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LEASES
 9 Months Ended
Sep. 30, 2024
Leases  
LEASES

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 rent the warehouse and office space of total 220,000 square feet for 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 expired 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, a related party owned by the controlling shareholder, to rent the warehouse and office space of total 66,000 square feet for monthly rent of $35,000 used for its operation. The lease expires on April 30, 2026. On May 1, 2024, the Company signed another two lease agreements with Miller Creek Holding LLC, a related party owned by the controller shareholder, 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 its operation, respectively. The leases will expire on August 31, 2029. The Company also had multiple lease agreements for machinery, office equipment and vehicles. 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 September 30, 2024 and 2023 amounted to $624,232 and $311,192, respectively. Amortization of operating lease right-of-use assets amounted to $471,350 and $272,580 for the three months ended September 30, 2024 and 2023, respectively.

 

Total operating lease expense for the nine months ended September 30, 2024 and 2023 amounted to $1,342,402 and $793,577, respectively. Amortization of operating lease right-of-use assets amounted to $1,110,979 and $698,336 for the nine months ended September 30, 2024 and 2023, respectively.

 

Total accretion of finance lease liabilities for the three months ended September 30, 2024 and 2023 amounted to $1,116 and $2,219, respectively. Amortization of finance lease right-of-use assets amounted to $10,379 and $10,380 for the three months ended September 30, 2024 and 2023, respectively.

 

Total accretion of finance lease liabilities for the nine months ended September 30, 2024 and 2023 amounted to $3,672 and $5,610, respectively. Amortization of finance lease right-of-use assets amounted to $31,139 and $31,733 for the nine months ended September 30, 2024 and 2023, respectively.

 

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

  

Operating leases

 

   September 30, 2024   December 31, 2023 
         
Operating lease liabilities - current  $2,075,541   $847,368 
Operating lease liabilities - non-current   8,186,938    630,853 
Total  $10,262,479   $1,478,221 

 

Financing leases

 

   September 30, 2024   December 31, 2023 
         
Finance lease liabilities - current  $42,970   $41,647 
Finance lease liabilities - non-current   44,629    77,024 
Total  $87,599   $118,671 

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 8 — LEASES (continued)

 

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

 

   September 30, 2024   December 31, 2023 
Cash paid of amounts included in the measurement of lease liabilities:          
Operating cash flows used in operating leases  $1,205,510   $1,104,769 
Financing cash flows used in finance leases  $34,744   $47,051 
Right-of-use assets obtained in exchange for lease obligations:          
Finance lease liabilities  $-   $60,805 
Operating lease liabilities  $9,758,345   $1,113,140 

 

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

 

   September 30, 2024   December 31, 2023 
Weighted-average remaining lease term (years):          
Finance lease   2.17 years    2.85 years 
Operating leases   4.62 years    1.82 years 
           
Weighted average discount rate:          
Finance leases   4.74%   4.61%
Operating leases   7.68%   8.61%

 

The following is a schedule of maturities of operating and finance lease liabilities as of September 30, 2024:

 

Operating leases

 

Twelve months ending September 30,     
Operating leases     
2025  $2,866,655 
2026   2,629,915 
2027   2,343,000 
2028   2,343,000 
2029   2,002,000 
Total future minimum lease payments   12,184,570 
Less: imputed interest   (1,922,091)
Present value of operating lease liabilities  $10,262,479 

 

Finance leases

 

Twelve months ending September 30,     
Finance leases     
2025  $46,325 
2026   34,578 
2027   8,701 
2028   3,626 
Total future minimum lease payments   93,230 
Less: imputed interest   (5,631)
Present value of finance lease liabilities  $87,599 

 

 

MASSIMO GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)