
are delivered. As of September 30, 2025 and December 31, 2024, the Company records contract liabilities of $
Disaggregation of revenues
The Company disaggregates its revenue from contracts by products, as the Company believes it best depicts how the nature, amount, timing and uncertainty of the revenue and cash flows are affected by economic factors. The Company’s disaggregation of revenues for the three and nine months ended September 30, 2025 and 2024 is disclosed in Note 18.
Cost of revenues
Cost of revenues includes all of the costs and expenses directly related to the production of goods and services included in revenues. Cost of revenues primarily consists of cost of products, freight and duty allocated and warehouse related overhead, such as salaries and benefits, rent, warehouse supplies and depreciation expenses.
The
freight and duty costs incurred when shipping raw materials from suppliers to the Company are included in cost of revenues, amounting
to $
| F-10 |
MASSIMO GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Shipping and handling costs
Shipping
and handling costs, which include costs related to the selection of products and their delivery to customers, are presented in cost of
revenues and selling expenses. The shipping and freight expense incurred upon goods delivery to customers are included in selling expenses,
amounting to $
Advertising costs
The
Company expenses all advertising costs as incurred. Advertising costs presented in selling expenses were $
401(k) benefit plan
The
401(k) benefit plan covers substantially all employees and allows voluntary employee contributions up to the annually adjusted Internal
Revenue Service dollar limit. These voluntary contributions are matched equal to
Income taxes
Before
the Reorganization, the Company elected to be taxed as an S Corporation for federal and state income tax purposes. As an S Corporation,
the Company is not subject to federal income tax and state tax in Texas. As such, shareholders are taxed on their pro rata share of earnings
and deductions of the Company, regardless of the amount of distributions received. After the Reorganization, the Company is subjected
to U.S. federal income tax at
Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.
The Company accounts for uncertain tax positions in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic No. 740, “Accounting for Uncertainty in Income Taxes.” A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.
| F-11 |
MASSIMO GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income taxes (continued)
Significant judgment is also required in evaluating the Company’s uncertain income tax positions and provisions for income taxes. Liabilities for uncertain income tax positions are recognized based on a two-step approach. The first step is to evaluate whether an income tax position has met the recognition threshold by determining if the weight of available evidence indicates that it is more likely than not to be sustained upon examination. The second step is to measure the income tax position that has met the recognition threshold as the largest amount that is more than 50% likely of being realized upon settlement. The Company continually assesses the likelihood and amount of potential adjustments and adjusts the income tax provisions, income taxes payable and deferred income taxes in the period in which the facts that give rise to a revision become known. The Company recognizes interest and penalties related to uncertain income tax positions as interest expense.
The Company computes earnings (loss) per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. For the three and nine months ended September 30, 2024, a total of unvested Restricted Stock Units (“RSU”) were included in the computation of weighted average number of common shares for the calculation of diluted EPS. For the three and nine months ended June 30, 2023, there were dilutive shares.
Stock Based compensation
The Company follows the provisions of ASC 718, “Compensation - Stock Compensation” (“ASC 260”), which establishes the accounting for employee share-based awards. For employee share-based awards, stock based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense with graded vesting on a straight-line basis over the requisite service period for the entire award.
Segment reporting
The
Company follows ASC 280, “Segment Reporting.” The Company’s Chief Executive Officer or chief operating
decision-maker reviews the consolidated financial results when making decisions about allocating resources and assessing the
performance of the Company based on product type. As a result, the Company has identified
Concentration and risks
a. Concentration of credit risk
Assets
that potentially subject the Company to a significant concentration of credit risk primarily consist of cash and cash equivalents, accounts
receivable and other receivable included in other current assets. The maximum exposure of such assets to credit risk is their carrying
amounts at the balance sheet dates. The Company maintains all the bank accounts at financial institutions in the United States, where
there is $
.
To limit the exposure to credit risk relating to deposits, the Company primarily places cash deposits with large financial institutions in the United States. The Company conducts credit evaluations of its customers and generally does not require collateral or other security from them. The Company establishes an accounting policy to provide for current expected credit losses based on the individual customer’s financial condition, credit history, and the current economic conditions.
| F-12 |
MASSIMO GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Concentration and risks (continued)
b. Foreign Exchange Risk
Most of our raw materials are imported from China. The value of the Chinese Yuan against the U.S. dollar is affected by the changes in China and United States economic conditions. We do not believe that we currently have any significant direct foreign exchange risk and have not used any derivative financial instruments to hedge exposure to such risk.
c. Interest Rate Risk
Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. Our exposure to interest rate risk primarily relates to the interest rates from our lessors and our borrowings with banks. The shareholder loans bear no interest. Our leasing obligations’ interest rates are fixed at the commencement date of the leases. We have not been exposed to material risks due to the fact that our borrowing from the bank is not significant. And we have not used any derivative financial instruments to manage our interest risk exposure. However, we cannot provide assurance that we will not be exposed to material risks due to changes in market interest rate in the future.
d. Liquidity Risk
Liquidity risk arises through the excess of financial obligations over available financial assets due at any point in time. Our objective in managing liquidity risk is to maintain sufficient readily available reserves in order to meet our liquidity requirements at any point in time. We achieve this by maintaining sufficient cash and banking facilities.
e. Significant customers
For the three months ended September 30, 2025 and 2024, one customer accounted
for
f. Significant suppliers
For the three months ended September 30, 2025, three suppliers accounted
for
As of September 30, 2025, three suppliers individually accounted for
| F-13 |
MASSIMO GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent accounting pronouncements
The Company considers the applicability and impact of all ASUs. Management periodically reviews new accounting standards that are issued.
The Jumpstart Our Business Startups Act provides that an emerging growth company (“EGC”) as defined therein can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an EGC to delay adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has adopted the extended transition period.
In December 2023, the FASB issued ASU No. 2023-09, “Improvements to Income Tax Disclosures” (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income tax paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2025. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. This ASU will likely result in the required additional disclosures being included in the Company’s condensed consolidated financial statements, once adopted.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures, which requires disaggregated disclosure of certain costs and expenses, including purchases of inventory, employee compensation, depreciation, amortization, and depletion, within relevant income statement captions. The guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating this ASU to determine the impact of adoption on its condensed consolidated financial statements and related disclosures.
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s condensed consolidated balance sheets, statements of income and comprehensive income and statements of cash flows.
| F-14 |
MASSIMO GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3 — ACCOUNTS RECEIVABLE, NET
Accounts receivable consisted of the following:
| September 30, 2025 | December 31, 2024 (Restated) | |||||||
| Accounts receivable – third parties | $ | $ | ||||||
| Less: allowance for credit loss | ( | ) | ( | ) | ||||
| Accounts receivable, net | $ | $ | ||||||
The
Company did
The
Company recorded an addition of allowance for credit loss of $
The movement of allowance for credit loss are as follow:
| September 30, 2025 | December 31, 2024 (Restated) | |||||||
| Balance as of beginning | $ | $ | ||||||
| Additional of provision | ( | ) | ( | ) | ||||
| Ending balance | $ | $ | ||||||
The Company’s accounts receivable balances as of September 30, 2025 and December 31, 2024 are pledged for its line of credit facility at Cathay Bank.
NOTE 4 — INVENTORIES
Inventories consist of the following:
| September 30, 2025 | December 31, 2024 (Restated) | |||||||
| Products | $ | $ | ||||||
| Parts and accessories | ||||||||
| Inventories in transit | ||||||||
| Freight and duty | ||||||||
| Less: inventory allowance | ( | ) | ( | ) | ||||
| Inventories, net | $ | $ | ||||||
Impairment
provision of inventories recorded for lower of cost or net realizable value adjustments were , , $
The inventory allowance movement is as follows:
| September 30, 2025 | December 31, 2024 (Restated) | |||||||
| Beginning balance | $ | $ | ||||||
| Addition of provision | ||||||||
| Ending balance | $ | $ | ||||||
Impairment
provision of inventories were
and
for the three and nine months ended September, 2025 and a reversal of impairment provision of inventories recorded were $
Partial
inventories of $
| F-15 |
MASSIMO GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 5 — ADVANCE TO SUPPLIERS
Advance to suppliers consisted of the following:
| September 30, 2025 | December 31, 2024 | |||||||
| Advance to suppliers | $ | $ | ||||||
| Less: impairment loss allowance due to irrecoverable prepayment | ( | ) | ||||||
| Advance to suppliers, net | $ | $ | ||||||
An
impairment loss allowance of advances to suppliers of , , $
In
June 2024, the Company reached a tentative agreement regarding general settlement terms with one supplier who would make payment of approximately
$
NOTE 6 — PREPAID AND CURRENT ASSETS
Other current assets consist of the following:
| September 30, 2025 | December 31, 2024 | |||||||
| Prepayment | $ | $ | ||||||
| Other receivables | ||||||||
| Total | $ | $ | ||||||
NOTE 7 — PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consist of the following:
| September 30, 2025 | December 31, 2024 | |||||||
| Furniture and Fixtures | $ | $ | ||||||
| Machinery equipment | ||||||||
| Vehicles | ||||||||
| Electronic equipment | ||||||||
| Leasehold improvement | ||||||||
| Subtotal | ||||||||
| Less: accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
The
Company recorded depreciation expense of $
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, 2025 and 2024 amounted to $
Total
operating lease expense for the nine months ended September 30, 2025 and 2024 amounted to $
Total
accretion of finance lease liabilities for the three months ended September 30, 2025 and 2024 amounted to $
Total
accretion of finance lease liabilities for the nine months ended September 30, 2025 and 2024 amounted to $
Supplemental balance sheet information related to operating and financing leases was as follows:
Operating leases
| September 30, 2025 | December 31, 2024 | |||||||
| Operating lease liabilities - current | $ | $ | ||||||
| Operating lease liabilities - non-current | ||||||||
| Total | $ | $ | ||||||
Financing leases
| September 30, 2025 | December 31, 2024 | |||||||
| 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, 2025 | December 31, 2024 | |||||||
| 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, 2025 | December 31, 2024 | |||||||
| 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, 2025:
Operating leases
| Twelve months ending September 30, | ||||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 and after | ||||
| Total future minimum lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Present value of operating lease liabilities | $ | |||
Finance leases
| Twelve months ending September30, | ||||
| 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 —RETURN LIABILITIES
The following table shows changes in the Company’s accrued return:
| September 30, 2025 | December 31, 2024 | |||||||
| Balance as of beginning | $ | $ | ||||||
| Actual recognized products return | ( | ) | ( | ) | ||||
| Accruals for product return liabilities | ||||||||
| Ending balance | $ | $ | ||||||
NOTE 10 — WARRANTY LIABILITIES
The following table shows changes in the Company’s accrued warranties and related costs:
| September 30, 2025 | December 31, 2024 | |||||||
| Balance as of beginning | $ | $ | ||||||
| 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, 2025 | December 31, 2024 | |||||||
| Credit card liabilities | $ | $ | ||||||
| Sales Tax payable | ||||||||
| Other current liabilities | ||||||||
| Payroll liabilities | ||||||||
| Accrual on litigation (a) | ||||||||
| Total | $ | $ | ||||||
Note
(a): Balance mainly represented $
| F-19 |
MASSIMO GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 12 — RELATED PARTY TRANSACTIONS
The relationship of related parties is summarized as follow:
| Name of Related Party | Relationship to the Company | |
| David Shan | ||
| Miller Creek Holdings LLC | ||
| Vessel Technology Inc. |
(a) Due to shareholder
| September 30, 2025 | December 31, 2024 | |||||||
| Loan from David Shan, opening balance | $ | $ | ||||||
| Repayment | ( | ) | ( | ) | ||||
| 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 MidFirst Bank was closed and the Company obtained a new line of credit with Cathay Bank, which did not have such requirement. Consequently, the outstanding balance has been reclassified from non-current liabilities to current liabilities as of December 31, 2024. The Company made repayments totaling $ and $ towards this loan during the nine months ended September 30, 2025 and the year ended December 31, 2024. The Company intends to continue the repayments of the loan from Mr. Shan in the next twelve months.
(b) Loan guarantee provided by related parties
In connection with the Company’s bank borrowings, Mr. David Shan, the controlling shareholder and Massimo Group, the holding company of Massimo Motor provided an unlimited guarantee to the Company’s loan.
(c) Due from a related party
| September 30, 2025 | December 31, 2024 | |||||||
| Vessel Technology Inc. | $ | $ | ||||||
Due
from a related party was and $
| F-20 |
MASSIMO GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 13 — TAXES
Corporate Income Taxes
Massimo
Motor and Massimo Marine were incorporated in the United States and are subject to a statutory income tax rate at
As
of September 30, 2025 and December 31, 2024, 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, 2025 and 2024, 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 and nine months ended September 30, 2025 and 2024 are
The provision for income tax consists of the following:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Income tax provision – current | $ | $ | $ | $ | ||||||||||||
| Income tax (recovery) - deferred | ( | ) | ( | ) | ( | ) | ||||||||||
| Income tax 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, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| 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-21 |
MASSIMO GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 13 — TAXES
Corporate Income Taxes (continued)
The Company’s deferred tax assets and liabilities consist of the following:
| September 30, 2025 | December 31, 2024 | |||||||
| Deferred tax assets: | ||||||||
| Allowance for credit loss | $ | $ | ||||||
| Property and equipment | ||||||||
| Lease liability – operating | ||||||||
| Lease liability – financing | ||||||||
| Loss carried forward | ||||||||
| Other temporary difference | ||||||||
| Total deferred tax assets | ||||||||
| Deferred tax liabilities: | ||||||||
| Right of use assets – operating | ( | ) | ( | ) | ||||
| Right of use assets – financing | ( | ) | ( | ) | ||||
| Total deferred tax liabilities | ( | ) | ( | ) | ||||
| Deferred tax assets (liabilities), net | $ | $ | ||||||
NOTE 14 — 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. For the three and nine months ended September 30, 2025, the Company issued and shares with par value of $ out of its 2024 stock incentive plan.
As of September 30, 2025 and December 31, 2024, and common shares were issued and outstanding, respectively, with par value of $.
| F-22 |
MASSIMO GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 14 — 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 consideration
for the services, TJCM is entitled to receive shares of the Company’s common stock equivalent to a value 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 fair value on the date of grant as a component
of shareholders’ equity. The fair value of these warrants was $
As
of September 30, 2025,
For the three and nine months ended September 30, 2025, the Company incurred a net loss. Accordingly, the effect of potential common shares from unexercised stock options, unexercised warrants, and unvested Restricted Stock Units (“RSUs”) was excluded from the computation of diluted net loss per share, as their inclusion would have been anti-dilutive.
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 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 three and nine months ended September 30, 2024 respectively.
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net 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 | ||||||||||||||||
| Earnings per share – basic | $ | $ | ) | $ | ) | $ | ||||||||||
| Earnings per share – diluted | $ | $ | ) | $ | ) | $ | ||||||||||
| F-23 |
MASSIMO GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 16 — 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”) Agreements. The 2024 Plan and RSUs Agreement authorized the award of stock options, RSUs to employees and directors.
The Company recorded , $, $ and $ stock-based compensation expense in connection with RSUs for three and nine months ended September 30, 2025 and 2024, respectively.
Number of RSUs | Weighted Average Grant Date Fair Value | Weighted Average Remaining Life in Years | ||||||||||
| Unvested at December 31, 2024 | $ | |||||||||||
| Vested | ( | ) | - | |||||||||
| Unvested at September 30, 2025 | $ | - | ||||||||||
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 .
As of September 30, 2025, intrinsic value of the options is .
The Company recorded $, $, $ and $ stock-based compensation expense in connection with options for three and nine months ended September 30, 2025 and 2024, respectively.
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Life in Years | ||||||||||
| Unvested balance, December 31, 2024 | $ | |||||||||||
| Exercisable, December 31, 2024 | ||||||||||||
| Granted | - | |||||||||||
| Cancelled | - | |||||||||||
| Vested | - | |||||||||||
| Unvested balance, September 30, 2025 | $ | |||||||||||
| Exercisable, September 30, 2025 | $ | |||||||||||
As of September 30, 2025, the total unrecognized compensation cost related to outstanding RSUs and stock options was and $, which the Company expects to recognize over a weighted-average period of nil and year.
| F-24 |
MASSIMO GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 17 — 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 condensed consolidated balance sheets or results of operations or liquidity as of September 30, 2025 and December 31, 2024, except the two discussed below.
Litigation
Taizhou Nebula Power Co. Ltd. v. Massimo Motor Sports, LLC
In
September 2020, Taizhou Nebula Power Co. Ltd. (“Nebula”) filed suit against us in the Dallas County District of Texas. Nebula
has alleged that we owe them $
Zhejiang Qunying Vehicle Co., Ltd. v. Cho International, Inc
On
September 5, 2023, Zhejiang Qunying Vehicle Co., Ltd. (“Zhejiang”) filed suit against the Company and ten other corporate
entities in the Superior Court of the State of California for Orange County. Zhejiang alleges claims of approximately $
NOTE 18 — 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 two reporting segments. The Company is primarily engaged in the business of manufacturing and sales of a wide selection of farm and ranch tested UTVs, recreational ATVs, and Pontoon Boats. The Company has identified that the Company engages in two distinct business activities, generates revenues from different products, and individually holds assets exceeding 10% of the Group’s consolidated total. Hence, the Company concludes that it has two reporting segments.
The following table presents sales by product categories for the three and nine months ended September 30, 2025 and 2024, respectively:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| UTVs, ATVs and e-bikes | $ | $ | $ | $ | ||||||||||||
| Pontoon Boats | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
NOTE 19 — SUBSEQUENT EVENTS
The Company evaluated all events and transactions that occurred after September 30, 2025 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.
On October 22, 2025, the Company announced a strategic partnership with a supplier in Vietnam to support the company’s ongoing initiatives to enhance production flexibility and expand capacity for its rapidly growing lineup of electric vehicles. The new 2026 MVR Golf Cart and MVR Cargo Max Electric Utility Cart has begun manufacturing in Vietnam.
The Board of Directors held a meeting on November 6, 2025, during which it approved the inclusion of Bitcoin as part of the Company’s long-term treasury reserve strategy. The Bitcoin acquisitions will be funded using the Company’s current operating cash flow and will be held in an institutional-grade, qualified custodial account.
| F-25 |
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/A for the fiscal year ended December 31, 2024 (“fiscal 2024”), as filed with the Securities and Exchange Commission (the “SEC”), on March 26, 2025 and as amended on May 20, 2025. 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 currently generate most of our revenues from the sales of UTVs and ATVs, which represented 96.4% and 98.0% of total revenue for the three months ended September 30, 2025 and 2024, respectively. For the nine months ended September 30, 2025 and 2024, revenue from sales of UTVs and ATVs represented 97.2% and 96.5% of total revenue, respectively.
We also generate revenue from the sales of Pontoon Boats, which represented 3.6% and 2.0% of our revenue for the three months ended September 30, 2025 and 2024, respectively. For the nine months ended September 30, 2025 and 2024, revenue from the sales of Pontoon Boats represented 2.8% and 3.5% 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 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 whom 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 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 Pontoon Boats which we manufacture in our Dallas facility. For the nine months ended September 30, 2025, we purchased approximately 82% of our products from two 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 and 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 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, 2025 and 2024, our revenue generated from Massimo Marine was approximately 3.6%, 2.8%, 2.0% and 3.5% of our total revenue, respectively. |
| ● | Uncertainty and impacts from recent US tariff policies: Governments have, and may continue to, turned to trade barriers to protect their domestic industries against foreign imports, thereby depressing shipping demand. Under the current U.S. administration, there is significant and increasing uncertainty about the future economic relationship between the United States, China, and other exporting countries, including with respect to trade policies, treaties, government regulations, and tariffs. In January 2025 the United States announced the commencement of additional substantial tariffs on imports from various countries, including China, Canada and Mexico. In February, the U.S. imposed 10% new tariff on imports from China. On March 4, 2025, the U.S. imposed 25% tariffs on imports from Mexico and Canada and enacted an extra 10% tariff on Chinese imports, therefore doubling the previously levied tariff from 10% in February to an additional 20% on imports from China. In response, China announced retaliatory tariffs on U.S. agricultural goods and export restrictions to the U.S., in addition to filing a lawsuit with the World Trade Organization.
On April 2, 2025, President Trump announced new tariffs on many U.S. trading partners, including a 34% tax on imports from China. The 34% tariff on imports from China was in addition to the 20% tariff announced. Protectionist developments, or the perception that they may occur, may have an effect on global economic conditions, and may reduce global trade.
On April 9, 2025, President Trump increased tariffs on Chinese imports, culminating in a total tariff rate of 145%. These increased tariff is aimed at addressing trade imbalances and other concerns. On April 10, 2025, China raised tariff on all U.S. goods to 84% and further increased to 125% on April 12, 2025.
On May 14, 2025, the United States and China have entered a 90-day trade truce, temporarily easing the heightened tariffs, and agreed to reduce tariffs for a 90-day period. The U.S. lowered tariffs on Chinese imports from a peak of 145% to 30%, while China reduced its duties on U.S. goods from 125% to 10%.
Although we are in the middle of a trade truce period, increasing trade protectionism may cause an increase in (i) the cost of goods exported from regions globally, particularly from the Asia-Pacific region, (ii) the length of time required to transport goods and (iii) the risks associated with exporting goods. Such increases may further reduce the quantity of goods to be shipped, shipping time schedules, voyage costs and other associated costs, which could have an adverse impact on our customers’ business, operating results and financial condition and could thereby affect their ability to make timely payments to us and their orders quantity. This could have a material adverse effect on our business, operating results, cash flows and financial condition. |
| 2 |
Results of Operations
For the Three and Nine Months Ended September 30, 2025 and 2024
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, 2025 and 2024 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, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenues | $ | 16,990,855 | $ | 25,602,310 | $ | 50,808,495 | $ | 91,156,640 | ||||||||
| Cost of revenues | 9,856,601 | 18,649,995 | 32,583,174 | 62,253,681 | ||||||||||||
| Gross profit | 7,134,254 | 6,952,315 | 18,225,321 | 28,902,959 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling expenses | 1,163,078 | 2,628,915 | 5,187,459 | 7,936,761 | ||||||||||||
| General and administrative expenses | 3,395,821 | 3,895,232 | 12,040,587 | 12,096,874 | ||||||||||||
| Impairment loss on supplier deposit due to lawsuit | - | 29,883 | - | 772,780 | ||||||||||||
| Research and development expenses | 786,650 | 94,771 | 1,772,603 | 257,021 | ||||||||||||
| Total operating expenses | 5,345,549 | 6,648,801 | 19,000,649 | 21,063,436 | ||||||||||||
| Income from operations | 1,778,705 | 303,514 | (775,328 | ) | 7,839,523 | |||||||||||
| Other income (expense): | ||||||||||||||||
| Other income, net | 147,946 | 210,701 | 253,246 | 590,538 | ||||||||||||
| Loss on litigation | - | (3,573,651 | ) | - | (3,573,651 | ) | ||||||||||
| Interest expenses | 373 | (64,462 | ) | (64,421 | ) | (268,803 | ) | |||||||||
| Total other income (expense), net | 148,319 | (3,427,412 | ) | 188,825 | (3,251,916 | ) | ||||||||||
| Income before income taxes | 1,937,024 | (3,123,898 | ) | (586,503 | ) | 4,587,607 | ||||||||||
| Provision for income taxes | 410,617 | (621,665 | ) | (101,882 | ) | 1,092,528 | ||||||||||
| Net income and comprehensive income | $ | 1,526,407 | $ | (2,502,233 | ) | $ | (484,621 | ) | $ | 3,495,079 | ||||||
| Earnings per Share – basic | 0.04 | (0.06 | ) | (0.01 | ) | 0.09 | ||||||||||
| Weighted average shares outstanding – basic * | 41,546,700 | 41,325,388 | 41,591,331 | 40,863,370 | ||||||||||||
| Earnings per Share –diluted | $ | 0.04 | $ | (0.06 | ) | $ | (0.01 | ) | $ | 0.09 | ||||||
| Weighted average shares outstanding –diluted* | 41,640,950 | 41,325,388 | 41,591,331 | 41,005,556 | ||||||||||||
Supported by steady upward sales increase and effective operating expense controls, the Company’s financial performance improved significantly from the first to the third quarter of 2025. The company’s revenue showed an overall upward trend, increasing from $14.9 million in Q1 to $18.9 million in Q2, before slightly edging down to $17.0 million in Q3. The above fluctuation in revenue is primarily attributed to the continued recovery in sales, coupled with a temporary decline in sales volume resulting from a modest price increase implemented in the third quarter.
From the first to the third quarter of 2025, the Company’s gross profit showed a steady upward trend, increasing from $4.2 million in Q1 to $6.9 million in Q2 and reaching $7.1 million in Q3. This improvement was primarily driven by higher sales prices and enhanced cost control measures on the purchasing side.
As a result, the Company’s net profit (loss) has been increasing steadily from the first quarter to the third quarter of 2025, the company transitioned from a net loss of 2.1 million in Q1 to turning a profit in Q2 with a net income of 0.07 million. By Q3, profitability strengthened further, with net profit rising to $1.5 million.
Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024
| For the Three months ended September 30, | ||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||
| Amount | As % of Sales | Amount | As % of Sales | Amount Increase (Decrease) | Percentage Increase (Decrease) | |||||||||||||||||||
| Sales | $ | 16,990,855 | 100.0 | % | $ | 25,602,310 | 100.00 | % | $ | (8,611,455 | ) | (33.6 | )% | |||||||||||
| Cost of sales | 9,856,601 | 58.0 | % | 18,649,995 | 72.80 | % | (8,793,394 | ) | (47.1 | )% | ||||||||||||||
| Gross profit | 7,134,254 | 42.0 | % | 6,952,315 | 27.20 | % | 181,939 | 2.6 | % | |||||||||||||||
| Operating expenses | - | - | ||||||||||||||||||||||
| Selling expenses | 1,163,078 | 6.8 | % | 2,628,915 | 10.30 | % | (1,465,837 | ) | (55.8 | )% | ||||||||||||||
| General and administrative expenses | 3,395,821 | 20.0 | % | 3,895,232 | 15.20 | % | (499,411 | ) | (12.8 | )% | ||||||||||||||
| Impairment loss on supplier deposit due to lawsuit | - | 0.0 | % | 29,883 | 0.10 | (29,883 | ) | (100.0 | )% | |||||||||||||||
| Research and development expenses | 786,650 | 4.6 | % | 94,771 | 0.40 | % | 691,879 | 730.1 | % | |||||||||||||||
| Total operating expenses | 5,345,549 | 31.5 | % | 6,648,801 | 26.00 | % | (1,303,252 | ) | (19.6 | )% | ||||||||||||||
| Income from operations | 1,788,705 | 10.5 | % | 303,514 | 1.20 | % | 1,485,191 | 489.3 | % | |||||||||||||||
| Other income (expenses) | - | - | ||||||||||||||||||||||
| Other income (expenses), net | 147,946 | (0.9 | )% | 210,701 | 0.80 | % | (62,755 | ) | (29.8 | )% | ||||||||||||||
| Loss on litigation | - | 0.0 | % | (3,573,651 | ) | (14.0 | ) | 3,573,651 | (100.0 | )% | ||||||||||||||
| Interest expense | 373 | 0.0 | % | (64,462 | ) | (0.3 | )% | 64,835 | (100.6 | )% | ||||||||||||||
| Total other income/(expenses) | 148,319 | 0.9 | % | (3,427,412 | ) | (13.4 | )% | 3,575,731 | (104.3 | )% | ||||||||||||||
| (Loss) Income before income taxes | 1,973,024 | 11.4 | % | (3,123,898 | ) | (12.2 | )% | 5,060,922 | (162.0 | )% | ||||||||||||||
| (Recovery of) Provision for income taxes | 410,617 | 2.4 | % | (621,665 | ) | (2.4 | )% | 1,032,282 | (166.1 | )% | ||||||||||||||
| Net (loss) income | $ | 1,526,407 | 9.0 | % | $ | (2,502,233 | ) | (9.8 | )% | $ | 4,028,640 | (161.0 | )% | |||||||||||
| 3 |
Revenues
Revenues decreased by $7.9 million, or 30.7%, from $25.6 million for the three months ended September 30, 2024, to $17.0 million for the three months ended September 30, 2025. The decrease in revenue was primarily due to the contraction of the U.S. economy and reduced consumer spending. New tariffs contributed to rising inflation, with U.S. consumer inflation reported at 2.8% year-over-year in February 2025, and expectations of further increases. This inflationary environment, coupled with high, long-lasting interest rates, led to reduced spending and demand from retail end customers for discretionary goods, particularly luxury items like yachts and pontoon boats. At the same time, the uncertainty surrounding tariffs, trade restrictions, and potential trade barriers stemming from President Trump’s policies, which were further exacerbated in January 2025, caused our major big-box customers to reduce their orders.
Revenue by Type
| For the three months ended September 30, | ||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||
| Revenue category | Revenue | % of total Revenue | Revenue | % of total Revenue | Amount Increase (Decrease) | Percentage Increase (Decrease) | ||||||||||||||||||
| UTVs, ATVs and e-bikes | $ | 16,375,901 | 96.4 | % | $ | 25,084,727 | 98.0 | % | $ | (8,708,826 | ) | (34.7 | )% | |||||||||||
| Pontoon Boats | 614,954 | 3.6 | % | 517,583 | 2.0 | % | 97,371 | 0.4 | % | |||||||||||||||
| Total | $ | 16,990,855 | 100.0 | % | $ | 25,602,310 | 100.0 | % | $ | (8,611,455 | ) | (34.3 | )% | |||||||||||
Revenue from sales of UTVs, ATVs and e-bikes
Revenue from sales of UTVs, ATVs and electric bikes decreased by $8.7 million, or 34.7%, from $25.1 million for the three months ended September 30, 2024 to $16.4 million for the three months ended September 30, 2025. The decrease in revenue was primarily attributed to a decline in sales volume from big box stores. Due to the uncertainty surrounding tariffs, trade restrictions, and potential trade barriers stemming from President Trump’s policies, which were further exacerbated in January 2025. These geopolitical factors have created a volatile market environment, leading to reduced confidence among our major retail customers, especially big-box stores that typically place large volume orders.
The uncertainty surrounding future tariffs and trade restrictions has made it difficult for these big-box customers to predict costs and plan inventories and orders effectively. As a result, many of them have taken a more conservative approach to ordering, significantly reducing their purchase volumes in anticipation of higher costs and possible delays in shipping. This has further contributed to the overall decline in sales.
Additionally, ongoing inflationary pressures, coupled with the prolonged impact of high interest rates, have put a strain on consumer spending. These macroeconomic factors have led to decreased demand for non-essential and higher-priced goods, including recreational vehicles like UTVs, ATVs, and electric bikes. Retailers, in turn, have been cautious about placing orders for items that may not move as quickly due to these reduced consumer spending patterns. The combination of geopolitical and economic uncertainties has resulted in an environment where both consumers and retailers are hesitant to make significant purchasing decisions, leading to the sharp decline in sales of these products.
Revenue from sales of Pontoon Boats
Revenue from sales of Pontoon Boats increased by $0.1 million, or 0.4%, from $0.5 million for the three months ended September 30, 2024 to $0.6 million for the three months ended September 30, 2025. Although an industry-wide downturn caused by high interest rates and inflation, which have impacted the consumption of non-essential goods. In 2025, we shifted our sales strategy from dealership channels back to direct engagement with retail customers. Through targeted social media campaigns and community-based marketing initiatives, we successfully attracted some local retail customers, resulting in a modest improvement in sales performance.
Gross profit
Our gross profit increased by $0.2 million, or 2.6%, from $7.0million in the third quarter of fiscal 2024, to $7.1 million in the third quarter of fiscal 2025. The gross profit margin was 42.0% in the third quarter of fiscal 2025, compared with 27.2% in the same period last year. The increase in gross margin was mainly due to an increase in sales compared to the first quarter as recovered to last year’s levels in September, lifting the quarterly average and due to the increasing higher sales price compared with the last year’s
Our cost and gross profit by revenue types are as follows:
For the three months ended September 30, 2025 | For the three months ended September 30, 2024 | |||||||||||||||||||||||||||||||||||
| 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 | $ | 9,567,353 | $ | 6,808,548 | 41.6 | $ | 18,139,031 | $ | 6,945,696 | 27.7 | $ | (8,571,678 | ) | $ | (137,148 | ) | 13.9 | |||||||||||||||||||
| Pontoon Boats | 289,248 | 325,705 | 53.0 | 510,964 | 6,619 | 1.3 | (221,715 | ) | 319,086 | 51.7 | ||||||||||||||||||||||||||
| Total | $ | 9,856,601 | $ | 7,134,253 | 42.0 | $ | 18,649,995 | $ | 6,952,315 | 27.2 | $ | (8,793,393 | ) | $ | 181,938 | 14.8 | ||||||||||||||||||||
| 4 |
The cost of revenue on UTVs, ATVs and e-bikes decreased by $8.6 million, or 47.3%, from $18.1 million in the third quarter of fiscal 2024 to $9.6 million in the third quarter of fiscal 2025, and the gross profit decreased by $0.13 million, or 2.0%, from $7.0 million in the third quarter of fiscal 2024 to $6.8 million in the third quarter of fiscal 2025. The gross margin increased by 13.9%, from 27.7% in the third quarter of fiscal 2024 to 41.6% in the third quarter of fiscal 2025. The decrease in the cost of revenue was primarily due to decreased product purchase cost, resulting from the decrease in sales volume. The increase in gross margin was primarily a result of selling some inventory at lower prices at our seasonal promotions in the third quarter of fiscal 2024, while the unit sales price is higher in the same period of fiscal 2025.
The cost of revenue on Pontoon Boats decreased by $0.22 million, or 43.4%, from $0.51 million in the third quarter of fiscal 2024 to $0.29 million in the third quarter of fiscal 2025, and the gross profit increased by $0.3 million, or 4,820.4%, from $0.01 million in the third quarter of fiscal 2024 to $0.32 million in the third quarter of fiscal 2025. The gross margin increased by 51.7%, from 1.3% in the third quarter of fiscal 2024 to 53.0% in the third quarter of fiscal 2025. The increase in gross margin was primarily because of strategically focusing on clearing to sell Pontoon Boats in the third of fiscal 2025 compared to that of fiscal 2024.
Selling expenses
Our selling expenses mainly include warranty expense, advertising and promotion expense, shipping and handling fee and merchant service fee. These expenses decreased by $1.4 million, or 55.8%, from $2.6 million in the third quarter of fiscal 2024 to $1.2 million in the third quarter of fiscal 2025, representing 10.3% and 6.8% of our total revenue in the third quarter of fiscal 2025 and fiscal 2024, respectively. The decrease was primarily driven by a $0.3 million reduction in warranty expenses, reflecting improvements in quality control and customer service, and by a $0.6 million reduction in shipping and handling fee, reflecting the decrease of sales in the third quarter of fiscal 2025.
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 decreased by $0.5 million, or 12.8%, from $3.9 million in the third quarter of fiscal 2024 to $3.4 million in the third quarter of fiscal 2025. The decrease was mainly due to increased rent expense, which were partly offset by a decrease in professional and legal fees. Our general and administrative expenses represented 20.7% and 15.2% of our total revenue in the third quarter of fiscal 2025 and the third quarter of fiscal 2024, respectively.
Our salaries and benefits were $1.4 million and $1.3 million, representing 38.1% and 39.1% of our total general and administrative expenses in the third quarter of fiscal 2025 and in the third quarter of fiscal 2024, respectively. The slight decrease in balance was mainly due to increase for one-off salaries compensation paid to an employee as result of employment termination and the decrease of basic salaries and benefits due to the employment termination.
Our rent expenses increased by $0.5 million or 95.1%, from $0.6 million in the third quarter of fiscal 2024 to $1.1 million in the third quarter of fiscal 2025, representing 30.1% and 15.4% of our total general and administrative expenses in the third quarter of fiscal 2025 and 2024, respectively. Our rent expense increased due to the higher renewal rent rate and the addition of a new lease agreement in the first quarter of fiscal 2025.
Our professional fees decreased by $0.55 million or 73.5%, from $0.75 million in the third quarter of fiscal 2024 to $0.20 million in the third quarter of fiscal 2025, representing 5.7% and 21.5% of our total general and administrative expenses in the third quarter of fiscal 2025 and 2024, respectively. The decrease was primarily attributable to fewer ongoing lawsuits cases that require legal consulting service in the third quarter of fiscal 2025 when compared with same period in last year.
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. Massimo filed its appellant’s brief on January 31, 2025. Nebula filed its appellee’s brief on May 1, 2025. Massimo intends to continue vigorously defending the lawsuit and pursuing its appeal.
Interest income (expenses)
Our interest expense turned from $2,943 in the third quarter of fiscal 2024 to an interest income of $343 in the third quarter of fiscal 2025. The decrease in interest expense was mainly because we did not have any bank loans during this period
| 5 |
Other income, net
Our other income was $147,946 in the third quarter of fiscal 2025, as compared with $210,701 in the third quarter of fiscal 2024, a decrease of $62,755, or 29.8%. The decrease was primarily related to we did not have such writing off a long outstanding negative balance of account receivable compared with the same period of the previous year.
Income before income taxes
We had an increase of $4.9 million in income before income taxes from a loss of $3.1 million in the third quarter of fiscal 2024 to approximately a profit of $1.9 million in the third quarter of fiscal 2025, respectively. The increase was primarily attributable to the fluctuation of gross profits and operating expenses discussed in the foregoing part.
Provision for income taxes
The income tax expense was approximately $0.4 million for the third quarter of fiscal 2025 and the income tax benefits was approximately $0.6 million for the third quarter of fiscal 2024, respectively. The increase in balance was mainly due to the increase in taxable income as discussed above.
Net income
We had net income of $1.5 million in the third quarter of fiscal 2025 compared to a net loss of $2.5 million in the third quarter of fiscal 2024, respectively. The increase was primarily due to fluctuation of revenues and gross profit, offset by a decrease in operating expenses as discussed above.
Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024
| For the nine months ended September 30, | ||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||
| Amount | As % of Sales | Amount | As % of Sales | Amount Increase (Decrease) | Percentage Increase (Decrease) | |||||||||||||||||||
| Sales | $ | 50,808,495 | 100.0 | % | $ | 91,156,640 | 100.0 | % | $ | (40,348,145 | ) | (44.3 | )% | |||||||||||
| Cost of sales | 32,583,174 | 64.1 | % | 62,253,681 | 68.3 | % | (29,670,507 | ) | (47.7 | )% | ||||||||||||||
| Gross profit | 18,225,321 | 35.9 | % | 28,902,959 | 31.7 | % | (10,677,638 | ) | (36.9 | )% | ||||||||||||||
| Operating expenses | - | - | ||||||||||||||||||||||
| Selling expenses | 5,187,459 | 10.2 | % | 7,936,761 | 8.7 | % | (2,749,302 | ) | (34.6 | )% | ||||||||||||||
| General and administrative expenses | 12,040,587 | 23.7 | % | 12,096,874 | 13.3 | % | (56,287 | ) | (0.5 | )% | ||||||||||||||
| Impairment loss on supplier deposits | - | 0.0 | % | 772,780 | 0.8 | % | (772,780 | ) | (100.0 | )% | ||||||||||||||
| Research and development expenses | 1,772,603 | 3.5 | % | 257,021 | 0.3 | % | 1,515,582 | 589.7 | % | |||||||||||||||
| Total operating expenses | 19,000,649 | 37.4 | % | 21,063,436 | 23.1 | % | (2,062,787 | ) | (9.8 | )% | ||||||||||||||
| Income from operations | (775,328 | ) | (1.5 | )% | 7,839,523 | 8.6 | % | (8,641,851 | ) | (109.9 | )% | |||||||||||||
| Other income (expenses) | ||||||||||||||||||||||||
| Other income, net | 253,246 | 0.5 | % | 590,538 | 0.6 | % | (337,292 | ) | (57.1 | )% | ||||||||||||||
| Loss on litigation | - | 0.0 | % | (3,573,651 | ) | (3.9 | ) | 3,573,651 | (100.0 | )% | ||||||||||||||
| Interest expenses | (64,421 | ) | (0.1 | )% | (268,803 | ) | (0.3 | )% | 204,382 | (76.0 | )% | |||||||||||||
| Total other income/(expenses) | 188,825 | 0.4 | % | (3,251,916 | ) | (3.6 | )% | 3,440,741 | (105.8 | )% | ||||||||||||||
| Income before income taxes | (586,503 | ) | (1.2 | )% | 4,587,607 | 5.00 | % | (5,174,110 | ) | (112.8 | )% | |||||||||||||
| Provision for income taxes | (101,882 | ) | (0.2 | )% | 1,092,528 | 1.20 | % | (1,194,410 | ) | (109.3 | )% | |||||||||||||
| Net income | $ | (484,621 | ) | (1.0 | )% | $ | 3,495,079 | 3.80 | % | $ | (3,979,700 | ) | (113.9 | )% | ||||||||||
| 6 |
Revenue
Revenues decreased by $40.3 million, or 44.3%, from $91.2 million for the nine months ended September 30, 2024, to $50.9 million for the nine months ended September 30, 2025. The decrease in revenue was primarily due to the contraction of the U.S. economy and reduced consumer spending. New tariffs contributed to rising inflation, with U.S. consumer inflation reported at 2.8% year-over-year in February 2025, and expectations of further increases. This inflationary environment, coupled with high, long-lasting interest rates, led to reduced spending and demand from retail end customers for discretionary goods, particularly luxury items like yachts and pontoon boats. At the same time, the uncertainty surrounding tariffs, trade restrictions, and potential trade barriers stemming from President Trump’s policies, which were further exacerbated in January 2025, caused our major big-box customers to reduce their orders.
Revenue by Type
| For the nine months ended September 30, | ||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||
| Revenue category | Revenue | % of total Revenue | Revenue | % of total Revenue | Amount Increase (Decrease) | Percentage Increase (Decrease) | ||||||||||||||||||
| UTVs, ATVs and e-bikes | $ | 49,408,096 | 97.2 | % | $ | 88,011,145 | 96.5 | % | $ | (38,603,049 | ) | (43.9 | )% | |||||||||||
| Pontoon Boats | 1,400,399 | 2.8 | % | 3,145,495 | 3.5 | % | (1,745,096 | ) | (55.5 | )% | ||||||||||||||
| Total | $ | 50,808,495 | 100.0 | % | $ | 91,156,640 | 100.0 | % | $ | (40,348,145 | ) | (44.3 | )% | |||||||||||
Revenue from sales of UTVs, ATVs and e-bikes
Revenue from sales of UTVs, ATVs and e-bikes decreased by $38.6 million, or 43.9%, from $88.0 million for the nine months ended September 30, 2024 to $49.4 million for the nine months ended September 30, 2025. The decrease in revenue was primarily attributed to a decline in sales volume from big box stores. Due to the uncertainty surrounding tariffs, trade restrictions, and potential trade barriers stemming from President Trump’s policies, which were further exacerbated in January 2025. These geopolitical factors have created a volatile market environment, leading to reduced confidence among our major retail customers, especially big-box stores that typically place large volume orders.
The uncertainty surrounding future tariffs and trade restrictions has made it difficult for these big-box customers to predict costs and plan inventories and orders effectively. As a result, many of them have taken a more conservative approach to ordering, significantly reducing their purchase volumes in anticipation of higher costs and possible delays in shipping. This has further contributed to the overall decline in sales.
Additionally, ongoing inflationary pressures, coupled with the prolonged impact of high interest rates, have put a strain on consumer spending. These macroeconomic factors have led to decreased demand for non-essential and higher-priced goods, including recreational vehicles like UTVs, ATVs, and electric bikes. Retailers, in turn, have been cautious about placing orders for items that may not move as quickly due to these reduced consumer spending patterns. The combination of geopolitical and economic uncertainties has resulted in an environment where both consumers and retailers are hesitant to make significant purchasing decisions, leading to the sharp decline in sales of these products.
Revenue from sales of Pontoon Boats
Revenue from sales of Pontoon Boats decrease by $1.7 million, or 55.5%, from $3.1 million for the nine months ended September 30, 2024 to $1.4 million for the nine months ended September 30, 2025. The decrease was primarily driven by an industry-wide downturn caused by high interest rates and inflation, which have impacted the consumption of non-essential goods. In addition, high rejection rates from floorplan financing providers such as Northpoint have directly affected the inventory level that dealers can maintain, thereby reducing our sales in this category. This trend aligns with broader industry challenges. Ongoing economic uncertainty in the U.S. has further reduced discretionary spending on luxury boats, negatively affecting sales of high-end models such as our yacht.
Gross profit
Our gross profit decreased by $10.7 million, or 36.9%, from $28.9 million for the nine months ended September 30, 2024 to $18.2 million for the nine months ended September 30, 2025. Gross profit margin was 35.9% for the nine months ended September 30, 2025, compared with 31.7% in the same period last year. The decrease in gross margin was mainly due to an increase in freight absorbed in cost of sales.
Our cost and gross profit by revenue types are as follows:
For the nine Months Ended September 30, 2025 | For the nine Months Ended September 30, 2024 | |||||||||||||||||||||||||||||||||||
| 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 | $ | 31,424,073 | $ | 17,984,023 | 36.4 | $ | 59,598,896 | $ | 28,412,249 | 32.3 | $ | (28,174,823 | ) | $ | (10,428,226 | ) | (36.7 | ) | ||||||||||||||||||
| Pontoon Boats | 1,943,208 | 494,098 | 20.3 | 2,654,785 | 490,710 | 15.6 | (711,577 | ) | 3,388 | 0.7 | ||||||||||||||||||||||||||
| Subtotal | 33,367,281 | 18,478,121 | 35.6 | 62,253,681 | 28,902,959 | 31.7 | (28,886,400 | ) | (10,424,838 | ) | (36.1 | ) | ||||||||||||||||||||||||
| Cost of inventory recovered from litigation | (784,107 | ) | (252,800 | ) | 24.4 | - | - | - | (784,106 | ) | (252,801 | ) | - | |||||||||||||||||||||||
| Total | $ | 32,583,174 | $ | 18,225,321 | 35.9 | $ | 62,253,681 | $ | 28,902,959 | 31.7 | $ | (29,670,507 | ) | $ | (10,677,638 | ) | (36.9 | ) | ||||||||||||||||||
| 7 |
Cost of revenue on UTVs, ATVs and e-bikes decreased by $28.2 million, or 47.3%, from $59.6 million for the nine months ended September 30, 2024, to $31.4 million for the nine months ended September 30, 2025 and gross profit decreased by $10.4 million, or 36.7%, from $28.4million for the nine months ended September 30, 2024, to $18.0 million for the nine months ended September 30, 2025. Gross margin slightly increased by 4.1%, from 32.3% for the nine months ended September 30, 2024 to 36.4% for the nine months ended September 30, 2025. The decrease in the cost of revenue was primarily due to decreased product purchase cost, resulting from the decrease in sales volume. The increase 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, while the unit sales price is higher in the same period of fiscal 2025.
Cost of revenue on Pontoon Boats decreased by $0.7 million, or 22.8%, from $2.6 million for the nine months ended September 30, 2024, to $1.9 million for the nine months ended September 30, 2025, and gross profit almost stayed the same for the nine months ended September 30, 2024 and 2025. Gross margin increased by 4.7%, from 15.6% for the nine months ended September 30, 2024, to 20.3% for the nine months ended September 30, 2025.
Selling expenses
Our selling expenses mainly include warranty expense, advertising and promotion expense, shipping and handling fee and merchant service fee. They decreased by $2.7 million, or 34.6%, from $7.9 million for the nine months ended September 30, 2024, to $5.2 million for the nine months ended September 30, 2025, representing 10.2% and 8.7% of our total revenue for the nine months ended September 30, 2025 and 2024, respectively. The decrease was primarily driven by a $1.0 million reduction in warranty expenses, reflecting improvements in quality control and customer service and the decrease of sales volume. The launch of a traveling technician team enabled faster and more efficient responses to customer service requests, which helped lower overall repair costs. The shipping and handling fees decreased for $1.5 million which is consist with the decrease in sales.
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 decreased from $12.1 million, for the nine months ended September 30, 2024, to $12.0 million for the nine months ended September 30, 2025. The increase was mainly due to increased salaries and benefit and rent expense, partly offset by a decrease in professional fees. Our general and administrative expenses represented 23.7% and 13.3% of our total revenue for the nine months ended September 30, 2025 and 2024, respectively.
Our salaries and benefits were $4.7 million and $4.2 million, representing 38.5% and 34.8% of our total general and administrative expenses for the nine months ended September 30, 2025 and 2024, respectively. The increase in the balance was mainly due to a severance package of $0.5 million paid to an employee as result of employment termination.
Our rent expenses increased by $0.8 million or 45.5%, from $1.7 million for the nine months ended September 30, 2024, to $2.5 million for the nine months ended September 30, 2025, representing 21.2% and 14.6% of our total general and administrative expenses for the nine months ended September 30, 2025 and 2024, respectively. Our rent expense increased due to the higher renewal rent rate and the addition of a new lease agreement for the nine months ended September 30, 2025, compared to the same period last year.
Our professional and legal fees decreased by $0.9 million or 44.8%, from $2.1 million for the nine months ended September 30, 2024, to $1.2 million for the nine months ended September 30, 2025, representing 9.4% and 17.1% of our total general and administrative expenses for the nine months ended September 30, 2025 and 2024, respectively. The decrease was primarily attributable to fewer ongoing lawsuits cases that require legal consulting service for the nine months ended September 30, 2025 when compared with same period in last year, partly offset by increased in professional fee that are related to being a public company.
| 8 |
Impairment loss on supplier deposit due to lawsuit
During the nine months ended September 30, 2024, we recorded a one-time impairment loss of approximately $0.7 million on advanced deposit to one supplier. In September 2024, we reached a tentative agreement regarding general settlement terms with one suppler who would pay approximately $342,000 including interest to resolve the claim. Our prepayment of $1.1 million would be considered irrecoverable. Therefore, we wrote off the approximately $742,000 of prepayment to the supplier during the three months ended September 30, 2024. During the nine months ended September 30, 2025, we had no impairment loss of prepayment.
Interest expenses
Our interest expense decreased by $0.2 million or 76.0%, from $268,803 for the nine months ended September 30, 2024, to $64,421 for the nine months ended September 30, 2025. The decrease in interest expense was mainly because we did not have any bank loans during the period but we recorded a bank charge $50,409 to establish a letter of credit.
Other income, net
Our other income of $253,246 for the nine months ended September 30, 2025, compared with $590,538 for the nine months ended September 30, 2024, decreased by $337,292, or 57.1%. We wrote off a vendor’s account payable balance as a result of a settlement between the vendor and the Company for the nine months ended September 30, 2024, which was one-off income. However, we did not have such income in the current same period.
(Loss)Income before income taxes
We had an decrease of $5.2 million in income (loss) before income taxes from a $4.6 million income for the nine months ended September 30, 2024, to approximately a loss of $0.6 million for the nine months ended September 30, 2025. The decrease was primarily attributable to the fluctuation of gross profits and operating expenses discuss in the foregoing part.
Provision for income taxes
We did not have current income tax for the nine months ended September 30, 2025 due to net loss position and we recognized a deferred income tax recovery of $0.10 million due to temporary differences recognized and net operating loss carried forward. For the nine months ended September 30, 2024, we had income tax of $1.1 million arising from net assessable income and the change of deferred tax assets.
Net income
Net loss was $0.48 million for the nine months ended September 30, 2025, compared with net income of $3.50 million for the same period last year. The decrease was primarily due to fluctuation of revenues and gross profit, offset by a decrease in operating expenses as discussed above.
Cash Flows
For the Periods Ended September 30, 2025 and 2024
The following table sets forth summary of our cash flows for the periods indicated:
| Periods Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Net cash used in operating activities | $ | (4,098,065 | ) | $ | (2,396,923 | ) | ||
| Net cash used in investing activities | (65,361 | ) | (262,163 | ) | ||||
| Net cash provided by (used in) financing activities | 3,451,044 | 3,617,055 | ||||||
| Net increase (decrease) in cash and cash equivalents | (7,614,470 | ) | 957,969 | |||||
| Cash and cash equivalents, beginning of the period | 10,210,084 | 765,814 | ||||||
| Cash and cash equivalents, end of the period | $ | 2,595,614 | $ | 1,723,783 | ||||
Operating Activities
Net cash used in operating activities was approximately $4.1 million during the nine months ended September 30, 2025, compared to net cash used in operating activities of approximately $2.4 million during the nine months ended September 30, 2024, representing an increase in the net cash used in operating activities of $1.7 million during the nine months ended September 30, 2025 compared with the same period in 2024. The decrease is primarily due to the following:
| ● | Net loss of $0.6 million for the nine months ended September 30, 2025 compared with net income of $3.5 million for the nine months ended September 30, 2024. |
| ● | Our net income was adjusted for non-cash items, including written-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, deferred tax expense (recovery) and provision (reversal of allowance) for expected credit loss. Non-cash items of approximately $2.2 million during the nine months ended September 30, 2025, compared to non-cash items of approximately $5.5 million during the same period in 2024. |
| 9 |
| ● | Inventory decreased by approximately $2.2 million during the nine months ended September 30, 2025, compared to a increase by approximately $5.0 million during the nine months ended September 30, 2024. |
| ● | Accounts receivable increased by approximately $0.5 million during the nine months ended September 30, 2025, compared to a increase by approximately $2.2 million during the nine months ended September 30, 2024. |
| ● | Accounts payable decreased by approximately $4.9 million during the nine months ended September 30, 2025, compared to a decrease by approximately $2.9 million during the nine months ended September 30, 2024. |
Investing Activities
Net cash used in investing activities was $65,361 for the nine months ended September 30, 2025 compared to net cash used in investing activities of $262,163 for the same period last year. We made a fixed deposit of $3.0 million with a bank in the first quarter of fiscal 2025 and had a proceed from the bank in the second quarter of fiscal 2025. During the same period in fiscal 2024, we had purchased and equipment of $0.4 million offsetting by a proceed of $0.16 million from sale of property and equipment during the nine months ended September 30, 2024.
Financing Activities
Net cash used in financing activities was approximately $3.5 million during the nine months ended September 30, 2025, compared to net cash generated from financing activities of approximately $3.6 million during the nine months ended September 30, 2024. We made a repayment of shareholder withdrawal totaling $3.4 million during the nine months ended September 30, 2025 compared to a repayment of related party of $1.5 million and a net proceed from IPO of $4.5 million during the comparable period.
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.
Working Capital
As of September 30, 2025, we had cash and cash equivalents of approximately $2.6 million. Our current assets were approximately $34.5 million, including approximately $5.3 million accounts receivable, approximately $25.1 million inventory, approximately $0.3 million advance to suppliers and approximately $1.2 million prepayment deposit and other receivables, and our current liabilities were approximately $16.7 million, including $4.7 million accounts payable to suppliers, $6.1 million other payable, accrued expenses and other current liabilities, $0.4 million contract liabilities, $1.1 million income tax payable, $2.1 million loan from a related party and $2.1 million liabilities from obligations under operating and financing leases, which resulted in a positive working capital of $17.8 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 meet operational needs solely by utilizing cash flows generated from our operating activities.
| 10 |
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 $65,361 and $424,164 for the nine months ended September 30, 2025 and 2024, respectively.
Contractual Commitments
As of September 30, 2025, 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 | $ | 9,364,820 | $ | 2,664,494 | $ | 6,700,326 | $ | - | $ | - | ||||||||||
Off-balance Sheet Commitments and Arrangements
There was no off-balance sheet arrangements for the nine months ended September 30, 2025 and 2024, 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, 2025 and December 31, 2024, $22,989 and $261,588 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, 2025 and 2024, we recorded sales returns of $69,854 and recorded sales return of $163,666 respectively. For the nine months ended September 30, 2025 and 2024, we recorded sales returns of $1,268,062 and $824,978 respectively.
Warranty
We generally provide a one-year limited warranty against defects in materials related to the sale of products. We consider 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 our 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. We estimate and adjust these accruals at each balance sheet date in accordance with changes in these factors. As of September 30, 2025 and December 31, 2024, $238,859 and $503,553 of product warranty were recorded in the unaudited condensed consolidated balance sheet, respectively. During the three-month period ended September 30, 2025 and 2024, we recorded warranty expenses of $5,687 and $234,314 respectively. During the nine-month period ended September 30, 2025 and 2024, we recorded warranty expenses of $114,184 and $1,102,494 respectively .
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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. We recorded an addition of allowance for credit loss of $133,665 and a reverse of allowance of $27,729 for the three months ended September 30, 2025 and 2024, respectively. We recorded a reversal of allowance for credit loss of $108,200 and an addition of allowance for credit loss of $223,051 for the nine months ended September 30, 2025 and 2024, respectively.
Inventory provision
We assessed the net realizable value of each item of inventories and compared it to the cost on the book, which includes 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, 2025 and December 31, 2024, the Company had inventory provision of $469,900 and $469,900, included in inventories, net in the condensed consolidated balance sheet. Impairment provision of inventories were nil and nil for the three and nine months ended September, 2025 and a reversal of impairment provision of inventories recorded were $110,000 and $110,000 for the three and nine months ended September 30, 2024, respectively, and is included in cost of revenues in the 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 of September 30, 2025.
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.
In designing periods specified in the SEC’s rules and forms, and that such information is accumulated and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
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The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Certifying Officers, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on the foregoing, the Certifying Officers concluded that a material weakness was present as of that date related to ineffective controls over information and communication and period end financial disclosure and reporting processes, including not effectively communicating internally between the sales department and the accounting department and externally with the client and lack of effectiveness of controls over accurate accounting and financial reporting and reviewing the underlying financial statement elements.
Remediated Material Weaknesses
We are committed to maintaining strong internal control over financial reporting. In relation to the material weaknesses, management, with oversight from the Company’s Audit Committee, is in the process of developing and implementing remediation plans in response to the identified material weaknesses described above by:
| ● | designing and implementing control activities to ensure there is an appropriate periodic assessment of its internal control environment and period end disclosure and reporting processes. For example, new approval procedure is in place for any changes in product offerings or terms and conditions of the arrangements with customers; |
| ● | designing and implementing additional monitoring controls for its existing and new revenue streams; and |
| ● | designing and implementing effective communication between the sales department and the accounting department. |
These material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time for management to conclude, through testing, that such controls are operating effectively. Management is committed to the remediation of the material weaknesses described above, as well as the continued improvement of our internal controls and will continue to review, optimize and enhance financial reporting controls and procedures.
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, 2025 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
Taizhou Nebula Power Co. Ltd. v. Massimo Motor Sports, LLC
In September 2020, Taizhou Nebula Power Co. Ltd. (“Nebula”) filed suit against us in the Dallas County District of Texas. Nebula has alleged that we owe them $2,343,868.60 for products that it shipped to us from 2017 to 2019. Nebula also seeks undefined damages they claim were caused by our failure to hit certain sales targets pursuant to the Distribution Agreement signed by both parties. A bench trial was conducted in May 2024. On June 6, 2024, the trial court entered its Findings of Fact and Conclusions of Law, which generally found for Nebula on its breach of contract claims and denied Massimo’s counterclaims. After post-trial fees briefing, the trial court entered its Final Judgment on July 8, 2024 (see first audit response letter). On August 7, 2024, Massimo timely filed a notice of appeal of the Final Judgment. Massimo filed its appellant’s brief on January 31, 2025. Nebula filed its appellee’s brief on May 1, 2025. Massimo intends to continue vigorously defending the lawsuit and pursuing its appeal.
Zhejiang Qunying Vehicle Co., Ltd. v. Cho International, Inc
On September 5, 2023, Zhejiang Qunyinh Vehicle Co., Ltd. (“Zhejiang”) filed suit against us and ten other corporate entities in the Superior Court of the State of California for Orange County. Zhejiang alleges claims of approximately $6,000,000 in damages for products that were allegedly shipped to the United States but not paid for. Despite us being one of the ten entities that plaintiff has sued, we have had minimal interactions with Zhejiang. We have not purchased any products from Zheijang. In February 2024, Zhejiang filed a Second Amended Complaint. Massimo filed a demurrer seeking to dismiss the Second Amended Complaint due to Zhejiang’s failure to state a valid claim in March 2024. In August 2024, the Court denied in part and granted in part Massimo’s demurrer. The trial is scheduled for March 2026. Massimo intends to vigorously defend the lawsuit.
In the past, we have also been subject to over fifty (50) legal proceedings encompassing: employment disputes, personal injury and wrongful death lawsuits, property damage lawsuits, product liability and manufacturing defect lawsuits and contractual disputes with our suppliers, distributors, customers, an on-site security provider, a freight shipping company and a previous law firm. These cases also include an inquiry by the Missouri Office of the Attorney General and the Pennsylvania State Board of Vehicle Manufacturers, Dealers and Salespersons. We do not believe that these past cases will have a material adverse effect on our business, operating results, financial condition, or cash flows. However, we cannot assure you that past litigation will not have an impact on our present reputation or goodwill among dealers, distributors and customers.
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, 2024 filed with the SEC on March 26, 2025 and as amended on May 20, 2025. 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
During
the quarterly period ended September 30, 2025, none of our directors or officers (as defined in Rule 16a-1(f) promulgated under the Exchange
Act)
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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 7, 2025 | /s/ David Shan |
| David Shan | |
| Chief Executive Officer | |
| (principal executive officer) |
| Date: November 7, 2025 | By: | /s/ Yunhao Chen |
| Yunhao Chen | ||
| Chief Financial Officer | ||
| (principal financial and accounting officer) |
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