Massimo Group

MASSIMO GROUP AND SUBSIDIARIES

NOTE 1 —ORGANIZATION AND BUSINESS DESCRIPTION

Massimo Group (the “Company”) is a holding company established on October 10, 2022 under the laws of the State of Nevada. The Company, through its subsidiaries, is primarily engaged in the manufacturing and sales of a wide selection of farm and ranch tested utility terrain vehicles (“UTVs”), recreational all-terrain vehicles (“ATVs”), and pontoon and tritoon boats (“Pontoon Boats”). On April 4, 2024, the Company closed its initial public offering (“IPO”) of 1,300,000 shares of its common stock at an IPO price of $4.50 per share for aggregate gross proceeds of approximately $5.85 million from the offering (Note 15). In connection with the offering, the Company’s common shares began trading on the Nasdaq Capital Market under the trading symbol “MAMO.” Mr. David Shan, the Company’s Executive Chairman of the Board of Directors and former Chief Executive Officer, is the controlling shareholder (the “controlling shareholder”) of the Company, owning 77.2% equity interest of Massimo Group as of June 30, 2026.

Reorganization

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

Before and after the Reorganization, the Company, together with its subsidiaries, is effectively controlled by the same controlling shareholders, and therefore the Reorganization is considered 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 has 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 condensed 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:

On June 1, 2023, the Company entered into two agreements with Asian International Securities Exchange Co., Ltd. (“AISE”) under which AISE agreed to invest $1 million in Massimo Motor Sports and $1 million in Massimo Marine in exchange for 15% equity interests in each entity, respectively. After the Reorganization, AISE’s 15% equity interests in Massimo Motor Sports and Massimo Marine were exchanged for a 15% equity interest in Massimo Group.

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 contingent 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.

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 cost over net realizable value is recognized as a provision for diminution in value. As of June 30, 2026 and December 31, 2025, the Company had inventory allowances of $469,900 and $469,900, respectively. No inventory impairment provision was recorded for the three or six months ended June 30, 2026 or 2025.

Advances to suppliers

Advances to suppliers consist of balances paid for products, parts and accessories not yet received. The Company reviews these balances periodically for impairment. No impairment loss was recorded for the three or six months ended June 30, 2026 or 2025.

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:

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.

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 consists of property and equipment, are evaluated for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying amount may not be fully recoverable or that the useful life is shorter than the Company had originally estimated. When these events occur, the Company evaluates the impairment by comparing the carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the assets, the Company recognizes an impairment loss based on the excess of the carrying value of the assets over the fair value of the assets. No impairment charge was recognized for the three and six months ended June 30, 2026 and 2025, respectively.

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:

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. Except for the crypto assets described below, the Company did not have any other assets or liabilities measured at fair value on a recurring or non-recurring basis as of June 30, 2026 and December 31, 2025.

The Company’s crypto assets consist of Bitcoin and are measured at fair value on a recurring basis using quoted market prices in active markets, which are classified within Level 1 of the fair value hierarchy. Changes in fair value are recognized in net income. The fair values of the Company’s crypto assets were $385,297 and $573,333 as of June 30, 2026 and December 31, 2025, respectively.

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.

Sales returns

As of June 30, 2026 and December 31, 2025, the Company recorded sales return liabilities of $6,334 and $12,166, respectively. During the three months ended June 30, 2026 and 2025, actual product returns were $15,960 and $15,139, respectively, and return-liability accruals were $10,857 and a reversal of $15,139, respectively. During the six months ended June 30, 2026 and 2025, actual product returns were $100,013 and $1,491,441, respectively, and return-liability accruals were $94,181 and $1,198,208, respectively.

Products warranty

As of June 30, 2026 and December 31, 2025, the Company recorded warranty liabilities of $143,969 and $152,795, respectively. Warranty expense was $48,364 and $5,687 for the three months ended June 30, 2026 and 2025, respectively, and $89,428 and $125,419 for the six months ended June 30, 2026 and 2025, respectively.

Disaggregation of revenues

The Company disaggregates its revenue from contracts by products, as the Company believes it best depicts how the nature, amount, timing and uncertainty of the revenue and cash flows are affected by economic factors. The Company’s disaggregation of revenues for the three and six months ended June 30, 2026 and 2025 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.

For the three months ended June 30, 2026 and 2025, freight and duty included in cost of revenues amounted to a recovery of $1,380,262 and expense of $2,298,848, respectively. For the six months ended June 30, 2026 and 2025, the amounts were a recovery of $167,587 and expense of $4,192,385, respectively.

Shipping and handling costs

Shipping and handling costs included in selling expense were $1,249,263 and $1,584,046 for the three months ended June 30, 2026 and 2025, respectively, and $2,155,934 and $2,636,004 for the six months ended June 30, 2026 and 2025, respectively.

401(k) benefit plan

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

Income taxes

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

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

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.

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.

Earnings per share

The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted-average common shares outstanding for the period. Diluted EPS presents the dilutive effect of potential common shares, such as options, warrants and restricted stock units, as if they had been converted at the beginning of the period presented, or at the issuance date, if later. Potential common shares that have an anti-dilutive effect are excluded from diluted EPS. See Note 15 for the period-specific reconciliation.

Stock Based compensation

The Company follows the provisions of ASC 718, “Compensation—Stock Compensation” (“ASC 718”), 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 the product type. As a result, the Company has identified two reportable segments, which reflect the way the business is managed and operated. The Company operates and manages its business as two segments. As the Company’s long-lived assets are all located in the United States and substantially all the Company’s revenues are derived from within the United States, no geographical segments are presented.

Concentration and risks

a. Concentration of credit risk

The standard FDIC insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. The Company monitors its concentration of credit risk with its financial institutions.

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.

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

One customer accounted for 50% and 65% of total revenue for the three months ended June 30, 2026 and 2025, respectively, and 50% and 66% for the six months ended June 30, 2026 and 2025, respectively.

As of June 30, 2026, one customer represented 87% of accounts receivable. As of June 30, 2025, one customer represented 77% of accounts receivable.

f. Significant suppliers

For the three months ended June 30, 2026, two suppliers represented 55% and 20% of purchases. For the three months ended June 30, 2025, three suppliers represented 36%,14% and 10% of purchases. For the six months ended June 30, 2026, two suppliers represented 59% and 13% of purchases.

For the six months ended June 30, 2025, two suppliers represented 24% and 16% of purchases. As of June 30, 2026, three suppliers represented 28%,21% and 19% of the supplied accounts-payable aging population. As of June 30, 2025, three suppliers represented 21%,17% and 13% of accounts payable.

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, 2026. 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.

NOTE 3 —ACCOUNTS RECEIVABLE, NET

Accounts receivable consisted of the following:

The Company didnot write off any uncollectible accounts receivable for the three and six months ended June 30, 2026 and 2025, respectively.

The Company recorded a provision for credit losses of $102,752 for the three months ended June 30, 2026 and a reversal of $75,474 for the three months ended June 30, 2025. For the six months ended June 30, 2026, the Company recorded a net provision of $76,757, compared with a reversal of $25,465 for the six months ended June 30, 2025.

The movement of allowance for credit loss are as follows:

The Company’s accounts receivable balances as of June 30, 2026 and December 31, 2025 are pledged for its line of credit facility at Cathay Bank.

NOTE 4 —INVENTORIES

Inventories consist of the following:

No inventory impairment provision was recorded for the three or six months ended June 30, 2026 or 2025.

The inventory allowance movement is as follows:

As of June 30, 2026 and December 31, 2025, inventories with carrying amounts of approximately $15,113,957 and $17,469,430, respectively, were pledged under the Company’s line of credit facility with Cathay Bank.

NOTE 5 —ADVANCE TO SUPPLIERS

Advance to suppliers consisted of the following:

No impairment loss on advances to suppliers was recorded for the three or six months ended June 30, 2026 or 2025.

NOTE 6 —PREPAID AND CURRENT ASSETS

Other current assets consist of the following:

NOTE 7 —PROPERTY AND EQUIPMENT, NET

Property and equipment, net, consist of the following:

Depreciation expense was $66,447 and $33,503 for the three months ended June 30, 2026 and 2025, respectively, and $105,509 and $67,005 for the six months ended June 30, 2026 and 2025, respectively.

Property and equipment additions were $406,376 andnil for the three months ended June 30, 2026 and 2025, respectively, and $668,834 andnil for the six months ended June 30, 2026 and 2025, respectively. There was no disposal during the second quarter of 2026. During the six months ended June 30, 2026, the Company received $10,000 of proceeds and recorded a $24,346 loss on disposal.

No impairment loss was recorded for the three and six months ended June 30, 2026 and 2025.

NOTE 8 —LEASES

The monthly rent for the Company’s approximately 66,000 square-foot Garland facility is $35,000.

Total operating lease expense for the three months ended June 30, 2026 and 2025 was $628,129 and $716,492, respectively. Amortization of operating lease right-of-use assets was $485,838 and $523,925, respectively.

Total operating lease expense for the six months ended June 30, 2026 and 2025 was $1,345,272 and $1,433,994, respectively. Amortization of operating lease right-of-use assets was $1,037,343 and $1,036,202, respectively.

Accretion of finance lease liabilities was $334 and $784 for the three months ended June 30, 2026 and 2025, respectively. Amortization of finance lease right-of-use assets was $6,113 and $10,380, respectively.

Accretion of finance lease liabilities was $876 and $1,680 for the six months ended June 30, 2026 and 2025, respectively. Amortization of finance lease right-of-use assets was $16,493 and $20,529, respectively.

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

Operating leases

Financing leases

NOTE 8 —LEASES (continued)

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

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

The following is a schedule of maturities of operating and finance lease liabilities as of June 30, 2026:

Operating leases

Finance leases

NOTE 9 —RETURN LIABILITIES

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

NOTE 10 —WARRANTY LIABILITIES

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

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:

Note (a): The balance mainly represented a $5,988,961 litigation accrual in connection with Nebula (see Note 17).

NOTE 12 —RELATED PARTY TRANSACTIONS

The relationship of related parties is summarized as follows:

(a) Due to shareholder

Due to shareholder consists of the following:

On January 3, 2024, the Company entered into an unsecured loan agreement with Mr. David Shan. The outstanding balance was classified as current. The Company madeno repayments during the six months ended June 30, 2026 and made repayments totaling $3,546,459 during the year ended December 31, 2025. The ending balance at June 30, 2026 was $2,000,089.

On June 23, 2026, the Company entered into a separate unsecured loan agreement with Mr. David Shan, pursuant to which Mr. Shan agreed to provide a draw-down loan facility of up to $4.0 million. Advances under the facility bear interest at 4.0% per annum and mature on June 22, 2027. No amounts had been drawn under this facility as of June 30, 2026.

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 21%.

Massimo Motor Sports and Massimo Marine are subject to U.S. federal income tax at 21%. The Company’s effective tax rates were approximately 16.2% and 26.0% for the three months ended June 30, 2026 and 2025, respectively, and 20.0% and 20.3% for the six months ended June 30, 2026 and 2025, respectively.

The provision for income tax consists of the following:

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

NOTE 13 — TAXES

Corporate Income Taxes (continued)

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

NOTE 14 —SHAREHOLDERS’ EQUITY

Common Shares

Based on the Company’s Articles of Incorporation, the authorized number of common stock was 100,000,000 shares of common stock with a par value of $0.001, of which 40,000,000 common shares were issued on June 1, 2023. The authorized number of preferred stock was 5,000,000 shares of preferred stock with a par value of $0.01, andno preferred shares were issued. All share information included in these condensed consolidated financial statements has been retroactively adjusted for the Reorganization as if the common-share issuance occurred on the first day of the first period presented. No shares were issued during the three or six months ended June 30, 2026.

As of June 30, 2026 and December 31, 2025,41,640,950 shares of common stock were issued and outstanding.

NOTE 14 — SHAREHOLDERS’ EQUITY (continued)

Initial Public Offering

On April 4, 2024, the Company closed its IPO of 1,300,000 shares of common stock at $4.50 per share for gross proceeds of approximately $5.85 million. Net proceeds after underwriting discounts and offering expenses were approximately $5.0 million. The underwriters’ over-allotment option expired in May 2024 without exercise.

Common Shares Issued for Service

On June 18, 2024, the Company signed a twelve-month consulting agreement with TJCM Asset Management LLC. On June 21, 2024, the Company issued 22,485 shares of common stock as partial prepayment for services. The agreement was terminated by mutual agreement on November 29, 2024, and 8,869 of those shares were cancelled.

Representative’s Warrants

Pursuant to the Underwriting Agreement, the Company issued to the Representative and its designee warrants (the “Representative’s Warrants”) to purchase 87,100 shares of common stock. The Representative’s Warrants are exercisable at a per share exercise price equal to $5.63 and are exercisable at any time and from time to time, in whole or in part, during the period commencing on October 4, 2024 and terminating on April 4, 2029. Neither the Representative’s Warrants nor any of the shares issued upon exercise of the Representative’s Warrants may be sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such securities by any person, for a period of six months immediately following the commencement of sales of the offering.

Management determined that these warrants meet the requirements for equity classification under ASC 815-40 because they are indexed to their own shares and meet the requirements for equity classification. The warrants were recorded at fair value on the date of grant as a component of shareholders’ equity. The fair value of these warrants was $220,000, which was considered a direct cost of IPO and included in additional paid-in capital. The fair value has been estimated using the Black-Scholes pricing model with the following weighted-average assumptions: market value of underlying share of $4.02, risk free rate of 4.3%, expected term offive years; exercise price of the warrants of $5.63, volatility of 89%; and expected future dividends ofnil.

As of June 30, 2026,87,100 representative warrants were outstanding with an exercise price of $5.63 and a remaining contractual life of approximately 2.76 years.

NOTE 15 —EARNINGS (LOSS) PER SHARE

For the three months ended June 30, 2026, potential common shares from outstanding stock options and warrants were excluded from diluted earnings per share because their exercise prices exceeded the average market price. No RSUs were outstanding.

For the six months ended June 30, 2026, potential common shares from outstanding stock options and warrants were excluded because their effect would have been anti-dilutive. No RSUs were outstanding.

For the three months ended June 30, 2025,74,840 unvested RSUs were included in diluted weighted-average shares. For the six months ended June 30, 2025, potential common shares were excluded because the Company incurred a net loss.

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

NOTE 16 —EMPLOYEE STOCK PLANS

Equity Incentive Plans

On May 22, 2024, the Company’s Board approved the 2024 Equity Incentive 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 recordedno RSU compensation expense for the three or six months ended June 30, 2026. RSU compensation expense was $111,439 and $307,379 for the three and six months ended June 30, 2025, respectively.

The following table summarizes the Company’s RSU activity:

Options

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

On May 22, 2024, the Company granted Mr. David Shan options to purchase 46,860 common shares under an incentive stock option plan at an exercise price of $4.268 per share. The awards vested in two equal annual installments beginning May 22, 2024 and expire on May 21, 2029.

On May 22, 2024, the Company also granted Mr. Shan options to purchase 103,140 common shares under a nonqualified stock option plan at an exercise price of $4.00 per share. The awards vested in two equal annual installments beginning May 22, 2024 and expire on May 21, 2034.

NOTE 16 — EMPLOYEE STOCK PLANS (continued)

Options (continued)

On May 22, 2024, the Company granted two executives options to purchase an aggregate of 200,000 common shares at $4.00 per share. The awards vested in two equal annual installments beginning May 22, 2024 and expire on May 21, 2034. During the second quarter of 2026,100,000 unexercised options held by the former CFO lapsed following termination.

As of June 30, 2026, the intrinsic value of outstanding stock options wasnil.

The Company recorded reversals of option compensation expense of $53,205 and $82,600 for the three and six months ended June 30, 2026, respectively. Option compensation expense was $66,808 and $157,288 for the three and six months ended June 30, 2025, respectively.

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

As of June 30, 2026, unrecognized compensation cost related to outstanding RSUs and stock options wasnil.

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 June 30, 2026 and December 31, 2025, 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 $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.

NOTE 17 — COMMITMENTS AND CONTINGENCIES(continued)

Litigation (continued)

Zhejiang Qunying Vehicle Co., Ltd. v. Cho International, Inc

On September 5, 2023, Zhejiang Qunying Vehicle Co., Ltd. (“Zhejiang Qunying”) filed suit against the Company and ten other corporate entities in the Superior Court of the State of California for Orange County. Zhejiang Qunying alleges claims of approximately $6,000,000 in damages for products that were allegedly shipped to the United States but not paid for. Despite being one of the ten entities that plaintiff has sued, the Company has had minimal interactions with Zhejiang Qunying. The Company has not purchased any products from Zheijang Qunying. In February 2025, Zhejiang filed a second amended complaint. The Company filed a demurrer seeking to dismiss the second amended complaint due to Zhejiang Qunying’s failure to state a valid claim in March 2024. In August 2024, the Court denied in part and granted in part the Company’s demurrer. The matter remains pending, and a trial date has not yet been scheduled. Based on the current assessment, a negative outcome of the legal proceeding is considered remote. Therefore, no accrual has been proposed in the financial statements.

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.

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 hastwo reporting segments.

The following table presents sales by product categories for the three and six months ended June 30, 2026 and 2025, respectively:

NOTE 19 —SUBSEQUENT EVENTS

The Company evaluated subsequent events through the date these condensed consolidated financial statements were issued. No material subsequent events requiring recognition or disclosure were identified, except as otherwise disclosed herein.