UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-41994

Massimo Group

(Exact name of registrant as specified in its charter)

Nevada		92-0790263
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3101 W Miller Road

Garland, TX

75041

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (877) 881-6376

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of exchange on which registered
Common stock, $0.001 par value		MAMO		The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of May 16, 2025, there were 41,546,700 shares of the Company’s common stock issued and outstanding.

TABLE OF CONTENTS

		Page
	Cautionary Note Regarding Forward-Looking Statements	ii

PART I.	FINANCIAL INFORMATION	F-1
Item 1.	Condensed Consolidated Balance Sheets as of March 31, 2025 (unaudited) and December 31, 2024	F-1
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three Months Ended March 31, 2025 and 2024 (unaudited)	F-2
	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three Months Ended March 31, 2025 and 2024 (unaudited)	F-3
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2025 and 2024 (unaudited)	F-4
	Notes to Condensed Consolidated Financial Statements (unaudited)	F-5 - 27
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	1
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	10
Item 4.	Controls and Procedures.	10
PART II.	OTHER INFORMATION	11
Item 1.	Legal Proceedings.	11
Item 1A.	Risk Factors.	11
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	11
Item 3.	Defaults Upon Senior Securities.	11
Item 4.	Mine Safety Disclosures.	11
Item 5.	Other Information.	11
Item 6.	Exhibits.	12
	Signatures	13

Unless otherwise stated in this Quarterly Report on Form 10-Q (this “Report”), references to “we,” “us,” “our,” “Company” or “our Company” are to Massimo Group, a Nevada corporation, and its subsidiaries.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Report contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements contained in this Report other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, projected costs and our objectives for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “should,” “shall,” “intend,” “goal,” “objective,” “seek,” “expect,” and similar expressions or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including but not limited to:

●	We have a limited operating history on which to judge our performance and assess our prospects for future success.
●	We rely on independent dealers and distributors to manage the retail distribution of many of our products.
●	We rely on third parties to manufacture many of the products we sell.
●	The majority of the products we purchase are manufactured by suppliers in China and their operations are subject to risks associated with business operations in China. Any disruption of these manufacturers to supply us with appropriately priced products on a timely basis could have a material adverse effect on our business.
●	Our management team has limited experience operating a company with publicly traded shares.
●	Economic conditions that impact consumer spending may have a material adverse effect on our business, and our partners’ business.
●	Rising U.S.-China trade tensions and tariffs may increase our costs and disrupt our supply chain.
●	We currently maintain all our cash and cash equivalents with three financial institutions.
●	We face intense competition in all product lines, including from some competitors that have greater financial and marketing resources.
●	Any decline in the social acceptability of our products or any increased restrictions on the access or the use of the Company’s products in certain locations could materially and adversely affect our business, operation results, or financial condition.
●	Our future expansion plans are subject to uncertainties and risks, and distribution centers we intend to open may not result in increased sales or efficiencies.
●	Our limited investment in R&D of new products may adversely affect our ability to enhance existing products and develop and market new products.
●	The inability of our dealers and distributors to secure adequate access to capital could materially and adversely affect our business.
●	We depend upon the successful management of inventory levels, both ours and that of our dealers
●	There is no assurance there will not be disruptions to trade between China and the United States.
●	We may not be able to successfully maintain our business strategy that relies upon offshore manufacturers.
●	Supply chain problems, termination or interruption of supply arrangements or increases in the cost of products could have a material adverse effect on our business.
●	The high cost of delivering our Pontoon Boats may limit the geographic market for these products.
●	Higher fuel costs can materially and adversely affect our business.
●	Changes in the credit markets could decrease the ability of consumers to purchase our products and have a material adverse effect on our business.
●	We may require additional capital which may not be available.
●	Our business depends on the continued contributions made by Mr. Shan, our founder, Chairman and Chief Executive Officer.
●	Our business depends on the efforts of our management, and our business may be severely disrupted if we lose their services.
●	If we fail to develop and protect our brand names and reputation, we may not attract and retain new distributors and dealers, or customers.
●	We may be unable to protect our intellectual property or may incur substantial costs as a result of litigation or other proceedings relating to our intellectual property.
●	Significant product repair and/or replacement due to product warranty claims or product recalls could have a material adverse impact on our business.

●	The failure of our IT systems or a security breach involving consumer or employee personal data could have a materially adverse effect on our business.
●	Retail sales of our new products may be materially and adversely affected by declining prices for used versions of our products or by competitors supplying new products in excess of market demand.
●	We are subject to laws, rules and regulations regarding product safety, health, environmental and noise pollution, and other issues.
●	If product liability lawsuits are filed against us, we may be exposed to significant financial liabilities.
●	Our insurance may not be sufficient.
●	We have been in the past, and may be, in the future subject to litigations arising from defective products that resulted in property damage, physical injury, and death.
●	Our business requires us to pay licensing fees for each state that we operate in. We may not be able to justify the cost of compliance in a particular state or locality thus necessitating that we allow our license to expire.
●	We have not made use of confidentiality agreements in the past and, although we intend to rely on such agreements in future dealings with suppliers, employees, consultants, and other parties, the prior lack of or the breach of such agreements could adversely affect our business and results of operations.
●	Our business could be materially harmed by epidemics, pandemics, or other public health emergencies, boycotts, and geo-political events.
●	Our ability, or lack thereof, to attract, recruit, and maintain talented sales representatives may adversely affect our business and our plans to expand our market.
●	Our ability, or lack thereof, to establish strategic partnerships and expand our distribution channels may adversely affect our business and our plans.
●	U.S. government policies that provide incentives to farmers may be discontinued.
●	There is no existing market for our securities, and we do not know if one will develop.
●	The market price of our common stock is likely to be highly volatile, and you could lose all or part of your investment.
●	We have no current plans to pay cash dividends on our common stock for the foreseeable future.
●	Our founder and principal shareholder have substantial influence over our Company.
●	We will incur significant increased costs as a result of operating as a public company and will be required to devote substantial time to compliance initiatives.
●	Changes to estimates related to our property, fixtures and equipment or operating results that are lower than our current estimates may cause us to incur impairment charges on certain long-lived assets, which may adversely affect our results of operations.
●	As an “emerging growth company” under applicable law, we are subject to lessened disclosure requirements, which could leave our stockholders with less information or fewer rights available to stockholders of more mature companies.
●	If securities or industry analysts do not publish or cease publishing research or reports about us, our business, or our market, or if they change their recommendations regarding our common stock adversely, the price of our common stock and trading volume could decline.
●	Anti-takeover provisions in our Articles of Incorporation and Bylaws and Nevada law could discourage, delay, or prevent a change in control of our company and may affect the trading price of our common stock.
●	Failure to establish and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price.
●	Our Bylaws provide that the Second Judicial District Court of Washoe County of the State of Nevada is the sole and exclusive forum for certain stockholder litigation matters.
●	Other risks and uncertainties described in this Report, including those described in the “Risk Factors” section.

Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, we undertake no duty to update any of these forward-looking statements after the date of this Report or to conform these statements to actual results or revised expectations.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely upon these statements.

We qualify all of the forward-looking statements in this Report by these cautionary statements.

iii

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

MASSIMO GROUP AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2025 AND DECEMBER 31, 2024

	March 31,2025 (unaudited)		December 31,2024 (restated)
	As of
	March 31,2025 (unaudited)		December 31,2024 (restated)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	843,624	$	10,210,084
Short-term investment		3,000,000		-
Accounts receivable, net		5,592,946		4,826,637
Inventories, net		24,386,248		27,258,640
Advance to suppliers		193,403		99,076
Due from a related party		12,689		8,576
Prepaid and other current assets		1,067,219		1,220,432
Total current assets		35,096,129		43,623,445

NON-CURRENT ASSETS
Property and equipment at cost, net		498,757		532,259
Right of use operating lease assets, net		8,973,622		9,485,899
Right of use financing lease assets, net		61,652		71,801
Other non-current assets		49,500		49,500
Deferred tax assets		1,670,689		1,126,614
Total non-current assets		11,254,220		11,266,073
TOTAL ASSETS	$	46,350,349	$	54,889,518

LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable	$	5,729,448	$	9,572,444
Other payable, accrued expenses and other current liabilities		6,983,264		6,169,193
Return liabilities		99,605		261,588
Warranty liabilities		386,798		503,553
Contract liabilities		558,183		449,999
Current portion of obligations under operating leases		2,156,252		2,119,894
Current portion of obligations under financing leases		43,877		43,421
Income tax payable		1,076,543		1,072,263
Loan from a related party		2,530,248		5,546,548
Total current liabilities		19,564,218		25,738,903

NON-CURRENT LIABILITIES
Obligations under operating leases, non-current		6,861,638		7,412,693
Obligations under financing leases, non-current		22,460		33,602
Total non-current liabilities		6,884,098		7,446,295
TOTAL LIABILITIES	$	26,448,316	$	33,185,198

Commitments and Contingencies		-		-

EQUITY
Common shares, $0.001 par value, 100,000,000 shares authorized, 41,546,700 and 41,539,950 issued and outstanding as of March 31, 2025 and December 31, 2024, respectively		41,546		41,539
Additional paid-in-capital		6,901,320		6,614,907
Retained earnings		12,959,167		15,047,874
Total equity		19,902,033		21,704,320

TOTAL LIABILITIES AND EQUITY	$	46,350,349	$	54,889,518

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-1

MASSIMO GROUP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

AND COMPREHENSIVE (LOSS) INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024

(UNAUDITED)

	2025			2024
	For the periods Ended
	March 31,
	2025			2024

Revenues	$	14,901,722		$	30,151,677
Cost of revenues		10,677,072			19,700,290
Gross profit		4,224,650			10,451,387

Operating expenses:
Selling expense		1,869,964			2,210,484
General and administrative		4,219,600			4,106,905
Research and development		841,196			162,250
Total operating expenses		6,930,760			6,479,639

(Loss) income from operations		(2,706,110	)		3,971,748

Other income (expense):
Other income, net		78,698			247,569
Interest expense		(1,090	)		(137,694	)
Total other income, net		77,608			109,875

(Loss) income before income taxes		(2,628,502	)		4,081,623

(Recovery of) provision for income taxes		(539,795	)		900,341

Net (loss) income and comprehensive (loss) income	$	(2,088,707	)	$	3,181,282

(Loss) earnings per Share – basic	$	(0.05	)	$	0.08
Weighted average shares outstanding – basic		41,542,800			40,000,000
(Loss) earnings per Share – diluted	$	(0.05	)	$	0.08
Weighted average shares outstanding – diluted		41,542,800			40,000,000

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-2

MASSIMO GROUP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024

(UNAUDITED)

	Shares		Amount		Receivable			Capital			Earnings			Total
	Common Share				Subscription			Additional Paid-in			Retained
	Shares		Amount		Receivable			Capital			Earnings			Total

Balance at December 31, 2023		40,000,000	$	40,000	$	(832,159	)	$	1,994,000		$	13,285,965		$	14,487,806
Subscription received		–		–		475,000			–			–			475,000
Net income		–		–		–			–			3,181,282			3,181,282
Balance at March 31, 2024		40,000,000	$	40,000	$	(357,159	)	$	1,994,000		$	16,467,247		$	18,144,088

Balance at December 31, 2024 (restated)		41,539,950	$	41,539	$	-		$	6,614,907		$	15,047,874		$	21,704,320
Balance		41,539,950	$	41,539	$	-		$	6,614,907		$	15,047,874		$	21,704,320
Common stock issued upon vesting of RSUs		6,750		7		–			(7	)		–			–
Amortization of share-based compensation related to options granted		–		–		–			90,480			–			90,480
Amortization of share-based compensation related to RSU granted		–		–		–			195,940			–			195,940
Net loss		–		–		–			–			(2,088,707	)		(2,088,707	)
Net income (loss)		–		–		–			–			(2,088,707	)		(2,088,707	)
Balance at March 31, 2025		41,546,700	$	41,546	$	-		$	6,901,320		$	12,959,167		$	19,902,033
Balance		41,546,700	$	41,546	$	-		$	6,901,320		$	12,959,167		$	19,902,033

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-3

MASSIMO GROUP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024

(UNAUDITED)

	2025			2024
	Periods Ended March 31,
	2025			2024

Cash flows from operating activities:
Net (loss) income	$	(2,088,707	)	$	3,181,282
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		33,502			36,511
Non-cash operating lease expense		512,277			280,790
Amortization of finance lease right-of-use assets		10,149			10,380
Provision of allowance for expected credit loss		50,009			234,298
Gain on disposal of property and equipment		-			(44,655	)
Amortization of share-based compensation related to options granted		90,480			-
Amortization of share-based compensation related to RSU granted		195,940			-
Deferred income tax recovery		(544,075	)		(212,347	)
Changes in operating assets and liabilities:
Accounts receivable		(816,318	)		(4,871,623	)
Inventories		2,872,393			(1,381,723	)
Advance to suppliers		(94,328	)		183,228
Prepaid and other current assets		153,213			(41,810	)
Due from a related party		(4,113	)		-
Repayment of a loan from a related party		-			(10,616	)
Accounts payables		(3,842,996	)		2,094,305
Other payable, accrued expense and other current liabilities		814,071			(7,634	)
Tax payable		4,280			1,100,118
Warranty liabilities		(116,755	)		21,412
Return liabilities		(161,983	)		(145,047	)
Contract liabilities		108,184			(783,069	)
Lease liabilities – operating lease		(514,697	)		(280,790	)
Net cash used in operating activities		(3,339,474	)		(636,990	)

Cash flows from investing activities:
Proceed from sales of property and equipment		-			128,001
Acquisition of property and equipment		-			(104,427	)
Purchase of short-term investment		(3,000,000	)		-
Net cash (used in) provided by investing activities		(3,000,000	)		23,574

Cash flows from financing activities:
Repayment of other loans		-			(303,583	)
Repayment of finance lease liabilities		(10,686	)		(10,250	)
Deferred offering costs		-			(106,428	)
Repayment of a loan from a related party		(3,016,300	)		-
Proceeds from subscription deposits		-			475,000
Net cash (used in) provided by financing activities		(3,026,986	)		54,739

Net decrease in cash and cash equivalents		(9,366,460	)		(558,677	)
Cash and cash equivalents, beginning of the period		10,210,084			765,814
Cash and cash equivalents, end of the period	$	843,624		$	207,137

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest	$	895		$	137,694
Cash paid for income taxes	$	-		$	12,570

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-4

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION

Massimo Group (the “Company”), is a holding company established on October 10, 2022 under the laws of the State of Nevada. The Company, through its subsidiaries, is primarily engaged in the manufacturing and sales of a wide selection of farm and ranch tested utility terrain vehicles (“UTVs”), recreational all-terrain vehicles (“ATVs”), and pontoon and tritoon boats (“Pontoon Boats”). On April 4, 2024, the Company closed its initial public offering (“IPO”) of 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 Chairman of the Board and Chief Executive Officer (“CEO”), is the controlling shareholder (the “controlling shareholder”) of the Company who owns 77.3% equity interest of Massimo Group as of March 31, 2025.

Reorganization

On June 1, 2023, the two 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 as a recapitalization of entities under common control in accordance with Accounting Standards Codification (“ASC”) 805-50-25. The consolidation of the Company and its subsidiaries have been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying unaudited 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:

Subsidiaries	Date of Incorporation	Jurisdiction of Formation	Percentage of direct/indirect Economic Ownership			Principal Activities
Massimo Group	October 10, 2022	Nevada				Holding company
Massimo Motor Sports, LLC	June 30, 2009	Texas		100	%	Manufacture of UTVs and ATVs
Massimo Marine, LLC	January 6, 2020	Texas		100	%	Manufacture of Pontoon Boats

On June 1, 2023, the Company entered into two agreements with Asian International Securities Exchange Co., Ltd. (“AISE”) and AISE agreed to invest $1 million in Massimo Motor Sports and $1 million in Massimo Marine to exchange for 15% of equity interest respectively. After the Reorganization, the 15% of equity interest in Massimo Motor Marine and Massimo Marine owned by AISE have been exchanged to 15% of equity interest in Massimo Group.

F-5

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements, which include the accounts of Massimo Group and its wholly owned subsidiaries, have been prepared in conformity with generally accepted accounting principles in the United States of America (GAAP). All intercompany balances and transactions have been eliminated in consolidation.

Uses of estimates and assumptions

In preparing the consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information as of the date of the consolidated financial statements. Significant accounting estimates required to be made by management include allowance for inventories, allowance for credit losses, sales return liabilities, warranty costs and the assessment and the disclosure of 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, maximum amounts of $495,779 and $597,877 are insured by Federal Deposit Insurance Corporation (“FDIC”) as of March 31, 2025 and December 31, 2024, respectively.

Accounts receivable, net

Accounts receivable represents trade receivable and are recognized initially at fair value and subsequently adjusted for any allowance for expected credit loss. The Company grants credit to customers, without collateral, under normal payment terms. The Company uses a loss rate method to estimate the allowance for credit losses. The Company evaluates the expected credit loss of accounts receivable based on customer financial condition and historical collection information adjusted for current market economic conditions and forecasts of future economic performance when appropriate. Loss-rate approach is based on the historical loss rates and expectations of future conditions. The Company writes off potentially uncollectible accounts receivable against the allowance for credit losses if it is determined that the amounts will not be collected.

F-6

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Inventories, net

Inventories are stated at the lower of cost or net realizable value, using the first-in, first out (FIFO) method. Costs include the cost of raw materials, freight and duty. Any excess of the cost over the net realizable value of each item of inventories is recognized as a provision for diminution in the value of inventories. Net realizable value is estimated using selling price in the normal course of business less any costs to complete and sell products. As of March 31, 2025 and December 31, 2024, the Company had inventory provision of $469,900 and $469,900, included in inventories, net in the condensed consolidated balance sheet. Impairment provision of inventories were nil and nil for the three months ended March 31, 2025 and 2024, respectively, included in cost of revenues in the condensed consolidated statement of operations and comprehensive income (loss).

Advance to suppliers

Advance to suppliers consists of balances paid to suppliers for purchasing products, parts and accessories that have not been provided or received. Advances to suppliers are short-term in nature and are reviewed periodically to determine whether their carrying value has become impaired. The Company evaluated the carrying value of individual advances based on specifics facts and circumstances for any impairment at each reporting date. For the three months ended March 31, 2025 and 2024, the Company recorded the impairment loss of nil and nil, respectively.

Property and equipment

Property and equipment are recorded at cost. Depreciation is provided in amounts sufficient to amortize the cost of the related assets over their useful lives using the straight-line method, as follows:

		Useful life
Furniture and fixtures		5-7 years
Machinery equipment		5-7 years
Electronic equipment		5 years
Transportation equipment		5 years
Leasehold improvement		Over the shorter of the lease term or estimated useful lives (3-5 years)

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 condensed consolidated statements of operations and comprehensive income.

F-7

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Leases

The Company adopted Accounting Standards Update (“ASU”) No. 2016-02—Leases (Topic 842) since January 1, 2020, using a modified retrospective transition method permitted under ASU No. 2018-11. This transition approach provides a method for recording existing leases only at the date of adoption and does not require previously reported balances to be adjusted. The Company evaluates the contracts it enters into to determine whether such contracts contain leases. A contract contains a lease if the contract conveys the right to control the use of identified property or equipment for a period of time in exchange for consideration. At commencement, contracts containing a lease are further evaluated for classification as an operating or finance lease where the Company is a lessee.

Operating Leases

For operating leases, the Company measures its lease liabilities based on the present value of the total lease payments not yet paid discounted based on the more readily determinable of the rate implicit in the lease or its incremental borrowing rate, which is the estimated rate the Company would be required to pay for a collateralized borrowing equal to the total lease payments over the term of the lease. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The Company measures right-of-use (“ROU”) assets based on the corresponding lease liability adjusted for payments made to the lessor at or before the commencement date, and initial direct costs it incurs under the lease. The Company begins recognizing lease expense when the lessor makes the underlying asset available to the Company.

Lease cost for operating leases includes the amortization of the ROU asset and interest expense related to the operating lease liability. For leases with lease term less than one year (short-term leases), the Company records operating lease expense in its condensed 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 consisting 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 months ended March 31, 2025 and 2024, respectively.

F-8

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Fair value of financial instruments

ASC 825-10 requires certain disclosures regarding the fair value of financial instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

●	Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
●	Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted market prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable and inputs derived from or corroborated by observable market data.
●	Level 3 — inputs to the valuation methodology are unobservable.

Unless otherwise disclosed, the fair value of the Company’s financial instruments, including cash and cash equivalents, accounts receivables, other receivable included in other current assets, loan from a related party, accounts payable, other payable, accrued expense and other liabilities, contract liabilities, approximates their recorded values due to their short-term maturities. The Company determined that the carrying value of the lease liabilities approximated their fair value as the interest rates used to discount the contracts approximate market rates. The Company noted no transfers between levels during any of the periods presented. The Company did not have any instruments that were measured at fair value on a recurring nor non-recurring basis as of March 31, 2025 and December 31, 2024.

Revenue recognition

The Company adopted ASC Topic 606, “Revenue from Contracts with Customers”. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the Company applies the following steps:

Step 1: Identify the contract(s) with a customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

The Company’s revenue is generated primarily by sales of UTVs, ATVs, electric bikes (“e-bikes”), and Pontoon Boats. Revenue represented the amount of consideration to which the Company expects to be entitled in exchange for promised goods. Revenue is recorded when performance obligations are considered to be satisfied when control is transferred to our customers. For sales made through our e-commerce platform, revenue is recorded upon delivery and customer acceptance. For direct sales and consignment sales, revenue is recognized when goods leave the warehouse and when customers pick up goods in stores, respectively.

F-9

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Sales returns

The Company provides a refund policy to accept returns from end customers, which varies and depends on different products and sales channels. 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 the Company’s 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, the Company revises its estimated sales returns liability accordingly. At each period end, the Company reviews and reassesses the adequacy of its recorded sales returns liabilities and adjusts the amounts as necessary. As of March 31, 2025 and December 31, 2024, $99,605 and $261,588 of sales return liabilities associated with estimated product returns were recorded in the condensed consolidated balance sheet, respectively. During the three months ended March 31, 2025 and 2024, the Company recorded sales returns of $1,213,347 and $425,705 respectively.

Products warranty

The Company generally provides a one-year limited warranty against defects in materials related to the sale of products. The Company considers the warranty as an assurance type warranty since the warranty provides the customers the assurance that the product complies with agreed-upon specifications. Estimated future warranty obligations are included in the cost of product sales in the period in which the related revenue is recognized. The factors affecting the Company’s 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 Company’s 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, the Company revises its estimated warranty liability. Each quarter, the Company reevaluates its estimates and assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. As of March 31, 2025 and December 31, 2024, $386,798 and $503,553 of product warranty were recorded in the condensed consolidated balance sheet, respectively. During the three months ended March 31, 2025 and 2024, the Company recorded warranty expenses of $119,732 and $386,959, respectively.

Contract liabilities

The contract liabilities of the Company are primarily related to advances received from customers. The contract liabilities are reported in a net position on a customer-by-customer basis at the end of each reporting period. Contract liabilities are recognized when the Company receives prepayment from customers resulting from purchase order. Contract liabilities will be recognized as revenue when the products are delivered. As of March 31, 2025 and December 31, 2024, the Company recorded contract liabilities of $558,183 and $449,999, respectively, which will be recognized as revenue upon delivery of the products sold. For the three months ended March 31, 2025 and 2024, the amounts transferred from contract liabilities to revenue at the beginning of the fiscal period were $121,172 and $929,686, 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 by product categories for the three months ended March 31, 2025 and 2024 is disclosed as below:

	2025			2024
	Three months ended
	March 31,
	2025			2024

UTVs, ATVs and e-bikes	$	15,424,435		$	28,693,141
Pontoon Boats		514,194			1,458,536
Pontoon Boats – repurchase credit		(1,036,907	)		-
Total	$	14,901,722		$	30,151,677
Total revenues	$	14,901,722		$	30,151,677

F-10

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Cost of revenues

Cost of revenues includes all of the costs and expenses directly related to the production of goods and services included in revenues. Cost of revenues primarily consists of cost of products, freight and duty allocated and warehouse related overhead, such as salaries and benefits, rent, warehouse supplies and depreciation expenses.

The freight and duty costs incurred when shipping raw materials from suppliers to the Company are included in cost of revenues, amounting to $1,893,537 and $2,687,647 for the three months ended March 31, 2025 and 2024, respectively.

Shipping and handling costs

Shipping and handling costs, which include costs related to the selection of products and their delivery to customers, are presented in selling expenses. The shipping and handling costs incurred upon goods delivery to customers are $1,250,786 and $1,107,047 for the three months ended March 31, 2025 and 2024, respectively.

Advertising costs

The Company expenses all advertising costs as incurred. Advertising costs presented in selling expenses were $257,071 and $228,476 for the three months ended March 31, 2025 and 2024, 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

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.

F-11

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Income taxes (continued)

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.

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 presents the dilutive effect on a per share basis of potential common shares (e.g., Restricted Stock Units (“RSU”), options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. For the three months ended March 31, 2025 and 2024, a total of nil and nil unvested RSU were included in the computation of weighted average number of common shares for the calculation of diluted EPS.

Stock-based compensation

The Company follows the provisions of ASC 718, “Compensation - Stock Compensation” (“ASC 260”), which establishes the accounting for employee share-based awards. For employee share-based awards, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense with graded vesting on a straight-line basis over the requisite service period for the entire award.

Segment reporting

The Company follows ASC 280, “Segment Reporting.” The Company’s Chief Executive Officer or chief operating decision-maker reviews the condensed 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.

F-12

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Concentration and risks

a. Concentration of credit risk

Assets that potentially subject the Company to a significant concentration of credit risk primarily consist of cash and cash equivalents, accounts receivable and other receivable included in other current assets. The maximum exposure of such assets to credit risk is their carrying amounts at the balance sheet dates. The Company maintains all the bank accounts at financial institutions in the United States, where there is $250,000 standard deposit insurance coverage limit per depositor, per FDIC-insured bank and per ownership category. As of March 31, 2025, the balance of one bank in Massimo Motor Sports exceeded the insured limits by $3,341,509. As of December 31, 2024, balances of two banks in Massimo Motor Sports exceeded the insured limits by $147,954 and $9,457,067, respectively.

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.

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 as most of our sales agreements are specified in U.S. dollars 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 related party loan bears 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 mitigating 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 adequate cash reserves and available banking facilities.

F-13

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Concentration and risks (continued)

e. Significant customers

For the three months ended March 31, 2025 and 2024, one and one customer accounted for 64% and 69% of the Company’s total revenues, respectively.

As of March 31, 2025, two customers individually accounted for 52% and 20% of the Company’s total accounts receivable. As of December 31, 2024, one customer accounted for 57% of the Company’s total accounts receivable.

f. Significant suppliers

For the three months ended March 31, 2025, three suppliers individually accounted for 47%, 12% and 10% of the Company’s total purchases, respectively. For the three months ended March 31, 2024, three suppliers individually accounted for 48%, 19% and 14% of the Company’s total purchases respectively.

As of March 31, 2025, three suppliers individually accounted for 27%, 12% and 11% of the Company’s total accounts payable, respectively. As of December 31, 2024, two suppliers individually accounted for 33% and 18% of the Company’s total accounts payable, respectively.

Recent accounting pronouncements

The Company considers the applicability and impact of all ASUs. Management periodically reviews new accounting standards that are issued.

The Jumpstart Our Business Startups Act provides that an emerging growth company (“EGC”) as defined therein can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an EGC to delay adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has adopted the extended transition period.

In December 2023, the FASB issued ASU No. 2023-09, “Improvements to Income Tax Disclosures” (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income tax paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2025. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. This ASU will likely result in the required additional disclosures being included in the Company’s condensed consolidated financial statements, once adopted.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures, which requires disaggregated disclosure of certain costs and expenses, including purchases of inventory, employee compensation, depreciation, amortization, and depletion, within relevant income statement captions. The guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating this ASU to determine the impact of adoption on its condensed consolidated financial statements and related disclosures.

The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s condensed consolidated balance sheets, statements of income and comprehensive income and statements of cash flows.

F-14

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 3 — ACCOUNTS RECEIVABLE, NET

The Company’s accounts receivable as of March 31, 2025 and December 31, 2024 consists of the following:

	March 31, 2025			December 31, 2024 (Restated)
Accounts receivable	$	6,027,147		$	5,210,829
Less: allowance for credit loss		(434,201	)		(384,192	)
Accounts receivable, net	$	5,592,946		$	4,826,637

The Company recorded an addition of allowance for credit loss of $50,009 and $234,298 for the three months ended March 31, 2025 and 2024, respectively.

The movement of allowance for credit loss are as follows:

	March 31, 2025		December 31, 2024 (Restated)
Beginning balance	$	384,192	$	557,360
Addition (reversal) of provision		50,009		(173,168	)
Ending balance	$	434,201	$	384,192

The Company’s accounts receivable balances as of March 31, 2025 and December 31, 2024 are pledged for its line of credit facility at Cathay Bank.

NOTE 4 — INVENTORIES, NET

Inventories, net as of March 31, 2025 and December 31, 2024 consist of the following:

SCHEDULE OF INVENTORIES

	March 31, 2025			December 31, 2024
Products and accessories	$	17,370,974		$	18,001,768
Parts		1,364,937			1,113,872
Inventories in transit		2,570,344			4,861,016
Freight and duty		3,549,893			3,751,884
Inventory, gross		24,856,148			27,728,540
Less: inventory allowance		(469,900	)		(469,900	)
Inventories, net	$	24,386,248		$	27,258,640

F-15

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 4 — INVENTORIES (continued)

The inventory allowance movement is as follows:

	March 31, 2025		December 31, 2024
Beginning balance	$	469,900	$	439,900
Addition of provision		-		30,000
Ending balance	$	469,900	$	469,900

Impairment provision of inventories recorded for lower of cost or net realizable value adjustments were nil and nil for the three months ended March 31, 2025 and 2024, respectively.

Partial inventories of $17,634,933 and $21,606,371 as of March 31, 2025 and December 31, 2024, respectively were pledged for the Company’s line of credit facility at Cathay Bank.

NOTE 5 — ADVANCE TO SUPPLIERS

Advance to suppliers consists of the following:

	March 31, 2025		December 31, 2024
Advance to suppliers	$	193,403	$	871,856
Less: impairment of advance to suppliers		-		(772,780	)
Advance to suppliers, net	$	193,403	$	99,076

An impairment of advance to suppliers of nil and nil was recorded during the three months ended March 31, 2025 and 2024.

In June 2024, the Company reached a tentative agreement regarding general settlement terms with one supplier who would make payment of approximately $312,500 to resolve the claim. Therefore, the Company wrote off $772,780 advance to the suppliers, reducing it from $1,085,280 to $312,500. The settlement agreement was finalized in August 2024, and related payment was received in October 2024.

NOTE 6 — PREPAID AND OTHER CURRENT ASSETS

Prepaid and other current assets consist of the following:

	March 31, 2025		December 31, 2024
Prepayment	$	833,947	$	1,096,383
Other receivables		233,272		124,049
Total	$	1,067,219	$	1,220,432

F-16

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 7 — PROPERTY AND EQUIPMENT, NET

Property and equipment, net, consist of the following:

	March 31, 2025			December 31, 2024
Furniture and Fixtures	$	125,977		$	125,977
Machinery equipment		360,868			360,868
Vehicles		473,667			473,667
Electronic equipment		35,303			35,303
Leasehold improvement		90,974			90,974
Subtotal		1,086,789			1,086,789
Less: accumulated depreciation and amortization		(588,032	)		(554,530	)
Property and equipment, net	$	498,757		$	532,259

The Company recorded depreciation expense of $33,502 and $36,511 for the three months ended March 31, 2025 and 2024, respectively.

There was no addition and an addition of $104,427 on property and equipment during the three months ended March 31, 2025 and 2024, respectively. There was no disposal and disposal of property and equipment with the net book value of $83,345 with realized gain of $44,655 on the disposal during the three months ended March 31, 2025 and 2024, respectively.

No impairment loss was recorded for the three months ended March 31, 2025 and 2024.

NOTE 8 — LEASES

On August 1, 2018, the Company signed a lease agreement with Miller Creek Holding LLC, a related party owned by the controlling shareholder, to lease the warehouse and office space of total 220,000 square feet for Massimo Motor with monthly rent of $40,000 used for its operation. The lease expired on July 31, 2021 and was further renewed for another three years and expired on July 31, 2024 with monthly rent of $60,000. On August 1, 2024, the lease was further renewed for another five years and will expire on July 31, 2029 with monthly rent of $145,750. On April 29, 2023, the Company signed another lease agreement with Miller Creek Holding LLC, to rent the warehouse and office space of total 66,000 square feet for Massimo Marine with monthly rent of $35,000 used for its operation. The lease will expire on April 30, 2026. On May 1, 2024, the Company signed another two lease agreements with Miller Creek Holding LLC, to rent additional warehouse and office space of 60,000 square feet and 30,000 square feet for monthly rent of $33,000 and $16,500 used for Massimo Motor and Massimo Marine’s operations, respectively. The leases will expire on August 31, 2029. The Company also had multiple lease agreements for machinery, office equipment and vehicles with other companies. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Total operating lease expense for the three months ended March 31, 2025 and 2024 amounted to $716,942 and $311,192, respectively. Amortization of operating lease right-of-use assets amounted to $512,277 and $280,790 for the three months ended March 31, 2025 and 2024, respectively.

Total accretion of finance lease liabilities for the three months ended March 31, 2025 and 2024 amounted to $895 and $1,331, respectively. Amortization of finance lease right-of-use assets amounted to $10,149 and $10,380 for the three months ended March 31, 2025 and 2024, respectively.

F-17

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 8 — LEASES (continued)

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

Operating leases

	March 31, 2025		December 31, 2024

Operating lease liabilities - current	$	2,156,252	$	2,119,894
Operating lease liabilities - non-current		6,861,638		7,412,693
Total	$	9,017,890	$	9,532,587

Financing leases

	March 31, 2025		December 31, 2024

Finance lease liabilities - current	$	43,877	$	43,421
Finance lease liabilities - non-current		22,460		33,602
Total	$	66,337	$	77,023

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

	Three months ended		Twelve months ended
	March 31, 2025		December 31, 2024
Cash paid of amounts included in the measurement of lease liabilities:
Operating cash flows used in operating leases	$	716,942	$	2,011,837
Operating cash flows used in finance leases	$	895	$	4,677
Financing cash flows used in finance leases	$	10,686	$	41,648
Right-of-use assets obtained in exchange for lease obligations:
Finance lease liabilities	$	-	$	-
Operating lease liabilities	$	-	$	9,587,851

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

	March 31, 2025			December 31, 2024
Weighted-average remaining lease term (years):
Finance lease		1.75 years			1.95 years
Operating leases		4.17 years			4.39 years

Weighted average discount rate:
Finance leases		4.95	%		4.85	%
Operating leases		8.63	%		8.65	%

F-18

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 8 — LEASES (continued)

The following is a schedule of maturities of operating and finance lease liabilities as of March 31, 2025:

Operating leases

Twelve months ending March 31,
Operating leases
2026	$	2,846,386
2027		2,387,799
2028		2,343,000
2029		2,343,000
2030		830,500
Total future minimum lease payments		10,750,685
Less: imputed interest		(1,732,795	)
Present value of operating lease liabilities	$	9,017,890

Finance leases

Twelve months ending March 31,
Finance leases
2026	$	46,325
2027		15,766
2028		7,976
Total future minimum lease payments		70,067
Less: imputed interest		(3,730	)
Present value of finance lease liabilities	$	66,337

NOTE 9 — RETURN LIABILITIES

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

	March 31, 2025			December 31, 2024
Beginning balance	$	261,588		$	283,276
Actual recognized products return		(1,375,330	)		(1,061,694	)
Accruals for product return liabilities		1,213,347			1,040,006
Ending balance	$	99,605		$	261,588

F-19

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 10 — WARRANTY LIABILITIES

The following table shows changes in the Company’s warranty liabilities and related costs:

	March 31, 2025			December 31, 2024
Beginning balance	$	503,553		$	619,113
Cost of warranty claims		(236,487	)		(1,274,037	)
Accruals for product warranty		119,732			1,158,477
Ending balance	$	386,798		$	503,553

NOTE 11 — OTHER PAYABLE, ACCRUED EXPENSE AND OTHER CURRENT LIABILITY

The following table shows the breakdown of the Company’s other payable, accrued expense and other current liabilities:

	March 31, 2025		December 31, 2024
Credit card liabilities	$	-	$	13,792
Sales Tax payable		50,096		27,129
Other current liabilities		840,738		-
Payroll liabilities		58,468		139,311
Accrual on litigation (a)		6,033,961		5,988,961
Total	$	6,983,264	$	6,169,193

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

F-20

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 12 — RELATED PARTY TRANSACTIONS

The relationship of related parties is summarized as follows:

Name of Related Party		Relationship to the Company
David Shan		Controlling shareholder of the Company
Miller Creek Holdings LLC		Controlled by David Shan
Vessel Technology Inc.		Controlled by David Shan

(a) Loan from a related party

Loan from a related party consists of the following:

SCHEDULE OF LOAN FROM RELATED PARTY

	March 31, 2025			December 31, 2024

Loan from David Shan, opening balance	$	5,546,548		$	7,920,141
Repayment		(3,016,300	)		(2,373,593	)
Loan from David Shan, ending balance		2,530,248			5,546,548
Non-current		-			-
Current	$	2,530,248		$	5,546,548

On January 3, 2024, the Company entered into an unsecured loan agreement with Mr. David Shan, the Chairman of the Board and CEO, to change the payment term from due on demand to due on January 3, 2029. This unsecured loan was required by MidFirst Bank when the Company renewed the line of credit on January 3, 2024. On May 13, 2024, the line of credit with MidFirst Bank was closed and the Company obtained a new line of credit with Cathay Bank, which did not have no such requirement. Consequently, the outstanding balance has been reclassified from non-current liabilities to current liabilities as of December 31, 2024. The Company made repayments totaling $3,016,300 and $2,373,593 towards this loan during the three months ended March 31, 2025 and the year ended December 31, 2024. The Company intends to continue the repayments of the loan from Mr. Shan in the next twelve months.

(b) Loan guarantee provided by related parties

In connection with the Company’s bank borrowings, Mr. David Shan, the controlling shareholder and Massimo Group, the holding company of Massimo Motor provided an unlimited guarantee to the Company’s loan.

(c) Due from a related party

SCHEDULE OF DUE FROM RELATED PARTY

		March 31, 2025		December 31, 2024

Vessel Technology Inc.	$	12,689	$	8,576

Due from a related party was $12,689 and $8,576 as of March 31, 2025 and December 31, 2024. Balance was in connection with health insurance reimbursement from Vessel Technology Inc.

F-21

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 13 — TAXES

Corporate Income Taxes

Massimo Motor and Massimo Marine were incorporated in the United States and are subject to a statutory income tax rate at 21%.

As of March 31, 2025 and December 31, 2024, the Company did not have an accrued liability for uncertain tax positions and does not anticipate recognition of any significant liabilities for uncertain tax positions during the next 12 months. For the three months ended March 31, 2025 and 2024, no amounts were incurred for income tax uncertainties or interest and penalties. The Company is currently not aware of any issues under review that could result in significant payments, accruals, or material deviation from its position. The Company’s tax years since its formation remain subject to possible income tax examination by its major taxing authorities for all periods. The Company’s effective tax rate for the three months ended March 31, 2025 and 2024 are 20.5% and 27.18% respectively.

The provision for income tax consists of the following:

SCHEDULE OF INCOME TAX PROVISION

	2025			2024
	Three months ended March 31,
	2025			2024

Income tax provision – current	$	4,280		$	1,112,688
Income tax recovery - deferred		(544,075	)		(212,347	)
Income tax (recovery) provision	$	(539,795	)	$	900,341

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

	2025			2024
	Three months ended
	March 31,
	2025			2024

Net (loss) income before income taxes	$	(2,628,502	)	$	4,081,623
Income tax at the federal statutory rate		21	%		21	%
Statutory U.S. federal income tax (recovery) provision		(551,985	)		857,141
State margin tax		4,280			40,737
Non-deductible expense		7,910			2,463
Total	$	(539,795	)	$	900,341

F-22

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 13 — TAXES (continued)

Corporate Income Taxes (continued)

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

	March 31, 2025			December 31, 2024 (Restated)
Deferred tax assets:
Allowance for credit loss	$	91,182		$	80,680
Property and equipment		16,480			16,480
Lease liability – operating		1,893,757			2,001,843
Lease liability – financing		13,931			16,175
Loss carried forward		542,639			-
Other temporary difference		1,010,108			1,018,553
Total deferred tax assets		3,568,097			3,133,731
Deferred tax liabilities:
Right of use assets – operating		(1,884,461	)		(1,992,039	)
Right of use assets – financing		(12,947	)		(15,078	)
Total deferred tax liabilities		(1,897,408	)		(2,007,117	)
Deferred tax assets, net	$	1,670,689		$	1,126,614

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 par value of $0.001, and 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 par value of $0.01, and no preferred shares were issued. All share information included in these condensed consolidated financial statements have been retroactively adjusted for the Reorganization as if par value and common shares issuance occurred on the first day of the first period presented. For the period ended March 31, 2025, the Company issued 6,750 shares with par value of $0.001 out of its 2024 stock incentive plan. For the period ended March 31, 2024, the Company had no activities.

As of March 31, 2025 and December 31, 2024, 41,546,700 and 41,539,950 common shares were issued and outstanding, respectively, with par value of $0.001.

F-23

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 14 — SHAREHOLDERS’ EQUITY (continued)

Initial Public Offering

On April 4, 2024, the Company closed its IPO of 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. The total net proceeds to the Company from the IPO, after deducting discounts, expense allowance, and expenses, were approximately $5.0 million. Pursuant to the terms and conditions of the underwriting agreement, dated as of April 1, 2024, by and between Craft Capital Management LLC (the “Representative”) and the Company (the “Underwriting Agreement”), the underwriters had an overallotment option, exercisable for 45 days by May 19, 2024, to purchase up to an additional 195,000 shares from the Company at the offering price less of $4.50 the underwriting discount and commissions to cover over-allotments. As of the reporting date, all representative options have expired without exercise.

Common Shares Issued for Service

On June 18, 2024, the Company signed a consulting agreement (the “Consulting Agreement”) with TJCM Asset Management LLC (“TJCM”) to provide strategic consulting and financial advisory services to the Company for twelve months from June 18, 2024. As partial consideration for the services, TJCM is entitled to receive shares of the Company’s common stock equivalent to a value of $160,000 calculated by the valuation price defined as average closing price of the Company’s shares of common stock for the five consecutive trading days immediately preceding the effective date of the Consulting Agreement. On June 21, 2024, the Company issued 22,485 shares of common stock to TJCM as the prepayment of $80,000 on the services to be provided. On November 29, 2024, the agreement was terminated under mutual agreement, and the Company cancelled 8,869 shares of out of the 22,485 shares of common stock issued to TJCM previously. The Company recorded expenses of nil and nil in connection with service for the three months ended March 31, 2025 and 2024, respectively.

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 of five 5years; exercise price of the warrants of $5.63, volatility of 89%; and expected future dividends of nil.

As of March 31, 2025, 87,100 warrants in connection with IPO funding was outstanding, with an exercise price of $5.63 and remaining life of 4.01 years.

F-24

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 15 — (LOSS) EARNINGS PER SHARE

For the three months ended March 31, 2025, the Company incurred a net loss. Accordingly, the effect of potential common shares from unexercised stock options, unexercised warrants, and unvested Restricted Stock Units (“RSUs”) was excluded from the computation of diluted net loss per share, as their inclusion would have been anti-dilutive.

For the three months ended March 31, 2024, the Company has no stock options, warrants or RSU issued and no impact on diluted earnings per share.

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

SCHEDULE OF EARNINGS PER SHARE

	Three months ended
	March 31,
	2025			2024

Net (loss) income attributable to the Company	$	(2,088,707	)	$	3,181,282
Weighted average number of common shares outstanding – basic		41,542,800			40,000,000

Dilutive securities – unvested RSU		-			-
Weighted average number of common shares outstanding – diluted		41,542,800			40,000,000
(Loss) earnings per share – basic	$	(0.05	)	$	0.08
(Loss) earnings per share – diluted	$	(0.05	)	$	0.08

NOTE 16 — EMPLOYEE STOCK PLANS

Equity Incentive Plans

On May 22, 2024, the Company’s Board approved the 2024 Equity Inventive Plan (“2024 Plan”) and Restricted Stock Units (“RSUs”) Agreements. The 2024 Plan and RSUs Agreement authorized the award of stock options, RSUs to employees and directors.

The Company recorded $195,940 and nil stock-based compensation expense in connection with RSUs for three months ended March 31, 2025 and 2024, respectively.

The following table summarizes the Company’s RSU activity:

	Number of RSUs			Weighted Average Grant Date Fair Value		Weighted Average Remaining Life in Years

Unvested at December 31, 2024		101,000		$	3.88		0.37
Granted		-			-		-
Forfeited		-			-		-
Vested		(6,750	)		3.88		-
Unvested at March 31, 2025		94,250		$	3.88		0.13

F-25

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 16 — EMPLOYEE STOCK PLANS (continued)

Options

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

As part of the compensation, the Company agrees to grant Mr. Shan options to purchase up to 46,860 common shares under Incentive Stock Option (“ISO”) plan, at an exercise price of $4.268 per share. The options were granted on May 22, 2024, and the options vest at a rate of 23,430 per year for two years, effective on May 22, 2024. The aggregate fair value of the options granted to Mr. Shan was $73,000. The fair value has been estimated using the Black-Scholes pricing model with the following weighted-average assumptions: market value of underlying common shares at time of grant of $3.88; risk free rate of 5.0% and 4.65%; expected term of 5 years; exercise price of the options of $4.268; volatility of 88.8%; and expected future dividends of nil. These options will expire on May 21, 2029.

The Company also granted Mr. Shan options to purchase up to 103,140 common shares, at an exercise price of $4.0 per share under Nonqualified Stock Option (“NSO”) plan. The options were granted on May 22, 2024, and vest at a rate of 51,570 shares per year for two years, effective on May 22, 2024. The aggregate fair value of the options granted to Mr. Shan was $160,000. The fair value has been estimated using the Black-Scholes pricing model with the following weighted-average assumptions: market value of underlying common shares at time of grant of $3.88; risk free rate of 5.0% and 4.65%; expected term of 10 years; exercise price of the options of $4.0; volatility of 88.8%; and expected future dividends of nil. These options will expire on May 21, 2034.

The Company also granted two executives options to purchase up to 200,000 common shares, at an exercise price of $4.0 per share under ISO and NSO plans. The options were granted on May 22, 2024, and vest at a rate of 100,000 shares per year for two years, effective on May 22, 2024. The aggregate fair value of the options granted to these two executives was $272,000. The fair value has been estimated using the Black-Scholes pricing model with the following weighted-average assumptions: market value of underlying common shares of $3.88; risk free rate of 5.0% and 4.65%; expected term of 10 years; exercise price of the options of $4.0; volatility of 88.8%; and expected future dividends of nil. These options will expire on May 21, 2034.

As of March 31, 2025, intrinsic value of the options is nil.

The Company recorded $90,480 and nil stock-based compensation expense in connection with options for periods ended March 31, 2025 and 2024, respectively.

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

SCHEDULE OF SHARE OPTION ACTIVITY

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Life in Years
Unvested balance, December 31, 2024		350,000	$	4.04		8.72
Exercisable, December 31, 2024		-	$	-		-
Granted		-		-		-
Cancelled		-		-		-
Vested		-		-		-
Unvested balance, March 31, 2025		350,000	$	4.04		8.48
Exercisable, March 31, 2025		-	$	-		-

As of March 31, 2025, the total unrecognized compensation cost related to outstanding RSUs and stock options was $111,439 and $188,269, which the Company expects to recognize over a weighted-average period of 0.12 years and 0.97 years.

F-26

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 17 — COMMITMENTS AND CONTINGENCIES

Contingencies

The Company may be involved in certain legal proceedings, claims and disputes arising from the commercial operations, which, in general, are subject to uncertainties and in which the outcomes are not predictable. The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. Although the Company can give no assurances about the resolution of pending claims, litigation or other disputes and the effect such outcomes may have on the Company, the Company believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided or covered by insurance, will not have a material adverse effect on the Company’s condensed consolidated balance sheets or results of operations or liquidity as at March 31, 2025 and December 31, 2024, except the two discussed below.

Litigation

Taizhou Nebula Power Co. Ltd. v. Massimo Motor Sports, LLC

In September 2020, Taizhou Nebula Power Co. Ltd. (“Nebula”) filed suit against us in the Dallas County District of Texas. Nebula has alleged that we owe them $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. While Massimo is not opposed to an out-of-court settlement, to date Nebula’s attorneys have had limited interest in discussing settlement.

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

On September 5, 2023, Zhejiang Qunyinh Vehicle Co., Ltd. (“Zhejiang”) filed suit against the Company and ten other corporate entities in the Superior Court of the State of California for Orange County. Zhejiang alleges claims of approximately $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. The Company has not purchased any products from Zheijang. In February 2024, Zhejiang filed a Second Amended Complaint. The Company filed a demurrer seeking to dismiss the Second Amended Complaint due to Zhejiang’s failure to state a valid claim in March 2024. In August 2024, the Court denied in part and granted in part the Company’s demurrer. As a result, Zhejiang still has valid claims against the Company. The trial is scheduled for March 2026. Based on the current assessment, the 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, generating revenues from different products, and individually holds assets exceeding 10% of the Company’s consolidated total. Hence, the Company concludes that it has two reporting.

The summary of key information by segments for the three months ended March 31, 2025 and 2024 was as follows:

For the three months ended March 31, 2025

	Sales of UTVs, ATVs and e-bikes			Sales of Pontoon Boats			Total
Revenue from external customers	$	15,424,435		$	(522,713	)	$	14,901,722
Cost of revenue	$	10,982,604		$	(305,532	)	$	10,677,072
Gross profit (loss)	$	4,441,831		$	(217,181	)	$	4,224,650
Depreciation & amortization	$	37,238		$	6,413		$	43,651
Income tax recovery	$	(539,795	)	$	–		$	(539,795	)
Long-lived assets	$	10,070,732		$	1,183,488		$	11,254,220
Segment assets	$	38,178,702		$	8,171,647		$	46,350,349
Segment loss	$	(1,617,120	)	$	(471,587	)	$	(2,088,707	)

For the three months ended March 31, 2024

	Sales of UTVs, ATVs and e-bikes		Sales of Pontoon Boats			Total
Revenue from external customers	$	28,693,141	$	1,458,536		$	30,151,677
Cost of revenue	$	18,463,616	$	1,236,674		$	19,700,290
Gross profit (loss)	$	10,229,525	$	221,862		$	10,451,387
Depreciation & amortization	$	40,478	$	6,413		$	46,891
Income tax recovery	$	900,341	$	–		$	900,341
Long-lived assets	$	2,721,301	$	874,345		$	3,595,646
Segment assets	$	38,936,823	$	8,337,784		$	47,274,607
Segment profit (loss)	$	3,563,107	$	(381,825	)	$	3,181,282

NOTE 19 — SUBSEQUENT EVENTS

The Company evaluated all events and transactions that occurred after March 31, 2025 up through the date the Company issued these condensed consolidated financial statements, and unless disclosed below, there are not any material subsequent events that require disclosure in these condensed consolidated financial statements.

F-27

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes to those statements included elsewhere in this Report and with the audited financial statements and the related notes included in our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2024 (“fiscal 2024”), as filed with the Securities and Exchange Commission (the “SEC”), on May 20, 2025. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Some of the numbers included herein have been rounded for the convenience of presentation. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors. See “Cautionary Note Regarding Forward-Looking Statements .”

Overview of Company

Massimo 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.

A Reorganization of the legal structure was completed on June 1, 2023. The Controlling Shareholder transferred his 85% equity interest in Massimo Motor and 85% equity interest in Massimo Marine to Massimo. Together with 15% non-controlling interests, after the reorganization, Massimo ultimately owns 100% equity interests of Massimo Motor and Massimo Marine.

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 condensed consolidated financial statements in accordance with ASC 805-50-45-5.

We currently generate most of our revenues from the sales of UTVs and ATVs, which represented 96.8% and 95.2% of total revenue for the period ended March 31, 2025 and 2024, respectively

We also generate revenue from the sales of Pontoon Boats, which represented 3.2% and 4.8% of our revenue for the period ended March 31, 2025 and 2024, respectively.

Trends and Key Factors that Affect Operating Results

We believe the most significant factors that affect our business and results of operations include the following:

●	Risk of intense competition in the industry - The Powersports Vehicles and Boat Industry is highly competitive. Competition in such markets is based upon a number of factors, including price, quality, reliability, styling, product features and warranties. At the dealer level, competition is based on a number of factors including sales and marketing support programs (such as financing joint advertising programs and cooperative advertising). Certain competitors are more diversified and have financial and marketing resources which are substantially greater than ours, which allow these competitors to invest more heavily in intellectual property, product development, and sales and marketing support. If we are not able to compete with new products, customer services, product features or models comparable or superior to those of our competitors, or attract new dealers, our business, results of operations or financial condition could be materially and adversely affected.

	We are subject to competitive pricing. Such pricing pressure may limit our ability to maintain prices or to increase prices for our products in response to raw material, component and other cost increases and so negatively affect our profit margins.

●

Risk of economic and policy changes within China - We import our products from various Chinese suppliers. The Chinese government continues to play a significant role in regulating industry within China by imposing industrial policies, providing subsidies and heavily regulating or prohibiting unwanted activities. There is no assurance the Chinese government will not interfere with the operations of Linhai Powersports or any of our other suppliers. In addition, the Chinese government has implemented certain measures, including interest rate adjustments, to control the pace of economic growth in China. These measures, or other economic, political, or social developments in China may affect our China-based suppliers, which may adversely affect our business and operating results. We also import our products from Taiwan. The Taiwan issue is a longstanding point of contention between China and the United States. The U.S. maintains unofficial relations with Taiwan, while also recognizing the One China policy, which acknowledges Beijing as the legitimate government of Taiwan. Both China and the U.S. have engaged in military posturing around the Taiwan Strait. This increases the risk of accidental clashes or misunderstandings that could escalate into conflict, which will affect both our China-mainland-based and Taiwan-based suppliers. Additionally, both U.S. and Chinese governments have imposed tariffs on certain products and taken other actions that have had an adverse impact on trade between the two countries.

●

Risk of unavailability of additional capital - We will require significant expenditures to fund future growth. We have funded our growth out of the proceeds of the IPO and internal sources of liquidity or through additional financing from external sources. Our ability to obtain external financing in the future at a reasonable cost is subject to a variety of uncertainties, including our future financial condition, results of operations and cash flows and the condition of the global and domestic financial markets. If we require additional funds and cannot obtain them on acceptable terms when required or at all, we may be unable to fulfill our working capital needs, upgrade our existing facilities or expand our business and may have to reduce the level of our operations. These factors may also prevent us from entering into transactions that would otherwise benefit our business or implementing our future strategies. Any debt financing that we undertake may be expensive and might impose covenants that restrict our operations and strategic initiatives, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our capital stock, make investments and engage in mergers, consolidations and asset sale transactions. Equity financings may be on terms that are dilutive or potentially dilutive to our shareholders, and the prices at which new investors would be willing to purchase our equity securities may be lower than the trading prices of such equities. If new sources of financing are required, but are unattractive, insufficient or unavailable, then we could be required to modify our business plans or growth strategy which could have a material adverse effect on our business, results of operations or financial condition.

●	Risk of uncertainty in the cost and production level of raw materials - We depend on third party suppliers to manufacture many of the products we sell, in particular, ATVs and UTVs, as opposed to our Pontoon Boats which we manufacture in our Dallas facility. For the period ended March 31, 2025, we purchased approximately 82% of our products from two of these suppliers. Competition for the output of these suppliers is intense. If these independent suppliers were unwilling or unable to supply us with products at prices which enable us to maintain our gross margins, it would materially and adversely affect our business, results of operations or financial condition. Although we are looking to broaden our supplier base and to reduce our dependence upon a limited number of suppliers, there is no assurance we will be able to do so and increasing the number of suppliers from which we purchase products may increase our costs.

●	Risk related to inflation - In recent years, our China-based suppliers have increased the cost of their products due to inflation. We may not be able to pass along price increases in raw materials, parts, or components to customers. As a result, an increase in the cost of the raw materials, parts, and components our suppliers use in the manufacture of our products could reduce our profitability and have a material adverse effect on our business, results of operations or financial condition.

●	Risk of seasonal sales of Pontoon Boats - A portion of our sales revenue generated from Massimo Marine has a seasonal sales pattern. For the period ended March 31, 2025 and 2024, our revenue generated from Massimo Marine was approximately 3.2% and 4.8% of our total revenue, respectively.

●	Uncertainty and impacts from recent US tariff policies - Governments have, and may continue to, turned to trade barriers to protect their domestic industries against foreign imports, thereby depressing shipping demand. Under the current U.S. administration, there is significant and increasing uncertainty about the future relationship between the United States, China, and other exporting countries, including with respect to trade policies, treaties, government regulations, and tariffs. In January 2025, during the initial days of President Trump’s second term, the United States announced the imposition of additional substantial tariffs on imports from various countries, including China, Canada and Mexico. On March 4, 2025, the U.S. imposed 25% tariffs on imports from Mexico and Canada and enacted an extra 10% tariff on Chinese imports, therefore doubling the previously levied tariff from February to an additional 20% on existing tariffs. In response, China announced retaliatory tariffs on U.S. agricultural goods and export restrictions to the U.S., in addition to filing a lawsuit with the World Trade Organization.

	On April 2, 2025, President Trump announced new tariffs on many U.S. trading partners, including a 34% tax on imports from China. These tariffs were in addition to the previous announcements of 25% taxes on auto imports, tariffs implemented against China, Canada and Mexico, and trade penalties on steel and aluminum. However, the 20% charge on imports from China was in addition to the 34% import tax announced. Protectionist developments, or the perception that they may occur, may have a material adverse effect on global economic conditions, and may significantly reduce global trade.

	On April 9, 2025, President Trump increased tariffs on Chinese imports, culminating in a total tariff rate of 145%. This included a 20% “fentanyl tariff” and a 125% “reciprocal tariff” aimed at addressing trade imbalances and other concerns. On April 10, 2025, China raised tariff on all U.S. goods to 84% and further increased to 125% on April 12, 2025.

	On May 14, 2025, the United States and China have entered a 90-day trade truce, temporarily easing the heightened tariffs, and agreed to reduce tariffs for a 90-day period. The U.S. lowered tariffs on Chinese imports from a peak of 145% to 30%, while China reduced its duties on U.S. goods from 125% to 10%.

	Moreover, increasing trade protectionism may cause an increase in (i) the cost of goods exported from regions globally, particularly from the Asia-Pacific region, (ii) the length of time required to transport goods and (iii) the risks associated with exporting goods. Such increases may further reduce the quantity of goods to be shipped, shipping time schedules, voyage costs and other associated costs, which could have an adverse impact on our customers’ business, operating results and financial condition and could thereby affect their ability to make timely payments to us and their orders quantity. This could have a material adverse effect on our business, operating results, cash flows and financial condition.

Results of Operations

For the Three Months Ended March 31, 2025 and 2024

The following table summarizes the results of condensed consolidated statements of operations and comprehensive income for the three months ended March 31, 2025 and 2024 in U.S. dollars, and provides information regarding the dollar and percentage increase or (decrease) during such year.

	For the three months ended March 31,
	2025						2024
	Amount			As % of Sales			Amount			As % of Sales			Amount Increase (Decrease)			Percentage Increase (Decrease)
Sales	$	14,901,722			100.0	%	$	30,151,677			100.0	%	$	(15,249,955	)		(50.6	)%
Cost of sales		10,677,072			71.6	%		19,700,290			65.3	%		(9,023,218	)		(45.8	)%
Gross profit		4,224,650			28.4	%		10,451,387			34.7	%		(6,226,737	)		(59.6	)%
Operating expenses
Selling expenses		1,869,964			12.5	%		2,210,484			7.3	%		(340,520	)		(15.4	)%
General and administrative expenses		4,219,600			28.3	%		4,106,905			13.6	%		112,695			2.7	%
Research and development		841,196			5.6	%		162,250			0.5	%		678,946			418.5	%
Total operating expenses		6,930,760			46.5	%		6,479,639			21.5	%		451,121			7.0	%
(Loss) income from operations		(2,706,110	)		(18.2	)%		3,971,748			13.2	%		(6,677,858	)		(168.1	)%
Other income (expenses):
Other income, net		78,698			0.5	%		247,569			0.8	%		(168,871	)		(68.2	)%
Interest expense		(1,090	)		-			(137,694	)		(0.5	)%		136,604			(99.2	)%
Total other income, net		77,608			0.5	%		109,875			0.4	%		(32,267	)		(29.4	)%
(Loss) income before income taxes		(2,628,502	)		(17.6	)%		4,081,623			13.5	%		(6,710,125	)		(164.4	)%
(Recovery of) provision for income taxes		(539,795	)		(3.6	)%		900,341			3.0	%		(1,440,136	)		(160.0	)%
Net (loss) income	$	(2,088,707	)		(14.0	)%	$	3,181,282			10.6	%	$	(5,269,989	)		(165.7	)%

Revenue

Revenues decreased by $15.3 million, or 50.6%, from $30.2 million in the first quarter of fiscal 2024 to $14.9 million in the first quarter of fiscal 2025. The decrease in revenue was primarily due to the contraction of the U.S. economy and reduced consumer spending. New tariffs contributed to rising inflation, with U.S. consumer inflation reported at 2.8% year-over-year in February 2025, and expectations of further increases. This inflationary environment, coupled with high, long-lasting interest rates, led to reduced spending and demand from retail end customers for discretionary goods, particularly luxury items like yachts and pontoon boats. At the same time, the uncertainty surrounding tariffs, trade restrictions, and potential trade barriers stemming from President Trump’s policies, which were further exacerbated in January 2025, caused our major big-box customers to reduce their orders.

Revenue by Type

	For the three months ended March 31,
	2025						2024
Revenue category	Revenue			% of total Revenue			Revenue		% of total Revenue			Amount Increase (Decrease)			Percentage Increase (Decrease)
UTVs, ATVs and e-bikes	$	15,424,435			103.5	%	$	28,693,141		95.2	%	$	(13,268,706	)		(46.2	)%
Pontoon Boats		514,194			3.5	%		1,458,536		4.8	%		(944,342	)		(64.7	)%
Subtotal		15,938,629			107.0	%		30,151,677		100.0	%		(14,213,048	)		(47.1	)%
Repurchase of goods under litigation settlement		(1,036,907	)		(7.0	)%		-		-			(1,036,907	)		NA
Total	$	14,901,722			100.0	%	$	30,151,677		100.0	%	$	(15,249,955	)		(50.6	)%

Revenue from sales of UTVs, ATVs and e-bikes

Revenue from sales of UTVs, ATVs and electric bikes decreased by $13.3 million, or 46.2%, from $28.7 million in the first quarter of fiscal 2024 to $15.4 million in the first quarter of fiscal 2025. The decrease in revenue was primarily attributed to a decline in sales volume from big box stores. Due to the uncertainty surrounding tariffs, trade restrictions, and potential trade barriers stemming from President Trump’s policies, which were further exacerbated in January 2025. These geopolitical factors have created a volatile market environment, leading to reduced confidence among our major retail customers, especially big-box stores that typically place large volume orders.

The uncertainty surrounding future tariffs and trade restrictions has made it difficult for these big-box customers to predict costs and plan inventories and orders effectively. As a result, many of them have taken a more conservative approach to ordering, significantly reducing their purchase volumes in anticipation of higher costs and possible delays in shipping. This has further contributed to the overall decline in sales.

Additionally, ongoing inflationary pressures, coupled with the prolonged impact of high interest rates, have put a strain on consumer spending. These macroeconomic factors have led to decreased demand for non-essential and higher-priced goods, including recreational vehicles like UTVs, ATVs, and electric bikes. Retailers, in turn, have been cautious about placing orders for items that may not move as quickly due to these reduced consumer spending patterns. The combination of geopolitical and economic uncertainties has resulted in an environment where both consumers and retailers are hesitant to make significant purchasing decisions, leading to the sharp decline in sales of these products.

Revenue from sales of Pontoon Boats

Revenue from sales of Pontoon Boats decreased by $1.0 million, or 64.7%, from $1.5 million in the first quarter of fiscal 2024 to $0.5 million in the first quarter of fiscal 2025. The decrease was primarily driven by an industry-wide downturn caused by high interest rates and inflation, which have impacted the consumption of non-essential goods. In addition, high rejection rates from floorplan financing providers such as Northpoint have directly affected the inventory level that dealers can maintain, thereby reducing our sales in this category. This trend aligns with broader industry challenges. Ongoing economic uncertainty in the U.S. has further reduced discretionary spending on luxury boats, negatively affecting sales of high-end models such as our yacht.

Gross profit

Our gross profit decreased by $6.3 million, or 59.6%, from $10.5 million in the first quarter of fiscal 2024 to $4.2 million in the first quarter of fiscal 2025. Gross margin was 28.4% in the first quarter of fiscal 2025, as compared with 34.7% in first quarter of fiscal 2024. The decrease in gross margin was mainly due to an increase in freight absorbed in cost of sales. The significant increase in tariff rates on Chinese imports in March 2025 has not yet been reflected in the cost of sales for the first quarter of fiscal 2025.

Our cost and gross profit by revenue types are as follows:

	For the three months ended March 31, 2025									For the three months ended March 31, 2024												Variance
Category	Cost of revenue			Gross profit (loss)			Gross Margin (%)			Cost of revenue		Gross profit		Gross margin (%)		Variance in Cost of revenue			Variance in gross profit			in gross margin (%)
UTVs, ATVs and e-bikes	$	10,982,604		$	4,441,831			28.8		$	18,463,616	$	10,229,525		35.7	$	(7,481,012	)	$	(5,787,694	)		(6.9	)
Pontoon Boats		478,574			35,619			6.9			1,236,674		221,862		15.2		(758,100	)		(186,243	)		(8.3	)
		11,461,178			4,477,450			28.1			19,700,290	$	10,451,387		34.7		(8,239,112	)		(5,973,937	)		(6.6	)
Cost of inventory recovered from litigation		(784,106	)		(252,800	)		24.4			-		-		-		(784,106	)		(252,800	)		24.4
Total	$	10,677,072		$	4,224,650			28.4	%	$	19,700,290	$	10,451,387		34.7	$	(9,023,218	)	$	(6,226,737	)		(6.3	)

Cost of revenue on UTVs, ATVs and electric bikes decreased by $7.5 million, or 40.5%, from $18.5 million in the first quarter of fiscal 2024 to $11.0 million in the first quarter of fiscal 2025 and gross profit decreased by $5.8 million, or 56.6%, from $10.2 million in the first quarter of fiscal 2024 to $4.4 million in the first quarter of fiscal 2025. Our gross margin decreased by 6.9%, from 35.7% in the first quarter of fiscal 2024 to 28.8% in the first quarter of fiscal 2025. The decrease in the cost of revenue was primarily due to decreased product purchase cost, resulting from the decrease in sales volume. The decline in gross margin was primarily driven by higher freight costs compared to the prior year.

Cost of revenue on Pontoon Boats decreased by $0.8 million, or 61%, from $1.2 million in the first quarter of fiscal 2024 to $0.5 million in the first quarter of fiscal 2025. Gross profit decreased by $0.2 million, or 84%, from a profit of $0.2 million in the first quarter of fiscal 2024 to a profit of $0.04 million in the first quarter of fiscal 2025. The decrease in cost of revenue was mainly due to lower products cost, resulting from decreased sales. Gross margin decreased by 8.3%, from 15.2% in the first quarter of fiscal 2024 to 6.9% in the first quarter of fiscal 2025, driven by the significant drop in sales. The gross loss occurred primarily due to two key factors. First, there was a significant decrease in revenue due to reduced consumer spending on recreational boats. Second, despite this decline in revenue, our fixed overhead costs remained high. These costs, such as rent and insurance, are not easily adjusted in the short term. As a result, the fixed overhead costs could not be absorbed by the reduced gross margin, leading to a gross loss for the period.

Repurchase of goods and cost of inventory recovered from litigation settlement

On February 19, 2025, we entered into a settlement agreement with a dealer to repurchase certain ATVs and pontoon boats at an agreed percentage of the original invoices amount. In connection with this settlement, we recorded a sales reduction of $1.0 million and recognized $0.8 million as the cost of repurchased inventory in the first quarter of fiscal 2025. As a result, our gross profit was reduced by $0.2 million.

Selling expenses

Our selling expenses mainly consist of warranty expense, advertising and promotion expense and shipping and handling fee. These expenses decreased by $0.3 million, or 15.4%, from $2.2 million in the first quarter of fiscal 2024 to $1.9 million in the first quarter of fiscal 2025, representing 12.5% and 7.3% of our total revenue in the first quarter of fiscal 2025 and the first quarter of fiscal 2024. The decrease was primarily driven by a $0.2 million reduction in warranty expenses, reflecting improvements in quality control and customer service. The launch of a traveling technician team enabled faster and more efficient responses to customer service requests, which helped lower overall repair costs. The decrease was partly offset by higher shipping and handling fees, which rose from approximately $1.1 million in the first quarter of fiscal 2024 to $1.3 million in the first quarter of fiscal 2025.

General and administrative expenses

Our general and administrative expenses primarily include salaries and benefits, professional fees, office expenses, travel expenses, insurance expenses, and depreciation expenses. General and administrative expenses increased by $0.1 million, or 2.7%, from $4.1 million in the first quarter of fiscal 2024 to $4.2 million in the first quarter of fiscal 2025. The increase was mainly due to increased salaries and benefit, insurance expense and professional fees that are related to being a public company, partly offset by a decrease in legal fee. Our general and administrative expenses represented 28.3% and 13.6% of our total revenue in the first quarter of fiscal 2025 and the first quarter of fiscal 2024, respectively.

Our salaries and benefits were $1.3 million and $1.1 million, representing 31.2% and 27.0% of our total general and administrative expenses in the first quarter of fiscal 2025 and 2024, respectively. The increase was primarily due to $0.3 million stock-based compensation expenses recognized for RSUs and stock option grants.

Our rent expenses increased by $0.2 million or 28.7%, from $0.7 million in the first quarter of fiscal 2024, to $0.9 million in the first quarter of fiscal 2025, representing 21.4% and 17.1% of our total general and administrative expenses for the three months ended March 31, 2025 and 2024, respectively. Our rent expense increased due to the higher renewal rent rate and the addition of a new lease agreement in the first quarter of fiscal 2025, compared to the first quarter of fiscal 2024.

Our legal and professional expense decreased by $0.2 million or 25.1%, from $0.8 million in the first quarter of fiscal 2024, to $0.6 million in the first quarter of fiscal 2025, representing 13.6% and 18.6% of our total general and administrative expenses in first quarter of fiscal 2025 and 2024, respectively. The decrease was primarily attributable to fewer ongoing lawsuits cases that require legal consulting service in the first quarter of fiscal 2025 when compared with same period in last year, partly offset by increased in professional fee that are related to being a public company.

Interest expenses

Our interest expense decreased by $0.1 million or 99.2%. Interest expense in the first quarter of fiscal 2024 primarily related to a bank loan. No such expense was recorded in the first quarter of fiscal 2025, as we did not have any bank loans during the period.

Other income, net

Other income decreased by $0.1 million, or 68.2%, from $0.2 million in the first quarter of fiscal 2024, to $0.1 million in the first quarter of fiscal 2025. We wrote off a vendor’s account payable balance by $177,147 as a result of a settlement between the vendor and the Company in the first quarter of fiscal 2024, which was one-off income. However, we did not have such income in the current quarter.

(Loss) income before income taxes

We had loss before income taxes of $2.6 million in the first quarter of fiscal 2025, compared to income before tax $4.0 million in the first quarter of fiscal 2024. The decrease was primarily attributable to a decrease of $6.2 million in gross profit, an increase of $0.7 million in research and development expenses, and other expenses as discussed above.

(Recovery of) Provision for income taxes

We did not have current income tax in the first quarter of fiscal 2025 due to net loss position and we recognized a deferred income tax recovery of $0.5 million due to temporary differences recognized and net operating loss carried forward. In the first quarter of fiscal 2024, we had current income tax of $0.9 million arising from net assessable income.

Net (loss) income

Net loss was $2.1 million in the first quarter of fiscal 2025, compared with net income of $3.2 million and 2024, respectively. The decrease was primarily due to decreased revenues and gross profit, offset by an increase in general and administrative expenses and a loss on litigation, as discussed above.

Cash Flows

For the Three Months ended March 31, 2025 and 2024

The following table sets forth summary of our cash flows for the periods indicated:

	Three months ended March 31,
	2025			2024
Net cash used in operating activities	$	(3,339,474	)	$	(636,990	)
Net cash (used in) provided by investing activities		(3,000,000	)		23,574
Net cash (used in) provided by financing activities		(3,026,986	)		54,739
Net decrease in cash		(9,366,460	)		(558,677	)
Cash, beginning of the period		10,210,084			765,814
Cash, end of the period	$	843,624		$	207,137

Operating Activities

Net cash used in operating activities was approximately $3.3 million in the first quarter of fiscal 2025, compared to net cash used operating activities of approximately $0.6 million in the first quarter of fiscal 2024, representing an increase in the net cash used in operating activities of $2.7 million in the first quarter of fiscal 2025 compared with the first quarter of fiscal 2024. The decrease is primarily due to the following:

●	Net loss of $2.1 million in the first quarter of fiscal 2025 compared with net income of $3.2 million in the first quarter of fiscal 2024.

●	Our net loss was adjusted for non-cash items, including non-cash operating lease expense, gain (loss) on disposal of fixed asset, impairment of advance to suppliers, amortization of stock-based compensation related to options and RSUs granted, amortization and depreciation, loss on litigation, deferred tax expense (recovery), inventories reserve, write-off of accounts receivable and provision (reversal of allowance) for expected credit loss. Non-cash items of approximately $0.3 million in the first quarter of fiscal 2025, compared to non-cash items of approximately $0.3 million during the first quarter of fiscal 2024.

●	Account payable decreased by approximately $3.8 million in the first quarter of fiscal 2025, compared to an increase of approximately $2.1 million in the first quarter of fiscal 2024, because we reduced our purchase of inventories due to decreased sales and high tariff policy.

●	Our tax payable remained unchanged in the first quarter of fiscal 2025, compared to an increase of approximately $1.1 million in the first quarter of fiscal 2024, primarily because we did not have current tax expense due to loss position.

●	Increase in payment of operating lease of $0.5 million in the first quarter of fiscal 2025, compared to $0.3 million in the first quarter of fiscal 2024, primary due to leasing additional warehouse space and rent increment upon the renewal of lease agreement.

●	The balance was partly offset by a decrease in accounts receivable by approximately $0.8 million in the first quarter of fiscal 2025, compared to a decrease of approximately $4.9 million in the first quarter of fiscal 2024, and

●	Decrease in inventories of approximately $2.9 million, compared to an increase of $1.4 million in the first quarter of fiscal 2024.

Investing Activities

Net cash used in investing activities was approximately $3.0 million in the first quarter of fiscal 2025, compared to net cash provided investing activities of $23,574 in the first quarter of fiscal 2024. We made a 7-month fixed deposit of $3.0 million with a bank in the first quarter of fiscal 2025. During the same period in fiscal 2024, we had proceeds from the sale of property and equipment totaling $128,001, partially offset by purchases of property and equipment amounting to $104,427.

Financing Activities

Net cash used in financing activities was approximately $3.0 million in the first quarter of fiscal 2025, compared to net cash provided by financing activities of approximately $0.1 million in the first quarter of fiscal 2024. The increase in net cash used in financing activities in the first quarter of fiscal 2025 was primarily attributable to repayment of shareholder withdrawal of $3.0 million. This compares to proceeds from the common shares’ subscription of $0.5 million, offset by the repayment of other loans of $0.3 million and the payment for initial public offering related costs of $0.1 million during the first quarter of fiscal 2024

Liquidity and Capital Resources

Overview

The general objectives of our capital management strategy reside in the preservation of our capacity to continue operating, in providing benefits to our stakeholders and in providing an adequate return on investment to our shareholders by selling our products at a price commensurate with the level of operating risk assumed by us.

We thus determine the total amount of capital required consistent with risk levels. This capital structure is adjusted on a timely basis depending on changes in the economic environment and risks of the underlying assets. We are not subject to any externally imposed capital requirements.

Working Capital

As of March 31, 2025, we had cash and cash equivalents of approximately $0.8 million. Our current assets were approximately $35.1 million, including approximately $3.0 million short-term investment in Certificate of Deposit, approximately $5.6 million accounts receivable, approximately $24.4 million inventory, approximately $0.2 million advance to suppliers and approximately $1.1 million prepayment deposit and other receivables, and our current liabilities were approximately $19.6 million, including $5.7 million accounts payable to suppliers, $7.0 million other payable, accrued expenses and other current liabilities, $0.6 million contract liabilities, $1.1 million income tax payable, $2.5 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 $15.5 million.

Our primary source of cash is currently generated from our business. 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.

Capital Expenditure

Our capital expenditure consists primarily of the lease of fixed assets and equipment as a result of our business growth. Our capital expenditure amounted to approximately nil and $104,427 for the first quarter of fiscal 2025 and 2024, respectively.

Contractual Commitments

As of March 31, 2025, the Company’s contractual obligations consisted of the following:

Contractual Obligations

Total

Less than

1 year

1-3 years

3-5 years

More than

5 years

Lease commitment

10,820,752

2,892,711

4,754,541

3,173,500

–

Off-balance Sheet Commitments and Arrangements

There was no off-balance sheet arrangements for the three months ended March 31, 2025 and 2024, that have, or that in the opinion of management are likely to have, a current or future material effect on our financial condition or results of operations.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, contingent assets and liabilities, each as of the date of the financial statements, and revenue and expenses during the periods presented. On an ongoing basis, management evaluates their estimates and assumptions, and the effects of any such revisions are reflected in the financial statements in the period in which they are determined to be necessary. Management bases its estimates on historical experience and on various other factors that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual outcomes could differ materially from those estimates in a manner that could have a material effect on our consolidated financial statements.

Management has determined that, while there are no critical accounting estimates, the most significant estimates relate to sales returns, products warranty, allowance for credit loss, inventory provision, and the assessment and disclosure of contingent liabilities due to on-going lawsuit. Each of these are discussed below.

Sales returns

We provide a refund policy to accept returns from end customers, which varies and depends on the different products and customers. We are also obligated to repurchase from the dealer if the dealer defaults on payments to the financing sources that have the repurchase agreements with us. 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, it 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 March 31, 2025 and December 31, 2024, $99,605 and $261,588 of sales return liabilities associated with estimated product returns were recorded in the condensed consolidated balance sheet, respectively. During the three months ended March 31, 2025 and 2024, the Company recorded sales returns of $1,213,347 and $425,705 respectively.

Warranty

We generally provide a one-year limited warranty against defects in materials related to the sale of products. We consider the warranty as an assurance type warranty since the warranty provides the 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 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 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 revise its estimated warranty liability. Each quarter, we re-evaluate its estimates and assess the adequacy of its recorded warranty liabilities and adjust the amounts as necessary. As of March 31, 2025 and December 31, 2024, $386,798 and $503,553 of product warranty were recorded in the condensed consolidated balance sheet, respectively. During the three months ended March 31, 2025 and 2024, the Company recorded warranty expenses of $119,732 and $386,959, respectively.

Allowance for credit loss

We considered various factors, including nature, historical collection experience, the age of the accounts receivable balances and the contract assets, credit quality and specific risk characteristics of its customers, current economic conditions, forecasts of future economic conditions, reversion period, and qualitative and quantitative adjustments to develop an estimate of credit losses. We have adopted loss rate method to calculate the credit loss and considered the relevant factors of the historical and future conditions of the Company to make reasonable estimation of the risk rate. For accounts receivable aged less than one year and non-overdue contract assets, we use the loss rate method, which is a combination of historical rate method and adjustment rate method, to estimate the credit loss. For accounts receivable aged over one year and overdue receivable, we use the individual specific valuation method to estimate the credit loss.

We wrote off potentially uncollectible accounts receivable against the allowance for credit losses if it is determined that the amounts will not be collected. As of March 31, 2025 and December 31, 2024, we recorded allowance for credit loss of $0.4 million and $0.4 million in the consolidated balance sheet, respectively.

Inventory provision

We assessed the net realizable value of each item of inventories and compared it to the cost on the book, which includes the cost of raw materials, freight and duty for raw materials, direct labor costs, and the overhead costs for finished goods at the end of each reporting period. In addition, we assessed all slow-moving or obsolete items for inventory valuation purposes. As of March 31, 2025 and December 31, 2024, the Company had inventory provision of $469,900 and $469,900, included in inventories, net in the condensed consolidated balance sheet. Impairment provision of inventories were nil and nil for the three months ended March 31, 2025 and 2024, respectively, included in cost of revenues in the condensed consolidated statement of operations and comprehensive income.

Contingencies

We may be involved in various legal proceedings, claims and other disputes arising from the commercial operations, projects and other matters which, in general, are subject to uncertainties and in which the outcome are not predictable. We determine whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. Although we can give no assurances about the resolution of pending claims, litigation or other disputes and the effect such outcomes may have on us, we believe that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided or covered by insurance, will not have a material adverse effect on the our unaudited condensed consolidated financial position or results of operations or liquidity as at March 31, 2025, except one litigation discussed below.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we are not required to provide the information required by this item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer (together, the “Certifying Officers”), or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

In designing periods specified in the SEC’s rules and forms, and that such information is accumulated and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Certifying Officers, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on the foregoing, the Certifying Officers concluded that a material weakness was present as of that date related to ineffective controls over information and communication and period end financial disclosure and reporting processes, including not effectively communicating internally between the sales department and the accounting department and externally with the client and lack of effectiveness of controls over accurate accounting and financial reporting and reviewing the underlying financial statement elements.

Remediated Material Weaknesses

We are committed to maintaining strong internal control over financial reporting. In relation to the material weaknesses, management, with oversight from the Company’s Audit Committee, is in the process of developing and implementing remediation plans in response to the identified material weaknesses described above by:

●

designing and implementing control activities to ensure there is an appropriate periodic assessment of its internal control environment and period end disclosure and reporting processes. For example, new approval procedure is in place for any changes in product offerings or terms and conditions of the arrangements with customers;

●

designing and implementing additional monitoring controls for its existing and new revenue streams; and

●

designing and implementing effective communication between the sales department and the accounting department.

These material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time for management to conclude, through testing, that such controls are operating effectively. Management is committed to the remediation of the material weaknesses described above, as well as the continued improvement of our internal controls and will continue to review, optimize and enhance financial reporting controls and procedures.

Changes in Internal Control over Financial Reporting

Other than as discussed above, there have been no changes to our internal control over financial reporting during the quarterly period ended March 31, 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Taizhou Nebula Power Co. Ltd. v. Massimo Motor Sports, LLC

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

On September 5, 2023, Zhejiang Qunyinh Vehicle Co., Ltd. (“Zhejiang”) filed suit against us and ten other corporate entities in the Superior Court of the State of California for Orange County. Zhejiang alleges claims of approximately $6,000,000 in damages for products that were allegedly shipped to the United States but not paid for. Despite us being one of the ten entities that plaintiff has sued, we have had minimal interactions with Zhejiang. We have not purchased any products from Zheijang. In February 2024, Zhejiang filed a Second Amended Complaint. Massimo filed a demurrer seeking to dismiss the Second Amended Complaint due to Zhejiang’s failure to state a valid claim in March 2024. In August 2024, the Court denied in part and granted in part Massimo’s demurrer. As a result, Zhejiang still has valid claims against Massimo. The trial is scheduled for March 2026. Massimo intends to vigorously defend the lawsuit.

In the past, we have also been subject to over fifty (50) legal proceedings encompassing: employment disputes, personal injury and wrongful death lawsuits, property damage lawsuits, product liability and manufacturing defect lawsuits and contractual disputes with our suppliers, distributors, customers, an on-site security provider, a freight shipping company and a previous law firm. These cases also include an inquiry by the Missouri Office of the Attorney General and the Pennsylvania State Board of Vehicle Manufacturers, Dealers and Salespersons. We do not believe that these past cases will have a material adverse effect on our business, operating results, financial condition, or cash flows. However, we cannot assure you that past litigation will not have an impact on our present reputation or goodwill among dealers, distributors and customers.

Item 1A. Risk Factors

As of the date of this Report, there have been no material changes with respect to those risk factors previously disclosed in our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2024 filed with the SEC on May 20, 2025. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risks could arise that may also affect our business. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Unregistered Sales of Equity Securities.

None.

Item 3. Default Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the quarterly period ended March 31, 2025, none of our directors or officers (as defined in Rule 16a-1(f) promulgated under the Exchange Act) adopted or terminated any “Rule 10b5-1 trading arrangement” or any “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.

Item 6. Exhibits, Financial Statement Schedules.

The following documents are filed as exhibits to this Report.

EXHIBIT INDEX

Exhibit Number		Description of Document
31.1		Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(*)
31.2		Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(*)
32.1		Certification of the Principal Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(**)
32.2		Certification of the Principal Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(**)
101.INS		Inline XBRL Instance Document(*)
101.SCH		Inline XBRL Taxonomy Extension Schema Document(*)
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document(*)
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document(*)
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document(*)
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document(*)
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)(*)

*	Filed herewith.

**	Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Massimo Group

Date: May 20, 2025		/s/ David Shan
		David Shan Chief Executive Officer
		(principal executive officer)

Date: May 20, 2025	By:	/s/ Yunhao Chen
		Yunhao Chen
		Chief Financial Officer
		(principal financial and accounting officer)

Massimo Group 10-Q