Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

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 quarterly 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, selling and renting 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 August 19, 2025, we have 16 stores, including 15 retail stores in the U.S and one retail store in Canada. The Company offers rental services from selected locations in New York, Toronto, 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 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 August 19, 2025, we offered 27 E-motorcycle products, 36 E-bike products and 38 E-scooter products.

We also operate a rental program to meet the increasing market demand for safe, UL-certified e-bikes in compliance with New York State regulations. The rental service, now available in New York City, Toronto, 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 our growth strategy, we plan to expand the rental service to Miami in the near term.

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 including the development of an 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 GO FLY APP is fully completed and delivered on September 9, 2024. The ERP system is fully completed and delivered on May 20, 2025.

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 June 30, 2025, we produced 1,236 E-motorcycles, 384 E-bikes and 88 E-scooters at the same facility.

Recent Developments

UL Litigation

On or about March 12, 2025, UL LLC ("UL") filed a complaint against the Company, along with the Company's certain subsidiaries and certain individuals, in the Eastern District of New York (the "Complaint"). The Complaint alleges that the Company improperly used UL's trademark by claiming certain products were certified by UL. The Complaint seeks $2,000,000 for each instance an allegedly counterfeit UL mark was used and asserts claims for federal trademark infringement and counterfeiting, unfair competition and false designations of the origin and false and misleading representations, common law unfair competition, common law unjust enrichment, and unlawful deceptive acts and practices.

On May 21, 2025, Company, along with its certain subsidiaries and certain individuals, and UL entered into a settlement and release agreement (the "Settlement Agreement") on mutually acceptable settlement terms. Pursuant to the Settlement Agreement, the Company and the other defendants agreed to pay UL an aggregate amount of $1,000,000 before November 30, 2025, and entered into a Consent Judgment and Permanent Injunction pursuant to which the Company and the other defendants agreed not to offer for sale, sell, or distribute products with UL Marks that were not tested and certified by UL. From May 28 to July 15, 2025, the Company paid $350,000 to UL.

The Settlement Agreement fully resolves all pending litigation between UL and the Company, and each party fully releases the other party from any and all past or present claims, demands, causes of action, obligations, damages, liabilities, expenses, or compensation of whatever kind or nature, that were or could have been asserted in connection with the Company's sales of products with a UL Mark which were not tested and certified by UL.

2025 Reverse Stock Split

On March 10, 2025, the Company held a special meeting of stockholders. At the special meeting, the stockholders approved a proposal to amend the Company's amended and restated certificate of incorporation to effect a reverse stock split of the Company's issued and outstanding shares of common stock, par value $0.01 per share, by a ratio in the range of 1-for-2 to 1-for-15, with such ratio to be determined in the discretion of the board of directors of the Company and with such action to be effected at such time and date, if at all, as determined by the board of directors within one year after the conclusion of the special meeting.

On June 16, 2025, the board of directors approved a one-for-five (1:5) reverse stock split of the Company's issued and outstanding shares of common stock (the "2025 Reverse Stock Split"). On July 2, 2025, the Company filed with the Secretary of State of the State of Delaware the Second Certificate of Amendment to its Certificate of Incorporation (the "Certificate of Amendment") to effect the 2025 Reverse Stock Split. The 2025 Reverse Stock Split became effective as of 5:00 p.m., Eastern Time, on July 3, 2025, and the Company's common stock began trading on the Nasdaq Stock Market on a split-adjusted basis on July 7, 2025.

After the 2025 Reverse Stock Split, every five (5) shares of the Company's issued and outstanding common stock have been automatically converted into one share of common stock, without any change in the par value per share. In addition, (i) a proportionate adjustment has been made to the per share exercise price and the number of shares issuable upon the exercise of all outstanding warrants to purchase shares of common stock, and (ii) the number of shares reserved for issuance pursuant to the Company's stock incentive plan has been reduced proportionately. Any fraction of a share of common stock created as a result of the 2025 Reverse Stock Split was rounded up to the nearest whole share. The Company's common stock continues to trade on the Nasdaq Capital Market under the symbol "FLYE."

Unless otherwise noted, the share and per share information in this report reflects the 2025 Reverse Stock Split.

Registered Direct Offering

On June 2, 2025, we closed our registered direct offering of an aggregate of (i) 5,719,111 shares of our common stock, par value $0.01 and (ii) 11,438,222 warrants (the "Warrants") to purchase 11,438,222 shares of common stock at a combined purchase price per share and accompanying Warrants of $1.2140, resulting in net proceeds to us of $6.24 million after deducting placement agent fees and offering expenses. All of the shares (including shares underlying the Warrants) were registered under the Securities Act pursuant to a registration statement on Form S-1, as amended (File No. 333-286678), which was declared effective by the Securities and Exchange Commission on May 15, 2025. American Trust Investment Services, Inc. ("ATIS") acted as the exclusive placement agent for the offering. We paid ATIS aggregate commissions of $219,430 and incurred offering expenses of $178,625.

Disposal of Certain Subsidiaries

During the three months ended June 30, 2025 and from July to August 2025, the Company disposed several subsidiaries as part of a disposal plan aimed at simplifying its legal and operational structure and improving administrative efficiency. The divestitures were not intended to be a strategic withdrawal from any specific geographic region or industry, but rather a measure to streamline the Company's corporate structure and reduce complexity in financial reporting. Between April and August 2025, the Company sold 14 subsidiaries to third-party individuals in multiple transactions, for an aggregated cash consideration of approximately $1.5 million, of which $112,000 has been collected as of August 19, 2025. See "Note 14- Disposal of Subsidiaries" in the accompanying consolidated financial statements for details.

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 our retail strategy and produce effective marketing initiatives to expand our brand perception with prospective customers. As of August 19, 2025, we have 16 stores, including 15 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 June 30, 2025, our net revenues decreased by 32.3% to $5.3 million, compared to $7.9 million for the same period in 2024, which was primarily driven by a decrease in total units sold, which dropped by 6,432 units, from 16,880 units for the three months ended June 30, 2024, to 10,448 units for the three months ended June 30, 2025, and by the decreased average sales price of EV, which decreased by $93 per EV, from $1,053 in the three months ended June 30, 2024 to $960 in the three months ended June 30, 2025. The decrease in volume 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 volume also attributed in part to the closures and disposition of our retail stores during the three months ended June 30, 2025. The decrease in average sales price was primarily attributable to changes in product mix and promotional pricing strategies implemented during the three months ended June 30, 2025.

We currently have a streamlined product portfolio consisting of three categories, with multiple models and specifications for each category. 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 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.

Employees

Our payroll expenses were $1.0 million for the three months ended June 30, 2025, compared to $1.0 million for the three ended June 30, 2024. As eight stores were sold during the three months ended June 30, 2025, and an additional three stores were sold subsequently, we expect a decrease in payroll expenses in the next quarter due to reduced demand for store sales staff. 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 June 30, 2025, we worked with two principal vendors, Depcl Corp. and Xiamen Innolabs Technology Co., Ltd, each of which respectively supplied approximately 64.5% and 11.7% of the accessories and components used in all our products for the three months ended June 30, 2025.

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 and e-scooter 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 and e-scooters 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 and e-scooter 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. From January 2025 to June 2025, we participated in this program and completed the delivery of Fly-11 Pro models to our retail partner participating in the program. 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.

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. 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.

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.

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 June 30, 2025 and 2024

The following table sets forth the components of our results of operations for the three months ended June 30, 2025 and 2024:

		For the Three Months Ended June 30,
		2025				2024				Change				Percentage Change
Revenues, Net		$	5,328,198			$	7,873,426			$	(2,545,228	)			(32.3	)%
Cost of Revenues			3,066,823				4,773,792				(1,706,969	)			(35.8	)%
Gross Profit			2,261,375				3,099,634				(838,259	)			(27.0	)%
Operating Expenses
Selling Expenses			1,321,217				1,612,495				(291,278	)			(18.1	)%
General and Administrative Expenses			2,444,933				1,532,638				912,295				59.5	%
Total Operating Expenses			3,766,150				3,145,133				621,017				19.7	%
Loss from Operations			(1,504,775	)			(45,499	)			(1,459,276	)			3,207.3	%
Other Income (Expenses), Net			(7,898	)			6,518				(14,416	)			(221.2	)%
Interest Expense			(546,234	)			(68,082	)			(478,152	)			702.3	%
Income Taxes Benefit (Expense)			50,259				(72,445	)			122,704				(169.4	)%
Net Loss		$	(2,008,648	)		$	(179,508	)		$	(1,829,140	)			1,019.0	%

Revenues

		For the Three Months Ended June 30,
		2025				2024				Change				Percentage Change
Sales-Retail		$	3,762,829			$	6,870,418			$	(3,107,589	)			(45.2	)%
Sales-Wholesale		$	1,427,231			$	1,003,008			$	424,223				42.3	%
Sales-Rental services			138,138				-				138,138				100.0	%
Total Net Revenues		$	5,328,198			$	7,873,426			$	(2,545,228	)			(32.3	)%

Our net revenues were $5.3 million for the three months ended June 30, 2025, a decrease of 32.3%, from $7.9 million for the three months ended June 30, 2024. The decrease in our net revenues was primarily driven by a decrease in sales volume by 6,432 units, from 16,880 units for the three months ended June 30, 2024, to 10,448 units for the three months ended June 30, 2025 and the decreased average sales price of EV, which decreased by $93 per EV, from $1,053 in the three months ended June 30, 2024 to $960 in the three months ended June 30, 2025.

Our retail sales revenue decreased by $3.1 million, or 45.2%, from $6.9 million for the three months ended June 30, 2024 to $3.8 million for the three months ended June 30, 2025. Our wholesale revenue increased by $0.4 million, or 42.3%, from $1.0 million for the three months ended June 30, 2024 to $1.4 million for the three months ended June 30, 2025. 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 retail sales also attributed in part to the closures and disposition of our retail stores during the three months ended June 30, 2025. The increase in wholesales revenue was driven primarily by the increase number of our dealers during the three months ended June 30, 2025.

Cost of Revenues

Cost of revenues decreased by 35.8%, from $4.8 million for the three months ended June 30, 2024, to $3.1 million for the three months ended June 30, 2025. 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 sales volume, as discussed above.

Gross Margin

The following table shows our gross profit and gross margin for the three months ended June 30, 2025 and 2024:

		For the Three Months Ended June 30,
		2025				2024				Change				Percentage Change
Gross Profit		$	2,261,375				3,099,634				(838,259	)			(27.0	)%
Gross Margin			42.4	%			39.4	%

Gross profit for the three months ended June 30, 2025 and 2024 was $2.3 million and $3.1 million, respectively. Gross margin was 42.4% and 39.4% for the three months ended June 30, 2025 and 2024, respectively. The increase in gross margin was mainly because of the increased revenues from rental business with higher margin than our other businesses. Gross margin of rental business was 79.8% and nil for the three months ended June 30, 2025 and 2024, respectively.

Total Operating Expenses

The following table sets forth the components of our total operating expenses for the three months ended June 30, 2025 and 2024:

		For the Three Months Ended June 30,
		2025				2024				Change				Percentage Change
Selling Expenses		$	1,321,217				1,612,495				(291,278	)			(18.1	)%
General and Administrative Expenses			2,444,933				1,532,638				912,295				59.5	%
Total Operating Expenses		$	3,766,150				3,145,133				621,017				19.7	%
Percentage of Revenue			70.7	%			39.9	%

Total operating expenses were $3.8 million for the three months ended June 30, 2025, an increase of $0.6 million, or 19.7%, compared to $3.1 million for the three months ended June 30, 2024. The increase in operating expenses was attributable to the increase in our depreciation expense, professional fees, product and software development expenses, as more fully discussed below.

Selling Expenses

Selling expenses primarily consist of payroll expenses, rent, and advertising expenses of retail stores. Total payroll expenses were $0.6 million for the three months ended June 30, 2025, compared to $0.6 million for the three months ended June 30, 2024. Rent was $0.4 million for the three months ended June 30, 2025, compared to $0.7 million for the three months ended June 30, 2024. Advertising expenses were $17,413 for the three months ended June 30, 2025, compared to $68,519 for the three months ended June 30, 2024. The decrease in rental expense was primarily due to the closures and dispositions of retail stores during this quarter.

General and Administrative Expenses

General and administrative expenses increased during the three months ended June 30, 2025 compared to the same period of previous year. Professional fees increased to $1.5 million for the three months ended June 30, 2025, compared to $0.4 million for the three months ended June 30, 2024, primarily attributable to the increase in audit fee, consulting fee, legal fee and IR expenses associated with our public offering and ongoing reporting obligations. Payroll expenses decreased to $0.2 million for the three months ended June 30, 2025 from $0.4 million for the three months ended June 30, 2024 primarily due to decrease in headcount of office assistants. Depreciation expense increased to $0.6 million for the three months ended June 30, 2025, compared to $0.2 million for the same period in prior year due to the increasing cost basis of fixed assets.

Income Tax Benefits (Provisions)

Income taxes benefit was $50,259 for the three months ended June 30, 2025, a change from $72,445 income tax provision for the three months ended June 30, 2024. Although the Company incurred pre-tax losses in both periods, the change was primarily because of differences in the recognition of deferred tax assets and related valuation allowance.

Net Loss

Net loss was $2.0 million for the three months ended June 30, 2025, an increase of $1.7 million, or 1,019.0%, from net loss of $0.2 million for the three months ended June 30, 2024, which was mainly attributable to the reasons discussed above.

EBITDA

The following table sets forth the components of our EBITDA for the three months ended June 30, 2025 and 2024:

		For the Three Months Ended June 30,
		2025				2024				Change				Percentage Change
Net loss		$	(2,008,648	)		$	(179,508	)		$	(1,829,140	)			1019.0	%
Income Tax provision			(50,259	)			72,445				(122,704	)			(169.4	)%
Depreciation			212,792				95,051				117,741				123.9	%
Interest Expenses			546,234				68,082				478,152				702.3	%
Amortization			27,315				951				26,364				2,772.2	%
EBITDA		$	(1,272,566	)		$	57,021			$	(1,329,587	)			(2,331.7	)%
Percentage of Revenue			(23.9	)%			0.7	%							(24.6	)%

Before interest expenses, income tax, depreciation, and amortization, for the three months ended June 30, 2025, our net loss was $1.3 million, a change of $1.3 million, compared to net income of $57,021 for the three months ended June 30, 2024, which was mainly attributable to the decrease in revenue, and increase in general and administrative expenses described above. The ratio of EBITDA to revenue was (23.9)% and 0.7% for the three months ended June 30, 2025 and 2024, respectively.

Liquidity and Capital Resources

As of June 30, 2025, we had cash of $2.3 million. We had working capital of $6.0 million and $1.3 million as of June 30, 2025 and March 31, 2025, respectively. We had net loss of $2.0 million and $0.2 million for the three months ended June 30, 2025 and 2024, respectively. During the three months ended June 30, 2025, net cash used in operating activities of the Company was approximately $5.3 million. As of June 30, 2025, the Company had a current portion of contractual obligation of approximately $9.3 million.

We have funded our working capital and other capital requirements in the past primarily by equity contributions from our stockholders and net proceeds received from IPO and equity financing, 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 June 30, 2025. 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 4, 2025, the Company issued 5,719,111 shares of common stock, at a price of $1.2140 per share in its follow-on public offering for gross proceeds of $6.9 million, prior to deducting the placement agent's fees and offering expenses payable by the Company.

As of June 30, 2025, the Company had working capital of approximately $6.0 million and cash of approximately $2.3 million. The main cash outflow for the three months ended June 30, 2025 was from net loss of $2.0 million, a decrease in accounts payable of $0.9 million, an increase in accounts receivable of $0.6 million, and an increase in prepayments and other receivables of $1.9 million. As of June 30, 2025, the Company had a current portion of contractual obligation of approximately $9.3 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 June 30, 2025 and March 31, 2025, our accounts receivable, net of allowance for credit losses, was $1.1 million and $0.5 million, respectively. Our accounts receivable turnover period decreased from 71 days in the year ended March 31, 2025 to 57 days in the quarter ended June 30, 2025 which was mainly attributable to the implementing stricter credit policies to customers.

Our accounts payable represent primarily accounts payable to suppliers from whom we purchased accessories and components for our products. As of June 30, 2025 and March 31, 2025, our accounts payable were $0.4 million and $1.3 million, respectively. Our accounts payable turnover period decreased to 30 days for the quarter ended June 30, 2025 from 33 days for the year ended March 31, 2025, which was primarily due to the Company's accelerated payments to certain suppliers during the quarter. The company pay invoices more promptly to ensure continued favorable terms and reliable service.

Our prepayments and other receivables primarily represent prepayments to vendors and other service providers. These prepayments and receivables increased by $2.6 million, from $3.7 million as of March 31, 2025, to $6.3 million as of June 30, 2025. 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 three months ended June 30, 2025, the Company made substantial prepayments to vendors to secure inventory for the new services.

Our inventories primarily include our EVs, their accessories and spare parts. As of June 30, 2025 and March 31, 2025, our inventories, net of allowance, were $5.9 million and $6.4 million, respectively. The decrease in inventories was primarily due to our preparation for the new rental business. Our inventory turnover days increased to 196 days in the quarter ended June 30, 2025, from 143 days in the year ended March 31, 2025, which was primarily due to strategic inventory buildup, allowing us to start new services.

As of June 30, 2025 and March 31, 2025, the total outstanding amount of loan principal was $8.7 million and $7.4 million, respectively. For the three months ended June 30, 2025 and 2024, the interest expenses on our outstanding loans amounted to $546,234 and $68,082, 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 three months ended June 30, 2025 and 2024:

		For the Three Months Ended June 30,
		2025				2024
Net Cash Used in Operating Activities		$	(5,284,034	)		$	(4,522,164	)
Net Cash Used in Investing Activities			(408,632	)			(1,066,130	)
Net Cash Provided by Financing Activities			7,171,615				8,653,972
Net changes in cash including cash classified within current assets held for sale		$	1,478,949			$	3,065,678

Operating Activities

Net cash used in operating activities for the three months ended June 30, 2025 was $5.3 million, which was due to net loss of $2.0 million, an increase in accounts receivable of $0.6 million, a decrease in accounts payable of $0.9 million, a decrease in operating lease liabilities of $0.8 million, a decrease in accrued expenses and other payables of $0.3 million, and an increase in prepayments and other receivables of $2.0 million, partially offset by amortization of right-of-use assets of $0.8 million, depreciation expenses of $0.2 million, and additional inventories reserve of $0.2 million provided during the quarter.

Net cash used in operating activities for the three months ended June 30, 2024 was $4.5 million, which was due to net loss of $0.2 million, a decrease in tax payable of $0.4 million, and a decrease in accrued expenses and other payables of $0.5 million, an increase in inventories of $0.9 million, a decrease in account payable of $0.8 million, a decrease in operating lease liabilities of $0.6 million, an increase in prepayments for operation services to a related party of $0.2 million and an increase in prepayments and other receivables of $2.1 million, partially offset by amortization of right-of-use assets of $0.8 million and a decrease in accounts receivables - a related party of $0.3 million.

Investing Activities

Net cash used in investing activities was $0.4 million for the three months ended June 30, 2025, which was due to purchase of properties and equipment of $0.1 million, advance to a related party of $0.2 million, and cash released from disposal of entities of $0.1 million.

Net cash used in investing activities was $1.1 million for the three months ended June 30, 2024, which was due to prepayment made for purchase of software from a related party of $0.8 million, prepayments for property rights of $0.1 million, and the purchase of equipment of $0.4 million, partially offset by the repayment from a related party of $0.2 million.

Financing Activities

Net cash provided by financing activities was $7.1 million for the three months ended June 30, 2025, which consisted of net proceeds from our follow-on public offering of $6.4 million, and loan proceeds of $1.9 million, partially offset by repayments of loans of $0.6 million and payment of public offering costs of $0.5 million.

Net cash provided by financing activities was $8.7 million for the three months ended June 30, 2024, which consisted of net proceeds of the IPO of $9.2 million, and loan proceeds of $0.2 million, partially offset by repayments of loans of $0.4 million and payment of IPO costs of $0.3 million.

Commitments and Contractual Obligations

The following table presents our material contractual obligations as of June 30, 2025:

Contractual Obligations		Total				Less than 1 year				1 - 2 years				3 - 5 years				Thereafter
Operating Lease Obligations and Others		$	9,323,939				2,106,614				4,424,584				2,037,060				755,681
Loan Payable			8,672,038				6,579,781				189,517				21,157				1,881,583
UL Litigation			650,000				650,000				-				-				-
Total Contractual Obligations		$	18,645,977				9,336,395				4,614,101				2,058,217				2,637,264

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.

Estimated Allowance for Inventory Obsolescence Reserve

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 June 30, 2025 and March 31, 2025, we recorded inventory allowance balance of $1,189,455 and $1,107,569, respectively.