Fly-E Group, Inc. 10-Q

Item 1. Financial Statements FLY-E GROUP, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Expressed in U.S. dollars, except for the number of shares) June 30, 2024 March 31, 2024 ASSETS Current Assets Cash $ 4,467,868 $ 1,403,514 Accounts receivable 371,916 212,804 Accounts receivable – related parties 47,742 326,914 Inventories, net 6,089,083 5,364,060 Prepayments and other receivables 2,654,196 588,660 Prepayments and other receivables – related parties 240,162 240,256 Total Current Assets 13,870,967 8,136,208 Property and equipment, net 2,011,495 1,755,022 Security deposits 805,435 781,581 Deferred IPO costs - 502,198 Deferred tax assets, net 94,298 35,199 Operating lease right-of-use assets 15,757,380 16,000,742 Intangible assets, net 35,433 36,384 Long-term prepayment for property 569,700 450,000 Long-term prepayment for software development– related parties 2,054,000 1,279,000 Total Assets $ 35,198,708 $ 28,976,334 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities Accounts payable $ 406,449 $ 1,180,796 Current portion of long-term loan payables 1,116,044 1,213,242 Accrued expenses and other payables 422,098 925,389 Other payables – related parties 2,229 92,229 Operating lease liabilities – current 3,092,721 2,852,744 Taxes payable 1,131,009 1,530,416 Total Current Liabilities 6,170,550 7,794,816 Long-term loan payables 381,890 412,817 Operating lease liabilities – non-current 13,675,379 13,986,879 Total Liabilities 20,227,819 22,194,512 Commitment and Contingencies Stockholders’ Equity Preferred stock, $ 0.01 par value, 4,400,000 shares authorized and nil outstanding as of June 30, 2024 and March 31, 2024* — — Common stock, $ 0.01 par value, 44,000,000 shares authorized and 24,587,500 shares outstanding as of June 30, 2024 and 22,000,000 shares outstanding as of March 31, 2024* 245,875 220,000 Additional Paid-in Capital 10,744,024 2,400,000 Shares Subscription Receivable ( 219,998 ) ( 219,998 ) Retained Earnings 4,216,141 4,395,649 Accumulated other comprehensive loss ( 15,153 ) ( 13,829 ) Total FLY-E Group, Inc. Stockholders’ Equity 14,970,889 6,781,822 Total Liabilities and Stockholders’ Equity $ 35,198,708 $ 28,976,334 * 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 unaudited condensed consolidated financial statements. 1 FLY-E GROUP, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME (Expressed in U.S. dollars, except for the number of shares) For the Three Months Ended June 30, 2024 2023 Revenues $ 7,873,426 $ 7,842,346 Cost of Revenues 4,773,792 5,119,631 Gross Profit 3,099,634 2,722,715 Operating Expenses Selling Expenses 1,612,495 1,083,106 General and Administrative Expenses 1,532,638 872,065 Total Operating Expenses 3,145,133 1,955,171 (Loss) Income from Operations ( 45,499 ) 767,544 Other Income (Expenses), net 6,518 ( 11,078 ) Interest Expenses, net ( 68,082 ) ( 32,623 ) (Loss) Income Before Income Taxes ( 107,063 ) 723,843 Income Tax Expense ( 72,445 ) ( 283,400 ) Net (Loss) Income $ ( 179,508 ) $ 440,443 Other Comprehensive Income (Loss) Foreign currency translation adjustment ( 1,324 ) — Total Comprehensive (Loss) Income $ ( 180,832 ) $ 440,443 (Losses) Earnings per Share* $ ( 0.01 ) $ 0.02 Weighted Average Number of Common Stock – Basic and Diluted* 22,636,250 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 unaudited condensed consolidated financial statements. 2 FLY-E GROUP, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Expressed in U.S. dollars, except for the number of shares) Preferred Stock Common Stock Additional Paid-in Shares Subscription Accumulated Other Comprehensive Retained Total Stockholders’ Shares* Amount Shares* Amount Capital Receivables Loss Earnings Equity Balance at March 31, 2024 — $ —   22,000,000 $ 220,000 2,400,000 ( 219,998 ) $ ( 13,829 ) $ 4,395,649 $ 6,781,822 Net Loss — — — — — — — ( 179,508 ) ( 179,508 ) Issuance of common stock upon initial public offering, net — — 2,587,500 25,875 8,344,024 — — — 8,369,899 Foreign currency translation adjustment — — — — — — ( 1,324 ) — ( 1,324 ) Balance at June 30, 2024 — $ — 24,587,500 $ 245,875 $ 10,744,024 $ ( 219,998 ) $ ( 15,153 ) $ 4,216,141 $ 14,970,889 * 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. Preferred Stock Common Stock Shares Subscription Additional Paid-in Retained Total Stockholders’ Shares* Amount Shares* Amount Receivables Capital Earnings Equity Balance at March 31, 2023 — $ — 22,000,000 $ 220,000 ( 219,998 ) $ — $ 2,500,427 $ 2,500,429 Net Income — — — — — 440,443 440,443 Capital Contribution — — 22,000,000 $ 220,000 ( 219,998 ) 2,400,000 — 2,400,000 Balance at June 30, 2023 — $ — 22,000,000 $ 220,000 ( 219,998 ) $ 2,400,000 $ 2,940,870 $ 5,340,872 * 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 unaudited condensed consolidated financial statements. 3 FLY-E GROUP, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in U.S. dollars, except for the number of shares) For the Three Months Ended June 30, 2024 2023 Cash flows from operating activities Net (loss) income $ ( 179,508 ) $ 440,443 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Depreciation expense 95,051 63,668 Amortization expense 951 — Deferred income taxes (benefits) expenses ( 59,099 ) 208,800 Amortization of operating lease right-of-use assets 798,044 485,467 Inventories reserve 176,072 153,625 Changes in operating assets and liabilities: Accounts receivable ( 159,112 ) ( 53,742 ) Accounts receivable – related parties 279,172 ( 282,814 ) Inventories ( 901,095 ) ( 1,411,037 ) Prepayments and other receivables ( 2,065,536 ) ( 185,406 ) Prepayments for operation services to related parties ( 180,000 ) — Security deposits ( 23,854 ) ( 52,809 ) Accounts payable ( 774,347 ) 1,681,224 Accrued expenses and other payables ( 503,291 ) 195,049 Operating lease liabilities ( 626,205 ) ( 458,937 ) Taxes payable ( 399,407 ) 36,504 Net cash (used in) provided by operating activities ( 4,522,164 ) 820,035 Cash flows from investing activities Purchases of equipment ( 351,524 ) ( 390,055 ) Prepayments for property ( 119,700 ) — Prepayment for purchasing software from a related party ( 775,000 ) — Repayment from a related party 180,256 — Advance to a related party ( 162 ) — Net cash used in investing activities ( 1,066,130 ) ( 390,055 ) Cash flows from financing activities Advance to a related party — ( 56,000 ) Borrowing from loan payables 247,500 — Repayments of loan payables ( 375,625 ) ( 296,002 ) Repayments on other payables - related parties ( 90,000 ) 182,239 Payments of related party loan — ( 75,000 ) Capital Contributions from Stockholders — 136,370 Payments of IPO cost ( 282,403 ) Net proceeds from issuance of common stock - IPO 9,154,500 — Net cash provided by (used in) financing activities 8,653,972 ( 108,393 ) Net changes in cash 3,065,678 321,587 Effect of exchange rate changes on cash ( 1,324 ) — Cash at beginning of the period 1,403,514 358,894 Cash at the end of the period $ 4,467,868 $ 680,481 Supplemental disclosure of cash flow information Cash paid for interest expense $ 68,082 $ 32,623 Cash paid for income taxes $ 481,929 $ 81,268 Supplemental disclosure of non-cash investing and financing activities Settlement of accounts payable by capital contribution $ — $ 2,263,630 Purchase of vehicle funded by loan $ — $ 34,974 Deferred IPO cost recognized as additional paid-in capital $ 502,198 $ — Termination of operating lease right-of-use assets and operating lease liabilities $ ( 2,962 ) — Right-of-use assets obtained in exchange for operating lease liabilities $ 557,643 $ 1,234,944 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 FLY-E GROUP, INC. Notes to Unaudited Condensed Consolidated Financial Statements 1 — DESCRIPTION OF BUSINESS, ORGANIZATION AND BASIS OF PRESENTATION Organization and principal activities Fly-E Group, Inc. (the “Company” or “Fly-E Group”) was incorporated under the laws of the State of Delaware on November 1, 2022. The Company has no substantive operations other than holding all of the issued and outstanding shares of Fly E-Bike Inc. (“Fly E-Bike”) and Fly EV, Inc. (“Fly EV”). Fly E-Bike and Fly EV were incorporated under the laws of the State of Delaware on August 22, 2022 and November 1, 2022, respectively. Fly EV has no substantive operations. The Company, through its wholly owned subsidiaries, is principally engaged in designing, installing and selling smart electric bikes (“E-bikes”), electric motorcycles (“E-motorcycles”), electric scooters (“E-scooters”), and related accessories under the brand name of “Fly E-Bike.” The Company’s principal operations and geographic markets are mainly in the United States of America (the “U.S.”). As of August 14, 2024, the Company has opened a total of 40 stores, including 39 retail stores in the U.S and one retail store in Canada. The Company offers rental services from selected locations. The Company also operates one online store, focusing on selling E-motorcycles, E-bikes, and E-scooters. The Company plans to open another online store focusing on selling gas bikes in the future. The Company’s business was initially operated under CTATE INC. (“Ctate”), a corporation formed under the laws of the State of New York in 2018. Before merging with Fly E-Bike, Ctate owned 27 companies, each of which operated a Fly E-Bike store. On September 12, 2022, Ctate and Fly E-Bike, which was a wholly-owned subsidiary of Ctate, entered into an Agreement and Plan of Merger, pursuant to which Ctate merged into and with Fly E-Bike, with Fly E-Bike being the surviving corporation (the “Merger”). As a result of the Merger, the original shareholders of Ctate became the stockholders of Fly E-Bike and subsequently effectively controlled the combined entity. On December 21, 2022, Fly-E Group and Fly E-Bike entered into a Share Exchange Agreement, pursuant to which Fly-E Group acquired all of the issued and outstanding shares of Fly E-Bike by issuing its shares to the stockholders of Fly E-Bike on a one-for-one basis (the “Share Exchange”). As a result of the Share Exchange, Fly E-Bike became a wholly owned subsidiary of Fly-E Group. As a result of the Merger and the Share Exchange, Fly E-Bike and its subsidiaries are under common control of Fly-E Group, resulting in the consolidation of Fly E-Bike and its subsidiaries, which was accounted as a reorganization of entities under common control at carrying value. The unaudited condensed consolidated financial statements are prepared on the basis as if the reorganization became effective as of the beginning of the first period presented in the unaudited condensed consolidated financial statements of Fly-E Group. On June 7, 2024, the Company issued 2,250,000 shares of common stock, at a price of $ 4.00 per share in its initial public offering (“IPO”). The gross proceeds of the offering were $ 9.0 million, prior to deducting the underwriting discounts, commissions and offering expenses payable by the Company. In addition, the Company granted the underwriters a 30-day option to purchase an additional 337,500 shares of common stock at the initial public offering price, less underwriting discounts and commissions, to cover over-allotments. On June 25, 2024, the Company issued an additional 337,500 shares of common stock to the underwriters of its IPO for gross proceeds of $ 1.4 million upon full exercise of the underwriters’ over-allotment option. Net proceeds received by the Company from its initial public offering, including the exercise of the over-allotment option, were approximately $ 9.2 million. The Company also issued to The Benchmark Company, LLC (“Benchmark”), the representative of the underwriters, and its designees warrants to purchase 129,375 shares. The unaudited condensed consolidated financial statements include the financial statements of the Company and each of the following subsidiaries as of June 30, 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. 5 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. 6 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. 7 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. 8 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. FWMOTOR INC. ● A New York corporation ● Incorporated on April 3, 2024 ● A retail store 100% owned by Fly E-Bike, Inc. DCMOTOR INC. ● A Maryland corporation ● Incorporated on April 9, 2024 ● A retail store 100% owned by Fly E-Bike, Inc. AOFL LLC ● A New York corporation ● Incorporated on June 25, 2024 ● A holding company 100% owned by Fly E-Bike, Inc. Liquidity As of June 30, 2024, the Company had working capital of approximately $ 7.7 million and cash of approximately $ 4.5 million. The Company had net loss of approximately $ 0.2 million and net income of approximately $ 0.4 million for the three months ended June 30, 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 unaudited condensed consolidated financial statements. 9 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the U.S. (the “U.S. GAAP”) and regulations of the Securities Exchange Commission (the “SEC”). The accompanying unaudited condensed consolidated financial statements contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. The realization of assets and the satisfaction of liabilities in the normal course of business are dependent on, among other things, the Company’s ability to operate profitably, to generate cash flows from operations, and its ability to attract investors and to borrow funds on reasonable economic terms. The results of operations for the three months ended June 30, 2024 are not necessarily indicative of results to be expected for any other interim period or for the full fiscal year ending March 31, 2025. Accordingly, these statements should be read in conjunction with the Company’s audited financial statements and note thereto as of and for the years ended March 31, 2024 and 2023. (b) Principles of Consolidation The unaudited condensed consolidated financial statements include the financial statements of the Company and its subsidiaries over which the Company exercises control and, when applicable, entities for which the Company has a controlling financial interest. All transactions and balances among the Company and its subsidiaries have been eliminated upon consolidation. (c) Segment Information The Company’s chief operating decision-makers (i.e., chief executive officer and his direct reports) review financial information presented on a consolidated basis, accompanied by disaggregated information about revenues by different revenues streams for purposes of allocating resources and evaluating financial performance. The Company and its subsidiaries offer E-bikes, E-motorcycles, E-scooters and other items and services in its stores. The Company’s retail operating divisions are geographically based, have similar economic characteristics and similar expected long-term financial performance. Because substantially all of the Company’s long-lived assets and revenues are located in and derived from the U.S., geographical segments are not presented. The Company’s operating segments are reported in one reportable segment. There are no segment managers who are held accountable for operations, operating results and plans for levels or components below the consolidated unit level. Based on qualitative and quantitative criteria established by Accounting Standards Codification (“ASC”) 280, “Segment Reporting”, the Company considers itself to be operating within one reportable segment. (d) Use of Estimates In the application of the Company’s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Significant accounting estimates include, but not limited to, useful lives of depreciable property and equipment, impairment of long-lived assets, the realization of deferred income tax assets, allowance for inventories, and discount rate for operating leases. Changes in facts and circumstances may result in revised estimates. Actual results could differ from those estimates, and as such, differences may be material to the unaudited condensed consolidated financial statements. (e) Commitments and Contingencies In the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out of its business, which cover a wide range of matters, including, among others, government investigations, shareholder lawsuits, and non-income tax matters. An accrual for a loss contingency is recognized when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. If a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, is disclosed. 10 (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 June 30, 2024 and March 31, 2024, $ 2.5 million and nil cash deposited with banks was uninsured, respectively. (g) Accounts Receivable Accounts receivable includes trade account due from customers. Accounts receivable is recorded at the invoiced amount less an allowance for any uncollectible accounts and does not bear interest, which is due after 30 to 90 days, depending on the credit term with the customers. Accounts receivable which is deemed to be uncollectible is charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. 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 June 30, 2024 and March 31, 2024, respectively. (h) Inventories, Net Inventories, consisting of products available for sale, are stated at the lower of cost or net realizable value using the first-in-first-out method. Adjustments to the carrying value are recorded for estimated obsolescence or excess inventory equal to the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future demand and market conditions. Inventory cost consists of the direct cost of merchandise including freight. For the three months ended June 30, 2024 and 2023, the impairment loss was $ 176,072 and $ 153,625 , respectively. 11 (i) Prepayments and Other Receivables Prepayments and other receivables are mainly prepayments to vendors, prepaid expenses paid to service providers, prepaid taxes, advances to employees, and other deposits. Management regularly reviews the aging of such balances and changes in payment and realization trends and records allowances when management believes that the collection of amounts due is at risk. Accounts considered uncollectable are written off against allowances after exhaustive efforts at collection are made. As of June 30, 2024 and March 31, 2024, no allowance against prepayments and other receivables was recorded. (j) Property and Equipment, Net Property and equipment are stated at cost less accumulated depreciation and any recorded impairment. The estimated useful lives are as follows: Machinery and equipment 5 years Furniture and fixtures 5 years Leasehold improvements 3 – 10 years (shorter of lease term or useful lives) Motor vehicles 5 years 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 June 30, 2024 and March 31, 2024, construction in progress was $ 500,000 and $ 275,000 , respectively, and primarily relating to the cost incurred to develop the software by 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. 12 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 June 30, 2024 and March 31, 2024, no impairment of long-lived assets was recognized. (m) Deferred IPO Costs The Company complies with the requirements of FASB ASC Topic 340-10-S99-1, “Other Assets and Deferred Costs — SEC Materials” (“ASC 340-10-S99”) and SEC Staff Accounting Bulletin Topic 5A, “Expenses of Offering”. Deferred IPO costs consist of underwriting, legal, accounting and other professional expenses incurred through the balance sheet date that are directly related to the initial public offering of the Company and that will be charged to additional paid in capital upon the completion of the offering. Total deferred offering cost of $ 502,198 reclassed to additional paid-in-capital upon IPO. (n) Fair Value Measurements Fair value is defined as the price that would be received for an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. Valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. When determining the fair value measurements for assets and liabilities, the Company considers the principal or most advantageous market in which it would transact and consider assumptions that market participants would use when pricing the asset or liability. The following summarizes the three levels of inputs required to measure fair value, of which the first two are considered observable and the third is considered unobservable: Level-1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level-2 — Include other inputs that are directly or indirectly observable in the marketplace. Level-3 — Unobservable inputs which are supported by little or no market activity. The fair value for certain assets and liabilities such as cash, accounts receivable, other receivables, prepayments and other current assets, short-term loans, accounts payable, contract liabilities, accrued expenses and other payables, and tax payables have been determined to approximate carrying amounts due to the short maturities of these instruments. The Company believes that its long-term loan to a third party approximates the fair value based on current yields for debt instruments with similar terms. The Company and its subsidiaries did not have any non-financial assets or liabilities that are measured at fair value on a recurring basis as of June 30, 2024 and March 31, 2024. (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. 13 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 $ 16,452 and $ 27,714 of warranty reserves under accrued expenses and other payables as of June 30, 2024 and March 31, 2024, respectively. The Company has no contract assets and contract liabilities balances as of June 30, 2024 and March 31, 2024, respectively. Disaggregated information of revenues by business lines are as follows: For the Three Months Ended June 30, 2024 2023 Revenues-retail $ 6,870,418 $ 6,168,173 Revenues-wholesale 1,003,008 1,674,173 Net revenues $ 7,873,426 $ 7,842,346 (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 $ 68,519 and $ 11,727 for the three months ended June 30, 2024 and 2023, respectively. 14 (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 three months ended June 30, 2024 and 2023, development costs amounted to $ 145,582 and nil , respectively, which were recorded under general and administrative expenses. (r) Income Taxes Current income taxes are provided based on net income/(loss) for financial reporting purposes and adjusted for income and expense items which are not assessable or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions. Deferred taxes are accounted for using the asset and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the unaudited condensed consolidated financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets (the “DTAs”) are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized, or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. DTAs are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all the DTAs will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities. An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50 % likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. The tax returns filed in 2018 to 2023 are subject to examination by any appropriate tax authorities. For the three months ended June 30, 2024 and 2023, the Company accrued $ 60,076 and $ 43,172 income tax related penalty included in taxes payable in the unaudited condensed consolidated balance sheets, respectively. (s) Leases The Company accounts for leases in accordance with ASC 842. The Company leases premises for offices, warehouses, and retail stores under non-cancellable operating leases. The Company recognizes right-of-use assets and lease liabilities for all leases at the commencement date of a lease, except for short-term leases and low-value asset leases accounted for applying a recognition exemption where lease payments are recognized as expenses on a straight-line basis over the lease terms. Leases with an initial term of 12 months or less are short-term leases and not recognized as operating lease right-of-use assets and operating lease liabilities on the unaudited condensed consolidated balance sheets. The Company recognizes lease expense for short-term leases on a straight-line basis over the lease term. Right-of-use assets are initially measured at cost, which comprises the initial measurement of lease liabilities adjusted for lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs needed to restore the underlying assets, and less any lease incentives received. Right-of-use assets are subsequently measured at cost less accumulated depreciation and impairment losses and adjusted for any remeasurement of the lease liabilities. Right-of-use assets are presented on a separate line in the unaudited condensed consolidated balance sheets. 15 Right-of-use assets are depreciated using the straight-line method from the commencement dates to the earlier of the end of the useful lives of the right-of-use assets or the end of the lease terms. Lease liabilities are initially measured at the present value of the lease payments, which comprise fixed payments, in-substance fixed payments, variable lease payments which depend on an index or a rate. The lease payments are discounted using the interest rate implicit in a lease if that rate can be readily determined. If that rate cannot be readily determined, the Company uses the lessee’s incremental borrowing rate. Subsequently, lease liabilities are measured at amortized cost using the effective interest method, with interest expense recognized over the lease terms. When there is a change in a lease term or a change in future lease payments resulting from a change in an index or a rate used to determine those payments, the Company remeasures the lease liabilities with a corresponding adjustment to the right-of-use-assets. However, if the carrying amount of the right-of-use assets is reduced to zero , any remaining amount of the remeasurement is recognized in profit or loss. Lease liabilities are presented on a separate line in the unaudited condensed consolidated balance sheets. Variable lease payments that do not depend on an index or a rate are recognized as expenses in the periods in which they are incurred. (t) Concentration Risk Concentration of customers and suppliers No customers individually represented greater than 10% of total net revenues of the Company for the three months ended June 30, 2024 and 2023. For the three months ended June 30, 2024, the Company’s top two suppliers represented 41 % and 38 % of total purchases of the Company, respectively. For the three months ended June 30, 2023, the Company’s top three suppliers represented 33 %, 18 % and 12 % of total purchases of the Company, respectively. As of June 30, 2024, one supplier accounted for 63 % of accounts payable balance. As of March 31, 2024, three suppliers accounted for 31 %, 26 %, and 23 % of accounts payable balance, respectively. Concentration of credit risk Financial instruments that are potentially subject to credit risk consist principally of accounts receivable. The Company believes the concentration of credit risk in its account receivable is substantially mitigated by its ongoing credit evaluation process and relatively short collection terms. The Company does not generally require collateral from customers. The Company evaluates the need for an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends, and other information. Historically, the Company did not have any bad debt on its account receivable. Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash and cash equivalents, term deposits, restricted cash, short-term investments, and accounts receivable, net. The Company’s investment policy requires cash and cash equivalents, term deposits, restricted cash, and short-term investments to be placed with high-quality financial institutions and to limit the amount of credit risk from any one issuer. The Company regularly evaluates the credit standing of the counterparties or financial institutions. (u) Related Parties A related party is generally defined as (i) any person and or their immediate family hold 10% or more of the Company’s securities (ii) the Company’s management and/or their immediate family, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. Related parties may be individuals or corporate entities. Transactions involving related parties cannot be presumed to be carried out on an arm’s length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s length transactions unless such representations can be substantiated. 16 (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 three months ended June 30, 2024, the Company had potential shares of common stock issuable upon the exercise of the Representative’s Warrants. As the Company incurred losses for the three months ended June 30, 2024, these potential shares of common stock were anti-dilutive and excluded from the calculation of diluted net loss per share. For the three months ended June 30, 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) Representative’s Warrants Upon the closing of IPO in June 2024, the Company issued to Benchmark the representative of the underwriters warrants (the “Representative’s Warrants”) for 129,375 shares of common stock, which are also exercisable on a cashless basis. The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification ASC 480, Distinguishing Liabilities from Equity and ASC 815, Derivatives and Hedging. The Company accounts for its warrants as equity that meet all of the criteria (i) require physical settlement or net-share settlement or (ii) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement), the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance and subsequent changes in fair value are not recognized as long as the warrants continue to be classified as equity. (y) Recent Accounting Pronouncements The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued. Under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging growth company and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies. In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This guidance requires a public entity to disclose for each reportable segment, on an interim and annual basis, the significant expense categories and amounts that are regularly provided to the chief operating decision-maker (“CODM”) and included in each reported measure of a segment’s profit or loss. Additionally, it requires a public entity to disclose the title and position of the individual or the name of the group or committee identified as the CODM. This guidance is effective for fiscal years beginning after December 31, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted and the guidance should be applied retrospectively to all periods presented in the financial statements, unless it is impracticable. The Company plans to adopt the provisions of this guidance 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. 17 Except as mentioned above, the Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed consolidated balance sheets, statements of income and comprehensive income and statements of cash flows. 3 — INVENTORIES, NET Inventories, net consisted of the following: June 30, 2024 March 31, 2024 Batteries $ 1,185,526 $ 1,009,228 Electric Vehicles 3,113,685 2,634,643 Tires 720,045 687,927 Accessories 1,627,990 1,546,283 Inventories 6,647,246 5,878,081 Inventory reserves ( 558,163 ) ( 514,021 ) Inventories, net $ 6,089,083 $ 5,364,060 Movements of inventory reserves are as follows: June 30, 2024 June 30, 2023 Beginning balance $ 514,021 $ 431,363 Addition 176,072 153,625 Write off ( 131,929 ) ( 216,450 ) Ending Balance $ 558,163 $ 368,537 As of June 30, 2024 and March 31, 2024, the inventory allowance balance was $ 558,163 and $ 514,021 , respectively. For the three months ended June 30, 2024 and 2023, the impairment loss was $ 176,072 and $ 153,625 , respectively. 4 — PREPAYMENTS AND OTHER RECEIVABLES Prepayments and other current assets as of June 30, 2024 and March 31, 2024 consisted of the following: June 30, 2024 March 31, 2024 Prepaid rent $ 223,631 $ 179,792 Prepayments to vendors 1,818,410 143,018 Prepaid iCloud Server 1,747 1,747 Prepaid insurance 311,633 237,207 Prepayments to other service providers 298,775 26,896 Total Prepayment and Other Receivables $ 2,654,196 $ 588,660 As of June 30, 2024 and March 31, 2024, the prepayments to vendors were $ 1.8 million and $ 0.1 million, respectively. The increase in prepayments to vendors was primarily due to the Company’s anticipation of future sales growth and rental services. The Company plans to purchase more E-vehicles related accessories from overseas vendors to support the expansion of retail and rental markets. These prepayment to vendors are expected to be settled by the end of August 2024. 18 5 — PROPERTY AND EQUIPMENT, NET Property and equipment as of June 30, 2024 and March 31, 2024 consisted of the following: June 30, 2024 March 31, 2024 Furniture & Fixtures $ 458,186 $ 400,558 Machinery & Equipment 178,581 212,317 Automobile 355,890 306,607 Leasehold improvements 1,030,220 976,870 Construction in progress-Software 500,000 275,000 Property and Equipment 2,522,877 2,171,352 Less: Accumulated depreciation ( 511,382 ) ( 416,330 ) Property and Equipment, net $ 2,011,495 $ 1,755,022 For the three months ended June 30, 2024 and 2023, the depreciation expenses were $ 95,051 and $ 63,668 , respectively. In December 2023, the Company engaged DFT, a related party, for certain technology services, such as ERP system and in July 2024, the Company engaged DFT for a new APP, GO FLY APP, for the upcoming rental business. The total contract price for the ERP system is $ 2,500,000 and the contract price for the GO FLY APP is $ 500,000 , subject to adjustments. As of June 30, 2024, the Company paid $ 2,554,000 to DFT including the prepayment for both ERP system and GO FLY APP. 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. The final delivery of GO FLY APP is scheduled for September 5, 2024, subject to adjustments mutually agreed upon by the parties in response to any changes in project scope or unforeseen delays. As of June 30, 2024 and March 31, 2024, construction in progress was $ 500,000 and $ 275,000 , respectively, and primarily relating to the cost incurred to develop the software from DFT. As of June 30, 2024 and March 31, 2024, the Company had a prepayment of $ 2,054,000 and $ 1,279,000 , respectively, to DFT (see Note 13 – Long-term prepayment for software development – related parties, net). 6 — INTANGIBLE ASSETS, NET Intangible assets as of June 30, 2024 and March 31, 2024 consisted of the following: June 30, 2024 March 31, 2024 Property rights $ 38,032 $ 38,032 Total Intangible assets 38,032 38,032 Less: Accumulated Amortization ( 2,599 ) ( 1,648 ) Intangible assets, net $ 35,433 $ 36,384 For the three months ended June 30, 2024 and 2023, the amortization expenses were $ 951 and nil , respectively. 19 7 — ACCRUED EXPENSES AND OTHER PAYABLES June 30, 2024 March 31, 2024 Accrued payroll $ 9,213 $ 121,120 Advances from customers 32,011 25,099 Advances from IGH Holding Inc 49,000 49,000 Accrued warranty 16,452 27,714 Payroll tax and sales tax payable 188,653 245,226 Accrued store expenses 35,327 21,975 Accrued IPO offering cost — 225,000 Accrued freight in cost 91,442 107,255 Accrued professional fee — 103,000 Accrued Expenses and Other Current Liabilities $ 422,098 $ 925,389 8 — LOAN PAYABLE A summary of the Company’s loans is listed as follows: Lender Due Date June 30, 2024 March 31, 2024 Chase Bank (i) October 25, 2027 166,092 176,366 Chase Bank (ii) January 12, 2028 53,511 56,580 Chase Bank (vii) September 28, 2028 211,483 221,197 Leaf Capital Funding, LLC (iii) September 30, 2027 43,876 46,856 Sinoelite Corp (iv) April 03, 2024 — 100,000 Automobile Loan – Honda (v) June 25, 2027 26,745 28,833 Bank of Hope (vi) September 15, 2024 391,227 391,227 Bank of Hope (vi) September 22, 2024 400,000 400,000 Bank of Hope (vi) December 12, 2024 205,000 205,000 Total loan payables 1,497,934 1,626,059 Current portion of loan payables ( 1,116,044 ) ( 1,213,242 ) Long-term loan payables $ 381,890 $ 412,817 (i) On October 25, 2022, the Company’s subsidiary, Universe King Corp. obtained a five-year long-term loan of $ 230,000 from JPMorgan Chase Bank, N.A. with an annual interest rate of 10.35 %. Mr. Ke Zhang, the Company’s Chief Human Resource Officer, provided a guarantee on this loan. To secure payment and performance of the liabilities, Universe King Corp. pledged to JPMorgan Chase Bank, N.A., a continuing security interest in all of its right, title and interest in all of its properties, whether now owned or hereinafter acquired and whether now existing or hereafter arising. On August 9, 2024, the Company paid off this loan in full. 20 (ii) On January 12, 2023, the Company’s subsidiary, Arfy Corp. obtained a five-year long-term loan of $ 70,000 from JPMorgan Chase Bank, N.A. with an annual interest rate of 9.8 %. Mr. Tong Chen, an original stockholder of the Company, provided a guarantee on this loan. To secure payment and performance of the liabilities, Arfy Corp. pledged to JPMorgan Chase Bank, N.A., a continuing security interest in all of its right, title and interest in all of its properties, whether now owned or hereinafter acquired and whether now existing or hereafter arising. On August 9, 2024, the Company paid off this loan in full. (iii) On August 24, 2022, Universe King Corp. obtained a five-year long-term loan of $ 63,674 from Leaf Capital Funding, LLC with an annual interest rate of 7.0 %. The collateral provided included the Fuso trucks, whether now owned or hereafter acquired by Universe King Corp., and together with all accessories, accessions, attachments thereto, and all other substitutions, renewals, replacements and improvements and all proceeds of the foregoing. From July 1 to August 14, 2024, the Company paid $2,523 on principal and interest of the loan. As of June 30, 2024, the outstanding balance is $ 43,876 . (iv) On January 3, 2023, Fly E-Bike, Inc. obtained a one-year and three-month long-term loan of $ 100,000 from Sinoelite Corp with no interest. On April 25, 2024, the Company paid off this loan in full. (v) On June 12, 2023, Flyebikemiami Inc obtained a four-year long-term loan of $ 34,974 from AutoNation Honda Miami Lakes with an annual interest rate of 3.98 %. The collateral provided was the Honda vehicle purchased by Flyebikemiami Inc. From July 1 to August 14, 2024, the Company paid $1,579 on principal and interest of the loan. As of June 30, 2024, the outstanding balance is $ 26,745 . (vi) On September 20, 2023, Fly-E Group, Inc obtained a line of credit of $ 1,000,000 from Bank of Hope with a floating annual interest rate, currently at 8.5 %. On the same date, the Company withdrew $ 391,226 from Bank of Hope to pay off the loan balance with Flushing Bank as of September 15, 2023. On September 22, 2023 and December 12, 2023, the Company withdrew $ 400,000 and $ 205,000 , respectively, from Bank of Hope to support its business operations. Mr. Zhou Ou, the Company’s Chief Executive Officer, and Mr. Ke Zhang, the Company’s Chief Human Resource Officer, provided a guarantee on this loan. To secure payment and performance of the liabilities, Fly-E Group pledged to Bank of Hope the following items: inventory, chattel paper, accounts, equipment, and general intangibles of first 29 incorporated subsidiaries of the Company. On August 9, 2024, the Company paid off this loan in full. (vii) On October 2, 2023, the Company’s subsidiary, Fly14 Corp. obtained a five-year long-term loan of $ 240,000 from JPMorgan Chase Bank, N.A. with an annual interest rate of 10.40 %. To secure payment and performance of the liabilities, Fly14 Corp. pledged to JPMorgan Chase Bank, N.A., a continuing security interest in all of its right, title and interest in all of its properties, whether now owned or hereinafter acquired and whether now existing or hereafter arising. On August 9, 2024, the Company paid off this loan in full. For the three months ended June 30, 2024 and 2023, the total interest expenses on the Company’s outstanding loans amounted to $ 68,082 and $ 32,623 , respectively. 21 9 — STOCKHOLDER’S EQUITY Prior to the effectiveness of the stock split discussed below, the Company was authorized to issue 400 shares of common stock having a par value of $ 0.01 per share and 40 shares of preferred stock having a par value of $ 0.01 per share. There were 200 shares of common stock were issued and outstanding prior to the effectiveness of the stock split. On March 27, 2024, the Company’s board of directors approved a 1-for-110,000 stock split of the Company’s capital stock. The stock split became effective on April 2, 2024. The par value of the Company’s common stock remained unchanged at $ 0.01 per share, and the number of authorized shares of the Company’s capital stock was increased from 440 to 48,400,000 , with the number of authorized shares of common stock and preferred stock being increased from 400 to 44,000,000 and from 40 to 4,400,000 , respectively. On June 7, 2024, the Company completed its initial public offering and issued 2,250,000 shares of common stock, at a price of $ 4.00 per share. The gross proceeds of the offering were $ 9.0 million, prior to deducting the underwriting discounts, commissions and offering expenses payable by the Company. In addition, the Company granted the underwriters a 30-day option to purchase an additional 337,500 shares of common stock at the initial public offering price, less underwriting discounts and commissions, to cover over-allotments. On June 25, 2024, the Company issued an additional 337,500 shares of common stock to the underwriters for gross proceeds of $ 1.4 million upon full exercise of the underwriters’ over-allotment option. Net proceeds received by the Company from the initial public offering, including the exercise of over-allotment option, were approximately $ 9.2 million. Upon the closing of IPO offering in June 2024, the Company issued to Benchmark the representative of the underwriters warrants to purchase 129,375 shares of common stock. The Representative’s Warrants have an exercise price equal to $ 4.00 per share and are exercisable until the date on June 7, 2029, after the date of commencement on December 7, 2024. The Representative’s Warrants are also exercisable on a cashless basis. As the Representative's Warrants are considered indexed to the Company’s own stock and meet the criteria for equity classification according to ASC :815-40, the Representative warrants are classified as equity. The fair value of the warrant, using the Black-Scholes Model on the date of issuance was $ 274,472 . The key inputs into the Black-Scholes Model variables were as follows at measurement date: June 7, 2024 Stock price $ 4.00 Risk-free interest rate 4.46 % Volatility 56.52 % Exercise price $ 4.00 Dividend yield $ 0 As of June 30, 2024 and March 31, 2024, the subscription receivable represents the unpaid capital contribution of $ 219,998 by the stockholders. During the three months ended June 30, 2023, Mr. Ou paid certain vendors of the Company to settle certain accounts payable balance on behalf the Company. On June 30, 2023, the Company transferred $ 2.26 million, a portion of the accounts payable balance, along with a cash contribution of $ 0.14 million from Mr. Zhou Ou as capital contribution (see Note 13). As of June 30, 2023, a total of $ 2.4 million were transferred and recorded as capital contribution (see Note 13). 22 10 — INCOME TAX (a) Income Tax Expense Income tax expense for the three months ended June 30, 2024 and 2023 amounted to $ 72,445 and $ 0.3 million, respectively. Significant components of the provision for income taxes are as follows: For the Three Months Ended June 30, 2024 2023 Current Federal $ 53,738 $ 15,900 State 46,669 38,000 City 31,669 20,700 Deferred Federal ( 38,000 ) 150,300 State ( 12,000 ) 38,400 City ( 9,000 ) 20,100 Foreign ( 631 ) — Total $ 72,445 $ 283,400 The provision for income taxes is based on the following pretax income (loss): For the Three Months Ended June 30, 2024 2023 U.S. $ ( 99,838 ) $ 723,843 Canada ( 7,225 ) - Total $ ( 107,063 ) $ 723,843 For the three months ended June 30, 2024, the total pre-tax loss was $ 0.1 million, which included $ 0.1 million pre-tax loss in U.S. and $ 7,225 pre-tax loss in Canada. For the three months ended June 30, 2023, the total pre-tax income was $ 0.72 million all of which was generated in the U.S. The following table reconciles to the Company’s effective tax rate: For the Three Months Ended June 30 2024 2023 Pre-tax book (loss) income $ ( 107,063 ) $ 723,843 Federal Statutory rate 21.0 % 21.0 % State income tax rate, net of federal income tax benefit ( 11.4 )% 7.4 % City income tax rate, net of federal income tax benefit ( 0.4 )% 4.9 % Foreign statutory rate ( 0.1 )% — Permanent differences ( 76.8 )% 5.7 % Return to project adjustment 0.1 % 0.2 % Total ( 67.6 )% 39.2 % Penalties and interest incurred related to underpayment of income tax are classified as income tax expenses in the period incurred. For the three months ended June 30, 2024 and 2023, the Company accrued $ 60,076 and $ 43,172 income tax related penalty included in taxes payable in the unaudited condensed consolidated balance sheets, respectively. 23 United States Income tax expense for the three months ended June 30, 2024 and 2023 amounted to $ 73,076 and $ 0.3 million, respectively. Significant components of the provision for income taxes are as follows: For the Three Months Ended June 30, 2024 2023 Current Federal $ 53,738 $ 15,900 State 46,669 38,000 City 31,669 20,700 Deferred Federal ( 38,000 ) 150,300 State ( 12,000 ) 38,400 City ( 9,000 ) 20,100 Total $ 73,076 $ 283,400 Canada Fly Toronto Corp, a subsidiary of the Company, was formed under the laws of Canada and conducts its business primarily in Canada. Income tax benefit for the three months ended June 30, 2024 and 2023 amounted to $ 631 and nil , respectively. Significant components of the provision for income taxes are as follows: For the Three Months Ended June 30 2024 2023 Current Federal $ — $ — State — — City — — Deferred Federal ( 357 ) — State ( 274 ) — City — — Total $ ( 631 ) $ — 24 (b) Deferred Tax Assets (Liabilities) Net DTAs as of June 30, 2024 and March 31, 2024 amounted to $ 94,298 and $ 35,199 , respectively. Significant components of DTAs (DTLs), net are as follows: As of June 30, 2024 As of March 31, 2024 Net operating loss carry forwards $ 40,772 $ 40,332 Inventory reserve 198,000 186,000 Lease liability 5,758,000 5,810,000 Less: Valuation allowance — — Total deferred tax assets (DTAs) $ 5,996,772 $ 6,036,332 Accumulated depreciation ( 494,474 ) ( 482,133 ) ROU asset ( 5,408,000 ) ( 5,519,000 ) Total deferred tax liabilities (DTLs) ( 5,902,474 ) ( 6,001,133 ) Total deferred tax assets, net $ 94,298 $ 35,199 Deferred tax assets (liabilities) – U.S., net $ 54,000 $ ( 5,000 ) Deferred tax assets – Canada, net $ 40,298 40,199 As of June 30, 2024 and March 31, 2024, the Company had approximately $ 6.0 million and $ 6.0 million, respectively, in the DTAs, which respectively included approximately $ 40,772 and $ 40,332 related to net operating loss carryforwards that can be used to offset taxable income in future periods, $ 5.8 million and $ 5.8 million related to lease liability, and $ 0.2 million and $ 0.2 million related to inventory allowance. As of June 30, 2024 and March 31, 2024, the Company had approximately $ 5.9 million and $ 6.0 million, respectively, which included $ 0.5 million and $ 0.5 million, respectively, in the DTLs that related to accumulated depreciation and $ 5.4 million and $ 5.5 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 June 30, 2024 and March 31, 2024, the Company recorded approximately $ 40,298 and $ 40,199 , respectively, in the net DTAs. The tax losses in Canada can be carried forward for twenty years to offset future taxable profit. The tax losses of entities in Canada will begin to expire in 2044, if not utilized. As of June 30, 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 three months ended June 30, 2024, the Company’s pre-tax book loss in the U.S. was approximately $ 0.1 million and for the three months ended June 30, 2023, the Company’s pre-tax book income in the U.S. was approximately $ 0.7 million. In addition, for the three months ended June 30, 2024 and 2023, the Company’s pre-tax book loss in Canada was approximately $ 7,225 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 June 30, 2024 and March 31, 2024, the Company did not have any significant unrecognized uncertain tax positions. 25 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: June 30, 2024 March 31, 2024 Operating ROU: ROU assets $ 15,757,380 $ 16,000,742 Total operating ROU assets $ 15,757,380 $ 16,000,742 June 30, 2024 March 31, 2024 Operating lease obligations: Current operating lease liabilities $ 3,092,721 $ 2,852,744 Non-current operating lease liabilities 13,675,379 13,986,879 Total lease liabilities $ 16,768,100 $ 16,839,623 The Company had 40 and 38 leases as of June 30, 2024 and March 31, 2024, respectively. The weighted average lease term, discount rates, and remaining lease terms for the operating leases as of June 30, 2024 were as follows: Remaining lease term and discount rate: Weighted average discount rate 6.5 % Weighted average remaining lease term (years) 5.29 years The weighted average lease term, discount rates, and remaining lease terms for the operating leases as of March 31, 2024 were as follows: Remaining lease term and discount rate: Weighted average discount rate 6.4 % Weighted average remaining lease term (years) 5.51 years The Company leases its offices, warehouse, and retail stores under non-cancellable operating lease agreements. Lease expenses were $ 1.12 million, including $ 0.29 million cost of goods-occupancy cost, $ 0.73 million rent expense in selling expense, and $ 0.10 million rent expense in general and administrative expense for the three months ended June 30, 2024. Lease expenses were $ 0.75 million, including $ 0.13 million cost of goods-occupancy cost, $ 0.52 million rent expense in selling expense, and $ 0.10 million rent expense in general and administrative expense for the three months ended June 30, 2023. 26 As of June 30, 2024, future minimum lease liabilities, all under office and facilities non-cancellable operating lease agreements, were as follows: As of June 30, 2024 Operating Lease Liabilities 2025 $ 4,064,624 2026 3,891,738 2027 3,777,003 2028 3,230,748 2029 2,404,706 Thereafter 2,524,939 Total lease payments 19,893,758 Less: interest ( 3,125,658 ) Present value of lease liabilities $ 16,768,100 12 — COMMITMENTS AND CONTINGENCIES Commitments The Company has not entered any off-balance sheet financial guarantees or other off-balance sheet commitments to guarantee the payment obligations of any third parties. The Company has not entered any derivative contracts that are indexed to its shares and classified as shareholder’s equity or that are not reflected in its unaudited condensed consolidated financial statements. Furthermore, the Company does not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. The Company does not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to itself or engages in leasing, hedging or product development services with itself. As of June 30, 2024, the remaining commitment amount for the purchase of office property is $ 3,024,300 , including a $ 10,704 closing fee. The Company paid $ 1,235,004 , which includes the $ 10,704 closing fee, and mortgaged the remaining $ 1,800,000 at an annual interest rate of 6.5 % for a term of 12 months on August 12, 2024. Contingencies Legal From time to time, the Company is a party to certain legal proceedings, as well as certain asserted and unasserted claims. Amounts accrued, as well as the total amount of reasonably possible losses with respect to such matters, individually and in the aggregate, are not deemed to be material to the unaudited condensed consolidated financial statements. The Company’s products and other production facilities as well as the packaging, storage, distribution, advertising and labeling of its products, are subject to extensive legal and regulatory requirements. For example, pursuant to the DMV registration requirement, the Company must satisfy the DMV Registration requirements and conduct required testing for all of its products sold in U.S. Loss of or failure to renew or obtain necessary permits, licenses, registrations, or certificates could prevent the Company from legally selling its products in the U.S. If the Company were found to be in violation of applicable laws and regulations, it could be subject to administrative punishment, including fines, injunctions, recalls or asset seizures, as well as potential criminal sanctions, any of which could have a material adverse effect on its business, financial condition, results of operations and prospects. As of the date hereof, the Company believes it is in compliance with the relevant regulations in the U.S. Inflation Inflationary factors, such as increases in personnel and overhead costs, could impair the Company’s operating results. Although the Company does not believe that inflation has had a material impact on the Company’s financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on the Company’s ability to maintain current levels of gross margin and operating expenses as a percentage of sales revenue if the revenues do not increase with such increased costs. 27 13 — RELATED PARTY TRANSACTIONS (A) Related party balances Accounts receivable — related parties Name of Related Party Relationship Nature June 30, 2024 March 31, 2024 Fly E Bike SRL Zhou Ou (CEO), owns over 50% equity interest of this entity Accounts receivable $ 47,742 $ 326,914 Accounts receivable — related parties $ 47,742 $ 326,914 During the three months ended June 30, 2024, the Company received $282,814 from Fly E Bike SRL. Prepayments and other receivables — related parties Name of Related Party Relationship Nature June 30, 2024 March 31, 2024 Fly E Bike SRL Zhou Ou (CEO), owns over 50% equity interest of this entity Other receivables $ 162 180,256 PJMG LLC Ruifeng Guo (CFO), owns over 50% equity interest of this entity Prepayments $ 240,000 60,000 Prepayments and other receivables – related parties $ 240,162 $ 60,000 During the three months ended June 30, 2024, the Company advanced $ 162 to Fly E Bike SRL, a distributor the Company works with and in which Mr. Ou holds over 50 % of the equity interest. This advance is unsecured, bears no interest and does not have a maturity date. On June 12, 2024, the Company received $ 180,256 from Fly E Bike SRL. On April 1, 2023, the Company agreed to retain the services of PJMG, a company in which Mr. Guo, the Company’s CFO, holds over 50 % of the equity interests as a consultant following the completion of its IPO. PJMG was engaged to provide compliance consulting services related to accounting, finance, and management, as well as to oversee market planning and development, follow-on fundraising, and investor relationship management . The service fee is $ 45,000 for the first month and from the second month the fees will be $ 15,000 . To secure these services, the Company prepaid a total of $ 240,000 to PJMG as of June 30, 2024. Long-term prepayment for software development – related parties, net Name of Related Party Relationship Nature June 30, 2024 March 31, 2024 DF Technology US Inc Ruifeng Guo (CFO), owns over 50% equity interest of this entity Long-term prepayment for software development $ 2,054,000 $ 1,279,000 Long-term prepayment for software development — related parties, net $ 2,054,000 $ 1,279,000 28 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 June 30, 2024, and March 31, 2024, the Company paid $ 2,054,000 and $ 1,279,000 to DFT as prepayment for software development, respectively. As of June 30, 2024 and March 31, 2024, construction in progress was $ 500,000 and $ 275,000 , respectively (see Note 5 – Property and Equipment). Other payables — related parties Name of Related Party Relationship Nature June 30, 2024 (i) March 31, 2024 (i) Zhou Ou Chairman, CEO of the Company Other payable $ 2,229 $ 92,229 Other Payables-related parties $ 2,229 $ 92,229 (i) Represents the remaining balance of the advance provided by the related party to the Company’s subsidiaries for the purpose of supporting their business operations. All of the above payables are unsecured, non-interest bearing, and due on demand. The Company paid a total of $ 90,000 to and borrowed a total of $ 182,239 from Mr. Zhou Ou during the three months ended June 30, 2024 and 2023, respectively. (B) Related party transactions Revenues — related parties For the Three Months Ended June 30 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 $ 3,642 $ 282,814 Revenues — related parties $ 3,642 $ 282,814 During the three months ended June 30, 2024 and 2023, Fly E Bike SRL, a distributor the Company works with and in which Mr. Ou holds over 50 % of the equity interest, purchased certain EV products from the Company in the amount of $ 3,642 and $ 136,565 , respectively. 29 (C) Other Related Party Transactions On March 6, 2021, the Company and DGLG entered into an engagement letter, pursuant to which the Company engaged DGLG as a consultant to assist the Company in its IPO planning, financing and tax services. Mr. Guo, the Company’s 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 $ 225,000 and $ nil for the three months ended June 30, 2024 and 2023, respectively. In addition, during the three months ended June 30, 2024, the Company paid DGLG a total of $ 15,600 for tax services rendered by DGLG. On April 1, 2023, the Company agreed to retain the services of PJMG, a company in which Mr. Guo, the Company’s CFO, holds over 50 % of the equity interests as a consultant following the completion of its IPO. To secure these services, the Company prepaid a total of $ 240,000 to PJMG as of June 30, 2024, and $ 15,000 was expensed as consulting expenses during the three months ended June 30, 2024. 14 — SUBSEQUENT EVENTS The Company has evaluated subsequent events after June 30, 2024, up through August 16, 2024, the date at which the unaudited condensed consolidated financial statements were issued. Except for the events mentioned below, the Company did not identify any subsequent events with material financial impact on the Company’s unaudited condensed consolidated financial statements. On July 16, 2024, the Company began offering rental services at its store located at 659 10TH AVE, NEW YORK, NY, 10036. On August 5, 2024, Fly-E Group, Inc obtained a line of credit of $ 5 million from Peapack-Gladstone Bank with a floating annual interest rate and the current annual interest rate is 8.8 %. On August 5, 2024, the Company withdrew from this line of credit to pay off the outstanding principal and interest of loans from Bank of Hope in total of $ 1,002,160 and the loan from JPMorgan Chase Bank, N.A obtained by Fly14 Corp in total of $ 208,601 . In addition to the loan repayment to Bank of Hope, the Company withdrew in total $ 215,604 from this line of credit to pay off the following Chase Bank loans on August 9, 2024: ● $ 162,836 for the loan obtained by Universe King Corp. from JPMorgan Chase Bank, N.A. on October 20, 2022. ● $ 52,768 for the loan obtained by Arfy Corp. from JPMorgan Chase Bank, N.A. on January 12, 2023. On August 12, 2024, the Company withdrew $ 1,235,004 from the above line of credit and paid $ 1,235,004 including the $ 10,704 closing fee to He’s Realty Holdings LLC to purchase office property and mortgaged the remaining $ 1,800,000 at the rate of 6.5 % per annum for a term of 12 months. On August 14, 2024, Wuxi Dianmeng Technology Co., Ltd. as the borrower, executed a promissory note in favor of the Company, as the lender, under which the borrower received an interest-free loan of $ 500,000 . Wuxi Dianmeng Technology Co., Ltd is an unrelated third party for the Company. The maturity date will be September 30, 2024. 30