フライ-Eグループの四半期報告

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______to _______

Commission file number 001-42122

FLY-E GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware		92-0981080
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

136-40 39th Avenue Flushing, New York		11354
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (929) 410-2770

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $0.01 par value per share		FLYE		The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes ☐ No ☒

As of August 15, 2024, there were 24,587,500 shares of the registrant’s common stock, par value $0.01 per share, outstanding.

	INDEX	Page Number

	Cautionary Statement Regarding Forward Looking Statements	ii
PART I	FINANCIAL INFORMATION	1
Item 1.	Financial Statements	1
	Unaudited Condensed Consolidated Balance Sheets as of June 30, 2024 and March 31, 2024	1
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the Three Months Ended June 30, 2024 and 2023	2
	Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Three Months Ended June 30, 2024 and 2023	3
	Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2024 and 2023	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	43

PART II	OTHER INFORMATION	44
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3.	Defaults Upon Senior Securities	44
Item 4.	Mine Safety Disclosures	44
Item 5.	Other Information	44
Item 6.	Exhibits	45
	Signatures	46

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act, as amended (the “Securities Act”), Section 21E of the Exchange Act, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be preceded by, or contain, words such as “may,” “will,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “predict,” “potential,” “might,” “could,” “would,” “should” or other words indicating future results, though not all forward-looking statements necessarily contain these identifying words. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including, without limitation, statements about our future business operations and results, our strategy and competition. These statements represent our current expectations or beliefs concerning various future events and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations, including, but not limited to:

●

our ability to obtain additional funding to market our vehicles and develop new products;

●

our ability to produce our vehicles with sufficient volume and quality to satisfy customers;

●

the inability of our principal vendors to deliver the necessary components for our vehicles at prices and volumes acceptable to us;

●

our principal vendors failing to perform quality control on our products;

●

the inability to obtain sufficient intellectual property protection for our brand and technologies;

●

our vehicles failing to perform as expected;

●

our facing product warranty claims or product recalls;

●

our facing adverse determinations in significant product liability claims;

●

customers not adopting electric vehicles;

●

the development of alternative technology that adversely affects our business;

●

the lingering impact of COVID-19 on our business;

●

increased government regulation of our industry;

	●	the risk of losing cash balances exceeding insurance limits held at banks;

	●	our ability to grow the rental services;

	●	tariffs and currency exchange rates; and

	●	the other risks and uncertainties discussed under the section titled “Risk Factors” beginning on page 44 of this Report and our other filings with the Securities and Exchange Commission (the “SEC”).

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We undertake no obligation to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In light of these risks, uncertainties and assumptions, the forward-looking events discussed or incorporated by reference in this prospectus supplement and the accompanying prospectus may not occur.

You should read this Report with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in the foregoing documents by these cautionary statements.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

FLY-E GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Expressed in U.S. dollars, except for the number of shares)

	June 30, 2024			March 31, 2024
ASSETS
Current Assets
Cash	$	4,467,868		$	1,403,514
Accounts receivable		371,916			212,804
Accounts receivable – related parties		47,742			326,914
Inventories, net		6,089,083			5,364,060
Prepayments and other receivables		2,654,196			588,660
Prepayments and other receivables – related parties		240,162			240,256
Total Current Assets		13,870,967			8,136,208
Property and equipment, net		2,011,495			1,755,022
Security deposits		805,435			781,581
Deferred IPO costs		-			502,198
Deferred tax assets, net		94,298			35,199
Operating lease right-of-use assets		15,757,380			16,000,742
Intangible assets, net		35,433			36,384
Long-term prepayment for property		569,700			450,000
Long-term prepayment for software development– related parties		2,054,000			1,279,000
Total Assets	$	35,198,708		$	28,976,334

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	406,449		$	1,180,796
Current portion of long-term loan payables		1,116,044			1,213,242
Accrued expenses and other payables		422,098			925,389
Other payables – related parties		2,229			92,229
Operating lease liabilities – current		3,092,721			2,852,744
Taxes payable		1,131,009			1,530,416
Total Current Liabilities		6,170,550			7,794,816
Long-term loan payables		381,890			412,817
Operating lease liabilities – non-current		13,675,379			13,986,879
Total Liabilities		20,227,819			22,194,512

Commitment and Contingencies

Stockholders’ Equity
Preferred stock, $0.01 par value, 4,400,000 shares authorized and nil outstanding as of June 30, 2024 and March 31, 2024*		—			—
Common stock, $0.01 par value, 44,000,000 shares authorized and 24,587,500 shares outstanding as of June 30, 2024 and 22,000,000 shares outstanding as of March 31, 2024*		245,875			220,000
Additional Paid-in Capital		10,744,024			2,400,000
Shares Subscription Receivable		(219,998	)		(219,998	)
Retained Earnings		4,216,141			4,395,649
Accumulated other comprehensive loss		(15,153	)		(13,829	)
Total FLY-E Group, Inc. Stockholders’ Equity		14,970,889			6,781,822
Total Liabilities and Stockholders’ Equity	$	35,198,708		$	28,976,334

*	Shares and per share data are presented on a retroactive basis to reflect the nominal share issuance on December 21, 2022 and to give effect to the stock split completed on April 2, 2024.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

FLY-E GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE (LOSS) INCOME

(Expressed in U.S. dollars, except for the number of shares)

	For the Three Months Ended June 30,
	2024			2023
Revenues	$	7,873,426		$	7,842,346
Cost of Revenues		4,773,792			5,119,631
Gross Profit		3,099,634			2,722,715

Operating Expenses
Selling Expenses		1,612,495			1,083,106
General and Administrative Expenses		1,532,638			872,065
Total Operating Expenses		3,145,133			1,955,171
(Loss) Income from Operations		(45,499	)		767,544

Other Income (Expenses), net		6,518			(11,078	)
Interest Expenses, net		(68,082	)		(32,623	)
(Loss) Income Before Income Taxes		(107,063	)		723,843
Income Tax Expense		(72,445	)		(283,400	)
Net (Loss) Income	$	(179,508	)	$	440,443

Other Comprehensive Income (Loss)
Foreign currency translation adjustment		(1,324	)		—
Total Comprehensive (Loss) Income	$	(180,832	)	$	440,443

(Losses) Earnings per Share*	$	(0.01	)	$	0.02
Weighted Average Number of Common Stock
– Basic and Diluted*		22,636,250			22,000,000

*	Shares and per share data are presented on a retroactive basis to reflect the nominal share issuance on December 21, 2022 and to give effect to the stock split completed on April 2, 2024.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

FLY-E GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS’ EQUITY

(Expressed in U.S. dollars, except for the number of shares)

	Preferred Stock				Common Stock				Additional Paid-in		Shares Subscription			Accumulated Other Comprehensive			Retained			Total Stockholders’
	Shares*		Amount		Shares*		Amount		Capital		Receivables			Loss			Earnings			Equity

Balance at March 31, 2024		—	$	—		22,000,000	$	220,000		2,400,000		(219,998	)	$	(13,829	)	$	4,395,649		$	6,781,822
Net Loss		—		—		—		—		—		—			—			(179,508	)		(179,508	)
Issuance of common stock upon initial public offering, net		—		—		2,587,500		25,875		8,344,024		—			—			—			8,369,899
Foreign currency translation adjustment		—		—		—		—		—		—			(1,324	)		—			(1,324	)
Balance at June 30, 2024		—	$	—		24,587,500	$	245,875	$	10,744,024	$	(219,998	)	$	(15,153	)	$	4,216,141		$	14,970,889

*	Shares and per share data are presented on a retroactive basis to reflect the nominal share issuance on December 21, 2022 and to give effect to the stock split completed on April 2, 2024.

	Preferred Stock				Common Stock				Shares Subscription			Additional Paid-in		Retained		Total Stockholders’
	Shares*		Amount		Shares*		Amount		Receivables			Capital		Earnings		Equity
Balance at March 31, 2023		—	$	—		22,000,000	$	220,000		(219,998	)	$	—	$	2,500,427	$	2,500,429
Net Income		—		—		—		—					—		440,443		440,443
Capital Contribution		—		—		22,000,000	$	220,000		(219,998	)		2,400,000		—		2,400,000
Balance at June 30, 2023		—	$	—		22,000,000	$	220,000		(219,998	)	$	2,400,000	$	2,940,870	$	5,340,872

*	Shares and per share data are presented on a retroactive basis to reflect the nominal share issuance on December 21, 2022 and to give effect to the stock split completed on April 2, 2024.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

FLY-E GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in U.S. dollars, except for the number of shares)

	For the Three Months Ended June 30,
	2024			2023
Cash flows from operating activities
Net (loss) income	$	(179,508	)	$	440,443
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation expense		95,051			63,668
Amortization expense		951			—
Deferred income taxes (benefits) expenses		(59,099	)		208,800
Amortization of operating lease right-of-use assets		798,044			485,467
Inventories reserve		176,072			153,625
Changes in operating assets and liabilities:
Accounts receivable		(159,112	)		(53,742	)
Accounts receivable – related parties		279,172			(282,814	)
Inventories		(901,095	)		(1,411,037	)
Prepayments and other receivables		(2,065,536	)		(185,406	)
Prepayments for operation services to related parties		(180,000	)		—
Security deposits		(23,854	)		(52,809	)
Accounts payable		(774,347	)		1,681,224
Accrued expenses and other payables		(503,291	)		195,049
Operating lease liabilities		(626,205	)		(458,937	)
Taxes payable		(399,407	)		36,504
Net cash (used in) provided by operating activities		(4,522,164	)		820,035

Cash flows from investing activities
Purchases of equipment		(351,524	)		(390,055	)
Prepayments for property		(119,700	)		—
Prepayment for purchasing software from a related party		(775,000	)		—
Repayment from a related party		180,256			—
Advance to a related party		(162	)		—
Net cash used in investing activities		(1,066,130	)		(390,055	)

Cash flows from financing activities
Advance to a related party		—			(56,000	)
Borrowing from loan payables		247,500			—
Repayments of loan payables		(375,625	)		(296,002	)
Repayments on other payables - related parties		(90,000	)		182,239
Payments of related party loan		—			(75,000	)
Capital Contributions from Stockholders		—			136,370
Payments of IPO cost		(282,403	)
Net proceeds from issuance of common stock - IPO		9,154,500			—
Net cash provided by (used in) financing activities		8,653,972			(108,393	)
Net changes in cash		3,065,678			321,587
Effect of exchange rate changes on cash		(1,324	)		—
Cash at beginning of the period		1,403,514			358,894
Cash at the end of the period	$	4,467,868		$	680,481

Supplemental disclosure of cash flow information
Cash paid for interest expense	$	68,082		$	32,623
Cash paid for income taxes	$	481,929		$	81,268

Supplemental disclosure of non-cash investing and financing activities
Settlement of accounts payable by capital contribution	$	—		$	2,263,630
Purchase of vehicle funded by loan	$	—		$	34,974
Deferred IPO cost recognized as additional paid-in capital	$	502,198		$	—
Termination of operating lease right-of-use assets and operating lease liabilities	$	(2,962	)		—
Right-of-use assets obtained in exchange for operating lease liabilities	$	557,643		$	1,234,944

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

FLY-E GROUP, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

1 — DESCRIPTION OF BUSINESS, ORGANIZATION AND BASIS OF PRESENTATION

Organization and principal activities

Fly-E Group, Inc. (the “Company” or “Fly-E Group”) was incorporated under the laws of the State of Delaware on November 1, 2022. The Company has no substantive operations other than holding all of the issued and outstanding shares of Fly E-Bike Inc. (“Fly E-Bike”) and Fly EV, Inc. (“Fly EV”). Fly E-Bike and Fly EV were incorporated under the laws of the State of Delaware on August 22, 2022 and November 1, 2022, respectively. Fly EV has no substantive operations. The Company, through its wholly owned subsidiaries, is principally engaged in designing, installing and selling smart electric bikes (“E-bikes”), electric motorcycles (“E-motorcycles”), electric scooters (“E-scooters”), and related accessories under the brand name of “Fly E-Bike.” The Company’s principal operations and geographic markets are mainly in the United States of America (the “U.S.”). As of August 14, 2024, the Company has opened a total of 40 stores, including 39 retail stores in the U.S and one retail store in Canada. The Company offers rental services from selected locations. The Company also operates one online store, focusing on selling E-motorcycles, E-bikes, and E-scooters. The Company plans to open another online store focusing on selling gas bikes in the future.

The Company’s business was initially operated under CTATE INC. (“Ctate”), a corporation formed under the laws of the State of New York in 2018. Before merging with Fly E-Bike, Ctate owned 27 companies, each of which operated a Fly E-Bike store. On September 12, 2022, Ctate and Fly E-Bike, which was a wholly-owned subsidiary of Ctate, entered into an Agreement and Plan of Merger, pursuant to which Ctate merged into and with Fly E-Bike, with Fly E-Bike being the surviving corporation (the “Merger”). As a result of the Merger, the original shareholders of Ctate became the stockholders of Fly E-Bike and subsequently effectively controlled the combined entity.

On December 21, 2022, Fly-E Group and Fly E-Bike entered into a Share Exchange Agreement, pursuant to which Fly-E Group acquired all of the issued and outstanding shares of Fly E-Bike by issuing its shares to the stockholders of Fly E-Bike on a one-for-one basis (the “Share Exchange”). As a result of the Share Exchange, Fly E-Bike became a wholly owned subsidiary of Fly-E Group.

As a result of the Merger and the Share Exchange, Fly E-Bike and its subsidiaries are under common control of Fly-E Group, resulting in the consolidation of Fly E-Bike and its subsidiaries, which was accounted as a reorganization of entities under common control at carrying value. The unaudited condensed consolidated financial statements are prepared on the basis as if the reorganization became effective as of the beginning of the first period presented in the unaudited condensed consolidated financial statements of Fly-E Group.

On June 7, 2024, the Company issued 2,250,000 shares of common stock, at a price of $4.00 per share in its initial public offering (“IPO”). The gross proceeds of the offering were $9.0 million, prior to deducting the underwriting discounts, commissions and offering expenses payable by the Company. In addition, the Company granted the underwriters a 30-day option to purchase an additional 337,500 shares of common stock at the initial public offering price, less underwriting discounts and commissions, to cover over-allotments. On June 25, 2024, the Company issued an additional 337,500 shares of common stock to the underwriters of its IPO for gross proceeds of $1.4 million upon full exercise of the underwriters’ over-allotment option. Net proceeds received by the Company from its initial public offering, including the exercise of the over-allotment option, were approximately $9.2 million. The Company also issued to The Benchmark Company, LLC (“Benchmark”), the representative of the underwriters, and its designees warrants to purchase 129,375 shares.

The unaudited condensed consolidated financial statements include the financial statements of the Company and each of the following subsidiaries as of June 30, 2024.

Name	Background	Ownership
FLY-E GROUP, INC.	● A Delaware corporation ● Incorporated on November 1, 2022 ● A holding company	Parent Company

FLY EV, INC.	● A Delaware corporation ● Incorporated on November 1, 2022 ● A holding Company	100% owned by Fly-E Group, Inc.

FLY E-BIKE, INC.	● A Delaware Company ● Incorporated on August 22, 2022 ● A holding Company	100% owned by Fly-E Group, Inc.

UNIVERSE KING CORP	● A New York corporation ● Incorporated on November 19, 2018 ● A retail store	100% owned by Fly E-Bike, Inc.

UFOTS CORP.	● A New York corporation ● Incorporated on May 2, 2019 ● A retail store	100% owned by Fly E-Bike, Inc.

ARFY CORP.	● A New York corporation ● Incorporated on April 29, 2020 ● A retail store	100% owned by Fly E-Bike, Inc.

TKPGO CORP.	● A New York corporation ● Incorporated on July 3, 2018 ● A retail store	100% owned by Fly E-Bike, Inc.

FLYFLS INC	● A New York corporation ● Incorporated on October 13, 2020 ● A retail store and corporate office	100% owned by Fly E-Bike, Inc.

FLY37 INC	● A New York corporation ● Incorporated on October 14, 2020 ● A retail store	100% owned by Fly E-Bike, Inc.

FIYET INC	● A New York corporation ● Incorporated on November 12, 2020 ● A retail store	100% owned by Fly E-Bike, Inc.

FLY GC INC.	● A New York corporation ● Incorporated on November 13, 2020 ● A retail store	100% owned by Fly E-Bike, Inc.

FLY MHT INC.	● A New York corporation ● Incorporated on December 15, 2020 ● A retail store	100% owned by Fly E-Bike, Inc.

FLYAM INC	● A New York corporation ● Incorporated on February 19, 2021 ● A retail store	100% owned by Fly E-Bike, Inc.

OFLYO INC	● A New York corporation ● Incorporated on March 29, 2021 ● A retail store	100% owned by Fly E-Bike, Inc.

FLYEBIKE INC	● A New York corporation ● Incorporated on March 30, 2021 ● A retail store	100% owned by Fly E-Bike, Inc.

FLYCLB INC	● A New York corporation ● Incorporated on April 15, 2021 ● A retail store	100% owned by Fly E-Bike, Inc.

FLYEBIKE NJ INC	● A New Jersey corporation ● Incorporated on June 8, 2021 ● A retail store	100% owned by Fly E-Bike, Inc.

ESEBIKE INC	● A New York corporation ● Incorporated on October 13, 2021 ● A retail store	100% owned by Fly E-Bike, Inc.

FLYEBIKEMIAMI INC	● A Florida corporation ● Incorporated on June 30, 2021 ● A retail store	100% owned by Fly E-Bike, Inc.

GOFLY INC	● A Texas corporation ● Incorporated on July 23, 2021 ● A retail store	100% owned by Fly E-Bike, Inc.

FLY14 CORP.	● A New York corporation ● Incorporated on September 15, 2021 ● A retail store	100% owned by Fly E-Bike, Inc.

EDISONEBIKE INC.	● A New York corporation ● Incorporated on October 13, 2021 ● A retail store	100% owned by Fly E-Bike, Inc.

FLYTRON INC.	● A New York corporation ● Incorporated on November 9, 2021 ● A retail store	100% owned by Fly E-Bike, Inc.

FLYCYCLE INC.	● A New York corporation ● Incorporated on January 10, 2022 ● A retail store	100% owned by Fly E-Bike, Inc.

FLYNJ2 INC.	● A New Jersey corporation ● Incorporated on February 10, 2022 ● A retail store	100% owned by Fly E-Bike, Inc.

FLYBWY INC.	● A New York corporation ● Incorporated on March 2, 2022 ● A retail store	100% owned by Fly E-Bike, Inc.

FLYCORONA INC.	● A New York corporation ● Incorporated on March 9, 2022 ● A retail store	100% owned by Fly E-Bike, Inc.

MEEBIKE	● A New York corporation ● Incorporated on March 25, 2022 ● A retail store	100% owned by Fly E-Bike, Inc.

FLY6AVE, INC.	● A New York corporation ● Incorporated on April 16, 2022 ● A retail store	100% owned by Fly E-Bike, Inc.

FLY E BIKE NJ3, INC	● A New Jersey corporation ● Incorporated on July 18, 2022 ● A retail store	100% owned by Fly E-Bike, Inc.

FLYEBIKE BROOKLYN, INC.	● A New York corporation ● Incorporated on November 2, 2022 ● A retail store	100% owned by Fly E-Bike, Inc.

FLY E-BIKE SAN ANTONIO INC	● A Texas corporation ● Incorporated on January 1, 2023 ● A retail store	100% owned by Fly E-Bike, Inc.

FLYEBIKE WORLD INC.	● A New York corporation ● Incorporated on February 27, 2023 ● A retail store	100% owned by Fly E-Bike, Inc.

FLY DELIVERY INC.	● A New York corporation ● Incorporated on March 2, 2023 ● A delivery store	100% owned by Fly E-Bike, Inc.

FLYEBIKE MIAMI2 INC.	● A Florida corporation ● Incorporated on April 13, 2023 ● A retail store	100% owned by Fly E-Bike, Inc.

FLYDC INC.	● A Washington, DC corporation ● Incorporated on May 31, 2023 ● A retail store	100% owned by Fly E-Bike, Inc.

FLYMHT659 INC.	● A New York corporation ● Incorporated on June 2, 2023 ● A retail store	100% owned by Fly E-Bike, Inc.

FLYBX745 INC.	● A New York corporation ● Incorporated on June 15, 2023 ● A retail store	100% owned by Fly E-Bike, Inc.

FLYJH8509 INC.	● A New York corporation ● Incorporated on August 30, 2023 ● A retail store	100% owned by Fly E-Bike, Inc.

FLYBX2381 INC.	● A New York corporation ● Incorporated on August 30, 2023 ● A retail store	100% owned by Fly E-Bike, Inc.

FLYNJ4 INC.	● A New York corporation ● Incorporated on October 4, 2023 ● A retail store	100% owned by Fly E-Bike, Inc.

FLYTORONTO Corp.	● A Toronto corporation ● Incorporated on October 18, 2023 ● A retail store	100% owned by Fly E-Bike, Inc.

FLYLA INC.	● A California corporation ● Incorporated on December 1, 2023 ● A retail store	100% owned by Fly E-Bike, Inc.

FWMOTOR INC.	● A New York corporation ● Incorporated on April 3, 2024 ● A retail store	100% owned by Fly E-Bike, Inc.

DCMOTOR INC.	● A Maryland corporation ● Incorporated on April 9, 2024 ● A retail store	100% owned by Fly E-Bike, Inc.

AOFL LLC	● A New York corporation ● Incorporated on June 25, 2024 ● A holding company	100% owned by Fly E-Bike, Inc.

Liquidity

As of June 30, 2024, the Company had working capital of approximately $7.7 million and cash of approximately $4.5 million. The Company had net loss of approximately $0.2 million and net income of approximately $0.4 million for the three months ended June 30, 2024 and 2023, respectively. On June 7, 2024, the Company closed the IPO of 2,250,000 shares of the common stock at the price of $4.00 per share, resulting in net proceeds to the Company of $7.9 million after deducting underwriting discounts and commissions and offering expenses. On June 25, 2024, the Company sold an additional 337,500 shares of common stock to the underwriters of the IPO for gross proceeds of $1.4 million upon full exercise of the underwriters’ over-allotment option and received net proceeds of approximately $1.2 million. The management plans to increase the Company’s revenue by strengthening its sales force, providing attractive sales incentive programs, and increasing marketing and promotion activities. The working capital requirements are affected by the efficiency of operations and depend on the Company’s ability to increase its revenue. The Company anticipates that it will continue to generate net income for the foreseeable future and believes that its cash on hand and operating cash flows will be sufficient to fund its operations over at least the next 12 months from the date of issuance of these unaudited condensed consolidated financial statements.

2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the U.S. (the “U.S. GAAP”) and regulations of the Securities Exchange Commission (the “SEC”). The accompanying unaudited condensed consolidated financial statements contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. The realization of assets and the satisfaction of liabilities in the normal course of business are dependent on, among other things, the Company’s ability to operate profitably, to generate cash flows from operations, and its ability to attract investors and to borrow funds on reasonable economic terms. The results of operations for the three months ended June 30, 2024 are not necessarily indicative of results to be expected for any other interim period or for the full fiscal year ending March 31, 2025. Accordingly, these statements should be read in conjunction with the Company’s audited financial statements and note thereto as of and for the years ended March 31, 2024 and 2023.

(b) Principles of Consolidation

The unaudited condensed consolidated financial statements include the financial statements of the Company and its subsidiaries over which the Company exercises control and, when applicable, entities for which the Company has a controlling financial interest. All transactions and balances among the Company and its subsidiaries have been eliminated upon consolidation.

The Company’s chief operating decision-makers (i.e., chief executive officer and his direct reports) review financial information presented on a consolidated basis, accompanied by disaggregated information about revenues by different revenues streams for purposes of allocating resources and evaluating financial performance. The Company and its subsidiaries offer E-bikes, E-motorcycles, E-scooters and other items and services in its stores. The Company’s retail operating divisions are geographically based, have similar economic characteristics and similar expected long-term financial performance. Because substantially all of the Company’s long-lived assets and revenues are located in and derived from the U.S., geographical segments are not presented. The Company’s operating segments are reported in one reportable segment. There are no segment managers who are held accountable for operations, operating results and plans for levels or components below the consolidated unit level. Based on qualitative and quantitative criteria established by Accounting Standards Codification (“ASC”) 280, “Segment Reporting”, the Company considers itself to be operating within one reportable segment.

(d) Use of Estimates

In the application of the Company’s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Significant accounting estimates include, but not limited to, useful lives of depreciable property and equipment, impairment of long-lived assets, the realization of deferred income tax assets, allowance for inventories, and discount rate for operating leases. Changes in facts and circumstances may result in revised estimates. Actual results could differ from those estimates, and as such, differences may be material to the unaudited condensed consolidated financial statements.

(e) Commitments and Contingencies

In the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out of its business, which cover a wide range of matters, including, among others, government investigations, shareholder lawsuits, and non-income tax matters.

An accrual for a loss contingency is recognized when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. If a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, is disclosed.

(f) Cash

Cash consists of cash on hand and cash deposited with banks. The Company’s cash is maintained at financial institutions in the U.S. Deposits in these financial institutions may, from time to time, exceed the Federal Deposit Insurance Corporation’s (the “FDIC”) federally insured limit, which is $250,000. The Company has not incurred any losses in the past for amount over the FDIC limits. As of June 30, 2024 and March 31, 2024, $2.5 million and nil cash deposited with banks was uninsured, respectively.

(g) Accounts Receivable

Accounts receivable includes trade account due from customers. Accounts receivable is recorded at the invoiced amount less an allowance for any uncollectible accounts and does not bear interest, which is due after 30 to 90 days, depending on the credit term with the customers. Accounts receivable which is deemed to be uncollectible is charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

On April 1, 2023, the Company adopted ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement on Credit Losses on Financial Instruments”, including certain subsequent amendments, transitional guidance and other interpretive guidance within ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-11, ASU 2020-02 and ASU 2020-03 (collectively, including ASU 2016-13, “ASC 326”). ASC 326 introduces an approach based on expected losses to estimate the allowance for doubtful accounts, replacing the previous incurred loss impairment model, which makes allowances when there is substantial doubt as to the collectability and a loss is determined to be probable.

The Company adopt the current expected credit loss model (“CECL model”) to estimate the expected credit losses, which is determined by multiplying the probability of default. In determining the probability of default, the Company mainly considers factors such as aging schedule of receivables, migration rate of receivables, assessment of receivables due from specific identifiable counterparties that are considered at risk or uncollectible, current market conditions, as well as reasonable and supportable forecasts of future economic conditions. The Company concludes that there is no impact over the initial adoption of CECL model, which should be treated as cumulative-effect adjustment on retained earnings as of March 31, 2023.

There was nil and nil provision of allowance for credit losses as of June 30, 2024 and March 31, 2024, respectively.

(h) Inventories, Net

Inventories, consisting of products available for sale, are stated at the lower of cost or net realizable value using the first-in-first-out method. Adjustments to the carrying value are recorded for estimated obsolescence or excess inventory equal to the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future demand and market conditions. Inventory cost consists of the direct cost of merchandise including freight. For the three months ended June 30, 2024 and 2023, the impairment loss was $176,072 and $153,625, respectively.

(i) Prepayments and Other Receivables

Prepayments and other receivables are mainly prepayments to vendors, prepaid expenses paid to service providers, prepaid taxes, advances to employees, and other deposits. Management regularly reviews the aging of such balances and changes in payment and realization trends and records allowances when management believes that the collection of amounts due is at risk. Accounts considered uncollectable are written off against allowances after exhaustive efforts at collection are made. As of June 30, 2024 and March 31, 2024, no allowance against prepayments and other receivables was recorded.

(j) Property and Equipment, Net

Property and equipment are stated at cost less accumulated depreciation and any recorded impairment.

The estimated useful lives are as follows:

Machinery and equipment		5 years
Furniture and fixtures		5 years
Leasehold improvements		3 – 10 years (shorter of lease term or useful lives)
Motor vehicles		5 years

Depreciation on property and equipment is calculated on the straight-line method over the estimated useful lives of the assets. The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the consolidated statements of operations. Expenditures for maintenance and repairs are charged to earnings as incurred, while additions, renewals, and betterments, which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods of depreciation to determine whether subsequent events and circumstances warrant revised estimates of useful lives.

Construction in progress

Direct costs that are related to the construction of property, equipment and software and incurred in connection with bringing the assets to their intended use are capitalized as construction in progress. Construction in progress is transferred to specific property, equipment and software items and the depreciation of these assets commences when the assets are ready for their intended use. In December 2023, the Company engaged DF Technology US Inc (“DFT”), a related party, for certain technology services, such as enterprise resource planning system (“ERP system”). As of June 30, 2024 and March 31, 2024, construction in progress was $500,000 and $275,000, respectively, and primarily relating to the cost incurred to develop the software by DFT.

(k) Definite-Lived Intangible Assets

The Company owns property rights of certain technologies and designs that relate to the Underwriter Laboratories certificates issued for its products. The Company capitalizes the costs associated with design, development, acquisition and maintenance of its acquired property rights and amortizes these assets over their remaining useful lives on a straight-line basis. Any further payments made to maintain or develop the property rights would be capitalized and amortized over the balance of the useful life for the property rights. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in the estimate being accounted for on a prospective basis.

The estimated useful lives of intangibles assets are as follows:

Property rights

5-20 years

(l) Impairment of Long-lived Assets

At the end of each reporting period, the Company reviews the carrying amounts of its property, plant and equipment, intangible assets subject to amortization, and right-of-use assets, to determine whether there is any indication that the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is identified, the Company will reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. As of June 30, 2024 and March 31, 2024, no impairment of long-lived assets was recognized.

(m) Deferred IPO Costs

The Company complies with the requirements of FASB ASC Topic 340-10-S99-1, “Other Assets and Deferred Costs — SEC Materials” (“ASC 340-10-S99”) and SEC Staff Accounting Bulletin Topic 5A, “Expenses of Offering”. Deferred IPO costs consist of underwriting, legal, accounting and other professional expenses incurred through the balance sheet date that are directly related to the initial public offering of the Company and that will be charged to additional paid in capital upon the completion of the offering. Total deferred offering cost of $502,198 reclassed to additional paid-in-capital upon IPO.

(n) Fair Value Measurements

Fair value is defined as the price that would be received for an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. Valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. When determining the fair value measurements for assets and liabilities, the Company considers the principal or most advantageous market in which it would transact and consider assumptions that market participants would use when pricing the asset or liability. The following summarizes the three levels of inputs required to measure fair value, of which the first two are considered observable and the third is considered unobservable:

Level-1

—

Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level-2

—

Include other inputs that are directly or indirectly observable in the marketplace.

Level-3

—

Unobservable inputs which are supported by little or no market activity.

The fair value for certain assets and liabilities such as cash, accounts receivable, other receivables, prepayments and other current assets, short-term loans, accounts payable, contract liabilities, accrued expenses and other payables, and tax payables have been determined to approximate carrying amounts due to the short maturities of these instruments. The Company believes that its long-term loan to a third party approximates the fair value based on current yields for debt instruments with similar terms. The Company and its subsidiaries did not have any non-financial assets or liabilities that are measured at fair value on a recurring basis as of June 30, 2024 and March 31, 2024.

(o) Revenue Recognition

The Company follows the revenue accounting requirements of Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. The core principle underlying the revenue recognition of this ASC allows the Company to recognize revenue that represents the transfer of products and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This will require the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of products and services transfers to a customer.

To achieve that core principle, the Company applies a five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation.

Product revenue — Performance obligation satisfied at point in time

The Company generates substantially all its revenues from sales of products such as smart E-bikes, E-motorcycles, E-scooters and accessories to the retail and wholesale customers through its wholly owned subsidiaries stores. In accordance with ASC 606, the Company’s performance obligations are satisfied upon the control of products being passed to the customer, which is the point in time that the customers are able to direct the use of and obtain substantially all of the economic benefit of the products or services. The transfer of control typically occurs at a point in time based on consideration of when the customer has an obligation to pay for the products, and physical possession of, legal title to, and the risks and rewards of ownership of the products have been transferred, and the customer has accepted the products. Revenue is recognized net of estimates of variable consideration, including product returns, customer discounts and allowance. which occurs at the point of sale, or the services have been rendered. Historically, the Company has not experienced any significant returns nor provided significant customer discounts.

The Company offers an assurance-type warranty to its customers. An assurance-type warranty guarantees that the product will perform as promised and is not a performance obligation. This type of warranty promises to repair or replace a delivered good or service if it does not perform as expected. Since an assurance-type warranty guarantees the functionality of a product, the warranty is not accounted for as a separate performance obligation, and thus no transaction price is allocated to it. Rather, to account for an assurance-type warranty the vendor should estimate and accrue a warranty liability when the promised good or service is delivered to the customer (see ASC 460-10).

Since the contract price and term are fixed and enforceable, and an assurance-type warranty guarantees the functionality of a product, and the warranty is not accounted for as a separate performance obligation, no transaction price is allocated to it. The Company recognizes sales in full at the point in time when the products are delivered or accepted by the customers, in accordance with the acceptance term specified in the contract. The Company records estimated future warranty costs under ASC 460. Such estimated costs for warranties are estimated at the time of delivery and these warranties are not service warranties separately sold by the Company. Generally, the estimated claim rates of warranty are based on actual warranty experience or the Company’s best estimate. The Company accrued $16,452 and $27,714 of warranty reserves under accrued expenses and other payables as of June 30, 2024 and March 31, 2024, respectively. The Company has no contract assets and contract liabilities balances as of June 30, 2024 and March 31, 2024, respectively.

Disaggregated information of revenues by business lines are as follows:

	For the Three Months Ended June 30,
	2024		2023
Revenues-retail	$	6,870,418	$	6,168,173
Revenues-wholesale		1,003,008		1,674,173
Net revenues	$	7,873,426	$	7,842,346

(p) Selling Expenses

Selling expenses mainly consist of advertising costs, marketing referring expenses and payroll and related expenses for personnel engaged in selling and marketing activities. Advertising expenses, which consist primarily of online and offline advertisements, are expenses when the services are received. The advertising expenses were $68,519 and $11,727 for the three months ended June 30, 2024 and 2023, respectively.

(q) Software Development Costs

ASC Topic 985-20, Software — Costs of Software to Be Sold, Leased, or Marketed, requires companies to expense software development costs as they incur them until technological feasibility has been established, at which time those costs are capitalized until the product is available for general release to customers. The development of the Fly E-Bike app is still in its preliminary stage and the development of core functions has not yet been completed. As a result, the Company expensed the development costs of the Fly E-Bike app as they incurred. For the three months ended June 30, 2024 and 2023, development costs amounted to $145,582 and nil, respectively, which were recorded under general and administrative expenses.

(r) Income Taxes

Current income taxes are provided based on net income/(loss) for financial reporting purposes and adjusted for income and expense items which are not assessable or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions.

Deferred taxes are accounted for using the asset and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the unaudited condensed consolidated financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets (the “DTAs”) are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized.

Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized, or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. DTAs are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all the DTAs will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.

An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. The tax returns filed in 2018 to 2023 are subject to examination by any appropriate tax authorities. For the three months ended June 30, 2024 and 2023, the Company accrued $60,076 and $43,172 income tax related penalty included in taxes payable in the unaudited condensed consolidated balance sheets, respectively.

(s) Leases

The Company accounts for leases in accordance with ASC 842. The Company leases premises for offices, warehouses, and retail stores under non-cancellable operating leases.

The Company recognizes right-of-use assets and lease liabilities for all leases at the commencement date of a lease, except for short-term leases and low-value asset leases accounted for applying a recognition exemption where lease payments are recognized as expenses on a straight-line basis over the lease terms. Leases with an initial term of 12 months or less are short-term leases and not recognized as operating lease right-of-use assets and operating lease liabilities on the unaudited condensed consolidated balance sheets. The Company recognizes lease expense for short-term leases on a straight-line basis over the lease term.

Right-of-use assets are initially measured at cost, which comprises the initial measurement of lease liabilities adjusted for lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs needed to restore the underlying assets, and less any lease incentives received. Right-of-use assets are subsequently measured at cost less accumulated depreciation and impairment losses and adjusted for any remeasurement of the lease liabilities. Right-of-use assets are presented on a separate line in the unaudited condensed consolidated balance sheets.

Right-of-use assets are depreciated using the straight-line method from the commencement dates to the earlier of the end of the useful lives of the right-of-use assets or the end of the lease terms.

Lease liabilities are initially measured at the present value of the lease payments, which comprise fixed payments, in-substance fixed payments, variable lease payments which depend on an index or a rate. The lease payments are discounted using the interest rate implicit in a lease if that rate can be readily determined. If that rate cannot be readily determined, the Company uses the lessee’s incremental borrowing rate. Subsequently, lease liabilities are measured at amortized cost using the effective interest method, with interest expense recognized over the lease terms. When there is a change in a lease term or a change in future lease payments resulting from a change in an index or a rate used to determine those payments, the Company remeasures the lease liabilities with a corresponding adjustment to the right-of-use-assets. However, if the carrying amount of the right-of-use assets is reduced to zero, any remaining amount of the remeasurement is recognized in profit or loss. Lease liabilities are presented on a separate line in the unaudited condensed consolidated balance sheets.

Variable lease payments that do not depend on an index or a rate are recognized as expenses in the periods in which they are incurred.

(t) Concentration Risk

Concentration of customers and suppliers

No customers individually represented greater than 10% of total net revenues of the Company for the three months ended June 30, 2024 and 2023.

For the three months ended June 30, 2024, the Company’s top two suppliers represented 41% and 38% of total purchases of the Company, respectively. For the three months ended June 30, 2023, the Company’s top three suppliers represented 33%, 18% and 12% of total purchases of the Company, respectively. As of June 30, 2024, one supplier accounted for 63% of accounts payable balance. As of March 31, 2024, three suppliers accounted for 31%, 26%, and 23% of accounts payable balance, respectively.

Concentration of credit risk

Financial instruments that are potentially subject to credit risk consist principally of accounts receivable. The Company believes the concentration of credit risk in its account receivable is substantially mitigated by its ongoing credit evaluation process and relatively short collection terms. The Company does not generally require collateral from customers. The Company evaluates the need for an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends, and other information. Historically, the Company did not have any bad debt on its account receivable.

Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash and cash equivalents, term deposits, restricted cash, short-term investments, and accounts receivable, net. The Company’s investment policy requires cash and cash equivalents, term deposits, restricted cash, and short-term investments to be placed with high-quality financial institutions and to limit the amount of credit risk from any one issuer. The Company regularly evaluates the credit standing of the counterparties or financial institutions.

(u) Related Parties

A related party is generally defined as (i) any person and or their immediate family hold 10% or more of the Company’s securities (ii) the Company’s management and/or their immediate family, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. Related parties may be individuals or corporate entities. Transactions involving related parties cannot be presumed to be carried out on an arm’s length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s length transactions unless such representations can be substantiated.

(v) Earnings Per Share

The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share”. ASC 260 requires companies to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common stock outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis of the potential common stock (e.g., convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential shares of common stock that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

For the three months ended June 30, 2024, the Company had potential shares of common stock issuable upon the exercise of the Representative’s Warrants. As the Company incurred losses for the three months ended June 30, 2024, these potential shares of common stock were anti-dilutive and excluded from the calculation of diluted net loss per share. For the three months ended June 30, 2023, there were no dilutive shares.

(w) Foreign Currencies Translation

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statement of operations. The reporting currency of the Company is United States Dollar ($). The Company’s subsidiary in Canada maintains its books and records in its local currency, Canadian dollar (CAD), which is the functional currency for this subsidiary as it is the primary currency of the economic environment in which this entity operates.

In general, for consolidation purposes, assets and liabilities of subsidiaries whose functional currency is not United States Dollar are translated into United States Dollar in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’ equity.

(x) Representative’s Warrants

Upon the closing of IPO in June 2024, the Company issued to Benchmark the representative of the underwriters warrants (the “Representative’s Warrants”) for 129,375 shares of common stock, which are also exercisable on a cashless basis. The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification ASC 480, Distinguishing Liabilities from Equity and ASC 815, Derivatives and Hedging. The Company accounts for its warrants as equity that meet all of the criteria (i) require physical settlement or net-share settlement or (ii) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement), the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance and subsequent changes in fair value are not recognized as long as the warrants continue to be classified as equity.

(y) Recent Accounting Pronouncements

The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued. Under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging growth company and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This guidance requires a public entity to disclose for each reportable segment, on an interim and annual basis, the significant expense categories and amounts that are regularly provided to the chief operating decision-maker (“CODM”) and included in each reported measure of a segment’s profit or loss. Additionally, it requires a public entity to disclose the title and position of the individual or the name of the group or committee identified as the CODM. This guidance is effective for fiscal years beginning after December 31, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted and the guidance should be applied retrospectively to all periods presented in the financial statements, unless it is impracticable. The Company plans to adopt the provisions of this guidance in conjunction with its Form 10-K for the fiscal year ending March 31, 2025.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This guidance requires a public entity to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and to provide more details about the reconciling items in some categories if the items meet a quantitative threshold. The guidance also requires all entities to disclose annually income taxes paid (net of refunds received) disaggregated by federal (national), state and foreign taxes and to disaggregate the information by jurisdiction based on a quantitative threshold. This guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted, and this guidance should be applied prospectively but there is the option to apply it retrospectively. The Company plans to adopt the provisions of this guidance in conjunction with its Form 10-K for the fiscal year ending March 31, 2026.

Except as mentioned above, the Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed consolidated balance sheets, statements of income and comprehensive income and statements of cash flows.

3 — INVENTORIES, NET

Inventories, net consisted of the following:

	June 30, 2024			March 31, 2024
Batteries	$	1,185,526		$	1,009,228
Electric Vehicles		3,113,685			2,634,643
Tires		720,045			687,927
Accessories		1,627,990			1,546,283
Inventories		6,647,246			5,878,081
Inventory reserves		(558,163	)		(514,021	)
Inventories, net	$	6,089,083		$	5,364,060

Movements of inventory reserves are as follows:

	June 30, 2024			June 30, 2023
Beginning balance	$	514,021		$	431,363
Addition		176,072			153,625
Write off		(131,929	)		(216,450	)
Ending Balance	$	558,163		$	368,537

As of June 30, 2024 and March 31, 2024, the inventory allowance balance was $558,163 and $514,021, respectively. For the three months ended June 30, 2024 and 2023, the impairment loss was $176,072 and $153,625, respectively.

4 — PREPAYMENTS AND OTHER RECEIVABLES

Prepayments and other current assets as of June 30, 2024 and March 31, 2024 consisted of the following:

	June 30, 2024		March 31, 2024
Prepaid rent	$	223,631	$	179,792
Prepayments to vendors		1,818,410		143,018
Prepaid iCloud Server		1,747		1,747
Prepaid insurance		311,633		237,207
Prepayments to other service providers		298,775		26,896
Total Prepayment and Other Receivables	$	2,654,196	$	588,660

As of June 30, 2024 and March 31, 2024, the prepayments to vendors were $1.8 million and $0.1 million, respectively. The increase in prepayments to vendors was primarily due to the Company’s anticipation of future sales growth and rental services. The Company plans to purchase more E-vehicles related accessories from overseas vendors to support the expansion of retail and rental markets. These prepayment to vendors are expected to be settled by the end of August 2024.

5 — PROPERTY AND EQUIPMENT, NET

Property and equipment as of June 30, 2024 and March 31, 2024 consisted of the following:

	June 30, 2024			March 31, 2024
Furniture & Fixtures	$	458,186		$	400,558
Machinery & Equipment		178,581			212,317
Automobile		355,890			306,607
Leasehold improvements		1,030,220			976,870
Construction in progress-Software		500,000			275,000
Property and Equipment		2,522,877			2,171,352
Less: Accumulated depreciation		(511,382	)		(416,330	)
Property and Equipment, net	$	2,011,495		$	1,755,022

For the three months ended June 30, 2024 and 2023, the depreciation expenses were $95,051 and $63,668, respectively.

In December 2023, the Company engaged DFT, a related party, for certain technology services, such as ERP system and in July 2024, the Company engaged DFT for a new APP, GO FLY APP, for the upcoming rental business. The total contract price for the ERP system is $2,500,000 and the contract price for the GO FLY APP is $500,000, subject to adjustments. As of June 30, 2024, the Company paid $2,554,000 to DFT including the prepayment for both ERP system and GO FLY APP. The final delivery of the ERP system is scheduled for May 10, 2025, subject to adjustments mutually agreed upon by the parties in response to any changes in project scope or unforeseen delays. The final delivery of GO FLY APP is scheduled for September 5, 2024, subject to adjustments mutually agreed upon by the parties in response to any changes in project scope or unforeseen delays. As of June 30, 2024 and March 31, 2024, construction in progress was $500,000 and $275,000, respectively, and primarily relating to the cost incurred to develop the software from DFT. As of June 30, 2024 and March 31, 2024, the Company had a prepayment of $2,054,000 and $1,279,000, respectively, to DFT (see Note 13 – Long-term prepayment for software development – related parties, net).

6 — INTANGIBLE ASSETS, NET

Intangible assets as of June 30, 2024 and March 31, 2024 consisted of the following:

	June 30, 2024			March 31, 2024
Property rights	$	38,032		$	38,032
Total Intangible assets		38,032			38,032
Less: Accumulated Amortization		(2,599	)		(1,648	)
Intangible assets, net	$	35,433		$	36,384

For the three months ended June 30, 2024 and 2023, the amortization expenses were $951 and nil, respectively.

7 — ACCRUED EXPENSES AND OTHER PAYABLES

	June 30, 2024		March 31, 2024
Accrued payroll	$	9,213	$	121,120
Advances from customers		32,011		25,099
Advances from IGH Holding Inc		49,000		49,000
Accrued warranty		16,452		27,714
Payroll tax and sales tax payable		188,653		245,226
Accrued store expenses		35,327		21,975
Accrued IPO offering cost		—		225,000
Accrued freight in cost		91,442		107,255
Accrued professional fee		—		103,000
Accrued Expenses and Other Current Liabilities	$	422,098	$	925,389

8 — LOAN PAYABLE

A summary of the Company’s loans is listed as follows:

Lender	Due Date	June 30, 2024			March 31, 2024
Chase Bank(i)	October 25, 2027		166,092			176,366
Chase Bank(ii)	January 12, 2028		53,511			56,580
Chase Bank(vii)	September 28, 2028		211,483			221,197
Leaf Capital Funding, LLC(iii)	September 30, 2027		43,876			46,856
Sinoelite Corp(iv)	April 03, 2024		—			100,000
Automobile Loan – Honda(v)	June 25, 2027		26,745			28,833
Bank of Hope(vi)	September 15, 2024		391,227			391,227
Bank of Hope(vi)	September 22, 2024		400,000			400,000
Bank of Hope(vi)	December 12, 2024		205,000			205,000
Total loan payables			1,497,934			1,626,059
Current portion of loan payables			(1,116,044	)		(1,213,242	)
Long-term loan payables		$	381,890		$	412,817

(i)

On October 25, 2022, the Company’s subsidiary, Universe King Corp. obtained a five-year long-term loan of $230,000 from JPMorgan Chase Bank, N.A. with an annual interest rate of 10.35%. Mr. Ke Zhang, the Company’s Chief Human Resource Officer, provided a guarantee on this loan. To secure payment and performance of the liabilities, Universe King Corp. pledged to JPMorgan Chase Bank, N.A., a continuing security interest in all of its right, title and interest in all of its properties, whether now owned or hereinafter acquired and whether now existing or hereafter arising. On August 9, 2024, the Company paid off this loan in full.

(ii)

On January 12, 2023, the Company’s subsidiary, Arfy Corp. obtained a five-year long-term loan of $70,000 from JPMorgan Chase Bank, N.A. with an annual interest rate of 9.8%. Mr. Tong Chen, an original stockholder of the Company, provided a guarantee on this loan. To secure payment and performance of the liabilities, Arfy Corp. pledged to JPMorgan Chase Bank, N.A., a continuing security interest in all of its right, title and interest in all of its properties, whether now owned or hereinafter acquired and whether now existing or hereafter arising. On August 9, 2024, the Company paid off this loan in full.

(iii)

On August 24, 2022, Universe King Corp. obtained a five-year long-term loan of $63,674 from Leaf Capital Funding, LLC with an annual interest rate of 7.0%. The collateral provided included the Fuso trucks, whether now owned or hereafter acquired by Universe King Corp., and together with all accessories, accessions, attachments thereto, and all other substitutions, renewals, replacements and improvements and all proceeds of the foregoing. From July 1 to August 14, 2024, the Company paid $2,523 on principal and interest of the loan. As of June 30, 2024, the outstanding balance is $43,876.

(iv)	On January 3, 2023, Fly E-Bike, Inc. obtained a one-year and three-month long-term loan of $100,000 from Sinoelite Corp with no interest. On April 25, 2024, the Company paid off this loan in full.

(v)

On June 12, 2023, Flyebikemiami Inc obtained a four-year long-term loan of $34,974 from AutoNation Honda Miami Lakes with an annual interest rate of 3.98%. The collateral provided was the Honda vehicle purchased by Flyebikemiami Inc. From July 1 to August 14, 2024, the Company paid $1,579 on principal and interest of the loan. As of June 30, 2024, the outstanding balance is $26,745.

(vi)

On September 20, 2023, Fly-E Group, Inc obtained a line of credit of $1,000,000 from Bank of Hope with a floating annual interest rate, currently at 8.5%. On the same date, the Company withdrew $391,226 from Bank of Hope to pay off the loan balance with Flushing Bank as of September 15, 2023. On September 22, 2023 and December 12, 2023, the Company withdrew $400,000 and $205,000, respectively, from Bank of Hope to support its business operations. Mr. Zhou Ou, the Company’s Chief Executive Officer, and Mr. Ke Zhang, the Company’s Chief Human Resource Officer, provided a guarantee on this loan. To secure payment and performance of the liabilities, Fly-E Group pledged to Bank of Hope the following items: inventory, chattel paper, accounts, equipment, and general intangibles of first 29 incorporated subsidiaries of the Company. On August 9, 2024, the Company paid off this loan in full.

(vii)

On October 2, 2023, the Company’s subsidiary, Fly14 Corp. obtained a five-year long-term loan of $240,000 from JPMorgan Chase Bank, N.A. with an annual interest rate of 10.40%. To secure payment and performance of the liabilities, Fly14 Corp. pledged to JPMorgan Chase Bank, N.A., a continuing security interest in all of its right, title and interest in all of its properties, whether now owned or hereinafter acquired and whether now existing or hereafter arising. On August 9, 2024, the Company paid off this loan in full.

For the three months ended June 30, 2024 and 2023, the total interest expenses on the Company’s outstanding loans amounted to $68,082 and $32,623, respectively.

9 — STOCKHOLDER’S EQUITY

Prior to the effectiveness of the stock split discussed below, the Company was authorized to issue 400 shares of common stock having a par value of $0.01 per share and 40 shares of preferred stock having a par value of $0.01 per share. There were 200 shares of common stock were issued and outstanding prior to the effectiveness of the stock split.

On March 27, 2024, the Company’s board of directors approved a 1-for-110,000 stock split of the Company’s capital stock. The stock split became effective on April 2, 2024. The par value of the Company’s common stock remained unchanged at $0.01 per share, and the number of authorized shares of the Company’s capital stock was increased from 440 to 48,400,000, with the number of authorized shares of common stock and preferred stock being increased from 400 to 44,000,000 and from 40 to 4,400,000, respectively.

On June 7, 2024, the Company completed its initial public offering and issued 2,250,000 shares of common stock, at a price of $4.00 per share. The gross proceeds of the offering were $9.0 million, prior to deducting the underwriting discounts, commissions and offering expenses payable by the Company. In addition, the Company granted the underwriters a 30-day option to purchase an additional 337,500 shares of common stock at the initial public offering price, less underwriting discounts and commissions, to cover over-allotments. On June 25, 2024, the Company issued an additional 337,500 shares of common stock to the underwriters for gross proceeds of $1.4 million upon full exercise of the underwriters’ over-allotment option. Net proceeds received by the Company from the initial public offering, including the exercise of over-allotment option, were approximately $9.2 million.

Upon the closing of IPO offering in June 2024, the Company issued to Benchmark the representative of the underwriters warrants to purchase 129,375 shares of common stock. The Representative’s Warrants have an exercise price equal to $4.00 per share and are exercisable until the date on June 7, 2029, after the date of commencement on December 7, 2024. The Representative’s Warrants are also exercisable on a cashless basis. As the Representative's Warrants are considered indexed to the Company’s own stock and meet the criteria for equity classification according to ASC :815-40, the Representative warrants are classified as equity.

The fair value of the warrant, using the Black-Scholes Model on the date of issuance was $274,472. The key inputs into the Black-Scholes Model variables were as follows at measurement date:

	June 7, 2024
Stock price	$	4.00
Risk-free interest rate		4.46	%
Volatility		56.52	%
Exercise price	$	4.00
Dividend yield	$	0

As of June 30, 2024 and March 31, 2024, the subscription receivable represents the unpaid capital contribution of $219,998 by the stockholders.

During the three months ended June 30, 2023, Mr. Ou paid certain vendors of the Company to settle certain accounts payable balance on behalf the Company. On June 30, 2023, the Company transferred $2.26 million, a portion of the accounts payable balance, along with a cash contribution of $0.14 million from Mr. Zhou Ou as capital contribution (see Note 13). As of June 30, 2023, a total of $2.4 million were transferred and recorded as capital contribution (see Note 13).

10 — INCOME TAX

(a) Income Tax Expense

Income tax expense for the three months ended June 30, 2024 and 2023 amounted to $72,445 and $0.3 million, respectively. Significant components of the provision for income taxes are as follows:

	For the Three Months Ended June 30,
	2024			2023
Current
Federal	$	53,738		$	15,900
State		46,669			38,000
City		31,669			20,700
Deferred
Federal		(38,000	)		150,300
State		(12,000	)		38,400
City		(9,000	)		20,100
Foreign		(631	)		—
Total	$	72,445		$	283,400

The provision for income taxes is based on the following pretax income (loss):

	For the Three Months Ended June 30,
	2024			2023
U.S.	$	(99,838	)	$	723,843
Canada		(7,225	)		-
Total	$	(107,063	)	$	723,843

For the three months ended June 30, 2024, the total pre-tax loss was $0.1 million, which included $0.1 million pre-tax loss in U.S. and $7,225 pre-tax loss in Canada. For the three months ended June 30, 2023, the total pre-tax income was $0.72 million all of which was generated in the U.S.

The following table reconciles to the Company’s effective tax rate:

	For the Three Months Ended June 30
	2024			2023
Pre-tax book (loss) income	$	(107,063	)	$	723,843
Federal Statutory rate		21.0	%		21.0	%
State income tax rate, net of federal income tax benefit		(11.4	)%		7.4	%
City income tax rate, net of federal income tax benefit		(0.4	)%		4.9	%
Foreign statutory rate		(0.1	)%		—
Permanent differences		(76.8	)%		5.7	%
Return to project adjustment		0.1	%		0.2	%
Total		(67.6	)%		39.2	%

Penalties and interest incurred related to underpayment of income tax are classified as income tax expenses in the period incurred. For the three months ended June 30, 2024 and 2023, the Company accrued $60,076 and $43,172 income tax related penalty included in taxes payable in the unaudited condensed consolidated balance sheets, respectively.

United States

Income tax expense for the three months ended June 30, 2024 and 2023 amounted to $73,076 and $0.3 million, respectively.

Significant components of the provision for income taxes are as follows:

	For the Three Months Ended June 30,
	2024			2023
Current
Federal	$	53,738		$	15,900
State		46,669			38,000
City		31,669			20,700
Deferred
Federal		(38,000	)		150,300
State		(12,000	)		38,400
City		(9,000	)		20,100
Total	$	73,076		$	283,400

Canada

Fly Toronto Corp, a subsidiary of the Company, was formed under the laws of Canada and conducts its business primarily in Canada.

Income tax benefit for the three months ended June 30, 2024 and 2023 amounted to $631 and nil, respectively. Significant components of the provision for income taxes are as follows:

	For the Three Months Ended June 30
	2024			2023
Current
Federal	$	—		$	—
State		—			—
City		—			—
Deferred
Federal		(357	)		—
State		(274	)		—
City		—			—
Total	$	(631	)	$	—

(b) Deferred Tax Assets (Liabilities)

Net DTAs as of June 30, 2024 and March 31, 2024 amounted to $94,298 and $35,199, respectively. Significant components of DTAs (DTLs), net are as follows:

	As of June 30, 2024			As of March 31, 2024
Net operating loss carry forwards	$	40,772		$	40,332
Inventory reserve		198,000			186,000
Lease liability		5,758,000			5,810,000
Less: Valuation allowance		—			—
Total deferred tax assets (DTAs)	$	5,996,772		$	6,036,332
Accumulated depreciation		(494,474	)		(482,133	)
ROU asset		(5,408,000	)		(5,519,000	)
Total deferred tax liabilities (DTLs)		(5,902,474	)		(6,001,133	)
Total deferred tax assets, net	$	94,298		$	35,199

Deferred tax assets (liabilities) – U.S., net	$	54,000		$	(5,000	)
Deferred tax assets – Canada, net	$	40,298			40,199

As of June 30, 2024 and March 31, 2024, the Company had approximately $6.0 million and $6.0 million, respectively, in the DTAs, which respectively included approximately $40,772 and $40,332 related to net operating loss carryforwards that can be used to offset taxable income in future periods, $5.8 million and $5.8 million related to lease liability, and $0.2 million and $0.2 million related to inventory allowance.

As of June 30, 2024 and March 31, 2024, the Company had approximately $5.9 million and $6.0 million, respectively, which included $0.5 million and $0.5 million, respectively, in the DTLs that related to accumulated depreciation and $5.4 million and $5.5 million related to ROU asset.

Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards. As of June 30, 2024 and March 31, 2024, the Company recorded approximately $40,298 and $40,199, respectively, in the net DTAs. The tax losses in Canada can be carried forward for twenty years to offset future taxable profit. The tax losses of entities in Canada will begin to expire in 2044, if not utilized. As of June 30, 2024, management considered it more likely than not that the Company will have sufficient taxable income in the future that will allow the Company to realize these net DTAs.

For the three months ended June 30, 2024, the Company’s pre-tax book loss in the U.S. was approximately $0.1 million and for the three months ended June 30, 2023, the Company’s pre-tax book income in the U.S. was approximately $0.7 million. In addition, for the three months ended June 30, 2024 and 2023, the Company’s pre-tax book loss in Canada was approximately $7,225 and nil, respectively.

Uncertain Tax Positions

The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. As of June 30, 2024 and March 31, 2024, the Company did not have any significant unrecognized uncertain tax positions.

11 — LEASES

Effective on April 1, 2019, the Company adopted Topic 842. At the inception of a contract, the Company determines if the arrangement is, or contains, a lease. The leases of the Company mainly consisted of offices, retail stores and warehouses.

The Company’s operating right-of-use (“ROU”) assets and lease liabilities were as follows:

	June 30, 2024		March 31, 2024
Operating ROU:
ROU assets	$	15,757,380	$	16,000,742
Total operating ROU assets	$	15,757,380	$	16,000,742

	June 30, 2024		March 31, 2024
Operating lease obligations:
Current operating lease liabilities	$	3,092,721	$	2,852,744
Non-current operating lease liabilities		13,675,379		13,986,879
Total lease liabilities	$	16,768,100	$	16,839,623

The Company had 40 and 38 leases as of June 30, 2024 and March 31, 2024, respectively.

The weighted average lease term, discount rates, and remaining lease terms for the operating leases as of June 30, 2024 were as follows:

Remaining lease term and discount rate:

Weighted average discount rate			6.5	%
Weighted average remaining lease term (years)			5.29 years

The weighted average lease term, discount rates, and remaining lease terms for the operating leases as of March 31, 2024 were as follows:

Remaining lease term and discount rate:

Weighted average discount rate			6.4	%
Weighted average remaining lease term (years)			5.51 years

The Company leases its offices, warehouse, and retail stores under non-cancellable operating lease agreements. Lease expenses were $1.12 million, including $0.29 million cost of goods-occupancy cost, $0.73 million rent expense in selling expense, and $0.10 million rent expense in general and administrative expense for the three months ended June 30, 2024. Lease expenses were $0.75 million, including $0.13 million cost of goods-occupancy cost, $0.52 million rent expense in selling expense, and $0.10 million rent expense in general and administrative expense for the three months ended June 30, 2023.

As of June 30, 2024, future minimum lease liabilities, all under office and facilities non-cancellable operating lease agreements, were as follows:

As of June 30, 2024	Operating Lease Liabilities
2025	$	4,064,624
2026		3,891,738
2027		3,777,003
2028		3,230,748
2029		2,404,706
Thereafter		2,524,939
Total lease payments		19,893,758
Less: interest		(3,125,658	)
Present value of lease liabilities	$	16,768,100

12 — COMMITMENTS AND CONTINGENCIES

Commitments

The Company has not entered any off-balance sheet financial guarantees or other off-balance sheet commitments to guarantee the payment obligations of any third parties. The Company has not entered any derivative contracts that are indexed to its shares and classified as shareholder’s equity or that are not reflected in its unaudited condensed consolidated financial statements. Furthermore, the Company does not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. The Company does not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to itself or engages in leasing, hedging or product development services with itself. As of June 30, 2024, the remaining commitment amount for the purchase of office property is $3,024,300, including a $10,704 closing fee. The Company paid $1,235,004, which includes the $10,704 closing fee, and mortgaged the remaining $1,800,000 at an annual interest rate of 6.5% for a term of 12 months on August 12, 2024.

Contingencies

Legal

From time to time, the Company is a party to certain legal proceedings, as well as certain asserted and unasserted claims. Amounts accrued, as well as the total amount of reasonably possible losses with respect to such matters, individually and in the aggregate, are not deemed to be material to the unaudited condensed consolidated financial statements.

The Company’s products and other production facilities as well as the packaging, storage, distribution, advertising and labeling of its products, are subject to extensive legal and regulatory requirements. For example, pursuant to the DMV registration requirement, the Company must satisfy the DMV Registration requirements and conduct required testing for all of its products sold in U.S. Loss of or failure to renew or obtain necessary permits, licenses, registrations, or certificates could prevent the Company from legally selling its products in the U.S. If the Company were found to be in violation of applicable laws and regulations, it could be subject to administrative punishment, including fines, injunctions, recalls or asset seizures, as well as potential criminal sanctions, any of which could have a material adverse effect on its business, financial condition, results of operations and prospects. As of the date hereof, the Company believes it is in compliance with the relevant regulations in the U.S.

Inflation

Inflationary factors, such as increases in personnel and overhead costs, could impair the Company’s operating results. Although the Company does not believe that inflation has had a material impact on the Company’s financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on the Company’s ability to maintain current levels of gross margin and operating expenses as a percentage of sales revenue if the revenues do not increase with such increased costs.

13 — RELATED PARTY TRANSACTIONS

(A) Related party balances

Accounts receivable — related parties

Name of Related Party	Relationship	Nature	June 30, 2024		March 31, 2024
Fly E Bike SRL	Zhou Ou (CEO), owns over 50% equity interest of this entity	Accounts receivable	$	47,742	$	326,914
Accounts receivable — related parties			$	47,742	$	326,914

During the three months ended June 30, 2024, the Company received $282,814 from Fly E Bike SRL.

Prepayments and other receivables — related parties

Name of Related Party	Relationship	Nature	June 30, 2024		March 31, 2024
Fly E Bike SRL	Zhou Ou (CEO), owns over 50% equity interest of this entity	Other receivables	$	162		180,256
PJMG LLC	Ruifeng Guo (CFO), owns over 50% equity interest of this entity	Prepayments	$	240,000		60,000
Prepayments and other receivables – related parties			$	240,162	$	60,000

During the three months ended June 30, 2024, the Company advanced $162 to Fly E Bike SRL, a distributor the Company works with and in which Mr. Ou holds over 50% of the equity interest. This advance is unsecured, bears no interest and does not have a maturity date. On June 12, 2024, the Company received $180,256 from Fly E Bike SRL. On April 1, 2023, the Company agreed to retain the services of PJMG, a company in which Mr. Guo, the Company’s CFO, holds over 50% of the equity interests as a consultant following the completion of its IPO. PJMG was engaged to provide compliance consulting services related to accounting, finance, and management, as well as to oversee market planning and development, follow-on fundraising, and investor relationship management . The service fee is $45,000 for the first month and from the second month the fees will be $15,000. To secure these services, the Company prepaid a total of $240,000 to PJMG as of June 30, 2024.

Long-term prepayment for software development – related parties, net

Name of Related Party	Relationship	Nature	June 30, 2024		March 31, 2024
DF Technology US Inc	Ruifeng Guo (CFO), owns over 50% equity interest of this entity	Long-term prepayment for software development	$	2,054,000	$	1,279,000
Long-term prepayment for software development — related parties, net			$	2,054,000	$	1,279,000

In December 2023, the Company engaged DFT for certain technology services. Mr. Guo, the Company’s CFO, owns over 50% of the equity interest in DFT. As of June 30, 2024, and March 31, 2024, the Company paid $2,054,000 and $1,279,000 to DFT as prepayment for software development, respectively. As of June 30, 2024 and March 31, 2024, construction in progress was $500,000 and $275,000, respectively (see Note 5 – Property and Equipment).

Other payables — related parties

Name of Related Party	Relationship	Nature	June 30, 2024(i)		March 31, 2024(i)
Zhou Ou	Chairman, CEO of the Company	Other payable	$	2,229	$	92,229
Other Payables-related parties			$	2,229	$	92,229

(i)	Represents the remaining balance of the advance provided by the related party to the Company’s subsidiaries for the purpose of supporting their business operations.

All of the above payables are unsecured, non-interest bearing, and due on demand. The Company paid a total of $90,000 to and borrowed a total of $182,239 from Mr. Zhou Ou during the three months ended June 30, 2024 and 2023, respectively.

(B) Related party transactions

Revenues — related parties

			For the Three Months Ended June 30
Name of Related Party	Relationship	Nature	2024		2023
Fly E Bike SRL	Zhou Ou (CEO), owns over 50% equity interest of this entity	Product sales	$	3,642	$	282,814
Revenues — related parties			$	3,642	$	282,814

During the three months ended June 30, 2024 and 2023, Fly E Bike SRL, a distributor the Company works with and in which Mr. Ou holds over 50% of the equity interest, purchased certain EV products from the Company in the amount of $3,642 and $136,565, respectively.

On March 6, 2021, the Company and DGLG entered into an engagement letter, pursuant to which the Company engaged DGLG as a consultant to assist the Company in its IPO planning, financing and tax services. Mr. Guo, the Company’s CFO, is a partner at DGLG. Under the terms of the engagement agreement with DGLG, the Company has agreed to compensate DGLG for consulting services based on an hourly fee arrangement. DGLG’s consulting fees were $225,000 and $nil for the three months ended June 30, 2024 and 2023, respectively. In addition, during the three months ended June 30, 2024, the Company paid DGLG a total of $15,600 for tax services rendered by DGLG.

On April 1, 2023, the Company agreed to retain the services of PJMG, a company in which Mr. Guo, the Company’s CFO, holds over 50% of the equity interests as a consultant following the completion of its IPO. To secure these services, the Company prepaid a total of $240,000 to PJMG as of June 30, 2024, and $15,000 was expensed as consulting expenses during the three months ended June 30, 2024.

14 — SUBSEQUENT EVENTS

The Company has evaluated subsequent events after June 30, 2024, up through August 16, 2024, the date at which the unaudited condensed consolidated financial statements were issued. Except for the events mentioned below, the Company did not identify any subsequent events with material financial impact on the Company’s unaudited condensed consolidated financial statements.

On July 16, 2024, the Company began offering rental services at its store located at 659 10TH AVE, NEW YORK, NY, 10036.

On August 5, 2024, Fly-E Group, Inc obtained a line of credit of $5 million from Peapack-Gladstone Bank with a floating annual interest rate and the current annual interest rate is 8.8%. On August 5, 2024, the Company withdrew from this line of credit to pay off the outstanding principal and interest of loans from Bank of Hope in total of $1,002,160 and the loan from JPMorgan Chase Bank, N.A obtained by Fly14 Corp in total of $208,601. In addition to the loan repayment to Bank of Hope, the Company withdrew in total $215,604 from this line of credit to pay off the following Chase Bank loans on August 9, 2024:

●

$162,836 for the loan obtained by Universe King Corp. from JPMorgan Chase Bank, N.A. on October 20, 2022.

●

$52,768 for the loan obtained by Arfy Corp. from JPMorgan Chase Bank, N.A. on January 12, 2023.

On August 12, 2024, the Company withdrew $1,235,004 from the above line of credit and paid $1,235,004 including the $10,704 closing fee to He’s Realty Holdings LLC to purchase office property and mortgaged the remaining $1,800,000 at the rate of 6.5% per annum for a term of 12 months.

On August 14, 2024, Wuxi Dianmeng Technology Co., Ltd. as the borrower, executed a promissory note in favor of the Company, as the lender, under which the borrower received an interest-free loan of $500,000. Wuxi Dianmeng Technology Co., Ltd is an unrelated third party for the Company. The maturity date will be September 30, 2024.

Item 2. 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 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 August 15, 2024, we have 40 stores, including 39 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 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 to expand our presence in the United States and 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 August 15, 2024, we offered 21 E-motorcycle products, 21 E-bike products and 34 E-scooter products.

We are currently in the process of developing a Fly E-Bike app, which is a management service mobile software for our EVs. 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. As of June 30, 2024, the Company paid $2,054,000 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 three months ended June 30, 2023, we produced 1,904 E-motorcycles, 2,058 E-bikes and 385 E-scooters at this facility. For the three months ended June 30, 2024, we produced 1,968 E-motorcycles, 1,513 E-bikes and 524 E-scooters at the same facility.

Recent Developments

Stock Split

In April 2024, we effected a stock split of our authorized and all issued and outstanding shares of our common stock and preferred stock at a split ratio of 1-for-110,000, where the par value of the Company’s common stock remained unchanged at $0.01 per share, and the number of authorized shares of the Company’s capital stock was increased from 440 to 48,400,000, with the number of authorized shares of common stock and preferred stock being increased from 400 to 44,000,000 and from 40 to 4,400,000, respectively. The issued and outstanding common stock and preferred stock increased at a split ratio of 1-for-110,000. The share number and related data in this Report has been updated to reflect the stock split referenced above.

Initial Public Offering

On June 7, 2024, we sold 2,250,000 shares of common stock, at a price of $4.00 per share in our IPO. The gross proceeds of the offering were $9.0 million, prior to deducting the underwriting discounts, commissions and offering expenses payable by the Company. In addition, we granted the underwriters a 30-day option to purchase an additional 337,500 shares of common stock at the initial public offering price, less underwriting discounts and commissions, to cover over-allotments. On June 25, 2024, we sold an additional 337,500 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. Net proceeds received by us from our initial public offering, including the exercise of the over-allotment option, were approximately $9.2 million. We also issued to The Benchmark Company, LLC, the representative of the underwriters, and its designees warrants to purchase 129,375 shares.

Rental Services

The Company launched a new rental program to meet the increasing market demand for safe, UL-certified e-bikes in compliance with New York State regulations. The rental service is now available in New York City in select Fly E-Bike stores, offering users with a flexible and affordable e-bike rental option featuring the Fly-E Fly-11 Pro model. The Company is currently developing the GO FLY app, a mobile application designed for its rental services. As part of FLY-E’s growth strategy, the Company plans to expand the rental service to Miami, Toronto, and Los Angeles shortly.

Impact of COVID-19

The United States Center for Disease Control announced that the COVID-19 public health emergency ended in May 2023, with the result that the COVID restrictions in the United States are no longer in effect and restrictions have been terminated worldwide. Although the anti-pandemic policies have been eased in China since the beginning of 2023, it is uncertain whether the Chinese government will tighten its restrictive policies and measures again in the future. Furthermore, the lingering impacts of COVID-19 may continue adversely affecting our supply chain, which in turn may materially and adversely affect our business and results of operations. We rely on a global supply chain network, with a significant portion of our supplies coming from China. Disruptions in this network, caused by factors such as COVID-19 lockdowns, port congestion, and geopolitical tensions, had resulted in supply shortages and increased freight costs. These issues had resulted in, and may continue to lead to, production delays and inventory shortages, affecting our ability to fulfill customer orders timely. Although our business operations were not materially impacted because of measures we took during the lockdown period in China in 2022, which included increasing order quantities for vehicle components and maintaining higher inventory levels, as well as avoiding heavy reliance on a single vendor, there can be no assurance as to whether and to what extent these mitigation measures will be effective in the event of future supply chain disruptions. Maintenance of high inventories can increase our costs and involve other risks. See “Item 1A. Risk Factors – Risks Related to the Company’s Business, Operations, and Industry - Changes in our supply chain may result in increased cost. If we are unsuccessful in our efforts to control and reduce supplier costs and manage inventory at optimal levels, our operating results will suffer.”

The global economic environment has experienced significant inflationary pressures, affecting various cost components, including labor, raw materials, and transportation. As a result, we face higher operating costs, which could impact our pricing strategies and profit margins. These challenges may lead to increased costs for raw materials, longer lead times, and potential delays in product availability, which could adversely affect our profitability and ability to meet customer demand.

In addition, if we encounter unexpected difficulties with our principal vendors, and if we are unable to fill these needs from other vendors in a timely manner, we could experience production delays and potential loss of access to important technology and parts for producing, servicing and supporting our vehicles. The loss of any vendors or the disruption in the supply of components from these vendors could lead to design changes and delays in product deliveries to our customers, which could hurt our relationships with our customers and result in negative publicity, damage to our brand and a material and adverse effect on our business, prospects, financial condition and operating results.

We are actively monitoring these developments and implementing mitigation strategies, such as diversifying our supplier base, increasing inventory levels where feasible, and exploring alternative logistics solutions. However, there can be no assurance that these measures will fully offset the adverse effects of inflation and supply chain disruptions on our business.

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 on our retail strategy and produce effective marketing initiatives to expand our brand perception with prospective customers. As of August 15, 2024, we have 40 stores, including 39 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 three months ended June 30, 2024, our net revenues increased by 0.4% to $7.9 million, compared to $7.8 million for the same period in 2023, which was primarily driven by sales from new stores and higher average sales price. In particular, the average sales price per EV increased by $46 or 4.6%, from $1,007 in the three months ended June 30, 2023 to $1,053 in the three months ended June 30, 2024.

In the future, our ability to increase our product sales price and volume will depend on our ability to innovate in design and technology and offer products that meet the customers’ demand. We currently have a streamlined product portfolio consisting of three categories, with multiple models and specifications for each category. Moreover, 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.

Employees

Our payroll expenses were $1.0 million for the three months ended June 30, 2024, compared to $0.6 million for the three months ended June 30, 2023. As our business expands, we expect increased payroll expenses due to hiring more employees for our retail stores and corporate office. 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, further contributing to the increase in payroll expenses. An inability to effectively manage payroll expenses while expanding the business would significantly impact our ability to grow revenue or improve our financial results.

Vendor and Supply Management

During the three months ended June 30, 2024, we worked with three principal vendors, Depcl Corp.(previously known as Fly Wing E-Bike Inc.), Xiamen Innolabs Technology Co., Ltd. and Wuxi Chiao International Trade Co., Ltd., each of which respectively supplied approximately 40.6%, 37.6% and 7.0% of the accessories and components used in all our products for the three months ended June 30, 2024.

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 and Competition

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.

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 July 2025, the New York City Department of Transportation announced that it anticipated to launch a $2 million trade-in program in early 2025, allowing eligible food delivery workers to replace their unsafe e-bikes, e-mobility devices, and batteries with certified, high-quality versions. 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.

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.

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.

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 Three Months Ended June 30, 2024 and 2023

The following table sets forth the components of our results of operations for the three months ended June 30, 2024 and 2023:

	For the Three Months Ended June 30,
	2024			2023			Change			Percentage Change
Revenues, Net	$	7,873,426		$	7,842,346		$	31,080			0.4	%
Cost of Revenues		4,773,792			5,119,631			(345,839	)		(6.8	)%
Gross Profit		3,099,634			2,722,715			376,919			13.8	%
Operating Expenses
Selling Expenses		1,612,495			1,083,106			529,389			48.9	%
General and Administrative Expenses		1,532,638			872,065			660,573			75.7	%
Total Operating Expenses		3,145,133			1,955,171			1,189,962			60.9	%
(Loss) Income from Operations		(45,499	)		767,544			(813,043	)		(105.9	)%
Other Income (Expenses), Net		6,518			(11,078	)		17,596			(158.8	)%
Interest Expenses, Net		(68,082	)		(32,623	)		(35,459	)		108.7	%
Provision for Income Taxes		(72,445	)		(283,400	)		210,955			(74.4	)%
Net (Loss) Income	$	(179,508	)	$	440,443		$	(619,951	)		(140.8	)%

Revenues

	For the Three Months Ended June 30,
	2024		2023		Change			Percentage Change
Sales-Retail	$	6,870,418	$	6,168,173	$	702,245			11.4	%
Sales-Wholesale	$	1,003,008	$	1,674,173	$	(671,165	)		(40.1	)%
Total Net Revenues	$	7,873,426	$	7,842,346	$	31,080			0.4	%

Our net revenues were $7.9 million for the three months ended June 30, 2024, an increase of 0.4%, from $7.8 million for the three months ended June 30, 2023. The increase in our net revenues was driven primarily by the increase of the average sale price of our EVs by $46 or 4.6%, from $1,007 in the three months ended June 30, 2023 to $1,053 in the three months ended June 30, 2024.

Our retail sales revenue increased by $0.7 million, or 11.4%, from $6.2 million for the three months ended June 30, 2023 to $6.9 million for the three months ended June 30, 2024. Our wholesale revenue decreased by $0.7 million, or 40.1%, from $1.7 million for the three months ended June 30, 2023 to $1.0 million for the three months ended June 30, 2024.The increase in retail sales revenue is mainly due to the addition of seven new retail stores from June 2023 to June 2024. The decrease in wholesales revenue was driven primarily by the decrease in purchase from the top two customers who closed their stores.

Cost of Revenues

Cost of revenues decreased by 6.8%, from $5.1 million for the three months ended June 30, 2023, to $4.8 million for the three months ended June 30, 2024. The decrease in cost of revenues was primarily attributable to more favorable pricing we obtained from our suppliers, especially for the price of batteries. The unit cost for battery decreased by 56%, from $157.0 in the three months ended June 30, 2023, to $69.0 in the three months ended June 30, 2024.

Gross Margin

The following table shows our gross profit and gross margin for the three months ended June 30, 2024 and 2023:

	For the Three Months Ended June 30,
	2024			2023			Change		Percentage Change
Gross Profit	$	3,099,634			2,722,715			376,919		13.8	%
Gross Margin		39.4	%		34.7	%

Gross profit for the three months ended June 30, 2024 and 2023 was $3.1 million and $2.7 million, respectively. Gross margin was 39.4% and 34.7% for the three months ended June 30, 2024 and 2023, respectively. The change was driven primarily by the increase of the average sale price of our EVs by $46 or 4.6%, from $1,007 in the three months ended June 30, 2023 to $1,053 in the three months ended June 30, 2024 and the decrease of the unit cost for battery by 56%, from $91.0 in the three months ended June 30, 2023, to $69.0 in the three months ended June 30, 2024

Total Operating Expenses

The following table sets forth the components of our total operating expenses for the three months ended June 30, 2024 and 2023:

	For the Three Months Ended June 30,
	2024			2023			Change		Percentage Change
Selling Expenses	$	1,612,495			1,083,106			529,389		48.9	%
General and Administrative Expenses		1,532,638			872,065			660,573		75.7	%
Total Operating Expenses	$	3,145,133			1,955,171			1,189,962		60.9	%
Percentage of Revenue		39.9	%		24.9	%

Total operating expenses were $3.1 million for the three months ended June 30, 2024, an increase of $1.2 million, or 60.9%, compared to $2.0 million for the three months ended June 30, 2023. The increase in operating expenses was attributable to the increase in our payroll expenses, rent expenses, meals and entertainment expenses, professional fees, and development expenses as we expanded our business as more fully discussed the below.

Selling Expenses

Selling expenses primarily consist of payroll expenses, rent, utilities expenses, and advertising expenses of retail stores. Total payroll expenses were $0.6 million for the three months ended June 30, 2024, compared to $0.4 million for the three months ended June 30, 2023. Rent expenses were $0.7 million for the three months ended June 30, 2024, compared to $0.5 million for the three months ended June 30, 2023. Utilities expenses were $45,825 for the three months ended June 30, 2024, compared to $28,383 for the three months ended June 30, 2023. Advertising expenses were $68,519 for the three months ended June 30, 2024, compared to $11,727 for the three months ended June 30, 2023. The increase in these expenses was primarily due to the increase in the number of new stores and new employees hired for these new stores in the three months ended June 30, 2024.

General and Administrative Expenses

Various general and administrative expenses increased during the three months ended June 30, 2024 compared to the previous year. Meals and entertainment expenses increased to $139,561 for the three months ended June 30, 2024, compared to $116,577 for the three months ended June 30, 2023, primarily due to increased meal expenses for employees who worked overtime. Professional fees increased to $0.4 million for the three months ended June 30, 2024, compared to $0.2 million for the three months ended June 30, 2023, primarily attributable to the increase in audit fee, consulting fee, and IR expenses associated with our initial public offering. Payroll expenses increased to $0.4 million for the three months ended June 30, 2024 from $0.2 million for the three months ended June 30, 2023 primarily due to additional employees hired in operation and accounting departments. Rent expenses increased to $0.1 million for the three months ended June 30, 2024, compared to $$0.1 million for the same quarter of prior year as a result of office space expansion in the three months ended June 30, 2024. Development fee increased to $0.1 million for the three months ended June 30, 2024, compared to $nil for the prior quarterly as a result of maintenance for Fly E-Bike app during the three months ended June 30, 2024.

Income Tax Provisions

Provision for income taxes were $72,445 for the three months ended June 30, 2024, a change of $0.2 million from $0.3 million income tax provision for the three months ended June 30, 2023. This decrease was due to our decreased taxable income for the three months ended June 30, 2024.

Net Income (Loss)

Net loss was $0.2 million for the three months ended June 30, 2024, a change of $0.6 million, or 140.8%, from net income of $0.4 million for the three months ended June 30, 2023, which was mainly attributable to the reasons discussed above.

EBITDA

The following table sets forth the components of our EBITDA for the three months ended June 30, 2024 and 2023:

	For the Three Months Ended June 30,
	2024			2023			Change			Percentage Change
(Loss) Income from Operations	$	(179,508	)	$	440,443		$	(619,951	)		(140.8	)%
Income Tax provision		72,445			283,400			(210,955	)		(74.4	)%
Depreciation		95,051			63,668			31,383			49.3	%
Interest Expenses		68,082			32,623			35,459			108.7	%
Amortization		951			—			951			100.0	%
EBITDA	$	57,021		$	820,134		$	(763,113	)		(93.0	)%
Percentage of Revenue		0.7	%		10.5	%					(9.7	)%

Before interest expenses, income tax, depreciation, and amortization, for the three months ended June 30, 2024, our net income was $57,021, a change of $0.8 million, compared to net income of $0.8 million for the three months ended June 30, 2023, which was mainly attributable to the increase in selling and general and administrative expense described above. The ratio of EBITDA to revenue was 0.7% and 10.5% for the three months ended June 30, 2024 and 2023, respectively.

Liquidity and Capital Resources

As of June 30, 2024, we had cash of $4.5 million. We had working capital of $7.7 million and $0.3 million as of June 30, 2024 and March 31, 2024, respectively. We had net loss of $0.2 million and net income of $0.4 million for the three months ended June 30, 2024 and 2023, respectively.

We had funded our working capital and other capital requirements in the past primarily by equity contributions from our stockholders and net proceeds received from IPO, 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 June 30, 2024. 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 2,250,000 shares of common stock, at a price of $4.00 per share in our IPO. The gross proceeds of the offering 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 337,500 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. We believe our cash on hand will be sufficient to meet our current and anticipated needs for general corporate purposes for at least the next 12 months. We may, however, need additional cash resources in the future if we experience changes in business conditions or other developments. We may also need additional cash resources in the future if we find and wish to pursue opportunities for investment, acquisition, capital expenditure or similar actions. If we determine that our cash requirements exceed the amount of cash we have on hand, we may seek to issue equity or equity linked securities or obtain debt financing. 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.

Our accounts receivable represent primarily accounts receivable from the distributors that purchased our EVs and other products. As of June 30, 2024 and March 31, 2024, our accounts receivable, net of allowance for credit losses, was $0.4 million and $0.2 million, respectively. Our accounts receivable turnover period decreased from 69 days in the year ended March 31, 2024 to 59 days in three months ended June 30, 2024, which was mainly attributable to a stricter credit policy implemented towards our U.S. distributors.

Our accounts payable represent primarily accounts payable to suppliers from whom we purchased accessories and components for our products. As of June 30, 2024 and March 31, 2024, our accounts payable were $0.4 million and $1.2 million, respectively. Our accounts payable turnover period decreased to 14 days for the three months ended June 30, 2024 from 25 days for the year ended March 31, 2024, which was primarily the result of the Company’s switch to a new vendor and the settlement of one vendor’s balance during this period.

Our prepayments and other receivables primarily represent prepayments to vendors and other service providers. These prepayments and receivables increased by $2.1 million, from $0.6 million as of March 31, 2024, to $2.7 million as of June 30, 2024. This significant increase is mainly due to the Company’s plans to launch E-bike rental services starting in September 2024, which will require additional inventory. As a result, during the three months ended June 30, 2024, the Company made substantial prepayments to vendors to secure inventory for the upcoming quarter.

Our inventories primarily include our EVs, their accessories and spare parts. As of June 30, 2024 and March 31, 2024, our inventories, net of allowance, were $6.1 million and $5.4 million, respectively. The increase in inventories was primarily due to our anticipation of future sales growth. Our inventory turnover days increased to 109 days in the three months ended June 30, 2024, from 89 days in the year ended March 31, 2024, which was primarily due to strategic inventory buildup, allowing us to open new stores and start new services.

For the three months ended June 30, 2024 and 2023, the interest expenses on our outstanding loans amounted to $68,082 and $32,623, respectively. See Note 8 to the Unaudited Condensed Consolidated Financial Statements included within this quarterly report for further information on details of our outstanding loans.

The following table summarizes our cash flow data for the three months ended June 30, 2024 and 2023:

	For the Three Months Ended June 30,
	2024			2023
Net Cash (Used in) Provided by Operating Activities	$	(4,522,164	)	$	820,035
Net Cash Used in Investing Activities		(1,066,130	)		(390,055	)
Net Cash Provided by (Used in) Financing Activities		8,653,972			(108,393	)
Net Change in Cash	$	3,065,678		$	321,587

Operating Activities

Net cash used in operating activities for the three months ended June 30, 2024 was $4.5 million, which was due to net loss of $0.2 million, a decrease in tax payable of $0.4 million, and a decrease in accrued expenses and other payables of $0.5 million, an increase in inventories of $0.9 million, a decrease in account payable of $0.8 million, a decrease in operating lease liabilities of $0.6 million, an increase in prepayments for operation services to related parties of $0.2 million and an increase in prepayments and other receivables of $2.1 million, partially offset by amortization of right-of-use assets of $0.8 million and a decrease in accounts receivables-related parties of $0.3 million.

Net cash provided by operating activities for the three months ended June 30, 2023 was $0.8 million, which was mainly comprised of net income of $0.4 million, an increase in accounts payable of $1.7 million, a noncash item of amortization of right-of-use assets of $0.5 million, offset by noncash item of an increase in inventories of $1.4 million and a decrease in operating lease liabilities of $0.5 million.

Investing Activities

Net cash used in investing activities was $1.1 million for the three months ended June 30, 2024, which was due to purchase of software from a related party of $0.8 million, prepayments for property of $0.1 million, and the purchase of equipment of $0.4 million, partially offset by the repayment from a related party of $0.2 million.

Net cash used in investing activities was $0.4 million for the three months ended June 30, 2023, which was due to the purchase of equipment of $0.4 million.

Financing Activities

Net cash provided by financing activities was $8.7 million for the three months ended June 30, 2024, which consisted of net proceeds of the IPO of $9.2 million, and borrowings from loan payable of $0.2 million, partially offset by repayments of loan payables of $0.4 million and payment of IPO costs of $0.3 million.

Net cash used in financing activities was $0.1 million for the three months ended June 30, 2023, which consisted of capital contributions from stockholders of $0.5 million, partially offset by repayments on loan payable of $0.3 million, advanced payments to related parties of $0.1 million and repayments to related parties of $0.2 million.

Commitments and Contractual Obligations

The following table presents our material contractual obligations as of June 30, 2024:

Contractual Obligations	Total		Less than 1 year		1 – 2 years		3 – 5 years		Thereafter
Operating Lease Obligations and others	$	16,768,100		3,092,721		6,314,056		5,055,516		2,305,807
Loan Payable		1,497,934		1,116,044		276,628		105,262		—
Purchase Commitment of Office Property		3,024,300		1,470,000		1,554,300		—		—
Total Contractual Obligations	$	21,290,334		5,678,765		8,144,984		5,160,778		2,305,807

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 borrowing bears 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 unaudited condensed consolidated financial statements.

We prepare our unaudited condensed 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.

When reading our unaudited condensed consolidated financial statements, you should consider our selection of critical accounting policies, the judgment and other uncertainties affecting the application of such policies and the sensitivity of reported results to changes in conditions and assumptions. Our critical accounting policies and practices include the following: (i) revenue recognition; and (ii) income taxes. See “Note 2 — Summary of Significant Accounting Policies” to our unaudited condensed consolidated financial statements for the disclosure of these accounting policies. We believe the following accounting estimates involve the most significant judgments used in the preparation of our financial statements.

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 June 30, 2024 and March 31, 2024, we recorded inventory allowance balance of $558,163 and $514,021, respectively.

Product Warranties

We provide a three-month warranty on our vehicles and the battery pack. We accrue warranty reserves at the time a vehicle is delivered to the customer. Warranty reserves include our best estimate of the projected cost to repair or to replace any items under warranty, based on actual warranty experience as it becomes available and other known factors that may impact our evaluation of historical data. We review our reserves regularly to ensure that our accruals are adequate in meeting expected future warranty obligations, and we will adjust our estimates as needed. Factors that could have an impact on the warranty reserve include the following: changes in manufacturing quality, shifts in product mix, changes in warranty coverage periods, product recalls and changes in sales volume. Warranty expense is recorded as a component of cost of revenues in the statement of operations. The portion of the warranty provision which is expected to be incurred within three months from the balance sheet date will be classified as current and classified as short-term liabilities. The Company accrued $16,452 and $27,714 of warranty reserves under accrued expenses and other payables as of June 30, 2024 and March 31, 2024, respectively.

Income Taxes

We provide current income tax expenses in accordance with the laws of the relevant taxing authorities. As part of the process of preparing financial statements, we are required to estimate our income taxes in each of the tax jurisdictions in which we operate, including New York State, New York City, New Jersey, Texas, Florida, California, Washington, D.C. and Canada.

We account for income taxes using the asset and liability approach. Under this method, deferred income taxes are recognized for tax consequences in future years based on differences between the tax bases of assets and liabilities and their reported amounts in the financial statements at each year-end and tax loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates applicable for the differences that are expected to reverse.

A valuation allowance is recorded to reduce deferred tax assets to the extent that we consider it is more likely than not that a deferred tax asset will not be realized in the foreseeable future. As of June 30, 2024 and March 31, 2024, we did not record any valuation allowance deferred tax assets.

We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determines if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained on audit, including resolution of any related appeals or litigation processes, and (2) measures the tax benefit as the largest amount that is more likely than not to be realized upon ultimate settlement. An uncertain income tax provision will not be recognized if it has less than a 50 percent likelihood of being sustained.

We consider many factors when evaluating our tax positions and estimating its tax benefits, which may require periodic adjustments, and which may not accurately forecast actual outcomes. We will include interest and fines arising from the underpayment of income taxes as a component of the provision for income taxes (if anticipated). Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. For the three months ended June 30, 2024, the Company accrued $60,076 income tax related penalty included in taxes payable in the unaudited condensed consolidated balance sheets. For the three months ended June 30, 2023, $43,172 accrued related to underpayment of income tax are classified as income tax expense in the period incurred. As of June30, 2024 and March 31, 2024, we did not have any significant unrecognized uncertain tax positions.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable for smaller reporting companies.

Item 4. 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.

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 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 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. 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. Our management performed additional analysis as deemed necessary to ensure that our unaudited condensed consolidated financial statements included in this Report were prepared in accordance with U.S. GAAP. Accordingly, management believes that the unaudited condensed consolidated financial statements included in this Report present fairly, in all material respects, our financial position, results of operations and cash flows of the periods presented.

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.

PART II - Other Information

Item 1. Legal Proceedings.

From time to time, we may be subject to legal proceedings arising in the ordinary course of business. Regardless of the outcome of any existing or future litigation, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.

Item 1A. Risk Factors.

Except for the additional risk factors set forth below, there have been no material changes to our Risk Factors as disclosed in our Annual Report on Form 10-K for the year ended March 31, 2024, as filed with the SEC on June 28, 2024.

We maintain our cash at financial institutions, often in balances that exceed federally insured limits.

The majority of our cash is held in accounts at US banking institutions. Cash held in our depository accounts may sometimes exceed the Federal Deposit Insurance Corporation (“FDIC”) standard deposit insurance limit of $250,000. As of June 30, 2024 and March 31, 2024, $2.5 million and $ nil cash deposited with banks was uninsured. If such banking institutions were to fail, such as Silicon Valley Bank when the FDIC took control in March 2023, we could lose all or a portion of those amounts held in excess of such insured amounts. In the future, our access to our cash in amounts adequate to finance our operations could be significantly impaired if the financial institutions with which we have arrangements encounter liquidity constraints or failures. Any future limitation on timely access to our funds or any material loss that we may experience in the future could have a material adverse effect on our financial condition and could materially impact our ability to pay our operating expenses or make other payments.

Our planned rental service may not be successful.

As we launch our new rental program to meet increasing market demand for safe, UL-certified e-bikes, our success will depend on several critical factors, including our ability to launch the rental services on time, effectively scale operations, manage supply chain logistics, secure necessary rental licenses, maintain the high-quality standards of our e-bikes, and successfully develop and deploy our mobile app for user access. Delays, challenges in obtaining or renewing rental licenses, difficulties in expanding the service to planned locations, or issues with the mobile app's performance and user experience, could adversely affect our brand, business, financial condition, and future prospects.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

We did not undertake any unregistered sales of our equity securities during the quarter ended June 30, 2024.

During the quarter ended June 30, 2024, we did not repurchase any shares of our common stock.

On June 7, 2024, we closed our IPO of 2,250,000 shares of our common stock at the price of $4.00 per share, resulting in net proceeds to us of $7.9 million after deducting underwriting discounts and commissions and offering expenses. On June 25, 2024, we sold an additional 337,500 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. All of the shares issued and sold in our IPO were registered under the Securities Act pursuant to a registration statement on Form S-1, as amended (File No. 333-276830), which was declared effective by the Securities and Exchange Commission on May 14, 2024. The Benchmark Company, LLC acted as representative of the underwriters. We paid the underwriters in aggregate approximately $0.7 million in underwriting commissions and incurred offering expenses of approximately $0.5 million. No payments for such expenses were made to our directors or officers or their associates, holders of 10% or more of any class of our equity securities, or to our affiliates. There has been no material change in the planned use of proceeds from our IPO from those disclosed in the final prospectus. No proceeds were used for the year ended March 31, 2024. As of August 15, 2024, we used approximately $4.3 million, $0.5 million, and $1.7 million for purchase of inventory and production costs, software development, and working capital, respectively. The balance is being held in short-term interest-bearing deposits and securities.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Loan and Security Agreement

On August 5, 2024 (the “Effective Date”), the Company, Fly E-Bike, Inc., and Fly EV, Inc. (collectively, the “Borrower”) entered into a loan and security agreement (the “Loan Agreement”) with Peapack-Gladstone Bank (the “Lender”). Pursuant to the Loan Agreement, the Lender made available to the Borrower a $5 million revolving credit facility (the “Revolving Credit”), which the Borrower will use periodically for operating needs and to help facilitate acquisitions. The Loan Agreement has a one-year term. The principal balance of the loan under the Revolving Credit bears interest at a per annum rate equal to the term SOFR plus a spread of 3.50%, with a floor of 5.50%. The Borrower will make interest-only payments quarterly, starting on November 1, 2024. The entire amount of outstanding principal and interest is due on the Revolving Credit Maturity Date, which is August 31, 2025.

As security for the payment of the loan, the Borrower granted the Lender a continuing lien on and security interest in all assets of the Borrower, including accounts, chattel paper, documents, instruments, inventory, general intangibles, equipment, fixtures, deposit accounts, goods, letter-of-credit rights, supporting obligations, investment property, commercial tort claims, property in the Lender's possession, additions, and proceeds. The Borrower paid a non-refundable revolving credit closing fee of $20,000 at closing, agreed to pay an unused line fee of 0.25% quarterly, and a late charge of 5% on any payments not made within five days of the due date. Upon an event of default, the Lender may terminate the Revolving Credit, declare the Borrower’s obligations immediately due and payable, and exercise rights under the UCC and other applicable laws, including taking possession of the collateral and selling it.

The foregoing description of the Loan Agreement is a summary only and is qualified in all respects by reference to the full text of the Loan Agreement, which is attached as Exhibit 10.1 hereto and incorporated by reference herein.

Contract Agreement for App Development

On July 5, 2024, DF Technology US Inc ("Developer") and the Company entered into a contract for the development of the GO FLY app, a rental services application for the Company. Mr. Guo, the Company’s CFO and director, owns over 50% of the equity interest in Developer. Under the terms of the agreement, the Developer will design, develop, and deliver the app for a total fee not exceeding $500,000, with an initial payment of $300,000 and the remaining $200,000 to be paid in installments upon the completion of specified milestones. The development commenced on July 5, 2024, with final delivery anticipated by September 5, 2024, subject to any mutually agreed-upon adjustments. Upon receipt of full payment, the Developer will transfer intellectual property rights associated with the development of the app to the Company. Developer has provided a warranty for a period of 36 months from the date of final acceptance.

The foregoing description of the contract is a summary only and is qualified in all respects by reference to the full text of the contract agreement, which is attached as Exhibit 10.2 hereto and incorporated by reference herein.

Letter Agreement for Consulting Services

On April 1, 2023, PJMG LLC ("Consultant") and the Company entered into a contract for consulting services, which includes strategic guidance and support in compliance, financial management, investor relations, and market expansion initiatives. The contract specifies an initial monthly fee of $45,000 after the completion of the Company’s IPO, with a subsequent fee of $15,000 per month, subject to mutually agreed adjustments based on the scope and circumstances of the services provided. Mr. Guo, the Company’s CFO and director, owns more than 50% of the equity interest in Consultant. Either party may terminate this agreement with 30 days' notice to the other party.

The foregoing description of the letter agreement is a summary only and is qualified in all respects by reference to the full text of the letter agreement, which is attached as Exhibit 10.3 hereto and incorporated by reference herein.

Item 6. Exhibits

3.1*		Amended and Restated Articles of Incorporation
10.1*^		Loan and Security Agreement dated as of August 5, 2024, by and among the registrant, Fly-E-Bike Inc., Fly EV, Inc. and Peapack-Gladstone Bank
10.2*^		Contract Agreement dated as of July 5, 2024, by and between the registrant and DF Technology US Inc
10.3*		Letter Agreement dated as of April 1, 2023, by and between the registrant and PJMG LLC
31.1*		Section 302 Certification of Principal Executive Officer
31.2*		Section 302 Certification of Principal Financial Officer
32.1**		Section 906 Certification of Principal Executive Officer
32.2**		Section 906 Certification of Principal Financial Officer
101.INS		Inline XBRL Instance Document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*	Filed herewith
**	Furnished herewith
^	The exhibits and schedules to this Exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant hereby agrees to furnish a copy of any omitted schedules to the SEC upon request.

SIGNATURES

In accordance with the requirements of Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	FLY-E GROUP, INC.

	By:	/s/ Zhou Ou
		Zhou Ou Chief Executive Officer and Director (Principal Executive Officer)

August 16, 2024

	By:	/s/ Ruifeng Guo
		Ruifeng Guo Chief Financial Officer and Director (Principal Financial and Accounting Officer)

August 16, 2024

EX-3.1 2 ea021110101ex3-1_flyegroup.htm AMENDED AND RESTATED ARTICLES OF INCORPORATION

Exhibit 3.1

AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION

OF
FLY-E GROUP, INC.

June 6, 2024

Fly-E Group, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), does hereby certify as follows:

1. The name of the Corporation is Fly-E Group, Inc. The certificate of incorporation of the Corporation was originally filed with the Secretary of State of the State of Delaware on November 1, 2022, as amended on April 2, 2024 (the “Certificate of Incorporation”).

2. This Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate”), which both restates and amends the provisions of the Certificate of Incorporation, has been approved by the Board of Directors of the Corporation (the “Board of Directors”) in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware, as amended from time to time (the “DGCL”) and has been adopted by the written consent of the stockholders of the Corporation in accordance with Section 228 of the DGCL.

3. This Amended and Restated Certificate shall become effective on the date of filing with the Secretary of State of Delaware.

4. The text of the certificate of incorporation of the Corporation, as heretofore amended, is hereby amended and restated by this Amended and Restated Certificate to read in its entirety as set forth in EXHIBIT A attached hereto.

	By:	/s/ Zhou Ou
	Name:	Zhou Ou
	Title:	Chief Executive Officer

EXHIBIT A

FLY-E GROUP, INC.

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

ARTICLE I: NAME

The name of the corporation is Fly-E Group, Inc. (the “Corporation”).

ARTICLE II: AGENT FOR SERVICE OF PROCESS

The address of the Corporation’s registered office in the State of Delaware is 1209 Orange Street, Wilmington, Delaware 19801, New Castle County. The name of the registered agent of the Corporation at such address is The Corporation Trust Company.

ARTICLE III: PURPOSE

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the “DGCL”).

ARTICLE IV: AUTHORIZED STOCK

1. Total Authorized. The total number of shares of all classes of stock that the Corporation has authority to issue is 110,000,000 shares, consisting of two classes: 100,000,000 shares of common stock, $0.01 par value per share (the “Common Stock”), and 10,000,000 shares of preferred stock, $0.01 par value per share (the “Preferred Stock”).

2. Common Stock

2.1

Relative Rights

The Common Stock shall be subject to all of the rights, privileges, preferences and priorities set forth in this Amended and Restated Certificate of Incorporation.

2.2

Dividends

Except as may be provided in any resolution or resolutions of the Board of Directors of the Corporation (the “Board”) providing for any series of Preferred Stock outstanding at any time, whenever there shall have been paid, or declared and set aside for payment, to the holders of shares of any class or series of stock having preference over the Common Stock as to the payment of dividends, the full amount of dividends and of sinking fund or retirement payments, if any, to which such holders are respectively entitled in preference to the Common Stock, then dividends may be paid on the Common Stock and on any class or series of stock entitled to participate therewith as to dividends, out of any assets legally available for the payment of dividends thereon, but only when and as declared by the Board. Any dividends on the Common Stock will not be cumulative.

2.3

Dissolution, Liquidation, Winding Up

In the event of any dissolution, liquidation, or winding up of the Corporation, whether voluntary or involuntary, the holders of the Common Stock, and holders of any class or series of stock entitled to participate therewith, in whole or in part, as to the distribution of assets in such event, shall be entitled to participate in the distribution of any assets of the Corporation remaining after the Corporation shall have paid, or provided for payment of, all debts and liabilities of the Corporation and after the Corporation shall have paid, or set aside for payment, to the holders of any class or series of stock having preference over the Common Stock in the event of dissolution, liquidation or winding up the full preferential amounts (if any) to which they are entitled.

2.4

Voting Rights

Each holder of shares of the Common Stock shall be entitled to attend all special and annual meetings. Except as may otherwise be required by law, and subject to the provisions of such resolution or resolutions as may be adopted by the Board pursuant to Section 3 of this Article IV granting the holders of one or more series of the Preferred Stock exclusive or special voting powers with respect to any matter, each holder of the Common Stock shall have one vote with respect to each share of the Common Stock held on all matters voted upon by the stockholders, provided, however, that except as otherwise required by law, holders of the Common Stock, as such, shall not be entitled to vote on any amendment to this Amended and Restated Certificate of Incorporation (including a certificate of designations relating to any series of the Preferred Stock) that relates solely to the terms of one or more outstanding series of the Preferred Stock if the holders of such affected series are entitled, either voting separately or together with the holders of one or more other such series, to vote thereon pursuant to this Amended and Restated Certificate of Incorporation (including a certificate of designations relating to any series of the Preferred Stock) or pursuant to the DGCL. Each holder of shares of the Common Stock may exercise its vote either in person or by proxy.

3. Preferred Stock

The Board is authorized, subject to limitations prescribed by the DGCL and the provisions of this Amended and Restated Certificate of Incorporation, to provide, by resolution or resolutions from time to time and by filing certificates of designations pursuant to the DGCL, for the issuance of shares of the Preferred Stock in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the voting powers, designations, preferences and relative, participating, optional or other special rights of the shares of each such series of the Preferred Stock and to fix the qualifications, limitations or restrictions thereof.

The authority of the Board with respect to each series shall include, but not be limited to, determination of the following: (1) the number of shares constituting that series and the distinctive designation of that series; (2) the dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series; (3) whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights; (4) whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board shall determine; (5) whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; (6) whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund; (7) the rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series; and (8) any other relative powers, preferences, and rights of that series, and qualifications, limitations or restrictions on that series as the Board shall determine.

Except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Amended and Restated Certificate of Incorporation (including any certificate of designation relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Amended and Restated Certificate of Incorporation (including any certificate of designation relating to any series of Preferred Stock) or pursuant to the DGCL.

Except as otherwise required by law, holders of any series of Preferred Stock shall be entitled to only such voting rights, if any, as shall expressly be granted thereto by this Amended and Restated Certificate of Incorporation (including any certificate of designation relating to such series of Preferred Stock).

ARTICLE V: AMENDMENT OF BYLAWS

In furtherance and not in limitation of the powers conferred by the DGCL, the Board is expressly authorized and empowered to adopt, alter, amend and repeal the Bylaws of the Corporation without the assent or vote of the stockholders in any manner not inconsistent with the laws of the State of Delaware or this Amended and Restated Certificate of Incorporation.

ARTICLE VI: BOARD OF DIRECTORS

1. Director Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board. In addition to the powers and authority expressly conferred upon them by statute or by this Amended and Restate Certificate of Incorporation or the Bylaws of the Corporation, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation.

2. Number of Directors. Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the total number of directors constituting the entire Board shall be as fixed from time to time by, or in the manner provided by, the Bylaws of the Corporation.

3. Term. Each director shall hold office until such director’s successor is elected and qualified, or until such director’s earlier death, resignation or removal. Any director may resign at any time upon notice to the Corporation given in writing or by any electronic transmission permitted in the Corporation’s Bylaws.

4. Board Vacancies. Subject to the rights of the holders of any series of Preferred Stock, any vacancy occurring in the Board for any cause, and any newly created directorship resulting from any increase in the authorized number of directors, shall, unless (a) the Board determines by resolution that any such vacancies or newly created directorships shall be filled by the stockholders or (b) as otherwise provided by law, be filled only by the affirmative vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director, and not by the stockholders. Any director elected in accordance with the preceding sentence shall hold office for a term expiring at the annual meeting of stockholders at which the term of office to which the director has been elected expires or until such director’s successor shall have been duly elected and qualified.

5. Vote by Ballot. Election of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

6. Officers. Except as otherwise expressly delegated by resolution of the Board, the Board shall have the exclusive power and authority to appoint and remove officers of the Corporation.

ARTICLE VII: DIRECTOR LIABILITY

1. Limitation of Liability. To the fullest extent permitted by law, no director of the Corporation shall be personally liable for monetary damages for breach of fiduciary duty as a director. Without limiting the effect of the preceding sentence, if the DGCL is hereafter amended to authorize the further elimination or limitation of the liability of a director, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.

2. Change in Rights. Neither any amendment nor repeal of this Article VII, nor the adoption of any provision of this Amended and Restated Certificate of Incorporation inconsistent with this Article VII, shall eliminate, reduce or otherwise adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such amendment, repeal or adoption of such an inconsistent provision.

ARTICLE VIII: MATTERS RELATING TO STOCKHOLDERS

1. No Action by Written Consent of Stockholders. Subject to the rights of any series of Preferred Stock, no action shall be taken by the stockholders of the Corporation except at a duly called annual or special meeting of stockholders and no action shall be taken by the stockholders by written consent.

2. Annual Meeting of Stockholders. The annual meeting of stockholders shall be held at such place, if any, on such date and at such time as fixed by the Board.

3. Special Meeting of Stockholders. Subject to the rights of any holders of the Preferred Stock, only a majority of the Board or the Chief Executive Officer of the Corporation shall be permitted to call a special meeting of stockholders, and the business permitted to be conducted at a special meeting of stockholders shall be limited to matters properly brought before the meeting by or at the direction of the Board.

4. Advance Notice of Stockholder Nominations and Business Transacted at Special Meetings. Advance notice of stockholder nominations for the election of directors of the Corporation and of business to be brought by stockholders before any meeting of stockholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation. Business transacted at special meetings of stockholders shall be confined to the purpose or purposes stated in the notice of meeting.

ARTICLE IX: SECTION 203 OF THE DGCL OPT-OUT

The Corporation shall not be governed or subject to Section 203 of the DGCL.

ARTICLE X: CREDITOR AND STOCKHOLDER COMPROMISES

Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the Corporation under the provisions of §291 of Title 8 of the DGCL or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under §279 of Title 8 of the DGCL order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three -fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation.

ARTICLE XI: AMENDMENT OF CERTIFICATE OF INCORPORATION

The Corporation reserves the right to amend, alter, or repeal any provision contained in this Amended and Restated Certificate, in the manner now or hereafter prescribed by the laws of the State of Delaware, and all rights conferred herein are granted subject to this reservation.

EX-10.1 3 ea021110101ex10-1_flyegroup.htm LOAN AND SECURITY AGREEMENT DATED AS OF AUGUST 5, 2024, BY AND AMONG THE REGISTRANT, FLY-E-BIKE INC., FLY EV, INC. AND PEAPACK-GLADSTONE BANK

Exhibit 10.1

LOAN AND SECURITY AGREEMENT

by and between

FLY-E GROUP, INC., FLY E-BIKE, INC. and FLY EV, INC.

And

PEAPACK-GLADSTONE BANK

Dated as of August 5, 2024

Table of Contents

SECTION I. DEFINITIONS AND INTERPRETATION		1

1.1.	Terms Defined	1
1.2.	Accounting Principles	10
1.3.	Construction	10

SECTION II. THE LOANS		10

2.1.	Revolving Credit - Description	10
2.2.	Advances and Payments	11
2.3.	Interest	12
2.4.	Additional Interest Provisions	13
2.5.	Fees and Charges	16
2.6.	Prepayments	16
2.7.	Use of Proceeds	16
2.8.	Capital Adequacy	16
2.9.	Requirements of Law	17

SECTION III. COLLATERAL		18

3.1.	Collateral	18
3.2.	Lien Documents	19
3.3.	Other Actions	19
3.4.	Searches, Certificates	19
3.5.	Landlord’s and Warehouseman’s Waivers; Access Agreements	20
3.6.	Filing Security Agreement	20
3.7.	Power of Attorney	20

SECTION IV. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES		20

4.1.	Resolutions, Opinions, and Other Documents	20
4.2.	Absence of Certain Events	21
4.3.	Warranties and Representations at Closing	21
4.4.	Compliance with this Agreement	21
4.5.	Closing	22
4.6.	Waiver of Rights	22
4.7.	Conditions for Future Advances	22

SECTION V. REPRESENTATIONS AND WARRANTIES		22

5.1.	Organization and Validity	22
5.2.	Places of Business	23
5.3.	Pending Litigation	23
5.4.	Title to Properties	23
5.5.	Governmental Consent	23
5.6.	Taxes	24
5.7.	Financial Statements	24
5.8.	Full Disclosure	25
5.9.	Subsidiaries	25
5.10.	Investments, Guarantees, Contracts, etc.	25
5.11.	Government Regulations, etc.	25
5.12.	Business Interruptions	26
5.13.	Names and Intellectual Property	26
5.14.	Other Associations	27
5.15.	Environmental Matters	27
5.16.	Regulation O	28
5.17.	Capital Stock	28
5.18.	Solvency	28
5.19.	Perfection and Priority	28
5.20.	Commercial Tort Claims	28
5.21.	Letter of Credit Rights	28
5.22.	Deposit Accounts	29
5.23.	Anti-Terrorism Laws	29

SECTION VI. BORROWER’S AFFIRMATIVE COVENANTS		29

6.1.	Payment of Taxes and Claims	29
6.2.	Maintenance of Properties and Corporate Existence	30
6.3.	Business Conducted	31
6.4.	Litigation	31
6.5.	Issue Taxes	31
6.6.	Bank Accounts	31
6.7.	Employee Benefit Plans	31
6.8.	Financial Covenants	32
6.9.	Financial and Business Information	32
6.10.	Officers’ Certificates	33
6.11.	Field Exams, Audits and Inspection; Appraisals	34
6.12.	Other Reports	34
6.13.	Information to Participant	34
6.14.	Material Adverse Developments	34
6.15.	Places of Business	34
6.16.	Commercial Tort Claims	34
6.17.	Letter of Credit Rights	35
6.18.	Electronic Transmission	35

SECTION VII. BORROWER’S NEGATIVE COVENANTS		35

7.1.	Merger, Consolidation, Dissolution or Liquidation	35
7.2.	Acquisitions	35
7.3.	Liens and Encumbrances	35
7.4.	Transactions With Affiliates or Subsidiaries	35
7.5.	Guarantees	36
7.6.	Distributions, Bonuses and Other Indebtedness	36
7.7.	Loans and Investments	36
7.8.	Use of Lenders’ Name	36
7.9.	Miscellaneous Covenants	36
7.10.	Jurisdiction of Organization	36

SECTION VIII. DEFAULT		37

8.1.	Events of Default	37
8.2.	Cure	39
8.3.	Rights and Remedies on Default	39
8.4.	Nature of Remedies	40
8.5.	Set-Off	40

SECTION IX. MISCELLANEOUS		41

9.1.	Governing Law	41
9.2.	Integrated Agreement	41
9.3.	Waiver	41
9.4.	Indemnity	41
9.5.	Time	42
9.6.	Expenses of Lender	42
9.7.	Brokerage	42
9.8.	Notices	43
9.9.	Headings	43
9.10.	Survival	43
9.11.	Successors and Assigns	44
9.12.	Duplicate Originals	44
9.13.	Modification	44
9.14.	Signatories	44
9.15.	Third Parties	44
9.16.	Discharge of Taxes, Borrower’s Obligations, Etc.	44
9.17.	Withholding and Other Tax Liabilities	45
9.18.	Consent to Jurisdiction	45
9.19.	Additional Documentation	45
9.20.	Waiver of Jury Trial	45
9.21.	Consequential Damages	45

iii

LOAN AND SECURITY AGREEMENT

This Loan and Security Agreement (“Agreement”) is dated this 5th day of August, 2024 (“Effective Date”), by and between FLY-E GROUP, INC., FLY E-BIKE, INC. and FLY EV, INC., each a Delware corporation (collectively the “Borrower”), and PEAPACK-GLADSTONE BANK, a banking corporation organized under the laws of the State of New Jersey (“Lender”).

BACKGROUND

A. Borrower desires to establish financing arrangements with Lender and Lender is willing to make loans and extensions of credit to Borrower under the terms and provisions hereinafter set forth.

B. The parties desire to define the terms and conditions of their relationship in writing.

NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:

SECTION I. DEFINITIONS AND INTERPRETATION

1.1. Terms Defined: As used in this Agreement, the following terms have the following respective meanings:

Account - All of the “accounts” (as that term is defined in the UCC) of Borrower, whether now existing or hereafter arising.

Account Debtor - Any Person obligated on any Account owing to Borrower.

Adjusted Net Worth – At any time, Tangible Net Worth plus Subordinated Debt.

Advance(s) - Any monies advanced or credit extended to Borrower by Lender under the Revolving Credit.

Advance Request – Section 2.2(b)(ii).

Affiliate - With respect to any Person, (a) any Person which, directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such Person, or (b) any Person who is a director or officer (i) of such Person, (ii) of any Subsidiary of such Person, or (iii) any person described in clause (a) above. For purposes of this definition, control of a Person shall mean the power, direct or indirect, (x) to vote 5% or more of the Capital Stock having ordinary voting power for the election of directors (or comparable equivalent) of such Person, or (y) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. Control may be by ownership, contract, or otherwise.

Anti-Terrorism Laws - Any statute, treaty, law (including common law), ordinance, regulation, rule, order, opinion, release, injunction, writ, decree or award of any Governmental Authority relating to terrorism or money laundering, including Executive Order No. 13224 and the USA Patriot Act.

Asset Sale - The sale, transfer, lease, license or other disposition by Borrower, or by any Subsidiary of Borrower, to any Person other than Borrower, of any Property which has a value greater than $200,000.00 and which is now owned, or hereafter acquired, of any nature whatsoever in any transaction or series of related transactions other than the sale of Inventory in the ordinary course of business. An Asset Sale includes, but is not limited to, a merger, consolidation, division, conversion, dissolution or liquidation.

Assignment of Claims Act – The Federal Assignment of Claims Act, 31 U.S.C. § 3727 et seq., as amended from time to time.

Authorized Officer - Any officer (or comparable equivalent) of Borrower authorized by specific resolution of Borrower to request Advances or execute Covenant Compliance Certificates as set forth in the authorization certificate delivered to Lender substantially in the form of Exhibit A attached hereto.

Bank Affiliate - With respect to Lender, any Person which, directly or indirectly, is in control of, is controlled by, or is under common control with Lender. For purposes of this definition, control of a Person shall mean the power, direct or indirect, (x) to vote 25% or more of any class of Capital Stock having ordinary voting power for the election of directors of such Person or other Persons performing similar functions for any such Person, or (y) to direct or cause the direction of the management and policies of such Person whether by ownership of Capital Stock, contract or otherwise.

Bankruptcy Code – Title 11 of the United States Code entitled “Bankruptcy”, as now or hereinafter in effect, or any successor statute.

Base Rate – The rate published from time to time in The Wall Street Journal as the “U.S. Prime Rate” or, in the event The Wall Street Journal ceases to be published, goes on strike, is otherwise not published or ceases publication of “Prime Rates,” the base, reference or other rate then designated by Lender, in its sole discretion, for general commercial loan reference. The Base Rate is not necessarily the lowest or best rate of interest offered by Lender to any borrower or class of borrowers. The Lender will not be obligated to notify the Borrower of any change in the Base Rate. Should the Base Rate ever go lower than the Floor, the Lender will deem the rate to be the Floor for the purposes of this Agreement.

Base Rate Loans – The Loans accruing interest based on a rate determined by reference to the Base Rate.

Blocked Person - Section 5.23.

Business Day – A day other than Saturday or Sunday when Lender is open for business in New Jersey.

Capitalized Lease Obligations - Any Indebtedness represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP, consistently applied.

Capital Expenditures – For any period, the aggregate of all expenditures (including that portion of Capitalized Lease Obligations attributable to that period) made in respect of the purchase, construction or other acquisition of fixed or capital assets, determined in accordance with GAAP.

Capital Stock - Any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all other ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing.

Change of Control – Means (a) any Person or group of persons within the meaning of § 13(d)(3) of the Securities Exchange Act of 1934 becomes the beneficial owner, directly or indirectly, of 50% or more of the outstanding Capital Stock of the Borrower, [(b) individuals who constitute the Continuing Directors cease for any reason to constitute at least a majority of the board of directors of the Borrower] [or] [(c) the [Equity Investors] shall cease to own [100%] of the voting and economic Capital Stock of [the Borrower]].

Closing – Section 4.5.

Closing Date – Section 4.5.

CME – CME Group Benchmark Administration Limited.

Collateral - All of the Property and interests in Property described in Section 3.1 of this Agreement and all other Property and interests in Property that now or hereafter secure payment of the Obligations and satisfaction by Borrower of all covenants and undertakings contained in this Agreement and the other Loan Documents and any Hedging Agreement.

Conforming Changes - With respect to the use, administration of or any conventions associated with SOFR, any conforming changes to the definition of “Base Rate”, “SOFR”, timing and frequency of determining rates and making payments of interest and other technical, administrative or operational matters (including, for the avoidance of doubt, the definition of “Business Day” and “U.S. Government Securities Business Day”, timing of borrowing requests or prepayment, conversion or continuation notices and length of lookback periods) as may be appropriate, in the reasonable discretion of the Lender, subject to the Borrower’s consent (not to be unreasonably withheld), to reflect the adoption and implementation of such applicable rate(s).

Covenant Compliance Certificate - Section 6.10.

Daily Simple SOFR - With respect to any applicable determination date means the secured overnight financing rate (“SOFR”) published on such date by the Federal Reserve Bank of New York, as the administrator of the benchmark (or a successor administrator) on the Federal Reserve Bank of New York’s website (or any successor source).

Default - Any event, act, condition or occurrence which with notice, or lapse of time or both, would constitute an Event of Default hereunder.

Disqualified Stock - Any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event (i) matures or is mandatorily redeemable for any reason, (ii) is convertible or exchangeable for Indebtedness or Capital Stock that meets the requirements of clauses (i) and (ii), or (iii) is redeemable at the option of the holder thereof, in whole or in part, in each case on or prior to the Revolving Credit Maturity Date.

Distribution -

a. Cash dividends or other cash distributions (including Permitted Tax Distributions) on any now or hereafter outstanding Capital Stock of Borrower;

b. The redemption, repurchase, defeasance or acquisition of such Capital Stock or of warrants, rights or other options to purchase such Capital Stock; and

c. Any loans or advances (other than salaries), to any shareholder(s), partner(s) or member(s) of Borrower.

Dollar, Dollars and U.S. Dollars and the Symbol $ - Lawful money of the United States of America.

Effective Date – The date set forth above.

Environmental Laws - Any and all Federal, foreign, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees and any and all common law requirements, rules and bases of liability regulating, relating to or imposing liability or standards of conduct concerning pollution, protection of the environment, or the impact of pollutants, contaminants or toxic or hazardous substances on human health or the environment, as now or may at any time hereafter be in effect from time to time.

ERISA - The Employee Retirement Income Security Act of 1974, as the same may be in effect, from time to time.

Event of Default - Section 8.1.

Executive Order No. 13224 - The Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, as the same has been, or shall hereafter be, renewed, extended, amended or replaced and as may be in effect from time to time.

Expenses - Section 9.6.

Floor – five and one-half percent (5.50%).

GAAP - Generally accepted accounting principles as in effect on the [Closing Date] [applicable date] applied in a manner consistent with the most recent audited financial statements of Borrower furnished to Lender. If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Documents, the Borrower and Lender shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such changes in GAAP; provided that, until so amended, (i) such ratio or requirement shall continue to computed in accordance with GAAP prior to such changes therein and (ii) Borrower shall provide to Lender financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before any after giving effect to such change in GAAP.

Governmental Authority - Any federal, state or local government or political subdivision, or any agency, authority, bureau, central bank, commission, department or instrumentality of either, or any court, tribunal, grand jury, or arbitration.

Guarantor – Shall be any Person who guarantees the obligations of Borrower hereunder.

Hazardous Substances – Any substances defined or designated as hazardous or toxic waste, hazardous or toxic material, hazardous or toxic substance or similar term, under any Environmental Law.

Indebtedness - Of any Person at any date, without duplication, (i) all indebtedness of such Person for borrowed money (including with respect to Borrower, the Obligations) or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), (ii) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (iii) all Capitalized Lease Obligations of such Person, (iv) the face amount of all letters of credit issued for the account of such Person and all drafts drawn thereunder, (v) all obligations of other Persons which such Person has guaranteed, (vi) Disqualified Stock, (vii) all net obligations of such Person under Hedging Agreements, and (viii) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof.

Inventory - All of the “inventory” (as that term is defined in the UCC) of Borrower, whether now existing or hereafter acquired or created.

IRS - Internal Revenue Service.

Lien - Any interest of any kind or nature in property securing an obligation owed to, or a claim of any kind or nature in property by, a Person other than the owner of the Property, whether such interest is based on the common law, statute, regulation or contract, and including, but not limited to, a security interest or lien arising from a mortgage, encumbrance, pledge, conditional sale or trust receipt, a lease, consignment or bailment for security purposes, a trust, or an assignment. For the purposes of this Agreement, Borrower shall be deemed to be the owner of any Property which it has acquired or holds subject to a conditional sale agreement or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person for security purposes.

Loans –Either the unpaid balance of Advances under the Revolving Credit, or the Term Loan, as the context may require.

Loan Documents – Collectively, this Agreement, the Revolving Credit Note or Term Loan Note, as applicable, and all agreements, instruments and documents executed and/or delivered in connection therewith, all as may be supplemented, restated, superseded, amended or replaced from time to time.

Material Adverse Effect - A material adverse effect with respect to (a) the business, assets, properties, financial condition, stockholders’ equity, contingent liabilities, prospects, material agreements or results of operations of Borrower, or (b) Borrower’s ability to pay the Obligations in accordance with the terms hereof, or (c) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights and remedies of Lender hereunder or thereunder.

Maximum Revolving Credit Amount - The sum of Five Million and 00/100 Dollars ($5,000,000.00).

Note – The Revolving Credit Note.

Non-SOFR Successor Rate - Section 2.4(h).

Obligations - All existing and future debts, liabilities and obligations of every kind or nature at any time owing by Borrower or any Guarantor to Lender or any other subsidiary of Lender or Bank Affiliate, whether under this Agreement, or any other existing or future instrument, document or agreement, between Borrower or Lender or any other subsidiary of Lender or Bank Affiliate, whether joint or several, related or unrelated, primary or secondary, matured or contingent, due or to become due (including debts, liabilities and obligations obtained by assignment), and whether principal, interest, fees, indemnification obligations hereunder or Expenses (specifically including interest accruing after the commencement of any bankruptcy, insolvency or similar proceeding with respect to Borrower, whether or not a claim for such post-commencement interest is allowed), including, without limitation, debts, liabilities and obligations in respect of the Revolving Credit and any extensions, modifications, substitutions, increases and renewals thereof; any Hedging Obligations; the payment of all amounts advanced by Lender or any other subsidiary of Lender or Bank Affiliate to preserve, protect and enforce rights hereunder and in the Collateral; and all Expenses incurred by Lender or any other subsidiary of Lender or Bank Affiliate. Without limiting the generality of the foregoing, Obligations shall include any other debts, liabilities or obligations owing to Lender or any other subsidiary of Lender or Bank Affiliate in connection with any lockbox, cash management, or other services (including electronic funds transfers or automated clearing house transactions) provided by Lender or any other subsidiary of Lender or Bank Affiliate to Borrower, as well as any other loan, advances or extension of credit, under any existing or future loan agreement, promissory note, Hedging Agreement or other instrument, document or agreement between Borrower and Lender or any other subsidiary of Lender or Bank Affiliate.

Other Interest Hedging Instrument - Any documentation evidencing any interest rate swap, interest “cap” or “collar” or any other interest rate hedging device between Borrower and a Person other than Lender (or any Affiliate of Lender).

Overadvance - Section 2.1(a)(i).

PBGC - The Pension Benefit Guaranty Corporation.

Permitted Indebtedness – (a) Indebtedness to Lender in connection with the Revolving Credit or otherwise pursuant to the Loan Documents; (b) Indebtedness under an Other Interest Rate Hedging Instrument provided such Other Interest Rate Hedging Instrument is entered into in the ordinary course of business and not for speculative purposes and is in form and substance acceptable to Lender; (c) trade payables incurred in the ordinary course of Borrower’s business; (d) purchase money Indebtedness (including Capitalized Lease Obligations) hereafter incurred by Borrower to finance the purchase of fixed assets; provided that, (i) such Indebtedness incurred in any fiscal year shall not exceed $500,000.00, (ii) such Indebtedness shall not exceed the purchase price of the assets funded and (iii) no such Indebtedness may be refinanced for a principal amount in excess of the principal amount outstanding at the time of such refinancing, (e) Indebtedness existing on the Closing Date that is identified and described on Schedule 1.1(a) attached hereto and made part hereof.

Permitted Investments - (a) investments and advances existing on the Closing Date that are disclosed on Schedule 5.10(a), and (b) (i) obligations issued or guaranteed by the United States of America or any agency thereof, (ii) commercial paper with maturities of not more than 180 days and a published rating of not less than A-1 or P-1 (or the equivalent rating) by a nationally recognized investment rating agency, (iii) certificates of time deposit and bankers’ acceptances having maturities of not more than 180 days and repurchase agreements backed by United States government securities of a commercial bank if (A) such bank has a combined capital and surplus of at least $500,000,000, or (B) its debt obligations, or those of a holding company of which it is a Subsidiary, are rated not less than A (or the equivalent rating) by a nationally recognized investment rating agency, and (iv) U.S. money market funds that invest solely in obligations issued or guaranteed by the United States of America or an agency thereof.

Permitted Liens - (a) Liens securing taxes, assessments or governmental charges or levies not delinquent; (b) Liens incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance, social security and other like laws; (c) Liens on fixed assets security purchase money Indebtedness permitted under Section 7.6; provided that, (i) such Lien attached to such assets concurrently, or within 20 days of the acquisition thereof, and only to the assets so acquired, and (ii) a description of the asset acquired is furnished to Lender; (d) Liens existing on the Closing Date and shown on Schedule 1.1(b) attached hereto and made part hereof and (e) Liens in favor of Lender securing the Obligations.

Person - An individual, partnership, corporation, trust, limited liability company, limited liability partnership, unincorporated association or organization, joint venture or any other entity.

Property - Any interest of Borrower in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.

Relevant Governmental Body - The Federal Reserve Board and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board and/or the Federal Reserve Bank of New York.

Requirement of Law – Collectively, all international, foreign, federal, state and local laws, statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.

Reserves – Such usual and customary amounts as may be required by Lender, at any time and from time to time without prior notice to Borrower, which Lender deems to be adequate to reserve against the Borrower’s Obligations to Lender or its affiliates or any guarantess or other contingent debts of the Borrower.

Revolving Credit - Section 2.1(a).

Revolving Credit Closing Fee - Section 2.5(a).

Revolving Credit Maturity Date – August 31, 2025, or such later date as Lender may, in its sole and absolute discretion, designate in writing to Borrower.

Revolving Credit Note - Section 2.1(b).

SOFR - The Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York (or a successor administrator).

SOFR Successor Rate - Section 2.4(h).

Spread – Three and one-half percent (3.50%).

Subordinated Debt - Indebtedness of Borrower subject to payment terms and subordination provisions set forth in a written subordination agreement or intercreditor agreement reasonably acceptable to Lender in its sole discretion.

Subsidiary - With respect to any Person at any time, (i) any corporation more than fifty percent (50%) of whose voting stock is legally and beneficially owned by such Person or owned by a corporation more than fifty percent (50%) of whose voting stock is legally and beneficially owned by such Person; (ii) any trust of which a majority of the beneficial interest is at such time owned directly or indirectly, beneficially or of record, by such Person or one or more Subsidiaries of such Person; and (iii) any partnership, joint venture, limited liability company or other entity of which ownership interests having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions are at such time owned directly or indirectly, beneficially or of record, by, or which is otherwise controlled directly, indirectly or through one or more intermediaries by, such Person or one or more Subsidiaries of such Person.

Tangible Net Worth - At any time, the amount by which all of Borrower’s consolidated assets (less (i) trademarks, copyrights, goodwill, covenants not to compete, and all other assets which would be classified as intangible assets under GAAP; and (ii) assets owing from Affiliates, officers, directors, shareholders and employees), exceed all of Borrower’s consolidated liabilities, all as would be shown on Borrower’s consolidated balance sheet prepared in accordance with GAAP.

Type - with respect to a Loan, its character as a Base Rate Loan or a Term SOFR Loan.

UCC - The Uniform Commercial Code as adopted in the State of New Jersey, as in effect from time to time.

Unused Line Fee - A fee payable quarterly in arrears on the first Business Day after the end of each calendar quarter in an amount equal to the product of (x) .25 percent (.25%) multiplied by (y) the excess, if any, of the Revolving Credit over the sum of the average principal amount of all Revolving Credit Notes outstanding from time to time during the preceding quarter.

Unfunded Capital Expenditures – Capital Expenditures that are not financed through interest bearing Indebtedness.

U.S. Government Securities Business Day - Any Business Day, except any Business Day on which any of the Securities Industry and Financial Markets Association, the New York Stock Exchange or the Federal Reserve Bank of New York is not open for business because such day is a legal holiday under the federal laws of the United States or the laws of the State of New York, as applicable.

1.2. Accounting Principles: Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, this shall be done in accordance with GAAP as in effect on the Closing Date, to the extent applicable, except as otherwise expressly provided in this Agreement. If there are any changes in GAAP after the Closing Date that would affect the computation of the financial covenants in Section 6.8, such changes shall only be followed, with respect to such financial covenants, from and after the date this Agreement shall have been amended to take into account any such changes.[Notwithstanding anything in this Agreement to the contrary, all obligations of any person that are or would have been treated as operating leases for purposes of GAAP prior to the effectiveness of Financial Accounting Standards Board (FASB) ASC 842 and related interpretations shall continue to be accounted for as operating leases for purposes of all financial definitions and calculations under the Agreement (whether or not such operating lease obligations were in effect on such date), notwithstanding the fact that such obligations are required in accordance with FASB ASC 842 (on a prospective or retroactive basis or otherwise) to be treated as capital lease obligations (however defined) in the financial statements.]

1.3. Construction: No doctrine of construction of ambiguities in agreements or instruments against the interests of the party controlling the drafting shall apply to any Loan Documents.

1.4. Lender does not warrant, nor accept responsibility, nor shall Lender have any liability with respect to the administration, submission or any other matter related to any reference rate referred to herein or with respect to any rate (including, for the avoidance of doubt, the selection of such rate and any related spread or other adjustment) that is an alternative or replacement for or successor to any such rate (including, without limitation, any Successor Rate) (or any component of any of the foregoing) or the effect of any of the foregoing, or of any Conforming Changes. Lender and its affiliates or other related entities may engage in transactions or other activities that affect any reference rate referred to herein, or any alternative, successor or replacement rate (including, without limitation, any Successor Rate) (or any component of any of the foregoing) or any related spread or other adjustments thereto, in each case, in a manner adverse to Borrower. Lender may select information sources or services in its reasonable discretion to ascertain any reference rate referred to herein or any alternative, successor or replacement rate (including, without limitation, any Successor Rate) (or any component of any of the foregoing), in each case pursuant to the terms of this Agreement, and shall have no liability to Borrower or any other person or entity for damages of any kind, including direct or indirect, special, punitive, incidental or consequential damages, costs, losses or expenses (whether in tort, contract or otherwise and whether at law or in equity), for any error or other action or omission related to or affecting the selection, determination, or calculation of any rate (or component thereof) provided by any such information source or service.

SECTION II. THE LOANS

2.1. Revolving Credit - Description:

a. i. Subject to the terms and conditions of this Agreement, Lender hereby establishes for the benefit of Borrower a revolving credit facility (collectively, the “Revolving Credit”) which shall include Advances extended by Lender to or for the benefit of Borrower from time to time hereunder. [The aggregate principal amount of unpaid Advances, shall not at any time exceed the lesser of the Revolving Credit or the Borrowing Base.] Subject to such limitation, the outstanding balance of Advances under the Revolving Credit may fluctuate from time to time, to be reduced by repayments made by Borrower, to be increased by future Advances which may be made by Lender, to or for the benefit of Borrower, and, subject to the provisions of Section 8 below, shall be due and payable on the Revolving Credit Maturity Date.

ii. Lender may, at all times, be entitled to reduce or increase the advance rates and standards of eligibility under this Agreement upon reasonable advance notice to Borrower.

b. At Closing, Borrower shall execute and deliver a promissory note to Lender for the Maximum Revolving Credit Amount (“Revolving Credit Note”). The Revolving Credit Note shall evidence Borrower’s unconditional obligation to repay Lender for all Advances made under the Revolving Credit, with interest as herein provided. Each Advance under the Revolving Credit shall be deemed evidenced by the Revolving Credit Note, which is deemed incorporated herein by reference and made part hereof. The Revolving Credit Note shall be in form and substance satisfactory to Lender.

c. The term of the Revolving Credit shall expire on the Revolving Credit Maturity Date. On such date, unless having been sooner accelerated by Lender pursuant to the terms hereof, and without impairing any rights under Section 3.1, all sums owing under the Revolving Credit shall be due and payable in full, and as of and after such date Borrower shall not request and Lender shall not make any further Advances under the Revolving Credit.

2.2. Advances and Payments:

a. Borrower will make payments of interest-only due on the first day of each quarter commencing with the payment due on November 1, 2024 and continuing on February 1, 2025, May 1, 2025 and August 1, 2025. If not sooner paid, the entire amount of outstanding principal and interest shall be due and payable in full on the Revolving Credit Maturity Date. Except to the extent otherwise set forth in this Agreement (or in the case of a Hedging Agreement or other applicable agreements), all payments of principal and of interest on the Revolving Credit, and all Expenses, fees, indemnification obligations and all other charges and any other Obligations of Borrower, shall be made to Lender at its banking office at 500 Hills Drive, Suite 300, P.O. Box 700, Bedminster, New Jersey 07921, or such other office as Lender may designate in writing, in United States dollars, in immediately available funds. Borrower hereby authorizes Lender to charge checking account number [*****] maintained at Lender and further agrees that Lender shall have the unconditional right and discretion (and Borrower hereby authorizes Lender) to charge any of Borrower’s operating and/or deposit account(s), in any event for all of Borrower’s Obligations as they become due from time to time under this Agreement including, without limitation, interest, principal, fees, indemnification obligations and reimbursement of Expenses. Alternatively, Lender may in its discretion (and Borrower hereby authorizes Lender to) make a Advance under the Revolving Credit in a sum sufficient to pay all interest accrued and payable on the Obligations and to pay all costs, fees and Expenses owing hereunder. There shall not be more than five (5) Revolving Credit Notes outstanding at one time. Borrower acknowledges that Borrower’s failure to maintain sufficient funds in any checking, operating or deposit account for payment of any of the Obligations, or Lender’s failure to charge any such account shall not relieve Borrower of any payment obligation under this Agreement or any other Loan Document. Any payments received prior to 2:00 p.m. Eastern time on any Business Day shall be deemed received on such Business Day. Any payments (including any payment in full of the Obligations), received after 2:00 p.m. Eastern time on any Business Day shall be deemed received on the immediately following Business Day.

b. Advances which may be made by Lender from time to time under the Revolving Credit shall be made available by crediting such proceeds to Borrower’s operating account with Lender.

i. All Advances requested by Borrower under the Revolving Credit (other than the initial Advance made on or about the date hereof which must be at least equal to $_____________) must be in the minimum amount of One Hundred Thousand and 00/100 Dollars ($100,000.00) and integral multiples of Twenty-Five Thousand and 00/100 Dollars ($25,000.00) in excess thereof (other than the initial Advance made on or about the date hereof

ii. When Revolving Credit outstandings reach $3,000,000.00, the Borrower is required to submit inventory invoices to support the advance request and each advance request thereafter. Each advance request must be in the minimum amount of $250,000.00, and is subject to underwriter review. This requirement will remain in effect until Lender provides guidance after the receipt and review of the Borrower’s March 31, 2025 fiscal year end financial statements.

iii. All Advances requested by Borrower under the Revolving Credit are to be in writing pursuant to a written request (“Advance Request”) executed by an Authorized Officer in the form of Exhibit B attached hereto. Requests for Loans must be requested by 2:00 p.m. Eastern time, on the date such Advance is to be made. If the aggregate principal amount of unpaid Advances, including the principal amount requested in the Advance Request, would exceed the Borrowing Base based on the latest Borrowing Base Certificate required to have been received by Lender pursuant to Section 6.9(a)(v), then Borrower shall submit a Borrowing Base Certificate with such Advance Request evidencing that the principal amount of unpaid Advances, including the principal amount requested in the Advance Request, will not exceed the Borrowing Base. Each Advance Request shall specify (i) whether Borrower is requesting a Revolving Loan or a conversion of Loans from one Type to the other, (ii) the requested date of the borrowing (which shall be a Business Day), (iii) the principal amount of the Loans to be borrowed, and (iv) the Type of Loans to be borrowed. If Borrower fails to specify a Type of Loan in an Advance Request, then the applicable Loans shall be made as, or converted to, Base Rate Loans. During the existence of a Default, no Loans may be requested as Term SOFR Loans without the consent of Lender, and Lender may demand that any or all of the then outstanding Term SOFR Loans be converted immediately to Base Rate Loans, and Borrower agrees to pay all amounts due under Section Section 2.4(g) in accordance with the terms thereof due to any such conversion.

iv. Upon receiving a request for an Advance in accordance with subparagraph (ii) above, on or before 2:00 p.m. Eastern time on the applicable Business Day and subject to the conditions set forth in this Agreement, Lender shall make the requested Advance available to Borrower on the requested Business Day. In the event such request for an Advance is received after 2:00 p.m. Eastern time on the applicable Business Day, the Lender shall make the requested Advance available to Borrower as soon as practicable on the following Business Day (subject to the conditions set forth in this Agreement).

2.3. Interest:

a. The unpaid principal balance of Advances under the Revolving Credit shall bear interest, subject to the terms hereof at a per annum rate equal to the Term SOFR plus the Spread, and such rate to change automatically on the same day there is a change in the Base Rate. The initial rate for Term SOFR shall be Term SOFR as of the first Business Day of the calendar month which includes the date first above written, and thereafter Term SOFR shall be reset on the first Business Day of every calendar quarter (herein, a “Change Date”) and remain in effect until the next Change Date.

b. On every calendar quarter, beginning November 1, 2024, the interest rate will be reset to the prevailing SOFR (in effect 30-days prior to the reset date) plus 3.500%, rounded to the highest 1/8th; with a floor of five and one-half percent (5.50%).

c. Interest shall be due and payable monthly on the first day of each month, and on the Revolving Credit Maturity Date.

2.4. Additional Interest Provisions:

a. Interest on Loans shall be calculated on the basis of a year of three hundred sixty (360) days but charged for the actual number of days elapsed (which results in more fees or interest, as applicable, being paid than if computed on the basis of a 365 day year). Each determination by Lender of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

b. After the occurrence and during the continuance of an Event of Default hereunder (and after giving of any required notice and the expiration of any applicable cure period), the per annum effective rate of interest on all outstanding principal under the Loans, shall be increased by five hundred (500) basis points. All such increases may be applied retroactively to the date of the occurrence of such Event of Default. Borrower agrees that the default rate payable to Lender is a reasonable estimate of Lender’s damages and is not a penalty.

c. All contractual rates of interest chargeable on outstanding principal under the Loans shall continue to accrue and be paid even after Default, an Event of Default, maturity, acceleration, judgment, bankruptcy, insolvency proceedings of any kind or the happening of any event or occurrence similar or dissimilar.

d. In no contingency or event whatsoever shall the aggregate of all amounts deemed interest hereunder and charged or collected pursuant to the terms of this Agreement exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that such court determines Lender has charged or received interest hereunder in excess of the highest applicable rate, Lender shall apply, in its sole discretion, and set off such excess interest received by Lender against other Obligations due or to become due and such rate shall automatically be reduced to the maximum rate permitted by such law.

e. With respect to Term SOFR the Lender will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, the Lender shall provide the Borrower with written notice of any such Conforming Changes reasonably promptly after the Lender determines that such changes are necessary. Any amendments implementing such Conforming Changes shall become effective on the date specified in the notice, and no further action or consent of the Borrower shall be required to effect such amendments; provided, however, that the Lender shall consider any reasonable requests by the Borrower for modifications to such amendments and will use commercially reasonable efforts to accommodate such requests.

f. If Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for Lender or its applicable lending office to make, maintain or fund or charge interest with respect to any borrowing, or to determine or charge interest rates based upon Term SOFR, then, upon notice thereof by Lender to Borrower, any obligation of Lender to make Term SOFR Loans or to convert Base Rate Loans to Term SOFR Loans shall be suspended until Lender notifies Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, Borrower shall, upon demand from Lender, convert all Term SOFR Loans to Base Rate Loans on the next Business Day, if Lender may lawfully continue to maintain such Term SOFR Loans to such day, or immediately, if Lender may not lawfully continue to maintain such Term SOFR Loans.

g. [Reserved.]

h. (a) If in connection with any request for a Term SOFR Loan or a conversion to Term SOFR Lender reasonably determines (which determination shall be conclusive absent manifest error) that (A) no Successor Rate has been determined in accordance with Section 2.4(h)(b) below, and the circumstances under clause (i) of (h)(b) below or the Scheduled Unavailability Date has occurred (as applicable), or (B) adequate and reasonable means do not otherwise exist for determining Term SOFR with respect to a proposed Term SOFR Loan or in connection with an existing or proposed Base Rate Loan, or (ii) Lender determines that for any reason (which determination shall be conclusive absent manifest error) that Term SOFR with respect to a proposed Term SOFR Loan does not adequately and fairly reflect the cost to the Lender of funding such Term SOFR Loan, Lender will promptly so notify the Borrower. Thereafter, the obligation of the Lender to make or maintain Term SOFR Loans or to convert Base Rate Loans to Term SOFR Loans shall be suspended (to the extent of the affected Term SOFR Loans) until the Lender revokes such notice. Upon receipt of such notice, (i) Borrower may revoke any pending request for a Borrowing of or conversion, as applicable, Term SOFR Loans (to the extent of the affected Term SOFR Loans) or, failing that, will be deemed to have converted such request into a request for a borrowing of Base Rate Loans in the amount specified therein.

(b) Notwithstanding anything to the contrary in this Agreement or any other Loan Documents, if Lender determines (which determination shall be conclusive absent manifest error), or Borrower notifies the Lender that Borrower has determined, that:

(i) adequate and reasonable means do not exist for ascertaining Term SOFR including, without limitation, because the Term SOFR Screen Rate is not available or published on a current basis and such circumstances are unlikely to be temporary; or

(ii) CME or any successor administrator of the Term SOFR Screen Rate or a Governmental Authority having jurisdiction over the Lender or such administrator with respect to its publication of Term SOFR, in each case acting in such capacity, has made a public statement identifying a specific date after which one month and three month interest periods of Term SOFR or the Term SOFR Screen Rate shall or will no longer be made available, or permitted to be used for determining the interest rate of U.S. dollar denominated syndicated loans, or shall or will otherwise cease, provided, that, at the time of such statement, there is no successor administrator that is satisfactory to Lender, that will continue to provide such interest periods of Term SOFR after such specific date (the latest date on which Term SOFR or the Term SOFR Screen Rate are no longer available permanently or indefinitely, the “Scheduled Unavailability Date”);

then, on a date and time determined by Lender (any such date, the “Term SOFR Replacement Date”), which date shall be, in the case of Term SOFR Loans, on the relevant interest payment date, as applicable, for interest calculated and, solely with respect to clause (y) above, no later than the Scheduled Unavailability Date, Term SOFR will be replaced hereunder and under any Loan Document with Daily Simple SOFR for any payment period for interest calculated that can be determined by the Lender, in each case, without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document (the “Successor Rate”).

If the Successor Rate is Daily Simple SOFR, all interest payments will be payable on a monthly basis.

Notwithstanding anything to the contrary herein, (A) if Lender determines that Daily Simple SOFR is not available on or prior to the Term SOFR Replacement Date, or (B) if the events or circumstances of the type described in clause (b)(i) or (ii) above have occurred with respect to the Successor Rate then in effect, then in each case, Lender and Borrower may amend this Agreement and the other Loan Documents solely for the purpose of replacing Term SOFR, or any then current Successor Rate in accordance with this section (h) at the relevant interest payment date or payment period (or, in the case of a daily floating interest rate, upon the effectiveness of such amendment) for interest calculated, as applicable, with an alternative benchmark rate giving due consideration to any evolving or then existing convention for similar U.S. dollar denominated bilateral credit facilities executed in the United States for such alternative benchmarks and, in each case, including any mathematical or other adjustments to such benchmark giving due consideration to any evolving or then existing convention for similar U.S. dollar denominated bilateral credit facilities executed in the United States for such benchmark, which adjustment or method for calculating such adjustment shall be published on an information service as selected by Lender from time to time in its reasonable discretion and may be periodically updated. For the avoidance of doubt, any such proposed rate and adjustments, shall constitute a “Successor Rate”.

Lender will promptly (in one or more notices) notify the Borrower of the implementation of any Successor Rate.

Any Successor Rate shall be applied in a manner consistent with market practice; provided that to the extent such market practice is not administratively feasible for Lender, such Successor Rate shall be applied in a manner as otherwise reasonably determined by Lender.

Notwithstanding anything else herein, if at any time any Successor Rate as so determined would otherwise be less than the Floor, the Successor Rate will be deemed to be the Floor for the purposes of this Agreement and the other Loan Documents.

In connection with the implementation of a Successor Rate, Lender will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement; provided that, with respect to any such amendment effected, Lender shall provide each such amendment implementing such Conforming Changes to Borrower reasonably promptly after such amendment becomes effective.

2.5. Fees and Charges:

a. At Closing, Lender shall have fully earned and Borrower shall unconditionally pay to Lender, a non-refundable fee with respect to the Revolving Credit (“Revolving Credit Closing Fee”) of Twenty Thousand and 00/100 Dollars ($20,000.00), less amounts previously paid thereon.

b. From and after the Effective Date and until all of the Obligations are paid and satisfied in full and the Revolving Credit has been terminated, the Borrower shall pay to Lender an Unused Line Fee.

c. Borrower shall unconditionally pay to Lender a late charge equal to five percent (5%) of any and all payments of principal or interest on the Loans that are not paid within five (5) days of the due date. Such late charge shall be due and payable regardless of whether Lender has accelerated the Obligations. Borrower agrees that any late fee payable to Lender is a reasonable estimate of Lender’s damages and is not a penalty.

2.6. Prepayments:

a. Borrower may prepay the Revolving Credit or Term Loan in whole or in part at any time or from time to time, without penalty or premium, with at least two (2) Business Days’ prior notice. Any prepayment in full shall be accompanied by all accrued and unpaid interest. Each prepayment of the Term Loans pursuant to this Section shall be applied to the installments of the Term Loans.

2.7. Use of Proceeds: The extensions of credit under and proceeds of the Revolving Credit or Term Loan shall be used for working capital and general corporate purposes, including, without limitation, using the proceeds of the Revolving Credit or Term Loan to pay off a previous loan to Borrower, for capital expenditures, acquisitions, or other business opportunities as they arise.

2.8. Capital Adequacy: If any present or future law, governmental rule, regulation, policy, guideline, directive or similar requirement (whether or not having the force of law) imposes, modifies, or deems applicable any capital adequacy, capital maintenance or similar requirement which affects the manner in which Lender allocates capital resources to its commitments (including any commitments hereunder), and as a result thereof, in the opinion of Lender, the rate of return on Lender’s capital with regard to the Loans is reduced to a level below that which Lender could have achieved but for such circumstances, then in such case and upon notice from Lender to Borrower, from time to time, Borrower shall pay Lender such additional amount or amounts as shall compensate Lender for such reduction in Lender’s rate of return. Such notice shall contain the statement of Lender with regard to any such amount or amounts which shall, in the absence of manifest error, be binding upon Borrower. In determining such amount, Lender may use any reasonable method of averaging and attribution that it deems applicable. Any rules, regulations, policies, guidelines, directives or similar requirements adopted, promulgated or implemented in connection with (a) the Dodd-Frank Wall Street Reform and Consumer Protection Act and (b) the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or any United States Governmental Authority, in each case pursuant to Basel III, shall in all events are deemed to have been imposed, introduced and adopted after the date of this Agreement.

2.9. Requirements of Law:

a. If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof:

i. shall subject Lender to any tax of any kind whatsoever with respect to any Base Rate Loan made by it, or change the basis of taxation of payments to Lender in respect thereof (except for changes in the rate of tax on the overall net income of Lender);

ii. shall impose, modify, or hold applicable, any reserve, special deposit, compulsory loan, or similar requirement against assets held by, deposits or other liabilities in, or for the account of, advances, loans, or other extension of credit (including participations therein) by, or any other acquisition of funds by, any office of Lender which is not otherwise included in the determination of the Base Rate hereunder; or

iii. shall impose on such Lender any other condition;

and the result of any of the foregoing is to materially increase the cost to Lender of making or maintaining Base Rate Loans, or to reduce any amount receivable hereunder, or under any Note, then, in any such case, Borrower shall promptly pay Lender, upon its demand, any additional amounts necessary to compensate Lender for such additional costs or reduced amount receivable which Lender reasonably deems to be material as determined by Lender, with respect to its Base Rate Loans. A certificate as to any additional amounts payable pursuant to this Section 2.9 submitted by Lender to Borrower shall be presumptive evidence of such amounts owing. Lender agrees to use reasonable efforts to avoid, or to minimize, any amounts which might otherwise be payable pursuant to this Section 2.9; provided however, that such efforts shall not cause the imposition on Lender of any additional costs or legal regulatory burdens deemed by Lender in good faith to be material.

b. The agreements in this Section 2.9 shall survive the termination of this Agreement and payment of the Obligations.

SECTION III. COLLATERAL

3.1. Collateral: As security for the payment of the Obligations, and satisfaction by Borrower of all covenants and undertakings contained in this Agreement and the other Loan Documents and any Hedging Agreement:

a. Personal Property: Borrower hereby assigns and grants to Lender, for itself and as agent for any of its Affiliates counterparty to or otherwise holding any Obligations, a continuing Lien on and security interest in, upon and to all assets of Borrower, including but not limited to the following Property, all whether now owned or hereafter acquired, created or arising and wherever located (all capitalized terms used in this Section 3.1(a) without further definition in this Agreement shall have the respective meaning set forth in the UCC):

i. Accounts - All Accounts;

ii. Chattel Paper - All Chattel Paper;

iii. Documents - All Documents;

iv. Instruments - All Instruments;

v. Inventory - All Inventory;

vi. General Intangibles - All General Intangibles;

vii. Equipment - All Equipment,

viii. Fixtures - All Fixtures;

ix. Deposit Accounts - All Deposit Accounts (including any Permitted Investments that constitute Deposit Accounts);

x. Goods - All Goods;

xi. Letter of Credit Rights – All Letter of Credit Rights;

xii. Supporting Obligations – All Supporting Obligations;

xiii. Investment Property - All Investment Property (including any Permitted Investments that constitute Investment Property);

xiv. Commercial Tort Claims – All Commercial Tort Claims identified and described on Schedule 5.20 (as amended or supplemented from time to time);

xv. Property in Lender’s Possession - All Property of Borrower, now or hereafter in Lender’s possession;

xvi. Additions – All additions to, accessions to, substitutions for, replacements of, and supporting obligations of the foregoing property described in clauses (i) through (xv); and xvii.

Proceeds - The Proceeds (including, without limitation, insurance proceeds), whether cash or non-cash, of all of the foregoing property described in clauses (i) through (xv).

3.2. Lien Documents: At Closing and thereafter as Lender deems necessary, Borrower shall execute and/or deliver to Lender, or have executed and delivered (all in form and substance satisfactory to Lender and its counsel):

a. Financing statements pursuant to the UCC, which Lender may file in the jurisdiction where Borrower is organized and in any other jurisdiction that Lender deems appropriate;

b. Any other agreements, documents, instruments and writings, including, without limitation, intellectual property security agreements, required by Lender to evidence, perfect or protect the Liens and security interests in the Collateral or as Lender may reasonably request from time to time.

3.3. Other Actions:

a. In addition to the foregoing, Borrower shall do anything further that may be reasonably required by Lender to secure Lender and effectuate the intentions and objects of this Agreement, including, without limitation, the execution and delivery of security agreements, contracts and any other documents required hereunder and the delivery of motor titles with Lender’s lien noted thereon. At Lender’s reasonable request, Borrower shall also promptly deliver (with execution by Borrower of all necessary documents or forms to reflect, implement or enforce the Liens described herein), or cause to be delivered to Lender all items for which Lender must receive possession to obtain a perfected security interest, including without limitation, all notes, stock powers, letters of credit, certificates and documents of title, Chattel Paper, Warehouse Receipts, Instruments, and any other similar instruments constituting Collateral.

b. Lender is hereby authorized to file financing statements and amendments to financing statements without Borrower’s signature, in accordance with the UCC. Borrower hereby authorizes Lender to file all such financing statements and amendments to financing statements describing the Collateral in any filing office as Lender, in its sole discretion may determine, including financing statements listing “All Assets” in the collateral description therein. Borrower agrees to comply with the requests of Lender in order for Lender to have and maintain a valid and perfected first security interest in the Collateral including, without limitation, executing and causing any other Person to execute such documents as Lender may require to obtain Control (as defined in the UCC) over all Deposit Accounts, Letter of Credit Rights and Investment Property.

3.4. Searches, Certificates:

a. Lender shall, prior to or at Closing, and thereafter as Lender may determine from time to time, at Borrower’s expense, obtain the following searches (the results of which are to be consistent with the warranties made by Borrower in this Agreement):

i. UCC searches with the Secretary of State and local filing office of each state where Borrower is organized, maintains its executive office, a place of business, or assets; and

ii. Judgment, state and federal tax lien and corporate tax lien searches, in all applicable filing offices of each state searched under subparagraph (i) above.

b. Borrower shall, prior to or at Closing and at its expense, obtain and deliver to Lender good standing certificates showing Borrower to be in good standing in its state of organization and in each other state in which it is doing and presently intends to do business for which qualification is required.

3.5. Landlord’s and Warehouseman’s Waivers; Access Agreements: Borrower will use its best efforts to cause each owner of any premises occupied by Borrower or to be occupied by Borrower and each warehouseman of any warehouse, where, in either event Collateral is held, to execute and deliver to Lender an instrument, in form and substance satisfactory to Lender, under which such owner(s) or warehouseman subordinates its/his/their interests in and waives its/his/their right to distrain on or foreclose against the Collateral and agrees to allow Lender to remain on such premises to dispose of or deal with any Collateral located thereon.

3.6. Filing Security Agreement: A carbon, photographic or other reproduction or other copy of this Agreement or of a financing statement is sufficient as and may be filed in lieu of a financing statement.

3.7. Power of Attorney: Each of the officers of Lender is hereby irrevocably made, constituted and appointed the true and lawful attorney for Borrower (without requiring any of them to act as such) with full power of substitution to do the following: (a) after an Event of Default, endorse the name of Borrower upon any and all checks, drafts, money orders and other instruments for the payment of monies that are payable to Borrower and constitute collections on Borrower’s Accounts or proceeds of other Collateral; (b) execute and/or file in the name of Borrower any financing statements, schedules, assignments, instruments, documents and statements that Borrower is obligated to give Lender hereunder or is necessary to perfect (or continue or evidence the perfection of such security interest or Lien) Lender’s security interest or Lien in the Collateral; and (c) do such other and further acts and deeds in the name of Borrower that Lender may reasonably deem necessary or desirable to enforce any Account or other Collateral, including without limitation, the notification of Account Debtors of Lender’s security interest in any such Collateral.

SECTION IV. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES

Closing under this Agreement is subject to the following conditions precedent (all instruments, documents and agreements to be in form and substance satisfactory to Lender and Lender’s counsel):

4.1. Resolutions, Opinions, and Other Documents: Borrower shall have delivered, or caused to be delivered to Lender the following:

a. this Agreement, the Notes and each of the other Loan Documents all properly executed;

b. financing statements and each of the other documents to be executed and/or delivered by Borrower or any other Person pursuant to this Agreement;

c. certified copies of (i) resolutions of Borrower’s board of directors’ authorizing the execution, delivery and performance of this Agreement, the Notes and each of the other Loan Documents required to be delivered by any Section hereof and (ii) Borrower’s articles or certificate of incorporation and by-laws;

d. an incumbency certificate for Borrower identifying all Authorized Officers, with specimen signatures;

e. a written opinion of Borrower’s independent counsel addressed to Lender and opinions of such other counsel as Lender deems reasonably necessary;

f. a collateral audit of Borrower’s assets, liabilities, books and records, satisfactory in all respects to Lender;

g. such financial statements, reports, certifications and other operational information as Lender may reasonably require, satisfactory in all respects to Lender;

h. payment by Borrower of all fees including, without limitation, Revolving Credit Closing Fee and Expenses associated with the Loans;

i. Searches and certificates required under Section 3.4;

j. Insurance certificates and policies as required under Section 6.2;

k. an initial Borrowing Certificate dated the Closing Date;

l. instruments and agreements required under Section 3.5; and

m. such other documents reasonably required by Lender.

4.2. Absence of Certain Events: At the Closing Date, no Default or Event of Default hereunder shall have occurred and be continuing.

4.3. Warranties and Representations at Closing: The warranties and representations contained in Section 5 as well as any other Section of this Agreement shall be true and correct in all respects on the Closing Date with the same effect as though made on and as of that date. Borrower shall not have taken any action or permitted any condition to exist which would have been prohibited by any Section hereof.

4.4. Compliance with this Agreement: Borrower shall have performed and complied with all agreements, covenants and conditions contained herein including, without limitation, the provisions of Sections 6 and 7 hereof, which are required to be performed or complied with by Borrower before or at the Closing Date.

4.5. Closing: Subject to the conditions of this Section, the Loans shall be made available on such date (the “Closing Date”) and at such time as may be mutually agreeable to the parties contemporaneously with the execution hereof (“Closing”).

4.6. Waiver of Rights: By completing the Closing hereunder, or by making Advances hereunder, Lender does not thereby waive a breach of any warranty or representation made by Borrower hereunder or under any agreement, document, or instrument delivered to Lender or otherwise referred to herein, and any claims and rights of Lender resulting from any breach or misrepresentation by Borrower are specifically reserved by Lender.

4.7. Conditions for Future Advances: The making of Advances under the Revolving Credit in any form following the Closing Date is subject to the following conditions precedent (all instruments, documents and agreements to be in form and substance satisfactory to Lender and its counsel) following the Closing Date:

a. This Agreement and each of the other Loan Documents shall be effective;

b. No event or condition shall have occurred or become known to Borrower, or would result from the making of any requested Advance, which could have a Material Adverse Effect;

c. No Default or Event of Default then exists or after giving effect to the making of the Advance would exist;

d. Each Advance is within and complies with the terms and conditions of this Agreement including, without limitation, the notice provisions contained in Section 2.2 hereof;

e. No Lien (other than a Permitted Lien) has been imposed on Borrower; and

f. Each representation and warranty set forth in Section 5 and any other Loan Document in effect at such time (as amended or modified from time to time) is then true and correct in all material respects as if made on and as of such date except to the extent such representations and warranties are made only as of a specific earlier date.

SECTION V. REPRESENTATIONS AND WARRANTIES

To induce Lender to complete the Closing and make the initial Advances under the Revolving Credit and Loans to Borrower, Borrower warrants and represents to Lender that:

5.1. Organization and Validity:

a. Borrower (i) is a corporation, duly organized and validly existing under the laws of the State of Delaware, (ii) has the appropriate power and authority to operate its business and to own its Property and (iii) is duly qualified, is validly existing and in good standing and has lawful power and authority to engage in the business it conducts in each state where the nature and extent of its business requires qualification, except where the failure to so qualify does not and could not have a Material Adverse Effect. A list of all states and other jurisdictions where Borrower is qualified to do business is shown on Schedule 5.1 attached hereto and made part hereof.

b. To the best of Borrower’s knowledge the making and performance of this Agreement and the other Loan Documents will not violate any Requirement of Law, or the charter, minutes or bylaw provisions of Borrower, or of Borrower’s stockholders agreement, or violate or result in a default (immediately or with the passage of time) under any contract, agreement or instrument to which Borrower is a party, or by which Borrower is bound. Borrower is not in violation of any term of any agreement or instrument to which it is a party or by which it may be bound which violation has or could have a Material Adverse Effect, or of its charter, minutes or bylaw provisions, or of Borrower’s stockholders agreement.

c. Borrower has all requisite power and authority to enter into and perform this Agreement and to incur the obligations herein provided for, and has taken all proper and necessary action to authorize the execution, delivery and performance of this Agreement, and the other Loan Documents as applicable.

d. This Agreement, the Notes to be issued hereunder, and all of the other Loan Documents, when delivered, will be valid and binding upon Borrower, and enforceable in accordance with their respective terms except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles.

5.2. Places of Business: The only places of business of Borrower, and the places where Borrower keeps and intends to keep its Property, are at the addresses shown on Schedule 5.2 attached hereto and made part hereof.

5.3. Pending Litigation: There are no judgments or judicial or administrative orders or proceedings pending, or to the knowledge of Borrower, threatened, against Borrower in any court or before any Governmental Authority except as shown on Schedule 5.3 attached hereto and made part hereof. To the knowledge of Borrower, there are no investigations (civil or criminal) pending or threatened against Borrower in any court or before any Governmental Authority.To its knowledge, Borrower is not in default with respect to any order of any Governmental Authority. To the knowledge of Borrower, no shareholder or executive officer of Borrower has been indicted in connection with or convicted of engaging in any criminal conduct, or is currently subject to any lawsuit or proceeding or under investigation in connection with any anti-racketeering or other conduct or activity which may result in the forfeiture of any property to any Governmental Authority.

5.4. Title to Properties: Borrower has good and marketable title in fee simple (or its equivalent under applicable law) to all the Property it purports to own, free from Liens and free from the claims of any other Person, except for Permitted Liens.

5.5. Governmental Consent: Neither the nature of Borrower or of its business or Property, nor any relationship between Borrower and any other Person, nor any circumstance affecting Borrower in connection with the issuance or delivery of this Agreement, the Notes or any other Loan Documents is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority on the part of Borrower.

5.6. Taxes: All tax returns required to be filed by Borrower in any jurisdiction have been filed, and all taxes, assessments, fees and other governmental charges upon Borrower, or upon any of its Property, income or franchises, which are shown to be due and payable on such returns have been paid, except for those taxes being contested in good faith with due diligence by appropriate proceedings for which appropriate reserves have been maintained under GAAP and as to which no Lien has been entered. Borrower is not aware of any proposed additional tax assessment or tax to be assessed against or applicable to Borrower.

5.7. Financial Statements: The annual audited consolidated (if applicable) balance sheet of Borrower as of December 31, 2023, and the related statements of profit and loss, stockholder’s equity and cash flow as of such date accompanied by reports thereon from Borrower’s independent certified public accountants (complete copies of which have been delivered to Lender), and the interim consolidated (if applicable) balance sheet of Borrower as of December 31, 2024, and the related statements of profit and loss, stockholder’s equity and cash flow as of such date have been prepared in accordance with GAAP and present fairly the financial position of Borrower as of such dates and the results of its operations for such periods. The fiscal year for Borrower currently ends on December 31. Borrower’s federal tax identification number and state organizational identification number for UCC purposes are as shown on Schedule 5.7 attached hereto and made part hereof.

a. The Audited financial statements (form 10K) of the Borrower and Subsidiaries on a consolidated basis no later than 90-days after fiscal year end. Audited financial statements should be free of material qualifications and accompanied by the Management Letter to the extent that one is prepared by the CPA.

b. An Accounts Receivable Aging Report of the Borrower in form reasonably satisfactory to the Bank due in conjunction with the annual financial statements of the Borrower.

c. An Inventory Report of the Borrower in form reasonably satisfactory to the Lender due in conjunction with the annual financial statements of the Borrower.

d. Current Personal Financial Statement for each personal Guarantor, executed on Lender form with all schedules completed, concurrent with the fiscal year-end financial statement of the Borrower.

e. In conjunction with the submission of the fiscal-year end reporting package, a listing of all operating subsidiaries (stores) that have opened or closed over the 12-month period shall be provided to the Lender along with all necessary KYC documentation. Upon successful completion of KYC, all newly formed subsidiaries to become party to the loan agreement via the execution of a joinder agreement.

f. The Accountant prepared quarterly financial statement (Form 10Q) of the Borrower and Subsidiaries on a consolidated basis no later than 45-days after each quarter period end (6/30, 9/30, 12/31).

g. The signed Tax Returns of the personal Guarantor(s) accompanied by Form 8879 if filed electronically by a CPA.

h. Concurrent with the Quarterly and Annual financial statements the Borrower shall submit a Covenant Compliance Certificate with Covenant calculations certified by an authorized signer

5.8. Full Disclosure: The financial statements referred to in Section 5.7 of this Agreement do not, nor does any other written statement of Borrower to Lender in connection with the negotiation of the Loans, contain any untrue statement of a material fact. Such statements do not omit a material fact, the omission of which would make the statements contained therein misleading. There is no fact known to Borrower which has not been disclosed in writing to Lender which has or could have a Material Adverse Effect.

5.9. Subsidiaries: Borrower does not have any Subsidiaries or Affiliates, except as shown on Schedule 5.9 attached hereto and made part hereof.

5.10. Investments, Guarantees, Contracts, etc.:

a. Borrower does not own or hold equity or long term debt investments in, or have any outstanding advances to, any other Person, except as shown on Schedule 5.10(a) attached hereto and made part hereof.

b. Borrower has not entered into any leases for real or personal Property (whether as landlord or tenant or lessor or lessee), except as shown on Schedule 5.10(b) attached hereto and made part hereof.

c. Borrower is not a party to any contract or agreement, or subject to any charter or other corporate restriction, which has or could have a Material Adverse Effect.

d. Except as otherwise specifically provided in this Agreement, Borrower has not agreed or consented to cause or permit any of its Property whether now owned or hereafter acquired to

be subject in the future (upon the happening of a contingency or otherwise), to a Lien not permitted by this Agreement.

5.11. Government Regulations, etc.:

a. The use of the proceeds of and Borrower’s issuance of the Notes will not directly or indirectly violate or result in a violation of Section 7 of the Securities Exchange Act of 1934, as amended, or any regulations issued pursuant thereto, including, without limitation, Regulations U, T and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II. Borrower does not own or intend to carry or purchase any “margin stock” within the meaning of said Regulation U.

b. Borrower has obtained all licenses, permits, franchises or other governmental authorizations necessary for the ownership of its Property and for the conduct of its business.

c. As of the date hereof, no employee benefit plan (“Pension Plan”), as defined in Section 3(2) of ERISA, maintained by Borrower or under which Borrower could have any liability under ERISA (i) has failed to meet the minimum funding standards established in Section 302 of ERISA, (ii) has failed to comply in a material respect with all applicable requirements of ERISA and of the Internal Revenue Code, including all applicable rulings and regulations thereunder, (iii) has engaged in or been involved in a prohibited transaction under Section 406 of ERISA or Section 4975 of the Internal Revenue Code which would subject Borrower to any material liability, or (iv) has been terminated if such termination would subject Borrower to any material liability. Borrower has not assumed, or received notice of a claim asserted against Borrower for, withdrawal liability (as defined in Section 4207 of ERISA) with respect to any multi-employer pension plan and is not a member of any Controlled Group (as defined in ERISA). Borrower has timely made all contributions when due with respect to any multi-employer pension plan in which it participates and no event has occurred triggering a claim against Borrower for withdrawal liability with respect to any multi-employer pension plan in which Borrower participates. All Employee Benefit Plans and multi-employer pension plans in which Borrower participates are shown on Schedule 5.11(c) attached hereto and made part hereof.

d. Borrower is not in violation of or receipt of written notice that it is in violation of any Requirement of Law (including, without limitation, Environmental Laws), a violation of which causes or could cause a Material Adverse Effect.

e. Borrower is current with all reports and documents required to be filed with any state or federal securities commission or similar agency and is in full compliance in all material respects with all applicable rules and regulations of such commissions.

5.12. Business Interruptions: Within five (5) years prior to the date hereof, none of the business, Property or operations of Borrower have been materially and adversely affected in any way by any casualty, strike, lockout, combination of workers, order of the United States of America, or any state or local government, or any political subdivision or agency thereof, directed against Borrower. There are no pending or, to Borrower’s knowledge, threatened labor disputes, strikes, lockouts or similar occurrences or grievances affecting Borrower. No labor contract of Borrower is scheduled to expire prior to the Revolving Credit Maturity Date.

5.13. Names and Intellectual Property:

a. Within five (5) years prior to the Closing Date, Borrower has not conducted business under or used any other name (whether corporate or assumed) except for the names shown on Schedule 5.13(a) attached hereto and made part hereof. Borrower is the sole owner of all names listed on such Schedule 5.13(a) and any and all business done and all invoices issued in such trade names are Borrower’s sales, business and invoices. Each trade name of Borrower represents a division or trading style of Borrower and not a separate Subsidiary or Affiliate or independent entity.

b. All trademarks, service marks, patents or copyrights which Borrower uses, plans to use or has a right to use are shown on Schedule 5.13(b) attached hereto and made part hereof and Borrower is the sole owner of such Property except to the extent any other Person has claims or rights in such Property, as such claims and rights are shown on Schedule 5.13(b). Borrower is not in violation of any rights of any other Person with respect to such Property.

c. Except as shown on Schedule 5.13(b) attached hereto and made part hereof, (i) Borrower does not require any copyrights, patents, trademarks or other intellectual property, or any license(s) to use any patents, trademarks or other intellectual property in order to provide services to its customers in the ordinary course of business; and (ii) Lender will not require any copyrights, patents, trademarks or other intellectual property or any licenses to use the same in order to provide such services after the occurrence of an Event of Default.

5.14. Other Associations: Borrower is not engaged and has no interest in any joint venture or partnership with any other Person except as shown on Schedule 5.14 attached hereto and made part hereof.

5.15. Environmental Matters: Except as shown on Schedule 5.15 attached hereto and made part hereof:

a. To the best of Borrower’s knowledge after due inquiry, no Property presently owned, leased or operated by Borrower contains, or has previously contained, any Hazardous Substances in amounts or concentrations which (i) constitute or constituted a violation of, or (ii) could give rise to liability under, any Environmental Law.

b. To the best of Borrower’s knowledge after due inquiry, Borrower is in compliance, and, for the duration of all applicable statutes of limitations periods, has been in compliance with all applicable Environmental Laws, and there is no contamination at, under or about any properties presently owned, leased, or operated by Borrower or violation of any Environmental Law with respect to such properties which could reasonably be expected to interfere with any of their continued operations or reasonably be expected to impair the fair saleable value thereof.

c. Borrower has not received any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance assessment with Environmental Laws and Borrower has no knowledge that any such notice will be received or is being threatened.

d. Hazardous Substances have not been transported or disposed of in a manner or to a location which are reasonably likely to give rise to liability of Borrower under any Environmental Law.

e. No judicial proceeding or governmental or administrative action is pending , or to the knowledge of Borrower, threatened under any Environmental Law to which Borrower is, or to Borrower’s knowledge will be, named as a party, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding, the implementation of which is reasonably likely to have a Material Adverse Effect on any natural resources or on Borrower’s business, financial condition, Property or prospects under any Environmental Law.

5.16. Regulation O: No director, executive officer or principal shareholder of Borrower is a director, executive officer or principal shareholder of Lender. For the purposes hereof the terms “director” “executive officer” and “principal shareholder” (when used with reference to Lender), have the respective meanings assigned thereto in Regulation O issued by the Board of Governors of the Federal Reserve System.

5.17. Capital Stock: The authorized and outstanding Capital Stock of Borrower is as shown on Schedule 5.17 attached hereto and made part hereof. All of the Capital Stock of Borrower has been duly and validly authorized and issued and is fully paid and non-assessable and has been sold and delivered to the holders thereof in compliance with, or under valid exemption from, all Federal and state laws and the rules and regulations of all Governmental Authorities governing the sale and delivery of securities. Except for the rights and obligations shown on Schedule 5.17 there are no subscriptions, warrants, options, calls, commitments, rights or agreements by which Borrower or any of the shareholders of Borrower is bound relating to the issuance, transfer, voting or redemption of shares of its Capital Stock or any pre-emptive rights held by any Person with respect to the shares of Capital Stock of Borrower. Except as shown on Schedule 5.17 Borrower has not issued any securities convertible into or exchangeable for shares of its Capital Stock or any options, warrants or other rights to acquire such shares or securities convertible into or exchangeable for such shares.

5.18. Solvency: After giving effect to the transactions contemplated under this Agreement, Borrower is solvent, is able to pay its debts as they become due, and has capital sufficient to carry on its business and all businesses in which it is about to engage, and now owns Property having a value both at fair valuation and at present fair salable value greater than the amount required to pay Borrower’s debts. Borrower will not be rendered insolvent by the execution and delivery of this Agreement or any of the other Loan Documents executed in connection with this Agreement or by the transactions contemplated hereunder or thereunder.

5.19. Perfection and Priority: This Agreement and the other Loan Documents are effective to create in favor of Lender legal, valid and enforceable Liens in all right, title and interest of Borrower in the Collateral, and when financing statements have been filed in the offices of the jurisdictions shown on Schedule 5.19 attached hereto and made part hereof under Borrower’s name, Borrower will have granted to Lender, and Lender will have perfected first priority Liens in the Collateral, superior in right to any and all other Liens, existing or future.

5.20. Commercial Tort Claims: As of the Closing Date, Borrower is not a party to any Commercial Tort Claims, except as shown on Schedule 5.20 attached hereto and made part hereof.

5.21. Letter of Credit Rights: As of the Closing Date, Borrower has no Letter of Credit Rights, except as shown on Schedule 5.21 attached hereto and made part hereof.

5.22. Deposit Accounts: All Deposit Accounts of Borrower are shown on Schedule 5.22 attached hereto and made part hereof.

5.23. Anti-Terrorism Laws:

a. General. Neither Borrower nor any Affiliate of Borrower is in violation of any Anti-Terrorism Law or engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

b. Executive Order No. 13224. Neither Borrower nor any Affiliate of Borrower, or to Borrower’s knowledge, any of its respective agents acting or benefiting in any capacity in connection with the Loans, Letters of Credit or other transactions hereunder, is any of the following (each a “Blocked Person”):

i. a Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224;

ii. a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224;

iii. a Person with which Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;

iv. a Person that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order No. 13224;

v. a Person that is named as a “specially designated national” on the most current list published by the U.S. Treasury Department Office of Foreign Asset Control at its official website or any replacement website or other replacement official publication of such list; or

vi. a Person who is affiliated with a Person listed above.

SECTION VI. BORROWER’S AFFIRMATIVE COVENANTS

Borrower covenants that until all of the Obligations are paid and satisfied in full and the Revolving Credit has been terminated, that:

6.1. Payment of Taxes and Claims: Borrower shall pay, before they become delinquent, all taxes, assessments and governmental charges, or levies imposed upon it, or upon Borrower’s Property, and all claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other Persons, entitled to the benefit of statutory or common law Liens which, in any case, if unpaid, would result in the imposition of a Lien upon its Property; provided however, that Borrower shall not be required to pay any such tax, assessment, charge, levy, claim or demand if the amount, applicability or validity thereof, shall at the time, be contested in good faith and by appropriate proceedings by Borrower, and if Borrower shall have set aside on its books adequate reserves in respect thereof, if so required in accordance with GAAP; which deferment of payment is permissible so long as no Lien other than a Permitted Lien has been entered and Borrower’s title to, and its right to use, its Property are not materially adversely affected thereby.

6.2. Maintenance of Properties and Corporate Existence:

a. Property - Borrower shall maintain its Property in good condition (normal wear and tear excepted) make all necessary renewals, replacements, additions, betterments and improvements thereto and will pay and discharge when due the cost of repairs and maintenance to its Property, and will pay all rentals when due for all real estate leased by Borrower.

b. Property Insurance, Public and Products Liability Insurance, - Borrower shall maintain insurance (i) on all insurable tangible Property against fire, flood, casualty and such other hazards (including, without limitation, extended coverage, workmen’s compensation, boiler and machinery, with inflation coverage by endorsement), (ii) against public liability, product liability and business interruption, in each case in such amounts, with such deductibles and with such insurers as are customarily used by companies operating in the same industry as Borrower. At or prior to Closing, Borrower shall furnish Lender with duplicate original policies of insurance or such other evidence of insurance as Lender may require, and any certificates of insurance shall be issued on Acord Form-27. In the event Borrower fails to procure or cause to be procured any such insurance or to timely pay or cause to be paid the premium(s) on any such insurance, Lender may do so for Borrower, but Borrower shall continue to be liable for the same. The policies of all such casualty insurance shall contain standard Lender’s Loss Payable Clauses (and, with respect to liability and interruption insurance, additional insured clauses) issued in favor of Lender under which all losses thereunder shall be paid to Lender as Lender’s interest may appear. Such policies shall expressly provide that the requisite insurance cannot be altered or canceled without thirty (30) days prior written notice to Lender and shall insure Lender notwithstanding the act or neglect of Borrower. Borrower hereby appoints Lender as Borrower’s attorney-in-fact, exercisable at Lender’s option to endorse any check which may be payable to Borrower in order to collect the proceeds of such insurance and any amount or amounts collected by Lender pursuant to the provisions of this Section may be applied by Lender, in its sole discretion, to any Obligations or to repair, reconstruct or replace the loss of or damage to Collateral as Lender in its discretion may from time to time determine. Borrower further covenants that all insurance premiums owing under its current policies have been paid. Borrower shall notify Lender, promptly, upon Borrower’s receipt of a notice of termination, cancellation, or non-renewal from its insurance company of any such policy.

c. Financial Records - Borrower shall keep current and accurate books of records and accounts in which full and correct entries will be made of all of its business transactions, and will reflect in its financial statements adequate accruals and appropriations to reserves, all in accordance with GAAP. Borrower shall not change its fiscal year end date without the prior written consent of Lender.

d. Corporate Existence and Rights - Borrower shall do (or cause to be done) all things necessary to preserve and keep in full force and effect its existence, good standing, rights and franchises. Borrower shall obtain and maintain any and all licenses, permits, franchises or other governmental authorizations necessary to the ownership of its property or the conduct of its businesses.

e. Compliance with Laws - Borrower shall be in compliance with any and all Requirements of Law to which it is subject, whether federal, state or local, including, without limitation, Environmental Laws. Borrower shall timely satisfy all assessments, fines, costs and penalties imposed (after exhaustion of all appeals, provided a stay has been put in effect during such appeal) by any Governmental Authority against Borrower or any Property of Borrower.

6.3. Business Conducted: Borrower shall continue in the business presently operated by it using its best efforts to maintain its customers and goodwill. Borrower shall not engage, directly or indirectly, in any material respect in any line of business substantially different from the businesses conducted by Borrower immediately prior to the Closing Date.

6.4. Litigation: Borrower shall give prompt notice to Lender of any litigation claiming in excess of [One Hundred Thousand and 00/100 Dollars ($100,000.00)] from Borrower, or which may otherwise have a Material Adverse Effect.

6.5. Issue Taxes: Borrower shall pay all taxes (other than taxes based upon or measured by any Lender’s income or revenues or any personal property tax), if any, in connection with the issuance of the Notes and the recording of any lien documents. The obligations of Borrower hereunder shall survive the payment of Borrower’s Obligations hereunder and the termination of this Agreement.

6.6. Bank Accounts: Borrower shall maintain its major depository and disbursement account(s) with Lender.

6.7. Employee Benefit Plans: Borrower shall (a) fund all of its Pension Plan(s) in a manner that will satisfy the minimum funding standards of Section 302 of ERISA, (b) furnish Lender, promptly upon Lender’s request, with copies of all reports or other statements filed with the United States Department of Labor, the PBGC or the IRS with respect to all Pension Plan(s), or which Borrower, or any member of a Controlled Group, may receive from the United States Department of Labor, the IRS or the PBGC, with respect to all such Pension Plan(s), and (c) promptly advise Lender of the occurrence of any reportable event (as defined in Section 4043 of ERISA, other than a reportable event for which the thirty (30) day notice requirement has been waived by the PBGC) or prohibited transaction (under Section 406 of ERISA or Section 4975 of the Internal Revenue Code) with respect to any such Pension Plan(s) and the action which Borrower proposes to take with respect thereto. Borrower will make all contributions when due with respect to any multi-employer pension plan in which it participates and will promptly advise Lender upon (x) its receipt of notice of the assertion against Borrower of a claim for withdrawal liability, (y) the occurrence of any event which, to the best of Borrower’s knowledge, would trigger the assertion of a claim for withdrawal liability against Borrower, and (z) upon the occurrence of any event which, to the best of Borrower’s knowledge, would place Borrower in a Controlled Group as a result of which any member (including Borrower) thereof may be subject to a claim for withdrawal liability, whether liquidated or contingent.

6.8. Financial Covenants: Borrower shall maintain and comply with the following financial covenants as set forth of Schedule ___ hereto [Choose from list on Schedule 6.8]:

a. Maintain on a consolidated basis a Debt Service Coverage Ratio of at least 1.25x. “Debt Service Coverage Ratio” means the ratio of Cash Flow to the sum of the current portion of long-term debt and the current portion of capitalized lease obligations plus interest expense on all obligations. “Cash Flow” is defined as (a) net income after income tax, (b) less income or plus loss from discontinued operations and extraordinary items, (c) plus depreciation depletion and amortization, (d) plus interest expense on all obligations and (e) minus dividends, withdrawals and other distributions. This ratio will be calculated at the end of each reporting period for which Peapack-Gladstone Bank requires financial statements from the Borrower, using the result of the twelve-month period ending with that reporting period – tested annually.

b. Subject to a 30 consecutive day clean-down provision to $2,500,000 – tested annually.

c. Liquidity of $1,000,000 at all times – tested quarterly. Liquidity will be measured by cash and marketable securities listed on the balance sheet. At Lender

6.9. Financial and Business Information: Borrower shall deliver or cause to be delivered to Lender the following:

a. Financial Statements and Collateral Reports: such data, reports, statements and information, financial or otherwise, as Lender may reasonably request, including, without limitation:

i. The Audited financial statements (form 10K) of the Borrower and Subsidiaries on a consolidated basis no later than 90-days after fiscal year end. Audited financial statements should be free of material qualifications and accompanied by the Management Letter to the extent that one is prepared by the CPA.

ii. An Accounts Receivable Aging Report of the Borrower in form reasonably satisfactory to the Bank due in conjunction with the annual financial statements of the Borrower.

iii. An Inventory Report of the Borrower in form reasonably satisfactory to the Lender due in conjunction with the annual financial statements of the Borrower.

iv. Current Personal Financial Statement for each personal Guarantor, executed on Lender form with all schedules completed, concurrent with the fiscal year-end financial statement of the Borrower.

v. In conjunction with the submission of the fiscal-year end reporting package, a listing of all operating subsidiaries (stores) that have opened or closed over the 12-month period shall be provided to the Lender along with all necessary KYC documentation. Upon successful completion of KYC, all newly formed subsidiaries to become party to the loan agreement via the execution of a joinder agreement.

vi. The Accountant prepared quarterly financial statement (Form 10Q) of the Borrower and Subsidiaries on a consolidated basis no later than 45-days after each quarter period end (6/30, 9/30, 12/31).

vii. The signed Tax Returns of the personal Guarantor(s) accompanied by Form 8879 if filed electronically by a CPA;

b. Notice of Event of Default - promptly upon becoming aware of the existence of any condition or event which constitutes a Default or an Event of Default under this Agreement, a written notice specifying the nature and period of existence thereof and what action Borrower is taking (and proposes to take) with respect thereto;

c. Notice of Claimed Default - promptly upon receipt by Borrower, notice of default, oral or written, given to Borrower by any creditor for Indebtedness for borrowed money, otherwise holding long term Indebtedness of Borrower in excess of One Hundred Thousand and 00/100 Dollars ($100,000.00); and

d. Securities and Other Reports - if Borrower shall be required to file reports with the Securities and Exchange Commission pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, promptly upon its becoming available, one copy of each financial statement, report, notice or proxy statement sent by Borrower to stockholders generally, and, a copy of each regular or periodic report, and any registration statement, or prospectus in respect thereof, filed by Borrower with any securities exchange or with federal or state securities and exchange commissions or any successor agency.

6.10. Officers’ Certificates: Along with the set of financial statements delivered to Lender at the end of each fiscal quarter pursuant to Section 6.9(a)(i) hereof and the annual financial statements delivered pursuant to Section 6.9(a)(ii) hereof, Borrower shall deliver to Lender a certificate (“Covenant Compliance Certificate”) (in the form of Exhibit D attached hereto and made part hereof) from the chief financial officer, chief executive officer or president of Borrower (and as to certificates accompanying the annual financial statements of Borrower, also certified by Borrower’s independent certified public accountant) setting forth:

a. Event of Default - that the signer has reviewed the relevant terms of this Agreement, and has made (or caused to be made under his/her supervision) a review of the transactions and conditions of Borrower from the beginning of the accounting period covered by the financial statements being delivered therewith to the date of the certificate, and that such review has not disclosed the existence during such period of any condition or event which constitutes a Default or an Event of Default or, if any such condition or event exists, specifying the nature and period of existence thereof and what action Borrower has taken or proposes to take with respect thereto.

b. Covenant Compliance - the information (including detailed calculations) required in order to establish that Borrower is in compliance with the requirements of Section 6.8 of this Agreement, as of the end of the period covered by the financial statements delivered.

6.11. Field Exams, Audits and Inspection; Appraisals: Borrower shall permit any of Lender’s officers or other representatives to visit and inspect upon reasonable notice during business hours any of the locations of Borrower (provided that, while an Event of Default exists, Lender may make such field exams, visits and inspections at any time without prior notice) to examine and audit all of Borrower’s Collateral, books of account, records, reports and other papers, to make copies and extracts therefrom and to discuss its affairs, finances and accounts with its officers, employees and independent certified public accountants all at Borrower’s expense at the standard rates charged by Lender for such activities, plus Lender’s reasonable out-of-pocket expenses (all of which amounts shall be Expenses). However, unless a Default or Event of Default has occurred and is continuing, Borrower shall not be responsible for the expense of audits, field exams and/or inspections conducted more than once per year. Appraisals shall be done by an appraiser reasonably acceptable to Lender and shall be in form and substance satisfactory to Lender.

6.12. Other Reports: Borrower agrees that, if requested by Lender, it shall promptly furnish Lender with copies of all reports filed with any federal, state or local Governmental Authority.

6.13. Information to Participant: Lender may divulge to any participant, assignee or co-lender or prospective participant, assignee or co-lender it may obtain in the Revolving Credit or any portion thereof, all information, and furnish to such Person copies of any reports, financial statements, certificates, and documents obtained under any provision of this Agreement, or related agreements and documents.

6.14. Material Adverse Developments: Borrower agrees that immediately upon becoming aware of any development or other information outside the ordinary course of business and excluding matters of a general economic, financial or political nature which would reasonably be expected to have a Material Adverse Effect it shall give to Lender telephonic notice specifying the nature of such development or information and such anticipated effect. In addition, such verbal communication shall be confirmed by written notice thereof to Lender on the same day such verbal communication is made or the next Business Day thereafter.

6.15. Places of Business: Borrower shall give thirty (30) days prior written notice to Lender of any changes in the location of any of its respective places of business, of the places where records concerning its Accounts or where its Inventory are kept, or the establishment of any new, or the discontinuance of any existing place of business; provided that Borrower may not establish any place of business outside of the United States except as otherwise set forth in Schedule 5.2.

6.16. Commercial Tort Claims: Borrower will immediately notify Lender in writing in the event that Borrower becomes a party to or obtains any rights with respect to any Commercial Tort Claim. Such notification shall include information sufficient to describe such Commercial Tort Claim, including, but not limited to, the parties to the claim, the court in which the claim was commenced, the docket number assigned to such claim, if any, and a detailed explanation of the events that gave rise to the claim. Borrower shall execute and deliver to Lender all documents and/or agreements necessary to grant Lender a security interest in such Commercial Tort Claim to secure the Obligations. Borrower authorizes Lender to file (without Borrower’s signature) initial financing statements or amendments, as Lender deems necessary to perfect its security interest in the Commercial Tort Claim.

6.17. Letter of Credit Rights: Borrower shall provide Lender with written notice of any letters of credit for which Borrower is the beneficiary. Borrower shall execute and deliver (or cause to be executed or delivered) to Lender, all documents and agreements as Lender may require in order to obtain and perfect its security interest in such Letter of Credit Rights.

6.18. Electronic Transmission: Borrower shall cooperate with Lender in the establishment and maintenance of a daily electronic monitoring and reporting system with respect to Borrower’s Inventory and Accounts and the collection of all proceeds with respect thereto. Notwithstanding the above, Lender shall exercise reasonable care in the downloading and management of any data or information with respect to such reporting system, and shall be held responsible for any negligence or misconduct in relation to the same.

SECTION VII. BORROWER’S NEGATIVE COVENANTS:

Borrower covenants that until all of the Obligations are paid and satisfied in full and the Revolving Credit has been terminated, that:

7.1. Merger, Consolidation, Dissolution or Liquidation:

a. Borrower shall not engage in any Asset Sale other than equipment that is replaced by other equipment of comparable or superior quality and value within ninety (90) days of such Asset Sale.

b. Borrower shall not merge or consolidate with any other Person or commence a dissolution or liquidation without the prior written consent of the Lender, which consent shall not be unreasonably withheld or delayed.

7.2. Acquisitions: Borrower shall not acquire all or a material portion of the Capital Stock or assets of any Person in any transaction or in any series of related transactions or enter into any sale and leaseback transaction without the prior written consent of Lender, which consent shall not be unreasonably withheld or delayed.

7.3. Liens and Encumbrances: Borrower shall not: (i) execute a negative pledge agreement with any Person covering any of its Property, or (ii) cause or permit or agree or consent to cause or permit in the future (upon the happening of a contingency or otherwise), its Property (including, without limitation, the Collateral), whether now owned or hereafter acquired, to be subject to a Lien or be subject to any claim except for Permitted Liens.

7.4. Transactions With Affiliates or Subsidiaries:

a. Borrower shall not enter into any transaction with any Subsidiary or other Affiliate, including, without limitation, the purchase, sale, or exchange of Property, or the loaning or giving of funds to any Affiliate or any Subsidiary unless: (i) such Subsidiary or Affiliate is engaged in a business substantially related to the business conducted by Borrower and the transaction is in the ordinary course of and pursuant to the reasonable requirements of Borrower’s business and upon terms substantially the same and no less favorable to Borrower as it would obtain in a comparable arm’s length transactions with any Person not an Affiliate or a Subsidiary, and so long as such transaction is not prohibited hereunder; or (ii) such transaction is intended for incidental administrative purposes.

b. Borrower shall not create or acquire any Subsidiary without the prior consent of the Lender, which consent will not be unreasonably withheld provided Borrower maintains its financial covenants

7.5. Guarantees: Excepting the endorsement in the ordinary course of business of negotiable instruments for deposit or collection, Borrower shall not become or be liable, directly or indirectly, primary or secondary, matured or contingent, in any manner, whether as guarantor, surety, accommodation maker, or otherwise, for the existing or future Indebtedness of any kind of any Person.

7.6. Distributions, Bonuses and Other Indebtedness: Borrower shall not: (a) declare or pay or make any forms of Distribution to holders of Borrower’s Capital Stock; (b) hereafter incur or become liable for any Indebtedness other than Permitted Indebtedness; (c) make any payments on Subordinated Debt which would cause the Adjusted Net Worth to be less than the Adjusted Net Worth required to be maintained under Section 6.8(b).

7.7. Loans and Investments: Borrower shall not make or have outstanding loans, advances, extensions of credit or capital contributions to, or investments in, any Person other than Permitted Investments, unless such loans, advances, extensions of credit or capital contributions, or investments are made in the ordinary course of business and do not materially affect the Borrower’s ability to repay the Loan.

7.8. Use of Lenders’ Name: Borrower shall not use Lender’s name in connection with any of its business operations, except as required for regulatory disclosures or reporting requirements, or with the prior written consent of the Lender. Nothing herein contained is intended to permit or authorize Borrower to make any contract on behalf of Lender.

7.9. Miscellaneous Covenants:

a. Borrower shall not become or be a party to any contract or agreement which at the time of becoming a party to such contract or agreement materially impairs Borrower’s ability to perform under this Agreement, or under any other instrument, agreement or document to which Borrower is a party or by which it is or may be bound.

b. Borrower shall not carry or purchase any “margin stock” within the meaning of Regulations U, T or X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II.

7.10. Jurisdiction of Organization: Borrower shall not change its jurisdiction of organization.

SECTION VIII. DEFAULT

8.1. Events of Default: Each of the following events shall constitute an event of default (“Event of Default”):

a. Payments - (i) if Borrower fails to make any payment of principal or interest under the Obligations on the date such payment is due and payable [or (ii) if Borrower fails to pay any Overadvance or amounts due under any Hedging Agreement on the date such payment is due and payable; provided that for subsection (ii) above, Borrower shall have a grace period of no more than two (2) days, provided further that such grace period shall be utilized no more than once in any twelve (12) month period]; or

b. Other Charges - if Borrower fails to pay any other charges, fees, Expenses or other monetary obligations owing to Lender arising out of or incurred in connection with this Agreement or any Hedging Agreement on the date such payment is due and payable provided that Borrower shall have a grace period of no more than two (2) days, provided further that such grace period shall be utilized no more than once in any twelve (12) month period; or

c. Particular Covenant Defaults - if Borrower fails to perform, comply with or observe any covenant or undertaking contained in this Agreement and (other than with respect to the covenants contained in Sections 6.2(b), 6.8, 6.9, 6.10, 6.11 and 6.18 and Section 7 for which no cure period shall exist), such failure continues for fifteen (15) days after the occurrence thereof; or

d. Financial Information - if any statement, report, financial statement, or certificate made or delivered by Borrower or any of its officers, employees or agents, to Lender is not true and correct, in all material respects, when made; or

e. Uninsured Loss - if there shall occur any uninsured damage to or loss, theft, or destruction in excess of [One Hundred Fifty Thousand and 00/100 Dollars ($150,000.00)] in the aggregate with respect to any portion of any Property of Borrower; or

f. Warranties or Representations - if any warranty, representation or other statement by or on behalf of Borrower contained in or pursuant to this Agreement, the other Loan Documents, any Hedging Agreement or in any document, agreement or instrument furnished in compliance with, relating to, or in reference to this Agreement, is false, erroneous, or misleading in any material respect when made; or

g. Cross Default - (i) if Borrower shall default beyond any grace period in the payment of principal or interest of any Indebtedness of Borrower in excess of [One Hundred Thousand and 00/100 Dollars ($100,000.00)] in the aggregate; or (ii) if Borrower otherwise defaults under the terms of any such Indebtedness which is in excess of One Hundred Thousand and 00/100 Dollars ($100,000) the effect of such default is to enable the holder of such Indebtedness to accelerate the payment of Borrower’s obligations, which are the subject thereof, prior to the maturity date or prior to the regularly scheduled date of payment;

h. Other Agreements with Lender and Affiliates - if Borrower or any Guarantor breaches or violates the terms of, or if a default (and expiration of any applicable cure period), or an Event of Default, occurs under, any Hedging Agreement, guaranty, or any other existing or future agreement (related or unrelated) (including, without limitation, the other Loan Documents) between Borrower or Guarantor and Lender or any Affiliate of Lender; or

i. Judgments - if any final judgment for the payment of money in excess of [Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00)] in the aggregate (i) which is not fully and unconditionally covered by insurance or (ii) for which Borrower has not established a cash or cash equivalent reserve in the full amount of such judgment, shall be rendered by a court of record against Borrower and such judgment shall continue unsatisfied and in effect for a period of thirty (30) consecutive days without being vacated, discharged, satisfied or bonded pending appeal; or

j. Assignment for Benefit of Creditors, etc. - if Borrower makes or proposes in writing, an assignment for the benefit of creditors generally, offers a composition or extension to creditors, or makes or sends notice of an intended bulk sale of any business or assets now or hereafter owned or conducted by Borrower; or

k. Bankruptcy, Dissolution, etc. - upon the commencement of any action for the dissolution or liquidation of Borrower, or the commencement of any proceeding to avoid any transaction entered into by Borrower, or the commencement of any case or proceeding for reorganization or liquidation of Borrower’s debts under the Bankruptcy Code or any other state or federal law, now or hereafter enacted for the relief of debtors, whether instituted by or against Borrower; provided however, that Borrower shall have sixty (60) days to obtain the dismissal or discharge of involuntary proceedings filed against it, it being understood that during such sixty (60) day period, Lender shall not be obligated to make Advances hereunder and Lender may seek adequate protection in any bankruptcy proceeding; or

l. Receiver - upon the appointment of a receiver, liquidator, custodian, trustee or similar official or fiduciary for any Borrower or for Borrower’s Property; or

m. Execution Process, etc. - the issuance of any execution or distraint process against any Property of Borrower; or

n. Termination of Business - if Borrower ceases any material portion of its business operations as presently conducted; or

o. Pension Benefits, etc. - if Borrower fails to comply with ERISA so that proceedings are commenced to appoint a trustee under ERISA to administer Borrower’s employee plans or the PBGC institutes proceedings to appoint a trustee to administer such plan(s), or a Lien is entered to secure any deficiency or claim or a “reportable event” as defined under ERISA occurs; or

p. Change of Control - if there shall occur a Change of Control; or

q. Liens - if any Lien in favor of Lender shall cease to be valid, enforceable and perfected and prior to all other Liens other than Permitted Liens or if Borrower shall assert any of the foregoing; or

r. Material Adverse Effect – if there is any change in Borrower’s financial condition which has or would be reasonably likely to have a Material Adverse Effect, or

s. Other Loan Documents - if any other Person (other than Lender) party to a Loan Document, breaches or violates any term, provision or condition of such Loan Documentafter the giving of any required notice and the expiration of applicable cure periods.

8.2. Cure: Nothing contained in this Agreement or the Loan Documents shall be deemed to compel Lender to accept a cure of any Event of Default hereunder.

8.3. Rights and Remedies on Default:

a. In addition to all other rights, options and remedies granted or available to Lender under this Agreement or the Loan Documents (each of which is also then exercisable by Lender), or otherwise available at law or in equity, upon or at any time after the occurrence and during the continuance of a Default or an Event of Default, Lender may, in its discretion, withhold or cease making Advances under the Revolving Credit.

b. In addition to all other rights, options and remedies granted or available to Lender under this Agreement or the Loan Documents (each of which is also then exercisable by Lender), or otherwise available at law or in equity, upon or at any time after the occurrence and during the continuance of an Event of Default Lender may, in its discretion, terminate the Revolving Credit and declare the Obligations, immediately due and payable, all without demand, notice, presentment or protest or further action of any kind (it also being understood that the occurrence of any of the events or conditions set forth in Sections 8.1(j),(k) or (l) shall automatically cause an acceleration of the Obligations.

c. In addition to all other rights, options and remedies granted or available to Lender under this Agreement or the Loan Documents (each of which is also then exercisable by Lender), or otherwise available at law or in equity, upon or at any time after the acceleration of the Obligations following the occurrence of an Event of Default (other than the rights with respect to clause (iv) below which Lender may exercise at any time after an Event of Default and regardless of whether there is an acceleration), Lender may, in its discretion, exercise all rights under the UCC and any other applicable law or in equity, and under all Loan Documents permitted to be exercised after the occurrence of an Event of Default, including the following rights and remedies (which list is given by way of example and is not intended to be an exhaustive list of all such rights and remedies):

i. The right to take possession of, send notices regarding and collect directly the Collateral, with or without judicial process (including without limitation the right to notify the United States postal authorities to redirect mail addressed to Borrower to an address designated by Lender); or

ii. By its own means or with judicial assistance, enter Borrower’s premises and take possession of the Collateral, or render it unusable, or dispose of the Collateral on such premises in compliance with subsection (e) below, without any liability for rent, storage, utilities or other sums, and Borrower shall not resist or interfere with such action; or

iii. Require Borrower at Borrower’s expense to assemble all or any part of the Collateral (other than real estate or fixtures) and make it available to Lender at any place designated by Lender; or

iv. The right to enjoin any violation of Section 7.1, it being agreed that Lender’s remedies at law are inadequate.

d. Borrower hereby agrees that a notice received by it at least seven (7) days before the time of any intended public sale or of the time after which any private sale or other disposition of the Collateral is to be made, shall be deemed to be reasonable notice of such sale or other disposition. If permitted by applicable law, any perishable inventory or Collateral which threatens to speedily decline in value or which is sold on a recognized market may be sold immediately by Lender without prior notice to Borrower. Borrower covenants and agrees not to interfere with or impose any obstacle to Lender’s exercise of its rights and remedies with respect to the Collateral, after the occurrence of an Event of Default hereunder. Lender shall have no obligation to clean up or prepare the Collateral for sale. If Lender sells any of the Collateral upon credit, Borrower will only be credited with payments actually made by the purchaser thereof, that are received by Lender. Lender may, in connection with any sale of the Collateral specifically disclaim any warranties of title or the like.

8.4. Nature of Remedies: All rights and remedies granted Lender hereunder and under the Loan Documents, or otherwise available at law or in equity, shall be deemed concurrent and cumulative, and not alternative remedies, and Lender may proceed with any number of remedies at the same time until all Obligations are satisfied in full. The exercise of any one right or remedy shall not be deemed a waiver or release of any other right or remedy, and Lender, upon or at any time after the occurrence of an Event of Default, may proceed against Borrower, at any time, under any agreement, with any available remedy and in any order.

8.5. Set-Off: In addition to all other rights, options and remedies granted or available to Lender under this Agreement or the Loan Documents or any Hedging Agreement (each of which is also then exercisable by Lender or its Affiliate as applicable), upon or at any time after the occurrence and during the continuance of an Event of Default, Lender (and any participant) shall have and be deemed to have, without notice to Borrower, the immediate right of set-off against any bank account of Borrower or Guarantor with Lender, or of Borrower with any other subsidiary of Lender or Bank Affiliate or any participant and may apply the funds or amount thus set-off against any of Borrower’s Obligations hereunder.

If any bank account of Borrower with Lender, any other subsidiary of Lender or Bank Affiliate or any participant is attached or otherwise liened or levied upon by any third party, Lender (and such participant) shall have and be deemed to have, without notice to Borrower, the immediate right of set-off and may apply the funds or amount thus set-off against any of Borrower’s Obligations hereunder.

SECTION IX. MISCELLANEOUS

9.1. Governing Law: THIS AGREEMENT, AND ALL MATTERS ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND ALL RELATED AGREEMENTS AND DOCUMENTS, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF NEW JERSEY. THE PROVISIONS OF THIS AGREEMENT AND ALL OTHER AGREEMENTS AND DOCUMENTS REFERRED TO HEREIN ARE TO BE DEEMED SEVERABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION SHALL NOT AFFECT OR IMPAIR THE REMAINING PROVISIONS WHICH SHALL CONTINUE IN FULL FORCE AND EFFECT.

9.2. Integrated Agreement: The Note, the other Loan Documents, all related agreements, and this Agreement shall be construed as integrated and complementary of each other, and as augmenting and not restricting Lender’s rights and remedies. If, after applying the foregoing, an inconsistency still exists, the provisions of this Agreement shall constitute an amendment thereto and shall control.

9.3. Waiver: No omission or delay by Lender in exercising any right or power under this Agreement or any related agreements and documents will impair such right or power or be construed to be a waiver of any Default, or Event of Default or an acquiescence therein, and any single or partial exercise of any such right or power will not preclude other or further exercise thereof or the exercise of any other right, and as to Borrower no waiver will be valid unless in writing and signed by Lender and then only to the extent specified. Lender, in its sole discretion, may charge Borrower a fee in consideration for waiving any Default or Event of Default.

9.4. Indemnity:

a. Borrower releases and shall indemnify, defend and hold harmless Lender and its Affiliates and their respective officers, employees and agents, of and from any claims, demands, liabilities, obligations, judgments, injuries, losses, damages and costs and expenses (including, without limitation, reasonable legal fees) resulting from (i) acts or conduct of Borrower under, pursuant or related to this Agreement and the other Loan Documents and any Hedging Agreement, (ii) Borrower’s breach or violation of any representation, warranty, covenant or undertaking contained in this Agreement or the other Loan Documents and any Hedging Agreement, (iii) Borrower’s failure to comply with any Requirement of Law (including, without limitation, Environmental Laws, etc.), and (iv) any claim by any other creditor of Borrower against Lender or its Affiliates arising out of any transaction whether hereunder or in any way related to the Loan Documents or Hedging Agreements and all costs, expenses, fines, penalties or other damages resulting therefrom, unless resulting solely from acts or conduct of Lender or its Affiliates constituting willful misconduct or gross negligence.

b. Promptly after receipt by an indemnified party under subsection (a) above of notice of the commencement of any action by a third party, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof. The omission so to notify the indemnifying party shall relieve the indemnifying party from any liability which it may have to any indemnified party under such subsection only if the indemnifying party is unable to defend such actions as a result of such failure to so notify. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnified party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation.

9.5. Time: Whenever Borrower shall be required to make any payment, or perform any act, on a day which is not a Business Day, such payment may be made, or such act may be performed, on the next succeeding Business Day. However, if Borrower makes payments due hereunder via the Automated Clearing House system or under Lender’s Automatic Funds Transfer arrangement and such payment is due on a day that is not a Business Day, then Lender shall debit Borrower’s account on the last Business Day of the preceeding month. Time is of the essence in Borrower’s performance under all provisions of this Agreement and all related agreements and documents.

9.6. Expenses of Lender: At Closing and from time to time thereafter, Borrower will pay upon demand of Lender all reasonable costs, fees and expenses of Lender in connection with (i) the analysis, negotiation, preparation, execution, administration, delivery and termination of this Agreement, and other Loan Documents and the documents and instruments referred to herein and therein, and any amendment, amendment and restatement, supplement, waiver or consent relating hereto or thereto, whether or not any such amendment, amendment and restatement, supplement, waiver or consent is executed or becomes effective, search costs, the reasonable fees, expenses and disbursements of counsel for Lender, any fees or expenses incurred by Lender under Section 6.11 for which Borrower is obligated thereunder, and reasonable charges of any expert consultant to Lender, (ii) the enforcement of Lender’s rights hereunder, or the collection of any payments owing from, Borrower under this Agreement and/or the other Loan Documents or the protection, preservation or defense of the rights of Lender hereunder and under the other Loan Documents, and (iii) any refinancing or restructuring of the credit arrangements provided under this Agreement and other Loan Documents in the nature of a “work-out” or of any insolvency or bankruptcy proceedings, or otherwise (including the reasonable fees and disbursements of counsel for Lender and, with respect to clauses (ii) and (iii), reasonable allocated costs of internal counsel) (collectively, the “Expenses”);

9.7. Brokerage: This transaction was brought about and entered into by Lender and Borrower acting as principals and without any brokers, agents or finders being the effective procuring cause hereof. Borrower represents that it has not committed Lender to the payment of any brokerage fee, commission or charge in connection with this transaction. If any such claim is made on Lender by any broker, finder or agent or other person, Borrower hereby indemnifies, defends and saves such party harmless against such claim and further will defend, with counsel satisfactory to Lender, any action or actions to recover on such claim, at Borrower’s own cost and expense, including such party’s reasonable counsel fees. Borrower further agrees that until any such claim or demand is adjudicated in such party’s favor, the amount demanded shall be deemed an Obligation of Borrower under this Agreement.

9.8. Notices:

a. Loan Documents and notices under the Loan Documents may be transmitted and/or signed by facsimile or electronically, and by signatures delivered in “PDF” format by electronic mail or other electronic formats. The effectiveness of any such documents and signatures shall, subject to applicable law, have the same force and effect as an original copy with manual signatures and shall be binding on Borrower, the Guarantors, and Lender. Lender may also require that any such documents and signature delivered by facsimile or “PDF” format by electronic mail be confirmed by a manually-signed original thereof; provided, however, that the failure to request or deliver any such manually-signed original shall not affect the effectiveness of any facsimile, electronic or “PDF” document or signature.

b. Any notices or consents required or permitted by this Agreement shall be in writing and shall be deemed given if delivered in person to the person listed below or if sent by electronic mail or by nationally recognized overnight courier, as follows, unless such address is changed by written notice hereunder:

	If to Lender to:	Peapack-Gladstone Bank
		500 Hills Drive, Suite 300
		P.O. Box 700
		Bedminster, New Jersey 07921-1538
		Attention: Commercial Lending

	With copies to:	Cahill, Wilinski, Rhodes & Joyce, P.C.
		89 Haddon Ave, Suite A
		Haddonfield, NJ 08033
		Attention: Marcus J. Mies, Esq.

	If to Borrower to:	Fly-E Group Inc.
		136-40 39th Avenue
		Flushing, NY 11354

c. Any notice sent by Lender, or Borrower by any of the above methods shall be deemed to be given when so received.

d. Lender shall be fully entitled to rely upon any electronic transmission or other writing purported to be sent by any Authorized Officer (whether requesting an Advance or otherwise) as being genuine and authorized.

9.9. Headings: The headings of any paragraph or Section of this Agreement are for convenience only and shall not be used to interpret any provision of this Agreement.

9.10. Survival: All warranties, representations, and covenants made by Borrower herein, or in any agreement referred to herein or on any certificate, document or other instrument delivered by it or on its behalf under this Agreement, shall be considered to have been relied upon by Lender, and shall survive the delivery to Lender of the Notes, regardless of any investigation made by Lender or on its behalf. All statements in any such certificate or other instrument prepared and/or delivered for the benefit of Lender shall constitute warranties and representations by Borrower hereunder. Except as otherwise expressly provided herein, all covenants made by Borrower hereunder or under any other agreement or instrument shall be deemed continuing until all Obligations are satisfied in full. All indemnification obligations under this Agreement, including under Section 6.5, 9.4 and 9.7, shall survive the termination of this Agreement and payment of the Obligations for a period of two (2) years.

9.11. Successors and Assigns: This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties. Borrower may not transfer, assign or delegate any of its duties or obligations hereunder. Borrower acknowledges and agrees that Lender may at any time, and from time to time, (a) sell participating interests in the Loans, and Lender’s rights hereunder to other financial institutions, and (b) sell, transfer, or assign the Loans and Lender’s rights hereunder, to any one or more additional banks or financial institutions or other person in the business of commercial lending or holding commercial loans, subject (as to Lender’s rights under this clause (b)) to Borrower’s written consent, which consent shall not be unreasonably withheld; provided that, no consent under this clause (b) shall be required if an Event of Default exists at the time of such sale, transfer or assignment.

9.12. Duplicate Originals: Two or more duplicate originals of this Agreement may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument.

9.13. Modification: No modification hereof or any agreement referred to herein shall be binding or enforceable unless in writing and signed by Borrower and Lender.

9.14. Signatories: Each individual signatory hereto represents and warrants that he is duly authorized to execute this Agreement on behalf of his principal and that he executes the Agreement in such capacity and not as a party.

9.15. Third Parties: No rights are intended to be created hereunder, or under any related agreements or documents for the benefit of any third party, creditor or incidental beneficiary of Borrower. Nothing contained in this Agreement shall be construed as a delegation to Lender of Borrower’s duty of performance, including, without limitation, Borrower’s duties under any account or contract with any other Person.

9.16. Discharge of Taxes, Borrower’s Obligations, Etc.: Lender, in its sole discretion, shall have the right at any time, and from time to time, with at least ten (10) days prior notice to Borrower if Borrower fail to do so, to: (a) pay for the performance of any of Borrower’s obligations hereunder, and (b) discharge taxes or Liens, at any time levied or placed on Borrower’s Property in violation of this Agreement unless Borrower is in good faith with due diligence by appropriate proceedings contesting such taxes or Liens and maintaining proper reserves therefor in accordance with GAAP. Expenses and advances shall be added to the Revolving Credit, and bear interest at the rate applicable to the Revolving Credit, until reimbursed to Lender. Such payments and advances made by Lender shall not be construed as a waiver by Lender of a Default or Event of Default under this Agreement.

9.17. Withholding and Other Tax Liabilities: Lender shall have the right to refuse to make any Advances from time to time unless Borrower shall, at Lender’s request, have given to Lender evidence, reasonably satisfactory to Lender, that Borrower has properly deposited or paid, as required by law, all withholding taxes and all federal, state, city, county or other taxes due up to and including the date of the requested Advance. Copies of deposit slips showing payment shall constitute satisfactory evidence for such purpose. In the event that any Lien, assessment or tax liability against Borrower shall arise in favor of any taxing authority, whether or not notice thereof shall be filed or recorded as may be required by law, Lender shall have the right (but shall not be obligated, nor shall Lender hereby assume the duty) to pay any such Lien, assessment or tax liability by virtue of which such charge shall have arisen; provided, however, that Lender shall not pay any such tax, assessment or Lien if the amount, applicability or validity thereof is being contested in good faith and by appropriate proceedings by Borrower. In order to pay any such Lien, assessment or tax liability, Lender shall not be obliged to wait until such lien, assessment or tax liability is filed before taking such action as hereinabove set forth. Any sum or sums which Lender shall have paid for the discharge of any such Lien shall be added to the Revolving Credit and shall be paid by Borrower to Lender with interest thereon at the rate applicable to the Revolving Credit, upon demand, and Lender shall be subrogated to all rights of such taxing authority against Borrower.

9.18. Consent to Jurisdiction: Borrower and Lender each hereby irrevocably consent to the non-exclusive jurisdiction of the Courts of the State of New Jersey or the United States District Court for the District of New Jersey in any and all actions and proceedings whether arising hereunder or under any other agreement or undertaking. Borrower waives any objection which Borrower may have based upon lack of personal jurisdiction, improper venue or forum non conveniens. Borrower irrevocably agrees to service of process by certified mail, return receipt requested to the address of the appropriate party set forth herein.

9.19. Additional Documentation: Borrower shall execute and/or re-execute, and cause any other Person party to any Loan Document, to execute and/or re-execute and to deliver to Lender or Lender’s counsel, as may be deemed appropriate, any document or instrument signed in connection with this Agreement which was incorrectly drafted and/or signed, as well as any document or instrument which should have been signed at or prior to the Closing, but which was not so signed and delivered. Borrower agrees to comply with any written request by Lender within ten (10) days after receipt by Borrower of such request.

9.20. Waiver of Jury Trial: BORROWER AND LENDER EACH HEREBY WAIVE ANY AND ALL RIGHTS IT MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION, PROCEEDING OR COUNTERCLAIM ARISING WITH RESPECT TO RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO OR UNDER THE LOAN DOCUMENTS OR WITH RESPECT TO ANY CLAIMS ARISING OUT OF ANY DISCUSSIONS, NEGOTIATIONS OR COMMUNICATIONS INVOLVING OR RELATED TO ANY PROPOSED RENEWAL, EXTENSION, AMENDMENT, MODIFICATION, RESTRUCTURE, FORBEARANCE, WORKOUT, OR ENFORCEMENT OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS.

9.21. Consequential Damages: Neither Lender nor agent or attorney of Lender, shall be liable for any consequential damages arising from any breach of contract, tort or other wrong relating to the establishment, administration or collection of the Obligations.

[SIGNATURES TO FOLLOW ON SEPARATE PAGE]

SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT

WITNESS the due execution of this Agreement as a document under seal as of the date first written above.

	FLY-E GROUP, INC., Borrower

	By:	/s/ Zhou Ou
		Zhou Ou, CEO

	FLY E-BIKE, INC., Borrower

	By:	/s/ Zhou Ou
		Zhou Ou, CEO

	FLY EV, INC., Borrower

	By:	/s/ Zhou Ou
		Zhou Ou, CEO

	PEAPACK-GLADSTONE BANK, Lender

	By:	/s/ Ling Li_
		Ling Li, Senior Managing Director

EXHIBIT A

FORM OF AUTHORIZATION CERTIFICATE

A-1

EXHIBIT B

FORM OF REVOLVING CREDIT ADVANCE REQUEST

B-1

EXHIBIT C

BORROWING BASE CERTIFICATE

C-1

EXHIBIT D

COVENANT COMPLIANCE CERTIFICATE

D-1

EX-10.2 4 ea021110101ex10-2_flyegroup.htm CONTRACT AGREEMENT DATED AS OF JULY 5, 2024, BY AND BETWEEN THE REGISTRANT AND DF TECHNOLOGY US INC

Exhibit 10.2

Contract Agreement for the Development of GO FLY APP

This Agreement is entered into as of July 5, 2024 by and between DF Technology US Inc, herein referred to as “Developer,” with a principal place of business at 471 N Broadway #365, Jericho, NY 11753, and Fly-E Group, Inc. herein referred to as “Client,” with a principal place of business at 136-40 39th Ave, Flushing, NY11354.

1. Scope of Services

1.1 Development Services: Developer agrees to design, develop, and deliver an APP for rental services, named GO FLY, (collectively, the “APP”) in accordance with the detailed specifications set forth in Exhibit A attached to this Agreement.

1.2 Project Milestones: The APP development will be completed in phases, each defined with specific deliverables and deadlines as detailed in Exhibit A.

2. Compensation and Payment Terms

2.1 Fee Structure: The total fee for the services provided under this Agreement shall be up to $500,000. The client should pay the developer $300,000 before June 30, 2024 as initial capital to set up working team, and the rest of $200,000 will be payable in installments as per the milestones outlined in Exhibit A.

2.2 Invoicing and Payment: Developer will issue invoices corresponding to the milestones reached. Each invoice must be paid by Client within 30 days of receipt. Late payments will incur a charge of 10% per month on the overdue amount.

3. Project Timeline

3.1 Commencement: The development services shall commence on July 5, 2024 and continue until the completion of the services as stipulated in Exhibit A.

3.2 Delivery: The final delivery of the System is scheduled for September 5, 2024, subject to adjustments mutually agreed upon by the parties in response to any changes in project scope or unforeseen delays.

4. Confidentiality and Non-Disclosure

4.1 Confidentiality Obligation: Both parties agree to maintain the confidentiality of information shared during the course of this project and not to disclose it to any third party without the prior written consent of the other party.

4.2 Duration of Confidentiality: This obligation shall remain in effect for one year following the termination or expiration of this Agreement.

5. Intellectual Property Rights

5.1 Ownership of Intellectual Property: Upon full payment of the agreed fees, all intellectual property rights in the developed System, excluding any pre-existing intellectual property of either party, shall become the sole and exclusive property of the Client.

5.2 Licensing: If any pre-existing intellectual property is incorporated into the System, Developer grants Client a non-exclusive, worldwide, perpetual license to use such intellectual property as part of the System.

6. Warranties and Limitations

6.1 System Warranty: Developer warrants that the System will conform to the specifications and will be free from defects in workmanship and material for a period of 36 months from the date of final acceptance.

6.2 Remedies for Breach of Warranty: Developer will, at its own expense, correct any defects in the System or workmanship notified within the warranty period.

7. Termination

7.1 Termination Rights: Either party may terminate this Agreement upon written notice if the other party materially breaches any of its terms and fails to correct the breach within 30 days after receiving written notice.

Company: DF Technology US Inc		Company: Fly-E Group, Inc

Signature:	/s/ Ruifeng Guo	Signature:	/s/ Zhou Ou
Name and Title: Ruifeng Guo, CEO		Name and Title: Zhou Ou, CEO

Date: 7/5/2024		Date: 7/5/2024

Exhibit A

EX-10.3 5 ea021110101ex10-3_flyegroup.htm LETTER AGREEMENT DATED AS OF APRIL 1, 2023, BY AND BETWEEN THE REGISTRANT AND PJMG LLC

Exhibit 10.3

PJMG

April 1, 2023

Fly-E Group

136-40 39th Ave, Flushing, NY 11354

Dear MR. Andy:

Thank you for selecting us to assist your business. The purpose of this letter is to confirm the terms of our engagement and the services we will provide. You received this letter because we understand you are the person responsible for the business matters of the corporation.

OBJECTIVE OF ENGAGEMENT

It is our understanding that the Company is a public listing company on Nasdaq. We will assist in conjunction with the Company’s after IPO consulting services, while PJMG’s work may involve analysis of accounting, business and other related records, this engagement is not considered to be an audit, review, or compilation services in accordance with generally accepted auditing standards in the United States or the standards of the Public Company Accounting Oversight Board.

SERVICES

We will adopt the following approach to assist the Company to complete the review processes. PJMG and the Company’s key personnel will work together to accomplish the main work results of every step.

After IPO, compliance consulting services related to accounting, financial, and management.

After IPO, follow on fund raising and investors relationship management.

After IPO, oversea market planning and development.

PJMG

We do not undertake to, and will not, provide any opinion or form of assurance on the financial statements we assemble in connection with these services and, accordingly, we do not undertake to make inquiries or perform other procedures to verify, corroborate, or review information supplied to you. Our engagement to assemble financial statements cannot be relied upon to disclose errors, irregularities, or illegal acts, including fraud or defalcation that may exist.

The Company is responsible for the presentation of the accounting records on the Company; and for selecting the accounting policies and determining that such accounting policies are appropriate for its purposes. The Company is also responsible for making all management decisions and performing all management functions, including monitoring ongoing activities; for designating an individual with suitable skill, knowledge, or experience to oversee the services we provide; and for evaluating the adequacy and results of those services and accepting responsibility for them.

Responsibilities of Management and PJMG

The Company confirms that the definition and scope of the services detailed in this engagement letter are agreed by the Company to be sufficient to meet its needs, and that the Company is responsible for the results to be achieved from using the services and any deliverables.

It is the Company's responsibility to determine the procedures deemed necessary in connection with its compliance with relevant SEC rules, to execute those procedures and to assess the adequacy and the results of such procedures thereof.

We provide no opinion or other form of assurance with respect to the Company’s compliance with the relevant SEC rules, or your procedures. We make no representation as to whether the Company’s procedures are sufficient for its purposes. Our services should not be taken to supplant inquiries and procedures that the Company should undertake for purposes of obtaining and using the information necessary in connection with the Company’s compliance with the provisions of the relevant SEC rules.

PJMG

The Company is ultimately responsible for deciding whether or not to adopt any of our recommendations, as well as for the implementation of any recommendations accepted by management. The Company is ultimately responsible for the on-going maintenance of the appropriateness and effectiveness of these processes.

The Company’s management and personnel need to be able to continually monitor and enhance the Company's controls. Thus, it is vital that there is full involvement of the Company’s personnel in the project and that they take leadership in the completion of documentation, testing and reporting as required. That is, the Company must utilize its own personnel to establish a regular system of self assessment and monitoring of its controls related to the preparation of financial statements.

SERVICES TO DATE

Any services performed by PJMG in connection with this engagement prior to this engagement letter, including any invoices sent or payments made by the client, shall be subject to the terms of this agreement in the same manner as if they were performed after the date this agreement is executed.

ADDITIONAL SERVICES

Any additional services that you may request, that we agree to provide, may be the subject of separate written agreements, either in the form of a separate engagement letter or as an amendment to this engagement letter. In the absence of any other written communication from us documenting such additional services, our services will continue to be governed by the terms of this engagement letter.

LIMITATION OF SERVICES

We will not perform management functions or make management decisions for client. However, we may provide advice, research materials, and recommendations to assist client’s management in performing its functions and making decisions. Our role is not to perform on-going monitoring activities or control activities that affect the execution of transactions or ensure that transactions are properly executed. Our role in this engagement is to review the activities performed by management and report deficiencies and provide recommendations for improvement. Client’s management will have the ultimate responsibilities for determining which recommendations will be implemented and to evaluate the adequacy and results of the service performed and accept responsibility for the results of the services.

PJMG

MR. Andy will be the individual designated by management to oversee our services in this regard.

CLIENT ASSISTANCE IN SUPPORT OF SERVICES

Certain documentation and information will be requested by us during the course of this engagement in order for us to complete the engagement objectives as you may outline to us. The client agrees that all records, documentation, and information requested by us in connection with this engagement will be made available to us (including those pertaining to related parties), that all material information will be disclosed to us, and that we will have the full cooperation of your personnel.

If we believe that failure to make reasonably requested information available prohibits us from making conclusions in accordance with engagement objectives, we will so notify you. In such event, you will not hold us responsible and all fees and expenses will be paid to us in accordance with the terms of the engagement.

ASSUMPTIONS AND REPRESENTATIONS

In performing our services, we will rely on the accuracy and reliability of data obtained from the client. As part of this engagement, we will not audit, review or compile financial statements, and we will not express an opinion of any form of assurance on them. Any written reports that we prepare are to be used only in connection with engagement hereunder and may not be distributed to outside parties, published or used in any other manner without the written consent of PJMG ACCOUNTING & TAX LLC. Our engagement cannot be relied upon to disclose fraud or other illegal acts that may exist.

PJMG

ACCESS TO WORKING PAPERS

All working papers and other documents prepared or received by us pursuant to this engagement will be maintained by us as confidential material in accordance with the terms hereof. Any working papers that we compile in connection with this engagement are the property of PJMG. We currently retain working papers for seven years from the completion of the engagement. After such time, working papers are properly disposed of. We are not responsible for the retention of Client's original records

CONFIDENTIALITY

As a client of the firm, you can feel confident that we are committed to safeguarding your personal information, using internal policies, procedures, and safeguards reasonably appropriate for the information we receive. We may from time to time, and depending on the circumstances, share confidential information with third-party service providers; any such third-party service provider will be required to maintain the confidentiality of your information.

ELECTRONIC COMMUNICATION AND DISSEMINATION

In connection with this engagement, we may communicate with you or others via e-mail transmission. As e-mails can be intercepted and read, disclosed, or otherwise used or communicated by an unintended third party, or may not be delivered to each of the parties to whom they were intending, we cannot guarantee or warrant the e-mails from us will be properly delivered and received by addressee. In that regard, you agree that we shall have no liability for any loss or damage resulting from the use of e-mail transmissions.

With regard to the electronic dissemination of any financial statements or tax returns, including documents published electronically or on your Internet website, you understand that electronic sites are a means of distributing information and, therefore, we are not required to read the information contained in those sites or to consider the consistency of other information in the electronic site with the original document.

PJMG

INDEMNIFICATION

Client agrees to indemnify, hold harmless, and defend PJMG ACCOUNTING & TAX LLC, its members, employees, agents, shareholders, affiliates, officers, and assigns against any and all losses, claims, damages, liabilities and costs (including, without limitation, legal and other expenses in investigating or defending claims or in giving testimony or in furnishing documents) relating to or arising out of PJMG's services or any transaction resulting there from. This indemnification clause shall not apply to the extent any such loss, claim, damages, liabilities, expenses or costs are found in the final judgment by a court to have resulted from PJMG's own negligence or willful misconduct. The provisions of this paragraph shall survive the termination of this agreement.

In the event that we are compelled by any subpoena, Court Order, or other legal authority to produce documents related to this engagement, whether originally received from the Client or generated by us in performing services related to this engagement, Client agrees to reimburse us for reasonable administrative and legal costs incurred in connection with the collection, review, and production of any such documents, as well as time spent responding to any subpoena or providing testimony.

LIMITATION OF LIABILITY

Client agrees that any liability of PJMG arising out of the services provided under this agreement is limited to the lesser of actual damages incurred or the amount of the fee paid for the specific service from which the claimed damages arose. Client agrees to release all known or unknown claims, matters beyond the scope of the retention for preparation of services, or any wrongdoing which already occurred. However, this limitation shall not apply in the event. However, PJMG is adjudged to have acted willfully or to have been grossly negligent. In no event shall PJMG or its personnel be liable to you for any punitive, consequential, lost profits, or benefitof-the-bargain damages in connection with the services provided under this agreement.

FEES

We have estimated the fees for the aforementioned services to be $45,000 for the first month and from the second month the fees will be $15,000. The payments are due upon presentation of invoices from PJMG.

PJMG

Our fees for these services will be computed at our standard hourly rates based upon the time required together with any out-of-pocket expenses. The fee estimate is based on anticipated cooperation from the Company’s personnel, timely responses to our inquiries, timely communication of all significant accounting and financial matters, and the assumption that unexpected circumstances will not be encountered during the work performed. If significant additional time is necessary, we will discuss it with you and arrive at a new fee estimate before we incur the additional costs. Our invoices for these fees will be rendered each month as work progresses and are payable on presentation. Service charges may be applied to past due balances at 1% per month.

Such payments will be made into an account designated by PJMG.

Currently our standard hourly billing rates are as follows:

Partners $ 375 - $ 450

Managers 275 - 325

Staff 150 - 250

These rates are subject to change from time to time.

Any additional services that may be requested and we agree to provide, will be the subject of separate arrangements.

TERM AND TERMINATION

Either party may terminate this agreement upon 30 days' notice to the other party. In the event that we choose to terminate our services for cause, Client shall be obligated to pay us for all services and charges accrued through the date of termination irrespective of whether we have concluded our engagement or rendered a report. Should you terminate this engagement prior to having paid PJMG an amount equal to the value of the services we have performed up to the date of termination, you agree to promptly remit any balances due. Our fee for the services described will be standard billing price plus out-of-pocket expenses. All invoices are due and payable upon presentation. To the extent permitted by state law, an interest charge will be added to all accounts not paid within thirty (30) days.

PJMG

COMPLETE AGREEMENT

This engagement letter represents the entire agreement between PJMG and the Client regarding the terms of the engagement, and supersedes all prior agreements, proposals, understandings, negotiations, promises, and notifications. The Client agrees that this engagement letter shall not be amended or modified in any respect, nor shall any provisions of the engagement letter be waived, except by an instrument in writing signed by the party against whom enforcement is sought.

SEVERABILITY

Any term or provision of this Agreement that is invalid or unenforceable in any situation, in any jurisdiction, shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.

NON ASSIGNMENT & INTENDED RECIPIENT

Our engagement hereunder is to be performed solely for the benefit of Client and no other person or entity is intended to have any rights under, or to be able to enforce the terms of, this agreement. Accordingly, unless otherwise agreed to in a writing signed by us, the services provided, and any work product resulting from those services, are not intended to benefit, be used by, or relied upon by anyone other than the listed clients.

GOVERNING LAW

This agreement, and any disputes that may arise out of the services provided under this agreement, shall be governed by the laws of the State of New York, without regard to choice of law principles. Any action arising out of the services provided under this agreement shall be commenced in the Supreme Court of the State of New York in the County of Nassau or the County of New York, or in the United States District Court for the Southern or Eastern District of New York.

ACKNOWLEDGEMENT

We believe the foregoing correctly sets forth our understanding, but if you have any questions, please let us know. Several technical terms and phrases have been used herein: we presume you to understand their meaning or that you will notify us otherwise so that we can furnish appropriate explanations.

PJMG

To affirm that this letter agrees with your understanding of the terms of our engagement, please sign the enclosed copy in the space indicated and return it.

We appreciate your confidence in us.

Sincerely,

/s/ Steven Guo
Steven Guo, Partner

PJMG
40 Wall St, New York

Accepted By:	/s/Zhou ou
Title	CEO
Date:	4/1/2023
Business name:	Fly-E Group, Inc
Business address:	136-40 39th Ave, Flushing, NY 11354

EX-31.1 6 ea021110101ex31-1_flyegroup.htm CERTIFICATION

Exhibit 31.1

CERTIFICATION OF THE
PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a) AND RULE 15d-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Zhou Ou, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Fly-E Group, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant and its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 16, 2024	By:	/s/ Zhou Ou
		Zhou Ou
		Chief Executive Officer
		(Principal Executive Officer)

EX-31.2 7 ea021110101ex31-2_flyegroup.htm CERTIFICATION

Exhibit 31.2

CERTIFICATION OF THE
PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a) AND RULE 15d-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Ruifeng Guo, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Fly-E Group, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 16, 2024	By:	/s/ Ruifeng Guo
		Ruifeng Guo
		Chief Financial Officer
		(Principal Accounting and Financial Officer)

EX-32.1 8 ea021110101ex32-1_flyegroup.htm CERTIFICATION

Exhibit 32.1

CERTIFICATION OF THE
PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Fly-E Group, Inc.(the “Company”) on Form 10-Q for the quarterly period ended June 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Quarterly Report”), I, Zhou Ou, Chief Executive Officer of the Company, do hereby certify, pursuant to 18 U.S.C. §1350, as added by §906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

(1)

The Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)

The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operation of the Company as of the dates and for the periods expressed in the Quarterly Report.

This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Securities Exchange Act.

Date: August 16, 2024	By:	/s/ Zhou Ou
		Zhou Ou
		Chief Executive Officer
		(Principal Executive Officer)

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2 9 ea021110101ex32-2_flyegroup.htm CERTIFICATION

Exhibit 32.2

CERTIFICATION OF THE
PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Fly-E Group, Inc.(the “Company”) on Form 10-Q for the quarterly period ended June 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Quarterly Report”), I, Ruifeng Guo, Chief Financial Officer, Principal Financial and Accounting Officer of the Company, do hereby certify, pursuant to 18 U.S.C. §1350, as added by §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)

The Quarterly Report fully complies with the requirements of Section 13(a), or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)

Date: August 16, 2024	By:	/s/ Ruifeng Guo
		Ruifeng Guo
		Chief Financial Officer
		(Principal Accounting and Financial Officer)