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COMMITMENTS AND CONTINGENCIES | 9 Months Ended
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Sep. 30, 2025
Commitments and Contingencies Disclosure [Abstract] |
COMMITMENTS AND CONTINGENCIES | NOTE 17 — COMMITMENTS AND CONTINGENCIES Contingencies The Company may be involved in certain legal proceedings, claims and disputes arising from the commercial operations, which, in general, are subject to uncertainties and in which the outcomes are not predictable. The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. Although the Company can give no assurances about the resolution of pending claims, litigation or other disputes and the effect such outcomes may have on the Company, the Company believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided or covered by insurance, will not have a material adverse effect on the Company’s condensed consolidated balance sheets or results of operations or liquidity as of September 30, 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 Qunying 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. The trial is scheduled for March 2026. Based on the current assessment, a negative outcome of the legal proceeding is considered remote. Therefore, no accrual has been proposed in the financial statements.

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