Fly-E Group, Inc.(FLYE) - 2026 Q1 - Quarterly Report

Cautionary Note Regarding Forward-Looking Statements Forward-Looking Statements The report contains forward-looking statements subject to risks and uncertainties, with no guarantee of future results or obligation to update - The report contains forward-looking statements subject to numerous risks and uncertainties that could cause actual results to differ materially from expectations[10][11] - Key risks include funding ability, production volume and quality, vendor reliability, intellectual property protection, product performance, warranty claims, customer adoption of electric vehicles, alternative technology development, increased government regulation, cash balance risks, growth of rental services, going concern ability, Nasdaq listing compliance, trade policies, tariffs, and currency exchange rates[13] PART I FINANCIAL INFORMATION Item 1. Unaudited Condensed Consolidated Financial Statements Presents unaudited condensed consolidated financial statements, showing a significant increase in net loss and cash used in operating activities for Q2 2025 Unaudited Condensed Consolidated Balance Sheets (June 30, 2025 vs. March 31, 2025) | ASSETS (USD) | June 30, 2025 | March 31, 2025 | | :--------------------------------- | :------------ | :------------- | | Cash | $2,334,288 | $840,102 | | Accounts receivable, net | $1,071,622 | $466,187 | | Inventories, net | $5,943,790 | $6,397,274 | | Total Current Assets | $16,757,538 | $14,000,516 | | Total Assets | $33,758,219 | $33,706,675 | | LIABILITIES & EQUITY (USD) | | | | Accounts payable | $419,128 | $1,272,305 | | Short-term loan payables | $6,317,712 | $5,191,058 | | Total Current Liabilities | $10,745,089 | $12,701,375 | | Total Liabilities | $20,054,671 | $23,873,343 | | Total Stockholders' Equity | $13,703,548 | $9,833,332 | Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss (Three Months Ended June 30, 2025 vs. 2024) | (USD) | June 30, 2025 | June 30, 2024 | | :--------------------------------- | :------------ | :------------ | | Revenues | $5,328,198 | $7,873,426 | | Cost of Revenues | $3,066,823 | $4,773,792 | | Gross Profit | $2,261,375 | $3,099,634 | | Total Operating Expenses | $3,766,150 | $3,145,133 | | Loss from Operations | $(1,504,775) | $(45,499) | | Interest Expenses | $(546,234) | $(68,082) | | Net Loss | $(2,008,648) | $(179,508) | | Losses per Share | $(0.30) | $(0.04) | Unaudited Condensed Consolidated Statements of Cash Flows (Three Months Ended June 30, 2025 vs. 2024) | (USD) | June 30, 2025 | June 30, 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 | | Cash at the end of the period | $2,334,288 | $4,467,868 | Notes to Unaudited Condensed Consolidated Financial Statements Detailed notes to financial statements cover business, accounting policies, corporate changes, public offerings, liquidity, and specific financial items 1 — Description of Business, Organization and Basis of Presentation - Fly-E Group, Inc. designs, installs, and sells smart electric bikes, motorcycles, scooters, and related accessories under the 'Fly E-Bike' brand, primarily in the U.S. and Canada, also offering rental services and operating an online store[35] - As of August 19, 2025, the company operates 16 retail stores (15 in U.S., 1 in Canada) and one online store, having closed one U.S. store in Q1 2025 and four in FY2025[35] - The company completed a second public offering on June 4, 2025, issuing 5,719,111 common shares and 11,438,222 warrants, generating gross proceeds of $6.9 million[40] - A 1-for-5 reverse stock split was implemented on July 3, 2025, retroactively adjusting all share and per share information[41][42] - The company reported a working capital of $6.0 million and cash of $2.3 million as of June 30, 2025, but a net loss of $2.0 million and net cash used in operating activities of $5.3 million for the quarter, raising substantial doubt about its ability to continue as a going concern[49] 2 — Summary of Significant Accounting Policies - The financial statements are prepared in accordance with U.S. GAAP and SEC regulations, assuming a going concern, though management has identified substantial doubt regarding this assumption[50] - The company operates as one reportable segment, with substantially all long-lived assets and revenues derived from the U.S[52] - Revenue is primarily generated from product sales (retail and wholesale) and rental services, with product revenue recognized when control transfers and rental revenue recognized over the rental period[73][78] Disaggregated Revenues by Business Line (Three Months Ended June 30, 2025 vs. 2024) | Revenue Type (USD) | June 30, 2025 | June 30, 2024 | | :------------------------- | :------------ | :------------ | | Product revenues - retail | $3,762,829 | $6,870,418 | | Product revenues - wholesale | $1,427,231 | $1,003,008 | | Revenues - rental services | $138,138 | $0 | | Net revenues | $5,328,198 | $7,873,426 | - The company adopted ASU 2023-07 (Segment Reporting) retrospectively for the year ended March 31, 2025, and is evaluating the impact of ASU 2023-09 (Income Tax Disclosures) and ASU 2024-03 (Expense Disaggregation Disclosures)[52][111][112] 3 — Inventories, Net Inventories, Net (June 30, 2025 vs. March 31, 2025) | Inventory Category (USD) | June 30, 2025 | March 31, 2025 | | :----------------------- | :------------ | :------------- | | Batteries | $1,803,102 | $2,084,890 | | Electric Vehicles | $3,059,766 | $3,070,224 | | Tires | $457,548 | $482,364 | | Accessories | $1,812,829 | $1,867,365 | | Inventories (Gross) | $7,133,245 | $7,504,843 | | Inventory reserves | $(1,189,455) | $(1,107,569) | | Inventories, net | $5,943,790 | $6,397,274 | Movements of Inventory Reserves (Three Months Ended June 30, 2025 vs. 2024) | (USD) | June 30, 2025 | June 30, 2024 | | :---------------- | :------------ | :------------ | | Beginning balance | $1,107,569 | $514,021 | | Addition | $229,780 | $176,072 | | Write off | $(147,894) | $(131,930) | | Ending Balance | $1,189,455 | $558,163 | 4 — Prepayments and Other Receivables Prepayments and Other Receivables (June 30, 2025 vs. March 31, 2025) | Category (USD) | June 30, 2025 | March 31, 2025 | | :----------------------------- | :------------ | :------------- | | Prepaid rent | $159,495 | $157,683 | | Prepayments to vendors | $3,947,312 | $2,353,105 | | Prepaid insurance | $155,481 | $214,111 | | Prepayments to other service providers | $957,664 | $269,693 | | Prepaid income tax | $68,191 | $18,127 | | Other receivable from third parties | $962,649 | $664,267 | | Total Prepayment and Other Receivables | $6,250,792 | $3,676,986 | - The increase in prepayments to vendors was primarily due to anticipated growth in future sales and rental services, with plans to purchase more E-vehicles and accessories[119] - The company entered into share transfer agreements for the sale of several subsidiaries to third-party buyers, with remaining considerations due totaling $414,779 as of June 30, 2025[115][116][117][119] 5 — Property and Equipment, Net Property and Equipment, Net (June 30, 2025 vs. March 31, 2025) | Category (USD) | June 30, 2025 | March 31, 2025 | | :-------------------------- | :------------ | :------------- | | Furniture and Fixtures | $372,039 | $400,080 | | Machinery and Equipment | $212,015 | $230,015 | | Automobile | $670,465 | $669,902 | | Leasehold improvements | $400,151 | $683,595 | | Building | $3,663,215 | $3,663,215 | | Computer hardware and software | $2,500,000 | $2,310,000 | | Properties for rental business | $243,776 | $193,963 | | Property and Equipment (Gross) | $8,061,661 | $8,150,770 | | Less: Accumulated depreciation | $(935,416) | $(863,557) | | Property and Equipment, net | $7,126,245 | $7,287,213 | - Depreciation expenses for the three months ended June 30, 2025, were $212,792, up from $95,051 in the same period of 2024[120] - The ERP system, with a total contract price of $2,500,000, was fully completed and delivered on May 20, 2025, with depreciation of a $2,310,000 portion starting in fiscal year 2025[120] 6 — Intangible Assets, Net Intangible Assets, Net (June 30, 2025 vs. March 31, 2025) | Category (USD) | June 30, 2025 | March 31, 2025 | | :---------------------- | :------------ | :------------- | | Property rights | $92,604 | $92,604 | | GO FLY App | $500,000 | $500,000 | | Total Intangible assets | $592,604 | $592,604 | | Less: Accumulated Amortization | $(94,054) | $(66,739) | | Intangible assets, net | $498,550 | $525,865 | - Amortization expenses for the three months ended June 30, 2025, were $27,315, significantly higher than $951 in the same period of 2024[121] 7 — Accrued Expenses and Other Payables Accrued Expenses and Other Payables (June 30, 2025 vs. March 31, 2025) | Category (USD) | June 30, 2025 | March 31, 2025 | | :-------------------------- | :------------ | :------------- | | Accrued payroll | $59,955 | $62,068 | | Advances from customers | $32,069 | $28,144 | | Advances from IGH Holding Inc | $49,000 | $49,000 | | Accrued warranty | $8,158 | $20,131 | | Payroll tax and sales tax payable | $131,783 | $113,601 | | Accrued store expenses | $39,782 | $58,044 | | Accrued freight in cost | $0 | $35,980 | | Accrued UL penalty | $650,000 | $1,000,000 | | Accrued Interest | $6,373 | $0 | | Accrued Expenses and Other Payables | $977,120 | $1,366,968 | - The accrued UL penalty decreased from $1,000,000 to $650,000, reflecting payments made towards the settlement agreement[122][163] 8 — Loan Payables Loan Payables Summary (June 30, 2025 vs. March 31, 2025) | Lender | Due Date | June 30, 2025 (USD) | March 31, 2025 (USD) | | :--------------------------------- | :--------------- | :------------------ | :------------------- | | Chase Bank | Jan 12, 2028 | $0 | $301 | | Leaf Capital Funding, LLC | Sep 30, 2027 | $31,424 | $34,620 | | Automobile Loan – Honda | Jun 25, 2027 | $18,182 | $20,353 | | Milea Truck Sales of Queens Inc. | Aug 22, 2027 | $96,253 | $106,093 | | Milea Truck Sales of Queens Inc. | Jul 26, 2027 | $69,140 | $76,779 | | Peapack-Gladstone Bank | Aug 31, 2025 | $4,936,058 | $4,936,058 | | Velocity Commercial Capital, LLC | Dec 1, 2054 | $1,926,141 | $1,927,729 | | AOWINV LLC | Jun 10, 2025 | $0 | $255,000 | | Agile Lending, LLC | Nov 27, 2025 | $1,258,862 | $0 | | Stripe, Inc. | Apr 20, 2026 | $122,793 | $0 | | Stripe, Inc. | Dec 22, 2026 | $213,185 | $0 | | Total loan payables | | $8,672,038 | $7,356,933 | | Short-term loan payables | | $(6,317,712) | $(5,191,058) | | Current portion of long-term loan payables | | $(262,069) | $(100,835) | | Long-term loan payables | | $2,092,257 | $2,065,040 | - Total interest expenses for the three months ended June 30, 2025, significantly increased to $546,234 from $68,082 in the prior year, with the weighted average annual interest rate on short-term borrowings rising to 37% from 13.1%[127] - New short-term loans were obtained from Agile Lending, LLC ($1,575,000 at 72.8% annual interest) and Stripe, Inc. (aggregate $342,100 at 10.2%-20.4% annual interest)[128] 9 — Stockholders' Equity - The company completed a 1-for-110,000 stock split on April 2, 2024, and a 1-for-5 reverse stock split on July 3, 2025, retroactively adjusting all share and per share data[130][132][133] - On June 4, 2025, the company issued 5,719,111 common shares and 11,438,222 warrants in a public offering, with an exercise price of $1.4565 per warrant[136] Warrants Activity (As of June 30, 2025) | | Number of Warrant | Weighted Average Exercise Price | | :-------------------------- | :---------------- | :------------------------------ | | Outstanding as of March 31, 2025 | 25,875 | $20.0000 | | Issued | 11,438,222 | $1.4565 | | Outstanding as of June 30, 2025 | 11,464,097 | $1.4984 | - From July 1 to July 28, 2025, 8,219,634 shares of common stock were issued due to cashless exercise of 2025 Warrants, with 11,438,218 warrants exercised as of August 19, 2025[140] 10 — Income Tax Income Tax Benefit (Expense) (Three Months Ended June 30, 2025 vs. 2024) | (USD) | June 30, 2025 | June 30, 2024 | | :---------------- | :------------ | :------------ | | Current Federal | $(3,108) | $53,738 | | Current State | $4,554 | $46,669 | | Current City | $(8,844) | $31,669 | | Deferred Federal | $0 | $(38,000) | | Deferred State | $0 | $(12,000) | | Deferred City | $0 | $(9,000) | | Foreign | $(42,861) | $(631) | | Total | $(50,259) | $72,445 | - The company reported a pre-tax loss of $2.1 million for the three months ended June 30, 2025, compared to $107,063 in the prior year, primarily from U.S. operations[145] Deferred Tax Assets (Liabilities), Net (June 30, 2025 vs. March 31, 2025) | Category (USD) | June 30, 2025 | March 31, 2025 | | :--------------------------------- | :------------ | :------------- | | Net operating loss carry forwards | $738,792 | $1,506,378 | | Inventory reserve | $431,000 | $410,000 | | Operating lease liabilities | $3,349,000 | $4,837,000 | | Total deferred tax assets (DTAs) | $4,539,792 | $6,763,378 | | Valuation allowance | $(974,000) | $(1,714,000) | | Deferred tax assets, net of valuation allowance | $3,565,792 | $5,049,378 | | Accumulated depreciation | $(325,705) | $(460,395) | | Operating lease right-of-use assets | $(3,087,000) | $(4,494,000) | | Total deferred tax liabilities (DTLs) | $(3,412,705) | $(4,954,395) | | Deferred tax assets, net | $153,087 | $94,983 | - A valuation allowance of $974,000 was established as of June 30, 2025, due to the company's recent taxable loss history, indicating uncertainty about realizing net deferred income tax assets[153] 11 — Leases Operating Right-of-Use (ROU) Assets and Lease Liabilities (June 30, 2025 vs. March 31, 2025) | Category (USD) | June 30, 2025 | March 31, 2025 | | :-------------------------- | :------------ | :------------- | | ROU assets | $8,584,684 | $10,933,068 | | Current operating lease liabilities | $2,106,614 | $2,617,762 | | Non-current operating lease liabilities | $7,217,325 | $9,106,928 | | Total lease liabilities | $9,323,939 | $11,724,690 | - The company had 27 leases as of June 30, 2025, down from 36 as of March 31, 2025, having terminated 9 leases during the quarter[156][159] - Weighted average remaining lease term was 4.34 years with a weighted average annual discount rate of 7.3% as of June 30, 2025[157] Future Minimum Lease Liabilities (As of June 30, 2025) | Twelve months ending June 30, | Operating Lease Liabilities (USD) | | :---------------------------- | :------------------------------ | | 2026 | $2,698,678 | | 2027 | $2,676,687 | | 2028 | $2,468,939 | | 2029 | $1,856,316 | | 2030 | $387,789 | | Thereafter | $882,555 | | Total lease payments | $10,970,964 | | Less: interest | $(1,647,025) | | Present value of lease liabilities | $9,323,939 | 12 — Commitments and Contingencies - The company settled a UL litigation on May 21, 2025, agreeing to pay UL $1,000,000 before November 30, 2025, for improper use of UL's trademark, with $350,000 paid between July 1 and August 19, 2025[163] - The company is subject to extensive environmental, safety, and other laws and regulations, including product safety and testing, and battery safety and disposal[162] - Inflationary factors could impair operating results, though no material impact has been observed to date[164] 13 — Related Party Transactions Related Party Balances (June 30, 2025 vs. March 31, 2025) | Category (USD) | Related Party | June 30, 2025 | March 31, 2025 | | :--------------------------------- | :------------ | :------------ | :------------- | | Accounts receivable, net | Fly E Bike SRL | $37,465 | $37,465 | | Prepayments and other receivables | Fly E Bike SRL | $147,288 | $0 | | Prepayments and other receivables | PJMG LLC | $75,000 | $120,000 | | Long-term prepayment for software development | DF Technology US Inc | $0 | $136,580 | - The company advanced $147,288 to Fly E Bike SRL (controlled by CEO Zhou Ou) during the three months ended June 30, 2025[167] - Consulting fees paid to DGLG (where former CFO Mr. Guo is a partner) were nil for the three months ended June 30, 2025, down from $225,000 in 2024, while tax services fees to DGLG increased to $106,175 from $15,600[171] 14 — Disposal of Subsidiaries - During Q1 2025 and July-August 2025, the company disposed of several subsidiaries to simplify its legal and operational structure and improve administrative efficiency, not as a strategic exit from any region or industry[173][179] - Between April and August 2025, 14 subsidiaries were sold for an aggregated cash consideration of approximately $1.5 million, with $112,000 collected as of August 19, 2025[198] Summarized Held for Sale Financial Information (June 30, 2025 vs. March 31, 2025) | Category (USD) | June 30, 2025 | March 31, 2025 | | :-------------------------- | :------------ | :------------- | | Cash | $68,665 | $61,548 | | Inventories, net | $95,167 | $195,192 | | Property and equipment, net | $104,165 | $154,876 | | Operating lease right-of-use assets | $588,962 | $1,955,765 | | Assets held for sale | $897,293 | $2,462,502 | | Short-term loan payables | $37,800 | $25,498 | | Operating lease liabilities – current | $184,101 | $319,874 | | Operating lease liabilities – non-current | $425,211 | $1,807,075 | | Liabilities held for sale | $662,446 | $2,152,447 | 15 — Subsequent Events - From July 1 to July 28, 2025, certain warrant holders exercised rights to acquire 8,219,634 common shares on a cashless basis, with 11,438,218 warrants exercised as of August 19, 2025[181] - On July 1, 2025, three subsidiaries (OFLYO INC, FLYCYCLE INC, FLYBX2381 INC) were sold for $235,939, and on August 1, 2025, three more (FLAM, FLYTRON, MEEBIKE) were sold for $96,327, with no consideration received for these sales as of August 19, 2025[180][182] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and operational results for Q2 2025, highlighting revenue decline, increased net loss, liquidity concerns, and strategic adjustments Overview - Fly-E Group is an EV company specializing in designing, installing, selling, and renting E-motorcycles, E-bikes, E-scooters, and accessories under the 'Fly E-Bike' brand, aiming to promote eco-friendly transportation[184] - As of August 19, 2025, the company operates 16 stores (15 U.S., 1 Canada), offers rental services in New York, Toronto, and Los Angeles via the Go Fly app, and plans to expand rental services to Miami and open a second online store for gas bikes[185][187] - The company offers a diversified product portfolio including 27 E-motorcycle, 36 E-bike, and 38 E-scooter products, with continuous refreshment to align with market trends[186] - The company is developing a Fly E-Bike app for EV management services and has completed an ERP system and the GO FLY APP development[188] Recent Developments - The company settled a UL litigation on May 21, 2025, agreeing to pay $1,000,000 to UL for improper trademark use, with $350,000 paid by July 15, 2025[191] - A 1-for-5 reverse stock split became effective on July 3, 2025, adjusting common stock shares and warrant exercise prices proportionately[194][195] - A registered direct offering closed on June 2, 2025, raising $6.24 million in net proceeds from the sale of 5,719,111 common shares and 11,438,222 warrants[196] - The company disposed of 14 subsidiaries between April and August 2025 for approximately $1.5 million in aggregated cash consideration, aiming to simplify its legal and operational structure[197][198] Key Factors that Affect Operating Results - Company growth depends on attracting new customers through retail strategy and effective marketing, managing production ramp-up and quality control, and expanding its sales network[200][201] - Net revenues decreased by 32.3% due to a 6,432-unit decrease in sales volume (from 16,880 to 10,448 units) and a $93 decrease in average EV sales price (from $1,053 to $960)[202] - The decline in sales volume is mainly attributed to recent lithium-battery accidents involving E-Bikes and E-Scooters in New York, leading customers to opt for oil-powered vehicles, and retail store closures[202] - Payroll expenses remained stable at $1.0 million YoY, but are expected to decrease in the next quarter due to reduced demand for store sales staff following store dispositions[204] - The company relies on two principal vendors, Depcl Corp. and Xiamen Innolabs Technology Co., Ltd, which supplied 64.5% and 11.7% of components, respectively, for the three months ended June 30, 2025[205] - Increased competition, U.S. government tariffs on imported EV components, and evolving regulatory landscapes (e.g., New York State e-bike safety laws, NYC trade-in program) are significant market factors[207][208] How to Assess Our Performance - Management assesses performance using net sales, gross profit, gross margin, selling, general and administrative expenses, and EBITDA[209] - Net sales include revenue from EV sales, accessories, spare parts, and repair/rental services, net of discounts and returns[210][211][212] - Cost of sales includes product costs, warehouse rent, payroll, depreciation, inventory reserves, warranty, and logistics[213] - Selling, general, and administrative expenses are expected to increase due to planned sales network expansion, marketing activities, and growth as a public company[216][217] Non-GAAP Financial Measures - The company uses EBITDA (earnings before interest, taxes, depreciation, and amortization) as a non-GAAP financial measure to evaluate operating performance, providing insight into underlying operations and facilitating year-to-year comparisons[219][220] - EBITDA is reconciled to net income, the most directly comparable U.S. GAAP measure, and includes adjustments for income taxes, interest income/expense, depreciation, and amortization[220] Results of Operations for the Three Months Ended June 30, 2025 and 2024 Consolidated Results of Operations (Three Months Ended June 30, 2025 vs. 2024) | (USD) | 2025 | 2024 | Change (USD) | 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)% | | 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% | | 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% | - Net revenues decreased by 32.3% to $5.3 million, primarily due to a decrease in sales volume (6,432 units) and a lower average sales price ($93 per EV), with retail sales decreasing by 45.2% while wholesale revenue increased by 42.3%[223][224] - Gross margin increased to 42.4% from 39.4%, mainly driven by higher-margin rental business revenues (79.8% gross margin in 2025 vs. nil in 2024)[226] - Total operating expenses increased by 19.7% to $3.8 million, largely due to higher professional fees ($1.5 million vs. $0.4 million) and depreciation expense ($0.6 million vs. $0.2 million), despite a decrease in selling expenses[227][228][229] EBITDA Reconciliation (Three Months Ended June 30, 2025 vs. 2024) | (USD) | 2025 | 2024 | Change (USD) | 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)% | Liquidity and Capital Resources - As of June 30, 2025, the company had cash of $2.3 million and working capital of $6.0 million, but a net loss of $2.0 million and net cash used in operating activities of $5.3 million, raising substantial doubt about its ability to continue as a going concern[233][236] - The company plans to alleviate going concern risk through equity financing, other debt financing, and financial support from related parties, but there is no assurance of securing such financing[236] - Accounts receivable turnover period decreased to 57 days (from 71 days), and accounts payable turnover period decreased to 30 days (from 33 days), reflecting stricter credit policies and accelerated payments[237][238] - Prepayments and other receivables increased by $2.6 million to $6.3 million, mainly due to substantial prepayments to vendors for inventory to support the new E-bike rental services[240] Cash Flow Data (Three Months Ended June 30, 2025 vs. 2024) | (USD) | June 30, 2025 | June 30, 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 | Commitments and Contractual Obligations (As of June 30, 2025) | Contractual Obligations (USD) | 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 | $0 | $0 | $0 | | Total Contractual Obligations | $18,645,977 | $9,336,395 | $4,614,101 | $2,058,217 | $2,637,264 | Quantitative and Qualitative Disclosures about Market Risk - The company has no significant direct foreign exchange risk as most revenues and expenses are in U.S. dollars, but anticipates increased exposure with future international expansion[252] - Interest rate risk primarily relates to fixed-rate short-term and long-term bank borrowings, with no material risks from market interest rate changes anticipated, though future renewals could introduce such risk[253] Critical Accounting Estimates - Critical accounting estimates involve significant judgments and assumptions, with actual results potentially differing from expectations[255] - The estimated allowance for inventory obsolescence reserves is a critical estimate, based on inventory aging, historical/forecasted demand, and market conditions, with the reserve at $1,189,455 as of June 30, 2025[257] Item 3. Quantitative and Qualitative Disclosures About Market Risk This item is not applicable to smaller reporting companies - This item is not applicable to smaller reporting companies[258] Item 4. Controls and Procedures Disclosure controls and procedures were ineffective as of June 30, 2025, due to material weaknesses in financial reporting, internal control policies, and IT general controls - Disclosure controls and procedures were not effective as of June 30, 2025, due to material weaknesses[260][262] - Identified material weaknesses include insufficient financial reporting and accounting personnel with U.S. GAAP/SEC knowledge, lack of formal internal control policies and independent supervision, and insufficient IT general control activities[261] - Remediation efforts, including engaging a third-party consultant, training accounting personnel, and enhancing IT infrastructure, are in progress but not yet fully remediated as of June 30, 2025[261] PART II - Other Information Item 1. Legal Proceedings The company is subject to ordinary course legal proceedings, which may adversely impact it through costs and diversion of management resources - The company is subject to legal proceedings in the ordinary course of business, which can have an adverse impact due to costs and diversion of management resources[266] Item 1A. Risk Factors There have been no material changes to the company's Risk Factors as disclosed in its Annual Report on Form 10-K for the year ended March 31, 2025 - No material changes to Risk Factors since the Annual Report on Form 10-K filed on July 15, 2025[267] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report for the period - None to report[268] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report for the period - None to report[269] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[270] Item 5. Other Information No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during the quarterly period ended June 30, 2025 - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during the quarter[271] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including amendments to the certificate of incorporation, securities purchase agreements, placement agency agreements, Section 302 and 906 certifications, and Inline XBRL documents - Exhibits include the Second Certificate of Amendment of Amended and Restated Certificate of Incorporation, Form of Securities Purchase Agreement, Joint Amendment to Placement Agency Agreement and Engagement Letter, Section 302 and 906 Certifications, and Inline XBRL documents[272]