Massimo Group(MAMO) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section details the company's unaudited financial statements, management's analysis, and internal controls Item 1. Financial Statements This section presents Massimo Group's unaudited Q1 2025 financial statements, showing decreased assets, revenue decline, and a net loss Condensed Consolidated Balance Sheets Total assets decreased to $46.4 million by March 31, 2025, driven by reduced cash and liabilities, leading to lower equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $844 | $10,210 | | Inventories, net | $24,386 | $27,259 | | Total current assets | $35,096 | $43,623 | | Total Assets | $46,350 | $54,890 | | Liabilities & Equity | | | | Accounts payable | $5,729 | $9,572 | | Loan from a related party | $2,530 | $5,547 | | Total current liabilities | $19,564 | $25,739 | | Total Liabilities | $26,448 | $33,185 | | Total Equity | $19,902 | $21,704 | Condensed Consolidated Statement of Operations Q1 2025 revenues declined 50.6% to $14.9 million, resulting in a $2.1 million net loss compared to prior year's net income Q1 2025 vs Q1 2024 Performance (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenues | $14,902 | $30,152 | | Gross Profit | $4,225 | $10,451 | | Total Operating Expenses | $6,931 | $6,480 | | (Loss) Income from Operations | ($2,706) | $3,972 | | Net (Loss) Income | ($2,089) | $3,181 | | (Loss) Earnings per Share | ($0.05) | $0.08 | Condensed Consolidated Statements of Cash Flows Net cash decreased by $9.4 million in Q1 2025 due to increased cash usage in operations, investing, and financing activities Cash Flow Summary for the Three Months Ended March 31 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($3,339) | ($637) | | Net cash (used in) provided by investing activities | ($3,000) | $24 | | Net cash (used in) provided by financing activities | ($3,027) | $55 | | Net decrease in cash and cash equivalents | ($9,366) | ($559) | Notes to Condensed Consolidated Financial Statements Detailed notes cover accounting policies, IPO impact, revenue recognition, significant customer concentration, related party transactions, and legal contingencies - The company completed its IPO on April 4, 2024, raising approximately $5.0 million in net proceeds[27][115] - Revenue is disaggregated into two main product categories: 'UTVs, ATVs and e-bikes' and 'Pontoon Boats'[52] - Significant customer concentration exists, with one customer representing 64% of total revenues for the three months ended March 31, 2025[71] - The company has two ongoing significant legal proceedings: one with Taizhou Nebula Power Co. Ltd. regarding a $2.3 million claim, and another with Zhejiang Qunying Vehicle Co., Ltd. for an alleged $6.0 million in damages[132][133] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Management discusses Q1 2025's 50.6% revenue decline, gross margin contraction, net loss, and liquidity challenges, citing economic factors and trade tensions Results of Operations Q1 2025 revenues dropped 50.6% to $14.9 million due to reduced orders, leading to a gross margin contraction and pre-tax loss Revenue by Category (in millions) | Revenue Category | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | UTVs, ATVs and e-bikes | $15.4 | $28.7 | (46.2)% | | Pontoon Boats | $0.5 | $1.5 | (64.7)% | | Total Revenue | $14.9 | $30.2 | (50.6)% | - The decrease in revenue was primarily due to the contraction of the U.S. economy, reduced consumer spending, and uncertainty surrounding tariffs causing major big-box customers to reduce their orders[153] - Gross margin decreased from 34.7% to 28.4%, mainly due to an increase in freight absorbed in cost of sales[160] - General and administrative expenses increased by 2.7% due to higher salaries, insurance, and professional fees related to being a public company[166] Liquidity and Capital Resources Working capital was $15.5 million, but cash significantly decreased to $0.8 million due to operational and financing outflows - Working capital was $15.5 million as of March 31, 2025, with current assets of $35.1 million and current liabilities of $19.6 million[181] - Net cash used in financing activities was approximately $3.0 million in Q1 2025, primarily due to a repayment of a shareholder loan[178] - Management is confident it can support operational needs for the next 12 months by utilizing cash flows generated from operating activities[182] Critical Accounting Policies and Estimates Key accounting estimates include sales returns, warranty provisions, credit losses, inventory obsolescence, and contingent liabilities - Key accounting estimates include sales returns, product warranty, allowance for credit loss, inventory provision, and contingent liabilities[188] Key Liability & Provision Balances (as of March 31, 2025) | Account | Balance | | :--- | :--- | | Sales Return Liabilities | $99,605 | | Warranty Liabilities | $386,798 | | Allowance for Credit Loss | ~$0.4 million | | Inventory Provision | $469,900 | Item 3. Quantitative and Qualitative Disclosures About Market Risk. The company is exempt from market risk disclosures as it qualifies as a smaller reporting company - The company is exempt from this disclosure requirement as it qualifies as a smaller reporting company[196] Item 4. Controls and Procedures. Management identified a material weakness in disclosure controls and procedures, with remediation plans underway to enhance financial reporting processes - Management concluded that a material weakness existed in disclosure controls and procedures as of the end of the period[199] - The material weakness is related to ineffective controls over information and communication, and period-end financial disclosure and reporting processes[199] - Remediation plans are in process, focusing on implementing new approval procedures, additional monitoring controls, and improving communication between sales and accounting departments[200][203] PART II. OTHER INFORMATION This section provides details on legal proceedings, risk factors, equity sales, defaults, and other miscellaneous disclosures Item 1. Legal Proceedings. The company is involved in two significant lawsuits, including a $2.3 million claim under appeal and a $6.0 million claim scheduled for trial - Taizhou Nebula Power Co. Ltd. v. Massimo Motor Sports, LLC: Nebula claims $2.34 million for products shipped from 2017-2019. A judgment was entered for Nebula, and Massimo is appealing[205] - Zhejiang Qunying Vehicle Co., Ltd. v. Cho International, Inc: Zhejiang claims approximately $6.0 million in damages. The trial is scheduled for March 2026, and Massimo intends to vigorously defend the lawsuit[206] Item 1A. Risk Factors. No material changes to risk factors have occurred since the last Annual Report on Form 10-K/A filing - No material changes to risk factors have occurred since the last Annual Report on Form 10-K/A was filed[208] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. The company reported no unregistered sales of equity securities during the period - None[210] Item 3. Defaults Upon Senior Securities. The company reported no defaults upon senior securities - None[211] Item 4. Mine Safety Disclosures. This item is not applicable to the company - Not applicable[212] Item 5. Other Information. No directors or officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No directors or officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter[213] Item 6. Exhibits. This section lists exhibits filed with Form 10-Q, including officer certifications and Inline XBRL data files