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, selling and renting E-motorcycles, E-bikes, E-scooters and related accessories under the brand “Fly E-Bike.”
At Fly E-Bike, our commitment is to encourage people to incorporate eco-friendly transportation into their active lifestyles, ultimately
contributing towards building a more environmentally friendly future.
Fly E-Bike was
established in 2018 with its first store opened in New York. Our business has grown rapidly until mid-2024. As of July 23, 2026, we
have 4 retail stores in the U.S. The Company offers rental services from selected locations in New York, 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.
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 23, 2026, we offered 27 E-motorcycle products, 37 E-bike products and 38
E-scooter products.
We also operate a rental program to meet the increasing
market demand for safe, UL-certified e-bikes in compliance with New York State regulations. The rental service, now available in New York
City, and Los Angeles via the Go Fly rental service mobile app and select Fly E-Bike stores, provides users with a flexible and affordable
e-bike rental option.
We are currently in the process of developing
a Fly E-Bike app, which is a management service mobile software for our EVs, enabling customers to purchase bikes, locate company stores,
schedule bike repairs, and more. We aim to design an app that will bring users a comprehensive intelligent experience to create a safer
and more satisfying riding life. The development of the app is still in its preliminary stage. We have launched a testing version of the
app, which is currently unavailable to our customers. In December 2023, the Company engaged DF Technology US Inc (“DFT”) for
certain technology services including the development of an enterprise resource planning system (“ERP system”), and in July
2024, the Company engaged DFT to develop a mobile phone application for its renal services, the GO FLY APP. The GO FLY APP is fully completed
and delivered on September 9, 2024. The ERP system is fully completed and delivered on May 20, 2025. For the year ended March 31, 2026,
we engaged Phecda Technology (HK) Limited to enhance the ERP functions and develop app for Flyebike, Riding, Lease and Rental. These developments
of the app are still in development stage.
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 and New York. For the year ended March
31, 2026, we assembled 2,714 E-motorcycles, 6,722 E-bikes and 1,830 E-scooters at the same facility.
35
Recent Developments
SEC Investigation
On January 21, 2026, the
Company was notified by the U.S. Securities and Exchange Commission (the “Commission”) that it has initiated an investigation
involving the Company. The Company has not been provided with substantive details regarding the investigation, and is fully cooperating
with the investigation.
Federal securities class action instituted on September 8,
2025
On September 8, 2025, a federal securities class
action was filed in the United States District Court, Eastern District of New York, by plaintiff Dino Kurt, individually and on behalf
of all others similarly situated, against defendants, the Company, chief executive officer (the “CEO”) Zhou Ou, and former
chief financial officer (the “CFO”) Shiwen Feng (the “Class Action”). The complaint alleges violations of Sections
10(b) and 20(a) of the Exchange Act and Rule 10b-5 during the class period spanning from July 15, 2025, to August 14, 2025. The plaintiff
claims that defendants provided materially false and misleading positive statements about revenue growth, brand reputation, and business
expansion, while concealing or minimizing material adverse facts concerning the safety of the Company’s lithium battery and inadequate
forecasting processes, which were already taking a material toll on E-vehicle (the “EV”) sales revenue. The plaintiff alleged
when the Company filed a form NT 10-Q on August 14, 2025, which disclosed a 32% decrease in net revenues primarily driven by a decline
in total units sold, attributed by the Company to “recent lithium-battery accidents involving E-Bikes and E-Scooters”; the
price of Company’s common stock declined dramatically by about 87% in a single day, resulting in economic loss for the plaintiff
and the class.
The relief sought includes determining that the
action may be maintained as a class action, requiring defendants to pay damages sustained by the plaintiff and the class, and awarding
pre-judgment and post-judgment interest, along with reasonable attorneys’ fees, expert fees, and other costs, with the monetary
damages sought being certified to be in excess of $150,000.
On May 22, 2026, the lead
plaintiff in the Class Action filed an Amended Complaint. The Company's response to the Amended Complaint is due August 14, 2026. Given
the preliminary stage of the lawsuit and the inherent uncertainties of litigation, the Company cannot determine with certainty the outcome
of the Class Action at this time.
Any potential loss associated with the action
is not reasonably estimable at this early stage. The Company did not accrue any material loss contingencies in this respect as of March
31, 2026.
Shareholder derivative actions instituted on October 28, 2025
and November 17, 2025
On October 28, 2025, a shareholder derivative
lawsuit was filed purportedly on behalf of the Company, as nominal defendant, against certain of its current and former directors and
officers in the United States Court for the Eastern District of New York, captioned Flynn v. Ou et al, No. 1:25-cv-06036 (E.D.N.Y.) (the
“Flynn Action”). The complaint filed in the Flynn Action alleges claims for alleged breach of fiduciary duties and gross mismanagement,
among others. On November 17, 2025, an additional putative shareholder derivative lawsuit was filed purportedly on behalf of the Company,
as nominal defendant, against certain of its current and former directors and officers in the United States Court for the Eastern District
of New York, captioned Shah v. Ou et al, No. 1:25-cv-06372 (E.D.N.Y.) (the “Shah Action”). The complaint filed in the Shah
Action alleges claims for alleged breach of fiduciary duty, unjust enrichment, waste of corporate assets, gross mismanagement, abuse of
control, among others.
The Flynn Action and Shah Action are based on
the same alleged facts and circumstances as the Class Action and seek damages from the current and former directors and officers and an
order directing the Company and current and former directors and officers to take actions to reform and improve corporate governance and
internal procedures. On December 9, 2025, the Court consolidated the Flynn Action and Shah Action into a single consolidated action captioned
In re Fly-E Group, Inc. Stockholder Derivative Litigation, No. 1:25-cv-06036 (E.D.N.Y.) (the “Consolidated Derivative Action”),
and appointed co-lead counsel. The current and former director and officer defendants dispute the allegations in the complaints and intend
to vigorously defend against all claims. Given the preliminary stage of the lawsuit and the inherent uncertainties of litigation, we cannot
determine with certainty the outcome of the Consolidated Derivative Action at this time.
36
UL Litigation
On or about March 12, 2025, UL LLC (“UL”)
filed a complaint against the Company, along with the Company’s certain subsidiaries and certain individuals, in the Eastern District
of New York (the “Complaint”). The Complaint alleges that the Company improperly used UL’s trademark by claiming certain
products were certified by UL. The Complaint seeks $2,000,000 for each instance an allegedly counterfeit UL mark was used and asserts
claims for federal trademark infringement and counterfeiting, unfair competition and false designations of the origin and false and misleading
representations, common law unfair competition, common law unjust enrichment, and unlawful deceptive acts and practices.
On May 21, 2025, Company, along with its certain
subsidiaries and certain individuals, and UL entered into a settlement and release agreement (the “Settlement Agreement”)
on mutually acceptable settlement terms. Pursuant to the Settlement Agreement, the Company and the other defendants agreed to pay UL an
aggregate amount of $1,000,000 before November 30, 2025, and entered into a Consent Judgment and Permanent Injunction pursuant to which
the Company and the other defendants agreed not to offer for sale, sell, or distribute products with UL Marks that were not tested and
certified by UL. During the year ended March 31, 2026, the Company paid $1,000,000 to UL.
The Settlement Agreement fully resolves all pending
litigation between UL and the Company, and each party fully releases the other party from any and all past or present claims, demands,
causes of action, obligations, damages, liabilities, expenses, or compensation of whatever kind or nature, that were or could have been
asserted in connection with the Company’s sales of products with a UL Mark which were not tested and certified by UL.
2025 Reverse Stock Split
On March 10, 2025, the Company held a special
meeting of stockholders. At the special meeting, the stockholders approved a proposal to amend the Company’s amended and restated
certificate of incorporation to effect a reverse stock split of the Company’s issued and outstanding shares of common stock, par
value $0.01 per share, by a ratio in the range of 1-for-2 to 1-for-15, with such ratio to be determined in the discretion of the board
of directors of the Company and with such action to be effected at such time and date, if at all, as determined by the board of directors
within one year after the conclusion of the special meeting.
On June 16, 2025, the board of directors approved
a one-for-five (1:5) reverse stock split of the Company’s issued and outstanding shares of common stock (the “2025 First Reverse
Stock Split”). On July 2, 2025, the Company filed with the Secretary of State of the State of Delaware the Second Certificate of
Amendment to its Certificate of Incorporation (the “Certificate of Amendment”) to effect the 2025 First Reverse Stock Split.
The 2025 First Reverse Stock Split became effective as of 5:00 p.m., Eastern Time, on July 3, 2025, and the Company’s common stock
began trading on the Nasdaq Stock Market on a split-adjusted basis on July 7, 2025.
After the 2025 First Reverse Stock Split, every
five (5) shares of the Company’s issued and outstanding common stock have been automatically converted into one share of common
stock, without any change in the par value per share. In addition, (i) a proportionate adjustment has been made to the per share exercise
price and the number of shares issuable upon the exercise of all outstanding warrants to purchase shares of common stock, and (ii) the
number of shares reserved for issuance pursuant to the Company’s stock incentive plan has been reduced proportionately. Any fraction
of a share of common stock created as a result of the 2025 First Reverse Stock Split was rounded up to the nearest whole share. The Company’s
common stock continues to trade on the Nasdaq Capital Market under the symbol “FLYE.”
On September 15, 2025, the Company planned to
hold a special meeting of stockholders, but adjourned to October 13, 2025 in order to achieve a quorum (the “Special Meeting”).
At the special meeting, the stockholder approved a proposal to amend the Company’s amended and restated certificate of incorporation
to effect a reverse stock split of the Company’s issued and outstanding shares of common stock, par value $0.01 per share, , by
a ratio in the range of 1-for-2 to 1-for-20, with such ratio to be determined in the discretion of the board of directors of the Company
and with such action to be effected at such time and date, if at all, as determined by the board of directors within one year after the
conclusion of the special meeting.
37
On October 13, 2025, the board of directors approved
a one-for-twenty (1:20) reverse stock split of the Company’s issued and outstanding shares of common stock (the “2025 Second
Reverse Stock Split”). On October 23, 2025, the Company filed with the Secretary of State of the State of Delaware the Second Certificate
of Amendment to its Certificate of Incorporation (the “Certificate of Amendment”) to effect the 2025 Second Reverse Stock
Split. The 2025 Second Reverse Stock Split became effective on November 4, 2025, and the Company’s common stock began trading on
the Nasdaq Stock Market on a split-adjusted basis on November 4, 2025.
After the 2025 Second Reverse Stock Split, every
twenty (20) shares of the Company’s issued and outstanding common stock have been automatically converted into one share of common
stock, without any change in the par value per share. In addition, (i) a proportionate adjustment has been made to the per share exercise
price and the number of shares issuable upon the exercise of all outstanding warrants to purchase shares of common stock, and (ii) the
number of shares reserved for issuance pursuant to the Company’s stock incentive plan has been reduced proportionately. Any fraction
of a share of common stock created as a result of the 2025 Second Reverse Stock Split was rounded up to the nearest whole share. The Company’s
common stock continues to trade on the Nasdaq Capital Market under the symbol “FLYE.”
Unless otherwise noted, the share and per share
information in this report reflects the two 2025 Reverse Stock Split.
Registered Direct Offering and Private Placement Offering
On June 2, 2025, we closed our registered direct
offering of an aggregate of (i) 285,956 shares of our common stock, par value $0.01 and (ii) 571,912 warrants (the “Warrants”)
to purchase 571,912 shares of common stock at a combined purchase price per share and accompanying Warrants of $24.28, resulting in net
proceeds to us of $6.24 million after deducting placement agent fees and offering expenses. All of the shares (including shares underlying
the Warrants) were registered under the Securities Act pursuant to a registration statement on Form S-1, as amended (File No. 333-286678),
which was declared effective by the Securities and Exchange Commission on May 15, 2025. American Trust Investment Services, Inc. (“ATIS”)
acted as the exclusive placement agent for the offering. We paid ATIS aggregate commissions of $219,430 and incurred offering expenses
of $178,625.
On September 18, 2025, the Company entered into
a securities purchase agreement with third-party individuals offering of (i) 687,500 shares of the common stock at the price of $16.0
per share for a total consideration of $11,000,000. During the year ended March 31, 2026, the Company received net proceeds of $10,996,558
from the investors. The disclosure that the closing of this transaction occurred on September 30, 2025, in the Form 8-K filed with the
SEC was incorrect and is hereby corrected.
Disposal of Certain Subsidiaries
During the year ended March 31, 2026, the Company
disposed several subsidiaries as part of a disposal plan aimed at simplifying its legal and operational structure and improving administrative
efficiency. The divestitures were not intended to be a strategic withdrawal from any specific geographic region or industry, but rather
a measure to streamline the Company’s corporate structure and reduce complexity in financial reporting. As part of this plan, as
of March 31, 2026, the Company had sold an aggregate of 28 subsidiaries to third-party individuals in multiple transactions, for total
cash consideration of approximately $2.9 million, of which approximately $0.1 million had been received. Between April 2025 and March
2026, the Company further sold 100% of its equity interests in 24 subsidiaries to third-party buyers for total cash consideration of approximately
$2.3 million, with no contingent payments or adjustments. As of July 23, 2026, the Company had not received any remaining consideration
under these transactions. (See Note - 15 — DISPOSAL OF SUBSIDIARIES in the accompanying consolidated financial statements for details).
38
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 23, 2026, we currently operate 4 retail stores in the U.S. During the year ended March 31, 2026, 23 retail stores in the U.S.
and 1 retail store in Canada were sold to streamline the Company’s corporate structure and reduce complexity in financial reporting
and operating costs. We offer rental services from selected locations. We also operate one online store, focusing on selling E-motorcycles,
E-bikes, and E-scooters 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, 2026, our net revenues
decreased by 25.0% to $19.1 million, compared to $25.4 million for the same period in 2025, which was primarily driven by a decrease in
total units sold and reductions in selling prices to reduce aged inventory for the year ended March 31, 2026.
We currently have a streamlined product portfolio
consisting of three categories, with multiple models and specifications for each category. Our ability to increase the sales price and
volume will depend on our ability to continually enhance our brand to attract customers, as well as our ability to successfully operate
our retail stores and expand our sales network globally. However, our product sales price is influenced by various factors such as market
demand and competitors’ pricing, and although we continue working on product improvements and retail expansion, there can be no
guarantee of sustained sales price increase or improved sales volume. If our prices remain stable, increasing sales volume would become
important for continued revenue growth, and failure to do so would significantly impact our ability to grow revenue or improve our financial
results.
Employees
Our payroll expenses were $2.5 million for the
year ended March 31, 2026, compared to $4.7 million for the year ended March 31, 2025. During the year ended March 31, 2026, the Company
closed 8 stores and sold 24 stores, and we expect a decrease in payroll expenses in the next quarter due to reduced demand for store sales
staff. Each of our retail stores has a minimum of two employees, and additional office employees will be hired to support retail stores
in customer service and marketing. In addition, to maintain excellent customer service in our retail stores, each store will have at least
one trained repair professional. Effective management of payroll expenses remains crucial to our ability to grow revenue and enhance our
financial results, especially as we navigate a reduced workforce.
39
Vendor and Supply Management
During the year ended March
31, 2026, we worked with two principal vendors, Depcl Corp. and Xiamen Innolabs Technology Co., Ltd, each of which respectively supplied
approximately 70.3% and 19.2% of the accessories and components used in all our products.
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.
How to Assess Our Performance
In assessing performance, management considers
a variety of performance and financial measures, including principal growth in net sales, gross profit, gross margin, selling, general
and administrative expenses and EBITDA. The key measures that we use to evaluate the performance of our business are set forth below.
Net Sales
We generate revenue from sales of our EVs, their
accessories and spare parts, and provision of repair services at our retail stores. Our net sales comprise gross sales net of discounts
and return allowances. We do not record sales taxes as a component of retail revenues as we consider it a pass-through conduit for collecting
and remitting sales taxes. Return allowances, which reduce net revenues, are estimated based on historical experience.
E-bikes, E-motorcycles and E-scooters sales.
We generate a substantial majority of our revenues from sales of E-bikes, E-motorcycles and E-scooters directly to customers through
our online store and retail stores, and to our distributors.
Accessories and spare parts sales. We also
sell accessories and spare parts for our EVs, such as rear storage boxes and front baskets. In addition, we offer Fly E-Bike branded accessories
and general merchandise, such as decorative car plates, key chains and apparel.
Service revenues. We also provide repair
services at our retail stores for a fee. The Company operates rental business primarily from the Go Fly rental mobile app and selected
Fly E-Bike stores that provide users with a flexible and affordable e-bike rental option.
40
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 decrease in the foreseeable future, as more retail stores are expected to be sold with reduced selling and marketing activities.
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 decrease in the foreseeable
future, as more retail stores are expected to be sold with reduced general and administrative activities.
Non-GAAP Financial Measures
To supplement our financial information presented
in accordance with the generally accepted accounting principles in the United States (the “U.S. GAAP”), management periodically
uses certain “non-GAAP financial measures,” as such term is defined under the rules of the SEC, to clarify and enhance understanding
of past performance and prospects for the future. Generally, a non-GAAP financial measure is a numerical measure of a company’s
operating performance, financial position or cash flows that excludes or includes amounts that are included in or excluded from the most
directly comparable measure calculated and presented in accordance with U.S. GAAP. For example, non-GAAP measures may exclude the impact
of certain items such as acquisitions, divestitures, gains, losses and impairments, or items outside of management’s control. Management
believes that the following non-GAAP financial measure provides investors and analysts useful insight into our financial position and
operating performance. Any non-GAAP measure provided should be viewed in addition to, and not as an alternative to, the most directly
comparable measure determined in accordance with U.S. GAAP. Further, the calculation of these non-GAAP financial measures may differ from
the calculation of similarly titled financial measures presented by other companies and therefore may not be comparable among companies.
We use EBITDA (earnings before interest, taxes,
depreciation, and amortization) to evaluate our operating performance. We believe EBITDA provides additional insight into our underlying,
ongoing operating performance and facilitates year-to-year comparisons by excluding the earnings impact of interest, tax, depreciation
and amortization and that presenting EBITDA is more representative of our operational performance and may be more useful for investors.
41
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, 2026 and 2025
The following table sets forth the components
of our results of operations for the years ended March 31, 2026 and 2025:
For the Years Ended March 31,
Percentage
2026
2025
Change
Change
Revenues, Net
$ 19,063,357
$ 25,427,163
$ (6,363,806 )
(25.0 )%
Cost of Revenues
14,404,283
14,976,266
(571,983 )
(3.8 )%
Gross Profit
4,659,074
10,450,897
(5,791,823 )
(55.4 )%
Operating Expenses
Selling Expenses
3,478,740
7,403,374
(3,924,634 )
(53.0 )%
General and Administrative Expenses
7,618,603
7,607,489
11,114
0.1 %
Total Operating Expenses
11,097,343
15,010,863
(3,913,520 )
(26.1 )%
Loss from Operations
(6,438,269 )
(4,559,966 )
(1,878,303 )
41.2 %
Other Expenses, Net
(684,775 )
10,588
(695,363 )
(6,567.5 )%
Interest Expense, Net
(1,806,085 )
(405,615 )
(1,400,470 )
345.3 %
Income Taxes Benefit
(328,679 )
(336,166 )
7,487
(2.2 )%
Net Loss
$ (9,257,808 )
$ (5,291,159 )
$ (3,966,649 )
75.0 %
Revenues
For the Years Ended March 31,
Percentage
2026
2025
Change
Change
Sales - Retail
$ 6,922,972
$ 21,725,817
$ (14,802,844 )
(68.1 )%
Sales - Wholesale
11,560,343
3,529,479
8,030,863
227.5 %
Sales - Rental services
580,042
171,867
408,175
237.5 %
Total Net Revenues
$ 19,063,357
$ 25,427,163
$ (6,363,806 )
(25.0 )%
For the year ended March 31, 2026, our net revenues decreased by 25.0%
to $19.1 million, compared to $25.4 million for the same period in 2025. The decrease in our net revenues was primarily driven by a decrease
in sales volume of 16,664 units, from 58,765 units for the year ended March 31, 2025, to 42,101 units for the year ended March 31, 2026,
and a decrease in selling prices in order to reduce aged inventory.
42
Our retail sales revenue decreased by $14.8 million,
or 68.1%, from $21.7 million for the year ended March 31, 2025 to $6.9 million for the year ended March 31, 2026. Our wholesale revenue
increased by $8.0 million, or 227.5%, from $3.5 million for the year ended March 31, 2025 to $11.6 million for the year ended March 31,
2026. The decrease in retail sales revenue was primarily attributable to softened consumer demand for E-bicycles and E-scooters, partly
driven by safety concerns stemming from lithium-ion battery-related incidents in New York during the period, which prompted some customers
to reconsider their purchases and explore alternative transportation options. In addition, the decline was partly due to the closure and
disposal of certain retail stores during the year ended March 31, 2026. The increase in wholesale revenue was mainly driven by continued
purchases from entities that were disposed of during the same period, as these stores continued to source products from us following the
disposals.
Cost of Revenues
Cost of revenues decreased by 3.8%, from $15.0 million for the year
ended March 31, 2025, to $14.4 million for the year ended March 31, 2026. The decrease was primarily attributable to the reduction in
sales volume resulting from the decrease in the number of retail stores during the year, as discussed above.
Gross Margin The following table shows
our gross profit and gross margin for the year ended March 31, 2025 and 2026:
For the Years Ended March 31,
Percentage
2026
2025
Change
Change
Gross Profit
$ 4,659,074
$ 10,450,897
$ (5,791,823 )
(55.4 )%
Gross Margin
24.4 %
41.1 %
Gross profit for the years ended March 31, 2026 and 2025 was $4.7 million
and $10.5 million, respectively. Gross margin was 24.4% and 41.1% for the years ended March 31, 2026 and 2025 respectively. The decrease
in gross margin was primarily attributable to lower average selling prices of our EVs implemented to clear aged inventory and an increase
in procurement costs driven by upstream price movements, as well as a shift in sales channel mix following the disposal of certain retail
stores, which resulted in a higher proportion of wholesale sales and a lower proportion of retail sales — the latter of which typically
generates higher margins. These negative factors were partially offset by increased rental services revenue with higher margins than our
other businesses, though its contribution remained relatively small. As a result, gross margin decreased by 16.7 percentage points from
41.1% to 24.4% for the year ended March 31, 2026.
Total Operating Expenses
The following table sets forth the components
of our total operating expenses for the years ended March 31, 2026 and 2025:
For the Years Ended March 31,
Percentage
2026
2025
Change
Change
Selling Expenses
$ 3,478,740
$ 7,403,374
$ (3,924,634 )
(53.0 )%
General and Administrative Expenses
7,618,603
7,607,489
11,114
0.1 %
Total Operating Expenses
$ 11,097,343
$ 15,010,863
$ (3,913,520 )
(26.1 )%
Percentage of Revenue
58.2 %
59.0 %
Total operating expenses were $11.1 million for the year ended March
31, 2026, a decrease of $3.9 million, or 26.1%, compared to $15.0 million for the years ended March 31, 2025. The decrease in operating
expenses was attributable to the combined effect of (i) reductions in payroll expenses, rent expenses, meals and entertainment expenses,
and insurance expenses as a result of the reduction in retail stores and the downsizing of our business operations, partially offset by
(ii) increases in warehouse maintenance costs, impairment loss on equipment, and inventory clearance losses, as discussed below.
43
Selling Expenses
Selling expenses primarily consist of payroll
expenses, rent, utilities, and advertising expenses of retail stores. For the year ended March 31, 2026, selling expenses decreased significantly
compared to the prior year, primarily due to the closures and dispositions of retail stores during the year, which reduced the scale of
our operations and resulted in lower associated expenses. Payroll expenses were $1.7 million for the year ended March 31, 2026, compared
to $3.3 million for the year ended March 31, 2025. Rent expenses were $1.1 million for the year ended March 31, 2026, compared to $2.9
million for the year ended March 31, 2025. Utilities expenses were $0.1 million for the year ended March 31, 2026, compared to $0.2 million
for the year ended March 31, 2025. Advertising expenses were $36,604 for the year ended March 31, 2026, compared to $0.3 million for the
year ended March 31, 2025.
General and Administrative Expenses
General and administrative expenses increased during the year ended
March 31, 2026 compared to the prior year, primarily due to increases in inventory clearance losses, impairment loss on property and equipment,
and repair and maintenance expenses, partially offset by decreases in payroll expenses, meals, entertainment and travel expenses, and
insurance expenses. Inventory clearance losses increased to $1.9 million for the year ended March 31, 2026 from nil for the year ended
March 31, 2025, primarily attributable to losses incurred from inventory clearance and count processes in connection with the closures
and dispositions of retail stores; impairment loss on property and equipment increased to $0.6 million for the year ended March 31, 2026
from nil for the year ended March 31, 2025, primarily due to impairment charges recorded for assets that were idle or no longer expected
to generate economic benefits. Payroll expenses decreased to $0.5 million for the year ended March 31, 2026 from $1.5 million for the
year ended March 31, 2025, primarily due to headcount reductions in operations and accounting departments; meals, entertainment and travel
expenses decreased to $0.3 million for the year ended March 31, 2026 from $0.5 million for the year ended March 31, 2025, primarily as
a result of reduced business entertainment and travel activities following the workforce reduction; and insurance expenses decreased to
$0.3 million for the year ended March 31, 2026 from $1.1 million for the year ended March 31, 2025, primarily due to lower general insurance
coverage purchased for closed and disposed retail stores.
Other (Expenses)/ Income, net
Other expenses, net were $0.7 million for the year ended March 31,
2026, compared to other income, net of $10,588 for the year ended March 31, 2025. The change was primarily attributable to the net impact
of losses and gains arising from the closure and disposition of retail stores during the year, with losses from store closures and asset
disposals partially offset by gains on certain dispositions, resulting in a net expense.
Interest expenses, net
Interest expenses, net were $1.8 million for the
year ended March 31, 2026, an increase of $1.4 million from $0.4 million for the year ended March 31, 2025. This increase was primarily
attributable to interest expenses incurred on new borrowings from financial institutions to fund our business operations, as well as extension
fees paid for certain loan renewals and the higher average annual interest rates following such renewals.
Income Tax Provisions
Income tax provision was $0.33 million for the
year ended March 31, 2026, a change from $0.34 million income tax provision for the year ended March 31, 2025. This change was primarily
due to our pre-tax loss for the year ended March 31, 2026.
Net Loss
Net loss was $9.3 million for the year ended March 31, 2026, an increase
of $4.0 million, or 75.0%, from net loss of $5.3 million for the year ended March 31, 2025, which was mainly attributable to the reasons
discussed above.
44
EBITDA
The following table sets forth the components of our EBITDA for the
years ended March 31, 2026 and 2025:
For the Years Ended March 31,
Percentage
2026
2025
Change
Change
Net Loss
$ (9,257,808 )
$ (5,291,159 )
$ (3,966,649 )
75.0 %
Income Tax Provision
328,679
336,166
(7,487 )
(2.2 )%
Depreciation
719,383
631,280
88,103
14.0 %
Interest Expenses
1,806,085
405,615
1,400,470
345.3 %
Amortization
110,149
65,091
45,058
69.2 %
EBITDA
$ (6,293,512 )
$ (3,853,007 )
$ (2,440,505 )
63.3
%
Percentage of Revenue
(33.0 )%
(15.2 )%
(17.8 )%
Before interest expenses,
income tax, depreciation, and amortization, for the year ended March 31, 2026, our net loss was approximately $6.3 million, an increase
of approximately $2.4 million, compared to net loss of $3.9 million for the year ended March 31, 2025, which was mainly attributable to
the decrease in revenue and selling expenses and increase in general and administrative expenses described above. The ratio of EBITDA
to revenue was negative 33.0% and negative 15.2% for the years ended March 31, 2026 and 2025, respectively.
Liquidity and Capital Resources
As of March 31, 2026, we
had cash of $0.3 million. We had working capital of $10.0 million and $1.3 million as of March 31, 2026 and 2025, respectively. We had
net loss of $9.3 million and $5.3 million for the years ended March 31, 2026 and 2025, respectively. During the year ended March 31, 2026,
net cash used in operating activities of the Company was approximately $13.8 million. As of March 31, 2026, the Company had a current
portion of contractual obligation of approximately $5.5 million, including short-term loan payables of approximately $3.9 million, current
portion of long-term loan payables of approximately $0.1 million, and current portion of operating lease liabilities of approximately
$1.5 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, 2026. Our ability to continue to fund working capital and
other capital requirements may be affected by general economic, competitive and other factors, many of which are outside of our control.
On June 4, 2025, the Company issued 285,956 shares
of common stock, at a price of $24.28 per share in its follow-on public offering for gross proceeds of $6.9 million, prior to deducting
the placement agent’s fees and offering expenses payable by the Company.
On September 18, 2025, the Company entered into
a securities purchase agreement with third-party individuals offering of (i) 687,500 shares of the common stock at the price of $16.0
per share for a total consideration of $11,000,000. During the year ended March 31, 2026, the Company received net proceeds of $10,996,558
from the investors.
45
As of March 31, 2026, the Company had working capital of approximately
$10.0 million and cash of approximately $0.3 million. The main cash outflow for the year ended March 31, 2026 was from net loss of $9.3
million, a decrease in accounts payable of $0.8 million, an increase in accounts receivable of $6.8 million, a decrease in inventory of
$1.9 million, and a decrease in prepayments and other receivables of $0.9 million. The Company became default of repayment for loan with
Peapack-Gladstone Bank since August 31, 2025. During the year ended March 31, 2026, the Company paid $1,000,000, $669,725 and $117,921 on
principal, interest and forbearance fee of the loan, respectively. The Company entered into forbearance and modification agreement with
the bank on November 7, 2025 for extension of repayment deadline with interest rate of 12.875% to March 31, 2026. Subsequent to the execution
of the forbearance agreement, the Company has received written notices from Peapack Private Bank asserting defaults and reserving the
lender’s rights to pursue remedies under the applicable loan documents. The Company entered into a forbearance and modification
agreement with the bank on May 28, 2026, extending the repayment deadline to June 30, 2026, at an interest rate of 12.875%, and the agreement
requires the Company to pay $123,877 in interest and a $4,000 forbearance fee in respect of the loan. As of July 23, 2026, the Company
is in ongoing negotiations with the bank for a renewal. 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, 2026 and 2025, our accounts receivable, net of
allowance for credit losses, was $7.0 million and $0.5 million, respectively. Our accounts receivable turnover period increased from 71
days in the year ended March 31, 2025 to 72 days in the year ended March 31, 2026 which was mainly attributable to the relaxation of
credit policies to customers.
Our accounts payable represent primarily accounts
payable to suppliers from whom we purchased accessories and components for our products. As of March 31, 2026 and 2025, our accounts payable
were $0.4 million and $1.3 million, respectively. Our accounts payable turnover period decreased to 29 days for the year ended March 31,
2026 from 33 days for the year ended March 31, 2025, which was primarily due to the Company’s accelerated payments to certain suppliers.
The company pay invoices more promptly to ensure continued favorable terms and reliable service.
Our prepayments and other receivables primarily
represent prepayments to vendors and other service providers. These prepayments and receivables increased by $3.3 million, from $3.7 million
as of March 31, 2025, to $7.0 million as of March 31, 2026. This significant increase is mainly due to receivables arising from the disposal of certain subsidiaries.
Our inventories primarily include our EVs, their accessories and spare
parts. As of March 31, 2026 and 2025, our inventories, net of allowance, were $2.3 million and $6.4 million, respectively. The decrease
in inventories was primarily due to those inventories held by stores classified as assets held for sale. Our inventory turnover days decreased
to 111 days in the year ended March 31, 2026, from 143 days in the year ended March 31, 2025, which was primarily due to optimized inventory
management and enhanced operational efficiency.
As of March 31, 2026 and 2025, the total outstanding
amount of loan principal was $6.0 million and $7.4 million, respectively. For the years ended March 31, 2026 and 2025, the interest expenses
on our loans amounted to $1.8 million and $0.4 million, respectively. See Note 9 to the Consolidated Financial Statements included within
this report for further information on details of our outstanding loans.
46
The following table summarizes our cash flow data
for the years ended March 31, 2026 and 2025:
For the Years Ended
March 31,
2026
2025
Net Cash Used in Operating Activities
$ (13,849,914 )
$ (10,059,466 )
Net Cash Used in Investing Activities
(2,485,792 )
(2,901,272 )
Net Cash Provided by Financing Activities
15,685,480
12,486,104
Net changes in cash including cash classified within current assets held for sale
$ (650,226 )
$ (474,634 )
Operating Activities
Net cash used in operating
activities for the year ended March 31, 2026 was $13.8 million, which was due to net loss of $9.3 million, amortization of right-of-use
assets of $1.9 million, impairment loss on property, and equipment of 0.6 million, depreciation expense of 0.7 million, amortization expense
of 0.1 million, inventory reserve of 0.5 million, a decrease in inventories of $1.9 million, a decrease in prepayments and other receivables
of $0.6 million, a decrease in accounts payable of $0.8 million, a decrease in accrued expenses and other payables of $0.5 million, and
a decrease in operating lease liabilities of $1.7 million, partially offset by gain on disposal of subsidiaries of $1.6 million, an increase
in accounts receivable of $6.8 million, and an increase in taxes payable of $0.1 million.
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.
Investing Activities
Net cash used in investing activities was $2.5 million for the year
ended March 31, 2026, which was due to prepayment for software development of $1.8 million, advance to a related party of $0.2 million,
and cash released from disposal of entities of $0.4 million.
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.
Financing Activities
Net cash provided by financing activities was $15.7 million for the
year ended March 31, 2026, which consisted of net proceeds from our follow-on public offering and private placement offering of $17.4
million, and loan proceeds of $2.0 million, partially offset by repayments of loans of $3.1 million and payment of public offering costs
of $0.5 million.
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.
47
Commitments and Contractual Obligations
The following table presents our material contractual obligations as
of March 31, 2026:
Less than
Contractual Obligations
Total
1 year
1 – 2 years
3 – 5 years
Thereafter
Operating Lease Obligations and Others
$ 4,809,665
$ 1,507,340
$ 1,663,771
$ 1,638,554
$ -
Loan Payables
5,975,480
4,029,893
40,631
32,989
1,871,967
Total Contractual Obligations
$ 10,785,145
$ 5,537,233
$ 1,704,402
$ 1,671,543
$ 1,871,967
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 loan payables. Our short-term and long-term loan payables bear interest 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 loan payables, 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.
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.
48
Estimated Allowance for Inventory Obsolescence Reserve
Our estimated allowance for the inventory obsolescence reserves is
based on our assessment of realization of inventory. Adjustments are recorded to write down the cost of inventories to the estimated net
realizable value due to slow-moving merchandise and obsolescence, which is dependent upon factors such as inventory aging, historical
and forecasted consumer demand, and market conditions that impact pricing. As of March 31, 2026 and 2025, we recorded inventory reserves
balance of $859,193 and $1,107,569, respectively.
Estimated Allowance for Expected Credit Losses
Our estimated allowance for expected credit losses
is based on our assessment of collectability of accounts receivable. Adjustments are recorded to estimate expected credit losses over
the contractual life of receivables under the current expected credit loss model, which is dependent upon 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. As
of March 31, 2026 and 2025, we recorded allowance for expected credit losses of $217,479 and $116,746, respectively.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable to smaller reporting companies.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls
and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange
Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our
reports filed or submitted under the Exchange Act is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer
(together, the “Certifying Officers”), to allow timely decisions regarding required disclosure.
Under the supervision and with the participation
of our management, including our Certifying Officers, we carried out an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our
Certifying Officers concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this
Report due to the material weakness identified below.
Management’s Annual Report on Internal
Control over Financial Reporting
A material weakness is a deficiency, or a combination
of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement
of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses that have been
identified in internal control over financial reporting included our lack of (i) sufficient financial reporting and accounting personnel
with appropriate knowledge of generally accepted accounting principles in the United States of America (the “U.S. GAAP”) and
SEC reporting requirements to properly address complex U.S. GAAP accounting issues and to prepare and review our unaudited condensed consolidated
financial statements and related disclosures to fulfill U.S. GAAP and SEC financial reporting requirements, (ii) formal internal control
policies and internal independent supervision functions to establish formal risk assessment process and internal control framework, and
(iii) sufficient controls designed and implemented in IT environment and IT general control activities, which are mainly associated with
areas of logical access management, change management, computer operation, service organization management as well as cyber security management.
To remediate the material weaknesses, we have engaged a third-party consultant to perform internal review and assist us to set up more
reliable internal control processes. The consultant commenced work in February 2025. We have begun organizing regular training programs
for our accounting personnel, with a focus on U.S. GAAP and SEC reporting requirements, in order to improve the competence and awareness
of our finance team. In addition, we plan to enhance our IT infrastructure by outsourcing our IT department to a provider to manage PC
operations and system monitoring. Furthermore, we are developing and plan to implement an enterprise resource planning system to streamline
sales, inventory, financial reporting, and order management. We will devote resources to remediate these material weaknesses as we grow
and such resources required for implementing proper internal controls for financial reporting are available. We have performed testing
to evaluate the operating effectiveness of these remediation measures. Based on the results of our testing, we concluded that these material
weaknesses had not been fully remediated as of March 31, 2026. Accordingly, we continue to consider these material weaknesses to be ongoing
as of that date.
49
As of March 31, 2026, we believe that our internal
controls over financial reporting were not effective in providing reasonable assurance regarding the reliability of our financial reporting
due to the material weaknesses identified above.
We do not expect that our disclosure controls
and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met.
Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits
must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation
of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances
of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control over Financial
Reporting
There was no change in our internal control over
financial reporting that occurred during the period covered by this Report that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk
Not applicable.