UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended December 31, 2024

OR

☐ 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 001-42122

FLY-E GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware |  | 92-0981080
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
136-40 39th Avenue Flushing, New York |  | 11354
(Address of principal executive offices) |  | (Zip Code)

Registrant’s telephone number, including area code: (929) 410-2770

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

Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common Stock, $0.01 par value per share |  | FLYE |  | The Nasdaq Stock Market LLC

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 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, smaller reporting company, or an emerging growth company. See the 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 Act) Yes ☐ No ☒

As of February 19, 2025, there were 24,587,500 shares of the registrant’s common stock, par value $0.01 per share, issued and outstanding.

INDEX

|  | Page Number
| Cautionary Statement Regarding Forward Looking Statements | ii
PART I | FINANCIAL INFORMATION | 1
Item 1. | Financial Statements | 1
| Unaudited Condensed Consolidated Balance Sheets as of December 31, 2024 and March 31, 2024 | 1
| Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Nine Months Ended December 31, 2024 and 2023 | 2
| Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Three and Nine Months Ended December 31, 2024 and 2023 | 3
| Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2024 and 2023 | 4
| Notes to Unaudited Condensed Consolidated Financial Statements | 5
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 32
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 46
Item 4. | Controls and Procedures | 46
PART II | OTHER INFORMATION | 47
Item 1. | Legal Proceedings | 47
Item 1A. | Risk Factors | 47
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 48
Item 3. | Defaults Upon Senior Securities | 48
Item 4. | Mine Safety Disclosures | 48
Item 5. | Other Information | 48
Item 6. | Exhibits | 48
| Signatures | 49

i

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (the “Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act, as amended (the “Securities Act”), Section 21E of the Exchange Act, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be preceded by, or contain, words such as “may,” “will,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “predict,” “potential,” “might,” “could,” “would,” “should” or other words indicating future results, though not all forward-looking statements necessarily contain these identifying words. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including, without limitation, statements about our future business operations and results, our strategy and competition. These statements represent our current expectations or beliefs concerning various future events and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations, including, but not limited to:

| ● | our ability to obtain additional funding to market our vehicles and develop new products;

| ● | our ability to produce our vehicles with sufficient volume and quality to satisfy customers;

| ● | the inability of our principal vendors to deliver the necessary components for our vehicles at prices and volumes acceptable to us;

| ● | our principal vendors failing to perform quality control on our products;

| ● | the inability to obtain sufficient intellectual property protection for our brand and technologies;

| ● | our vehicles failing to perform as expected;

| ● | our facing product warranty claims or product recalls;

| ● | our facing adverse determinations in significant product liability claims;

| ● | customers not adopting electric vehicles;

| ● | the development of alternative technology that adversely affects our business;

| ● | the lingering impact of COVID-19 on our business;

| ● | increased government regulation of our industry;

| ● | the risk of losing cash balances exceeding insurance limits held at banks;
| ● | our ability to grow the rental services;
| ● | our ability to continue as a going concern;
| ● | our ability to regain and maintain compliance with the continued listing standards of the Nasdaq Capital Market (“Nasdaq”);
| ● | the changes or developments with respect to domestic and international customs, tariffs, and trade policies, corresponding or retaliatory actions by other countries and related uncertainties;
| ● | tariffs and currency exchange rates; and
| ● | the other risks and uncertainties discussed under the section titled “Risk Factors” beginning on page 44 of this Report and our other filings with the Securities and Exchange Commission (the “SEC”).

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. We undertake no obligation to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In light of these risks, uncertainties and assumptions, the forward-looking events discussed or incorporated by reference in this prospectus supplement and the accompanying prospectus may not occur.

You should read this Report with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in the foregoing documents by these cautionary statements.

ii

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

FLY-E GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Expressed in U.S. dollars, except for the number of shares)

|  | December 31, 2024 |  |  | March 31, 2024 |
ASSETS |  |  |  |  |  |
Current Assets |  |  |  |  |  |
Cash |  | $ | 1,367,248 |  |  | $ | 1,403,514 |
Accounts receivable |  |  | 305,157 |  |  |  | 212,804 |
Accounts receivable – related parties |  |  | 88,885 |  |  |  | 326,914 |
Inventories, net |  |  | 8,605,628 |  |  |  | 5,364,060 |
Prepayments and other receivables |  |  | 2,306,692 |  |  |  | 588,660 |
Prepayments and other receivables – related parties |  |  | 171,057 |  |  |  | 240,256 |
Total Current Assets |  |  | 12,844,667 |  |  |  | 8,136,208 |
Property and equipment, net |  |  | 7,232,689 |  |  |  | 1,755,022 |
Security deposits |  |  | 851,994 |  |  |  | 781,581 |
Deferred IPO costs |  |  | — |  |  |  | 502,198 |
Deferred tax assets, net |  |  | 895,206 |  |  |  | 35,199 |
Operating lease right-of-use assets |  |  | 14,318,422 |  |  |  | 16,000,742 |
Intangible assets, net |  |  | 560,125 |  |  |  | 36,384 |
Long-term prepayment for property |  |  | — |  |  |  | 450,000 |
Long-term prepayment for software development– related parties |  |  | 536,580 |  |  |  | 1,279,000 |
Total Assets |  | $ | 37,239,683 |  |  | $ | 28,976,334 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |  |  |  |  |
Current Liabilities |  |  |  |  |  |  |  |
Accounts payable |  | $ | 1,277,716 |  |  | $ | 1,180,796 |
Short-term loan payables |  |  | 4,909,982 |  |  |  | — |
Current portion of long-term loan payables |  |  | 99,079 |  |  |  | 1,213,242 |
Accrued expenses and other payables |  |  | 432,469 |  |  |  | 925,389 |
Other payables – related parties |  |  | — |  |  |  | 92,229 |
Operating lease liabilities – current |  |  | 3,151,171 |  |  |  | 2,852,744 |
Taxes payable |  |  | — |  |  |  | 1,530,416 |
Total Current Liabilities |  |  | 9,870,417 |  |  |  | 7,794,816 |
Long-term loan payables |  |  | 2,090,734 |  |  |  | 412,817 |
Operating lease liabilities – non-current |  |  | 12,153,196 |  |  |  | 13,986,879 |
Total Liabilities |  |  | 24,114,347 |  |  |  | 22,194,512 |
Commitment and Contingencies |  |  |  |  |  |  |  |
Stockholders’ Equity |  |  |  |  |  |  |  |
Preferred stock, $0.01 par value, 4,400,000 shares authorized and nil outstanding as of December 31, 2024 and March 31, 2024* |  |  | — |  |  |  | — |
Common stock, $0.01 par value, 44,000,000 shares authorized and 24,587,500 shares outstanding as of December 31, 2024 and 22,000,000 shares outstanding as of March 31, 2024* |  |  | 245,875 |  |  |  | 220,000 |
Additional Paid-in Capital |  |  | 10,744,024 |  |  |  | 2,400,000 |
Shares Subscription Receivable |  |  | (219,998 | ) |  |  | (219,998 | )
Retained Earnings |  |  | 2,388,806 |  |  |  | 4,395,649 |
Accumulated other comprehensive loss |  |  | (33,371 | ) |  |  | (13,829 | )
Total FLY-E Group, Inc. Stockholders’ Equity |  |  | 13,125,336 |  |  |  | 6,781,822 |
Total Liabilities and Stockholders’ Equity |  | $ | 37,239,683 |  |  | $ | 28,976,334 |

* | Shares and per share data are presented on a retroactive basis to reflect the stock split completed on April 2, 2024.

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

1

FLY-E GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE (LOSS) INCOME

(Expressed in U.S. dollars, except for the number of shares)

|  | For the Three Months Ended December 31, |  |  | For the Nine Months Ended December 31, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Revenues |  | $ | 5,678,010 |  |  | $ | 7,428,212 |  |  | $ | 20,375,842 |  |  | $ | 24,034,397 |
Cost of Revenues |  |  | 3,116,940 |  |  |  | 4,455,399 |  |  |  | 11,810,684 |  |  |  | 14,577,570 |
Gross Profit |  |  | 2,561,070 |  |  |  | 2,972,813 |  |  |  | 8,565,158 |  |  |  | 9,456,827 |
Operating Expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Selling Expenses |  |  | 1,943,633 |  |  |  | 1,935,498 |  |  |  | 5,597,563 |  |  |  | 4,637,043 |
General and Administrative Expenses |  |  | 1,557,716 |  |  |  | 843,326 |  |  |  | 5,184,432 |  |  |  | 2,773,626 |
Total Operating Expenses |  |  | 3,501,349 |  |  |  | 2,778,824 |  |  |  | 10,781,995 |  |  |  | 7,410,669 |
Income (Loss) from Operations |  |  | (940,279 | ) |  |  | 193,989 |  |  |  | (2,216,837 | ) |  |  | 2,046,158 |
Other Expenses, net |  |  | (16,699 | ) |  |  | (53,824 | ) |  |  | (64,110 | ) |  |  | (24,123 | )
Interest Expenses, net |  |  | (155,673 | ) |  |  | (31,558 | ) |  |  | (247,550 | ) |  |  | (82,150 | )
Income (Loss) Before Income Taxes |  |  | (1,112,651 | ) |  |  | 108,607 |  |  |  | (2,528,497 | ) |  |  | 1,939,885 |
Income Tax Benefit (Expense) |  |  | 428,164 |  |  |  | (87,718 | ) |  |  | 521,654 |  |  |  | (731,997 | )
Net Income (Loss) |  | $ | (684,487 | ) |  | $ | 20,889 |  |  | $ | (2,006,843 | ) |  | $ | 1,207,888 |
Other Comprehensive Income (Loss) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency translation adjustment |  |  | (22,516 | ) |  |  | 3,101 |  |  |  | (19,542 | ) |  |  | 3,101 |
Total Comprehensive Income (Loss) |  | $ | (707,003 | ) |  | $ | 23,990 |  |  | $ | (2,026,385 | ) |  | $ | 1,210,989 |
Earnings (Losses) per Share* |  | $ | (0.03 | ) |  | $ | 0.001 |  |  | $ | (0.08 | ) |  | $ | 0.05 |
Weighted Average Number of Common Stock |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
– Basic and Diluted* |  |  | 24,587,500 |  |  |  | 22,000,000 |  |  |  | 23,946,578 |  |  |  | 22,000,000 |

* | Shares and per share data are presented on a retroactive basis to reflect the stock split completed on April 2, 2024.

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

2

FLY-E GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS’ EQUITY

(Expressed in U.S. dollars, except for the number of shares)

|  | Preferred Stock |  |  | Common Stock |  |  | Additional Paid-in |  |  | Shares Subscription |  |  | Accumulated Other |  |  | Retained |  |  | Total Stockholders’ |
|  | Shares* |  |  | Amount |  |  | Shares* |  |  | Amount |  |  | Capital |  |  | Receivables |  |  | Comprehensive |  |  | Earnings |  |  | Equity |
Balance at March 31, 2024 |  |  | — |  |  | $ | — |  |  |  | 22,000,000 |  |  | $ | 220,000 |  |  |  | 2,400,000 |  |  |  | (219,998 | ) |  | $ | (13,829 | ) |  | $ | 4,395,649 |  |  | $ | 6,781,822 |
Net Loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (179,508 | ) |  |  | (179,508 | )
Issuance of common stock upon initial public offering, net |  |  | — |  |  |  | — |  |  |  | 2,587,500 |  |  |  | 25,875 |  |  |  | 8,344,024 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 8,369,899 |
Foreign currency translation adjustment |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1,324 | ) |  |  | — |  |  |  | (1,324 | )
Balance at June 30, 2024 |  |  | — |  |  | $ | — |  |  |  | 24,587,500 |  |  | $ | 245,875 |  |  | $ | 10,744,024 |  |  | $ | (219,998 | ) |  | $ | (15,153 | ) |  | $ | 4,216,141 |  |  | $ | 14,970,889 |
Net Loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1,142,848 | ) |  |  | (1,142,848 | )
Foreign currency translation adjustment |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 4,298 |  |  |  | — |  |  |  | 4,298 |
Balance at September 30, 2024 |  |  | — |  |  | $ | — |  |  |  | 24,587,500 |  |  | $ | 245,875 |  |  | $ | 10,744,024 |  |  | $ | (219,998 | ) |  | $ | (10,855 | ) |  | $ | 3,073,293 |  |  | $ | 13,832,339 |
Net loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (684,487 | ) |  |  | (684,487 | )
Foreign currency translation adjustment |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (22,516 | ) |  |  | — |  |  |  | (22,516 | )
Balance at December 31, 2024 |  |  | — |  |  | $ | — |  |  |  | 24,587,500 |  |  | $ | 245,875 |  |  | $ | 10,744,024 |  |  | $ | (219,998 | ) |  | $ | (33,371 | ) |  | $ | 2,388,806 |  |  | $ | 13,125,336 |

* | Shares and per share data are presented on a retroactive basis to reflect the stock split completed on April 2, 2024.

|  | Preferred Stock |  |  | Common Stock |  |  | Shares Subscription |  |  | Additional Paid-in |  |  | Accumulated Other |  |  | Retained |  |  | Total Stockholders’ |
|  | Shares* |  |  | Amount |  |  | Shares* |  |  | Amount |  |  | Receivables |  |  | Capital |  |  | Comprehensive |  |  | Earnings |  |  | Equity |
Balance at March 31, 2023 |  |  | — |  |  | $ | — |  |  |  | 22,000,000 |  |  | $ | 220,000 |  |  | $ | (219,998 | ) |  | $ | — |  |  | $ | — |  |  | $ | 2,500,427 |  |  | $ | 2,500,429 |
Net Income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  |  |  |  |  | — |  |  |  | — |  |  |  | 440,443 |  |  |  | 440,443 |
Capital Contribution |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2,400,000 |  |  |  | — |  |  |  | — |  |  |  | 2,400,000 |
Balance at June 30, 2023 |  |  | — |  |  | $ | — |  |  |  | 22,000,000 |  |  | $ | 220,000 |  |  | $ | (219,998 | ) |  | $ | 2,400,000 |  |  | $ | — |  |  | $ | 2,940,870 |  |  | $ | 5,340,872 |
Net Income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 746,556 |  |  |  | 746,556 |
Balance at September 30, 2023 |  |  | — |  |  | $ | — |  |  |  | 22,000,000 |  |  | $ | 220,000 |  |  | $ | (219,998 | ) |  | $ | 2,400,000 |  |  | $ | — |  |  | $ | 3,687,426 |  |  | $ | 6,087,428 |
Net Income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 20,889 |  |  |  | 20,889 |
Foreign currency translation adjustment |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 3,101 |  |  |  | — |  |  |  | 3,101 |
Balance at December 31, 2023 |  |  | — |  |  | $ | — |  |  |  | 22,000,000 |  |  | $ | 220,000 |  |  | $ | (219,998 | ) |  | $ | 2,400,000 |  |  | $ | 3,101 |  |  | $ | 3,708,315 |  |  | $ | 6,111,418 |

* | Shares and per share data are presented on a retroactive basis to reflect the stock split completed on April 2, 2024.

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

3

FLY-E GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in U.S. dollars, except for the number of shares)

|  | For the Nine Months Ended December 31, |
|  | 2024 |  |  | 2023 |
Cash flows from operating activities |  |  |  |  |  |
Net (loss) income |  | $ | (2,006,843 | ) |  | $ | 1,207,888 |
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: |  |  |  |  |  |  |  |
Depreciation expense |  |  | 310,910 |  |  |  | 203,788 |
Amortization expense |  |  | 30,831 |  |  |  | 782 |
Deferred income taxes (benefits) expenses |  |  | (860,007 | ) |  |  | 225,506 |
Amortization of operating lease right-of-use assets |  |  | 2,404,092 |  |  |  | 1,798,832 |
Inventories reserve |  |  | 678,157 |  |  |  | 287,946 |
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |
Accounts receivable |  |  | (92,353 | ) |  |  | (198,720 | )
Accounts receivable – related parties |  |  | 238,029 |  |  |  | (230,149 | )
Inventories |  |  | (3,985,343 | ) |  |  | (1,827,543 | )
Prepayments and other receivables |  |  | (1,772,605 | ) |  |  | (310,727 | )
Prepayments for operation services to related parties |  |  | (105,000 | ) |  |  | — |
Security deposits |  |  | (70,413 | ) |  |  | (395,867 | )
Accounts payable |  |  | 96,920 |  |  |  | 2,287,560 |
Accrued expenses and other payables |  |  | (492,920 | ) |  |  | 233,082 |
Operating lease liabilities |  |  | (2,257,028 | ) |  |  | (1,651,005 | )
Taxes payable |  |  | (1,530,416 | ) |  |  | 112,614 |
Net cash (used in) provided by operating activities |  |  | (9,413,989 | ) |  |  | 1,743,987 |
Cash flows from investing activities |  |  |  |  |  |  |  |
Purchases of equipment |  |  | (1,618,290 | ) |  |  | (503,772 | )
Purchase of software from a related party |  |  | (500,000 | ) |  |  | — |
Prepayment for purchasing software from a related party |  |  | (892,580 | ) |  |  | (350,000 | )
Repayment from a related party |  |  | 660,256 |  |  |  | — |
Advance to a related party |  |  | (486,057 | ) |  |  | — |
Payments of property rights |  |  | — |  |  |  | (109,532 | )
Net cash used in investing activities |  |  | (2,836,671 | ) |  |  | (963,304 | )
Cash flows from financing activities |  |  |  |  |  |  |  |
Advance to a related party |  |  | — |  |  |  | (111,500 | )
Borrowing from loan payables |  |  | 7,086,099 |  |  |  | 845,000 |
Repayments of loan payables |  |  | (3,632,031 | ) |  |  | (362,583 | )
Repayments on other payables - related parties |  |  | (92,229 | ) |  |  | (200,249 | )
Payments of related party loan |  |  | — |  |  |  | (150,000 | )
Capital Contributions from Stockholders |  |  | — |  |  |  | 136,370 |
Payments of IPO cost |  |  | (282,403 | ) |  |  | (126,488 | )
Net proceeds from issuance of common stock - IPO |  |  | 9,154,500 |  |  |  | — |
Net cash provided by financing activities |  |  | 12,233,936 |  |  |  | 30,550 |
Net changes in cash |  |  | (16,724 | ) |  |  | 811,233 |
Effect of exchange rate changes on cash |  |  | (19,542 | ) |  |  | 3,101 |
Cash at beginning of the period |  |  | 1,403,514 |  |  |  | 358,894 |
Cash at the end of the period |  | $ | 1,367,248 |  |  | $ | 1,173,228 |
Supplemental disclosure of cash flow information |  |  |  |  |  |  |  |
Cash paid for interest expense |  | $ | 227,679 |  |  | $ | 82,150 |
Cash paid for income taxes |  | $ | 1,940,778 |  |  | $ | 435,881 |
Supplemental disclosure of non-cash investing and financing activities |  |  |  |  |  |  |  |
Settlement of accounts payable by related parties |  | $ | — |  |  | $ | 50,000 |
Settlement of accounts payable by capital contribution |  | $ | — |  |  | $ | 2,263,630 |
Purchase of vehicle funded by loan |  | $ | 219,668 |  |  | $ | 34,974 |
Purchase of office funded by loan |  | $ | 1,800,000 |  |  | $ | — |
Purchase software and office by using previous prepayments |  | $ | 2,085,000 |  |  | $ | — |
Purchase property rights by using previous prepayments |  | $ | 54,572 |  |  |  |  |
Properties used for rental services |  | $ | 65,618 |  |  |  |  |
Deferred IPO cost recognized as additional paid-in capital |  | $ | 502,198 |  |  | $ | — |
Termination of operating lease right-of-use assets and operating lease liabilities |  | $ | (863,513 | ) |  | $ | — |
Right-of-use assets obtained in exchange for operating lease liabilities |  | $ | 1,585,285 |  |  | $ | 3,579,568 |

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

4

FLY-E GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

1 — DESCRIPTION OF BUSINESS, ORGANIZATION AND BASIS OF PRESENTATION

Organization and principal activities

Fly-E Group, Inc. (the “Company” or “Fly-E Group”) was incorporated under the laws of the State of Delaware on November 1, 2022. The Company has no substantive operations other than holding all of the issued and outstanding shares of Fly E-Bike Inc. (“Fly E-Bike”) and Fly EV, Inc. (“Fly EV”). Fly E-Bike and Fly EV were incorporated under the laws of the State of Delaware on August 22, 2022 and November 1, 2022, respectively. Fly EV has no substantive operations. The Company, through its wholly owned subsidiaries, is principally engaged in designing, installing and selling smart electric bikes (“E-bikes”), electric motorcycles (“E-motorcycles”), electric scooters (“E-scooters”), and related accessories under the brand name of “Fly E-Bike.” The Company’s principal operations and geographic markets are mainly in the United States of America (the “U.S.”). During the nine months ended December 31, 2024, the Company closed four stores in the U.S. As of February 19, 2025, the Company has opened a total of 36 stores, including 35 retail stores in the U.S and one retail store in Canada. The Company offers rental services from selected locations. The Company also operates one online store, focusing on selling E-motorcycles, E-bikes, and E-scooters. The Company plans to open another online store focusing on selling gas bikes in the future.

The Company’s business was initially operated under CTATE INC. (“Ctate”), a corporation formed under the laws of the State of New York in 2018. Before merging with Fly E-Bike, Ctate owned 27 companies, each of which operated a Fly E-Bike store. On September 12, 2022, Ctate and Fly E-Bike, which was a wholly-owned subsidiary of Ctate, entered into an Agreement and Plan of Merger, pursuant to which Ctate merged into and with Fly E-Bike, with Fly E-Bike being the surviving corporation (the “Merger”). As a result of the Merger, the original shareholders of Ctate became the stockholders of Fly E-Bike and subsequently effectively controlled the combined entity.

On December 21, 2022, Fly-E Group and Fly E-Bike entered into a Share Exchange Agreement, pursuant to which Fly-E Group acquired all of the issued and outstanding shares of Fly E-Bike by issuing its shares to the stockholders of Fly E-Bike on a one-for-one basis (the “Share Exchange”). As a result of the Share Exchange, Fly E-Bike became a wholly owned subsidiary of Fly-E Group.

As a result of the Merger and the Share Exchange, Fly E-Bike and its subsidiaries are under common control of Fly-E Group, resulting in the consolidation of Fly E-Bike and its subsidiaries, which was accounted as a reorganization of entities under common control at carrying value. The unaudited condensed consolidated financial statements are prepared on the basis as if the reorganization became effective as of the beginning of the first period presented in the unaudited condensed consolidated financial statements of Fly-E Group.

On June 7, 2024, the Company issued 2,250,000 shares of common stock, at a price of $4.00 per share in its initial public offering (“IPO”). The gross proceeds of the offering were $9.0 million, prior to deducting the underwriting discounts, commissions and offering expenses payable by the Company. In addition, the Company granted the underwriters a 30-day option to purchase an additional 337,500 shares of common stock at the initial public offering price, less underwriting discounts and commissions, to cover over-allotments. On June 25, 2024, the Company issued an additional 337,500 shares of common stock to the underwriters of its IPO for gross proceeds of $1.4 million upon full exercise of the underwriters’ over-allotment option. Net proceeds received by the Company from its initial public offering, including the exercise of the over-allotment option, were approximately $9.2 million. The Company also issued to The Benchmark Company, LLC (“Benchmark”), the representative of the underwriters warrants to purchase 129,375 shares.

The unaudited condensed consolidated financial statements include the financial statements of the Company and each of the following subsidiaries as of December 31, 2024.

Name |  | Background |  | Ownership
FLY-E GROUP, INC. |  | ● A Delaware corporation ● Incorporated on November 1, 2022 ● A holding company |  | Parent Company
FLY EV, INC. |  | ● A Delaware corporation ● Incorporated on November 1, 2022 ● A holding Company |  | 100% owned by Fly-E Group, Inc.
FLY E-BIKE, INC. |  | ● A Delaware Company ● Incorporated on August 22, 2022 ● A holding Company |  | 100% owned by Fly-E Group, Inc.
UNIVERSE KING CORP |  | ● A New York corporation ● Incorporated on November 19, 2018 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
UFOTS CORP. |  | ● A New York corporation ● Incorporated on May 2, 2019 ● A retail store |  | 100% owned by Fly E-Bike, Inc.

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ARFY CORP. |  | ● A New York corporation ● Incorporated on April 29, 2020 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
TKPGO CORP. |  | ● A New York corporation ● Incorporated on July 3, 2018 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
FLYFLS INC |  | ● A New York corporation ● Incorporated on October 13, 2020 ● A retail store and corporate office |  | 100% owned by Fly E-Bike, Inc.
FLY37 INC |  | ● A New York corporation ● Incorporated on October 14, 2020 ● No operation |  | 100% owned by Fly E-Bike, Inc.
FIYET INC |  | ● A New York corporation ● Incorporated on November 12, 2020 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
FLY GC INC. |  | ● A New York corporation ● Incorporated on November 13, 2020 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
FLY MHT INC. |  | ● A New York corporation ● Incorporated on December 15, 2020 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
FLYAM INC |  | ● A New York corporation ● Incorporated on February 19, 2021 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
OFLYO INC |  | ● A New York corporation ● Incorporated on March 29, 2021 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
FLYEBIKE INC |  | ● A New York corporation ● Incorporated on March 30, 2021 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
FLYCLB INC |  | ● A New York corporation ● Incorporated on April 15, 2021 ● A retail store |  | 100% owned by Fly E-Bike, Inc.

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FLYEBIKE NJ INC |  | ● A New Jersey corporation ● Incorporated on June 8, 2021 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
ESEBIKE INC |  | ● A New York corporation ● Incorporated on October 13, 2021 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
FLYEBIKEMIAMI INC |  | ● A Florida corporation ● Incorporated on June 30, 2021 ● No operation |  | 100% owned by Fly E-Bike, Inc.
GOFLY INC |  | ● A Texas corporation ● Incorporated on July 23, 2021 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
FLY14 CORP. |  | ● A New York corporation ● Incorporated on September 15, 2021 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
EDISONEBIKE INC. |  | ● A New York corporation ● Incorporated on October 13, 2021 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
FLYTRON INC. |  | ● A New York corporation ● Incorporated on November 9, 2021 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
FLYCYCLE INC. |  | ● A New York corporation ● Incorporated on January 10, 2022 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
FLYNJ2 INC. |  | ● A New Jersey corporation ● Incorporated on February 10, 2022 ● A retail store |  | 100% owned by Fly E-Bike, Inc.

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FLYBWY INC. |  | ● A New York corporation ● Incorporated on March 2, 2022 ● No operation |  | 100% owned by Fly E-Bike, Inc.
FLYCORONA INC. |  | ● A New York corporation ● Incorporated on March 9, 2022 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
MEEBIKE |  | ● A New York corporation ● Incorporated on March 25, 2022 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
FLY6AVE, INC. |  | ● A New York corporation ● Incorporated on April 16, 2022 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
FLY E BIKE NJ3, INC |  | ● A New Jersey corporation ● Incorporated on July 18, 2022 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
FLYEBIKE BROOKLYN, INC. |  | ● A New York corporation ● Incorporated on November 2, 2022 ● No operation |  | 100% owned by Fly E-Bike, Inc.
FLY E-BIKE SAN ANTONIO INC |  | ● A Texas corporation ● Incorporated on January 1, 2023 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
FLYEBIKE WORLD INC. |  | ● A New York corporation ● Incorporated on February 27, 2023 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
FLY DELIVERY INC. |  | ● A New York corporation ● Incorporated on March 2, 2023 ● A delivery store |  | 100% owned by Fly E-Bike, Inc.
FLYEBIKE MIAMI2 INC. |  | ● A Florida corporation ● Incorporated on April 13, 2023 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
FLYDC INC. |  | ● A Washington, DC corporation ● Incorporated on May 31, 2023 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
FLYMHT659 INC. |  | ● A New York corporation ● Incorporated on June 2, 2023 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
FLYBX745 INC. |  | ● A New York corporation ● Incorporated on June 15, 2023 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
FLYJH8509 INC. |  | ● A New York corporation ● Incorporated on August 30, 2023 ● A retail store |  | 100% owned by Fly E-Bike, Inc.

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FLYBX2381 INC. |  | ● A New York corporation ● Incorporated on August 30, 2023 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
FLYNJ4 INC. |  | ● A New York corporation ● Incorporated on October 4, 2023 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
FLYTORONTO Corp. |  | ● A Toronto corporation ● Incorporated on October 18, 2023 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
FLYLA INC. |  | ● A California corporation ● Incorporated on December 1, 2023 ● A retail and rental store |  | 100% owned by Fly E-Bike, Inc.
FWMOTOR INC. |  | ● A New York corporation ● Incorporated on April 3, 2024 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
DCMOTOR INC. |  | ● A Maryland corporation ● Incorporated on April 9, 2024 ● A retail store |  | 100% owned by Fly E-Bike, Inc.
AOFL LLC |  | ● A New York corporation ● Incorporated on June 25, 2024 ● A holding company |  | 100% owned by Fly E-Bike, Inc.
GOBIKE INC |  | ● A New York corporation ● Incorporated on July 16, 2024 ● A rental store |  | 100% owned by Fly E-Bike, Inc.
FLYEBIKE BOSTON INC. |  | ● A Massachusetts corporation ● Incorporated on September 1, 2024 ● A retail store |  | 100% owned by Fly E-Bike, Inc.

Liquidity and Going Concern

In assessing the Company’s liquidity, the Company monitors and analyzes its cash on-hand and its operating and capital expenditure commitments. The Company’s liquidity needs are to meet its working capital requirements, operating expenses and capital expenditure obligations. Debt financing from financial institutions and equity financings have been utilized to finance the working capital requirements of the Company.

On June 7, 2024, the Company closed the IPO of 2,250,000 shares of the common stock at the price of $4.00 per share, resulting in net proceeds to the Company of $7.9 million after deducting underwriting discounts and commissions and offering expenses. On June 25, 2024, the Company sold an additional 337,500 shares of common stock to the underwriters of the IPO for gross proceeds of $1.4 million upon full exercise of the underwriters’ over-allotment option and received net proceeds of approximately $1.2 million.

As of December 31, 2024, the Company had working capital of approximately $3.0 million and cash of approximately $1.4 million. During the three and nine months ended December 31, 2024, the Company had net loss of approximately $0.7 million and $2.0 million, respectively. During the nine months ended December 31, 2024, net cash used in operating activities of the Company was approximately $9.4 million. As of December 31, 2024, the Company had a current portion of contractual obligation of approximately $8.2 million. Management has determined there is substantial doubt about its ability to continue as a going concern. Management plans to alleviate the going concern risk through (i) equity financing to support the Company’s working capital; (ii) other available sources of financing (including debt) from banks and other financial institutions; and (iii) financial support from the Company’s related parties. There is no assurance that the Company will be successful in implementing the foregoing plans or that additional financing will be available to the Company on commercially reasonable terms, or at all. The Company’s inability to secure needed financing when required could require material changes to the Company’s business plans and could have a material adverse effect on the Company’s ability to continue as a going concern and results of operations. The unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of such uncertainties.

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2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the U.S. (the “U.S. GAAP”) and regulations of the Securities Exchange Commission (the “SEC”). The accompanying unaudited condensed consolidated financial statements contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. The realization of assets and the satisfaction of liabilities in the normal course of business are dependent on, among other things, the Company’s ability to operate profitably, to generate cash flows from operations, and its ability to attract investors and to borrow funds on reasonable economic terms. The results of operations for the nine months ended December 31, 2024 are not necessarily indicative of results to be expected for any other interim period or for the full fiscal year ending March 31, 2025. Accordingly, these statements should be read in conjunction with the Company’s audited financial statements and note thereto as of and for the years ended March 31, 2024 and 2023.

(b) Principles of Consolidation

The unaudited condensed consolidated financial statements include the financial statements of the Company and its subsidiaries over which the Company exercises control and, when applicable, entities for which the Company has a controlling financial interest. All transactions and balances among the Company and its subsidiaries have been eliminated upon consolidation.

(c) Segment Information

The Company’s chief operating decision-makers (i.e., chief executive officer and his direct reports) review financial information presented on a consolidated basis, accompanied by disaggregated information about revenues by different revenues streams for purposes of allocating resources and evaluating financial performance. The Company and its subsidiaries offer E-bikes, E-motorcycles, E-scooters and other items and services in its stores. The Company’s retail operating divisions are geographically based, have similar economic characteristics and similar expected long-term financial performance. Because substantially all of the Company’s long-lived assets and revenues are located in and derived from the U.S., geographical segments are not presented. The Company’s operating segments are reported in one reportable segment. There are no segment managers who are held accountable for operations, operating results and plans for levels or components below the consolidated unit level. Based on qualitative and quantitative criteria established by Accounting Standards Codification (“ASC”) 280, “Segment Reporting”, the Company considers itself to be operating within one reportable segment.

(d) Use of Estimates

In the application of the Company’s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Significant accounting estimates include, but not limited to, useful lives of depreciable property and equipment, impairment of long-lived assets, the realization of deferred income tax assets, allowance for inventories, and discount rate for operating leases. Changes in facts and circumstances may result in revised estimates. Actual results could differ from those estimates, and as such, differences may be material to the unaudited condensed consolidated financial statements.

(e) Commitments and Contingencies

In the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out of its business, which cover a wide range of matters, including, among others, government investigations, shareholder lawsuits, and non-income tax matters.

An accrual for a loss contingency is recognized when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. If a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, is disclosed.

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(f) Cash

Cash consists of cash on hand and cash deposited with banks. The Company’s cash is maintained at financial institutions in the U.S. Deposits in these financial institutions may, from time to time, exceed the Federal Deposit Insurance Corporation’s (the “FDIC”) federally insured limit, which is $250,000. The Company has not incurred any losses in the past for amount over the FDIC limits. As of December 31, 2024 and March 31, 2024, nil and nil deposited with banks was uninsured, respectively.

(g) Accounts Receivable

Accounts receivable includes trade account due from customers. Accounts receivable is recorded at the invoiced amount less an allowance for any uncollectible accounts and does not bear interest, which is due after 30 to 90 days, depending on the credit term with the customers. Accounts receivable which is deemed to be uncollectible is charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

The Company adopt the current expected credit loss model (“CECL model”) to estimate the expected credit losses, which is determined by multiplying the probability of default. In determining the probability of default, the Company mainly considers factors such as aging schedule of receivables, migration rate of receivables, assessment of receivables due from specific identifiable counterparties that are considered at risk or uncollectible, current market conditions, as well as reasonable and supportable forecasts of future economic conditions.

There was nil and nil allowance for credit losses as of December 31, 2024 and March 31, 2024, respectively.

(h) Inventories, Net

Inventories, consisting of products available for sale, are stated at the lower of cost or net realizable value using the first-in-first-out method. Adjustments to the carrying value are recorded for estimated obsolescence or excess inventory equal to the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future demand and market conditions. Inventory cost consists of the direct cost of merchandise including freight. For the three months ended December 31, 2024 and 2023, the impairment loss was $347,333 and $128,095, respectively. For the nine months ended December 31, 2024 and 2023, the impairment loss was $678,157 and $287,946, respectively.

11

(i) Prepayments and Other Receivables

Prepayments and other receivables are mainly prepayments to vendors, prepaid expenses paid to service providers, prepaid taxes, advances to employees, and other deposits. Management regularly reviews the aging of such balances and changes in payment and realization trends and records allowances when management believes that the collection of amounts due is at risk. Accounts considered uncollectable are written off against allowances after exhaustive efforts at collection are made. As of December 31, 2024 and March 31, 2024, no allowance against prepayments and other receivables was recorded.

(j) Property and Equipment, Net

Property and equipment are stated at cost less accumulated depreciation and any recorded impairment.

The estimated useful lives are as follows:

Machinery and equipment |  | 5 years
Furniture and fixtures |  | 5 years
Leasehold improvements |  | 3 – 10 years (shorter of lease term or useful lives)
Motor vehicles |  | 5 years
Buildings |  | 30 years
Properties used for lease |  | 2 years

Depreciation on property and equipment is calculated on the straight-line method over the estimated useful lives of the assets. The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the consolidated statements of operations. Expenditures for maintenance and repairs are charged to earnings as incurred, while additions, renewals, and betterments, which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods of depreciation to determine whether subsequent events and circumstances warrant revised estimates of useful lives.

Construction in progress

Direct costs that are related to the construction of property, equipment and software and incurred in connection with bringing the assets to their intended use are capitalized as construction in progress. Construction in progress is transferred to specific property, equipment and software items and the depreciation of these assets commences when the assets are ready for their intended use. In December 2023, the Company engaged DF Technology US Inc (“DFT”), a related party, for certain technology services, such as enterprise resource planning system (“ERP system”). As of December 31, 2024 and March 31, 2024, construction in progress was $1,910,000 and $275,000, respectively, and primarily relating to the cost incurred to develop the software by DFT.

(k) Intangible Assets

Intangible asset is stated at cost less accumulated amortization and amortized in a method which reflects the pattern in which the economic benefits of the intangible asset are expected to be consumed or otherwise used up. The balance of intangible asset represents internal use software and property rights. The software is acquired externally tailored to the Company’s requirements. The Company capitalizes the costs associated with design, development, acquisition and maintenance of its acquired intangible assets and amortizes these assets over their remaining useful lives on a straight-line basis. Any further payments made to maintain or develop these assets would be capitalized and amortized over the balance of the useful life for the assets. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in the estimate being accounted for on a prospective basis.

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The estimated useful lives of intangibles assets are as follows:

Property rights |  | 5-20 years
Software |  | 5 years

(l) Impairment of Long-lived Assets

At the end of each reporting period, the Company reviews the carrying amounts of its property, plant and equipment, intangible assets subject to amortization, and right-of-use assets, to determine whether there is any indication that the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is identified, the Company will reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. As of December 31, 2024 and March 31, 2024, no impairment of long-lived assets was recognized.

(m) Deferred IPO Costs

The Company complies with the requirements of FASB ASC Topic 340-10-S99-1, “Other Assets and Deferred Costs — SEC Materials” (“ASC 340-10-S99”) and SEC Staff Accounting Bulletin Topic 5A, “Expenses of Offering”. Deferred IPO costs consist of underwriting, legal, accounting and other professional expenses incurred through the balance sheet date that are directly related to the initial public offering of the Company and that will be charged to additional paid in capital upon the completion of the offering. Total deferred offering cost of $502,198 was charged to additional paid-in-capital upon IPO.

(n) Fair Value Measurements

Fair value is defined as the price that would be received for an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. Valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. When determining the fair value measurements for assets and liabilities, the Company considers the principal or most advantageous market in which it would transact and consider assumptions that market participants would use when pricing the asset or liability. The following summarizes the three levels of inputs required to measure fair value, of which the first two are considered observable and the third is considered unobservable:

| Level-1 | — | Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

| Level-2 | — | Include other inputs that are directly or indirectly observable in the marketplace.

| Level-3 | — | Unobservable inputs which are supported by little or no market activity.

The fair value for certain assets and liabilities such as cash, accounts receivable, other receivables, prepayments and other current assets, short-term loans, accounts payable, contract liabilities, accrued expenses and other payables, and tax payables have been determined to approximate carrying amounts due to the short maturities of these instruments. The Company believes that its long-term loan to a third party approximates the fair value based on current yields for debt instruments with similar terms. The Company and its subsidiaries did not have any non-financial assets or liabilities that are measured at fair value on a recurring basis as of December 31, 2024 and March 31, 2024.

(o) Revenue Recognition

Product revenue

The Company follows the revenue accounting requirements of Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. The core principle underlying the revenue recognition of this ASC allows the Company to recognize revenue that represents the transfer of products and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This will require the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of products and services transfers to a customer.

To achieve that core principle, the Company applies a five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation.

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The Company generates substantially all its revenues from sales of products such as smart E-bikes, E-motorcycles, E-scooters and accessories to the retail and wholesale customers through its wholly owned subsidiaries stores. In accordance with ASC 606, the Company’s performance obligations are satisfied upon the control of products being passed to the customer, which is the point in time that the customers are able to direct the use of and obtain substantially all of the economic benefit of the products or services. The transfer of control typically occurs at a point in time based on consideration of when the customer has an obligation to pay for the products, and physical possession of, legal title to, and the risks and rewards of ownership of the products have been transferred, and the customer has accepted the products. Revenue is recognized net of estimates of variable consideration, including product returns, customer discounts and allowance. which occurs at the point of sale, or the services have been rendered. Historically, the Company has not experienced any significant returns nor provided significant customer discounts.

The Company offers an assurance-type warranty to its customers. An assurance-type warranty guarantees that the product will perform as promised and is not a performance obligation. This type of warranty promises to repair or replace a delivered good or service if it does not perform as expected. Since an assurance-type warranty guarantees the functionality of a product, the warranty is not accounted for as a separate performance obligation, and thus no transaction price is allocated to it. Rather, to account for an assurance-type warranty the vendor should estimate and accrue a warranty liability when the promised good or service is delivered to the customer (see ASC 460-10).

Since the contract price and term are fixed and enforceable, and an assurance-type warranty guarantees the functionality of a product, and the warranty is not accounted for as a separate performance obligation, no transaction price is allocated to it. The Company recognizes sales in full at the point in time when the products are delivered or accepted by the customers, in accordance with the acceptance term specified in the contract. The Company records estimated future warranty costs under ASC 460. Such estimated costs for warranties are estimated at the time of delivery and these warranties are not service warranties separately sold by the Company. Generally, the estimated claim rates of warranty are based on actual warranty experience or the Company’s best estimate. The Company accrued $37,363 and $27,714 of warranty reserves under accrued expenses and other payables as of December 31, 2024 and March 31, 2024, respectively. The Company has no contract assets and contract liabilities balances as of December 31, 2024 and March 31, 2024, respectively.

Rental Revenue

The Company operates rental business primarily from the Go Fly rental mobile app and selected Fly E-Bike stores that provide users with a flexible and affordable e-bike rental option.

The Company offers rental services through its subsidiaries, GOBIKE INC and FLYLA INC. All the products available for rent are owned by the Company. The Company leases products to customers, and as a result, the Company considers itself to be the accounting lessor, as applicable, in these arrangements in accordance with ASC 842. Rental business operating costs include refunded products repair fee and other operating costs, as applicable.

Due to the short-term nature of the rental business, the Company classifies these rentals operating leases. Revenue generated from the rental services is recognized over the rental period, which is typically one day, one week or more.

Disaggregated information of revenues by business lines are as follows:

|  | For the Three Months Ended December 31, |  |  | For the Nine Months Ended December 31, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Product revenues - retail (ASC 606) |  | $ | 4,914,741 |  |  | $ | 6,292,490 |  |  | $ | 17,708,735 |  |  | $ | 19,229,491 |
Product revenues - wholesale (ASC 606) |  |  | 714,308 |  |  |  | 1,135,722 |  |  |  | 2,618,146 |  |  |  | 4,804,906 |
Revenues - rental services (ASC 842) |  |  | 48,961 |  |  |  | — |  |  |  | 48,961 |  |  |  | — |
Net revenues |  | $ | 5,678,010 |  |  | $ | 7,428,212 |  |  | $ | 20,375,842 |  |  | $ | 24,034,397 |

(p) Selling Expenses

Selling expenses mainly consist of advertising costs, and payroll and related expenses for personnel engaged in selling and marketing activities. Advertising expenses, which consist primarily of online and offline advertisements, are expenses when the services are received. The advertising expenses were $32,681 and $6,629 for the three months ended December 31, 2024 and 2023, respectively. The advertising expenses were $230,742 and $32,695 for the nine months ended December 31, 2024 and 2023, respectively.

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(q) Research and Development Expenses

Research and development expenses include salaries for the Company’s research and development personnel, as well as related development expenses paid to the third-party development team. The Company recognizes internal use software acquired and internally developed in accordance with ASC 350-40 “Software—internal use software”. The Company expenses all costs that are incurred in connection with the planning and implementation phases of development, and costs that are associated with maintenance of the existing software for internal use. Certain costs associated with developing internal-use software are capitalized when such costs are incurred within the application development stage of software development. As a result, the Company expensed the development costs of the Fly E-Bike app as they incurred. For the three months ended December 31, 2024 and 2023, development costs amounted to $125,312 and $89,420, respectively, which were recorded under general and administrative expenses. For the nine months ended December 31, 2024 and 2023, development costs amounted to $434,760 and $96,880, respectively, which were recorded under general and administrative expenses.

(r) Income Taxes

Current income taxes are provided based on net income/(loss) for financial reporting purposes and adjusted for income and expense items which are not assessable or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions.

Deferred taxes are accounted for using the asset and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the unaudited condensed consolidated financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets (the “DTAs”) are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized.

Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized, or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. DTAs are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all the DTAs will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.

An uncertain 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. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. The tax returns filed in 2018 to 2023 are subject to examination by any appropriate tax authorities. For the three months ended December 31, 2024 and 2023, the Company accrued nil and nil income tax related penalty included in current income taxes expenses, respectively. For the nine months ended December 31, 2024 and 2023, the Company accrued $63,812 and $55,604 income tax related penalty included in current income taxes expenses, respectively.

(s) Leases

The Company accounts for leases in accordance with ASC 842. The Company leases premises for offices, warehouses, and retail stores under non-cancellable operating leases, and the Company leases its products to customers under non-cancellable operating leases.

Lessor

The Company’s lease arrangements include products rentals to customers. The lease term is from one hour to one month. Due to the short-term nature of these arrangements, the Company classifies these leases as operating leases. The Company does not separate lease and non-lease components, such as insurance or roadside assistance provided to the lessee, in its lessor lease arrangements. Lease payments are primarily fixed and are recognized as revenue in the period over which the lease arrangement occurs. Taxes or other fees assessed by governmental authorities that are both imposed on and concurrent with each lease revenue-producing transaction and collected by the Company from the lessee are excluded from the consideration in its lease arrangements. The Company mitigates residual value risk of its leased assets by performing regular maintenance and repairs, as necessary, and through periodic reviews of asset depreciation rates based on the Company’s ongoing assessment of present and estimated future market conditions.

Lessee

The Company recognizes right-of-use assets and lease liabilities for all leases at the commencement date of a lease, except for short-term leases and low-value asset leases accounted for applying a recognition exemption where lease payments are recognized as expenses on a straight-line basis over the lease terms. Leases with an initial term of 12 months or less are short-term leases and not recognized as operating lease right-of-use assets and operating lease liabilities on the unaudited condensed consolidated balance sheets. The Company recognizes lease expense for short-term leases on a straight-line basis over the lease term.

Right-of-use assets are initially measured at cost, which comprises the initial measurement of lease liabilities adjusted for lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs needed to restore the underlying assets, and less any lease incentives received. Right-of-use assets are subsequently measured at cost less accumulated depreciation and impairment losses and adjusted for any remeasurement of the lease liabilities. Right-of-use assets are presented on a separate line in the unaudited condensed consolidated balance sheets.

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Right-of-use assets are depreciated using the straight-line method from the commencement dates to the earlier of the end of the useful lives of the right-of-use assets or the end of the lease terms.

Lease liabilities are initially measured at the present value of the lease payments, which comprise fixed payments, in-substance fixed payments, variable lease payments which depend on an index or a rate. The lease payments are discounted using the interest rate implicit in a lease if that rate can be readily determined. If that rate cannot be readily determined, the Company uses the lessee’s incremental borrowing rate. Subsequently, lease liabilities are measured at amortized cost using the effective interest method, with interest expense recognized over the lease terms. When there is a change in a lease term or a change in future lease payments resulting from a change in an index or a rate used to determine those payments, the Company remeasures the lease liabilities with a corresponding adjustment to the right-of-use-assets. However, if the carrying amount of the right-of-use assets is reduced to zero, any remaining amount of the remeasurement is recognized in profit or loss. Lease liabilities are presented on a separate line in the unaudited condensed consolidated balance sheets.

Variable lease payments that do not depend on an index or a rate are recognized as expenses in the periods in which they are incurred.

(t) Concentration Risk

Concentration of customers and suppliers

No customers individually represented greater than 10% of total net revenues of the Company for the three and nine months ended December 31, 2024 and 2023.

For the three months ended December 31, 2024, the Company’s top two suppliers represented 50% and 25% of total purchases of the Company, respectively. For the three months ended December 31, 2023, the Company’s top three suppliers represented 59%, 34%, and 17% of total purchases of the Company, respectively. For the nine months ended December 31, 2024, the Company’s top three suppliers represented 45%, 29%, and 10% of total purchases of the Company, respectively. For the nine months ended December 31, 2023, the Company’s top three suppliers represented 35%, 20% and 13% of total purchases of the Company, respectively. As of December 31, 2024, two suppliers accounted for 58% and 24% of accounts payable balance, respectively. As of March 31, 2024, three suppliers accounted for 31%, 26%, and 23% of accounts payable balance, respectively.

Concentration of credit risk

Financial instruments that are potentially subject to credit risk consist principally of accounts receivable. The Company believes the concentration of credit risk in its account receivable is substantially mitigated by its ongoing credit evaluation process and relatively short collection terms. The Company does not generally require collateral from customers. The Company evaluates the need for an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends, and other information. Historically, the Company did not have any bad debt on its account receivable.

Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash and cash equivalents, term deposits, restricted cash, short-term investments, and accounts receivable, net. The Company’s investment policy requires cash and cash equivalents, term deposits, restricted cash, and short-term investments to be placed with high-quality financial institutions and to limit the amount of credit risk from any one issuer. The Company regularly evaluates the credit standing of the counterparties or financial institutions.

(u) Related Parties

A related party is generally defined as (i) any person and or their immediate family hold 10% or more of the Company’s securities (ii) the Company’s management and/or their immediate family, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. Related parties may be individuals or corporate entities. Transactions involving related parties cannot be presumed to be carried out on an arm’s length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s length transactions unless such representations can be substantiated.

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(v) Earnings (Loss) Per Share

The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share”. ASC 260 requires companies to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common stock outstanding for the period. Diluted EPS takes into account the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised and converted into ordinary shares. Potential shares of common stock 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 and nine months ended December 31, 2024, the Company had potential shares of common stock issuable upon the exercise of the Representative’s Warrants (as defined below). As the Company incurred losses for the three and nine months ended December 31, 2024, inclusion of these potential shares of common stock would have reduced the net loss per share. Therefore, these potential shares were excluded from the calculation of diluted net loss per share. For the three and nine months ended December 31, 2024, there were no dilutive shares.

(w) Foreign Currencies Translation

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statement of operations. The reporting currency of the Company is United States Dollar ($). The Company’s subsidiary in Canada maintains its books and records in its local currency, Canadian dollar (CAD), which is the functional currency for this subsidiary as it is the primary currency of the economic environment in which this entity operates.

In general, for consolidation purposes, assets and liabilities of subsidiaries whose functional currency is not United States Dollar are translated into United States Dollar in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’ equity.

(x) Representative’s Warrants

Upon the closing of the IPO in June 2024, the Company issued to Benchmark underwriters warrants (the “Representative’s Warrants”) to purchase 129,375 shares of common stock which warrants are also exercisable on a cashless basis. The Company accounts for these warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification ASC 480, Distinguishing Liabilities from Equity and ASC 815, Derivatives and Hedging. The Company accounts for its warrants as equity that meet all of the criteria (i) require physical settlement or net-share settlement or (ii) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement), the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance and subsequent changes in fair value are not recognized as long as the warrants continue to be classified as equity.

(y) Recent Accounting Pronouncements

The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued. Under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging growth company and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This guidance requires a public entity to disclose for each reportable segment, on an interim and annual basis, the significant expense categories and amounts that are regularly provided to the chief operating decision-maker (“CODM”) and included in each reported measure of a segment’s profit or loss. Additionally, it requires a public entity to disclose the title and position of the individual or the name of the group or committee identified as the CODM. This guidance is effective for fiscal years beginning after December 31, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted and the guidance should be applied retrospectively to all periods presented in the financial statements, unless it is impracticable. The Company plans to adopt the provisions of this guidance for the fiscal year ending March 31, 2025.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This guidance requires a public entity to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and to provide more details about the reconciling items in some categories if the items meet a quantitative threshold. The guidance also requires all entities to disclose annually income taxes paid (net of refunds received) disaggregated by federal (national), state and foreign taxes and to disaggregate the information by jurisdiction based on a quantitative threshold. This guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted, and this guidance should be applied prospectively but there is the option to apply it retrospectively. The Company plans to adopt the provisions of this guidance for the fiscal year ending March 31, 2026.

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Except as mentioned above, 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 unaudited condensed consolidated balance sheets, statements of operations and comprehensive loss and statements of cash flows.

3 — INVENTORIES, NET

Inventories, net consisted of the following:

|  | December 31, 2024 |  |  | March 31, 2024 |
Batteries |  | $ | 2,893,576 |  |  | $ | 1,009,228 |
Electric Vehicles |  |  | 4,665,639 |  |  |  | 2,634,643 |
Tires |  |  | 608,145 |  |  |  | 687,927 |
Accessories |  |  | 1,374,298 |  |  |  | 1,546,283 |
Inventories |  |  | 9,541,658 |  |  |  | 5,878,081 |
Inventory reserves |  |  | (936,030 | ) |  |  | (514,021 | )
Inventories, net |  | $ | 8,605,628 |  |  | $ | 5,364,060 |

Movements of inventory reserves are as follows:

|  | December 31, 2024 |  |  | December 31, 2023 |
Beginning balance |  | $ | 514,021 |  |  | $ | 431,363 |
Addition |  |  | 678,157 |  |  |  | 287,946 |
Write off |  |  | (256,147 | ) |  |  | (316,278 | )
Ending Balance |  | $ | 936,030 |  |  | $ | 403,031 |

As of December 31, 2024 and March 31, 2024, the inventory allowance balance was $936,030 and $514,021, respectively. For the three months ended December 31, 2024 and 2023, the impairment loss was $347,333 and $128,095, respectively. For the nine months ended December 31, 2024 and 2023, the impairment loss was $678,157 and $287,946, respectively.

4 — PREPAYMENTS AND OTHER RECEIVABLES

Prepayments and other current assets as of December 31, 2024 and March 31, 2024 consisted of the following:

|  | December 31, 2024 |  |  | March 31, 2024 |
Prepaid rent |  | $ | 70,766 |  |  | $ | 179,792 |
Prepayments to vendors |  |  | 1,580,417 |  |  |  | 143,018 |
Prepaid iCloud Server |  |  | — |  |  |  | 1,747 |
Prepaid insurance |  |  | 293,294 |  |  |  | 237,207 |
Prepaid income tax |  |  | 86,705 |  |  |  | — |
Prepayments to other service providers |  |  | 275,510 |  |  |  | 26,896 |
Total Prepayment and Other Receivables |  | $ | 2,306,692 |  |  | $ | 588,660 |

As of December 31, 2024 and March 31, 2024, the prepayments to vendors were $1.6 million and $0.1 million, respectively. The increase in prepayments to vendors was primarily due to the Company’s anticipation of growth in future sales and rental services. The Company plans to purchase more E-vehicles and related accessories from oversea vendors to support the expansion in retail and rental markets. These prepayments to vendors are expected to be settled by the end of March 2025.

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5 — PROPERTY AND EQUIPMENT, NET

Property and equipment as of December 31, 2024 and March 31, 2024 consisted of the following:

|  | December 31, 2024 |  |  | March 31, 2024 |
Furniture & Fixtures |  | $ | 419,950 |  |  | $ | 400,558 |
Machinery & Equipment |  |  | 267,477 |  |  |  | 212,317 |
Automobile |  |  | 669,909 |  |  |  | 306,607 |
Leasehold improvements |  |  | 963,759 |  |  |  | 976,870 |
Building |  |  | 3,663,215 |  |  |  | — |
Construction in progress-Software |  |  | 1,910,000 |  |  |  | 275,000 |
Properties for rental business |  |  | 65,618 |  |  |  | — |
Property and Equipment |  |  | 7,959,928 |  |  |  | 2,171,352 |
Less: Accumulated depreciation |  |  | (727,239 | ) |  |  | (416,330 | )
Property and Equipment, net |  | $ | 7,232,689 |  |  | $ | 1,755,022 |

For the three months ended December 31, 2024 and 2023, the depreciation expenses were $130,000 and $13,229, respectively. For the nine months ended December 31, 2024 and 2023, the depreciation expenses were $310,910 and $203,788, respectively.

In December 2023, the Company engaged DFT, a former related party, for certain technology services, such as ERP system. The total contract price for the ERP system is $2,500,000, subject to adjustments. The final delivery of the ERP system is scheduled for May 10, 2025, subject to adjustments mutually agreed upon by the parties in response to any changes in project scope or unforeseen delays. As of December 31, 2024 and March 31, 2024, the accumulative payments to DFT for development of the ERP system were $2,446,580 and $1,554,000, respectively. As of December 31, 2024 and March 31, 2024, construction in progress was $1,910,000 and $275,000, respectively, and primarily relating to the cost incurred to develop the software by DFT. As of December 31, 2024 and March 31, 2024, the Company had a prepayment of $536,580 and $1,279,000, respectively, to DFT (see Note 13 – Long-term prepayment for software development – related parties, net).

On August 12, 2024, the Company entered into a purchase agreement with He’s Realty Holdings LLC (the “Seller”), a third party, to purchase an office property. The final purchase price of the property was $3,594,000 and closing cost was $69,215. The Company paid $628,211 in cash to the Seller, withdrew $1,235,004 from its line of credit with Peapack-Gladstone Bank, and financed the remaining $1,800,000. On August 13, 2024, the Company’s subsidiary, AOFL LLC, obtained a one-year short-term loan of $1,800,000 from He’s Realty Holdings LLC with an annual interest rate of 6.5%. The principal amount shall be paid to He’s Realty Holdings LLC in one or more installments on or before August 11, 2025, and during the one-year borrowing period, AOFL LLC only needs to pay interest of $9,750 to He’s Realty Holdings LLC on a monthly basis. The collateral provided was the office purchased by AOFL LLC. The loan was paid off in full on November 29, 2024.

In October 2024, the Company started to offer rental services through its subsidiaries, GOBIKE INC, in New York, and FLYLA INC, in Log Angeles. The rental term is from one hour to one month. In New York, the Company offers a single model of E-Bike for rent, FLY 11 PRO GOFLY as of the date of this report. In Log Angeles, the Company offers 31 types of E-Bikes and E-scooters for rent, including FLY AIR2, FLY TANK, and FLY 11 PRO.

6 — INTANGIBLE ASSETS, NET

Intangible assets as of December 31, 2024 and March 31, 2024 consisted of the following:

|  | December 31, 2024 |  |  | March 31, 2024 |
Property rights |  | $ | 92,604 |  |  | $ | 38,032 |
GO FLY App |  |  | 500,000 |  |  |  | — |
Total Intangible assets |  |  | 592,604 |  |  |  | 38,032 |
Less: Accumulated Amortization |  |  | (32,479 | ) |  |  | (1,648 | )
Intangible assets, net |  | $ | 560,125 |  |  | $ | 36,384 |

For the three months ended December 31, 2024 and 2023, the amortization expenses were $21,985 and nil, respectively. For the nine months ended December 31, 2024 and 2023, the amortization expenses were $30,831 and nil, respectively.

In July 2024, the Company engaged DFT, a related party, to develop a new APP, GO FLY APP, for the rental business. The total contract price for the GO FLY APP is $500,000, and the GO FLY APP was delivered on September 5, 2024.

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7 — ACCRUED EXPENSES AND OTHER PAYABLES

|  | December 31, 2024 |  |  | March 31, 2024 |
Accrued payroll |  | $ | 42,196 |  |  | $ | 121,120 |
Advances from customers |  |  | 26,445 |  |  |  | 25,099 |
Advances from IGH Holding Inc |  |  | 49,000 |  |  |  | 49,000 |
Accrued warranty |  |  | 37,363 |  |  |  | 27,714 |
Payroll tax and sales tax payable |  |  | 112,068 |  |  |  | 245,226 |
Accrued store expenses |  |  | 51,077 |  |  |  | 21,975 |
Accrued IPO offering cost |  |  | — |  |  |  | 225,000 |
Accrued freight in cost |  |  | 94,650 |  |  |  | 107,255 |
Accrued interest expense |  |  | 19,670 |  |  |  |  |
Accrued professional fee |  |  | — |  |  |  | 103,000 |
Accrued Expenses and Other Current Liabilities |  | $ | 432,469 |  |  | $ | 925,389 |

8 — LOAN PAYABLE

A summary of the Company’s loans is listed as follows:

Lender |  | Due Date |  | December 31, 2024 |  |  | March 31, 2024 |
Chase Bank(i) |  | October 25, 2027 |  |  | — |  |  |  | 176,366 |
Chase Bank(ii) |  | January 12, 2028 |  |  | 301 |  |  |  | 56,580 |
Chase Bank(vii) |  | September 28, 2028 |  |  | — |  |  |  | 221,197 |
Leaf Capital Funding, LLC(iii) |  | September 30, 2027 |  |  | 37,759 |  |  |  | 46,856 |
Sinoelite Corp(iv) |  | April 03, 2024 |  |  | — |  |  |  | 100,000 |
Automobile Loan – Honda(v) |  | June 25, 2027 |  |  | 22,506 |  |  |  | 28,833 |
Bank of Hope(vi) |  | September 15, 2024 |  |  | — |  |  |  | 391,227 |
Bank of Hope(vi) |  | September 22, 2024 |  |  | — |  |  |  | 400,000 |
Bank of Hope(vi) |  | December 12, 2024 |  |  | — |  |  |  | 205,000 |
Milea Truck Sales of Queens Inc. (viii) |  | August 22, 2027 |  |  | 115,694 |  |  |  | — |
Milea Truck Sales of Queens Inc. (viii) |  | July 26, 2027 |  |  | 84,285 |  |  |  | — |
Peapack-Gladstone Bank(ix) |  | August 31, 2025 |  |  | 4,909,982 |  |  |  | — |
Veiocity Commercial Capital, LLC (x) |  | December 1, 2054 |  |  | 1,929,268 |  |  |  | — |
Total loan payables |  |  |  |  | 7,099,795 |  |  |  | 1,626,059 |
Short-term loan payables |  |  |  |  | (4,909,982 | ) |  |  | — |
Current portion of long-term loan payables |  |  |  |  | (99,079 | ) |  |  | (1,213,242 | )
Long-term loan payables |  |  |  | $ | 2,090,734 |  |  | $ | 412,817 |

(i) | On October 25, 2022, the Company’s subsidiary, Universe King Corp. obtained a five-year long-term loan of $230,000 from JPMorgan Chase Bank, N.A. with an annual interest rate of 10.35%. Mr. Ke Zhang, the Company’s Chief Human Resource Officer, provided a guarantee on this loan. To secure payment and performance of the liabilities, Universe King Corp. pledged to JPMorgan Chase Bank, N.A., a continuing security interest in all of its right, title and interest in all of its properties, whether now owned or hereinafter acquired and whether now existing or hereafter arising. On August 9, 2024, the Company paid off this loan in full.

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(ii) | On January 12, 2023, the Company’s subsidiary, Arfy Corp. obtained a five-year long-term loan of $70,000 from JPMorgan Chase Bank, N.A. with an annual interest rate of 9.8%. Mr. Tong Chen, an original stockholder of the Company, provided a guarantee on this loan. To secure payment and performance of the liabilities, Arfy Corp. pledged to JPMorgan Chase Bank, N.A., a continuing security interest in all of its right, title and interest in all of its properties, whether now owned or hereinafter acquired and whether now existing or hereafter arising. On August 9, 2024, the Company paid $52,069 and as of December 31, 2024, the outstanding balance is $301.

(iii) | On August 24, 2022, Universe King Corp. obtained a five-year long-term loan of $63,674 from Leaf Capital Funding, LLC with an annual interest rate of 7.0%. The collateral provided included the Fuso trucks, whether now owned or hereafter acquired by Universe King Corp., and together with all accessories, accessions, attachments thereto, and all other substitutions, renewals, replacements and improvements and all proceeds of the foregoing. As of December 31, 2024, the outstanding balance is $40,845. From January 1 to February 19, 2025, the Company paid $2,523 on principal and interest of the loan.

(iv) | On January 3, 2023, Fly E-Bike, Inc. obtained a one-year and three-month long-term loan of $100,000 from Sinoelite Corp with no interest. On April 25, 2024, the Company paid off this loan in full.

(v) | On June 12, 2023, Flyebikemiami Inc obtained a four-year long-term loan of $34,974 from AutoNation Honda Miami Lakes with an annual interest rate of 3.98%. The collateral provided was the Honda vehicle purchased by Flyebikemiami Inc. As of December 31, 2024, the outstanding balance is $24,635. From January 1 to February 19, 2025, the Company paid $1,579 on principal and interest of the loan.

(vi) | On September 20, 2023, Fly-E Group, Inc obtained a line of credit of $1,000,000 from Bank of Hope with a floating annual interest rate, currently at 8.5%. On the same date, the Company withdrew $391,226 from Bank of Hope to pay off the loan balance with Flushing Bank as of September 15, 2023. On September 22, 2023 and December 12, 2023, the Company withdrew $400,000 and $205,000, respectively, from Bank of Hope to support its business operations. Mr. Zhou Ou, the Company’s Chief Executive Officer, and Mr. Ke Zhang, the Company’s Chief Human Resource Officer, provided a guarantee on this loan. To secure payment and performance of the liabilities, Fly-E Group pledged to Bank of Hope the following items: inventory, chattel paper, accounts, equipment, and general intangibles of first 29 incorporated subsidiaries of the Company. On August 9, 2024, the Company paid off this loan in full.

(vii) | On October 2, 2023, the Company’s subsidiary, Fly14 Corp. obtained a five-year long-term loan of $240,000 from JPMorgan Chase Bank, N.A. with an annual interest rate of 10.40%. To secure payment and performance of the liabilities, Fly14 Corp. pledged to JPMorgan Chase Bank, N.A., a continuing security interest in all of its rights, title and interest in all of its properties, whether now owned or hereinafter acquired and whether now existing or hereafter arising. On August 9, 2024, the Company paid off this loan in full.

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(viii) | On August 22, 2024, Fly E-Bike, Inc. obtained a three-year long-term loan of $128,132 from Milea Truck Sales of Queens Inc. with an annual interest rate of 9.90%. The collateral provided was the FTR 2025 vehicle purchased by Fly E-Bike, Inc. As of December 31, 2024, the outstanding balance is $125,061. From January 1 to February 19, 2025, the Company paid $8,257 on principal and interest of the loan. On July 26, 2024, Fly E-Bike, Inc. obtained a three-year long-term loan of $96,506 from Milea Truck Sales of Queens Inc. with an annual interest rate of 7.03%. The collateral provided was the NRR-CAB 2025 vehicle purchased by Fly E-Bike, Inc. As of December 31, 2024, the outstanding balance is $91,095. From January 1 to February 19, 2025, the Company paid $5,962 on principal and interest of the loan.

(ix) | On August 5, 2024, Fly-E Group, Inc obtained a line of credit of $5 million from Peapack-Gladstone Bank with a floating annual interest rate and the current annual interest rate is 8.8%. On August 5, 2024, the Company withdrew from this line of credit to pay off the outstanding principal and interest of loans from Bank of Hope in total of $996,476 and the loan from JPMorgan Chase Bank, N.A obtained by Fly14 Corp in total of $208,601. On August 6, 2024, the Company withdrew in total $214,905 from this line of credit to pay off the outstanding principal and interest of loans from JPMorgan Chase Bank, N.A. From August 7, 2024 to August 19, 2024, the Company withdrew $3,490,000 from the line of credit. Mr. Zhou Ou, the Company’s Chief Executive Officer, and Mr. Ke Zhang, the Company’s Chief Human Resource Officer, provided a guarantee on this loan. To secure payment and performance of the liabilities, Fly-E Group granted Peapack-Gladstone Bank a continuing lien on and security interest in all assets of the Company, including accounts, chattel paper, documents, instruments, inventory, general intangibles, equipment, fixtures, deposit accounts, goods, letter-of-credit rights, supporting obligations, investment property, commercial tort claims, property in the Lender’s possession, additions, and proceeds of first 39 incorporated subsidiaries of the Company. From January 1 to February 19, 2025, the Company paid $102,492 on interest of the line of credit.

(x) | On November 27, 2024, the Company’s subsidiary, AOFL LLC (the “borrower”) obtained four thirty-year long-term loans of $525,000, $560,000, $595,000, and $420,000, respectively, from Veiocity Commercial Capital, LLC (the “lender”) with an annual interest rate of 11.24%. The lender charged a total of $170,933 loan settlement fees for closing the loan which included attorney fee, escrow fee, origination fee, and so on. The Company amortized the $170,933 over the loan term. To secure payment and performance of the liabilities, AOFL LLC pledged to Veiocity Commercial Capital, LLC a continuing lien on and security interest in any and all deposits or other sums at any time credited by or due from lender to the borrower and any cash, securities, instruments or other property of the borrower in the possession of lender. From January 1 to February 19, 2025, the Company paid $40,761 on principal and interest of the loan.

| On August 13, 2024, the Company’s subsidiary, AOFL LLC, obtained a one-year short-term loan of $1,800,000 from He’s Realty Holdings LLC with an annual interest rate of 6.5%. The principal amount shall be paid to He’s Realty Holdings LLC in one or more installments on or before August 11, 2025, and during the one-year borrowing period, AOFL LLC only needs to pay interest of $9,750 to He’s Realty Holdings LLC on a monthly basis. The collateral provided was the office purchased by AOFL LLC. The loan was paid off in full on November 29, 2024.

For the three months ended December 31, 2024 and 2023, the total interest expenses on the Company’s outstanding loans amounted to $155,673 and $31,558, respectively. For the nine months ended December 31, 2024 and 2023, the total interest expenses on the Company’s outstanding loans amounted to $247,550 and $82,150, respectively.

22

9 — STOCKHOLDER’S EQUITY

Prior to the effectiveness of the stock split discussed below, the Company was authorized to issue 400 shares of common stock having a par value of $0.01 per share and 40 shares of preferred stock having a par value of $0.01 per share. There were 200 shares of common stock were issued and outstanding prior to the effectiveness of the stock split.

On March 27, 2024, the Company’s board of directors approved a 1-for-110,000 stock split of the Company’s capital stock. The stock split became effective on April 2, 2024. The par value of the Company’s common stock remained unchanged at $0.01 per share, and the number of authorized shares of the Company’s capital stock was increased from 440 to 48,400,000, with the number of authorized shares of common stock and preferred stock being increased from 400 to 44,000,000 and from 40 to 4,400,000, respectively.

On June 7, 2024, the Company completed its initial public offering and issued 2,250,000 shares of common stock, at a price of $4.00 per share. The gross proceeds of the offering were $9.0 million, prior to deducting the underwriting discounts, commissions and offering expenses payable by the Company. In addition, the Company granted the underwriters a 30-day option to purchase an additional 337,500 shares of common stock at the initial public offering price, less underwriting discounts and commissions, to cover over-allotments. On June 25, 2024, the Company issued an additional 337,500 shares of common stock to the underwriters for gross proceeds of $1.4 million upon full exercise of the underwriters’ over-allotment option. Net proceeds received by the Company from the initial public offering, including the exercise of over-allotment option, were approximately $9.2 million.

Upon the closing of IPO offering in June 2024, the Company issued to Benchmark the representative of the underwriters warrants to purchase 129,375 shares of common stock. The Representative’s Warrants have an exercise price equal to $4.00 per share and are exercisable until the date on June 7, 2029, after the date of commencement on December 7, 2024. The Representative’s Warrants are also exercisable on a cashless basis. As the Representative’s Warrants are considered indexed to the Company’s own stock and meet the criteria for equity classification according to ASC:815-40, the Representative’s Warrants are classified as equity. None of the Representative’s Warrants were exercised as of December 31, 2024.

The fair value of the warrant, using the Black-Scholes Model on the date of issuance was $274,472. The key inputs into the Black-Scholes Model variables were as follows at measurement date:

|  | June 7, 2024 |
Stock price |  | $ | 4.00 |
Risk-free interest rate |  |  | 4.46 | %
Volatility |  |  | 56.52 | %
Exercise price |  | $ | 4.00 |
Dividend yield |  | $ | — |

The following table summarizes the Company’s activities and status of the Representative’s Warrants:

|  | Number of Warrant |  |  | Weighted Average Exercise Price |  |  | Weighted Average Remaining Term (Years) |
Outstanding as of March 31, 2024 |  |  | — |  |  |  | — |  |  |  | — |
Issued |  |  | 129,375 |  |  | $ | 4.00 |  |  |  | 4.5 |
Exercised |  |  | — |  |  |  | — |  |  |  | — |
Forfeited or expired |  |  | — |  |  |  | — |  |  |  | — |
Outstanding as of December 31, 2024 |  |  | 129,375 |  |  | $ | 4.00 |  |  |  | 4.4 |

As of December 31, 2024 and March 31, 2024, the subscription receivable represents the unpaid capital contribution of $219,998 by the stockholders.

During the nine months ended December 31, 2023, Mr. Ou paid certain vendors of the Company to settle certain accounts payable balance on behalf the Company. On June 30, 2023, the Company transferred $2.26 million, a portion of the accounts payable balance, along with a cash contribution of $0.14 million from Mr. Zhou Ou as capital contribution (see Note 13). As of June 30, 2023, a total of $2.4 million were transferred and recorded as capital contribution (see Note 13).

23

10 — INCOME TAX

(a) Income Tax Expense

Income tax benefit for the three months ended December 31, 2024 was $0.4 million, and income tax expense for the three months ended December 31, 2023 amounted to $87,718. Income tax benefit for the nine months ended December 31, 2024 was $0.5 million, and income tax expense for the nine months ended December 31, 2023 amounted to $0.7 million. Significant components of the provision for income taxes are as follows:

|  | For the Nine Months Ended December 31, |
|  | 2024 |  |  | 2023 |
Current |  |  |  |  |  |
Federal |  | $ | 101,808 |  |  | $ | 183,590 |
State |  |  | 120,932 |  |  |  | 182,860 |
City |  |  | 119,766 |  |  |  | 139,903 |
Deferred |  |  |  |  |  |  |  |
Federal |  |  | (508,000 | ) |  |  | 166,500 |
State |  |  | (202,000 | ) |  |  | 42,300 |
City |  |  | (128,000 | ) |  |  | 24,500 |
Foreign |  |  | (26,160 | ) |  |  | (7,656 | )
Total |  | $ | (521,654 | ) |  | $ | 731,997 |

The provision for income taxes is based on the following pretax income (loss):

|  | For the Nine Months Ended December 31, |
|  | 2024 |  |  | 2023 |
U.S. |  | $ | (2,412,980 | ) |  | $ | 1,973,031 |
Canada |  |  | (115,517 | ) |  |  | (33,146 | )
Total |  | $ | (2,528,497 | ) |  | $ | 1,939,885 |

For the three months ended December 31, 2024, the total pre-tax loss was $1.1 million, which included $1.0 million pre-tax loss in the U.S. and $0.1 million pre-tax loss in Canada. For the three months ended December 31, 2023, the total pre-tax income was $0.1 million, which included $0.1 million pre-tax income in the U.S. and $33,146 pre-tax loss in Canada. For the nine months ended December 31, 2024, the total pre-tax loss was $2.5 million, which included $2.4 million pre-tax loss in the U.S. and $0.1 million pre-tax loss in Canada. For the nine months ended December 31, 2023, the total pre-tax income was $1.9 million, which included $2.0 million pre-tax income in the U.S. and $$0.1 million pre-tax loss in Canada.

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

|  | For the Nine Months Ended December 31 |
|  | 2024 |  |  | 2023 |
Pre-tax book (loss) income |  | $ | (2,528,497 | ) |  | $ | 1,939,885 |
Federal Statutory rate |  |  | 21.0 | % |  |  | 21.0 | %
State income tax rate, net of federal income tax benefit |  |  | 4.3 | % |  |  | 8.0 | %
City income tax rate, net of federal income tax benefit |  |  | 3.7 | % |  |  | 5.0 | %
Foreign statutory rate |  |  | 0.4 | % |  |  | (0.4 | )%
Permanent differences |  |  | (4.0 | )% |  |  | 5.3 | %
Return to project adjustment |  |  | (4.8 | )% |  |  | (1.4 | )%
Total |  |  | 20.6 | % |  |  | 37.5 | %

Penalties and interest incurred related to underpayment of income tax are classified as income tax expenses in the period incurred. For the three months ended December 31, 2024 and 2023, the Company accrued nil and nil income tax related penalty included in taxes payable in the unaudited condensed consolidated balance sheets, respectively. For the nine months ended December 31, 2024 and 2023, the Company accrued $63,812 and $55,604 income tax related penalty included in taxes payable in the unaudited condensed consolidated balance sheets, respectively.

24

United States

Income tax benefit for the three months ended December 31, 2024 amounted to $0.4 million and income tax expense for the three months ended December 31, 2023 amounted to $95,374. Income tax benefit for the nine months ended December 31, 2024 amounted to $0.5 million and income tax expense for the nine months ended December 31, 2023 amounted to $0.7 million.

Significant components of the provision for income taxes are as follows:

|  | For the Nine Months Ended December 31, |
|  | 2024 |  |  | 2023 |
Current |  |  |  |  |  |
Federal |  | $ | 101,808 |  |  | $ | 183,590 |
State |  |  | 120,932 |  |  |  | 182,860 |
City |  |  | 119,766 |  |  |  | 139,903 |
Deferred |  |  |  |  |  |  |  |
Federal |  |  | (508,000 | ) |  |  | 166,500 |
State |  |  | (202,000 | ) |  |  | 42,300 |
City |  |  | (128,000 | ) |  |  | 24,500 |
Total |  | $ | (495,494 | ) |  | $ | 739,653 |

Canada

Fly Toronto Corp, a subsidiary of the Company, was formed under the laws of Canada and conducts its business primarily in Canada.

Income tax benefit for the three months ended December 31, 2024 and 2023 amounted to $21,516 and $7,656, respectively. Income tax benefit for the nine months ended December 31, 2024 and 2023 amounted to $26,160 and $7,656, respectively. Significant components of the provision for income taxes are as follows:

|  | For the Nine Months Ended December 31 |
|  | 2024 |  |  | 2023 |
Current |  |  |  |  |  |
Federal |  | $ | — |  |  | $ | — |
State |  |  | — |  |  |  | — |
City |  |  | — |  |  |  | — |
Deferred |  |  |  |  |  |  |  |
Federal |  |  | (14,807 | ) |  |  | (4,334 | )
State |  |  | (11,353 | ) |  |  | (3,322 | )
City |  |  | — |  |  |  | — |
Total |  | $ | (26,160 | ) |  | $ | (7,656 | )

25

(b) Deferred Tax Assets (Liabilities)

Net DTAs as of December 31, 2024 and March 31, 2024 amounted to $497,939 and $35,199, respectively. Significant components of DTAs (DTLs), net are as follows:

|  | As of December 31, 2024 |  |  | As of March 31, 2024 |
Net operating loss carry forwards |  | $ | 716,087 |  |  | $ | 40,332 |
Inventory reserve |  |  | 330,000 |  |  |  | 186,000 |
Lease liability |  |  | 5,216,000 |  |  |  | 5,810,000 |
Less: Valuation allowance |  |  | — |  |  |  | — |
Total deferred tax assets (DTAs) |  | $ | 6,262,087 |  |  | $ | 6,036,332 |
Accumulated depreciation |  |  | (493,881 | ) |  |  | (482,133 | )
ROU asset |  |  | (4,873,000 | ) |  |  | (5,519,000 | )
Total deferred tax liabilities (DTLs) |  |  | (5,366,881 | ) |  |  | (6,001,133 | )
Total deferred tax assets, net |  | $ | 895,206 |  |  | $ | 35,199 |
Deferred tax assets (liabilities) – U.S., net |  | $ | 833,000 |  |  | $ | (5,000 | )
Deferred tax assets – Canada, net |  | $ | 62,206 |  |  |  | 40,199 |

As of December 31, 2024 and March 31, 2024, the Company had approximately $6.3 million and $6.0 million, respectively, in the DTAs, which respectively included approximately $0.7 million and $40,332 related to net operating loss carryforwards that can be used to offset taxable income in future periods, $5.2 million and $5.8 million related to lease liability, and $0.3 million and $0.2 million related to inventory allowance.

As of December 31, 2024 and March 31, 2024, the Company had approximately $5.4 million and $6.0 million, respectively, which included $0.5 million and $0.5 million, respectively, in the DTLs that related to accumulated depreciation and $4.9 million and $5.5 million related to ROU assets.

Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards. As of December 31, 2024 and March 31, 2024, the Company recorded approximately $62,206 and $40,199, respectively, in the net DTAs. The tax losses in Canada can be carried forward for twenty years to offset future taxable profit. The tax losses of entities in Canada will begin to expire in 2044, if not utilized. As of December 31, 2024, management considered it more likely than not that the Company will have sufficient taxable income in the future that will allow the Company to realize these net DTAs.

As a result of the Tax Cuts and Jobs Act (TCJA), US NOLs arising after December 31, 2017, may be carried forward indefinitely and can offset only up to 80% of taxable income in any future year.

Uncertain Tax Positions

The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. As of December 31, 2024 and March 31, 2024, the Company did not have any significant unrecognized uncertain tax positions.

26

11 — LEASES

The Company adopted Topic 842 for all periods presented. At the inception of a contract, the Company determines if the arrangement is, or contains, a lease. The leases of the Company mainly consisted of offices, retail stores, and warehouses.

The Company’s operating right-of-use (“ROU”) assets and lease liabilities were as follows:

|  | December 31, 2024 |  |  | March 31, 2024 |
Operating ROU: |  |  |  |  |  |
ROU assets |  | $ | 14,318,422 |  |  | $ | 16,000,742 |
Total operating ROU assets |  | $ | 14,318,422 |  |  | $ | 16,000,742 |

|  | December 31, 2024 |  |  | March 31, 2024 |
Operating lease obligations: |  |  |  |  |  |
Current operating lease liabilities |  | $ | 3,151,171 |  |  | $ | 2,852,744 |
Non-current operating lease liabilities |  |  | 12,153,196 |  |  |  | 13,986,879 |
Total lease liabilities |  | $ | 15,304,367 |  |  | $ | 16,839,623 |

The Company had 34 and 38 leases as of December 31, 2024 and March 31, 2024, respectively.

The weighted average lease term, discount rates, and remaining lease terms for the operating leases as of December 31, 2024 were as follows:

Remaining lease term and discount rate:

Weighted average discount rate |  |  | 6.8 | %
Weighted average remaining lease term (years) |  |  | 4.79 years |

The weighted average lease term, discount rates, and remaining lease terms for the operating leases as of March 31, 2024 were as follows:

Remaining lease term and discount rate:

Weighted average discount rate |  |  | 6.4 | %
Weighted average remaining lease term (years) |  |  | 5.51 years |

The Company leases its offices, warehouse, and retail stores under non-cancellable operating lease agreements. During the three months ended December 31, 2024, lease expenses were $1.02 million, including $0.36 million in cost of goods-occupancy cost, $0.67 million in rent expense included in selling expense, and nil in rent expense in general and administrative expense. During the three months ended December 31, 2023, lease expenses were $0.84 million, including $0.14 million in cost of goods-occupancy cost, $0.65 million in rent expense in selling expense, and $0.04 million in rent expense in general and administrative expense.

Lease expenses were $3.26 million for the nine months ended December 31, 2024, including $1.00 million in cost of goods-occupancy cost, $2.16 million in rent expense in selling expense, and $0.09 million rent expense in general and administrative expense. Lease expenses for the nine months ended December 31, 2023 were $2.33 million, including $0.39 million in goods-occupancy cost, $1.73 million in rent expense in selling expense, and $0.21 million in rent expense in general and administrative expense. For the nine months ended December 31, 2024, the Company terminated six leases.

27

As of December 31, 2024, future minimum lease liabilities, all under office and facilities non-cancellable operating lease agreements, were as follows:

As of December 31, 2024 |  | Operating Lease Liabilities |
2025 |  | $ | 4,065,892 |
2026 |  |  | 3,957,134 |
2027 |  |  | 3,629,042 |
2028 |  |  | 3,001,292 |
2029 |  |  | 1,500,384 |
Thereafter |  |  | 1,821,813 |
Total lease payments |  |  | 17,975,557 |
Less: interest |  |  | (2,671,190 | )
Present value of lease liabilities |  | $ | 15,304,367 |

12 — COMMITMENTS AND CONTINGENCIES

Commitments

The Company has not entered any off-balance sheet financial guarantees or other off-balance sheet commitments to guarantee the payment obligations of any third parties. The Company has not entered any derivative contracts that are indexed to its shares and classified as shareholder’s equity or that are not reflected in its unaudited condensed consolidated financial statements. Furthermore, the Company does not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. The Company does not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to itself or engages in leasing, hedging or product development services with itself.

Contingencies

Legal

From time to time, the Company is a party to certain legal proceedings, as well as certain asserted and unasserted claims. Amounts accrued, as well as the total amount of reasonably possible losses with respect to such matters, individually and in the aggregate, are not deemed to be material to the unaudited condensed consolidated financial statements.

The Company’s products and other production facilities as well as the packaging, storage, distribution, advertising and labeling of its products, are subject to extensive legal and regulatory requirements. For example, pursuant to the DMV registration requirement, the Company must satisfy the DMV Registration requirements and conduct required testing for all of its products sold in U.S. Loss of or failure to renew or obtain necessary permits, licenses, registrations, or certificates could prevent the Company from legally selling its products in the U.S. If the Company were found to be in violation of applicable laws and regulations, it could be subject to administrative punishment, including fines, injunctions, recalls or asset seizures, as well as potential criminal sanctions, any of which could have a material adverse effect on its business, financial condition, results of operations and prospects. As of the date hereof, the Company believes it is in compliance with the relevant regulations in the U.S.

Inflation

Inflationary factors, such as increases in personnel and overhead costs, could impair the Company’s operating results. Although the Company does not believe that inflation has had a material impact on the Company’s financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on the Company’s ability to maintain current levels of gross margin and operating expenses as a percentage of sales revenue if the revenues do not increase with such increased costs.

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13 — RELATED PARTY TRANSACTIONS

(A) Related party balances

Accounts receivable — related parties

Name of Related Party |  | Relationship |  | Nature |  | December 31, 2024 |  |  | March 31, 2024 |
Fly E Bike SRL |  | Zhou Ou (CEO), owns over 50% equity interest of this entity |  | Accounts receivable |  | $ | 88,885 |  |  | $ | 326,914 |
Accounts receivable — related parties |  |  |  |  |  | $ | 88,885 |  |  | $ | 326,914 |

During the nine months ended December 31, 2024, the Company received $285,814 from Fly E Bike SRL.

Prepayments and other receivables — related parties

Name of Related Party |  | Relationship |  | Nature |  | December 31, 2024 |  |  | March 31, 2024 |
Fly E Bike SRL |  | Zhou Ou (CEO), owns over 50% equity interest of this entity |  | Other receivables |  | $ | 6,057 |  |  | $ | 180,256 |
PJMG LLC |  | Ruifeng Guo (former CFO who resigned on November 6, 2024), owns over 50% equity interest of this entity |  | Prepayments |  |  | 165,000 |  |  |  | 60,000 |
Prepayments and other receivables – related parties |  |  |  |  |  | $ | 171,057 |  |  | $ | 240,256 |

During the nine months ended December 31, 2024, the Company advanced $6,057 to Fly E Bike SRL, a distributor the Company works with and in which Mr. Ou holds over 50% of the equity interest. This advance is unsecured, bears no interest and does not have a maturity date. On June 12, 2024, the Company received $180,256 from Fly E Bike SRL. On April 1, 2023, the Company agreed to retain the services of PJMG, a company in which Mr. Guo, the Company’s former CFO who resigned on November 6, 2024, holds over 50% of the equity interests as a consultant following the completion of its IPO. PJMG was engaged to provide compliance consulting services related to accounting, finance, and management, as well as to oversee market planning and development, follow-on fundraising, and investor relationship management from June 2024 to May 2025. The service fee is $45,000 for the first month and from the second month the fees will be $15,000 per month. To secure these services, the Company prepaid a total of $165,000 to PJMG as of December 31, 2024. From August 9, 2024 to September 17, 2024, the Company advanced $477,771 to Mr. Ou, Chairman and CEO of the Company, for personal use. This advance is unsecured, bears no interest and does not have a maturity date. As of December 31, 2024, the advance was paid back in full.

Long-term prepayment for software development – related parties, net

Name of Related Party |  | Relationship |  | Nature |  | December 31, 2024 |  |  | March 31, 2024 |
DF Technology US Inc |  | Ruifeng Guo (former CFO who resigned on November 6, 2024), owns over 50% equity interest of this entity |  | Long-term prepayment for software development |  | $ | 536,580 |  |  | $ | 1,279,000 |
Long-term prepayment for software development — related parties, net |  |  |  |  |  | $ | 536,580 |  |  | $ | 1,279,000 |

29

In December 2023, the Company engaged DFT for development of certain technology services. Mr. Guo, the Company’s former CFO who resigned on November 6, 2024, owns over 50% of the equity interest in DFT. As of December 31, 2024 and March 31, 2024, the Company paid $536,580 and $1,279,000 to DFT as prepayment for software development, respectively. As of December 31, 2024 and March 31, 2024, construction in progress was $1,910,000 and $275,000, respectively (see Note 5 – Property and Equipment).

Other payables — related parties

Name of Related Party |  | Relationship |  | Nature |  | December 31, 2024(i) |  |  | March 31, 2024(i) |
Zhou Ou |  | Chairman, CEO of the Company |  | Other payable |  | $ | — |  |  | $ | 92,229 |
Other Payables-related parties |  |  |  |  |  | $ | — |  |  | $ | 92,229 |

(i) | Represents the remaining balance of the advance provided by the related party to the Company’s subsidiaries for the purpose of supporting their business operations.

All of the above payables are unsecured, non-interest bearing, and due on demand. The Company paid a total of $92,229 and $198,615 to Mr. Zhou Ou during the nine months ended December 31, 2024 and 2023, respectively.

(B) Related party transactions

Revenues — related parties

|  |  |  |  |  | For the three Months Ended December 31 |  |  | For the Nine Months Ended December 31 |
Name of Related Party |  | Relationship |  | Nature |  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Fly E Bike SRL |  | Zhou Ou (CEO), owns over 50% equity interest of this entity |  | Product sales |  | $ | — |  |  | $ | 26,670 |  |  | $ | 47,785 |  |  | $ | 309,484 |
Revenues — related parties |  |  |  |  |  | $ | — |  |  | $ | 26,670 |  |  | $ | 47,785 |  |  | $ | 282,814 |

During the three months ended December 31, 2024 and 2023, Fly E Bike SRL, a distributor the Company works with and in which Mr. Ou holds over 50% of the equity interest, purchased certain EV products from the Company in the amount of nil and $26,670, respectively. During the nine months ended December 31, 2024 and 2023, Fly E Bike SRL, purchased certain EV products from the Company in the amount of $47,785 and $309,484, respectively.

30

Purchase of Intangible Assets — related parties

Name of Related Party |  | Relationship |  | Nature |  | December 31, 2024 |  |  | March 31, 2024 |
DF Technology US Inc |  | Ruifeng Guo (former CFO who resigned on November 6, 2024), owns over 50% equity interest of this entity |  | Purchase of Software |  | $ | 500,000 |  |  | $ | — |
Purchase of Intangible Assets — related parties |  |  |  |  |  | $ | 500,000 |  |  | $ | — |

In December 2023, the Company engaged DFT for development of certain technology services. Mr. Guo, the Company’s former CFO who resigned on November 6, 2024, owns over 50% of the equity interest in DFT. In July 2024, the Company engaged DFT for development of a new APP, GO FLY APP, for the rental business. The total contract price for the GO FLY APP is $500,000, and the GO FLY APP was delivered on September 5, 2024.

(C) Other Related Party Transactions

On March 6, 2021, the Company and DGLG entered into an engagement letter, pursuant to which the Company engaged DGLG as a consultant to assist the Company in its IPO planning, financing and tax services. Mr. Guo, the Company’s former CFO who resigned on November 6, 2024, is a partner at DGLG. Under the terms of the engagement agreement with DGLG, the Company has agreed to compensate DGLG for consulting services based on an hourly fee arrangement. DGLG’s consulting fees were nil and $100,000 for the three months ended December 31, 2024 and December 31, 2023, respectively, and $225,000 and $100,000 for the nine months ended December 31, 2024 and 2023, respectively. In addition, during the three and nine months ended December 31, 2024, the Company paid DGLG a total of $9,000 and $37,400 for tax services, including sales tax services, payroll tax services, and income tax services, rendered by DGLG, respectively.

On April 1, 2023, the Company agreed to retain the services of PJMG, a company in which Mr. Guo, the Company’s former CFO who resigned on November 6, 2024, holds over 50% of the equity interests as a consultant following the completion of its IPO. To secure these services, the Company prepaid a total of $165,000 to PJMG as of December 31, 2024. $105,000 was expensed as consulting expenses during the three months ended December 31, 2024. $165,000 was expensed as consulting expenses during the nine months ended December 31, 2024. During the three and nine months ended December 31, 2024, the Company paid PJMG a total of nil and $232,547 for consulting services, respectively.

14 — SUBSEQUENT EVENTS

The Company has evaluated subsequent events after December 31, 2024, up through February 19, 2025, the date at which the unaudited condensed consolidated financial statements were issued. Except for the events mentioned below, the Company did not identify any subsequent events with material financial impact on the Company’s unaudited condensed consolidated financial statements.

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

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto included in this Report. The following discussion contains forward-looking statements. Actual results could differ materially from the results discussed in the forward-looking statements. See “Item 1A. Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements”.

Overview

We are an EV company that is principally engaged in designing, installing and selling E-motorcycles, E-bikes, E-scooters and related accessories under the brand “Fly E-Bike.” At Fly E-Bike, our commitment is to encourage people to incorporate eco-friendly transportation into their active lifestyles, ultimately contributing towards building a more environmentally friendly future.

Fly E-Bike was established in 2018 with its first store opened in New York. Our business has grown rapidly since then and we are now one of the leading providers of E-bikes for food delivery workers in New York City. As of February 19, 2025, we have 36 stores, including 35 retail stores in the U.S and one retail store in Canada. The Company offers rental services from selected locations in New York and Los Angeles. We also operate one online store at flyebike.com, focusing on selling E-motorcycles, E-bikes and E-scooters, serving customers in the United States. In addition, we plan to open a second online store focusing on selling gas bikes in the future. We plan to expand our presence in the United States and extend our business into South America and Europe in the future.

We have a diversified product portfolio that is designed to satisfy the various demands of our customers and address different urban travel scenarios. Additionally, we aim to refresh our product offerings continuously to align with evolving market trends. As of February 19, 2025, we offered 25 E-motorcycle products, 28 E-bike products and 37 E-scooter products.

We are currently in the process of developing a Fly E-Bike app, which is a management service mobile software for our EVs, enabling customers to purchase bikes, locate company stores, schedule bike repairs, and more. We aim to design an app that will bring users a comprehensive intelligent experience to create a safer and more satisfying riding life. The development of the app is still in its preliminary stage. We have launched a testing version of the app, which is currently unavailable to our customers. In December 2023, the Company engaged DF Technology US Inc (“DFT”) for certain technology services, for the development of the enterprise resource planning system (“ERP system”), and in July 2024, the Company engaged DFT to develop a mobile phone application for its renal services, the GO FLY APP. The total contract price for the GO FLY APP is $500,000, and the GO FLY APP was delivered and launched in the rental business on September 5, 2024. As of December 31, 2024, the Company paid $536,580 to DFT as prepayment for software development.

We source a significant portion of our vehicle components from China and the United States, and then assemble them into our vehicles in a facility located in Maspeth, New York. For the three months ended December 31, 2024, we produced 728 E-motorcycles, 930 E-bikes and 200 E-scooters at this facility. For the nine months ended December 31, 2024, we produced 3,842 E-motorcycles, 5,713 E-bikes and 1,480 E-scooters at the same facility.

Recent Developments

Stock Split

In April 2024, we effected a stock split of our authorized and all issued and outstanding shares of our common stock and preferred stock at a split ratio of 1-for-110,000, where the par value of the Company’s common stock remained unchanged at $0.01 per share, and the number of authorized shares of the Company’s capital stock was increased from 440 to 48,400,000, with the number of authorized shares of common stock and preferred stock being increased from 400 to 44,000,000 and from 40 to 4,400,000, respectively. The issued and outstanding common stock and preferred stock increased at a split ratio of 1-for-110,000. The share number and related data in this Report has been updated to reflect the stock split referenced above.

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Initial Public Offering

On June 7, 2024, we sold 2,250,000 shares of common stock, at a price of $4.00 per share in our IPO. The gross proceeds of the offering were $9.0 million, prior to deducting the underwriting discounts, commissions and offering expenses payable by the Company. In addition, we granted the underwriters a 30-day option to purchase an additional 337,500 shares of common stock at the initial public offering price, less underwriting discounts and commissions, to cover over-allotments. On June 25, 2024, we sold an additional 337,500 shares of common stock to the underwriters of our IPO for gross proceeds of $1.4 million upon full exercise of the underwriters’ over-allotment option. Net proceeds received by us from our initial public offering, including the exercise of the over-allotment option, were approximately $9.2 million. We also issued to The Benchmark Company, LLC, the representative of the underwriters warrants to purchase 129,375 shares.

Rental Services

The Company launched a rental program to meet the increasing market demand for safe, UL-certified e-bikes in compliance with New York State regulations in October 2024. The rental service, now available in New York City and Los Angeles via the Go Fly rental service mobile app and select Fly E-Bike stores, provides users with a flexible and affordable e-bike rental option. As part of FLY-E’s growth strategy, the Company plans to expand the rental service to Miami and Toronto shortly.

NYC Trade-In Program

In January 2025, the New York City Department of Transportation (“NYC DOT”) launched a $2 million trade-in program, allowing eligible food delivery workers to replace their unsafe e-bikes, e-mobility devices, and batteries with UL certified, high-quality versions. Our Fly-11 PRO was chosen as the official model of NYC DOT and participates in this program. The company has also been actively cooperating with the government to provide information and promote the model.

Key Factors that Affect Operating Results

Our results of operations and financial condition are affected by the general factors driving the U.S.’s electric two-wheeled vehicles industry, including, among others, the U.S.’s overall economic growth, the increase in per capita disposable income, the expansion of urbanization, the growth in consumer spending and consumption upgrades, the competitive environment, governmental policies and initiatives towards electric two-wheeled vehicles, as well as the general factors affecting the electric two-wheeled vehicles industry in overseas markets. Unfavorable changes in any of these general industry conditions could negatively affect demand for our products and materially and adversely affect our results of operations.

While our business is influenced by these general factors, our results of operations are more directly affected by company specific factors, including the following major factors:

New Customers

Our growth will depend on our ability to achieve sales targets, including our ability to attract new customers, which in turn depends in part on our ability to execute on our retail strategy and produce effective marketing initiatives to expand our brand perception with prospective customers. As of February 19, 2025, we have 36 stores, including 35 retail stores in the U.S and one retail store in Canada. We offer rental services from selected locations. We also operate one online store, focusing on selling E-motorcycles, E-bikes, and E-scooters and selling our product in the United States. It is critical for us to successfully manage production ramp-up and quality control to deliver to customers in adequate volume and quality.

With respect to branding and marketing, we plan to raise brand awareness through both traditional and social media channels and connect with customers through physical touchpoints such as our retail stores and distributors. We believe that effective marketing can boost our brand awareness and contribute to increased sales. In addition, we intend to provide superior customer experience through our trained technicians who will provide after-sale maintenance and repair services at our retail stores. An inability to attract new customers would substantially impact our ability to grow revenue or improve our financial results.

Product Sales Price and Volume

For the three months ended December 31, 2024, our net revenues decreased by 23.6% to $5.7 million, compared to $7.4 million for the same period in 2023, which was primarily driven by a decrease in total units sold, which dropped by 3,511 units, from 13,500 units for the three months ended December 31, 2023, to 9,989 units for the three months ended December 31, 2024.

For the nine months ended December 31, 2024, our net revenues decreased by 15.2% to $20.4 million, compared to $24.0 million for the same period in 2023, which was primarily driven by a decrease in total units sold, which dropped by 7,578 units, from 49,503 units for the nine months ended December 31, 2023, to 41,925 units for the nine months ended December 31, 2024.

In the future, our ability to increase our product sales price and volume will depend on our ability to innovate in design and technology and offer products that meet the customers’ demand. We currently have a streamlined product portfolio consisting of three categories, with multiple models and specifications for each category. Moreover, our ability to increase the sales price and volume will depend on our ability to continually enhance our brand to attract customers, as well as our ability to successfully operate our retail stores and expand our sales network both domestically and globally. However, our product sales price is influenced by various factors such as market demand and competitors’ pricing, and although we continue working on product improvements and retail expansion, there can be no guarantee of sustained sales price increase or improved sales volume. If our prices remain stable, increasing sales volume would become important for continued revenue growth, and failure to do so would significantly impact our ability to grow revenue or improve our financial results.

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Employees

Our payroll expenses were $1.3 million for the three months ended December 31, 2024, compared to $0.7 million for the three months ended December 31, 2023. Our payroll expenses were $3.6 million for the nine months ended December 31, 2024, compared to $1.9 million for the nine months ended December 31, 2023. As four stores were closed during the nine months ended December 31, 2024, we expect a decrease in payroll expenses due to the demand for store sales staff has decreased. Each of our retail stores has a minimum of two employees, and additional office employees will be hired to support retail stores in customer service and marketing. In addition, to maintain excellent customer service in our retail stores, each store will have at least one trained repair professional. Effective management of payroll expenses remains crucial to our ability to grow revenue and enhance our financial results, especially as we navigate a reduced workforce.

Vendor and Supply Management

During the three months ended December 31, 2024, we worked with three principal vendors, Xiamen Innolabs Technology Co., Ltd, Depcl Corp. (previously known as Fly Wing E-Bike Inc.), and Anhui Ineo International Trading Co., each of which respectively supplied approximately 49.6%, 25.4%, and 7.0% of the accessories and components used in all our products for the three months ended December 31, 2024. During the nine months ended December 31, 2024, we worked with three principal vendors, Xiamen Innolabs Technology Co., Ltd, Depcl Corp., and Anhui Ineo International Trading Co., each of which respectively supplied approximately 44.8%, 28.7%, and 10.0% of the accessories and components used in all our products for the nine months ended December 31, 2024.

We have implemented a centralized vendor management system that streamlines purchasing, enhances our negotiating power and maintains strong vendor relationships. We believe this approach delivers cost savings, improved risk management and increased negotiating power, ultimately benefiting our operating results. Changes in costs related to our major vendors can significantly affect our financial condition and operating results.

Market Trends, Competition and Tariff

We operate in a rapidly growing EV market with a special focus on E-motorcycles, E-bikes and E-scooters. However, increased competition may pressure prices and margins, reducing sales volume, revenues, and sales margin for us. Additionally, marketing and advertising costs may rise as we differentiate ourselves and maintain our market position. Moreover, competitors may impact customer acquisition and retention, satisfaction and loyalty. While we believe we maintain competitive advantages in several areas, including brand, product design and quality, smart features, omnichannel retail model, customer satisfaction and loyalty, we must continuously innovate, invest in research and development and marketing to maintain our competitive edge and unique selling points. Recently, the U.S. government issued executive orders imposing tariffs on products from key international suppliers, citing national security and public health concerns. These tariffs are expected to impact a wide range of imported goods, including components used in e-bike manufacturing. While some agreements have temporarily delayed their implementation, ongoing trade tensions could lead to supply chain disruptions, increased costs, and pricing pressures within the industry. Tariffs on e-bikes or their components would likely increase prices for consumers, and create challenges for U.S. manufacturers and retailers. While there could be long-term opportunities for domestic production, the immediate impact would likely be negative for the growing e-bike market.

Regulatory Landscape

We operate in an industry that is subject to extensive environmental, safety and other laws and regulations, which include products safety and testing, as well as battery safety and disposal. These requirements create additional costs and possible production delay in connection with the testing and manufacturing of our products. We also benefit from environmental regulations in our target markets which include economic incentives to purchasers of EVs and tax credits for EV manufacturers. The Governor of New York State signed a legislative package in July 2024 aimed at raising awareness about the safe use of e-bikes and lithium-ion battery products, prohibiting the sale of non-compliant batteries, requiring safety protocols and training for first responders, mandating operating manuals for e-bike retailers, and improving accident reporting and registration processes for e-bikes and mopeds. Additionally, in January 2025, the New York City Department of Transportation launched a $2 million trade-in program, allowing eligible food delivery workers to replace their unsafe e-bikes, e-mobility devices, and batteries with certified, high-quality versions. Our Fly-11 PRO was chosen for the official model of DOT and participates in this program. The first batch of delivery workers is expected to complete enrollment on February 17, 2025. The company has also been actively cooperating with the government to provide information and promote the model. While we expect relevant regulations to provide a tailwind to our growth, it is possible for other regulations to result in margin pressures.

How to Assess Our Performance

In assessing performance, management considers a variety of performance and financial measures, including principal growth in net sales, gross profit, gross margin, selling, general and administrative expenses and EBITDA. The key measures that we use to evaluate the performance of our business are set forth below.

Net Sales

We generate revenue from sales of our EVs, their accessories and spare parts, and provision of repair services at our retail stores. Our net sales comprise gross sales net of discounts and return allowances. We do not record sales taxes as a component of retail revenues as we consider it a pass-through conduit for collecting and remitting sales taxes. Return allowances, which reduce net revenues, are estimated based on historical experience.

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E-bikes, E-motorcycles and E-scooters sales. We generate a substantial majority of our revenues from sales of E-bikes, E-motorcycles and E-scooters directly to customers through our online store and retail stores, and to our distributors.

Accessories and spare parts sales. We also sell accessories and spare parts for our EVs, such as rear storage boxes and front baskets. In addition, we offer Fly E-Bike branded accessories and general merchandise, such as decorative car plates, key chains and apparel.

Service revenues. We also provide repair services at our retail stores for a fee.

Cost of Sales

Cost of sales includes product costs, warehouse rent expenses, payroll costs, depreciation costs, inventory reserves, warranty costs, and logistic costs. The logistic costs incurred to receive products from our vendors are included in our inventory and recognized as cost of sales upon sale of products to our customers.

Gross Profit and Gross Margin

We calculate gross profit as net sales less cost of revenue. Gross margin represents gross profit as a percentage of net sales.

Selling, General and Administrative Expenses

Selling, general and administrative expenses primarily consist of retail operational expenses, salaries and benefits costs, marketing, advertising, and corporate overhead.

Marketing costs primarily consist of advertising and payroll and related expenses for personnel engaged in marketing and selling activities.

We expect that our selling and marketing expenses will continue to increase in the foreseeable future, as we plan to further expand our sales network and retail channels, and engage in more selling and marketing activities to enhance our brand and attract more purchases from new and existing customers.

General and administrative expenses primarily consist of costs for corporate functions, including payroll and related expenses, facilities and equipment expenses, such as depreciation and amortization expense and rent, and professional fees. We expect that our general and administrative will increase in the foreseeable future, as we hire additional personnel and incur additional expenses related to the anticipated growth of our business and our operation as a public company after the completion of our initial public offering.

Non-GAAP Financial Measures

To supplement our financial information presented in accordance with the generally accepted accounting principles in the United States (the “U.S. GAAP”), management periodically uses certain “non-GAAP financial measures,” as such term is defined under the rules of the SEC, to clarify and enhance understanding of past performance and prospects for the future. Generally, a non-GAAP financial measure is a numerical measure of a company’s operating performance, financial position or cash flows that excludes or includes amounts that are included in or excluded from the most directly comparable measure calculated and presented in accordance with U.S. GAAP. For example, non-GAAP measures may exclude the impact of certain items such as acquisitions, divestitures, gains, losses and impairments, or items outside of management’s control. Management believes that the following non-GAAP financial measure provides investors and analysts useful insight into our financial position and operating performance. Any non-GAAP measure provided should be viewed in addition to, and not as an alternative to, the most directly comparable measure determined in accordance with U.S. GAAP. Further, the calculation of these non-GAAP financial measures may differ from the calculation of similarly titled financial measures presented by other companies and therefore may not be comparable among companies.

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We use EBITDA (earnings before interest, taxes, depreciation, and amortization) to evaluate our operating performance. We believe EBITDA provides additional insight into our underlying, ongoing operating performance and facilitates year-to-year comparisons by excluding the earnings impact of interest, tax, depreciation and amortization and that presenting EBITDA is more representative of our operational performance and may be more useful for investors.

We reconcile our non-GAAP financial measure to our net income, which is our most directly comparable financial measure calculated and presented in accordance with U.S. GAAP. EBITDA includes adjustments for provision for income taxes, as applicable, interest income and expense, depreciation, and amortization. EBITDA does not represent and should not be considered an alternative to net income as determined by U.S. GAAP, and our calculations thereof may not be comparable to those reported by other companies. We believe EBITDA is an important measure of operating performance and provides useful information to investors because it highlights trends in our business that may not otherwise be apparent when relying solely on U.S. GAAP measures and because it eliminates items that have less bearing on our operating performance. EBITDA, as presented herein, is a supplemental measure of our performance that is not required by, or presented in accordance with, U.S. GAAP. We use non-GAAP financial measures as supplements to our U.S. GAAP results in order to provide a more complete understanding of the factors and trends affecting our business. EBITDA is a measure of operating performance that is not defined by U.S. GAAP and should not be considered a substitute for net (loss) income as determined in accordance with U.S. GAAP.

EBITDA along with a reconciliation to net income is shown within the Results of Operations below.

Results of Operations for the Three Months Ended December 31, 2024 and 2023

The following table sets forth the components of our results of operations for the three months ended December 31, 2024 and 2023:

|  | For the Three Months Ended December 31, |
|  | 2024 |  |  | 2023 |  |  | Change |  |  | Percentage Change |
Revenues, Net |  | $ | 5,678,010 |  |  | $ | 7,428,212 |  |  | $ | (1,750,202 | ) |  |  | (23.6 | )%
Cost of Revenues |  |  | 3,116,940 |  |  |  | 4,455,399 |  |  |  | (1,338,459 | ) |  |  | (30.0 | )%
Gross Profit |  |  | 2,561,070 |  |  |  | 2,972,813 |  |  |  | (411,743 | ) |  |  | (13.9 | )%
Operating Expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Selling Expenses |  |  | 1,943,633 |  |  |  | 1,935,498 |  |  |  | 8,135 |  |  |  | 0.4 | %
General and Administrative Expenses |  |  | 1,557,716 |  |  |  | 843,326 |  |  |  | 714,390 |  |  |  | 84.7 | %
Total Operating Expenses |  |  | 3,501,349 |  |  |  | 2,778,824 |  |  |  | 722,525 |  |  |  | 26.0 | %
(Loss) Income from Operations |  |  | (940,279 | ) |  |  | 193,989 |  |  |  | (1,134,268 | ) |  |  | (584.7 | )%
Other Income (Expenses), Net |  |  | (16,699 | ) |  |  | (53,824 | ) |  |  | 37,125 |  |  |  | (69.0 | )%
Interest Expenses, Net |  |  | (155,673 | ) |  |  | (31,558 | ) |  |  | (124,115 | ) |  |  | 393.3 | %
Income Tax Benefit (Expense) |  |  | 428,164 |  |  |  | (87,718 | ) |  |  | 515,882 |  |  |  | (588.1 | )%
Net (Loss) Income |  | $ | (684,487 | ) |  | $ | 20,889 |  |  | $ | (705,376 | ) |  |  | (3376.8 | )%

Revenues

|  | For the Three Months Ended December 31, |
|  | 2024 |  |  | 2023 |  |  | Change |  |  | Percentage Change |
Sales-Retail |  | $ | 4,914,741 |  |  | $ | 6,292,490 |  |  | $ | (1,377,749 | ) |  |  | (21.9 | )%
Sales-Wholesale |  |  | 714,308 |  |  |  | 1,135,722 |  |  |  | (421,414 | ) |  |  | (37.1 | )%
Sales-Rental services |  | $ | 48,961 |  |  | $ | — |  |  | $ | 48,961 |  |  |  | 100.0 | %
Total Net Revenues |  | $ | 5,678,010 |  |  | $ | 7,428,212 |  |  | $ | (1,750,202 | ) |  |  | (23.6 | )%

Our net revenues were $5.7 million for the three months ended December 31, 2024, a decrease of 23.6%, from $7.4 million for the three months ended December 31, 2023. The decrease in our net revenues was primarily due to the decrease in sales volume by 3,511 units, from 13,500 units sold for the three months ended December 31, 2023, to 9,989 units sold for the three months ended December 31, 2024.

Our retail sales revenue decreased by $1.4 million, or 21.9%, from $6.3 million for the three months ended December 31, 2023 to $4.9 million for the three months ended December 31, 2024. Our wholesale revenue decreased by $0.4 million, or 37.1%, from $1.1million for the three months ended December 31, 2023 to $0.7 million for the three months ended December 31, 2024. The decrease in retail sales revenue is mainly due to recent lithium-battery accidents involving E-Bikes and E-Scooters. With an increasing number of lithium-battery explosion incidents in New York, customers are less inclined to purchase E-Bikes. Consequently, the management believes that sales have declined as customers opt for oil-powered vehicles over electric vehicles. The decrease in wholesales revenue was driven primarily by the decrease in orders from the top two customers who closed their retail stores in December 2023.

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Cost of Revenues

Cost of revenues decreased by 30.0%, from $4.5 million for the three months ended December 31, 2023, to $3.1 million for the three months ended December 31, 2024. The decrease in cost of revenues was primarily attributable to a reduction in units sold, which declined by 3,511 units, from 13,500 units sold for the three months ended December 31, 2023, to 9,989 units sold for the three months ended December 31, 2024.

Gross Margin

The following table shows our gross profit and gross margin for the three months ended December 31, 2024 and 2023:

|  | For the Three Months Ended December, |
|  | 2024 |  |  | 2023 |  |  | Change |  |  | Percentage Change |
Gross Profit |  | $ | 2,561,070 |  |  |  | 2,972,813 |  |  |  | (411,743 | ) |  |  | (13.9 | )%
Gross Margin |  |  | 45.1 | % |  |  | 39.0 | % |  |  |  |  |  |  |  |

Gross profit for the three months ended December 31, 2024 and 2023 was $2.6 million and $3.0 million, respectively. Gross margin was 45.1% and 39.0% for the three months ended December 31, 2024 and 2023, respectively. The increase in gross margin was driven primarily by the increase of the average sale price of the batteries by 20.0%, from $197 in the nine months ended December 31, 2023 to $236 in the nine months ended December 31, 2024, and the increase of the unit cost for battery by only 12%, from $141 in the nine months ended December 31, 2023, to $158 in the nine months ended December 31, 2024.

Total Operating Expenses

The following table sets forth the components of our total operating expenses for the three months ended December 31, 2024 and 2023:

|  | For the Three Months Ended December 31, |
|  | 2024 |  |  | 2023 |  |  | Change |  |  | Percentage Change |
Selling Expenses |  | $ | 1,943,633 |  |  |  | 1,935,498 |  |  |  | 8,135 |  |  |  | 0.4 | %
General and Administrative Expenses |  |  | 1,557,716 |  |  |  | 843,326 |  |  |  | 714,390 |  |  |  | 84.7 | %
Total Operating Expenses |  | $ | 3,501,349 |  |  |  | 2,778,824 |  |  |  | 722,525 |  |  |  | 26.0 | %
Percentage of Revenue |  |  | 61.7 | % |  |  | 37.4 | % |  |  |  |  |  |  |  |

Total operating expenses were $3.7 million for the three months ended December 31, 2024, an increase of $0.7 million, or 26.0%, compared to $2.8 million for the three months ended December 31, 2023. The increase in operating expenses was attributable to the increase in our payroll expenses, rent expenses, advertising expenses, professional fees, and insurance expenses as we expanded our business as discussed below.

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Selling Expenses

Selling expenses primarily consist of payroll expenses, rent, utilities expenses, and advertising expenses of retail stores. Total payroll expenses were $0.9 million for the three months ended December 31, 2024, compared to $0.5 million for the three months ended December 31, 2023. Rent expenses were $0.7 million for the three months ended December 31, 2024, compared to $0.7 million for the three months ended December 31, 2023. Advertising expenses were $32,681 for the three months ended December 31, 2024, compared to $6,629 for the three months ended December 31, 2023. The increase in these expenses was primarily due to the increased number of new employees hired for repair and maintenance business operation in the three months ended December 31, 2024. Total commission expenses were nil for the three months ended December 31, 2024, compared to $0.6 million for the three months ended December 31, 2023. The decrease in the commission expenses was primarily due to the Company’s discontinuation of marketing referral expenses for promotions as of January 1, 2024.

General and Administrative Expenses

Various general and administrative expenses increased during the three months ended December 31, 2024 compared to the same period of the previous year. Professional fees increased to $0.4 million for the three months ended December 31, 2024, compared to $0.3 million for the three months ended December 31, 2023, primarily attributable to the increase in audit fee, consulting fee, legal fee and IR expenses associated with ongoing reporting obligations. Payroll expenses increased to $0.4 million for the three months ended December 31, 2024 from $0.2 million for the three months ended December 31, 2023 primarily due to additional employees hired in operation departments. Insurance expenses increased to $0.3 million for the three months ended December 31, 2024, compared to $35,050 for the same quarter of prior year as a result of purchase of the directors and officers liability insurance after initial public offering in the three months ended December 31, 2024. The development fee increased to $0.1 million for the three months ended December 31, 2024 from nil for the three months ended December 31, 2023. The increase in development fee was primarily due to the increasing development fee of Fly E-Bike app and the increasing maintenance fee of Go Fly App.

Income Tax Provisions

Income taxes benefits were $428,164 for the three months ended December 31, 2024, a change from $87,718 income tax provision for the three months ended December 31, 2023. This change was due to our negative pre-tax income for the three months ended December 31, 2024. We recognized a deferred tax asset which can be used to reduce taxes in future periods when the Company is profitable.

Net Income (Loss)

Net loss was $684,487 for the three months ended December 31, 2024, a change of $705,376, or 3376.8%, from net income of $20,889 for the three months ended December 31, 2023, which was mainly attributable to the reasons discussed above.

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EBITDA

The following table sets forth the components of our EBITDA for the three months ended December 31, 2024 and 2023:

|  | For the Three Months Ended December 31, |
|  | 2024 |  |  | 2023 |  |  | Change |  |  | Percentage Change |
(Loss) Income from Operations |  | $ | (684,487 | ) |  | $ | 20,889 |  |  | $ | (705,376 | ) |  |  | (3376.8 | )%
Income Tax (Benefit) Expense |  |  | (428,164 | ) |  |  | 87,718 |  |  |  | (515,882 | ) |  |  | (588.1 | )%
Depreciation |  |  | 130,000 |  |  |  | 13,229 |  |  |  | 116,771 |  |  |  | 882.7 | %
Interest Expenses |  |  | 155,673 |  |  |  | 31,558 |  |  |  | 124,115 |  |  |  | 393.3 | %
Amortization |  |  | 21,985 |  |  |  | — |  |  |  | 21,985 |  |  |  | 100.0 | %
EBITDA |  | $ | (804,993 | ) |  | $ | 153,394 |  |  | $ | (958,387 | ) |  |  | (624.8 | )%
Percentage of Revenue |  |  | (14.2 | )% |  |  | 2.1 | % |  |  |  |  |  |  | (16.2 | )%

Before interest expenses, income tax, depreciation, and amortization, for the three months ended December 31, 2024, our net loss was $0.8 million, a change of $1.0 million, compared to net income of $0.2 million for the three months ended December 31, 2023, which was mainly attributable to the decrease in the cost of revenue, increase in selling and general and administrative expense described above. The ratio of EBITDA to revenue was negative 14.2% and 2.1% for the three months ended December 31, 2024 and 2023, respectively.

Results of Operations for the Nine Months Ended December 31, 2024 and 2023

The following table sets forth the components of our results of operations for the nine months ended December 31, 2024 and 2023:

|  | For the Nine Months Ended December 31, |
|  | 2024 |  |  | 2023 |  |  | Change |  |  | Percentage Change |
Revenues, Net |  | $ | 20,375,842 |  |  | $ | 24,034,397 |  |  | $ | (3,658,555 | ) |  |  | (5.2 | )%
Cost of Revenues |  |  | 11,810,684 |  |  |  | 14,577,570 |  |  |  | (2,766,886 | ) |  |  | (19.0 | )%
Gross Profit |  |  | 8,565,158 |  |  |  | 9,456,827 |  |  |  | (891,669 | ) |  |  | (9.4 | )%
Operating Expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Selling Expenses |  |  | 5,597,563 |  |  |  | 4,637,043 |  |  |  | 960,520 |  |  |  | 20.7 | %
General and Administrative Expenses |  |  | 5,184,432 |  |  |  | 2,773,626 |  |  |  | 2,410,806 |  |  |  | 86.9 | %
Total Operating Expenses |  |  | 10,781,995 |  |  |  | 7,410,669 |  |  |  | 3,371,326 |  |  |  | 45.5 | %
(Loss) Income from Operations |  |  | (2,216,837 | ) |  |  | 2,046,158 |  |  |  | (4,262,995 | ) |  |  | (208.3 | )%
Other Income (Expenses), Net |  |  | (64,110 | ) |  |  | (24,123 | ) |  |  | (39,987 | ) |  |  | 165.8 | )%
Interest Expenses, Net |  |  | (247,550 | ) |  |  | (82,150 | ) |  |  | (165,400 | ) |  |  | 201.3 | %
Income Taxes Benefit (Expense) |  |  | 521,654 |  |  |  | (731,997 | ) |  |  | 1,253,651 |  |  |  | (171.3 | )%
Net (Loss) Income |  | $ | (2,006,843 | ) |  | $ | 1,207,888 |  |  | $ | (3,214,731 | ) |  |  | (266.1 | )%

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Revenues

|  | For the Nine Months Ended December 31, |
|  | 2024 |  |  | 2023 |  |  | Change |  |  | Percentage Change |
Sales-Retail |  | $ | 17,708,735 |  |  | $ | 19,229,491 |  |  | $ | (1,520,756 | ) |  |  | (7.9 | )%
Sales-Wholesale |  | $ | 2,618,146 |  |  | $ | 4,804,906 |  |  | $ | (2,186,761 | ) |  |  | (45.5 | )%
Sales-Rental services |  |  | 48,961 |  |  |  | — |  |  |  | 48,961 |  |  |  | 100 | %
Total Net Revenues |  | $ | 20,375,842 |  |  | $ | 24,034,397 |  |  | $ | (3,658,555 | ) |  |  | (15.2 | )%

Our net revenues were $20.4 million for the nine months ended December 31, 2024, a decrease of 15.2%, from $24.0 million for the nine months ended December 31, 2023. The decrease in our net revenues was driven primarily by a decrease in total units sold, which decreased by 7,578 units, from 49,503 units for the nine months ended December 31, 2023 to 41,925 units for the nine months ended December 31, 2024.

Our retail sales revenue decreased by $1.5 million, or 7.9%, from $19.2 million for the nine months ended December 31, 2023 to $17.7 million for the nine months ended December 31, 2024. Our wholesale revenue decreased by $2.2 million, or 45.5%, from $4.8 million for the nine months ended December 31, 2023 to $2.6 million for the nine months ended December 31, 2024. The decrease in retail sales revenue is mainly due to recent lithium-battery accidents involving E-Bikes and E-Scooters. With an increasing number of lithium-battery explosion incidents in New York, customers are less inclined to purchase E-Bikes. Consequently, sales have declined as customers opt for oil-powered vehicles over electric vehicles. The decrease in wholesales revenue was driven primarily by the closure of stores by the top two customers who closed their stores in December 2023 due to lack of profitability.

Cost of Revenues

Cost of revenues decreased by 19.0%, from $14.6 million for the nine months ended December 31, 2023, to $11.8 million for the nine months ended December 31, 2024. The decrease in cost of revenues was primarily attributable to more favorable pricing obtained from our suppliers, particularly for batteries, as well as a reduction in battery sales volume, as discussed previously. These factors collectively contributed to the overall decrease in cost of revenues. The unit cost for battery decreased by 25%, from $121 in the nine months ended December 31, 2023, to $91 in the nine months ended December 31, 2024.

Gross Margin

The following table shows our gross profit and gross margin for the nine months ended December 31, 2024 and 2023:

|  | For the Nine Months Ended December 31, |
|  | 2024 |  |  | 2023 |  |  | Change |  |  | Percentage Change |
Gross Profit |  | $ | 8,565,158 |  |  |  | 9,456,827 |  |  |  | (891,669 | ) |  |  | (9.4 | )%
Gross Margin |  |  | 42.0 | % |  |  | 39.3 | % |  |  |  |  |  |  |  |

Gross profit for the nine months ended December 31, 2024 and 2023 was $8.6 million and $9.5 million, respectively. Gross margin was 42.0% and 39.3% for the nine months ended December 31, 2024 and 2023, respectively. The increase in gross margin was driven primarily by the decrease of the sales of our batteries by $0.9 million, from $2.9 million in the nine months ended December 31, 2023 to $2.0 million in the nine months ended December 31, 2024, and the decrease of the cost for batteries by $1.0 million, from $2.6 million in the nine months ended December 31, 2023, to $1.6 million in the nine months ended December 31, 2024. The decrease in gross profit was driven by the decrease of the sales of E-motorcycles by $3.2 million, from $7.2 million in the nine months ended December 31, 2023 to $4.0 million in the nine months ended December 31, 2024, and the decrease of the cost for E-motorcycles by $2.3 million, from $5.0 million in the nine months ended December 31, 2023, to $2.8 million in the nine months ended December 31, 2024.

Total Operating Expenses

The following table sets forth the components of our total operating expenses for the nine months ended December 31, 2024 and 2023:

|  | For the Nine Months Ended December 31, |
|  | 2024 |  |  | 2023 |  |  | Change |  |  | Percentage Change |
Selling Expenses |  | $ | 5,597,563 |  |  |  | 4,637,043 |  |  |  | 960,520 |  |  |  | 20.7 | %
General and Administrative Expenses |  |  | 5,184,432 |  |  |  | 2,773,626 |  |  |  | 2,410,806 |  |  |  | 86.9 | %
Total Operating Expenses |  | $ | 10,781,995 |  |  |  | 7,410,669 |  |  |  | 3,371,326 |  |  |  | 45.5 | %
Percentage of Revenue |  |  | 52.9 | % |  |  | 30.8 | % |  |  |  |  |  |  |  |

Total operating expenses were $10.9 million for the nine months ended December 31, 2024, an increase of $3.4 million, or 45.5%, compared to $7.4 million for the nine months ended December 31, 2023. The increase in operating expenses was attributable to the increase in our payroll expenses, rent expenses, meals and entertainment expenses, professional fees, and development expenses as we expanded our business as discussed below.

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Selling Expenses

Selling expenses primarily consist of payroll expenses, rent, utilities expenses, and advertising expenses of retail stores. Total payroll expenses were $2.5 million for the nine months ended December 31, 2024, compared to $1.3 million for the nine months ended December 31, 2023. Rent expenses were $2.2 million for the nine months ended December 31, 2024, compared to $1.7 million for the nine months ended December 31, 2023. Utilities expenses were $0.2 million for the nine months ended December 31, 2024, compared to $0.1 million for the nine months ended December 31, 2023. Advertising expenses were $0.2 million for the nine months ended December 31, 2024, compared to $32,695 for the nine months ended December 31, 2023. The increase in these expenses was primarily due to the increased number of new employees hired for business operations in the nine months ended December 31, 2024. Total commission expenses were $9,980 for the nine months ended December 31, 2024, compared to $1.1 million for the nine months ended December 31, 2023. The decrease in the commission expenses was primarily due to the Company’s discontinuation of marketing referral expenses for promotions as of January 1, 2024.

General and Administrative Expenses

General and administrative expenses increased during the nine months ended December 31, 2024 compared to the previous year. Professional fees increased to $1.7 million for the nine months ended December 31, 2024, compared to $0.7 million for the nine months ended December 31, 2023, primarily attributable to the increase in audit fee, consulting fee, legal fee and IR expenses associated with our initial public offering and ongoing reporting obligations. Payroll expenses increased to $1.2 million for the nine months ended December 31, 2024 from $0.7 million for the nine months ended December 31, 2023 primarily due to additional employees hired in operation and accounting departments. Insurance expenses increased to $0.8 million for the nine months ended December 31, 2024, compared to $0.1 million for the same period of prior year as a result of purchase of directors and officers liability insurance after initial public offering in the nine months ended December 31, 2024. Software development fee increased to $0.4 million for the nine months ended December 31, 2024, compared to $0.1 million for the same period in prior year due to the increasing development fee of Fly E-Bike app and the increasing maintenance fee of Go Fly App.

Income Tax Provisions

Income taxes benefits were $0.5 million for the nine months ended December 31, 2024, a change from $0.7 million income tax provision for the nine months ended December 31, 2023. This change was due to our negative pre-tax income for the three months ended December 31, 2024. We recognized a deferred tax asset which can be used to reduce taxes in future periods when the Company is profitable.

Net Income (Loss)

Net loss was $2.0 million for the nine months ended December 31, 2024, a change of $3.2 million, or 266.1%, from net income of $1.2 million for the nine months ended December 31, 2023, which was mainly attributable to the reasons discussed above.

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EBITDA

The following table sets forth the components of our EBITDA for the nine months ended December 31, 2024 and 2023:

|  | For the Nine Months Ended December 31, |
|  | 2024 |  |  | 2023 |  |  | Change |  |  | Percentage Change |
(Loss) Income from Operations |  | $ | (2,006,843 | ) |  | $ | 1,207,888 |  |  | $ | (3,214,731 | ) |  |  | (266.1 | )%
Income Tax (benefit) provision |  |  | (521,654 | ) |  |  | 731,997 |  |  |  | (1,253,651 | ) |  |  | (171.3 | )%
Depreciation |  |  | 310,910 |  |  |  | 203,788 |  |  |  | 107,122 |  |  |  | 52.6 | %
Interest Expenses |  |  | 247,550 |  |  |  | 82,150 |  |  |  | 165,400 |  |  |  | 201.3 | %
Amortization |  |  | 30,831 |  |  |  | — |  |  |  | 30,831 |  |  |  | 100.0 | %
EBITDA |  | $ | (1,939,206 | ) |  | $ | 2,225,823 |  |  | $ | (4,165,029 | ) |  |  | (187.1 | )%
Percentage of Revenue |  |  | (9.5 | )% |  |  | 9.3 | % |  |  |  |  |  |  | (18.8 | )%

Before interest expenses, income tax, depreciation, and amortization, for the nine months ended December 31, 2024, our net loss was $1.9 million, a change of $4.2 million, compared to net income of $2.2 million for the nine months ended December 31, 2023, which was mainly attributable to the decrease in revenue, increase in selling and general and administrative expense described above. The ratio of EBITDA to revenue was negative 9.5% and 9.3% for the nine months ended December 31, 2024 and 2023, respectively.

Liquidity and Capital Resources

As of December 31, 2024, we had cash of $1.4 million. We had working capital of $3.0 million and $0.3 million as of December 31, 2024 and March 31, 2024, respectively. We had net loss of $2.0 million and net income of $1.2 million for the nine months ended December 31, 2024 and 2023, respectively. During the nine months ended December 31, 2024, net cash used in operating activities of the Company was approximately $9.4 million. As of December 31, 2024, the Company had a current portion of contractual obligation of approximately $8.2 million.

We had funded our working capital and other capital requirements in the past primarily by equity contributions from our stockholders and net proceeds received from IPO, cash flow from operations, and bank loans. Our ability to repay our current obligation will depend on the future realization of our current assets. Management has considered the historical experience, the economy, trends in the retail industry, the expected collectability of the accounts receivable and the realization of the inventories as of December 31, 2024. Our ability to continue to fund working capital and other capital requirements may be affected by general economic, competitive and other factors, many of which are outside of our control.

On June 7, 2024, we sold 2,250,000 shares of common stock, at a price of $4.00 per share in our IPO. The gross proceeds of the offering were $9.0 million, prior to deducting the underwriting discounts, commissions and offering expenses payable by us. Net proceeds received by us from IPO were approximately $7.9 million. On June 25, 2024, we sold an additional 337,500 shares of common stock to the underwriters of our IPO for gross proceeds of $1.4 million upon full exercise of the underwriters’ over-allotment option and received net proceeds of $1.2 million. The main cash outflow for the nine months ended December 31, 2024 was from net loss of $1.2 million, a decrease in tax payable of $1.5 million, an increase in inventories of $5.3 million, a decrease in operating lease liabilities of $2.9 million, purchase of software from a related party of $0.9 million, and an increase in prepayments and other receivables of $1.8 million. These factors raise substantial doubt as to the Company’s ability to continue as a going concern. For the next 12 months from the issuance date of this report, we plan to alleviate the going concern risk through (i) equity financing to support the Company’s working capital; (ii) other available sources of financing (including debt) from banks and other financial institutions; and (iii) financial support from the Company’s related parties. The issuance and sale of additional equity would result in further dilution to our stockholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all. In the event that financing sources are not available, or that we are unsuccessful in increasing our gross profit margin and reducing operating losses, we may be unable to implement our current plans for expansion, repay debt obligations or respond to competitive pressures, any of which would have a material adverse effect on our business, financial condition and results of operations and may materially adversely affect our ability to continue as a going concern. The unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded assets or the amounts and classification of liabilities or any other adjustments that might be necessary should we be unable to continue as a going concern.

Our accounts receivable represent primarily accounts receivable from distributors that purchased our EVs and other products. As of December 31, 2024 and March 31, 2024, our accounts receivable, net of allowance for credit losses, was $0.3 million and $0.2 million, respectively. Our accounts receivable turnover period decreased from 69 days in the year ended March 31, 2024 to 62 days in nine months ended December 31, 2024, which was mainly attributable to a stricter credit policy implemented towards our U.S. distributors.

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Our accounts payable represent primarily accounts payable to suppliers from whom we purchased accessories and components for our products. As of December 31, 2024 and March 31, 2024, our accounts payable were $1.3 million and $1.2 million, respectively. Our accounts payable turnover period increased to 31 days for the nine months ended December 31, 2024 from 25 days for the year ended March 31, 2024, which was primarily the result of the Company increased its purchase volume during the nine months ended December 31, 2024 without a corresponding acceleration in payment cycles.

Our prepayments and other receivables primarily represent prepayments to vendors and other service providers. These prepayments and receivables increased by $1.6 million, from $0.6 million as of March 31, 2024, to $2.2 million as of December 31, 2024. This significant increase is mainly due to the launch of Company’s E-bike rental services, which required additional inventory. As a result, during the nine months ended December 31, 2024, the Company made substantial prepayments to vendors to secure inventory for the upcoming quarter.

Our inventories primarily include our EVs, their accessories and spare parts. As of December 31, 2024 and March 31, 2024, our inventories, net of allowance, were $10.0 million and $5.4 million, respectively. The increase in inventories was primarily due to our preparation for the new rental business. Our inventory turnover days increased to 183 days in the nine months ended December 31, 2024, from 125 days in the year ended March 31, 2024, which was primarily due to strategic inventory buildup, allowing us to start new services.

As of December 31, 2024 and March 31, 2024, the total outstanding amount of loan principal was $7.1 million and $1.6 million, respectively. For the three months ended December 31, 2024 and 2023, the interest expenses on our outstanding loans amounted to $135,802 and $31,558, respectively. For the nine months ended December 31, 2024 and 2023, the interest expenses on our outstanding loans amounted to $247,550 and $82,150, respectively. See Note 8 to the Unaudited Condensed Consolidated Financial Statements included within this quarterly report for further information on details of our outstanding loans.

The following table summarizes our cash flow data for the nine months ended December 31, 2024 and 2023:

|  | For the Nine Months Ended December 31, |
|  | 2024 |  |  | 2023 |
Net Cash (Used in) Provided by Operating Activities |  | $ | (9,413,989 | ) |  | $ | 1,743,987 |
Net Cash Used in Investing Activities |  |  | (2,836,671 | ) |  |  | (963,304 | )
Net Cash Provided by Financing Activities |  |  | 12,233,936 |  |  |  | 30,550 |
Net Change in Cash |  | $ | (16,724 | ) |  | $ | 811,233 |

Operating Activities

Net cash used in operating activities for the nine months ended December 31, 2024 was $9.4 million, which was due to net loss of $2.0 million, a decrease in tax payable of $1.5 million, and a decrease in accrued expenses and other payables of $0.5 million, an increase in inventories of $4.0 million, a decrease in account payable of $0.1 million, a decrease in operating lease liabilities of $2.3 million, and an increase in prepayments and other receivables of $1.8 million, partially offset by amortization of right-of-use assets of $2.4 million and a decrease in accounts receivables-related parties of $0.2 million.

Net cash provided by operating activities for the nine months ended December 31, 2023 was $1.7 million, which was mainly comprised of net income of $1.2 million, an increase in accounts payable of $2.3 million, a noncash item of amortization of right-of-use assets of $1.7 million, offset by an increase in inventories of $1.8 million and a decrease in operating lease liabilities of $1.7 million.

Investing Activities

Net cash used in investing activities was $2.8 million for the nine months ended December 31, 2024, which was due to purchase of properties and equipment of $1.6 million, purchase of GO FLY App from a related party of $0.5 million, purchase of software from a related party of $0.9 million, the advance to a related party of $0.5 million, and partially offset by the repayment from a related party of $0.7 million.

Net cash used in investing activities was $1.0 million for the nine months ended December 31, 2023, which was due to the purchase of equipment of $0.5 million, payment of intangible assets of $0.1 million and the prepayment to related parties for software development of $0.4 million.

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Financing Activities

Net cash provided by financing activities was $12.2 million for the nine months ended December 31, 2024, which consisted of net proceeds of the IPO of $9.2 million, and loan proceeds of $7.1 million, partially offset by repayments of loans of $3.6 million and payment of IPO costs of $0.3 million.

Net cash provided by financing activities was $30,550 for the nine months ended December 31, 2023, which consisted of repayment of the related party’s loan of $0.2 million, repayments of loan payables of $0.4 million, repayments of other payables of related party of $0.2 million, payments of deferred IPO cost of $0.1 million, and payments of related-party receivable of $0.1 million, partially offset by borrowing from loan payables of $0.8 million and capital contribution from shareholders of $0.1 million.

Commitments and Contractual Obligations

The following table presents our material contractual obligations as of December 31, 2024:

Contractual Obligations |  | Total |  |  | Less than 1 year |  |  | 1 – 2 years |  |  | 3 – 5 years |  |  | Thereafter |
Operating Lease Obligations and others |  | $ | 15,304,367 |  |  |  | 3,151,170 |  |  |  | 6,394,599 |  |  |  | 4,082,061 |  |  |  | 1,676,537 |
Loan Payable |  |  | 7,099,795 |  |  |  | 5,009,061 |  |  |  | 183,471 |  |  |  | 19,893 |  |  |  | 1,887,370 |
Total Contractual Obligations |  | $ | 22,404,162 |  |  |  | 8,160,231 |  |  |  | 6,578,070 |  |  |  | 4,101,954 |  |  |  | 3,563,907 |

Off-Balance Sheet Arrangements

We have not entered into any transactions, agreements or other contractual arrangements that would result in off-balance sheet liabilities.

Quantitative and Qualitative Disclosures about Market Risk

Foreign Exchange Risk

A substantial majority of all of our revenues and expenses are denominated in U.S. dollars. We do not believe that we currently have any significant direct foreign exchange risk and have not used any derivative financial instruments to hedge exposure to such risk. In addition, as our business and operation expand in European and other overseas markets in the future, we may be exposed to increased foreign exchange risks for other currencies.

Interest Rate Risk

Our exposure to interest rate risk primarily relates to the interest expenses on our short-term and long-term bank borrowings. Our short-term and long-term bank borrowings bear interests at fixed rates. We have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in market interest rates. However, our future interest expenses may exceed expectations due to changes in market interest rates. If we were to renew these short-term and long-term bank borrowings, we might be subject to interest rate risk.

Critical Accounting Estimates

An accounting estimate is considered critical if it requires to be made based on assumptions about matters that are highly uncertain at the time such estimate is made, and if different accounting estimates that reasonably could have been used, or changes in the accounting estimate that are reasonably likely to occur periodically, could materially impact the unaudited condensed consolidated financial statements.

We prepare our unaudited condensed consolidated financial statements in conformity with U.S. GAAP, which requires us to make estimates and assumptions. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experiences and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates. Some of our accounting policies require a higher degree of judgment than others in their application and require us to make significant accounting estimates.

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Estimated Allowance for Inventories

Our estimated allowance for the inventory obsolescence reserves is based on our assessment of realization of inventory. Adjustments are recorded to write down the cost of inventories to the estimated net realizable value due to slow-moving merchandise and obsolescence, which is dependent upon factors such as inventory aging, historical and forecasted consumer demand, and market conditions that impact pricing. As of December 31, 2024 and March 31, 2024, we recorded inventory allowance balance of $936,030 and $514,021, respectively.

Income Taxes

We provide current income tax expenses in accordance with the laws of the relevant taxing authorities. As part of the process of preparing financial statements, we are required to estimate our income taxes in each of the tax jurisdictions in which we operate, including New York State, New York City, New Jersey, Texas, Florida, California, Washington, D.C. and Canada.

We account for income taxes using the asset and liability approach. Under this method, deferred income taxes are recognized for tax consequences in future years based on differences between the tax bases of assets and liabilities and their reported amounts in the financial statements at each year-end and tax loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates applicable for the differences that are expected to reverse.

A valuation allowance is recorded to reduce deferred tax assets to the extent that we consider it is more likely than not that a deferred tax asset will not be realized in the foreseeable future. As of December 31, 2024 and March 31, 2024, we did not record any valuation allowance deferred tax assets.

We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determines if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained on audit, including resolution of any related appeals or litigation processes, and (2) measures the tax benefit as the largest amount that is more likely than not to be realized upon ultimate settlement. An uncertain income tax provision will not be recognized if it has less than a 50 percent likelihood of being sustained.

We consider many factors when evaluating our tax positions and estimating its tax benefits, which may require periodic adjustments, and which may not accurately forecast actual outcomes. We will include interest and fines arising from the underpayment of income taxes as a component of the provision for income taxes (if anticipated). Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. For the nine months ended December 31, 2024, the Company accrued $52,122 income tax related penalty included in taxes payable in the unaudited condensed consolidated balance sheets. For the nine months ended December 31, 2023, $55,604 accrued related to underpayment of income tax are classified as income tax expense in the period incurred. As of December 31, 2024 and March 31, 2024, we did not have any significant unrecognized uncertain tax positions.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable for smaller reporting companies.

Item 4. 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 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 our Chief Executive Officer and Chief Financial Officer (together, the “Certifying Officers”), to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our Certifying Officers, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this Report due to the material weakness identified below.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses that have been identified in internal control over financial reporting included our lack of (i) sufficient financial reporting and accounting personnel with appropriate knowledge of generally accepted accounting principles in the United States of America (the “U.S. GAAP”) and SEC reporting requirements to properly address complex U.S. GAAP accounting issues and to prepare and review our consolidated financial statements and related disclosures to fulfill U.S. GAAP and SEC financial reporting requirements, (ii) formal internal control policies and internal independent supervision functions to establish formal risk assessment process and internal control framework, and (iii) sufficient controls designed and implemented in IT environment and IT general control activities, which are mainly associated with areas of logical access management, change management, computer operation, service organization management as well as cyber security management. To remediate the material weaknesses, we have engaged a third party consultant to perform internal review and assist us to set up more reliable internal control processes. The consultant has commenced work in February 2025. In addition, we plan to enhance our IT infrastructure by outsourcing our IT department to a provider to manage PC operations and system monitoring. Furthermore, we are developing and plan to implement an enterprise resource planning system to streamline sales, inventory, financial reporting, and order management. We will devote resources to remediate these material weaknesses as we grow and such resources required for implementing proper internal controls for financial reporting are available. Our management performed additional analysis as deemed necessary to ensure that our unaudited condensed consolidated financial statements included in this Report were prepared in accordance with U.S. GAAP. Accordingly, management believes that the unaudited condensed consolidated financial statements included in this Report present fairly, in all material respects, our financial position, results of operations and cash flows of the periods presented.

We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

46

PART II - Other Information

Item 1. Legal Proceedings.

From time to time, we may be subject to legal proceedings arising in the ordinary course of business. Regardless of the outcome of any existing or future litigation, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.

Item 1A. Risk Factors.

Except for the additional risk factors set forth below, there have been no material changes to our Risk Factors as disclosed in our Annual Report on Form 10-K for the year ended March 31, 2024 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 and September 30, as filed with the SEC on June 28, 2024, August 16, 2024, and November 19, 2024, respectively.

Significant changes or developments with respect to domestic and international customs, tariffs, and trade policies, corresponding or retaliatory actions by other countries and related uncertainties could adversely affect our financial results and profitability.

On February 1, 2025, President Trump issued an executive order imposing a 10% ad valorem tariff on all imports from China, effective February 4, 2025. This tariff applies in addition to any existing duties, fees, or charges and is expected to remain in effect indefinitely, with the potential for further increases if China retaliates. As a company that imports raw materials and parts from China, we are subject to these increased costs, which could have a material adverse impact on our financial condition, results of operations, and profitability. The additional tariffs may increase our cost of goods sold, reduce our gross margins, and require us to pass higher costs on to customers, potentially affecting demand for our products. Additionally, supply chain disruptions and delays resulting from the new tariff policies could impact our ability to procure necessary materials in a timely manner. We will seek to mitigate these risks through alternative sourcing strategies, price adjustments, or operational efficiencies; however, there is no guarantee that such measures will fully offset the financial impact of the tariffs. Furthermore, given the evolving nature of U.S. trade policy, there is uncertainty regarding the duration and scope of these tariffs, as well as the potential for retaliatory measures by China that could further impact our supply chain and market conditions.

47

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Trading Arrangements

During the quarterly period ended December 31, 2024, 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

31.1* |  | Section 302 Certification of Principal Executive Officer
31.2* |  | Section 302 Certification of Principal Financial Officer
32.1** |  | Section 906 Certification of Principal Executive Officer
32.2** |  | Section 906 Certification of Principal Financial Officer
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

48

SIGNATURES

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

| FLY-E GROUP, INC.
| By: | /s/ Zhou Ou
|  | Zhou Ou
|  | Chief Executive Officer
|  | (Principal Executive Officer)
February 19, 2025 |  |
| By: | /s/ Shiwen Feng
|  | Shiwen Feng
|  | Chief Financial Officer
|  | (Principal Financial and Accounting Officer)
February 19, 2025 |  |

49

Shares and per share data are presented on a retroactive basis to reflect the nominal share issuance on December 21, 2022 and to give effect to the stock split completed on April 2, 2024. On November 27, 2024, the Company’s subsidiary, AOFL LLC (the “borrower”) obtained four thirty-year long-term loans of $525,000, $560,000, $595,000, and $420,000, respectively, from Veiocity Commercial Capital, LLC (the “lender”) with an annual interest rate of 11.24%. The lender charged a total of $170,933 loan settlement fees for closing the loan which included attorney fee, escrow fee, origination fee, and so on. The Company amortized the $170,933 over the loan term. To secure payment and performance of the liabilities, AOFL LLC pledged to Veiocity Commercial Capital, LLC a continuing lien on and security interest in any and all deposits or other sums at any time credited by or due from lender to the borrower and any cash, securities, instruments or other property of the borrower in the possession of lender. From January 1 to February 19, 2025, the Company paid $40,761 on principal and interest of the loan. On August 13, 2024, the Company’s subsidiary, AOFL LLC, obtained a one-year short-term loan of $1,800,000 from He’s Realty Holdings LLC with an annual interest rate of 6.5%. The principal amount shall be paid to He’s Realty Holdings LLC in one or more installments on or before August 11, 2025, and during the one-year borrowing period, AOFL LLC only needs to pay interest of $9,750 to He’s Realty Holdings LLC on a monthly basis. The collateral provided was the office purchased by AOFL LLC. 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