10-K: Fly-E Group Faces Significant Losses and Going Concern Doubt Amidst Revenue Decline and Operational Challenges

Fly-E Group reported a substantial net loss and negative EBITDA for fiscal year 2025, raising significant doubt about its ability to continue as a going concern, despite recent capital raises and strategic initiatives.

Summary

• Net revenues decreased by 21.0% to $25.4 million for the fiscal year ended March 31, 2025, down from $32.2 million in 2024.
• The company reported a net loss of $5.3 million for fiscal year 2025, a sharp reversal from a net income of $1.9 million in 2024.
• EBITDA swung to a negative $3.85 million in 2025 from a positive $3.5 million in 2024.
• Total units sold decreased by 10,846 units, from 69,611 in 2024 to 58,765 in 2025, primarily attributed to customer reluctance to purchase e-bikes following lithium-battery accidents in New York.
• Selling, general, and administrative expenses increased by 52.5% to $15.0 million in 2025, driven by higher payroll, rent, professional fees, insurance, and a $1.0 million settlement payment for UL litigation.
• The company raised approximately $9.2 million net from its Initial Public Offering (IPO) in June 2024 and $6.24 million net from a registered direct offering in June 2025.
• Substantial doubt exists about the company's ability to continue as a going concern, with cash at $0.8 million and net cash used in operating activities of $10.1 million as of March 31, 2025.
• The company launched a rental program in October 2024 and participated in the NYC DOT's $2 million trade-in program for e-bikes in January 2025.
• A 1-for-5 reverse stock split was effected on July 3, 2025, following a 1-for-110,000 stock split in April 2024.

Sentiment

Score: 3

Explanation: The company faces severe financial challenges, including a significant net loss, negative EBITDA, and substantial cash burn, leading to a 'going concern' warning. While there are strategic initiatives and recent capital raises, these are overshadowed by declining sales volume, increased operating costs, and material weaknesses in internal controls. The overall outlook is highly concerning.

Positives

• Launched a rental program in New York City, Toronto, and Los Angeles in October 2024, with plans to expand to Miami, diversifying service offerings.
• The Fly-11 PRO model was chosen as the official model for the NYC DOT's $2 million trade-in program for eligible food delivery workers, indicating product quality and market relevance.
• Successfully completed an Initial Public Offering (IPO) in June 2024, raising approximately $9.2 million in net proceeds, and a registered direct offering in June 2025, raising $6.24 million in net proceeds, providing capital for operations.
• Secured a $5 million revolving credit facility with Peapack-Gladstone Bank in August 2024 to support operating needs and facilitate acquisitions.
• Gross margin slightly increased to 41.1% in 2025 from 40.7% in 2024, and the average sales price per EV increased by $29 to $989.
• Successfully settled UL litigation for $1.0 million, resolving a significant legal claim.
• Continued product innovation, launching over 67 new products and introducing upgrades since 2018, and developing the Fly E-Bike app and Fly E-Bike Care extended warranty program.

Negatives

• Net revenues decreased by 21.0% to $25.4 million in fiscal year 2025 from $32.2 million in 2024, driven by a 10,846-unit decrease in sales volume.
• The company reported a net loss of $5.3 million for fiscal year 2025, a significant reversal from a net income of $1.9 million in 2024.
• EBITDA turned negative, reaching $(3.85) million in 2025 compared to $3.5 million in 2024.
• Net cash used in operating activities was approximately $10.1 million for the year ended March 31, 2025, indicating significant cash burn.
• Sales decline attributed mainly to recent lithium-battery accidents involving E-Bikes and E-Scooters, leading customers to opt for oil-powered vehicles.
• Wholesale revenue decreased significantly by 39.3% due to the closure of stores by the top two customers.
• Total operating expenses increased by 52.5% to $15.0 million, largely due to higher professional fees, insurance costs, and a $1.0 million settlement payment for UL litigation.
• Identified material weaknesses in internal control over financial reporting, including a lack of sufficient financial reporting and accounting personnel, formal internal control policies, and IT general control activities.
• The company disposed of 15 subsidiaries between December 2024 and July 2025, collecting only $133,000 of the $1.3 million aggregated cash consideration by July 15, 2025.

Risks

• Inability to meet growing production and delivery plans, which depends on supplier support, current assembling capacity utilization, production yield, and quality maintenance.
• Heavy reliance on a limited number of principal vendors in China for a significant portion of vehicle components, posing risks if vendors fail to deliver or terminate partnerships.
• Adverse impact from current tensions in international trade policies and rising political tensions, particularly between the United States and China, potentially increasing costs due to tariffs.
• Dependence on third parties for quality control on parts sourced from China, which could lead to product quality issues, recalls, or lawsuits if duties are not performed properly.
• Unproven ability to economically produce vehicles at scale and with consistent quality, which is crucial for business success and growth strategy implementation.
• Increased costs and operational suffering due to changes in the supply chain, including challenges in managing inventory effectively and potential shortages or excessive inventory levels.
• Increases in costs, disruption of supply, or shortage of materials used in vehicle components, including potential risks stemming from global conflicts like the Russia-Ukraine war.
• Vehicles may not perform in line with customer expectations regarding durability, longevity, ease of repair, or battery range, potentially harming reputation and leading to warranty claims or recalls.
• Future growth is dependent on the demand for and consumer willingness to adopt electric vehicles, which is influenced by perceptions of quality, safety, design, performance, cost, and availability of charging infrastructure.
• Operating in a rapidly changing and often complex regulatory environment at local, state, national, and international levels, requiring costly modifications for compliance.
• Inability to adequately control the costs associated with operations, including research and development, raw material procurement, and selling and distribution expenses.
• Failure to establish, maintain, and strengthen the brand, which could adversely affect customer acceptance and business relationships.
• Limited operating history makes it difficult to evaluate future prospects, forecast financial results, and assess risks and challenges.
• Substantial doubt about the ability to continue as a going concern due to significant losses, cash outflows, and current contractual obligations.
• Material weaknesses in internal controls over financial reporting, which could lead to inaccurate or untimely financial reporting and adversely affect business and stock price.
• Intense competition in the nascent electric two-wheel vehicle market from companies with significantly greater resources.
• Significant product liability claims, especially concerning lithium-ion batteries, could materially adversely affect financial position and reputation.
• Dependence on key executives, with any interruption in their services potentially causing operational cessation.
• Management team lacks experience in operating a publicly traded company, potentially diverting focus to compliance.
• Potential for costly and time-consuming intellectual property disputes or inadequate protection of IP.
• Cybersecurity threats could compromise systems and data, leading to financial losses and reputational damage.
• Inability to improve existing products and develop new ones that respond to customer needs and achieve market acceptance.
• Limited experience servicing vehicles, which could harm customer satisfaction if service requirements are not met.
• Product repair and/or replacement due to product warranty claims or product recalls could have a material adverse financial impact.
• Aftermarket modifications by vehicle owners could lead to improper operation, negative publicity, and harm the business.
• An active, liquid, and orderly trading market for common stock may not develop or be maintained, leading to price volatility.
• Directors and executive officers hold significant control (18.7%), limiting other shareholder influence.
• Increased costs as a result of being a publicly traded company due to compliance requirements.
• Lack of analyst coverage or negative analyst opinions may reduce stock value.
• Emerging growth company status and smaller reporting company status may deter investors due to reduced disclosures.
• Future issuance of preferred stock could deter takeovers and affect stock value.
• No expectation of paying cash dividends in the near future.
• Future stock sales may dilute ownership and lower the stock price.
• Delaware law and corporate bylaws could make a merger, tender offer, or proxy contest difficult.
• Failure to comply with Nasdaq continued listing standards (already received notice, reverse split implemented to address).
• FINRA sales practice requirements may limit stockholders' ability to buy and sell common stock.
• Warrant holders have no stockholder rights until they acquire common stock.

Future Outlook

Fly-E Group plans to diversify its business by opening a second online store for gas bikes and expanding into South America and Europe. The company aims to continuously refresh its product offerings, develop the Fly E-Bike app for enhanced user experience, and launch the Fly E-Bike Care extended warranty program. It intends to expand its sales network internationally and open more flagship stores in major U.S. cities, while also exploring leveraging existing retail stores as logistics hubs for small package delivery. Management anticipates a decrease in payroll expenses in the next fiscal year due to recent store closures and dispositions. To address the going concern risk, the company plans to secure additional equity financing, debt from financial institutions, and financial support from related parties.

Management Comments

• "Our commitment is to encourage people to incorporate eco-friendly transportation into their active lifestyles, ultimately contributing towards building a more environmentally friendly future."
• "We believe we are now one of the leading providers of E-bikes for food delivery workers in New York City."
• "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."
• "Management has determined there is substantial doubt about its ability to continue as a going concern."
• "Management plans to alleviate the going concern risk through (i) equity financing to support the Companys working capital; (ii) other available sources of financing (including debt) from banks and other financial institutions; and (iii) financial support from the Companys related parties."

Industry Context

The electric vehicle (EV) industry, particularly for two-wheelers, is experiencing significant growth driven by technological advancements, increasing demand for eco-friendly transportation, and the rise of e-bike sharing services. Government incentives and regulations, such as tax credits and subsidies, further support this growth. North America is expected to see substantial future growth, with cities like New York, Miami, and Dallas being key markets due to high demand for small package deliveries, where e-bikes offer an efficient and environmentally friendly alternative to trucks. However, the industry faces evolving regulatory scrutiny, especially concerning lithium-ion battery safety, as evidenced by New York State legislation and NYC DOT programs, and potential restrictions on micromobility device operation in federal parks.

Comparison to Industry Standards

• The company operates in a highly competitive and nascent market for electric two-wheel vehicles, competing with established players like Trek Bicycle Corporation, Specialized Bicycle Components, Inc., and Rad Power Bikes Inc.
• Most of the company's current and potential competitors possess significantly greater financial, technical, manufacturing, marketing, and sales network resources.
• No specific comparable financial metrics or project results for these competitors are provided in the document to assess Fly-E Group's performance against industry benchmarks.

Management Changes

Corporate Governance

Legal Proceedings

• UL LLC filed a complaint on March 12, 2025, alleging improper use of UL's trademark and seeking $2,000,000 for each instance of alleged counterfeit mark use.
• The company entered into a settlement and release agreement with UL LLC on May 21, 2025, agreeing to pay an aggregate amount of $1,000,000 before November 30, 2025.
• As of July 15, 2025, the company had paid $350,000 to UL, fully resolving the litigation.

Related Party Transactions

• Zhou Ou (Chairman and CEO): Provided financial support to the company by advancing funds and making payments totaling $3,274,924 from April 1, 2023, to March 31, 2025. Repaid $1,207,404 and transferred $2,263,630 of payable balance along with a $136,370 cash contribution as capital contribution. Advanced $477,771 for personal use from August 9, 2024, to September 17, 2024, which was paid back in full by March 31, 2025.
• Rui Feng (Chief Operating Officer): Advanced $8,711 to subsidiaries from April 1, 2023, to March 31, 2025, which was fully repaid by March 31, 2025.
• Ke Zhang (Chief Human Resource Officer): Advanced $52,802 to subsidiaries from April 1, 2023, to March 31, 2025, which was fully repaid by March 31, 2025.
• DGLG Accounting and Tax LLC (partnered by former CFO Mr. Guo): Received consulting fees of $225,000 (2025) and $100,000 (2024), and tax services fees of $61,050 (2025) and $123,000 (2024).
• PJMG LLC (over 50% equity owned by former CFO Mr. Guo): Received $372,047 for consulting services in 2025 ($312,047 expensed), with $120,000 prepaid as of March 31, 2025.
• Fly E Bike SRL (over 50% equity owned by CEO Mr. Ou): Purchased EV products from the company totaling $42,010 (2025) and $326,914 (2024). Had accounts receivable of $37,465 from this entity as of March 31, 2025. Advanced $143,455 to Fly E Bike SRL in 2025, which was paid back in full by July 15, 2025.
• DF Technology US Inc (over 50% equity owned by former CFO Mr. Guo): Engaged for ERP system development ($2,500,000 total contract price, $2,446,580 paid by March 31, 2025) and GO FLY APP development ($500,000 total contract price, delivered September 5, 2024).

Stakeholder Impact

• Shareholders: Experienced significant dilution from recent stock splits and offerings. Face substantial risk due to the 'going concern' warning, net losses, and negative cash flow. The concentration of voting power (18.7%) by directors and executive officers limits broader shareholder influence.
• Employees: Payroll expenses increased in 2025 but are expected to decrease in the next fiscal year due to store closures, potentially impacting employment levels. The company states it maintains a good working relationship with employees.
• Customers: Benefit from new rental services, participation in the NYC DOT trade-in program for safer e-bikes, and ongoing product innovation. However, concerns about lithium-battery accidents may deter some potential customers.
• Suppliers: The company's heavy reliance on a limited number of principal vendors, particularly from China, exposes suppliers to risks related to trade tensions and potential supply chain disruptions. The company's financial instability could also impact supplier relationships.
• Creditors: Face increased risk due to the company's substantial doubt about its ability to continue as a going concern, significant loan payables, and negative cash flow from operations. The company's assets are pledged as security for some loans.

Next Steps

• Expand rental service to Miami in the near term.
• Open a second online store focusing on selling gas bikes in the future.
• Extend business into South America and Europe.
• Continuously refresh product offerings to align with evolving market trends.
• Develop the Fly E-Bike app to improve communication between customers and products, including functions like GPS, navigation, battery/tire pressure management, online shopping, and anti-theft features.
• Launch Fly E-Bike Care, an extended warranty program providing continuous maintenance services beyond the manufacturer and battery warranty period.
• Expand sales network internationally and open more flagship stores in high-traffic retail locations in New York City and other major U.S. cities.
• Collaborate with other lifestyle brands to promote brand image.
• Broaden business by leveraging existing retail stores as logistics hubs for small package delivery, seeking business partners, assembling a delivery team, and developing an app.
• Remediate identified material weaknesses in internal control over financial reporting by hiring qualified personnel, organizing regular training, enhancing IT infrastructure, and implementing an ERP system.
• Monitor the closing bid price of common stock and consider options to regain Nasdaq compliance if needed (reverse stock split already implemented).
• Pay the remaining $650,000 of the UL litigation settlement before November 30, 2025.

Key Dates

Recommendation

Keywords

Electric Vehicles, E-bikes, E-motorcycles, E-scooters, Micromobility, SEC Filing, 10-K, Financial Report, Nasdaq, IPO, Reverse Stock Split, Lithium-ion Battery Safety, Urban Mobility, Food Delivery, New York City, Supply Chain, Corporate Governance, Risk Factors, Financial Performance, Going Concern, Capital Raise