Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition
and results of operations should be read in conjunction with the financial statements and the notes thereto included in this annual report.
The following discussion contains forward-looking statements. Actual results could differ materially from the results discussed in the
forward-looking statements. See “ Item 1A. Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements ”.
Overview
We are an EV company that is principally engaged
in designing, installing and selling E-motorcycles, E-bikes, E-scooters and related accessories under the brand “Fly E-Bike.”
At Fly E-Bike, our commitment is to encourage people to incorporate eco-friendly transportation into their active lifestyles, ultimately
contributing towards building a more environmentally friendly future.
Fly E-Bike was established in 2018 with its first
store opened in New York. Our business has grown rapidly since then and we are now one of the leading providers of E-bikes for food
delivery workers in New York City. As of July 15, 2025 , we have 20 stores, including
19 retail stores in the U.S and one retail store in Canada. The Company offers rental services from selected locations in New York,
Toronto, and Los Angeles. We also operate one online store at flyebike.com, focusing on selling E-motorcycles, E-bikes and E-scooters,
serving customers in the United States. In addition, we plan to open a second online store focusing on selling gas bikes in the future.
We plan extend our business into South America and Europe in the future.
We have a diversified product portfolio that
is designed to satisfy the various demands of our customers and address different urban travel scenarios. Additionally, we aim to refresh
our product offerings continuously to align with evolving market trends. As of July 15, 2025 ,
we offered 27 E-motorcycle products, 36 E-bike products and 38 E-scooter products.
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We are currently in the process of developing
a Fly E-Bike app, which is a management service mobile software for our EVs, enabling customers to purchase bikes, locate company stores,
schedule bike repairs, and more. We aim to design an app that will bring users a comprehensive intelligent experience to create a safer
and more satisfying riding life. The development of the app is still in its preliminary stage. We have launched a testing version of
the app, which is currently unavailable to our customers. In December 2023, the Company engaged DF Technology US Inc (“DFT”)
for certain technology services, for the development of the enterprise resource planning system (“ERP system”), and in July
2024, the Company engaged DFT to develop a mobile phone application for its renal services, the GO FLY APP. The total contract price
for the GO FLY APP is $500,000, and the GO FLY APP was delivered and launched in the rental business on September 5, 2024. The total
contract price for the ERP system is $2,500,000. The ERP system is fully completed and delivered on May 20, 2025. During the fiscal year
of 2025, the Company started to use part of the ERP system which was valued at $2,310,000 and treated that part as computer hardware
and software and started for depreciation. As of March 31, 2025, the Company paid $136,580 to DFT as prepayment for software development.
We source a significant portion of our vehicle
components from China and the United States, and then assemble them into our vehicles in a facility located in Maspeth, New York.
For the year ended March 31, 2025, we produced 4,595 E-motorcycles, 5,974 E-bikes and 1,557 E-scooters at the same facility.
Recent Developments
See “ Item 1. Business
— Recent Developments .”
Key Factors that Affect Operating Results
Our results of operations and financial condition
are affected by the general factors driving the U.S.’s electric two-wheeled vehicles industry, including, among others, the U.S.’s
overall economic growth, the increase in per capita disposable income, the expansion of urbanization, the growth in consumer spending
and consumption upgrades, the competitive environment, governmental policies and initiatives towards electric two-wheeled vehicles, as
well as the general factors affecting the electric two-wheeled vehicles industry in overseas markets. Unfavorable changes in any of these
general industry conditions could negatively affect demand for our products and materially and adversely affect our results of operations.
While our business is influenced by these general
factors, our results of operations are more directly affected by company specific factors, including the following major factors:
New Customers
Our growth will depend on our ability to achieve
sales targets, including our ability to attract new customers, which in turn depends in part on our ability to execute our retail strategy
and produce effective marketing initiatives to expand our brand perception with prospective customers. As of July 15, 2025, we have 20
stores, including 19 retail stores in the U.S and one retail store in Canada. We offer rental services from selected locations.
We also operate one online store, focusing on selling E-motorcycles, E-bikes, and E-scooters and selling our product in the United States.
It is critical for us to successfully manage production ramp-up and quality control to deliver to customers in adequate volume and quality.
With respect to branding and marketing, we plan
to raise brand awareness through both traditional and social media channels and connect with customers through physical touchpoints such
as our retail stores and distributors. We believe that effective marketing can boost our brand awareness and contribute to increased
sales. In addition, we intend to provide superior customer experience through our trained technicians who will provide after-sale maintenance
and repair services at our retail stores. An inability to attract new customers would substantially impact our ability to grow revenue
or improve our financial results.
Product Sales Price and Volume
For the year ended March 31, 2025, our net revenues
decreased by 21.0% to $25.4 million, compared to $32.2 million for the same period in 2024, which was primarily driven by a decrease
in total units sold, which dropped by 10,846 units, from 69,611 units for the year ended March 31, 2024, to 58,765 units for the year
ended March 31, 2025. The decrease in volume is mainly due to recent lithium-battery accidents involving E-Bikes and E-Scooters. With
an increasing number of lithium-battery explosion incidents in New York, customers are less inclined to purchase E-Bikes. Consequently,
sales have declined as customers opt for oil-powered vehicles over electric vehicles. The decrease in volume also attributed in part
to the closures and disposition of our retail stores during the year ended March 31, 2025. The average sales price per EV increased by
$29, from $960 in the year ended March 31, 2024 to $989 in the year ended March 31, 2025. These improvements were driven by product upgrades
and enhanced sales channels in the market.
We currently have a streamlined product portfolio
consisting of three categories, with multiple models and specifications for each category. Our ability to increase the sales price and
volume will depend on our ability to continually enhance our brand to attract customers, as well as our ability to successfully operate
our retail stores and expand our sales network both domestically and globally. However, our product sales price is influenced by various
factors such as market demand and competitors’ pricing, and although we continue working on product improvements and retail expansion,
there can be no guarantee of sustained sales price increase or improved sales volume. If our prices remain stable, increasing sales volume
would become important for continued revenue growth, and failure to do so would significantly impact our ability to grow revenue or improve
our financial results.
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Employees
Our payroll expenses were $4.7 million for
the year ended March 31, 2025, compared to $2.9 million for the year ended March 31, 2024. As four stores were closed and four others
were sold during the year ended March 31, 2025, and an additional six stores were sold subsequently, we expect a decrease in payroll
expenses in the next fiscal year due to reduced demand for store sales staff. Each of our retail stores has a minimum of two employees,
and additional office employees will be hired to support retail stores in customer service and marketing. In addition, to maintain excellent
customer service in our retail stores, each store will have at least one trained repair professional. Effective management of payroll
expenses remains crucial to our ability to grow revenue and enhance our financial results, especially as we navigate a reduced workforce.
Vendor and Supply Management
During the year ended March 31, 2025, we worked
with two principal vendors, Xiamen Innolabs Technology Co., Ltd and Depcl Corp., each of which respectively supplied approximately 41.9%
and 32.3% of the accessories and components used in all our products for the year ended March 31, 2025.
We have implemented a centralized vendor management
system that streamlines purchasing, enhances our negotiating power and maintains strong vendor relationships. We believe this approach
delivers cost savings, improved risk management and increased negotiating power, ultimately benefiting our operating results. Changes
in costs related to our major vendors can significantly affect our financial condition and operating results.
Market Trends, Competition and Tariff
We operate in a rapidly growing EV market with
a special focus on E-motorcycles, E-bikes and E-scooters. However, increased competition may pressure prices and margins, reducing sales
volume, revenues, and sales margin for us. Additionally, marketing and advertising costs may rise as we differentiate ourselves and maintain
our market position. Moreover, competitors may impact customer acquisition and retention, satisfaction and loyalty. While we believe
we maintain competitive advantages in several areas, including brand, product design and quality, smart features, omnichannel retail
model, customer satisfaction and loyalty, we must continuously innovate, invest in research and development and marketing to maintain
our competitive edge and unique selling points. Recently, the U.S. government issued executive orders imposing tariffs on products from
key international suppliers, citing national security and public health concerns. These tariffs are expected to impact a wide range of
imported goods, including components used in e-bike and e-scooter manufacturing. While some agreements have temporarily delayed their
implementation, ongoing trade tensions could lead to supply chain disruptions, increased costs, and pricing pressures within the industry.
Tariffs on e-bikes and e-scooters or their components would likely increase prices for consumers, and create challenges for U.S. manufacturers
and retailers. While there could be long-term opportunities for domestic production, the immediate impact would likely be negative for
the growing e-bike and e-scooter market.
Regulatory Landscape
We operate in an
industry that is subject to extensive environmental, safety and other laws and regulations, which include products safety and
testing, as well as battery safety and disposal. These requirements create additional costs and possible production delay in
connection with the testing and manufacturing of our products. We also benefit from environmental regulations in our target markets
which include economic incentives to purchasers of EVs and tax credits for EV manufacturers. The Governor of New York State signed a
legislative package in July 2024 aimed at raising awareness about the safe use of e-bikes and lithium-ion battery products,
prohibiting the sale of non-compliant batteries, requiring safety protocols and training for first responders, mandating operating
manuals for e-bike retailers, and improving accident reporting and registration processes for e-bikes and mopeds. Additionally, in
January 2025, the New York City Department of Transportation launched a $2 million trade-in program, allowing eligible food delivery
workers to replace their unsafe e-bikes, e-mobility devices, and batteries with certified, high-quality versions. Our Fly-11 PRO was
chosen for the official model of DOT and participates in this program. From January 2025 to June 2025, we participated in this
program and completed the delivery of Fly-11 Pro models to our retail partner participating in the program. While we expect relevant
regulations to provide a tailwind to our growth, it is possible for other regulations to result in margin pressures.
How to Assess Our Performance
In assessing performance, management considers
a variety of performance and financial measures, including principal growth in net sales, gross profit, gross margin, selling, general
and administrative expenses and EBITDA. The key measures that we use to evaluate the performance of our business are set forth below.
35
Net Sales
We generate revenue from sales of our EVs, their
accessories and spare parts, and provision of repair services at our retail stores. Our net sales comprise gross sales net of discounts
and return allowances. We do not record sales taxes as a component of retail revenues as we consider it a pass-through conduit for collecting
and remitting sales taxes. Return allowances, which reduce net revenues, are estimated based on historical experience.
E-bikes, E-motorcycles and E-scooters sales. We generate a
substantial majority of our revenues from sales of E-bikes, E-motorcycles and E-scooters directly to customers through our online store
and retail stores, and to our distributors.
Accessories and spare parts sales. We
also sell accessories and spare parts for our EVs, such as rear storage boxes and front baskets. In addition, we offer Fly E-Bike branded
accessories and general merchandise, such as decorative car plates, key chains and apparel.
Service revenues. We also provide
repair services at our retail stores for a fee. The Company operates rental business primarily from the Go Fly rental mobile app and
selected Fly E-Bike stores that provide users with a flexible and affordable e-bike rental option.
Cost of Sales
Cost of sales includes product costs, warehouse
rent expenses, payroll costs, depreciation costs, inventory reserves, warranty costs, and logistic costs. The logistic costs incurred
to receive products from our vendors are included in our inventory and recognized as cost of sales upon sale of products to our customers.
Gross Profit and Gross Margin
We calculate gross profit as net sales less cost
of revenue. Gross margin represents gross profit as a percentage of net sales.
Selling, General and Administrative Expenses
Selling, general and administrative expenses
primarily consist of retail operational expenses, salaries and benefits costs, marketing, advertising, and corporate overhead.
Marketing costs primarily consist of advertising
and payroll and related expenses for personnel engaged in marketing and selling activities.
We expect that our selling and marketing expenses
will continue to increase in the foreseeable future, as we plan to further expand our sales network and retail channels, and engage in
more selling and marketing activities to enhance our brand and attract more purchases from new and existing customers.
General and administrative expenses primarily
consist of costs for corporate functions, including payroll and related expenses, facilities and equipment expenses, such as depreciation
and amortization expense and rent, and professional fees. We expect that our general and administrative will increase in the foreseeable
future, as we hire additional personnel and incur additional expenses related to the anticipated growth of our business and our operation
as a public company after the completion of our initial public offering.
Non-GAAP Financial Measures
To supplement our financial information presented
in accordance with the generally accepted accounting principles in the United States (the “U.S. GAAP”), management
periodically uses certain “non-GAAP financial measures,” as such term is defined under the rules of the SEC, to clarify and
enhance understanding of past performance and prospects for the future. Generally, a non-GAAP financial measure is a numerical measure
of a company’s operating performance, financial position or cash flows that excludes or includes amounts that are included in or
excluded from the most directly comparable measure calculated and presented in accordance with U.S. GAAP. For example, non-GAAP
measures may exclude the impact of certain items such as acquisitions, divestitures, gains, losses and impairments, or items outside
of management’s control. Management believes that the following non-GAAP financial measure provides investors and analysts useful
insight into our financial position and operating performance. Any non-GAAP measure provided should be viewed in addition to, and not
as an alternative to, the most directly comparable measure determined in accordance with U.S. GAAP. Further, the calculation
of these non-GAAP financial measures may differ from the calculation of similarly titled financial measures presented by other companies
and therefore may not be comparable among companies.
36
We use EBITDA (earnings before interest, taxes, depreciation, and
amortization) to evaluate our operating performance. We believe EBITDA provides additional insight into our underlying, ongoing operating
performance and facilitates year-to-year comparisons by excluding the earnings impact of interest, tax, depreciation and amortization
and that presenting EBITDA is more representative of our operational performance and may be more useful for investors.
We reconcile our non-GAAP financial measure to
our net income, which is our most directly comparable financial measure calculated and presented in accordance with U.S. GAAP. EBITDA
includes adjustments for provision for income taxes, as applicable, interest income and expense, depreciation, and amortization. EBITDA
does not represent and should not be considered an alternative to net income as determined by U.S. GAAP, and our calculations thereof
may not be comparable to those reported by other companies. We believe EBITDA is an important measure of operating performance and provides
useful information to investors because it highlights trends in our business that may not otherwise be apparent when relying solely on
U.S. GAAP measures and because it eliminates items that have less bearing on our operating performance. EBITDA, as presented herein,
is a supplemental measure of our performance that is not required by, or presented in accordance with, U.S. GAAP. We use non-GAAP
financial measures as supplements to our U.S. GAAP results in order to provide a more complete understanding of the factors and
trends affecting our business. EBITDA is a measure of operating performance that is not defined by U.S. GAAP and should not be considered
a substitute for net (loss) income as determined in accordance with U.S. GAAP.
EBITDA along with a reconciliation to net income
is shown within the Results of Operations below.
Results of Operations for the Years Ended
March 31, 2025 and 2024
The following table sets forth the components
of our results of operations for the years ended March 31, 2025 and 2024:
For the Year Ended March 31,
2025
2024
Change
Percentage
Change
Revenues, Net
$ 25,427,163
$ 32,205,666
$ (6,778,503 )
(21.0 )%
Cost of Revenues
14,976,266
19,099,120
(4,122,854 )
(21.6 )%
Gross Profit
10,450,897
13,106,546
(2,655,649 )
(20.3 )%
Operating Expenses
Selling Expenses
7,403,374
5,914,786
1,488,588
25.2 %
General and Administrative Expenses
7,607,489
3,931,203
3,676,286
93.5 %
Total Operating Expenses
15,010,863
9,845,989
5,164,874
52.5 %
(Loss) Income from Operations
(4,559,966 )
3,260,557
(7,820,523 )
(239.9 )%
Other Income (Expenses), Net
10,588
(30,352 )
40,940
(134.9 )%
Interest Expenses, Net
(405,615 )
(152,050 )
(253,565 )
166.8 %
Income Taxes Expense
(336,166 )
(1,182,933 )
846,767
(71.6 )%
Net (Loss) Income
$ (5,291,159 )
$ 1,895,222
$ (7,186,381 )
(379.2 )%
Revenues
For the Year Ended March 31,
2025
2024
Change
Percentage
Change
Sales-Retail
$ 21,725,817
$ 26,389,720
$ (4,663,903 )
(17.7 )%
Sales-Wholesale
$ 3,529,479
$ 5,815,946
$ (2,286,467 )
(39.3 )%
Sales-Rental services
171,867
—
171,867
100.0 %
Total Net Revenues
$ 25,427,163
$ 32,205,666
$ (6,778,503 )
(21.0 )%
Our net revenues were $25.4 million for
the year ended March 31, 2025, a decrease of 21.0%, from $32.2 million for the year ended March 31, 2024. The decrease in our net
revenues was primarily driven by a decrease in sales volume by 10,846 units, from 69,611 units for the year ended March 31, 2024, to
58,765 units for the year ended March 31, 2025.
37
Our retail sales revenue decreased by $4.7 million,
or 17.7%, from $26.4 million for the year ended March 31, 2024 to $21.7 million for the year ended March 31, 2025. Our wholesale
revenue decreased by $2.3 million, or 39.3%, from $5.8 million for the year ended March 31, 2024 to $3.5 million for the year
ended March 31, 2025. The decrease in retail sales revenue is mainly due to recent lithium-battery accidents involving E-Bikes and E-Scooters.
With an increasing number of lithium-battery explosion incidents in New York, customers are less inclined to purchase E-Bikes. Consequently,
sales have declined as customers opt for oil-powered vehicles over electric vehicles. The decrease in retail sales also attributed in
part to the closures and disposition of our retail stores during the year ended March 31, 2025. The decrease in wholesales revenue was
driven primarily by the closure of stores by the top two customers who closed their stores in December 2023 due to lack of profitability.
Cost of Revenues
Cost of revenues decreased by 21.6%, from $19.1 million for the
year ended March 31, 2024, to $15.0 million for the year ended March 31, 2025. The decrease in cost of revenues was primarily attributable
to more favorable pricing obtained from our suppliers, particularly for batteries, as well as a reduction in sales volume, as discussed
previously. These factors collectively contributed to the overall decrease in cost of revenues. The unit cost for battery decreased by
11%, from $112 in the year ended March 31, 2024, to $99 in the year ended March 31, 2025.
Gross Margin
The following table shows our gross profit and gross margin for the
years ended March 31, 2025 and 2024:
For the Year Ended March 31,
2025
2024
Change
Percentage
Change
Gross Profit
$ 10,450,897
13,106,546
(2,655,649 )
(20.3 )%
Gross Margin
41.1 %
40.7 %
Gross profit for the years ended March 31, 2025
and 2024 was $10.5 million and $13.1 million, respectively. Gross margin was 41.1% and 40.7% for the year ended March 31, 2025 and
2024, respectively. The gross margin remained at the same level for the two periods.
Total Operating Expenses
The following table sets forth the components
of our total operating expenses for the years ended March 31, 2025 and 2024:
For the Year Ended March 31,
2025
2024
Change
Percentage
Change
Selling Expenses
$ 7,403,374
5,914,786
1,488,588
25.2 %
General and Administrative Expenses
7,607,489
3,931,203
3,676,286
93.5 %
Total Operating Expenses
$ 15,010,863
9,845,989
5,164,874
52.5 %
Percentage of Revenue
59.0 %
30.6 %
Total operating expenses were $15.0 million for
the year ended March 31, 2025, an increase of $5.2 million, or 52.5%, compared to $9.8 million for the year ended March 31,
2024. The increase in operating expenses was attributable to the increase in our payroll expenses, rent, professional fees, product and
software development expenses and settlement payments, as more fully discussed below.
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Selling Expenses
Selling expenses primarily consist of payroll
expenses, rent, and advertising expenses of retail stores. Total payroll expenses were $3.3 million for the year ended March 31, 2025,
compared to $1.6 million for the year ended March 31, 2024. Rent was $2.9 million for the year ended March 31, 2025, compared to
$2.4 million for the year ended March 31, 2024. Advertising expenses were $0.3 million for the year ended March 31, 2025, compared
to $64,423 for the year ended March 31, 2024. The increase in payroll expenses was primarily due to the increased number of new employees
hired for business operations in the first three quarters of the year ended March 31, 2025, despite a reduction in headcounts in the
last quarter resulting from closures and dispositions of retail stores. The increase in rental expense was primarily due to the expansion
of retail stores to support the Company’s business growth and operational needs. The rise in advertising expense was mainly driven
by intensified marketing campaigns and promotional activities aimed at enhancing brand visibility. Total commission expenses were $9,980
for the year ended March 31, 2025, compared to $1.1 million for the year ended March 31, 2024. The decrease in the commission expenses
was primarily due to the Company’s discontinuation of marketing referral expenses for promotions as of January 1, 2024.
General and Administrative Expenses
General and administrative expenses increased
during the year ended March 31, 2025 compared to the previous year. Professional fees increased to $2.0 million for the year ended
March 31, 2025, compared to $1.0 million for the year ended March 31, 2024, primarily attributable to the increase in audit fee,
consulting fee, legal fee and IR expenses associated with our initial public offering and ongoing reporting obligations. Payroll
expenses increased to $1.5 million for the year ended March 31, 2025 from $1.1 million for the year ended March 31, 2024 primarily
due to additional employees hired in operation and accounting departments. Insurance expenses increased to $1.1 million for the
year ended March 31, 2025, compared to $0.2 million for the same period of prior year as a result of increased general insurance
of the stores and the purchase of directors and officers liability insurance after initial public offering in the year ended March 31,
2025. Software development fee increased to $0.5 million for the year ended March 31, 2025, compared to $0.3 million for the same period
in prior year due to the increasing development fee of Fly E-Bike app and the increasing maintenance fee of Go Fly App. There were settlement
payments of $1.0 million for the year ended March 31, 2025, in connection with the UL Litigation.
Income Tax Provisions
Income taxes provision was $0.3 million for the
year ended March 31, 2025, a change from $1.2 million income tax provision for the year ended March 31, 2024. This change was due
to our pre-tax loss for the year ended March 31, 2025.
Net Income (Loss)
Net loss was $5.3 million for the year ended
March 31, 2025, a change of $7.2 million, or 379.2%, from net income of $1.9 million for the year ended March 31, 2024, which was
mainly attributable to the reasons discussed above.
EBITDA
The following table sets forth the components
of our EBITDA for the years ended March 31, 2025 and 2024:
For the Year Ended March 31,
2025
2024
Change
Percentage
Change
(Loss) Income from Operations
$ (5,291,159 )
$ 1,895,222
$ (7,186,381 )
(379.2 )%
Income Tax provision
336,166
1,182,933
(846,767 )
(71.6 )%
Depreciation
631,280
272,708
358,572
131.5 %
Interest Expenses
405,615
152,050
253,565
166.8 %
Amortization
65,091
1,648
63,443
3849.7 %
EBITDA
$ (3,853,007 )
$ 3,504,561
$ (7,357,568 )
(209.9 )%
Percentage of Revenue
(15.2 )%
10.9 %
(26.1 )%
Before interest expenses, income tax, depreciation,
and amortization, for the year ended March 31, 2025, our net loss was $3.9 million, a change of $7.4 million, compared to net income
of $3.5 million for the year ended March 31, 2024, which was mainly attributable to the decrease in revenue, increase in selling
expenses and general and administrative expenses described above. The ratio of EBITDA to revenue was negative 15.2% and 10.9% for the
year ended March 31, 2025 and 2024, respectively.
39
Liquidity and Capital Resources
As of March 31, 2025, we had cash of $0.8 million.
We had working capital of $1.3 million and $0.3 million as of March 31, 2025 and 2024, respectively. We had net loss of $5.3 million
and net income of $1.9 million for the year ended March 31, 2025 and 2024, respectively. During the year ended March 31, 2025, net cash
used in operating activities of the Company was approximately $10.1 million. As of March 31, 2025, the Company had a current portion
of contractual obligation of approximately $8.9 million.
We have funded our working capital and other
capital requirements in the past primarily by equity contributions from our stockholders and net proceeds received from IPO and equity
financing, cash flow from operations, and bank loans. Our ability to repay our current obligation will depend on the future realization
of our current assets. Management has considered the historical experience, the economy, trends in the retail industry, the expected
collectability of the accounts receivable and the realization of the inventories as of March 31, 2025. Our ability to continue to fund
working capital and other capital requirements may be affected by general economic, competitive and other factors, many of which are
outside of our control.
On June 7, 2024, we sold
450,000 shares of common stock, at a price of $20.00 per share in our IPO. The gross proceeds of the IPO were $9.0 million, prior to deducting
the underwriting discounts, commissions and offering expenses payable by us. Net proceeds received by us from IPO were approximately $7.9
million. On June 25, 2024, we sold an additional 67,500 shares of common stock to the underwriters of our IPO for gross proceeds of $1.4
million upon full exercise of the underwriters’ over-allotment option and received net proceeds of $1.2 million. On June 4, 2025,
Company issued 5,719,111 shares of common stock, at a price of $1.2140 per share in its secondary public offering for gross proceeds of
the offering were $6.9 million, prior to deducting the placement agent’s fees and offering expenses payable by the Company.
On July 3, 2025, the Company
implemented a 1-for-5 reverse stock split of its issued and outstanding shares of common stock. The reverse stock split reduced the number
of shares of common stock issued and outstanding from 24,587,500 to 4,917,500 as of March 31, 2025. The par value per share
remained unchanged at $0.01.
As of March 31, 2025, the
Company had working capital of approximately $1.3 million and cash of approximately $0.8 million. The main cash outflow for
the year ended March 31, 2025 was from net loss of $5.3 million, a decrease in tax payable of $1.5 million, an increase in inventories
of $2.5 million, a decrease in operating lease liabilities of $4.9 million, purchase of software from a related party of $0.9 million,
purchase of equipment of $1.6 million and an increase in prepayments and other receivables of $2.5 million. As of March 31,
2025, the Company had a current portion of contractual obligation of approximately $8.9 million. These factors raise substantial doubt
as to the Company’s ability to continue as a going concern. For the next 12 months from the issuance date of this report, we plan
to alleviate the going concern risk through (i) equity financing to support the Company’s working capital; (ii) other available
sources of financing (including debt) from banks and other financial institutions; and (iii) financial support from the Company’s
related parties. The issuance and sale of additional equity would result in further dilution to our stockholders. The incurrence of indebtedness
would result in increased fixed obligations and could result in operating covenants that would restrict our operations. We cannot assure
you that financing will be available in amounts or on terms acceptable to us, if at all. In the event that financing sources are not available,
or that we are unsuccessful in increasing our gross profit margin and reducing operating losses, we may be unable to implement our current
plans for expansion, repay debt obligations or respond to competitive pressures, any of which would have a material adverse effect on
our business, financial condition and results of operations and may materially adversely affect our ability to continue as a going concern.
The consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded assets
or the amounts and classification of liabilities or any other adjustments that might be necessary should we be unable to continue as a
going concern.
Our accounts receivable represent primarily accounts
receivable from distributors that purchased our EVs and other products. As of March 31, 2025 and 2024, our accounts receivable, net of
allowance for credit losses, was $0.5 million and $0.5 million, respectively. Our accounts receivable turnover period increased
from 69 days in the year ended March 31, 2024 to 71 days in the year ended March 31, 2025, which was mainly attributable to the longer
payment terms to dealers.
Our accounts payable represent primarily accounts
payable to suppliers from whom we purchased accessories and components for our products. As of March 31, 2025 and 2024, our accounts
payable were $1.3 million and $1.2 million, respectively. Our accounts payable turnover period increased to 33 days for the year
ended March 31, 2025 from 25 days for the year ended March 31, 2024, which was primarily the result of longer payment cycles.
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Our prepayments and other receivables primarily
represent prepayments to vendors and other service providers. These prepayments and receivables increased by $3.1 million, from $0.6
million as of March 31, 2024, to $3.7 million as of March 31, 2025. This significant increase is mainly due to the launch of Company’s
E-bike rental services, which required additional inventory. As a result, during the year ended March 31, 2025, the Company made substantial
prepayments to vendors to secure inventory for the new services.
Our inventories primarily include our EVs, their
accessories and spare parts. As of March 31, 2025 and 2024, our inventories, net of allowance, were $6.4 million and $5.4 million,
respectively. The increase in inventories was primarily due to our preparation for the new rental business. Our inventory turnover days
increased to 143 days in the year ended March 31, 2025, from 89 days in the year ended March 31, 2024, which was primarily due to
strategic inventory buildup, allowing us to start new services.
As of March 31, 2025 and
2024, the total outstanding amount of loan principal was $7.4 million and $1.6 million, respectively. For the year ended March 31, 2025
and 2024, the interest expenses on our outstanding loans amounted to $405,615 and $152,050, respectively. See Note 8 to the Consolidated
Financial Statements included within this annual report for further information on details of our outstanding loans.
The following table summarizes our cash flow
data for the years ended March 31, 2025 and 2024:
For the Year Ended
March 31,
2025
2024
Net Cash (Used in) Provided by Operating Activities
$ (10,059,466 )
$ 4,308,920
Net Cash Used in Investing Activities
(2,901,272 )
(3,200,843 )
Net Cash Provided by (Used in) Financing Activities
12,486,104
(49,628 )
Net changes in cash including cash classified within current assets held for sale
$ (474,634 )
$ 1,058,449
Operating Activities
Net cash used in operating
activities for the year ended March 31, 2025 was $10.1 million, which was due to net loss of $5.3 million, a decrease in tax
payable of $1.5 million, an increase in inventories of $2.7 million, a decrease in operating lease liabilities of $4.8 million, and
an increase in prepayments and other receivables of $2.7 million, partially offset by amortization of right-of-use assets of $5.1
million, an increase in accrued expenses and other payables of $0.5 million, and a decrease in accounts receivables-related parties of
$0.2 million.
Net cash provided by operating activities for
the year ended March 31, 2024 was $4.3 million, which was mainly comprised of net income of $1.9 million, amortization of right-of-use
assets of $2.3 million and inventories reserve of $0.5 million, an increase in account payable of $2.5 million, an increase in tax payable
of $0.6 million, and an increase of accrued expenses and other payables of $0.3 million, offset by an increase in inventories of $2.0
million, and a decrease in operating lease liabilities of $1.9 million.
Investing Activities
Net cash used in investing
activities was $2.9 million for the year ended March 31, 2025, which was due to purchase of properties and equipment of $1.6
million, purchase of GO FLY App and computer hardware and software from a related party of $1.4 million, and the advance to a related
party of $0.5 million, and partially offset by the repayment from a related party of $0.7 million.
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Net cash used in investing activities was $3.2 million for the year
ended March 31, 2024, which was due to purchase of software from a related party of $1.3 million, the purchase of equipment of $1.3 million,
advance to related parties of $0.3 million, a prepayment for purchase of property of $0.5 million and the purchase of property rights
of $0.03 million, offset by repayment from related parties of $0.1 million.
Financing Activities
Net cash provided by financing activities was
$12.5 million for the year ended March 31, 2025, which consisted of net proceeds from the IPO of $9.2 million, and loan proceeds
of $7.4 million, partially offset by repayments of loans of $3.7 million and payment of IPO costs of $0.3 million.
Net cash used in financing activities was $0.05 million for the year
ended March 31, 2024, which consisted of deferred IPO cost of $0.2 million, repayments of loan payables of $0.6 million, repayments to
former related parties on other payables of $0.3 million and payments of former related party loan of $0.2 million, offset by borrowings
from loan payable of $1.1 million and capital contributions from stockholders of $0.1 million.
Commitments and Contractual Obligations
The following table presents
our material contractual obligations as of March 31, 2025:
Contractual Obligations
Total
Less than
1 year
1 – 2 years
3 – 5 years
Thereafter
Operating Lease Obligations and Others
$ 11,724,690
2,617,762
5,290,390
2,842,381
974,157
Loan Payable
7,356,936
5,291,893
160,004
20,515
1,884,524
UL Litigation
1,000,000
1,000,000
—
—
—
Total Contractual Obligations
$ 20,081,626
8,909,655
5,450,394
2,862,896
2,858,681
Off-Balance Sheet Arrangements
We have not entered into
any transactions, agreements or other contractual arrangements that would result in off-balance sheet liabilities.
Quantitative and Qualitative Disclosures about
Market Risk
Foreign Exchange Risk
A substantial majority of
all of our revenues and expenses are denominated in U.S. dollars. We do not believe that we currently have any significant direct
foreign exchange risk and have not used any derivative financial instruments to hedge exposure to such risk. In addition, as our business
and operation expand in European and other overseas markets in the future, we may be exposed to increased foreign exchange risks for
other currencies.
Interest Rate Risk
Our exposure to interest
rate risk primarily relates to the interest expenses on our short-term and long-term bank borrowings. Our short-term and long-term bank
borrowings bear interests at fixed rates. We have not been exposed to, nor do we anticipate being exposed to, material risks due to changes
in market interest rates. However, our future interest expenses may exceed expectations due to changes in market interest rates. If we
were to renew these short-term and long-term bank borrowings, we might be subject to interest rate risk.
Critical Accounting Estimates
An accounting estimate is
considered critical if it requires to be made based on assumptions about matters that are highly uncertain at the time such estimate
is made, and if different accounting estimates that reasonably could have been used, or changes in the accounting estimate that are reasonably
likely to occur periodically, could materially impact the consolidated financial statements.
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We prepare our consolidated
financial statements in conformity with U.S. GAAP, which requires us to make estimates and assumptions. We continually evaluate these
estimates and assumptions based on the most recently available information, our own historical experiences and various other assumptions
that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting
process, actual results could differ from our expectations as a result of changes in our estimates. Some of our accounting policies require
a higher degree of judgment than others in their application and require us to make significant accounting estimates.
Estimated Allowance for Inventories
Our estimated allowance for
the inventory obsolescence reserves is based on our assessment of realization of inventory. Adjustments are recorded to write down the
cost of inventories to the estimated net realizable value due to slow-moving merchandise and obsolescence, which is dependent upon factors
such as inventory aging, historical and forecasted consumer demand, and market conditions that impact pricing. As of March 31, 2025 and
2024, we recorded inventory allowance balance of $1,107,569 and $514,021, respectively.
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary
Data
The information required
by this item appears beginning on page F-1 of this annual report and is incorporated herein by reference.
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial Disclosures
Not applicable.