Massimo Group
For the period ended Jun 30, 2024. Filed Aug 12, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 12, 2024
MAMO$0.96-0.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-14.
0001493152-24-018997
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-12.
0001493152-24-031164
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 82 previous paragraphs and 117 current paragraphs.
41 unchanged; 32 reworded; 39 added; 8 removed; 1 previous and 5 current paragraphs rearranged.
Tables are not compared: 15 previous and 15 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (39)
Current report
We listed our common stocks on the Nasdaq Capital Market under the symbol “MAMO” on April 4, 2024 and completed our IPO of 1,300,000 shares of common stock on April 4, 2024, raising approximately $5.0 million in net proceeds after deducting underwriting commissions and the offering expenses payable by us.
Current report
For the Three and Six Months Ended June 30, 2024 and 2023
Current report
Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023
Current report
Revenue from sales of UTVs, ATVs and e-bikes
Current report
The cost of revenue on Pontoon Boats decreased by $3.0 million, or 76.5%, from $3.9 million in the second quarter of fiscal 2023 to $0.9 million in the second quarter of fiscal 2024, and the gross profit decreased by $0.3 million, or 51.6%, from $0.5 million in the second quarter of fiscal 2023 to $0.3 million in the second quarter of fiscal 2024. The gross margin increased by 10.1%, from 12.3% in the second quarter of fiscal 2023 to 22.4% in the second quarter of fiscal 2024. The increase in gross margin was primarily because of strategically focusing on selling higher-margin models of Pontoon Boats in the second quarter of fiscal 2024 compared to that of fiscal 2023.
Current report
Our salaries and benefits were $1.7 million and $1.0 million, representing 42.3% and 30.9% of our total general and administrative expenses in the second quarter of fiscal 2024 and in the second quarter of fiscal 2023, respectively. The increase in balance was mainly due to one-off salaries compensation paid to an employee as result of employment termination andstock-based compensation expense of $0.2 million recognized on RSUs and stock option grant.
Current report
Our professional fees decreased by $0.5 million or 46.2%, from $1.0 million in the second quarter of fiscal 2023 to $0.5 million in the second quarter of fiscal 2024, representing 13.6% and 31.0% of our total general and administrative expenses in the second quarter of fiscal 2024 and 2023, respectively. The decrease was mainly due to reduced legal fees arising from ongoing lawsuits.
Current report
Impairment loss on supplier deposit due to lawsuit
Current report
During the three months ended June 30, 2024, we recorded a one-time impairment loss of approximately $0.7 million on advanced deposit to one supplier. In June 2024, we reached a tentative agreement regarding general settlement terms with one suppler who would pay approximately $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 June 30, 2024. During the three months ended June 30, 2023, we had no impairment loss of prepayment.
Current report
Our other income was $132,268 in the second quarter of fiscal 2024, as compared with $26,973 in the second quarter of fiscal 2023, an increase of $105,295, or 390.4%. The increase was primarily related to writing off a long outstanding negative balance of account receivable of approximately $90,000. The write-off increased the other income in in second quarter of fiscal 2024 compared with the same period of the previous year.
Current report
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Current report
Revenue
Current report
Revenue by Type
Current report
Revenue from sales of UTVs, ATVs and e-bikes
Current report
Revenue from sales of UTVs, ATVs and e-bikes increased by $24.1 million, or 62.1%, from $38.8 million for the six months ended June 30, 2023 to $62.9 million for the six months ended June 30, 2024. The increase in revenue was primarily attributed to the expansion into more big box stores. During the six months ended June 30, 2023, our sales to those big box stores were $19.2 million. They increased to $48.6 million during the six months ended June 30, 2024, with $40.0 million of these sales from one new customer since fiscal 2023. This surge is consistent with the increasing ranch/farm-work utilization of UTVs across the 1.89 million farms in the U.S. with an average size of 464 acres and the new customer’s rural lifestyle focus. The increase in sales is also due to a shift in our sales strategy, focusing mostly on in-store sales to this new customer, which generally involve larger volumes and no returns. In addition, sales to this new customer consist of high-turnover inventory products that are of high quality and have a strong customer reputation. This enhances the efficiency of our capital utilization.
Current report
Revenue from sales of Pontoon Boats decreased by $4.1 million, or 61.1%, from $6.7 million for the six months ended June 30, 2023 to $2.6 million for the six months ended June 30, 2024. The decrease in revenue was primarily attributable to the fact that we shifted from retailing to dealer sales in fiscal 2023 and the dealers have experienced high rejection rates at the floorplan financing providers such as Northpoint since late fiscal 2023. This is consistent with the industry-wide trend. Additionally, the challenging economic environment, characterized by rising interest rates and inflation, has further constrained sales of luxury boats such as our yacht.
Current report
Gross profit
Current report
Our gross profit increased by $8.2 million, or 60.0%, from $13.7 million for the six months ended June 30, 2023 to $22.0 million for the six months ended June 30, 2024. Gross profit margin was 33.5% for the six months ended June 30, 2024, compared with 30.1% in the same period last year. Our gross profit margin for the six months ended June 30, 2024 increased slightly from the same period in 2023 due to a reduction of freight costs since 2023.
Current report
Cost of revenue on UTVs, ATVs and e-bikes increased by $15.4 million, or 59.2%, from $26.0 million for the six months ended June 30, 2023, to $41.5 million for the six months ended June 30, 2024 and gross profit increased by $8.7 million, or 68.2%, from $12.8 million for the six months ended June 30, 2023, to $21.5 million for the six months ended June 30, 2024. Gross margin slightly increased by 1.2%, from 32.9% for the six months ended June 30, 2023 to 34.1% for the six months ended June 30, 2024. The increase in the cost of revenue was in line with the increase in sales. The slight increase in gross profit margin was mainly due to decreased global container freight. Our freight costs decreased for the six months ended June 30, 2024, compared with last year.
Current report
Cost of revenue on Pontoon Boats decreased by $3.7 million, or 63.1%, from $5.8 million for the six months ended June 30, 2023, to $2.1 million for the six months ended June 30, 2024, and gross profit decreased by $0.5 million, or 49.4%, from $1.0 million for the six months ended June 30, 2023, to $0.5 million for the six months ended June 30, 2024. Gross margin increased by 4.3%, from 14.2% for the six months ended June 30, 2023, to 18.4% for the six months ended June 30, 2024. The increase in gross margin was primarily because of strategically focusing on selling higher-margin models of Pontoon Boats for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.
Current report
Selling expenses
Current report
Our selling expenses mainly include warranty expense, advertising and promotion expense, shipping and handling fee and merchant service fee. They increased by $0.9 million, or 19.6%, from $4.4 million for the six months ended June 30, 2023, to $5.3 million for the six months ended June 30, 2024, representing 8.1% and 9.7% of our total revenue for the six months ended June 30, 2024 and 2023, respectively. Our selling expenses increased mainly due to an increase in shipping and handling fee which were approximately $3.1 million and $2.4 million for the six months ended June 30, 2024 and 2023, respectively. The increase is consistent with the increase in sales.
Current report
General and administrative expenses
Current report
Our general and administrative expenses primarily include salaries and benefits, professional fees, office expenses, travel expenses, insurance expenses, rent expense and depreciation expenses. General and administrative expenses increased by $1.9 million, or 29.7%, from $6.3 million for the six months ended June 30, 2023, to $8.2 million for the six months ended June 30, 2024. The increase was mainly due to the increased rent expense, salaries and benefit, and insurance expense, which was partly offset by decreased professional and legal fee. Our general and administrative expenses represented 12.5% and 13.9% of our total revenue for the six months ended June 30, 2024 and 2023, respectively.
Current report
Our salaries and benefits were $2.8 million and $2.1 million, representing 34.7% and 33.7% of our total general and administrative expenses for the six months ended June 30, 2024 and 2023, 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 and the stock-based compensation expense of $0.2 million recognized on RSUs and stock option grants.
Current report
Our rent expenses increased by $0.6 million or 92.1%, from $0.6 million for the six months ended June 30, 2023, to $1.2 million for the six months ended June 30, 2024, representing 15.0% and 10.1% of our total general and administrative expenses for the six months ended June 30, 2024 and 2023, respectively. Our rent expense increased because we had two new lease agreements in May 2024 and one lease agreement in May 2023. Our property taxes included in the rent expenses also increased by $0.4 million for the six months ended June 30, 2024, when compared with the same period last year.
Current report
Our professional and legal fees decreased by $0.4 million or 22.6%, from $1.7 million for the six months ended June 30, 2023, to $1.3 million for the six months ended June 30, 2024, representing 16.1% and 27.0% of our total general and administrative expenses for the six months ended June 30, 2024 and 2023, respectively. The decrease was mainly due to decreased legal fees arising from ongoing lawsuits.
Current report
Impairment loss on supplier deposit due to lawsuit
Current report
During the six months ended June 30, 2024, we recorded a one-time impairment loss of approximately $0.7 million on advanced deposit to one supplier. In June 2024, we reached a tentative agreement regarding general settlement terms with one suppler who would pay approximately $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 six months ended June 30, 2024. During the six months ended June 30, 2023, we had no impairment loss of prepayment.
Current report
Interest expenses
Current report
Our interest expense decreased by $75,769 or 27.0%, from $280,110 for the six months ended June 30, 2023, to $204,341 for the six months ended June 30, 2024. The decrease in interest expense was mainly because we lowered the average loan balance during the six months ended June 30, 2024, when compared with the same period last year in light of increasing interest rates.
Current report
Other income, net
Current report
Income before income taxes
Current report
We had an increase of $4.9 million in income before income taxes from $2.8 million for the six months ended June 30, 2023, to approximately $7.7 million for the six months ended June 30, 2024. The increase was primarily attributable to the increase of gross profit by $8.2 million, which was partly offset by an increase of general and administrative expenses by approximately $1.9 million for the six months ended June 30, 2024, as well as other expenses as discussed above.
Current report
Provision for income taxes
Current report
Net income
Current report
Loan balance consists of the following:
Current report
Contingencies
Current report
We may be involved in various legal proceedings, claims and other disputes arising from the commercial operations, projects and other matters which , in general, are subject to uncertainties and in which the outcome are not predictable. We determine whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. Although we can give no assurances about the resolution of pending claims, litigation or other disputes and the effect such outcomes may have on us, we believe that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided or covered by insurance, will not have a material adverse effect on the our unaudited condensed consolidated financial position or results of operations or liquidity as at June 30, 2024 and December 31, 2023.
Removed paragraphs (8)
Previous report
Cost of revenue on Pontoon Boats was decreased by $0.7 million, or 36.4%, from $1.9 million in the first quarter of fiscal 2023 to $1.2 million in the first quarter of fiscal 2024, and gross profit was decreased by $0.2 million, or 46.7%, from $0.4 million in the first quarter of fiscal 2023 to $0.2 million in the first quarter of fiscal 2024. Gross margin was decreased by 2.4%, from 17.6% in the first quarter of fiscal 2023 to 15.2% in the first quarter of fiscal 2024. The decrease in gross margin was primarily because that we had higher portion of dealership sales which have a lower gross margin in the first quarter of fiscal 2024 compared to that in the first quarter of fiscal 2023.
Previous report
Our salaries and benefits were $1.1 million and $1.1 million, representing 27.0% and 36.8% of our total general and administrative expenses in the first quarter of fiscal 2024 and in the first quarter of fiscal 2023, respectively. We had no material fluctuation on salaries and benefits expense in the first quarter of fiscal 2024 when compared with same period last year.
Previous report
Our professional fee were increased by $0.1 million or 13.6%, from $0.7 million in the first quarter of fiscal 2023 to $0.8 million in the first quarter of fiscal 2024, representing 18.6% and 22.5% of our total general and administrative expenses in the first quarter of fiscal 2024 and in the first quarter of fiscal 2023, respectively. The increase was mainly due to legal fees arising from ongoing lawsuits.
Previous report
Recent Developments
Previous report
Initial Public Offering
Previous report
On April 4, 2024, we closed our IPO of 1,300,000 shares of our common stock at an IPO price of $4.50 per share for aggregate gross proceeds of approximately $5.85 million from the offering, before deducting underwriting discounts and commissions and other offering expenses payable by our Company. Pursuant to the terms and conditions of the Underwriting Agreement, the underwriters may exercise the Overallotment Option, exercisable for 45 days from April 1, 2024, to purchase up to an additional 195,000 shares from the Company at the offering price less the underwriting discount and commissions to cover over-allotments. Following the closing of the offering, we have a total of 41,300,000 common shares issued and outstanding. In connection with the offering, our common shares began trading on the Nasdaq Capital Market under the trading symbol “MAMO.”
Previous report
Representative’s Warrants
Previous report
Pursuant to the Underwriting Agreement, we issued to the Representative and its designee Representative’s Warrants to purchase 87,100 shares of common stock. In the event the Representative exercises its Overallotment Option, the Representative will be entitled to purchase an additional 13,065 shares of common stock. The Representative’s Warrants will be exercisable at a per share exercise price equal to $5.625 and are exercisable at any time and from time to time, in whole or in part, during the period commencing on October 4, 2024 and terminating on April 4, 2029. Neither the Representative’s Warrants nor any of the shares issued upon exercise of the Representative’s Warrants may be sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such securities by any person, for a period of six (6) months immediately following the commencement of sales of the offering.
Reworded paragraphs (32)
Previous wording
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes to those statements included elsewhere in this Report and with the audited financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the Securities and Exchange Commission (the “SEC”), on April 15, 2024. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Some of the numbers included herein have been rounded for the convenience of presentation. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors. See “Cautionary Note Regarding Forward-Looking Statements .”
Current wording
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes to those statements included elsewhere in this Report and with the audited financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (“fiscal 2023”), as filed with the Securities and Exchange Commission (the “SEC”), on April 15, 2024. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Some of the numbers included herein have been rounded for the convenience of presentation. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors. See “Cautionary Note Regarding Forward-Looking Statements .”
Previous wording
Massimo Group 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 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.
Current wording
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.
Previous wording
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, Massimo Group ultimately owns 100% equity interests of Massimo Motor and Massimo Marine.
Current wording
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.
Previous wording
Before and after the Reorganization, the Company, together with its subsidiaries, is 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 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.
Current wording
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.
Previous wording
Massimo Group currently generates most of its revenues from the sales of UTVs and ATVs, which represented 95.2% and 87.5% of total revenue for the first quarter of fiscal 2024 and 2023, respectively. We also generate revenue from the sales of Pontoon Boats, which represented 4.8% and 12.5% of our revenue for the for the first quarter of fiscal 2024 and 2023, respectively.
Current wording
We currently generate most of our revenues from the sales of UTVs and ATVs, which represented 96.7% and 83.5% of total revenue for the three months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2024 and 2023, revenue from sales of UTVs and ATVs represented 96.0% and 85.2% of total revenue, respectively.
Previous wording
The following table summarizes the results of consolidated statements of operations and comprehensive income for the three months ended March 31, 2024 and 2023 and provides information regarding the dollar and percentage increase or (decrease) during such period.
Current wording
The following table summarizes the results of condensed consolidated statements of operations and comprehensive income (unaudited) for the three and six months ended June 30, 2024 and 2023 in U.S. dollars, and provides information regarding the dollar and percentage increase or (decrease) during such periods.
Previous wording
Revenues increased by $11.3 million, or 60.0%, from $18.8 million in the first quarter of fiscal 2023 to $30.1 million in the first quarter of fiscal 2024. The increase in revenue was primarily due to combined effected of rising demand in the U.S. ATV and UTV market and our modified sales strategy. In 2024, we continued to expand our distribution network with various retailers to increase our products’ market penetration. We strategically focused our efforts on big box retailers that offer their own financing plans, while moving away from retailers that have liberal return policies. Over 80% of our sales in the first quarter of fiscal 2024 were from retailers, compared to 39% of our sales in the first quarter of fiscal 2023.
Current wording
Revenues increased by $8.7 million, or 32.4%, from $26.7 million in the second quarter of fiscal 2023, to $35.4 million in the second quarter of fiscal 2024. The increase in revenue was primarily due to combined effect of rising demand in the U.S. ATV and UTV market and our modified sales strategy. In 2024, we continued to expand our distribution network with various retailers to increase our products’ market penetration. We strategically focused our efforts on big box retailers that offer their own financing plans, while moving away from retailers that have liberal return policies.
Previous wording
Revenue from sales of UTVs, ATVs and electric bikes was increased by $12.2 million, or 74.1%, from $16.5 million in the first quarter of fiscal 2023 to $28.7 million in the first quarter of fiscal 2024. Increase in revenue was primarily attributed to the expansion into more large retail stores in US (as “big box stores”). In the first quarter of fiscal 2023, our sales to those big box stores were $6.5 million. They increased to $22.7 million in the first quarter of fiscal 2024, with $19.7 million of its sales from one new customer since fiscal 2023. This surge is due to a shift in our sales strategy, focusing mostly on in-store sales at TSC, which generally involve larger volumes and fewer returns. In addition, sales to TSC consist of high-turnover inventory products that are of high quality and have a strong customer reputation. This enhances the efficiency of our capital utilization.
Current wording
Revenue from sales of UTVs, ATVs and e-bikes increased by $11.9 million, or 53.3%, from $22.3 million in the second quarter of fiscal 2023, to $34.2 million in the second quarter of fiscal 2024. The increase in revenue was primarily attributed to the expansion into more large retail stores in the U.S. (as “big box stores”). In the second quarter of fiscal 2023, our sales to those big box stores were $12.7 million. These increased to $25.9 million in the second quarter of fiscal 2024, with $20.3 million of these sales from one new customer since fiscal 2023. This surge is consistent with the increasing ranch/farm-work utilization of UTVs across the 1.89 million farms in the U.S. with an average size of 464 acres and the new customer’s rural lifestyle focus. The increase in sales is also due to a shift in our sales strategy, focusing mostly on in-store sales at this new customer, which generally involve larger volumes and fewer returns. In addition, sales to this new customer consist of high-turnover inventory products that are of high quality and have a strong customer reputation. This enhances the efficiency of our capital utilization.
Previous wording
Revenue from sales of Pontoon Boats decreased by $0.9 million, or 38.2%, from $2.4 million in the first quarter of fiscal 2023 to $1.5 million in the first quarter of fiscal 2024. The decrease in revenue was primarily attributable to the fact that we shifted from retailing in Q1 2023 to dealer sales in Q1 2024 and the dealers have experienced high rejection rates at the floorplan financing providers such as Northpoint. This is consistent with industry-wide trend.
Current wording
Revenue from sales of Pontoon Boats decreased by $3.2 million, or 73.5%, from $4.4 million in the second quarter of fiscal 2023, to $1.2 million in the second quarter of fiscal 2024. The decrease in revenue was primarily attributable to the fact that we shifted from retailing to dealer sales starting in fiscal 2024 and the dealers have experienced high rejection rates at the floorplan financing providers such as Northpoint. This is consistent with the industry-wide trend. Additionally, the challenging economic environment, characterized by rising interest rates and inflation, has further constrained sales of luxury boats.
Previous wording
Our gross profit was increased by $4.8 million, or 16.3%, from $5.6 million in the first quarter of fiscal 2023 to $10.5 million in the first quarter of fiscal 2024. Gross profit margin was 34.7% in the first quarter of fiscal 2024, as compared with 29.8% in same period last year. The increase of 4.8% in the gross profit margin was primarily attributable to higher net sales partly due to decreased return, as well as the lower cost of sales due to reduced freight costs in the first quarter of fiscal 2023 as compared with last year.
Current wording
Our gross profit increased by $3.4 million, or 41.9%, from $8.1 million in the second quarter of fiscal 2023, to $11.5 million in the second quarter of fiscal 2024. The gross profit margin was 32.5% in the second quarter of fiscal 2024, compared with 30.3% in the same period last year. The increase of 2.2% in the gross profit margin was primarily attributable to higher net sales partly due to decreased return, which was partly offset by higher cost of sales due to increased freight costs in the second quarter of fiscal 2024 as compared with last year.
Previous wording
Cost of revenue on UTVs, ATVs and electric bikes was increased by $7.2 million, or 63.7%, from $11.3 million in the first quarter of fiscal 2023 to $18.5 million in the first quarter of fiscal 2024 and gross profit was increased by $5.0 million, or 96.7%, from $5.2 million in the first quarter of fiscal 2023 to $10.2 million in the first quarter of fiscal 2024. Gross margin was increased by 4.1%, from 31.6% in the first quarter of fiscal 2023 to 35.7% in the first quarter of fiscal 2024. The increase in the cost of revenue was in line with the increase in sales. The increase in gross profit margin was mainly due to a decline in global container freight. Our freight costs dropped in the first quarter of fiscal 2024 when compared with last year.
Current wording
The cost of revenue on UTVs, ATVs and e-bikes increased by $8.2 million, or 55.7%, from $14.8 million in the second quarter of fiscal 2023 to $23.0 million in the second quarter of fiscal 2024, and the gross profit increased by $3.6 million, or 48.6%, from $7.6 million in the second quarter of fiscal 2023 to $11.2 million in the second quarter of fiscal 2024. The gross margin decreased by 1.1%, from 33.9% in the second quarter of fiscal 2023 to 32.8% in the second quarter of fiscal 2024. The increase in the cost of revenue was in line with the increase in sales. The slight decrease in gross margin was mainly due to a rise in global container freight in the second quarter of fiscal 2024. Our freight costs increased in the second quarter of fiscal 2024 when compared with last year.
Previous wording
Our selling expenses mainly include warranty expense, advertising and promotion expense, shipping and handling fee and merchant service fee. It increased by $0.3 million, or 13.3%, from $2.0 million in the first quarter of fiscal 2023 to $2.2 million in the first quarter of fiscal 2024, representing 7.3% and 10.4% of our total revenue in the first quarter of fiscal 2024 and the first quarter of fiscal 2023, respectively. Approximately $0.3 million and $0.1 million merchant service fees were recognized for the first quarter of fiscal 2024 and the first quarter of fiscal 2023 respectively. This is consistent with the fact that the chargebacks from new big box customerhas been increased as a result of increased sales.
Current wording
Our selling expenses mainly include warranty expense, advertising and promotion expense, shipping and handling fee and merchant service fee. They increased by $0.6 million, or 24.6%, from $2.5 million in the second quarter of fiscal 2023 to $3.1 million in the second quarter of fiscal 2024, representing 8.7% and 9.3% of our total revenue in the second quarter of fiscal 2024 and fiscal 2023, respectively. The increase in selling expenses was mainly due to an increase in shipping and handling fees, which were approximately $2.0 million and $1.3 million in the second quarter of fiscal 2024 and fiscal 2023, respectively. The increase is consistent with the increase in sales.
Previous wording
Our general and administrative expenses primarily include salaries and benefits, professional fees, office expenses, travel expenses, insurance expenses, rent expense and depreciation expenses. General and administrative expenses increased by $1.1 million, or 37.6%, from $3.0 million in the first quarter of fiscal 2024 to $4.1 million in the first quarter of fiscal 2023. The increase was mainly due to the increased rent expense and professional fees. Our general and administrative expenses represented 13.6% and 15.8% of our total revenue in the first quarter of fiscal 2024 and in the first quarter of fiscal 2023, respectively.
Current wording
Our general and administrative expenses primarily include salaries and benefits, professional fees, office expenses, travel expenses, insurance expenses, rent expense and depreciation expenses. General and administrative expenses increased by $0.8 million, or 22.7%, from $3.3 million in the second quarter of fiscal 2023 to $4.1 million in the second quarter of fiscal 2024. The increase was mainly due to increased salaries and benefits, impairment loss and rent expense, which were partly offset by a decrease in professional and legal fees. Our general and administrative expenses represented 11.6% and 12.5% of our total revenue in the second quarter of fiscal 2024 and the second quarter of fiscal 2023, respectively.
Previous wording
Our rent expenses were increased by $0.3 million or 90.5%, from $0.4 million in the first quarter of fiscal 2023 to $0.7 million in the first quarter of fiscal 2024, representing 17.1% and 12.3% of our total general and administrative expenses in the first quarter of fiscal 2024 and in the first quarter of fiscal 2023, respectively. We had a rent increase of $0.1 million in the first quarter of fiscal 2024 since May 2023. Our property taxes included in the rent expenses were increased by $0.2 million in the first quarter of fiscal 2024 compared to the same period in prior year.
Current wording
Our rent expenses increased by $0.3 million or 94.4%, from $0.2 million in the second quarter of fiscal 2023 to $0.5 million in the second quarter of fiscal 2024, representing 12.9% and 8.2% of our total general and administrative expenses in the second quarter of fiscal 2024 and 2023, respectively. We had a rent increase of $0.05 million in the second quarter of fiscal 2024 because we had two new lease agreements in May 2024. Our property taxes included in the rent expenses also increased by $0.2 million in the second quarter of fiscal 2024 compared to the same period in the prior year.
Previous wording
Our interest expense was decreased by $17,404 or 11.2%, from $155,098 in the first quarter of fiscal 2023 to $137,694 in the first quarter of fiscal 2024. The decrease in interest expense was mainly because we lowered the loan balance during the year in light of increasing interest rates and repaid all the loan balance in November 2023.
Current wording
Our interest expense decreased by $58,365 or 46.7%, from $125,012 in the second quarter of fiscal 2023 to $66,647 in the second quarter of fiscal 2024. The decrease in interest expense was mainly because we lowered the average loan balance in second quarter of fiscal 2024 compared with the same period of last year in light of high interest rates.
Previous wording
We had an increase of $3.5 million in income before income taxes from $0.6 million in the first quarter of fiscal 2023 to approximately $4.1 million in the first quarter of fiscal 2024, respectively. The increase was primarily attributable to the increase of revenue by $11.3 million and gross profit by $4.8 million, which was partly offset by increase of general and administrative expenses by approximately $1.1 million in the first quarter of fiscal 2024, as well as other expenses as discussed above.
Current wording
We had an increase of $1.4 million in income before income taxes from $2.2 million in the second quarter of fiscal 2023 to approximately $3.6 million in the second quarter of fiscal 2024, respectively. The increase was primarily attributable to the increase in gross profit by $3.4 million, which was partly offset by an increase of general and administrative expenses of approximately $0.8 million in the second quarter of fiscal 2024, as well as other expenses as discussed above.
Previous wording
We had net income of $3.2 million and $0.5 million in the first quarter of fiscal 2024 and 2023, respectively. The increase was primarily attributable to the increased revenues and gross profit as discussed above.
Current wording
We had net income of $2.8 million and $2.1 million in the second quarter of fiscal 2024 and 2023, respectively. The increase was primarily attributable to the increased revenues and gross profit as discussed above.
Previous wording
Revenue from sales of UTVs, ATVs and electric bikes
Current wording
Revenue from sales of Pontoon Boats
Previous wording
Our other income of $247,569 in the first quarter of fiscal 2024, as compared with $44,895 in the first quarter of fiscal 2023, was increased by $202,674, or 451.4%. The increase was primarily because we wrote off a vendor’s account payable balance by $177,147 as a result of a settlement between the vendor and us. The write-off has increased the other income in the first quarter of fiscal 2024.
Current wording
Our other income of $379,837 for the six months ended June 30, 2024, compared with $71,868 for the six months ended June 30, 2023, increased by $307,969, or 428.5%. The increase was primarily because (i) we wrote off a vendor’s account payable balance by $177,147 as a result of a settlement between the vendor and us and (ii) we wrote off long outstanding negative balance of account receivable of approximately $90,000. The write-offs increased the other income for the six months ended June 30, 2024.
Previous wording
The income tax expense was approximately $0.9 million and $0.02 million for the first quarter of fiscal 2024 and 2023, respectively. We terminated our status as a S Corporation as of June 1, 2023, in connection with the Reorganization and became a taxable C Corporation. As such, the income tax provision for the first quarter of fiscal 2024 combined both federal income tax of 21% and the state margin tax at Texas as a C Corporation, and the income tax provision for the first quarter of fiscal 2024 only reflected state margin tax at Texas as a S Corporation.
Current wording
The income tax expense was approximately $1.7 million and $0.1 million for the six months ended June 30, 2024 and 2023, respectively. We terminated our status as an S Corporation as of June 1, 2023, in connection with the Reorganization and became a taxable C Corporation. As such, the income tax provision for the first half of fiscal 2024 combined both federal income tax of 21% and the state margin tax at Texas as a C Corporation, and the income tax provision for the six months ended June 30, 2023 only reflected state margin tax at Texas as a S Corporation and a federal income tax of 21% for only one month’s operation.
Previous wording
Net cash used in operating activities was approximately $0.6 million for the first quarter of fiscal 2024, compared to net cash provided by operating activities of approximately $0.8 million during the first quarter of fiscal 2023, representing an increase in the net cash used in operating activities of $1.4 million during the first quarter of fiscal 2024 compared with the same period in 2023, primarily due to the following:
Current wording
Net cash used in operating activities was approximately $7.1 million during the six months ended June 30, 2024, compared to net cash provided by operating activities of approximately $2.7 million during the six months ended June 30, 2023, representing an increase in the net cash used in operating activities of $9.8 million during the six months ended June 30, 2024 compared with the same period in 2023. This is consistent with the Company using part of the IPO proceeds as working capital to grow sales. The increase is primarily due to the following:
Previous wording
Net cash provided by investing activities was approximately $23,574 during the first quarter of fiscal 2024, compared to net cash from investing activities of $nil during the first quarter of fiscal 2023. The increase in net cash provided by investing activities was primarily attributable to the proceeds of $128,001 from the sales of property and equipment, offset by costs of $104,427 for additions of property and equipment during the first quarter of fiscal 2024.
Current wording
Net cash used in investing activities was approximately $0.2 during the six months ended June 30, 2024, compared to net cash used in investing activities of $0.02 million during the six months ended June 30, 2023. The increase in net cash used investing activities was primarily attributable to purchase of property and equipment of $0.3 million offsetting by a proceed of $0.2 million from sale of property and equipment during the six months ended June 30, 2024.
Previous wording
Net cash provided by financing activities was approximately $53,408 during the first quarter of fiscal 2024, compared to net cash used in financing activities of approximately $0.7 million during the first quarter of fiscal 2023. The increase in net cash provided by financing activities during the first quarter of fiscal 2024 was primarily attributable to the proceeds from the common shares subscription of $0.5 million, offset by the repayment of other loas of $0.3 million and the payment for initial public offering related costs of $0.1 million during the first quarter of fiscal 2024; combined with the repayment of bank loan of $0.9 million offset by the proceeds of $0.3 million from new bank loan during the first quarter of fiscal 2023.
Current wording
Net cash provided by financing activities was approximately $7.8 million during the six months ended June 30, 2024, compared to net cash used in financing activities of approximately $2.7 million during the six months ended June 30, 2023. The increase in net cash provided by financing activities during the six months ended June 30, 2024 was primarily attributable to net proceed from bank loan of $2.7 million, net proceed from IPO of $4.5 million and the common shares subscription of $0.08 million, offset by the repayment of other loans of $0.3 million; combined with the net repayment of bank loan of $0.1 million and repayment of $2.6 million to shareholder during the six months ended June 30, 2023.
Previous wording
As of March 31, 2024, we had cash and cash equivalents of approximately $0.2 million. Our current assets were approximately $43.7 million, including approximately $14.2 million accounts receivable, approximately $27.2 million inventory, approximately $1.4 million advance to suppliers and approximately $0.7 million prepayment and other receivables, and our current liabilities were approximately $20.6 million, including $14.8 million accounts payable to suppliers, $1.1 million contract liabilities, $3.2 million income tax payable, and $0.7 million liabilities from obligations under operating and financing leases, which resulted in a positive working capital of $23.0 million.
Current wording
As of June 30, 2024, we had cash and cash equivalents of approximately $1.3 million. Our current assets were approximately $45.2 million, including approximately $11.5 million accounts receivable, approximately $30.8 million inventory, approximately $0.9 million advance to suppliers and approximately $0.7 million prepayment and other receivables, and our current liabilities were approximately $18.1 million, including $2.7 million bank loan, $8.2 million accounts payable to suppliers, $1.2 million contract liabilities, $4.1 million income tax payable, and $1.0 million liabilities from obligations under operating and financing leases, which resulted in a positive working capital of $27.1 million.
Previous wording
Our capital expenditures consist primarily of expenditures for the purchase of fixed assets and equipment leases as a result of our business growth. Our capital expenditures amounted to approximately $128,001 and $nil for the first quarter of fiscal 2024 and 2023, respectively.
Current wording
Our capital expenditures consist primarily of expenditures for the purchase of fixed assets and equipment leases as a result of our business growth. Our capital expenditures amounted to approximately $341,852 and $24,661 for the six months ended June 30, 2024 and 2023, respectively.
Previous wording
There were no off-balance sheet arrangements for the first quarter of fiscal 2024 and 2023, that have, or that in the opinion of management are likely to have, a current or future material effect on our financial condition or results of operations.
Current wording
There were no off-balance sheet arrangements for the six months ended June 30, 2024 and 2023, that have, or that in the opinion of management are likely to have, a current or future material effect on our financial condition or results of operations.
Previous wording
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 and inventory provision. Each of these are discussed below.
Current wording
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.
Previous wording
The Company provides a refund policy to accept returns from end customer, which varies and depends on the difference 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 March 31, 2024 and December 31, 2023, we recorded $138,229 and $283,276 of sales return liabilities associated with estimated product returns in the consolidated balance sheet, respectively.
Current wording
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 June 30, 2024 and December 31, 2023, $202,273 and $283,276 of sales return liabilities associated with estimated product returns were recorded in the unaudited condensed consolidated balance sheet, respectively. During the three-month period ended June 30, 2024 and 2023, we recorded sales return credits of $398,058 and $425,906 respectively. During the six-month period ended June 30, 2024 and 2023, we recorded sales return credits of $823,763 and $1,105,428 respectively.
Previous wording
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 March 31, 2024 and December 31, 2023, we recorded $640,525 and $619,113 of products warranty in the consolidated balance sheet, respectively.
Current wording
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 June 30, 2024 and December 31, 2023, $732,565 and $619,113 of product warranty were recorded in the unaudited condensed consolidated balance sheet, respectively. During the three-month period ended June 30, 2024 and 2023, we recorded warranty expenses of $459,366 and $583,047 respectively. During the six-month period ended June 30, 2024 and 2023, we recorded warranty expenses of $846,325 and $931,199 respectively.
Previous wording
The Company 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. The Company has 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, the Company uses 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, the Company uses the individual specific valuation method to estimate the credit loss.
Current wording
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.
Previous wording
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. As of March 31, 2024 and December 31, 2023, the Company recorded allowance for credit loss of $0.8 million and $0.6 million in the consolidated balance sheet, respectively.
Current wording
We wrote off potentially uncollectible accounts receivable against the allowance for credit losses if it is determined that the amounts will not be collected. As of June 30, 2024 and December 31, 2023, we recorded allowance for credit loss of $0.8 million and $0.6 million in the consolidated balance sheet, respectively.
Previous wording
The Company assessed the net realizable value of each item of inventories and compared to the cost on the book, which include the cost of raw materials, freight and duty for raw materials, direct labor costs, and the overhead costs for finished goods at the end of each reporting period. In addition, the Company assessed all slow-moving or obsolete items for inventory valuation purposes. As of March 31, 2024 and December 31, 2023, the Company had inventory provision of $0.4 million and $0.4 million in the consolidated balance sheet respectively.
Current wording
We assessed the net realizable value of each item of inventories and compared to the cost on the book, which include the cost of raw materials, freight and duty for raw materials, direct labor costs, and the overhead costs for finished goods at the end of each reporting period. In addition, we assessed all slow-moving or obsolete items for inventory valuation purposes. As of June 30, 2024 and December 31, 2023, we had inventory provision of $0.4 million and $0.4 million in the consolidated balance sheet respectively.
Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
We also generate revenue from the sales of Pontoon Boats, which represented 3.3% and 16.5% of our revenue for the three months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2024 and 2023, revenue from the sales of Pontoon Boats represented 4.0% and 14.8% of our revenue, respectively.
Current report — wording carried from elsewhere
The income tax expense was approximately $0.8 million and $0.1 million for the second quarter of fiscal 2024 and 2023, respectively. The increase in balance was mainly due to the increase in taxable income as a result of increased sales in second quarter of fiscal 2024 compared with same period last year. Additionally, we were subjected to higher tax rate in second quarter of fiscal 2024 because we terminated our status as an S Corporation as of June 1, 2023, in connection with the Reorganization and became a taxable C Corporation. As such, the income tax provision for the whole income in second quarter of fiscal 2024 combined both federal income tax of 21% and the state margin tax at Texas as a C Corporation.
Current report — wording carried from elsewhere
Revenues increased by $20.0 million, or 43.8%, from $45.6 million for the six months ended June 30, 2023, to $65.6 million for the six months ended June 30, 2024. The increase in revenue was primarily due to combined effects of rising demand in the U.S. ATV and UTV market and our modified sales strategy. In 2024, we continued to expand our distribution network with various retailers to increase our products’ market penetration. We strategically focused our efforts on large retail stores in the U.S. (the “big box stores”) that offer their own financing plans, while moving away from retailers that have liberal return policies.
Current report — wording carried from elsewhere
Our cost and gross profit by revenue types are as follows:
Current report — wording carried from elsewhere
We had net income of $6.0 million and $2.6 million for the six months ended June 30, 2024 and 2023, respectively. The increase was primarily attributable to the increased revenues and gross profit as discussed above.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
For the Three Months Ended March 2024 and 2023