Fly-E Group, Inc. 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Disclosure controls and procedures are controls and other procedures designed to ensure that the information required to be disclosed by us in the reports that we file or submit 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 by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. As of March 31, 2024, we were a privately-owned company, not subject to disclosure controls and internal controls over financial reporting required by the Exchange Act for public companies. This annual report on Form 10-K does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our registered public accounting firm due to a transition period established by rules of the SEC for newly public companies. Item 9B. Other Information We have adopted an insider trading policy. Our insider trading policy is filed as an exhibit to this annual report and is incorporated herein by reference. During the fourth quarter of the year ended March 31, 2024, we were a privately owned company and disclosure required by Item 9B was not applicable. Item 9C. Disclosure Regarding Foreign Jurisdiction that Prevent Inspections. Not applicable. 40 Part III Item 10. Directors, Executive Officers and Corporate Governance Executive Officers and Directors Set forth below is certain information with respect to our directors and executive officers: Name Age Position Zhou (Andy) Ou 35 Chairman of the Board and Chief Executive Officer Ruifeng (Steven) Guo 36 Director and Chief Financial Officer Rui (Ricky) Feng 39 Chief Operating Officer Ke (Simon) Zhang 37 Chief Human Resource Officer Bin Wang 66 Director Lun Feng 64 Director Alan Jacobs 82 Director Set forth below is biographical information about each of the individuals named in the tables above: Zhou (Andy) Ou, Chairman of the Board and Chief Executive Officer. Mr. Ou founded Fly E-Bike in 2018 and has since served as our Chairman of the Board and Chief Executive Officer (“CEO”). Before founding Fly E-Bike, Mr. Ou operated a motorcycle repair business for over eight years, and previously held a managerial position at a food delivery company. We believe that Mr. Ou’s prior experience in the motorcycle industry and his understanding of the delivery industry, combined with his tenure at our company, qualifies him to serve as our Chairman of the Board. Ruifeng (Steven) Guo, Director and Chief Financial Officer. Mr. Guo joined our company as a tax and financial advisor in March 2020 and has been serving as our Chief Financial Officer (“CFO”) since December 2022 and our director since September 1, 2023. He is currently a partner at DGLG Accounting and Tax LLC, a U.S. financial consulting firm, where he has been working since May 2020, and he is currently a partner at DFT since December 2023. Additionally, he is the managing partner at SJ International Development, a New York based real estate management company, since October 2020. Mr. Guo is also the managing partner at PJMG LLC, a New York based consulting company, since June 2019. Prior to that, Mr. Guo worked as a senior business manager at Xinyuan Real Estate Co., Ltd. from April 2018 to April 2020. Between 2013 and 2017, Mr. Guo worked as an associate and senior auditor at three auditing firms, including Friedman LLP, Marcum LLP and Janover LLC. Mr. Guo obtained his Bachelor of Economy from Beijing International Studies University in 2010 and his MBA in Accounting from Hofstra University in 2012. Mr. Guo was selected to serve as a member of our board of directors because of his senior-level experience in the financial services industry and his extensive knowledge of our business and industry. Rui (Ricky) Feng, Chief Operating Officer. Mr. Feng joined us as a retail store manager in 2018 and was responsible for overseeing our supply chain, implementing effective customer strategies, and ensuring legal compliance. He has served as our Chief Operating Officer since December 2022. Prior to joining us, Mr. Feng owned and operated a restaurant for four years, which provided him with valuable experience in managing a business. Ke (Simon) Zhang, Chief Human Resource Officer. Mr. Zhang has also been serving as our Chief Human Resource Officer since December 2022. Mr. Zhang previously served as our director and resigned from this position on September 1, 2023. He joined us as a retail store manager in 2018, where he was responsible for overseeing various HR functions, including recruiting, employee training and development and managing our benefits system. Bin Wang, Director. Mr. Wang has served as a director on our board of directors since the closing of the IPO. Mr. Wang has over 30 years of management experience in the financial industry. He currently serves as the Managing Director of Eon Capital International Ltd, a Hong Kong corporate advisory service company. He has also been a member of the board of directors of Maison Solutions Inc., a Nasdaq-listed company, since 2023. Previously, from 2018 to 2020, Mr. Wang was the Chairman and CEO of Alberton Acquisition Corp., a Nasdaq-listed company. From 2010 to 2012, he served as Independent Board Director in Sky Digital Stores Corp. (SKYC), participating in the company’s public listing process. From 2007 to 2018, Bin has provided his corporate advisory services to dozens of corporation clients in the US and Asia. Bin began his financial career at Chemical Bank in 1994 when he served as a commercial banking manager for the bank’s domestic Asian market. From 1996 to 2000, he served as Vice President and Team Leader of Chase International Financial Services, to promote the bank’s business in Asia-Pacific region. After Chase merged with JPMorgan in 2000, Bin continued to work at JPMorgan Chase until late 2006, playing a wide range of management roles in the development and growth of international business. Mr. Wang graduated from Northwestern Polytechnic University in 1980, obtained his Master of Science degree in Mechanical Engineering from Xi’an Jiaotong University in 1983, and earned his Master of Arts degree in economics from Illinois State University in 1992. Mr. Wang was selected to serve as a member of our board of directors because of his extensive senior-level experience in the financial services industry and his profound knowledge of our business and the industry as a whole. 41 Lun Feng, Director. Mr. Feng has served as a director on our board of directors since the closing of the IPO . Since August 2015, Mr. Feng has held the position of executive director at Si Fang Yu Feng Investment Co., Ltd., a Chinese investment management company. From June 2009 to June 2021, he served as the chairman of the board of directors at Beijing Wan Tong Li Ti Zhi Cheng Investment Co., Ltd., a Chinese investment management company. Additionally, Mr. Feng currently holds the position of an independent director at three public companies listed on the Shanghai Stock Exchange and Shenzhen Stock Exchange. These companies include Bank of Xi’an Co., Ltd., Shanghai Xinnanyang Only Education and Technology Co., Ltd., and Bona Film Group Co., Ltd. Mr. Feng received his bachelor’s degree in political economy from Northwest University (China) in 1982. Mr. Feng was selected to serve as a member of our board of directors because of his extensive senior-level management experience of public companies, his board experience and his extensive knowledge of our business and industry. Alan Jacobs, Director. Mr. Jacobs has served as a director on our board of directors since the closing of the IPO . Mr. Jacobs has over 40 years of experience as a corporate and securities attorney, investment banker, business and financial advisor and senior executive of both private and public companies. Since August 2018, Mr. Jacobs has been serving as President at Worthy Lending, LLC. In addition, he has been serving as Executive Vice President, Treasurer and Chief Strategy Officer of Worthy Financial, Inc. since January 2016. Mr. Jacobs currently serves as President of the Worthy Lending V subsidiary. He currently also serves as Executive Vice President, Chief Operating Officer, and a member of the board of directors of Worthy Financial, Inc.’s wholly owned subsidiaries, including Worthy Peer Capital, Inc., Worthy Peer Capital II, Inc., Worthy Community Bonds, Inc., Worthy Community Bonds II, Inc. and Worthy Property Bonds, Inc., and as President of their respective wholly owned loan and investment subsidiaries, all since their respective dates of organization. From 2016 to 2018 Mr. Jacobs was the Founder and President of CorpFin Management Group where he was focused on business development, strategic planning, and corporate development. From September 2014 to December 2015, Mr. Jacobs was associated with ViewTrade Securities, a FINRA registered broker-dealer where he was focused on advisory and corporate services. Prior to that time and for more than 30 years, Mr. Jacobs was associated with several FINRA registered broker-dealers including Ladenburg Thalman & Co. Inc., Josephthal & Company, and Capital Growth Securities. Mr. Jacobs received his bachelor’s degree from Franklin and Marshall College in 1963 and his law degree from Columbia University in 1966. Mr. Jacobs was selected to serve as a member of our board of directors because of his extensive experience in the investment and financial services industry. Information about the Board of Directors Our board of directors oversees our business and affairs and monitors the performance of management. In accordance with corporate governance principles, the board does not involve itself in day-to-day operations. The directors keep themselves informed through discussions with our chief executive officer and other key executives, by reading the reports and other materials that we send them, and by participating in board and committee meetings. Directors hold office until their successors have been elected and qualified or until he or she resigns or have been removed or disqualified. Committees of the Board of Directors We established an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. We have adopted a charter for each of the three committees. Each committee’s members and functions are described below. The rules of the Nasdaq Stock Market, or the Nasdaq Rules, require a majority of a listed company’s board of directors to be composed of independent directors within one year of listing. In addition, the Nasdaq Rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and governance committees be independent. Under the Nasdaq Rules, a director will only qualify as an independent director if, in the opinion of the board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The Nasdaq Rules also require that audit committee members satisfy independence criteria set forth in Rule 10A-3 under the Exchange Act. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee, accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries or otherwise be an affiliated person of the listed company or any of its subsidiaries. In considering the independence of compensation committee members, the Nasdaq Rules require that the board of directors if a listed company must consider additional factors relevant to the duties of a compensation committee member, including the source of any compensation the company pays to the director and any affiliations with the company. 42 Audit Committee. Our Audit Committee consists of three independent directors. The members of the Audit Committee are Bin Wang, Lun Feng and Alan Jacobs, with Mr. Wang serving as the committee chair. The Audit Committee consists exclusively of directors who are financially literate. Mr. Wang is considered an “audit committee financial expert” as defined by the SEC’s rules and regulations. The Audit Committee responsibilities include: ● overseeing the compensation and work of and performance by our independent auditor and any other registered public accounting firm performing audit, review or attestation services for us; ● engaging, retaining and terminating our independent auditor and determining the terms thereof; ● assessing the qualifications, performance and independence of the independent auditor; ● evaluating whether the provision of permitted non-audit services is compatible with maintaining the auditor’s independence; ● reviewing and discussing the audit results, including any comments and recommendations of the independent auditor and the responses of management to such recommendations; ● reviewing and discussing the annual and quarterly financial statements with management and the independent auditor; ● producing a committee report for inclusion in applicable SEC filings; ● reviewing the adequacy and effectiveness of internal controls and procedures; ● establishing procedures regarding the receipt, retention and treatment of complaints received regarding the accounting, internal accounting controls, or auditing matters and conducting or authorizing investigations into any matters within the scope of the responsibility of the Audit Committee; and ● reviewing transactions with related persons for potential conflict of interest situations. Compensation Committee. Our Compensation Committee consists of three independent directors. The members of the Compensation Committee are Lun Feng, Bin Wang and Alan Jacobs, with Mr. Feng serving as the committee chair. The committee has primary responsibility for: ● reviewing and recommending all elements and amounts of compensation for each executive officer, including any performance goals applicable to those executive officers; ● reviewing and recommending for approval the adoption, any amendment and termination of all cash and equity-based incentive compensation plans; ● once required by applicable law, causing to be prepared a committee report for inclusion in applicable SEC filings; ● approving any employment agreements, severance agreements or change of control agreements that are entered into with the CEO and certain executive officers; and ● reviewing and recommending the level and form of non-employee director compensation and benefits. 43 Nominating and Governance Committee. The Nominating and Governance Committee consists of three independent directors. The members of the Nominating and Governance Committee are Alan Jacobs, Bin Wang and Lun Feng, with Mr. Jacobs serving as the committee chair. The Nominating and Governance Committee’s responsibilities include: ● recommending persons for election as directors by the stockholders; ● recommending persons for appointment as directors to the extent necessary to fill any vacancies or newly created directorships; ● reviewing annually the skills and characteristics required of directors and each incumbent director’s continued service on the board; ● reviewing any stockholder proposals and nominations for directors; ● advising the board of directors on the appropriate structure and operations of the board and its committees; ● reviewing and recommending standing board committee assignments; ● developing and recommending to the board Corporate Governance Guidelines, a Code of Business Conduct and Ethics and other corporate governance policies and programs and reviewing such guidelines, code and any other policies and programs at least annually; ● making recommendations to the board as to determinations of director independence; and ● making recommendations to the board regarding corporate governance based upon developments, trends, and best practices. The Nominating and Governance Committee will consider stockholder recommendations for candidates for the board of directors. Involvement in Certain Legal Proceedings None of our directors and executive officers have been involved in any of the following events during the past ten years: ● any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; ● any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); ● being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking activities or to be associated with any person practicing in banking or securities activities; ● being found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; ● being subject of, or a party to, any federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or ● being subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. 44 Code of Business Conduct and Ethics We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of the code is made available in the Corporate Governance section of our website, which is located at flyebike.com. Our stockholders are also able to review these documents by accessing our public filings at the SEC’s website at www.sec.gov . If we make any substantive amendments to, or grant any waivers from, the code of business conduct and ethics for any officer or director, we will disclose the nature of such amendment or waiver on our website or in a current report on Form 8-K filed with the SEC. Trading Policies On May 3, 2024, we adopted insider trading policies and procedures governing the purchase, sale, and/or other dispositions of our securities by directors, officers and employees, which are reasonably designed to promote compliance with insider trading laws, rules and regulations, and applicable Nasdaq listing standards (the “Insider Trading Policy”). Clawback Policy Our board of directors has adopted a clawback policy that covers our executive officers, who are defined as our chief executive officer, president, chief financial officer, principal accounting officer (or the controller, if no such accounting officer exists), any vice-president in charge of a significant principal business unit, division, or function (such as sales, administration, or finance), and any other officer or person who performs a policy-making function. This clawback policy pertains to incentive-based compensation, which includes any compensation that is granted, earned, or vested wholly or in part based on the achievement of a financial reporting measure. It mandates the recovery of such compensation from an executive officer in cases where we must prepare an accounting restatement due to material noncompliance with U.S. financial reporting requirements under the securities laws. This includes any necessary restatement to correct an error in previously issued financial statements that is material to those statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected. The Compensation Committee will make determinations regarding “materiality” for the purposes of this policy. The incentive-based compensation eligible for recovery under this policy includes compensation received during the three completed fiscal years immediately preceding the date we are required to prepare an accounting restatement, as outlined above. This applies provided that the individual served as an executive officer at any time during the performance period relevant to the incentive-based compensation. Section 16 Compliance Section 16(a) of the Exchange Act requires the Company’s officers, directors and persons who beneficially own more than ten percent of its common stock to file reports of ownership and changes in ownership with the SEC. These reporting persons are also required to furnish the Company with copies of all Section 16(a) forms they file. Based solely on our review of such forms furnished to us, we believe that all reports applicable to our executive officers, directors and greater than ten percent beneficial owners were filed in a timely manner in accordance with Section 16(a) of the Exchange Act. Item 11. Executive Compensation The following table shows the compensation awarded to or earned during the years ended March 31, 2024 and 2023 by our chief executive officer. Other than as listed below, we did not have any officers that received more than $100,000 in compensation during the years ended March 31, 2024 and 2023. Summary Compensation Table Name and principal position Year Salary Bonus Stock Awards Option Awards All Other Compensation Total ($) Zhou Ou 2024 $ 100,000 — — — — $ 100,000 Chief Executive Officer 2023 $ 100,000 — — — — $ 100,000 45 Outstanding Equity Awards at Fiscal Year End None. Employment Agreements Zhou Ou, Chief Executive Officer Mr. Ou has entered into an employment agreement with one of our subsidiaries, FLYEBIKE Inc, dated April 1, 2023. The employment agreement provides that Mr. Zhou Ou will serve as the Chief Executive Officer of the Company and will receive a monthly base salary of $8,333. He will also be entitled to reimbursement for authorized and reasonable expenses. The agreement allows for at-will termination by either party. If Mr. Ou’s employment is terminated due to death or disability, he or his estate will receive salary and benefits through the termination date. The Company may terminate the agreement for cause, releasing it from all further obligations except for accrued salary and benefits through the termination date. “Cause” includes failure or neglect by Mr. Ou to perform duties, disobedience to orders, misconduct such as misappropriation of funds, personal profit from Company transactions, misrepresentation, legal violations, acts involving moral turpitude or unethical conduct, disloyalty including aiding a competitor, failure to devote full-time efforts to the Company, not working exclusively for the Company, non-cooperation in investigations, breaches of the employment agreement or the Company rules, and any other act of misconduct or omission. The agreement includes covenants for non-disclosure, non-solicitation, and non-competition. For two years post-termination, Mr. Ou agrees not to solicit the Company’s customers or engage in competing business activities within New York State. Ruifeng (Steven) Guo, Chief Financial Officer Mr. Guo has entered into an employment agreement with one of our subsidiaries, FLYEBIKE Inc, dated April 1, 2023. The employment agreement provides that Mr. Ruifeng Guo will serve as the Chief Financial Officer of the Company and will receive a monthly base salary of $5,000. He will also be entitled to reimbursement for authorized and reasonable expenses. The agreement allows for at-will termination by either party. If Mr. Guo’s employment is terminated due to death or disability, he or his estate will receive salary and benefits through the termination date. The Company may terminate the agreement for cause, releasing it from all further obligations except for accrued salary and benefits through the termination date. “Cause” includes failure or neglect by Mr. Guo to perform duties, disobedience to orders, misconduct such as misappropriation of funds, personal profit from Company transactions, misrepresentation, legal violations, acts involving moral turpitude or unethical conduct, disloyalty including aiding a competitor, failure to devote full-time efforts to the Company, not working exclusively for the Company, non-cooperation in investigations, breaches of the employment agreement or the Company rules, and any other act of misconduct or omission. The agreement includes covenants for non-disclosure, non-solicitation, and non-competition. For two years post-termination, Mr. Guo agrees not to solicit the Company’s customers or engage in competing business activities within New York State. Employee Benefit Plans 2024 Omnibus Incentive Plan We have adopted the 2024 Plan at the closing of the IPO (the “Effective Date”). The number of shares of our common stock available for issuance under the 2024 Plan is 2,500,000 (the “Share Limit”). We have not issued any grants or awards under the 2024 Plan. The following is a summary of the material terms of the 2024 Plan. Plan Administration The 2024 Plan is administered by our Compensation Committee. Our board of directors retains the authority under the 2024 Plan to exercise any or all of the powers and authorities related to the administration and implementation of the 2024 Plan. Award Eligibility Awards under the 2024 Plan may be made to our or any of our affiliates’ employees, officers and directors, as well as to consultants and advisors currently providing services to us or any of our affiliates at the time of such award. Reversion of Shares If any shares covered by an award are not purchased or are forfeited or expire, or if any award otherwise terminates without delivery of any shares subject to the award or is settled in cash in lieu of shares, then the number of shares counted against the Share Limit with respect to such award will, to the extent of any such forfeiture, termination, expiration or settlement, again be available for issuance under the 2024 Plan. Awards The 2024 Plan provides for the grant of awards of stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units, deferred stock units, unrestricted stock, dividend equivalent rights, and other equity-based awards. 46 Stock Options Stock options granted under the 2024 Plan may be nonqualified stock options or incentive stock options within the meaning of Section 422 of the Code. Each option will become vested and exercisable at such times and under such conditions as our Compensation Committee may approve consistent with the terms of the 2024 Plan. No option may be exercisable more than ten years after the option grant date. Our Compensation Committee may include in the option agreement provisions specifying the period during which an option may be exercised following termination of the grantee’s service. The exercise price per share of our common stock for each option granted under the 2024 Plan may not be less than 100%, or 110% in the case of an incentive stock option granted to a stockholder who owns more than ten percent of our voting stock, of the fair market value of a share of our common stock on the option grant date, except in the case of an option granted upon assumption of, or in substitution for, outstanding awards previously granted under a compensatory plan by a business entity acquired or to be acquired by us or an affiliate of ours or with which we or an affiliate has combined or will combine. Payment of the exercise price for shares purchased pursuant to the exercise of an option may be made in such forms as are approved by our Compensation Committee. These forms may include, in our Compensation Committee’s discretion, cash, cash equivalents, shares of our common stock and net issuance. Restricted Stock, Restricted Stock Units, and Deferred Stock Units Restricted stock is an award of our common stock on which vesting restrictions are imposed that subject such shares of our common stock to a substantial risk of forfeiture, as defined in Section 83 of the Code. A restricted stock unit is an award that represents a conditional right to receive shares of our common stock in the future and that may be made subject to the same types of restrictions and risk of forfeiture as restricted stock. A deferred stock unit is a restricted stock unit that may be settled at some point in the future at a time or times consistent with the requirements of Section 409A of the Code. Stock Appreciation Rights A SAR is a right to receive upon exercise, in the form of common stock, cash or a combination of common stock and cash, the excess of the fair market value of one share of common stock on the exercise date over the grant price of the SAR. SARs may be granted in conjunction with all or a part of any option or other award granted under the 2024 Plan, or without regard to any option or other award. Upon exercise of a SAR, the holder will be entitled to receive, in the specified form of consideration, the excess of the fair market value of one share of our common stock on the exercise date over the exercise price of the SAR, as determined by our Compensation Committee. The exercise price of a SAR may not be less than the fair market value of a share of our common stock on the grant date. Dividend Equivalent Rights Dividend equivalent rights entitle the grantee to receive cash, shares of our common stock, or a combination of both equal to the amount of that the grantee would have received had the grantee held a specified number of shares of our common stock during the period. Dividend equivalent rights may be granted independently or in connection with the grant of any equity-based award, except that no dividend equivalent right may be granted in connection with, or related to an option or SAR. Other Equity-Based Awards Our Compensation Committee may grant other types of equity-based or equity-related awards in such amounts and subject to such terms and conditions as our Compensation Committee may determine, including unrestricted stock and dividend equivalent rights which are described in more detail in the 2024 Plan. Changes to Capital Structure In the event of a merger, reorganization, recapitalization, reclassification, stock split, reverse stock split, spin-off combination of shares, exchange of shares, stock dividend or other distribution payable in capital stock, or other increase or decrease in such shares effected without the receipt of consideration by us, then the number and kind of shares for which grants of options and other awards may be made under the 2024 Plan may be adjusted proportionately and accordingly by our Compensation Committee. 47 Change of Control Except as otherwise provided in the applicable award agreement, upon the occurrence of a change of control of our Company in which outstanding awards are not being assumed or continued, all outstanding shares of restricted stock, restricted stock units, deferred stock units, dividend equivalent rights and performance-based awards will be deemed to have vested and any underlying shares of our common stock will be deemed delivered immediately before the change of control; and either or both of the following actions shall be taken: (i) at our Compensation Committee’s discretion, all options and SARs will become exercisable fifteen days before the change of control (with any exercise of an option or SAR during such fifteen day period to be contingent upon the consummation of the change of control) and terminate upon the change of control to the extent not exercised; and/or (ii) at our Compensation Committee’s discretion, all options, SARs, shares of restricted stock, restricted stock units, deferred stock units, dividend equivalent rights and/or performance-based awards will be canceled and cashed out in connection with the change of control. Other equity-based awards will be governed by the terms of the applicable award agreement. If we experience a change of control in which outstanding awards that are not exercised prior to the change of control will be assumed or continued by the surviving entity, then, except as otherwise provided in the applicable award agreement, in another agreement with the grantee, or as otherwise set forth in writing, upon the occurrence of the change of control, the 2024 Plan and the awards granted under the 2024 Plan will continue in the manner and under the terms so provided in the event of the change of control to the extent that provision is made in writing in connection with such change of control for the assumption or continuation of such awards, or for the substitution for such awards with new awards, with appropriate adjustments as to the number of shares (disregarding any consideration that is not common stock) and exercise prices of options and SARs. Plan Amendment and Termination The Compensation Committee may adopt, amend and rescind rules relating to the administration of the 2024 Plan, and our board of directors may amend, suspend, or terminate the 2024 Plan at any time; provided, that, no such amendment or termination will be made that materially and adversely impairs the rights of any participant with respect to any award granted under the 2024 Plan without the participant’s consent, other than amendments that are necessary to permit the granting of awards in compliance with applicable laws. The 2024 Plan will automatically terminate the day before the tenth (10 th ) anniversary of the Effective Date, unless earlier terminated by our board of directors or in accordance with the terms of the 2024 Plan. Director Compensation The following table sets forth information as to the compensation paid to our directors in the year ended March 31, 2024: Name Cash Compensation Stock Awards Total Bin Wang (1) - - - Lun Feng (1) - - - Alan Jacobs (1) - - - Zhou Ou (2) - - - Ruifeng (Steven) Guo (3) $ 60,000 $ 60,000 (1) The appointment of our independent directors took effect upon the effectiveness of the registration statement as of May 14, 2024 and therefore they did not receive any compensation for the year ended March 31, 2024. (2) Mr. Ou does not receive any additional compensation as a director in addition to his compensation disclosed in the Summary Compensation Table. (3) Mr. Guo receives $5,000 per month for serving as Chief Financial Officer of the Company. Mr. Guo does not receive any additional compensation as a director in addition to his compensation disclosed in the Summary Compensation Table. 48 Director Agreements Each of the Company’s independent directors, Bin Wang, Lun Feng and Alan Jacobs, has entered into an Independent Director Agreement (each, an “Independent Director Agreement”). Under the Independent Director Agreement between us and each of our independent directors, each independent director is entitled to an annual cash fee of $50,000. We will also reimburse each independent director for pre-approved reasonable business-related expenses incurred in good faith in connection with the performance of the director’s duties for us. As also required under each Independent Director Agreement, we have separately entered into a standard indemnification agreement with each of our directors, the term of which began on the date of the director’s appointment. Item 12. Security Ownership of Certain Beneficial Owner and Management and Related Stockholder Matters The following table sets forth information with respect to the beneficial ownership of our common stock as of June 27, 2024 by: ● each person known to us to beneficially own 5% or more of our common stock; ● each director; ● each of our executive officers; and ● all officers and directors as a group. All information with respect to beneficial ownership has been furnished by the respective 5% or more stockholders, directors or executive officers, as the case may be. Each person is deemed to own beneficially shares of common stock that are issuable upon exercise of options, warrants or upon conversion of convertible securities if they are exercisable or convertible within 60 days of June 27, 2024. Except as otherwise indicated each person has the sole power to vote and dispose of all shares of common stock listed opposite his or her name. Unless otherwise noted, the mailing address of each listed beneficial owner is c/o Fly-E Group, Inc., 136-40 39 th Avenue, Flushing, NY 11354. Name and address of beneficial owner Shares beneficially owned Percentage owned Executive Officers and Directors Zhou Ou 7,700,000 31.32 % Ruifeng Guo — — % Rui Feng 1,760,000 7.16 % Ke Zhang 7,370,000 29.97 % Bin Wang — — % Lun Feng — — % Alan Jacobs — — % Directors and Officers as a group (seven persons) 16,830,000 68.45 % Securities Authorized for Issuance Under Equity Compensation Plans We have adopted the 2024 Plan in order to grant equity-based and other incentive awards to our officers, employees, directors, consultants and advisers. There are 2,500,000 shares of common stock reserved for future issuance under the 2024 Plan. We have not issued any grants or awards under the 2024 Plan. 49 Item 13. Certain Relationships and Related Transactions, and Director Independence Except as set forth below, during our last two fiscal years, we have not entered into any material transactions or series of transactions that would be considered material in which any director or executive officer or beneficial owner of 5% or more of any class of our capital stock, or any immediate family member of any of the preceding persons, had a direct or indirect material interest: From April 1, 2022 to March 31, 2024, our Chairman and CEO, Mr. Ou, provided financial support to the Company by advancing funds and making various payments on behalf of the Company totaling $3,187,807. These amounts payable to Mr. Ou are unsecured, bear no interest and do not have a maturity date. From April 1, 2022 to March 31, 2024, the Company repaid a total of $3,171,996 to Mr. Ou, including repayment of amounts owed to Mr. Ou. As of March 31, 2024, the Company transferred $2,263,630 of the payable balance along with a cash contribution of $136,370 from Mr. Ou as capital contribution. As of March 31, 2024 and 2023, the remaining balance of these payables was $92,229 and $332,481, respectively. The Company paid a total of $290,252 to Mr. Zhou Ou during the year ended March 31, 2024. From April 1, 2022 to March 31, 2024, Mr. Rui Feng, our Chief Operating Officer, advanced a total of $711 to the subsidiaries of the Company to support their business operations. These amounts payable to Mr. Feng are unsecured, bear no interest and do not have a maturity date. From April 1, 2022 to March 31, 2024, the Company repaid $64,937 to Mr. Feng. As of March 31, 2024, the Company has paid off all amounts owed to Mr. Feng. From April 1, 2022 to March 31, 2024, Mr. Ke Zhang, our Chief Human Resource Officer, advanced an aggregate of $58,252 to the subsidiaries of the Company to support their business operations. These amounts payable to Mr. Zhang are unsecured, bear no interest and do not have a maturity date. From April 1, 2022 to March 31, 2024, the Company repaid $243,122 to Mr. Zhang. As of March 31, 2024, the Company has paid off all amount owed to Mr. Zhang. On March 6, 2021, the Company and DGLG Accounting and Tax LLC (“DGLG”) entered into an engagement letter, wherein the Company engaged DGLG as a consultant to assist the Company in its IPO planning, financing and tax services. Mr. Guo is a partner at DGLG. In December 2022, the Company hired Mr. Guo as its CFO. 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. For the years ended March 31, 2024 and 2023, DGLG’s consulting fees were $100,000 and $25,000, respectively. For the years ended March 31, 2024 and 2023, the Company paid DGLG a total of $123,000 and $13,050, respectively, for tax services. On February 1, 2023, PJMG LLC (“PJMG”), a company in which Mr. Guo, our CFO, holds over 50% of the equity interests, provided a loan of $150,000 to the Company (the “PJMG Loan”). The PJMG Loan was unsecured, bore no interest and was set to mature on May 31, 2024. Furthermore, the Company has agreed to retain the services of PJMG as a consultant following the completion of its IPO. To secure these services, the Company prepaid a total of $210,000 to PJMG during the year ended March 31, 2024, of which $150,000 was applied to offset the PJMG Loan. Fly E Bike SRL, a company formed under the laws of the Dominican Republic and in which Mr. Ou holds over 50% of the equity interests, is a distributor for the Company. During the years ended March 31, 2024 and 2023, Fly E Bike SRL purchased certain EV products from the Company in the amount of $326,914 and $136,565, respectively. As of March 31, 2024 and 2023, the Company had accounts receivable from Fly E Bike SRL in the amounts of $326,914 and $136,565, respectively. In addition, during the year ended March 31, 2024, the Company advanced a total of $291,756 to Fly E Bike SRL. Such advance is unsecured, bears no interest and does not have a maturity date. As of March 31, 2024, Fly E Bike SRL has repaid $111,500 to the Company. In December 2023, the Company engaged DF Technology US Inc (“DFT”) for certain technology services. Mr. Guo, our CFO, owns over 50% of the equity interest in DFT. For the year ended March 31, 2024, the Company paid a total of $1,554,000 to DFT, of which $275,000 was recognized as construction in progress and the remaining of $1,279,000 was prepayment for software development as of March 31, 2024. Director Independence We believe that each of our directors, Messrs. Wang, Feng, and Jacobs, is an independent director using the Nasdaq definition of independence. 50 Related Party Transaction Policy Our Company has adopted a written Related Party Transaction Policy, or the Policy, for the purpose of describing the procedures used to identify, review, approve and disclose, if necessary, any transaction in which (i) the Company is a participant and (ii) a related person has or will have a direct or indirect material interest. Once a related party transaction in which the aggregate amount involved will or may be expected to exceed the lesser of $120,000 or 1% of the Company’s total assets at year-end for the last two completed fiscal years if the Company qualifies as a smaller reporting company in any calendar year has been identified, the Audit Committee or the full board must review the transaction for approval or ratification. In determining whether to approve or ratify a related party transaction, the Audit Committee or the full board shall consider all relevant facts and circumstances, including the following factors: (i) the materiality and character of the related person’s direct or indirect interest; (ii) the commercial reasonableness of the terms; (iii) any Company contractual obligations; (iv) the benefit or perceived benefit, or lack thereof, to the Company; (v) the opportunity cost of alternate transactions; and (vi) the actual or apparent conflict of interest of the related person. Any director who has a direct or indirect material interest in the proposed related person transaction may be present during initial presentation of the related person transaction to the Audit Committee or the board, but should not participate in the Audit Committee or the board action regarding whether to approve or ratify the transaction. If, however, a proposed transaction arises in which all directors are deemed to have a direct or indirect material interest in the transaction, the interested directors may participate in the consideration and approval of the proposed transaction, and the Company may enter into any such related person transaction that is approved in accordance with the provisions of the Delaware General Corporation Law. Item 14. Principal Accounting Fees and Services The following table sets forth the fees billed by Marcum Asia CPAs LLP (“Marcum Asia”) and Friedman LLP (“Friedman”) , our registered independent public accounting firms, for 2024 and 2023 for the categories of services indicated. Year Ended March 31, 2024 2023 Audit fees $ 552,065 $ 410,502 Tax Fees - - All Other Fees - - Total All Fees $ 552,065 $ 410,502 Audit fees consist of fees related to professional services rendered in connection with the audit of our annual financial statements, review of our quarterly financial statements and review of our registration statement on Form S-1 relating to our initial public offering. Our policy is to pre-approve all audit and permissible non-audit services performed by the independent accountants. These services may include audit services, audit-related services, tax services and other services. The pre-approval is made by the audit committee of the board of directors. Our board approved all services that our independent accountants provided to us in the past two fiscal years. 51 Part IV Item 15. Exhibits, Financial Statement Schedules (a) The following documents are filed as part of this report: (1) Financial Statements: Page Report of Independent Registered Public Accounting Firm (PCAOB ID:5395) F-2 Consolidated Balance Sheets as of March 31, 2024 and 2023 F-3 Consolidated Statements of Income and Comprehensive Income for the Years Ended March 31, 2024 and 2023 F-4 Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended March 31, 2024 and 2023 F-5 Consolidated Statements of Cash Flows for the Years Ended March 31, 2024 and 2023 F-6 Notes to Consolidated Financial Statements F-7 (2) Financial Statement Schedules: All financial statement schedules are omitted because they are not applicable or the amounts are immaterial and not required, or the required information is presented in the financial statements and notes thereto beginning on page F-1. (3) Exhibits We hereby file as part of this report the exhibits listed in the attached Exhibit Index. Exhibits which are incorporated herein by reference can be inspected on the SEC website at www.sec.gov. Item 16. Form 10-K Summary Not Applicable. 52 EXHIBIT INDEX Exhibit number Description 1.1 Underwriting Agreement, dated as of June 5, 2024, by and between the Company and The Benchmark Company, LLC. 2 3.1 Amended and Restated Articles of Incorporation, as amended. 1 3.2 Amended and Restated Bylaws. 1 4.1* Description of Securities of the Registrant 4.2 Form of Underwriter's Warrant, dated June 7, 2024 1 10.1* Employment agreement dated April 1, 2023 by and between FLYEBIKE Inc and Zhou Ou. † 10.2* Employment agreement dated April 1, 2023 by and between FLYEBIKE Inc and Ruifeng Guo. † 10.3 Fly-E Group, Inc. 2024 Omnibus Incentive Plan. 1† 10.4 Form of the Independent Director’s Agreement of Fly-E Group, Inc. 1 10.5 Form of Indemnification Agreement 1 10.6* Engagement Letter dated March 6, 2021, by and between the Company and DGLG Accounting and Tax LLC. 10.7* Contract Agreement for the Development of POS and ERP System dated December 13, 2023 between the Company and DF Technology US Inc. # 10.8* Contract of Sale dated March 19, 2024 by and between He’s Realty Holdings LLC and AOFL LLC # 14.1* Code of Ethics 19.1* Insider Trading Policy 21.1* List of Subsidiaries. 31.1* Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2* Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1** Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2** Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 97.1* Clawback policy 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) (1) Filed as an exhibit to the Company’s registration statement on Form S-1 (File No. 333-276830) filed on May 3, 2024 and incorporated herein by reference. (2) Filed as an exhibit to the Company’s current report on Form 8-K filed on June 7, 2024 and incorporated herein by reference. * Filed herewith. ** Furnished herewith † Compensatory plan or arrangement. # The exhibits and schedules to this Exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant hereby agrees to furnish a copy of any omitted schedules to the Commission upon request. 53 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized. Date: June 27, 2024 FLY-E GROUP, INC. By: /s/ Zhou Ou Name: Zhou Ou Title: Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Zhou Ou Chief Executive Officer (Principal Executive Officer) and Director June 27, 2024 Zhou Ou /s/ Ruifeng Guo Chief Financial Officer (Principal Accounting and Financial Officer) and Director June 27, 2024 Ruifeng Guo /s/ Bin Wang Director June 27, 2024 Bin Wang /s/ Lun Feng Director June 27, 2024 Lun Feng /s/ Alan Jacobs Director June 27, 2024 Alan Jacobs 54 FLY-E GROUP, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 5395 ) F-2 Consolidated Balance Sheets as of March 31, 2024 and 2023 F-3 Consolidated Statements of Income and Comprehensive Income for the Years Ended March 31, 2024 and 2023 F-4 Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended March 31, 2024 and 2023 F-5 Consolidated Statements of Cash Flows for the Years Ended March 31, 2024 and 2023 F-6 Notes to Consolidated Financial Statements F-7 F- 1 Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors of Fly-E Group, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Fly-E Group, Inc. (the “Company”) as of March 31, 2024 and 2023, the related consolidated statements of income and comprehensive income, stockholders’ equity and cash flows for each of the years in the two-year period ended March 31, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended March 31, 2024, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Marcum Asia CPAs LLP Marcum Asia CPAs LLP We have served as the Company’s auditor since 2022 (such date takes into account the acquisition of certain assets of Friedman LLP by Marcum Asia CPAs LLP effective September 1, 2022). New York , NY June 27, 2024 NEW YORK OFFICE • 7 Penn Plaza • Suite 830 • New York, New York • 10001 Phone 646.442.4845 • Fax 646.349.5200 • www.marcumasia.com F- 2 FLY-E GROUP, INC. CONSOLIDATED BALANCE SHEETS (Expressed in U.S. dollars, except for the number of shares) March 31, 2024 March 31, 2023 ASSETS Current Assets Cash $ 1,403,514 $ 358,894 Accounts receivable 212,804 389,077 Accounts receivable – related parties 326,914 136,565 Inventories, net 5,364,060 3,838,754 Prepayments and other receivables 588,660 782,819 Prepayments and other receivables – related parties 240,256 — Total Current Assets 8,136,208 5,506,109 Property and equipment, net 1,755,022 785,285 Security deposits 781,581 424,942 Deferred IPO costs 502,198 75,819 Deferred tax assets, net 35,199 211,100 Operating lease right-of-use assets 16,000,742 10,261,556 Intangible assets, net 36,384 — Long-term prepayment for property 450,000 — Long-term prepayment for software development – related parties 1,279,000 — Total Assets $ 28,976,334 $ 17,264,811 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities Accounts payable $ 1,180,796 $ 1,005,401 Current portion of long-term loan payables 1,213,242 412,224 Accrued expenses and other payables 925,389 365,662 Other payables – related parties 92,229 332,481 Operating lease liabilities – current 2,852,744 1,836,737 Taxes payable 1,530,416 959,456 Total Current Liabilities 7,794,816 4,911,961 Long-term loan payables 412,817 723,228 Long-term loan payables – related parties — 150,000 Operating lease liabilities – non-current 13,986,879 8,979,193 Total Liabilities 22,194,512 14,764,382 Commitment and Contingencies Stockholders’ Equity Preferred stock, $ 0.01 par value, 4,400,000 shares authorized and nil outstanding as of March 31, 2024 and March 31, 2023* — — Common stock, $ 0.01 par value, 44,000,000 shares authorized and 22,000,000 shares outstanding as of March 31, 2024 and March 31, 2023* 220,000 220,000 Additional Paid-in Capital 2,400,000 — Shares Subscription Receivable ( 219,998 ) ( 219,998 ) Retained Earnings 4,395,649 2,500,427 Accumulated other comprehensive loss ( 13,829 ) — Total FLY-E Group, Inc. Stockholders’ Equity 6,781,822 2,500,429 Total Liabilities and Stockholders’ Equity $ 28,976,334 $ 17,264,811 * 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. The accompanying notes are an integral part of these consolidated financial statements. F- 3 FLY-E GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Expressed in U.S. dollars, except for the number of shares) For the Years Ended March 31, 2024 2023 Revenues $ 32,205,666 $ 21,774,937 Cost of Revenues 19,099,120 13,485,405 Gross Profit 13,106,546 8,289,532 Operating Expenses Selling Expenses 5,914,786 3,667,227 General and Administrative Expenses 3,931,203 2,309,927 Total Operating Expenses 9,845,989 5,977,154 Income from Operations 3,260,557 2,312,378 Other Expenses, net ( 30,352 ) ( 11,524 ) Interest Expenses, net ( 152,050 ) ( 100,387 ) Income Before Income Taxes 3,078,155 2,200,467 Income Tax Expense ( 1,182,933 ) ( 821,896 ) Net Income $ 1,895,222 $ 1,378,571 Other Comprehensive Income (Loss) Foreign currency translation adjustment ( 13,829 ) — Total Comprehensive Income $ 1,881,393 $ 1,378,571 Earnings per Share* $ 0.09 $ 0.06 Weighted Average Number of Common Stock – Basic and Diluted* 22,000,000 22,000,000 * 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. The accompanying notes are an integral part of these consolidated financial statements. F- 4 FLY-E GROUP, INC. 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, 2022 — $ — 22,000,000 $ 220,000 $ — $ ( 219,998 ) $ — $ 1,121,856 $ 1,121,858 Net Income — — — — — — — 1,378,571 1,378,571 Balance at March 31, 2023 — $ — 22,000,000 $ 220,000 — ( 219,998 ) $ — $ 2,500,427 $ 2,500,429 Net Income — — — — — — — 1,895,222 1,895,222 Capital contributions — — — — 2,400,000 — — — 2,400,000 Foreign currency translation adjustment — — — — — — ( 13,829 ) — ( 13,829 ) Balance at March 31, 2024 — $  — 22,000,000 $ 220,000 $ 2,400,000 $ ( 219,998 ) $ ( 13,829 ) $ 4,395,649 $ 6,781,822 * 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. The accompanying notes are an integral part of these consolidated financial statements. F- 5 FLY-E GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in U.S. dollars, except for the number of shares) For the Years Ended March 31, 2024 2023 Cash flows from operating activities Net income $ 1,895,222 $ 1,378,571 Adjustments to reconcile net income to net cash provided by operating activities: Loss on disposal of property, and equipment 46,084 — Depreciation expense 272,708 145,783 Amortization expense 1,648 — Deferred income taxes expenses 176,093 448,800 Amortization of operating lease right-of-use assets 2,277,910 1,905,028 Loss from termination of operating lease 5,957 — Inventories reserve 456,209 151,378 Changes in operating assets and liabilities: Accounts receivable 176,273 ( 334,752 ) Accounts receivable – related parties ( 190,349 ) ( 136,565 ) Inventories ( 1,981,515 ) 615,394 Prepayments and other receivables 194,160 ( 637,630 ) Prepayments for operation services to related parties ( 60,000 ) — Security deposits ( 422,240 ) ( 130,680 ) Accounts payable 2,489,025 ( 70,928 ) Accrued expenses and other payables 334,726 ( 105,097 ) Operating lease liabilities ( 1,933,760 ) ( 1,697,190 ) Taxes payable 570,769 225,027 Net cash provided by operating activities 4,308,920 1,757,139 Cash flows from investing activities Purchases of equipment ( 1,253,555 ) ( 442,915 ) Purchases of property rights ( 38,032 ) — Prepayments for property ( 450,000 ) — Prepayment for purchasing software from a related party ( 1,279,000 ) — Payment received from a related party 111,500 — Advance to a related party ( 291,756 ) — Net cash used in investing activities ( 3,200,843 ) ( 442,915 ) Cash flows from financing activities Borrowing from loan payables 1,095,000 1,500,000 Repayments of loan payables ( 639,367 ) ( 278,222 ) Repayments on other payables - related parties ( 290,252 ) ( 2,496,323 ) Payments of related party loan ( 150,000 ) — Deferred IPO Cost ( 201,379 ) ( 75,819 ) Capital contributions from Stockholders 136,370 — Net cash used in financing activities ( 49,628 ) ( 1,350,364 ) Net changes in cash 1,058,449 ( 36,140 ) Effect of exchange rate changes on cash ( 13,829 ) — Cash at beginning of the year 358,894 395,034 Cash at the end of the year $ 1,403,514 $ 358,894 Supplemental disclosure of cash flow information Cash paid for interest expense $ 152,050 $ 100,341 Cash paid for income taxes $ 435,881 $ 148,064 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 $ 34,974 $ — Unpaid deferred IPO cost $ 225,000 $ 11,717 Termination of operating lease right-of-use assets and operating lease liabilities $ ( 2,814,235 ) — Right-of-use assets obtained in exchange for operating lease liabilities $ 10,771,688 $ 4,082,664 The accompanying notes are an integral part of these consolidated financial statements. F- 6 FLY-E GROUP, INC. Notes to 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.”). As of June 27, 2024, the Company has opened a total of 40 stores, including 39 stores in the U.S and one store in Canada. 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 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 consolidated financial statements of Fly-E Group. The consolidated financial statements include the financial statements of the Company and each of the following subsidiaries as of March 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. F- 7 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 ● A retail store 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. F- 8 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 ● A retail store 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. F- 9 FLYBWY INC. ● A New York corporation ● Incorporated on March 2, 2022 ● A retail store 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 ● A retail store 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. F- 10 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. 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 store 100% owned by Fly E-Bike, Inc. Liquidity As of March 31, 2024, the Company had working capital of approximately $ 0.34 million and cash of approximately $ 1.4 million. The Company had net income of approximately $ 1.9 million and $ 1.4 million for the years ended March 31, 2024 and 2023, respectively. 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. The management plans to increase the Company’s revenue by strengthening its sales force, providing attractive sales incentive programs, and increasing marketing and promotion activities. The working capital requirements are affected by the efficiency of operations and depend on the Company’s ability to increase its revenue. The Company anticipates that it will continue to generate net income for the foreseeable future and believes that its cash on hand and operating cash flows will be sufficient to fund its operations over at least the next 12 months from the date of issuance of these consolidated financial statements. F- 11 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Presentation The accompanying 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”). (b) Principles of Consolidation The 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 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. F- 12 (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 March 31, 2024 and 2023, no balance deposited with banks was uninsured. (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. Management considers the following factors when determining the collectability of specific accounts: historical experience, credit worthiness of the clients, aging of the receivables and other specific circumstances related to the accounts. An allowance for doubtful accounts is made and recorded into general and administrative expenses based on the aging of accounts receivable and on any specifically identified accounts receivable that may become uncollectible. 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. No allowance for doubtful accounts as of March 31, 2024 and 2023 was recorded. On April 1, 2023, the Company adopted ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement on Credit Losses on Financial Instruments”, including certain subsequent amendments, transitional guidance and other interpretive guidance within ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-11, ASU 2020-02 and ASU 2020-03 (collectively, including ASU 2016-13, “ASC 326”). ASC 326 introduces an approach based on expected losses to estimate the allowance for doubtful accounts, replacing the previous incurred loss impairment model, which makes allowances when there is substantial doubt as to the collectability and a loss is determined to be probable. 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. The Company concludes that there is no impact over the initial adoption of CECL model, which should be treated as cumulative-effect adjustment on retained earnings as of March 31, 2023. There was nil and nil provision of allowance for credit losses as of March 31, 2024 and 2023, 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 years ended March 31, 2024 and 2023, the impairment loss was $ 456,209 and $ 151,378 , respectively. F- 13 (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 March 31, 2024 and 2023, 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 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 March 31, 2024, construction in progress was $ 275,000 and primarily relating to the cost incurred to develop the software from DFT. (k) Definite-Lived Intangible Assets The Company owns property rights of certain technologies and designs that relate to the Underwriter Laboratories certificates issued for its products. The Company capitalizes the costs associated with design, development, acquisition and maintenance of its acquired property rights and amortizes these assets over their remaining useful lives on a straight-line basis. Any further payments made to maintain or develop the property rights would be capitalized and amortized over the balance of the useful life for the property rights. 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. F- 14 The estimated useful lives of intangibles assets are as follows: Property rights 5 - 20 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 March 31, 2024 and 2023, 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. (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 March 31, 2024 and 2023. (o) Revenue Recognition 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. F- 15 Product revenue — Performance obligation satisfied at point in time 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 $ 27,714 and $ 22,056 of warranty reserves under accrued expenses and other payables as of March 31, 2024 and 2023, respectively. The Company has no contract assets and contract liabilities balances as of March 31, 2024 and 2023, respectively. Disaggregated information of revenues by business lines are as follows: For the Years Ended March 31, 2024 2023 Revenues-retail $ 26,389,720 $ 18,844,921 Revenues-wholesale 5,815,946 2,930,016 Net revenues $ 32,205,666 $ 21,774,937 (p) Selling Expenses Selling expenses mainly consist of advertising costs, marketing referring expenses 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 $ 64,423 and $ 49,420 for the years ended March 31, 2024 and 2023, respectively. F- 16 (q) Software Development Costs ASC Topic 985-20, Software — Costs of Software to Be Sold, Leased, or Marketed, requires companies to expense software development costs as they incur them until technological feasibility has been established, at which time those costs are capitalized until the product is available for general release to customers. The development of the Fly E-Bike app is still in its preliminary stage and the development of core functions has not yet been completed. As a result, the Company expensed the development costs of the Fly E-Bike app as they incurred. For the years ended March 31, 2024 and 2023, development costs amounted to $ 7,460 and $ 80,040 , 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 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 year ended March 31, 2024, the Company accrued $ 60,487 income tax related penalty included in taxes payable in the consolidated balance sheets. For the year ended March 31, 2023, no penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. (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. 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 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 consolidated balance sheets. F- 17 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 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 years ended March 31, 2024 and 2023. For the year ended March 31, 2024, the Company’s top three suppliers represented 36 %, 21 % and 13 % of total purchases of the Company, respectively. For the year ended March 31, 2023, the Company’s top three suppliers represented 33 %, 21 % and 12 % of total purchase of the Company respectively. As of March 31, 2024, three suppliers accounted for 31 %, 26 %, and 23 % of accounts payable balance, respectively. As of March 31, 2023, three suppliers accounted for 55 %, 27 % and 11 % 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. F- 18 (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. (v) Earnings 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 presents the dilutive effect on a per share basis of the potential common stock (e.g., convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. 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 years ended March 31, 2024 and 2023, 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) 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 in conjunction with its Form 10-K 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 in conjunction with its Form 10-K for the fiscal year ending March 31, 2026. F- 19 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 consolidated balance sheets, statements of income and comprehensive income and statements of cash flows. (y) Reclassification The Company has reclassified certain prior year amounts to conform to current year presentation. The Company reclassified $ 279,985 from inventories reserve to changes in inventories for the year ended March 31, 2023 in the consolidated statement of cash flows. The reclassification had no impact to the Company’s net cash provided by operating activities for the year ended March 31, 2023. 3 — INVENTORIES, NET Inventories, net consisted of the following: March 31, 2024 March 31, 2023 Batteries $ 1,009,228 $ 1,370,513 Electric Vehicles 2,634,643 2,485,573 Tires 687,927 414,031 Accessories 1,546,283 — Inventories 5,878,081 4,270,117 Inventory reserves ( 514,021 ) ( 431,363 ) Inventories, net $ 5,364,060 $ 3,838,754 Movements of inventory reserves are as follows: March 31, 2024 March 31, 2023 Beginning balance $ 431,363 $ 279,985 Addition 456,209 151,378 Write off ( 373,551 ) — Ending Balance $ 514,021 $ 431,363 As of March 31, 2024 and 2023, the inventory allowance balance was $ 514,021 and $ 431,363 , respectively. For the years ended March 31, 2024 and 2023, the impairment loss was $ 456,209 and $ 151,378 , respectively. 4 — PREPAYMENTS AND OTHER RECEIVABLES Prepayments and other current assets as of March 31, 2024 and 2023 consisted of the following: March 31, 2024 March 31, 2023 Prepaid rent $ 179,792 $ 26,332 Prepayments to vendors 143,018 647,746 Prepaid iCloud Server 1,747 — Prepayments to DMV — 500 Prepaid insurance 237,207 108,241 Prepayments to other service providers 26,896 — Total Prepayment and Other Receivables $ 588,660 $ 782,819 F- 20 5 — PROPERTY AND EQUIPMENT, NET Property and equipment as of March 31, 2024 and 2023 consisted of the following: March 31, 2024 March 31, 2023 Furniture & Fixtures $ 400,558 $ 113,485 Machinery & Equipment 212,317 103,684 Automobile 306,607 242,633 Leasehold improvements 976,870 575,134 Construction in progress-Software 275,000 — Property and Equipment 2,171,352 1,034,936 Less: Accumulated depreciation ( 416,330 ) ( 249,651 ) Property and Equipment, net $ 1,755,022 $ 785,285 For the years ended March 31, 2024 and 2023, the depreciation expenses were $ 272,708 and $ 145,783 , respectively. In December 2023, the Company engaged DFT, a related party, for certain technology services, for example ERP system. The total contract price for the technology services provided will be up to $ 2.5 million, which will be payable in installments as per the milestones outlined. 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 March 31, 2024, construction in progress was $ 275,000 and primarily relating to the cost incurred to develop the software from DFT. As of March 31, 2024, the Company had a prepayment of $ 1,279,000 to DFT (see Note 13 – Long-term prepayment for software development – related parties, net). In the future, the Company needs to pay up to $ 0.9 million to DFT. 6 — INTANGIBLE ASSETS, NET Intangible assets as of March 31, 2024 and 2023 consisted of the following: March 31, 2024 March 31, 2023 Property rights $ 38,032 $ — Total Intangible assets 38,032 — Less: Accumulated Amortization ( 1,648 ) — Intangible assets, net $ 36,384 $ — For the years ended March 31, 2024 and 2023, the amortization expenses were $ 1,648 and nil , respectively. F- 21 7 — ACCRUED EXPENSES AND OTHER PAYABLES March 31, 2024 March 31, 2023 Accrued payroll $ 121,120 $ 15,808 Advances from customers 25,099 36,396 Advances from IGH Holding Inc 49,000 — Accrued warranty 27,714 22,056 Payroll tax and sales tax payable 245,226 155,689 Accrued store expenses 21,975 123,996 Accrued IPO offering cost 225,000 11,717 Accrued freight in cost 107,255 — Accrued professional fee 103,000 — Accrued Expenses and Other Current Liabilities $ 925,389 $ 365,662 8 — LOAN PAYABLE A summary of the Company’s loans is listed as follows: Lender Due Date March 31, 2024 March 31, 2023 Flushing Bank (i) June 1, 2027 $ — $ 435,537 Chase Bank (ii) October 25, 2027 176,366 214,529 Chase Bank (iii) January 12, 2028 56,580 68,051 Chase Bank (x) September 28, 2028 221,197 — Xuper Funding (iv)(v) May 01, 2023 — 259,072 Leaf Capital Funding, LLC (vi) September 30, 2027 46,856 58,263 Sinoelite Corp (vii) April 03, 2024 100,000 100,000 Automobile Loan – Honda (viii) June 25, 2027 28,833 — Bank of Hope (ix) September 15, 2024 391,227 — Bank of Hope (ix) September 22, 2024 400,000 — Bank of Hope (ix) December 12, 2024 205,000 — Total loan payables 1,626,059 1,135,452 Current portion of loan payables ( 1,213,242 ) ( 412,224 ) Long-term loan payables $ 412,817 $ 723,228 (i) On June 14, 2022, Ctate (now merged into Fly E-Bike, Inc.) obtained a five-year long-term loan of $ 500,000 from Flushing Bank with an annual interest rate of 7 %. The collateral provided includes all of Ctate’s inventory, accounts, notes, machinery, equipment, fixtures and other products, and any proceeds and products generated from these items in any form. On September 20, 2023, the Company paid off this loan in full. (ii) 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. From April 1 to June 26, 2024, the Company paid $9,888 on principal and interest of the loan. F- 22 (iii) 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. From April 1 to June 26, 2024, the Company paid $4,455 on principal and interest of the loan. (iv) On January 11, 2023, Fly E-Bike, Inc. obtained a seven-month short-term loan of $ 250,000 from Xuper Funding with annual interest rate of 136 %. On May 1, 2023, the Company paid off this loan in full. (v) On February 23, 2023, Fly E-Bike, Inc. obtained a seven-month short-term loan of $ 100,000 from Xuper Funding with an annual interest rate of 54 %. On May 1, 2023, the Company paid off this loan in full. (vi) 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. From April 1 to June 26, 2024, the Company paid $3,785 on principal and interest of the loan. (vii) 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. (viii) 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. From April 1 to June 26, 2024, the Company paid $1,579 on principal and interest of the loan. (ix) 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. (x) 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 right, title and interest in all of its properties, whether now owned or hereinafter acquired and whether now existing or hereafter arising. From April 1 to June 26, 2024, the Company paid $10,329 on principal and interest of the loan. For the years ended March 31, 2024 and 2023, the total interest expenses on the Company’s outstanding loans amounted to $ 152,050 and $ 100,387 , respectively. F- 23 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. As of March 31, 2024 and 2023, the subscription receivable represents the unpaid capital contribution of $ 219,998 by the stockholders. During the year ended March 31, 2024, 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 March 31, 2024, a total of $ 2.4 million were transferred and recorded as capital contribution (see Note 13). 10 — INCOME TAX (a) Income Tax Expense The company conduct business both domestically and internationally and, as a result, the parent company and most of its subsidiaries file a consolidated income tax return in U.S. federal, U.S. states and U.S. Cities, and one of the subsidiaries files a foreign income tax return in certain foreign jurisdictions. The Company will file a consolidated annual U.S. federal tax return for tax year ending March 31, 2024, as well as combined tax returns for New Jersey, New York State, Florida, Texas, California, District of Columbia, and New York City. Most subsidiaries of the Company were incorporated in the State of New York and are subject to the U.S. federal corporate income taxes with a tax rate of 21.0 %. The State of New York levies a corporate income tax rate of 8.45 % on state-level earnings. In addition, a sum of fixed dollar minimum taxes is imposed on the taxable group members, in accordance with their gross receipts within the State of New York. The City of New York levies a 6.50 % city corporate income tax, along with a sum of fixed dollar minimum taxes, applied to taxable group members based on their gross receipts within the city. Four of the Company’s subsidiaries are located in New Jersey, which imposes a state income tax rate of 9.0 %. One of the Company’s subsidiaries is located in Florida, which imposes a state income tax rate of 5.5 %. Two subsidiaries of the Company are located in Texas, which imposes a state income tax rate of 0.75 % on the appointed state revenue. One of the Company’s subsidiaries is located in California, which imposes a state income tax rate of 8.84 %. One of the Company’s subsidiaries is located in District of Columbia, which imposes a state income tax rate of 8.25 %. The Company’s wholly owned foreign subsidiary in Canada will file a Canadian federal tax return for tax year ending March 31, 2024, as well as Ontario state tax return. It is subject to the Canadian federal corporate income taxes with a tax rate of 15.0 % and Ontario state corporate income taxes with a tax rate of 11.5 %. Income tax on unappropriated earnings is accrued during the period the earnings arise and adjusted to the extent that distributions are approved by the stockholders in the following year. F- 24 Income tax expense for the years ended March 31, 2024 and 2023 amounted to $ 1.18 million and $ 0.82 million, respectively. Significant components of the provision for income taxes are as follows: For the Year Ended March 31, 2024 2023 Current Federal $ 474,445 $ 210,924 State 297,885 107,325 City 234,510 54,847 Deferred Federal 158,300 236,200 State 36,300 115,700 City 21,500 96,900 Foreign ( 40,007 ) — Total $ 1,182,933 $ 821,896 The provision for income taxes is based on the following pretax income (loss): For the Year Ended March 31, 2024 2023 U.S. $ 3,275,797 $ 2,200,467 Canada ( 197,642 ) - Total $ 3,078,155 $ 2,200,467 For the year ended March 31, 2024, the total pre-tax income was $ 3.1 million, which included $ 3.3 million pre-tax income in U.S. and $ 0.2 million pre-tax loss in Canada. For the year ended March 31 2023, the total pre-tax income was $ 2.2 million all of which was generated in the U.S. The following table reconciles to the Company’s effective tax rate: For the Year Ended March 31, 2024 2023 Pre-tax book income $ 3,078,155 $ 2,200,467 Federal Statutory rate 21.0 % 21.0 % State income tax rate, net of federal income tax benefit 7.9 % 9.5 % City income tax rate, net of federal income tax benefit 5.0 % 6.9 % Foreign statutory rate — — Permanent differences 5.2 % 1.6 % Return to project adjustment ( 0.8 )% ( 1.6 )% Total 38.3 % 37.4 % F- 25 Penalties and interest incurred related to underpayment of income tax are classified as income tax expenses in the period incurred. For the years ended March 31, 2024, the Company accrued $ 60,487 in income tax related penalty included in taxes payable in the consolidated balance sheets. United States Income tax expense for the year ended March 31, 2024 and 2023 amounted to $ 1.22 million and $ 0.82 million, respectively. Significant components of the provision for income taxes are as follows: For the Year Ended March 31, 2024 2023 Current Federal $ 474,445 $ 210,924 State 297,885 107,325 City 234,510 54,847 Deferred Federal 158,300 236,200 State 36,300 115,700 City 21,500 96,900 Total $ 1,222,940 $ 821,896 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 year ended March 31, 2024 and 2023 amounted to $ 40,007 and nil , respectively. Significant components of the provision for income taxes are as follows: For the Year Ended March 31, 2024 2023 Current Federal $ — $ — State — — City — — Deferred Federal ( 22,845 ) — State ( 17,515 ) — City 353 — Total $ ( 40,007 ) $ — F- 26 (b) Deferred Tax Assets (Liabilities) Net DTAs as of March 31, 2024 amounted to $ 35,199 , and as of March 31, 2023, net Deferred Tax Assets (the “DTLs”) amounted to $ 211,100 . Significant components of DTAs (DTLs), net are as follows: As of March 31, 2024 As of March 31, 2023 Net operating loss carry forwards $ 40,332 $ 93,800 Inventory reserve 186,000 155,400 Lease liability 5,810,000 3,702,500 Less: Valuation allowance — — Total deferred tax assets (DTAs) $ 6,036,332 $ 3,951,700 Accumulated depreciation ( 482,133 ) ( 230,600 ) ROU asset ( 5,519,000 ) ( 3,510,000 ) Total deferred tax liabilities (DTLs) ( 6,001,133 ) ( 3,740,600 ) Total deferred tax assets, net $ 35,199 $ 211,100 Deferred tax assets (liabilities) – U.S., net $ ( 5,000 ) $ 211,100 Deferred tax assets – Canada, net $ 40,199 — As of March 31, 2024 and 2023, the Company had approximately $ 6.04 million and $ 3.95 million, respectively, in the DTAs, which respectively included approximately $ 0.04 million and $ 0.09 million related to net operating loss carryforwards that can be used to offset taxable income in future periods, $ 5.81 million and $ 3.70 million related to lease liability, and $ 0.19 million and $ 0.16 million related to inventory allowance. As of March 31, 2024 and 2023, the Company had approximately $ 6.00 million and $ 3.74 million, respectively, which included $ 0.48 million and $ 0.23 million, respectively, in the DTLs that related to accumulated depreciation and $ 5.52 million and $ 3.51 million related to ROU asset. 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 March 31, 2024 and 2023, the Company recorded approximately $ 0.04 million and $ 0.21 million, 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 March 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. For the year ended March 31, 2024 and 2023, the Company’s pre-tax book income in the U.S. was approximately $ 3.08 million and $ 2.20 million, respectively, and all of previous net tax loss carry forward was used to reduce taxable income in the current period. In addition, for the years ended March 31, 2024 and 2023, the Company’s pre-tax book loss in Canada was approximately $ 0.20 million and nil , respectively. 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 March 31, 2024 and 2023, the Company did not have any significant unrecognized uncertain tax positions. F- 27 11 — LEASES Effective on April 1, 2019, the Company adopted Topic 842. 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: March 31, 2024 March 31, 2023 Operating ROU: ROU assets $ 16,000,742 $ 10,261,556 Total operating ROU assets $ 16,000,742 $ 10,261,556 March 31, 2024 March 31, 2023 Operating lease obligations: Current operating lease liabilities $ 2,852,744 $ 1,836,737 Non-current operating lease liabilities 13,986,879 8,979,193 Total lease liabilities $ 16,839,623 $ 10,815,930 The Company had 38 and 31 leases as of March 31, 2024 and 2023, respectively. 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 weighted average lease term, discount rates, and remaining lease terms for the operating lease as of March 31, 2023 were as follows: Remaining lease term and discount rate: Weighted average discount rate 5 % Weighted average remaining lease term (years) 6.47 years The Company leases its offices, warehouse, and retail stores under non-cancellable operating lease agreements. Lease expenses were $ 3.31 million, including $ 0.66 million cost of goods-occupancy cost, $ 2.42 million rent expense in selling expense, and $ 0.23 million rent expense in general and administrative expense for the year ended March 31, 2024. Lease expenses were $ 2.34 million, including $ 0.48 million cost of goods-occupancy cost, $ 1.74 million rent expense in selling expense, and $ 0.12 million rent expense in general and administrative expense for the year ended March 31, 2023. F- 28 As of March 31, 2024, future minimum lease liabilities, all under office and facilities non-cancellable operating lease agreements, were as follows: As of March 31, 2024 Operating Lease Liabilities 2025 $ 3,818,603 2026 3,774,838 2027 3,666,143 2028 3,260,536 2029 2,678,719 Thereafter 2,889,477 Total lease payments 20,088,316 Less: interest ( 3,248,693 ) Present value of lease liabilities $ 16,839,623 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 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. As of March 31, 2024, the remaining commitment amount for purchase of software development is $ 946,000 , and the Company will pay this amount within one year. As of March 31, 2024, the remaining commitment amount for purchase of office property is $ 3,144,000 , and the Company will pay $ 1,589,700 within one year and mortgage the rest $ 1,554,300 . 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 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. F- 29 13 — RELATED PARTY TRANSACTIONS (A) Related party balances Accounts receivable — related parties Name of Related Party Relationship Nature March 31, 2024 March 31, 2023 Fly E Bike SRL Zhou Ou (CEO), owns over 50% equity interest of this entity Accounts receivable $ 326,914 $ 136,565 Accounts receivable — related parties $ 326,914 $ 136,565 In June 2024, the Company received $ 282,814 from Fly E Bike SRL. Prepayments and other receivables — related parties Name of Related Party Relationship Nature March 31, 2024 March 31, 2023 Fly E Bike SRL Zhou Ou (CEO), owns over 50% equity interest of this entity Other receivables $ 180,256 — PJMG LLC Ruifeng Guo (CFO), owns over 50% equity interest of this entity Prepayments $ 60,000 — Prepayments and other receivables – related parties $ 240,256 $ — During the year ended March 31, 2024, the Company advanced $ 291,756 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. During the year ended March 31, 2024, Fly E Bike SRL repaid $ 111,500 to the Company. On June 12, 2024, the Company received $ 180,256 from Fly E Bike SRL. For the prepayments to PJMG LLC, please refer to Note 13 - Loan payables — related party. Long-term prepayment for software development – related parties, net Name of Related Party Relationship Nature March 31, 2024 March 31, 2023 DF Technology US Inc Ruifeng Guo (CFO), owns over 50% equity interest of this entity Long-term prepayment for software development $ 1,279,000 $ — Long-term prepayment for software development — related parties, net $ 1,279,000 $ — F- 30 In December 2023, the Company engaged DFT for certain technology services. Mr. Guo, the Company’s CFO, owns over 50 % of the equity interest in DFT. As of March 31, 2024, the Company paid $ 1,279,000 to DFT as prepayment for software development. As of March 31, 2024, construction in progress was $ 275,000 (see Note 5 – Property and Equipment). Other payables — related parties Name of Related Party Relationship Nature March 31, 2024 (i) March 31, 2023 (i) Zhou Ou Chairman, CEO of the Company Other payable $ 92,229 $ 332,481 Other Payables-related parties $ 92,229 $ 332,481 (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 $ 290,252 and $ 2,496,323 to Mr. Zhou Ou during the years ended March 31, 2024 and 2023, respectively. Loan payables — related party Name of Related Party Relationship Nature March 31, 2024 March 31, 2023 PJMG LLC Ruifeng Guo (CFO) owns over 50% equity interest of this entity Loan payable $ — $ 150,000 Loan Payables-related parties $ — $ 150,000 On February 1, 2023, PJMG LLC (“PJMG”), a company in which Mr. Guo, the Company’s CFO, holds over 50 % of the equity interests, provided a loan of $ 150,000 to the Company (the “PJMG Loan”). The PJMG Loan was unsecured, bore no interest and was set to mature on May 31, 2024. Furthermore, the Company has agreed to retain the services of PJMG as a consultant following the completion of its IPO. To secure these services, the Company prepaid a total of $ 210,000 to PJMG during the year ended March 31, 2024, of which $ 150,000 was applied to offset the PJMG Loan. The remaining prepayments balance was $ 60,000 as of March 31, 2024, and it will be used from June 2024. See Note 13 - Prepayments and other receivables — related parties. F- 31 (B) Related party transactions Revenues — related party For the Years ended March 31, Name of Related Party Relationship Nature 2024 2023 Fly E Bike SRL Zhou Ou (CEO) owns over 50% equity interest of this entity Product sales $ 326,914 $ 136,565 Revenues-related parties $ 326,914 $ 136,565 During the years ended March 31, 2024 and 2023, Fly E Bike SRL purchased certain EV products from the Company in the amount of $ 326,914 and $ 136,565 , respectively. (C) Other Related Party Transactions (i) During the year ended March 31, 2024, 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 $ 2,263,630 , a portion of the accounts payable balance, along with a cash contribution of $ 136,370 from Mr. Zhou Ou as capital contribution (see Note 9). On July 18, 2023, Mr. Ou paid $ 50,000 to one of the vendors on behalf the Company. As of March 31, 2024, a total of $ 2,400,000 were transferred and recorded as capital contribution (see Note 9). (ii) 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 CFO, 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 $ 100,000 and $ 25,000 for the years ended March 31, 2024 and 2023, respectively. In addition, during the year ended March 31, 2024, the Company paid DGLG a total of $ 123,000 for tax services rendered by DGLG. 14 — SUBSEQUENT EVENTS The Company has evaluated subsequent events after March 31, 2024, up through June 27, 2024, the date at which the consolidated financial statements were issued, except for the event mentioned below the Company did not identify any subsequent events with material financial impact on the Company’s consolidated financial statements. On April 25, 2024, the Company paid off the loan from Sinoelite Corp of $ 100,000 . 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. The Company also issued to The Benchmark Company, LLC, the representative of the underwriters, and its designees warrants to purchase 129,375 shares of its common stock. On June 1, 2024, the Company engaged Taptalk LLC to promote the Company’s designated products or corporate image on the TikTok shop platform. The contract is valid from June 1, 2024 to June 2025. On June 14, 2024, the Company paid $ 160,500 to Taptalk LLC. F-32