10-Q: Fly-E Group Reports Q3 2025 Results: Revenue Declines Amid Expansion Efforts and Market Headwinds

Fly-E Group's Q3 2025 results reveal a revenue decrease due to lower sales volume, despite increased gross margins and ongoing expansion initiatives.

Summary

• Fly-E Group's Q3 2025 revenue decreased by 23.6% to $5.7 million compared to $7.4 million in Q3 2024, primarily due to a drop in unit sales from 13,500 to 9,989.
• For the nine months ended December 31, 2024, revenue decreased by 15.2% to $20.4 million compared to $24.0 million in the same period of 2023, with unit sales declining from 49,503 to 41,925.
• The company reported a net loss of $684,487 for Q3 2025, a significant change from the $20,889 net income in Q3 2024.
• The net loss for the nine months ended December 31, 2024, was $2.0 million, compared to a net income of $1.2 million for the same period in 2023.
• Gross margin increased to 45.1% in Q3 2025 from 39.0% in Q3 2024, driven by higher average selling prices for batteries.
• Operating expenses increased by 26.0% to $3.5 million in Q3 2025, driven by higher payroll, rent, and professional fees.
• The company's management expresses substantial doubt about its ability to continue as a going concern, citing a working capital of approximately $3.0 million and cash of approximately $1.4 million as of December 31, 2024, and net cash used in operating activities of approximately $9.4 million during the nine months ended December 31, 2024.
• The company plans to address the going concern risk through equity financing, debt financing, and financial support from related parties.
• The company launched a rental program in October 2024 in New York City and Los Angeles and plans to expand to Miami and Toronto.
• The company is developing a Fly E-Bike app and has launched a testing version.

Sentiment

Score: 3

Explanation: The document presents a concerning financial picture with declining revenues, net losses, and doubts about the company's ability to continue as a going concern. While there are some positive aspects, such as increased gross margins and expansion initiatives, the overall sentiment is negative due to the significant financial challenges and uncertainties.

Positives

• Gross margin increased to 45.1% in Q3 2025 from 39.0% in Q3 2024, driven by higher average selling prices for batteries.
• The company launched a rental program in October 2024 in New York City and Los Angeles and plans to expand to Miami and Toronto.
• The company is developing a Fly E-Bike app and has launched a testing version.
• The company is participating in the New York City Department of Transportation's (NYC DOT) $2 million trade-in program, with the Fly-11 PRO chosen as the official model.

Negatives

• Fly-E Group's Q3 2025 revenue decreased by 23.6% to $5.7 million compared to $7.4 million in Q3 2024, primarily due to a drop in unit sales from 13,500 to 9,989.
• The company reported a net loss of $684,487 for Q3 2025, a significant change from the $20,889 net income in Q3 2024.
• Operating expenses increased by 26.0% to $3.5 million in Q3 2025, driven by higher payroll, rent, and professional fees.
• The company's management expresses substantial doubt about its ability to continue as a going concern, citing a working capital of approximately $3.0 million and cash of approximately $1.4 million as of December 31, 2024, and net cash used in operating activities of approximately $9.4 million during the nine months ended December 31, 2024.
• Four stores were closed during the nine months ended December 31, 2024.

Risks

• The company's management expresses substantial doubt about its ability to continue as a going concern.
• The company faces risks related to obtaining additional funding, producing vehicles with sufficient volume and quality, vendor performance, intellectual property protection, product performance, warranty claims, product liability claims, customer adoption of electric vehicles, alternative technology, COVID-19 impacts, government regulation, cash balances exceeding insurance limits, and compliance with Nasdaq listing standards.
• The company faces risks related to domestic and international customs, tariffs, and trade policies, corresponding or retaliatory actions by other countries and related uncertainties.
• The company acknowledges material weaknesses in internal control over financial reporting, including a lack of sufficient financial reporting and accounting personnel, formal internal control policies, and sufficient controls in the IT environment.
• The company is subject to extensive environmental, safety and other laws and regulations, which include products safety and testing, as well as battery safety and disposal.

Future Outlook

The company plans to expand its rental service to Miami and Toronto and intends to provide superior customer experience through trained technicians who will provide after-sale maintenance and repair services at its retail stores. The company 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.

Management Comments

• 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.

Industry Context

The company operates in a rapidly growing EV market with a special focus on E-motorcycles, E-bikes and E-scooters. The company benefits from environmental regulations in its 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.

Comparison to Industry Standards

• It is difficult to compare Fly-E Group's results directly to industry standards due to its specific focus on electric two-wheeled vehicles and its business model combining retail, wholesale, and rental services.
• However, the company's revenue decline and net loss contrast with the overall growth trends in the electric vehicle market, where many companies are experiencing increased demand and investment.
• Companies like Rad Power Bikes and VanMoof, which focus on e-bikes, have seen significant growth in recent years, but they also face challenges related to supply chain, quality control, and competition.
• In the broader electric vehicle market, companies like Tesla and NIO are setting benchmarks for innovation, production, and customer satisfaction, but they operate on a much larger scale and with different product offerings.
• Fly-E Group's gross margin of 45.1% is relatively healthy compared to some retailers, but its operating expenses are high, leading to net losses.
• To improve its performance, Fly-E Group needs to focus on increasing sales volume, reducing operating expenses, and differentiating itself from competitors through product innovation and customer service.

Related Party Transactions

• During the nine months ended December 31, 2024, Fly E Bike SRL, purchased certain EV products from the Company in the amount of $47,785.
• In July 2024, the Company engaged DFT for development of a new APP, GO FLY APP, for the rental business.
• On April 1, 2023, the Company agreed to retain the services of PJMG, a company in which Mr. Guo, the Companys former CFO who resigned on November 6, 2024, holds over 50% of the equity interests as a consultant following the completion of its IPO.

Stakeholder Impact

• Shareholders face potential dilution from future equity financing.
• Employees face uncertainty due to the company's financial challenges and potential restructuring.
• Customers may be affected by potential changes in product offerings or service quality.
• Suppliers may face increased pressure on pricing and payment terms.
• Creditors face increased risk due to the company's going concern issues.

Next Steps

• The company plans to expand its rental service to Miami and Toronto.
• The company is developing a Fly E-Bike app.
• The company plans to alleviate the going concern risk through equity financing, debt financing, and financial support from related parties.
• The company plans to enhance its IT infrastructure by outsourcing its IT department to a provider to manage PC operations and system monitoring.
• The company is developing and plan to implement an enterprise resource planning system to streamline sales, inventory, financial reporting, and order management.

Key Dates