Massimo Group

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 (the “Controlling Shareholder”) of the Company.

Current wording

Massimo 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 (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. After this reorganization, Massimo ultimately owns 100% equity interests of Massimo Motor and Massimo Marine.

Previous wording

Massimo Group currently generates most of its revenues from the sales of UTVs and ATVs, which represent 89.8% and 90.2% of total revenue for the years ended December 31, 2023 and 2022, respectively. We also generate revenue from the sales of Pontoon Boats, which represented 10.2% and 9.8% of our revenue for the for the years ended December 31, 2023 and 2022, respectively.

Current wording

We currently generate most of our revenues from the sales of UTVs and ATVs, which represented 96.6% and 89.8% of total revenue for the years ended December 31, 2024 and 2023, respectively

Previous wording

Revenue from sales of UTVs, ATVs and electric bikes

Current wording

Revenue from sales of UTVs, ATVs and e-bikes

Previous wording

Cost of revenue on Pontoon Boats increased by $2.4 million, or 34.3%, from $6.9 million from fiscal 2022 to $9.2 million in fiscal 2023, and gross profit increased by $0.9 million, or 53.4%, from $1.6 million from fiscal 2022 to $2.5 million in fiscal 2023. Gross profit margin increased by 2.1%, from 19.0% from fiscal 2022 to 21.1% in fiscal 2023.

Current wording

Cost of revenue on Pontoon Boats decreased by $5.8 million, or 63.2%, from $9.2 million in fiscal 2023 to $3.4 million in fiscal 2024, and gross profit decreased by $2.1 million, or 85.9%, from $2.5 million in fiscal 2023 to $0.3 million in fiscal 2024. Decrease in cost of revenue was mainly due to decrease in products cost and freight and duty cost, resulting from decreased sales. Gross margin decreased by 11.9%, from 21.1% in fiscal 2023 to 9.3% in fiscal 2024, which was driven by significant decrease in sales.

Previous wording

Our general and administrative expenses primarily include salaries and benefits, professional fee, office expenses, travel expenses, insurance expenses, and depreciation expenses. General and administrative expenses increased by $4.3 million, or 48.1%, from $8.9 million from fiscal 2022 to $13.2 million in fiscal 2023. The increase was mainly due to increased salaries and benefits and professional fees. Our general and administrative expenses represented 11.5% and 10.3% of our total revenue in fiscal 2023 and fiscal 2022, respectively.

Current wording

Our general and administrative expenses primarily include salaries and benefits, professional fee, office expenses, travel expenses, insurance expenses, and depreciation expenses. General and administrative expenses increased by $3.4 million, or 25.6%, from $13.2 million in fiscal 2023 to $16.6 million in fiscal 2024. The increase was mainly due to increased salaries and benefit, insurance expense and rent expense. Our general and administrative expenses represented 14.9% and 11.5% of our total revenue in fiscal 2024 and fiscal 2023, respectively.

Previous wording

Our interest expense decreased by $0.3 million or 37.4%, from $0.8 million from fiscal 2022 to $0.5 million in fiscal 2023. The decrease in interest expense was mainly because we lowered the loan balance during the year in light of increasing interest rate and repaid all the loan balance in November 2023.

Current wording

Our interest expense decreased by $0.4 million or 81.0%, from $0.5 million in fiscal 2023, to $0.1 million in fiscal 2024. The decrease was mainly due to the repayment of all outstanding loans in early fiscal 2024.

Previous wording

Net cash provided by operating activities was approximately $10.9 million and $0.6 million in Fiscal 2023 and 2022, respectively. Net cash provided by operating activities increased $10.3 million during Fiscal 2023 compared with Fiscal 2022, primarily due to the following: :

Current wording

Net cash provided by operating activities was approximately $6.7 million in fiscal 2024, compared to net cash provided by operating activities of approximately $10.9 million in fiscal 2023, representing a decrease in the net cash provided by operating activities of $4.2 million in fiscal 2024 compared with fiscal 2023. The decrease is primarily due to the following:

Previous wording

Net cash used in investing activities was approximately $0.1 million in fiscal 2023, compared to used in investing activities was approximately $0.2 million in fiscal 2022. The decrease in net cash used in investing activities was primarily attributable to the reduced purchase of property and equipment in the fiscal 2023.

Current wording

Net cash used in investing activities was approximately $0.2 million in fiscal 2024, compared to net cash used in investing activities of $0.1 million in fiscal 2023. The increase in net cash used investing activities was primarily attributable to the purchase of property and equipment of $0.4 million, partially offset by a proceed of $0.2 million from sale of property and equipment in fiscal 2024.

Previous wording

Net cash used in financing activities was approximately $11.0 million in fiscal 2023, compared to net cash used in financing activities was approximately $0.8 million in fiscal 2022. The increase in net cash used in financing activities in fiscal 2023 was primarily attributable to net repayment of bank loan of $5.6 million and shareholder withdraw of $5.3 million in fiscal 2023, compared to repayment of shareholder advance of $2.5 million, partly offset by net proceeds from bank loan of $1.6 million in fiscal 2022.

Current wording

Net cash provided by financing activities was approximately $3.0 million in fiscal 2024, compared to net cash used in financing activities of approximately $11.0 million in fiscal 2023. The increase in net cash provided by financing activities in fiscal 2024 was primarily attributable to net proceed from IPO of $4.8 million and from the common shares subscription of $0.9 million, offset by the repayment of bank loans of $0.3 million and repayment of loan from a related party of $2.4 million. This compares to fiscal 2023, when cash used in financing included, net repayment of bank loan of $5.6 million and shareholder withdraw of $5.3 million.

Previous wording

As of December 31, 2023, we had cash and cash equivalents of approximately $0.8 million. Our current assets were approximately $38.4 million, including approximately $9.6 million accounts receivable, approximately $25.8 million inventory, approximately $1.6 million advance to suppliers and approximately $0.6 million prepayment and other receivables, and our current liabilities were approximately $18.8 million, including $12.7 million accounts payable to supplies, $1.8 million contract liabilities, $2.1 million income tax payable, and $0.9 million liabilities from obligations under operating and financing leases, which resulted in a positive working capital of $19.6 million.

Current wording

As of December 31, 2024, we had cash and cash equivalents of approximately $10.2 million. Our current assets were approximately $45.4 million, including approximately $6.6 million accounts receivable, approximately $27.3 million inventory, approximately $0.1 million advance to suppliers and approximately $1.2 million prepayment deposit and other receivables, and our current liabilities were approximately $26.1 million, including $9.6 million accounts payable to suppliers, $6.0 million accrued payment on a legal judgment, $0.4 million contract liabilities, $1.5 million income tax payable, $5.5 million loan from a related party and $2.2 million liabilities from obligations under operating and financing leases, which resulted in a positive working capital of $19.2 million.

Previous wording

Our primary source of cash is currently generated from our business and bank borrowings. In the coming years, we will be looking to other sources, such as raising additional capital by issuing shares of stock, to meet our cash needs. While facing uncertainties regarding the size and timing of capital raise, we are confident that we can continue to meet operational needs solely by utilizing cash flows generated from our operating activities.

Current wording

Our primary source of cash is currently generated from our business and bank borrowings. In the coming years, we will be looking to other sources, such as raising additional capital by issuing shares of stock, to meet our cash needs. While facing uncertainties regarding the size and timing of capital raise, we are confident that we can continue to support our operational needs solely by utilizing cash flows generated from our operating activities organically for the next 12 months.

Previous wording

Our capital expenditure consists 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 $134,662 and $197,802 for Fiscal 2023 and 2022, 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 $387,876 and $134,662 for Fiscal 2024 and 2023, respectively.

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 December 31, 2023 and 2022, $283,276 and $556,538 of sales return liabilities associated with estimated product returns were recorded 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.” The factors affecting our sales return liabilities include the number of products currently within the return period, historical and anticipated rates of sales returns claimed on those products, and the estimated amount of returns that may be claimed within this period. If actual results differ from the estimates, revises its estimated sales returns liability accordingly. Each period end, the Company reviews and reassesses the adequacy of its recorded sales returns liabilities and adjusts the amounts as necessary. As of December 31, 2024 and 2023, $261,588 and $283,276 of sales return liabilities associated with estimated product returns were recorded in the consolidated balance sheet, respectively. During the years ended December 31, 2024 and 2023, the Company recorded sales returns of $1,061,694 and $3,355,112 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 December 31, 2023 and 2022, $619,113 and $260,531 of Products warranty were recorded in the consolidated balance sheet, respectively.

Current wording

We generally provides a one-year limited warranty against defects in materials related to the sale of products. We considers the warranty as an assurance type warranty since the warranty provides the customers 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 factors affecting the our warranty include the number of products currently under warranty, historical and anticipated rates of warranty claim on those products, and the estimates of repair and replacement costs to satisfy the our warranty obligation. The anticipated rate of warranty claims is the primary estimate used in determining the warranty liability and is relatively predictable using historical experience of failure rates. The average remaining aggregate warranty period of the products sold is calculated, repair parts are generally already in stock or available at pre-determined prices, and labor rates are generally arranged at pre-established amount with service providers. If actual results differ from the estimates, we revises its estimated warranty liability. Each quarter, we reevaluates its estimates and assess the adequacy of its recorded warranty liabilities and adjust the amounts as necessary. As of December 31, 2024 and 2023, $503,553 and $619,113 of product warranty were recorded in the consolidated balance sheet, respectively. During the years ended December 31, 2024 and 2023, the Company recorded warranty expenses of $1,274,037 and $1,924,203, 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 December 31, 2023 and 2022, the Company recorded allowance for credit loss of $0.6 million and $0.4 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 December 31, 2024 and 2023, we recorded allowance for credit loss of $0.5 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, and adding labor costs and overhead costs for finished goods at end of each reporting period. Also, the Company reviewed any slow-moving or obsoleted items for inventory valuation. As of December 31, 2023 and 2022, the Company had inventory provision of $439,900 and $nil, included in inventories, net in the consolidated balance sheet.

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 December 31, 2024 and 2023, the Company had inventory provision of $469,900 and $439,900, included in inventories, net in the consolidated balance sheet. Impairment provision of inventories was $30,000 and $439,900 for the years ended December 31, 2024 and 2023, respectively, included in cost of revenues in the consolidated statement of operations and comprehensive income.

Previous wording

While our significant accounting policies are more fully described in Note 2 – Summary of Significant Accounting Policies to our consolidated financial statements, we believe that there were no critical accounting policies

Current wording

Although our significant accounting policies are elaborated upon in Note 2 – Summary of Significant Accounting Policies in our consolidated financial statements, we maintain that there were no critical accounting policies.