Executive Summary / Key Takeaways

• Niche Market Leadership with Growth Potential: Fly-E Group, Inc. (NASDAQ: FLYE) has established itself as a leading provider of electric two-wheelers, particularly for food delivery workers in New York City, leveraging an omnichannel retail model and a user-centric product design philosophy. The company's strategic expansion into rental services and international markets positions it for future growth in the burgeoning urban micromobility sector.
• Recent Financial Headwinds and Liquidity Concerns: Fiscal Year 2025 saw a significant 21% decline in net revenues to $25.4 million and a net loss of $5.3 million, primarily due to public concerns over lithium-battery safety and the closure of key wholesale customer stores. This, coupled with substantial cash outflows from operations, raises "substantial doubt" about the company's ability to continue as a going concern, despite recent capital raises.
• Technological Differentiators and Strategic Pivots: FLYE's competitive edge stems from its specialized product features like an easy battery swap system for delivery workers, ongoing development of the "Fly E-Bike" app for enhanced user experience, and a planned "Fly E-Bike Care" extended warranty program. These initiatives aim to improve customer loyalty and operational efficiency.
• Intense Competitive Landscape and Regulatory Scrutiny: Operating in an evolving and highly competitive market, FLYE faces larger, better-resourced EV manufacturers. The company must navigate increasing regulatory demands for product safety, particularly concerning lithium-ion batteries, which have directly impacted sales and resulted in a $1.0 million settlement for trademark infringement.
• Path Forward Hinges on Execution and Capital: Management's plan to alleviate going concern risk relies on securing further equity and debt financing, alongside strategic initiatives like expanding rental services and exploring new product categories like gas bikes. Successful execution of these plans and effective remediation of internal control weaknesses are critical for long-term viability.

The Electric Pulse of Urban Delivery: Fly-E's Strategic Foundation

Fly-E Group, Inc. (FLYE) has carved out a significant niche in the rapidly expanding electric vehicle (EV) market, specifically focusing on smart electric motorcycles, e-bikes, and e-scooters under its "Fly E-Bike" brand. Established in 2018, the company quickly became a prominent player in urban mobility, particularly for the bustling food delivery sector in New York City. This early market entry allowed Fly-E to capitalize on the burgeoning e-commerce trend and the amplified demand for delivery services, especially during and after the COVID-19 pandemic.

The company's strategic evolution has been marked by continuous innovation and a user-centric design philosophy. Since 2018, Fly-E has launched over 67 new products and consistently upgraded existing models, demonstrating a commitment to refreshing its offerings in line with market trends. A key technological differentiator for Fly-E's e-bikes, especially those tailored for food delivery workers, is their longer battery life and a stable backseat designed for holding delivery baskets. Crucially, the company has developed an "easy battery swap system," allowing delivery workers to replace a fully charged battery at any Fly E-Bike store within a minute, a tangible benefit that significantly reduces downtime and enhances operational efficiency for its core customer base.

Beyond hardware, Fly-E is developing the "Fly E-Bike app," a mobile software designed to provide a comprehensive intelligent experience for users. This app is expected to include functions such as GPS, navigation, battery and tire pressure management, online shopping, and anti-theft features, aiming to create a safer and more satisfying riding experience. Furthermore, the planned "Fly E-Bike Care" program will offer an extended warranty, functioning as an insurance policy for continuous maintenance services beyond the standard manufacturer and battery warranties, including coverage for accidental damages. These technological and service innovations are designed to build a stronger competitive moat by enhancing product utility, customer convenience, and loyalty.

Strategic Expansion and Market Presence

Fly-E Group has strategically expanded its physical and digital footprint since its inception. The company operates an omnichannel retail model, comprising 20 retail stores (19 in the U.S. and one in Canada) and an online store at flyebike.com. This integrated approach allows customers to place orders online and pick up products at retail locations, seamlessly blending the online and offline experience. The company also works with 85 distributors across the United States, extending its reach into various markets.

Recent strategic initiatives underscore Fly-E's ambition. In October 2024, the company launched a rental program in New York City, Toronto, and Los Angeles, offering UL-certified e-bikes to meet increasing market demand, with plans to expand to Miami. This new revenue stream generated $171,867 in its first partial year (FY2025). In January 2025, Fly-E's "Fly-11.00 PRO" model was selected as an official participant in the New York City Department of Transportation's $2 million trade-in program for food delivery workers, a testament to its product quality and market relevance. The company is also exploring leveraging its existing retail stores as logistics hubs for small package delivery, a move that could diversify its service offerings and tap into the growing urban logistics market.

To streamline its corporate structure and improve administrative efficiency, Fly-E Group disposed of 15 subsidiaries between December 2024 and July 2025. This was not a strategic withdrawal from any specific market but rather a measure to reduce complexity in financial reporting and operations. Concurrently, the company has been active in capital markets, completing an Initial Public Offering (IPO) in June 2024, raising approximately $9.2 million in net proceeds, and a registered direct offering in June 2025, which generated an additional $6.24 million in net proceeds. These capital infusions are crucial for supporting its growth initiatives and operational needs.

Competitive Dynamics in Micromobility

The market for electric two-wheel vehicles is in its infancy but is rapidly becoming more competitive. Fly-E Group operates within this dynamic landscape, competing on factors such as innovation, performance, price, technology, product features, styling, brand recognition, quality, and distribution. While Fly-E believes it holds competitive advantages in brand, product design, smart features, and its omnichannel retail model, it faces formidable rivals.

Larger, more established electric vehicle manufacturers, such as NIU Technologies (NIU), XPeng Inc. (XPEV), and NIO Inc. (NIO), possess significantly greater financial, technical, manufacturing, and marketing resources. While these companies primarily operate in broader EV segments, they increasingly overlap with Fly-E in urban mobility solutions, including e-motorcycles and smart vehicle technologies. For instance, NIU, a prominent e-scooter and e-bike manufacturer, typically reports gross margins around 15-30% and operating margins that are often negative, similar to XPEV and NIO, which also show negative operating and net margins due to heavy R&D and scaling costs.

In contrast, Fly-E Group reported a consolidated gross margin of 41.1% in fiscal year 2025, significantly higher than its larger EV counterparts. This suggests a potentially more favorable product mix or cost structure within its niche. However, Fly-E's operating margin was -3.51% and net margin was -4.62% for the TTM period, indicating that while its product gross profitability is strong, higher operating expenses are eroding overall profitability. This highlights Fly-E's challenge in scaling efficiently and managing overheads compared to its larger competitors.

Fly-E's competitive advantages lie in its specialized accessory ecosystem, offering a wide range of add-ons and performance upgrades that appeal to a customization-focused customer base. This can lead to higher average selling prices and improved customer loyalty. Its extensive retail network in the U.S. and Canada provides direct customer engagement, potentially reducing customer acquisition costs and fostering brand recognition, particularly among its core food delivery worker demographic. However, Fly-E's technological capabilities, while innovative for its niche, may lag behind the advanced AI and battery technologies seen in competitors like XPeng and NIO, which boast superior energy efficiency and faster charging solutions. This technological gap could result in higher operating costs per unit for Fly-E's products and potentially limit its market share in segments demanding cutting-edge performance.

Financial Performance and Liquidity Challenges

Fly-E Group's financial performance in fiscal year 2025 (ended March 31, 2025) presented significant challenges. Net revenues decreased by 21% to $25.4 million, down from $32.2 million in the prior fiscal year. This decline was primarily driven by a substantial 10,846-unit decrease in sales volume, from 69,611 units in FY2024 to 58,765 units in FY2025. Management attributed this volume reduction largely to increasing public concerns over lithium-battery accidents in New York, which led customers to opt for oil-powered vehicles. Wholesale revenue also suffered a 39.3% decline, from $5.8 million to $3.5 million, due to the closure of key customer stores.

Despite the revenue decline, Fly-E managed to increase its average sales price per EV by 2.9% to $989 in FY2025, driven by product upgrades and enhanced sales channels. Cost of revenues decreased by 21.6%, benefiting from more favorable pricing from suppliers, particularly an 11% reduction in battery unit costs from $112 to $99. This enabled the company to maintain a stable gross margin of 41.1% in FY2025, compared to 40.7% in FY2024.

However, total operating expenses surged by 52.5% to $15.01 million in FY2025, up from $9.85 million. This increase was primarily due to higher payroll expenses, increased rent from retail store expansion, and a significant rise in professional fees associated with its IPO and ongoing public company obligations. The company also incurred a $1.0 million settlement payment related to UL litigation. These escalating costs, combined with reduced revenues, resulted in a net loss of $5.3 million for FY2025, a sharp reversal from the $1.9 million net income in FY2024.

The company's liquidity position as of March 31, 2025, reflects these challenges. Cash stood at $0.8 million, with working capital of $1.3 million.

Net cash used in operating activities was approximately $10.1 million for FY2025, and current contractual obligations amounted to $8.9 million. This financial strain has led the company's auditor to express "substantial doubt about our ability to continue as a going concern." Management plans to address this through further equity financing, debt from financial institutions, and support from related parties, though there is no assurance these efforts will be successful.

Risks and Outlook

Fly-E Group faces several critical risks that could impact its future performance. The most pressing is the product safety risk associated with lithium-ion batteries, which has already deterred customers and contributed to declining sales. Any further incidents or negative publicity could severely damage brand reputation and lead to costly product recalls or liability claims. The evolving regulatory environment for micromobility devices, particularly concerning battery safety and certification (as evidenced by the UL litigation and new NYC regulations), poses ongoing compliance challenges and potential margin pressures.

Supply chain vulnerabilities remain a concern, given the company's heavy reliance on a limited number of principal vendors in China. Geopolitical tensions and tariffs between the U.S. and China, as well as broader global conflicts like the Russia-Ukraine war, could disrupt supply, increase costs, and negatively impact operating results. Furthermore, Fly-E's ability to scale production economically and maintain consistent quality is unproven for large volumes, a critical factor for future growth. The identified material weaknesses in internal control over financial reporting also present a significant operational risk, potentially affecting financial reporting accuracy and investor confidence.

Despite these headwinds, Fly-E Group's outlook involves several strategic initiatives aimed at re-establishing growth and improving financial health. The company plans to expand its rental services to new markets like Miami, leveraging the "Go Fly" app. It also intends to open a second online store focusing on gas bikes, a move that could diversify its product portfolio and mitigate risks associated with electric vehicle adoption. International expansion into South America and Europe is also on the horizon, seeking new growth opportunities and favorable government policies. Management anticipates a decrease in payroll expenses in the next fiscal year due to recent store closures and dispositions, which could help alleviate some operating cost pressures. The successful implementation of its ERP system, completed in May 2025, is expected to streamline operations, including sales, inventory, and financial reporting, potentially improving efficiency and cost control.

Conclusion

Fly-E Group stands at a pivotal juncture, embodying the high-stakes potential and inherent volatility of the rapidly evolving urban micromobility market. Its foundational strength lies in its early establishment as a key player in the New York City delivery sector, supported by a robust omnichannel presence and product innovations like the easy battery swap system. This technological differentiation, coupled with a strategic focus on customer-centric services and a diverse accessory ecosystem, provides a unique value proposition in a competitive landscape.

However, the company's recent financial performance, marked by declining revenues and a net loss driven by external safety concerns and operational cost increases, underscores significant challenges. The "going concern" warning highlights the urgent need for successful capital raises and stringent cost management. While Fly-E's gross margins are notably stronger than some larger EV counterparts, its ability to translate this into overall profitability and sustainable cash flow will depend on its capacity to scale efficiently, mitigate supply chain risks, and adapt to a dynamic regulatory environment. For investors, Fly-E represents a compelling, albeit high-risk, opportunity to participate in the future of urban electric transportation, contingent on management's adept execution of its strategic pivots and its ability to overcome current operational and financial hurdles.