Core Insights - Senmiao Technology Limited reported total revenues of $1.6 million for the fiscal 2024 third quarter, a decrease from $1.7 million in the prior-year period, primarily due to reduced revenues from online ride-hailing services, partially offset by growth in the automobile rental business [1][3] - The company narrowed its loss from operations to $1.1 million from $1.3 million year-over-year, and net loss decreased to $0.9 million from $1.0 million [1][5] - The automobile rental business saw a 27.0% increase in operating lease revenues, reaching $1.0 million, attributed to improved utilization rates [3][5] Financial Performance - Total revenues for the third quarter were $1.6 million, with the automobile rental business contributing $1.0 million and the online ride-hailing platform generating $0.5 million [1][3] - Gross profit increased by 128.5% to $0.4 million, driven by higher contributions from the automobile rental segment [5] - Selling, general and administrative expenses decreased by 24.0% to $1.1 million, reflecting ongoing cost control measures [5] Operational Highlights - Since the launch of its online ride-hailing platform on October 23, 2020, Senmiao has completed over 35.4 million rides, generating total fares of $114.0 million [1] - The company operates in 26 cities across China, including major markets like Chengdu, Changsha, and Guangzhou [1] - A partnership with Anhui Lianma Technology Co., Ltd. is expected to enhance order completion rates and operational efficiency [2] Cost Management - Cost of revenues decreased by 22.9% to $1.2 million, mainly due to reduced maintenance and insurance expenses related to the automobile rental business [4][5] - The company has implemented cost-cutting initiatives that have successfully reduced SG&A expenses [2][5] Financial Position - As of December 31, 2023, cash and cash equivalents stood at $1.1 million, down from $1.6 million as of March 31, 2023 [5][8] - Total stockholders' equity decreased to $2.2 million from $4.4 million during the same period [5][11]

Financial Position - Total assets decreased from $14,238,615 to $12,135,150, representing a decline of approximately 14.8%[12] - Current liabilities increased from $5,184,823 to $5,418,047, reflecting an increase of about 4.5%[12] - Cash and cash equivalents decreased from $1,610,090 to $1,064,822, a reduction of approximately 33.9%[12] - Total stockholders' equity decreased from $4,394,214 to $2,238,876, a decline of approximately 49.1%[13] - Non-controlling interests decreased from $3,833,466 to $3,626,870, a reduction of about 5.4%[14] - Total liabilities increased from $5,741,549 to $6,035,040, representing an increase of about 5.1%[14] - Total current assets increased from $4,854,786 to $5,042,414, reflecting an increase of approximately 3.9%[12] - The total accumulated deficit as of December 31, 2023, was $40,003,077, compared to $36,323,523 as of December 31, 2022, indicating an increase of approximately 10.5%[22] - The total equity as of December 31, 2023, was $5,865,746, a decrease from $10,005,952 as of December 31, 2022, representing a decline of approximately 41.5%[22] Revenue and Profitability - Total revenues for the three months ended December 31, 2023, were $1,611,277, a decrease of 5.8% compared to $1,710,172 for the same period in 2022[15] - Gross profit for the nine months ended December 31, 2023, was $1,373,619, compared to $951,548 for the same period in 2022, reflecting a significant increase of 44.4%[15] - Net loss attributable to the Company's stockholders for the three months ended December 31, 2023, was $(933,998), compared to $(971,341) for the same period in 2022, indicating a reduction in losses[15] - Total comprehensive loss attributable to stockholders for the nine months ended December 31, 2023, was $(2,634,660), compared to $(2,940,216) for the same period in 2022, showing an improvement[15] - The company reported a loss from operations of $(1,079,707) for the three months ended December 31, 2023, compared to $(1,329,376) for the same period in 2022, indicating a decrease in operational losses[15] - The cost of revenues for the nine months ended December 31, 2023, was $(4,166,456), down from $(5,372,370) for the same period in 2022, indicating cost management efforts[15] Cash Flow and Investments - The company reported a net cash provided by operating activities of $254,749 for the nine months ended December 31, 2023, compared to $249,287 for the same period in 2022, indicating a slight increase of 2%[20] - The company had a net cash used in investing activities of $541,204 for the nine months ended December 31, 2023, compared to a net cash provided of $287,146 in the same period of 2022[20] - As of December 31, 2023, total cash, cash equivalents, and restricted cash amounted to $1,067,197, a decrease from $1,537,609 at the end of December 31, 2022[22] Segment Information - The Company operates in two segments: automobile transaction and related services, and online ride-hailing platform services, with operations in Chengdu, Changsha, and 24 other cities in China[26] Credit and Allowance for Losses - The allowance for credit losses due from Jinkailong was $2,115,735 as of December 31, 2023, with a provision for credit losses of $680,396 recorded during the nine months ended December 31, 2023[34] - The company did not record any allowance for credit losses against accounts receivable as of December 31, 2023, and March 31, 2023[65] - The company has not recorded any allowance against the balance from automobile purchasers during the three and nine months ended December 31, 2023[127] Derivative Liabilities and Fair Value - The fair value of derivative liabilities as of December 31, 2023, is $91,755, a decrease from $501,782 as of March 31, 2023[54] - The change in fair value of derivative liabilities for the nine months ended December 31, 2023, resulted in a decrease of $410,021[54] - The company reported a significant change in the fair value of derivative liabilities, with a notable decrease in values for various warrants from March 31, 2023, to December 31, 2023[54] Taxation and Valuation Allowances - The net operating loss for U.S. income taxes for the nine months ended December 31, 2023, was approximately $1.3 million, compared to $0.4 million for the same period in 2022[164] - As of December 31, 2023, the Company's net operating loss carryforward for U.S. income taxes was approximately $8.5 million[164] - The Company provided a 100% valuation allowance on deferred tax assets related to net operating loss carryforwards in the U.S. and PRC, totaling approximately $4.9 million as of December 31, 2023[168] Operational Expenses - Employee benefit contributions for the three months ended December 31, 2023, were $67,565, down from $107,638 for the same period in 2022, a decrease of about 37.2%[143] - The total interest expense for the three months ended December 31, 2023, was $7,852, compared to $6,975 for the same period in 2022, an increase of approximately 12.6%[137] Future Commitments and Liabilities - As of December 31, 2023, the Company had a working capital deficit of approximately $0.4 million and a purchase commitment of approximately $0.8 million for 100 automobiles[39] - The company expects to complete the remaining automobile purchase of 100 units by December 31, 2024, with prepayments of $650,713 made as of December 31, 2023[135] - The company is subject to a potential future payment of approximately $840,000 to Impawn due to joint and several liability guarantees for loans[204] Management Concerns - Management has expressed substantial doubt about the Company's ability to continue as a going concern if significant revenue is not generated[41]

Core Viewpoint - Senmiao Technology Limited reported a 13.6% increase in completed orders for its online ride-hailing platform in December 2023, reaching approximately 0.55 million orders, attributed to a strategic partnership with Anhui Lianma Technology [1][2]. Group 1: Operating Metrics - In December 2023, Senmiao and its affiliates completed approximately 0.55 million total orders, up from 0.48 million in November 2023 [1]. - Since the launch of its platform in October 2020, Senmiao has completed over 26.2 million rides, with approximately 9.2 million rides completed through partner platforms under a new operational model [2][3]. - The number of Active Drivers in December 2023 was 5,127, a decrease from 5,240 in November 2023 [1][2]. Group 2: Business Models - The original model allows orders from partner platforms to be completed by Senmiao's own platform, where Senmiao earns commissions based on a percentage of the order value [4]. - The new model, initiated in August 2021, enables ride-hailing requests to be completed on partner platforms using Senmiao's network of cars and drivers for a fixed monthly fee [4][5]. Group 3: Future Reporting - Starting in 2024, Senmiao will provide updates on its operating metrics on a quarterly basis as part of its financial disclosures [2].

Core Viewpoint - Senmiao Technology Limited has entered into a strategic cooperation agreement with Anhui Lianma Technology Co., Ltd to enhance its online ride-hailing platform operations in major Chinese cities, aiming to increase completed orders and operational efficiency amidst rising competition and compliance challenges [1][2][3]. Group 1: Strategic Cooperation - The agreement, signed on November 30, 2023, involves Senmiao and Lianma collaborating on ride-hailing platform operations in cities such as Chengdu, Changsha, and Guangzhou [2]. - Lianma will manage various operational aspects for Senmiao, including business development, driver and vehicle resource management, platform management, and customer service, with service fees based on completed orders [2][3]. Group 2: Operational Impact - Senmiao's Chairman and CEO, Xi Wen, expressed confidence that the partnership with Lianma will lead to an increase in monthly completed orders and improved operational efficiency, which is crucial given the competitive landscape and compliance scrutiny from Gaode [3]. - The original model allows orders from partner platforms to be fulfilled by Senmiao's platform, enabling riders to access Senmiao's services through partner platforms [3]. Group 3: Company Overview - Senmiao Technology Limited, headquartered in Chengdu, Sichuan Province, provides automobile transaction services and operates its own ride-hailing platform, targeting the growing online ride-hailing market in China [4].

[Front Matter](index=1&type=section&id=Front%20Matter) This section contains preliminary information including the report type, company details, and a cautionary note regarding forward-looking statements [Cover Page](index=1&type=section&id=Cover%20Page) This Form 10-Q Quarterly Report for Senmiao Technology Limited (AIHS) covers the period ended September 30, 2023 - The report is a **Form 10-Q Quarterly Report**[2](index=2&type=chunk) - The company is **Senmiao Technology Limited (AIHS)**[3](index=3&type=chunk) - The reporting period ended on **September 30, 2023**[2](index=2&type=chunk) - **9,568,040 shares** of common stock were outstanding as of November 10, 2023[3](index=3&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=3&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section warns that the report contains forward-looking statements subject to significant risks and uncertainties - The report contains forward-looking statements based on management's current expectations, subject to various risks[6](index=6&type=chunk) - Key risk factors include business expansion, public health epidemics, Chinese economic growth, competition, and policy changes[6](index=6&type=chunk) - The company operates in an evolving environment with emerging risks and disclaims any obligation to update forward-looking statements[7](index=7&type=chunk)[8](index=8&type=chunk) [PART I – FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis [Unaudited Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section presents the company's unaudited consolidated financial statements and related notes for the period ended September 30, 2023 Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | Sep 30, 2023 (USD) | Mar 31, 2023 (USD) | | :--- | :--- | :--- | | **Total Current Assets** | 5,263,710 | 4,854,786 | | **Total Assets** | 12,658,665 | 14,238,615 | | **Total Current Liabilities** | 5,596,978 | 5,184,823 | | **Total Liabilities** | 6,281,320 | 5,741,549 | | **Total Equity** | 6,142,981 | 8,227,680 | Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended Sep 30, 2023 (USD) | Six Months Ended Sep 30, 2023 (USD) | | :--- | :--- | :--- | | **Total Revenues** | 1,826,951 | 3,921,665 | | **Gross Profit** | 374,111 | 956,051 | | **Loss from Operations** | (1,281,945) | (2,070,367) | | **Net Loss** | (1,207,452) | (1,628,799) | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Six Months Ended Sep 30, 2023 (USD) | Six Months Ended Sep 30, 2022 (USD) | | :--- | :--- | :--- | | **Net Cash Provided by Operating Activities** | 88,129 | 512,205 | | **Net Cash (Used in) Provided by Investing Activities** | (276,658) | 414,261 | | **Net Cash (Used in) Provided by Financing Activities** | (22,926) | 32,075 | | **Net (Decrease) in Cash** | (302,976) | 780,311 | [Note 1. ORGANIZATION AND PRINCIPAL ACTIVITIES](index=8&type=section&id=Note%201.%20ORGANIZATION%20AND%20PRINCIPAL%20ACTIVITIES) Senmiao Technology Limited operates in China through two segments: automobile transaction services and online ride-hailing platform services - The company operates two primary business segments in the PRC: **automobile transaction services** and **online ride-hailing platform services (Xixingtianxia)**[25](index=25&type=chunk)[26](index=26&type=chunk) - The ride-hailing platform operates in **27 cities** across China[26](index=26&type=chunk) - On March 31, 2022, the company deconsolidated Jinkailong, which is now a **35% equity investee**[31](index=31&type=chunk)[32](index=32&type=chunk) - As of September 30, 2023, a net balance of **$4,250,553** was due from Jinkailong[33](index=33&type=chunk) [Note 2. GOING CONCERN](index=11&type=section&id=Note%202.%20GOING%20CONCERN) Management expresses substantial doubt about the company's ability to continue as a going concern due to financial losses and commitments - Management has determined substantial doubt exists about the company's ability to continue as a going concern[40](index=40&type=chunk) - Key factors include a net loss of approximately **$1.6 million** for the six-month period, an accumulated deficit of approximately **$39.1 million**, a working capital deficit of approximately **$0.3 million**, and purchase commitments for **120 automobiles** totaling approximately **$1.2 million**[39](index=39&type=chunk) - Management plans to seek equity financing, debt from PRC banks, and related party support, though success is not assured[40](index=40&type=chunk)[41](index=41&type=chunk) [Note 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=11&type=section&id=Note%203.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note details significant accounting policies, including foreign currency translation, fair value measurements, revenue recognition, and lease accounting - Financial statements are prepared under **U.S. GAAP**, with the U.S. dollar as reporting currency and Chinese Renminbi (RMB) as functional currency for PRC operations[42](index=42&type=chunk)[44](index=44&type=chunk) - Derivative liabilities, primarily warrants, are measured at fair value using the Black-Scholes model, decreasing from **$501,782** at March 31, 2023, to **$137,943** at September 30, 2023[51](index=51&type=chunk)[52](index=52&type=chunk) - Revenue is recognized under **ASC 606**, disaggregated into Automobile Transaction and Related Services and Online Ride-hailing Platform Services, with ride-hailing revenue recognized on a net basis[77](index=77&type=chunk)[79](index=79&type=chunk)[83](index=83&type=chunk) - The company adopted the **CECL model** for credit losses on April 1, 2023, with no material financial impact[95](index=95&type=chunk) [Note 4. DISCONTINUED OPERATIONS](index=22&type=section&id=Note%204.%20DISCONTINUED%20OPERATIONS) The company discontinued its online P2P lending services in October 2019 due to regulatory changes, with remaining liabilities of $459,186 - The company discontinued its online **P2P lending services** business on October 17, 2019, due to regulatory tightening in China[100](index=100&type=chunk) Liabilities from Discontinued Operations | Liability Class | Sep 30, 2023 (Unaudited) | Mar 31, 2023 | | :--- | :--- | :--- | | Accrued expenses and other liabilities | $459,186 | $487,829 | [Note 17. RELATED PARTY TRANSACTIONS AND BALANCES](index=31&type=section&id=Note%2017.%20RELATED%20PARTY%20TRANSACTIONS%20AND%20BALANCES) This note details transactions and balances with related parties, primarily Jinkailong, including intercompany balances and lease agreements - As of September 30, 2023, the net balance due from related parties was **$4.27 million**, primarily from Jinkailong, the company's equity investee[162](index=162&type=chunk) - An allowance for credit losses of **$680,396** was recorded against the balance due from Jinkailong for the six months ended September 30, 2023[164](index=164&type=chunk) - Operating lease agreements with related parties resulted in rental expenses of **$80,901** for the six months ended September 30, 2023[167](index=167&type=chunk)[169](index=169&type=chunk) - For the six months ended September 30, 2023, the company generated **$22,147** in revenue from leasing automobiles to Jinkailong and incurred **$392,344** in rental costs from leasing automobiles from Jinkailong[171](index=171&type=chunk) [Note 19. COMMITMENTS AND CONTINGENCIES](index=35&type=section&id=Note%2019.%20COMMITMENTS%20AND%20CONTINGENCIES) The company has significant purchase commitments for automobiles and contingent liabilities from loan guarantees and its equity investee - The company has purchase commitments for **120 automobiles** totaling approximately **$1.2 million**, expected by December 31, 2023[184](index=184&type=chunk) - The company faces credit risk from guaranteeing lease/loan payments for automobile purchasers, with no contingent liabilities for its own purchasers as of September 30, 2023[181](index=181&type=chunk)[185](index=185&type=chunk) - Jinkailong, an equity investee, has maximum contingent liabilities of approximately **$3.1 million**, with Senmiao's exposure capped at approximately **$480,000**[186](index=186&type=chunk)[187](index=187&type=chunk) [Note 20. SEGMENT INFORMATION](index=39&type=section&id=Note%2020.%20SEGMENT%20INFORMATION) The company operates in two segments: Automobile Transaction and Online Ride-hailing Platform Services, with most assets and revenue in the PRC Segment Performance for the Six Months Ended September 30, 2023 (Unaudited) | Segment | Revenues (USD) | Loss from Operations (USD) | | :--- | :--- | :--- | | Automobile Transaction and Related Services | 2,372,246 | (1,182,242) | | Online Ride-hailing Platform Services | 1,549,419 | (196,928) | | Unallocated | — | (691,197) | | **Consolidated Total** | **3,921,665** | **(2,070,367)** | - As of September 30, 2023, total assets were allocated as follows: **$10.86 million** to the automobile segment, **$0.90 million** to the ride-hailing segment, and **$0.90 million** unallocated[197](index=197&type=chunk) [Note 21. SUBSEQUENT EVENTS](index=40&type=section&id=Note%2021.%20SUBSEQUENT%20EVENTS) Subsequent events include a lawsuit settlement of $76,000 and the issuance of 1.5 million common shares for consulting services - On November 3, 2023, the company settled a lawsuit, agreeing to pay approximately **$76,000**[199](index=199&type=chunk) - In October 2023, the company agreed to issue **1,500,000 shares** of common stock for M&A, market research, and financial advisory services, issued on November 7, 2023[200](index=200&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, operational results, liquidity, and critical accounting policies for its two business segments - The company operates two core businesses: **Automobile Transaction and Related Services** and an **Online Ride-hailing Platform (Xixingtianxia)**[202](index=202&type=chunk)[203](index=203&type=chunk) - The online ride-hailing platform, Xixingtianxia, operates in **27 cities** and collaborates with major aggregation platforms[208](index=208&type=chunk) - Key operational risks include intense competition, regulatory compliance, managing vehicle defaults, and the adverse impacts of the COVID-19 pandemic[214](index=214&type=chunk)[220](index=220&type=chunk)[231](index=231&type=chunk) [Results of Operations](index=51&type=section&id=Results%20of%20Operations) This section analyzes financial performance, noting revenue decreases in ride-hailing due to competition, partially offset by automobile leasing growth Comparison of Results for the Three Months Ended September 30 | Metric | 2023 (USD) | 2022 (USD) | Change (USD) | | :--- | :--- | :--- | :--- | | **Revenues** | 1,826,951 | 2,241,202 | (414,251) | | **Gross Profit** | 374,111 | 308,818 | 65,293 | | **Loss from Operations** | (1,281,945) | (1,585,206) | 303,261 | | **Net Loss** | (1,207,452) | (1,179,804) | (27,648) | Comparison of Results for the Six Months Ended September 30 | Metric | 2023 (USD) | 2022 (USD) | Change (USD) | | :--- | :--- | :--- | :--- | | **Revenues** | 3,921,665 | 4,582,998 | (661,333) | | **Gross Profit** | 956,051 | 768,798 | 187,253 | | **Loss from Operations** | (2,070,367) | (3,025,801) | 955,434 | | **Net Loss** | (1,628,799) | (935,884) | (692,915) | - Revenue from online ride-hailing platform services decreased to **$643,813** from **$972,703** year-over-year for the three-month period, primarily due to increased competition[253](index=253&type=chunk) - Gross profit margin for the six-month period increased to **24.4%** from **16.8%** year-over-year, driven by profitability in the automobile operating leasing business[283](index=283&type=chunk) [Liquidity and Going Concern](index=62&type=section&id=Liquidity%20and%20Going%20Concern) The company faces liquidity challenges and going concern doubts due to net losses, a working capital deficit, and significant purchase commitments - Cash and cash equivalents were **$1,305,199** as of September 30, 2023, a decrease from **$1,610,090** at March 31, 2023[294](index=294&type=chunk) - Substantial doubt about going concern exists due to net losses, a working capital deficit of approximately **$0.3 million**, and purchase commitments of approximately **$1.2 million**[295](index=295&type=chunk) Cash Flow Summary for the Six Months Ended September 30 | Cash Flow Activity | 2023 (USD) | 2022 (USD) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | 88,129 | 512,205 | | Net Cash (Used in)/Provided by Investing Activities | (276,658) | 414,261 | | Net Cash (Used in)/Provided by Financing Activities | (22,926) | 32,075 | [Off-Balance Sheet Arrangements](index=64&type=section&id=Off-Balance%20Sheet%20Arrangements) The company has off-balance sheet arrangements including purchase commitments for automobiles and contingent liabilities from loan guarantees - The company has outstanding purchase commitments for **120 automobiles** totaling approximately **$1.8 million**, expected by December 31, 2023[303](index=303&type=chunk) - The company has contingent liabilities from guaranteeing loans for automobile purchasers and is exposed to a maximum of approximately **$480,000** of liabilities from its **35% equity interest** in Jinkailong[304](index=304&type=chunk) [Critical Accounting Policies and Estimates](index=64&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section outlines critical accounting policies and estimates, including fair value measurements, revenue recognition, credit losses, and asset impairment - Critical accounting policies involve significant judgments and estimates[305](index=305&type=chunk) - Key areas of estimation include fair value of derivative liabilities, revenue recognition for leases, allowances for credit losses, lease accounting, and impairment of long-lived assets[308](index=308&type=chunk)[309](index=309&type=chunk)[312](index=312&type=chunk)[313](index=313&type=chunk)[317](index=317&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=67&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not applicable as the company qualifies as a smaller reporting company - This section is not applicable for the company[319](index=319&type=chunk) [Controls and Procedures](index=67&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective due to material weaknesses in accounting staff, internal audit, and IT controls - The CEO and CFO concluded that disclosure controls and procedures were **not effective** as of September 30, 2023[319](index=319&type=chunk) - Identified material weaknesses include insufficient U.S. GAAP expertise, inadequate internal audit function, and deficiencies in IT general controls[319](index=319&type=chunk) - Remediation plans involve hiring qualified accounting staff, improving internal audit, and enhancing system security[320](index=320&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter[321](index=321&type=chunk) [PART II - OTHER INFORMATION](index=68&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This part includes exhibits filed with the report and the official signatures [Exhibits](index=68&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including officer certifications and Inline XBRL documents - Filed exhibits include **CEO and CFO certifications** under Sarbanes-Oxley Sections 302 and 906[323](index=323&type=chunk) - Various **Inline XBRL documents** are included for financial data tagging[323](index=323&type=chunk) [Signatures](index=69&type=section&id=SIGNATURES) The report is signed by the Chief Executive Officer and Chief Financial Officer on November 14, 2023 - The report was signed on **November 14, 2023**[325](index=325&type=chunk) - Signatories are **Xi Wen (CEO)** and **Xiaoyuan Zhang (CFO)**[326](index=326&type=chunk)

[PART I – FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1. Unaudited Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Unaudited Q2 2023 financials show a **$0.42 million net loss**, **$13.5 million total assets**, and going concern doubts [Financial Statements Overview](index=4&type=section&id=Financial%20Statements%20Overview) Q2 2023 financials show a **$421,347 net loss**, total assets of **$13.5 million**, and a **$436,295 net cash outflow** Condensed Consolidated Balance Sheet Data (Unaudited) | Balance Sheet Items | June 30, 2023 ($) | March 31, 2023 ($) | | :--- | :--- | :--- | | **Total Current Assets** | 4,794,779 | 4,854,786 | | **Total Assets** | 13,540,348 | 14,238,615 | | **Total Current Liabilities** | 5,263,360 | 5,184,823 | | **Total Liabilities** | 5,917,954 | 5,741,549 | | **Total Equity** | 7,379,947 | 8,227,680 | Condensed Consolidated Statements of Operations (Unaudited) | Income Statement Items | Three Months Ended June 30, 2023 ($) | Three Months Ended June 30, 2022 ($) | | :--- | :--- | :--- | | **Total Revenues** | 2,094,714 | 2,341,796 | | **Gross Profit** | 581,940 | 459,980 | | **Loss from Operations** | (788,422) | (1,440,595) | | **Net Income (Loss)** | (421,347) | 243,920 | | **Net Earnings (Loss) Per Share** | (0.05) | 0.05 | Condensed Consolidated Statements of Cash Flows (Unaudited) | Cash Flow Items | Three Months Ended June 30, 2023 ($) | Three Months Ended June 30, 2022 ($) | | :--- | :--- | :--- | | **Net Cash Provided by Operating Activities** | 204,866 | 514,139 | | **Net Cash Provided by (Used in) Investing Activities** | (330,066) | 24,332 | | **Net Cash Provided by (Used in) Financing Activities** | (247,322) | 171,073 | | **Net (Decrease) in Cash and Cash Equivalents** | (436,295) | 669,117 | | **Cash and Cash Equivalents, End of Period** | 1,173,795 | 1,854,338 | [Note 1. Organization and Principal Activities](index=8&type=section&id=Note%201.%20Organization%20and%20Principal%20Activities) The company operates two segments in China: automobile services for ride-hailing and its Xixingtianxia platform - The company's business is divided into two segments: **Automobile transaction and related services** focusing on the online ride-hailing industry in China, and **Online ride-hailing platform services** operating its own platform, Xixingtianxia[25](index=25&type=chunk)[26](index=26&type=chunk) - On March 31, 2022, the company deconsolidated Jinkailong, its former VIE, and now accounts for it as a **35% equity investee company** through its subsidiary Hunan Ruixi[38](index=38&type=chunk)[39](index=39&type=chunk) [Note 2. Going Concern](index=11&type=section&id=Note%202.%20Going%20Concern) Substantial doubt about going concern stems from a **$0.4M net loss**, **$38.1M accumulated deficit**, and **$1.2M purchase commitments** - Factors contributing to substantial doubt about the company's ability to continue as a going concern include a **net loss of approximately $0.4 million** for the quarter, an **accumulated deficit of approximately $38.1 million**, a **working capital deficit of approximately $0.5 million**, and **purchase commitments totaling approximately $1.2 million**[43](index=43&type=chunk) - Management is attempting to mitigate going concern risk through equity financing, debt financing, and related-party financial support, though success is not assured[44](index=44&type=chunk)[45](index=45&type=chunk) [Note 20. Segment Information](index=45&type=section&id=Note%2020.%20Segment%20Information) The company reports two segments, Automobile Services and Online Ride-hailing, both incurring operational losses in Q2 2023 Segment Performance for Three Months Ended June 30, 2023 | Segment | Revenues ($) | Loss from Operations ($) | | :--- | :--- | :--- | | Automobile Transaction and Related Services | 1,189,108 | (334,966) | | Online Ride-hailing Platform Services | 905,606 | (72,632) | | Unallocated | — | (380,824) | | **Consolidated Total** | **2,094,714** | **(788,422)** | Segment Performance for Three Months Ended June 30, 2022 | Segment | Revenues ($) | Loss from Operations ($) | | :--- | :--- | :--- | | Automobile Transaction and Related Services | 1,154,276 | (291,788) | | Online Ride-hailing Platform Services | 1,187,520 | (517,352) | | Unallocated | — | (631,455) | | **Consolidated Total** | **2,341,796** | **(1,440,595)** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=47&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A reports an **11% revenue decrease** to **$2.1M**, a **$421K net loss**, and reiterates going concern doubts [Business Overview](index=47&type=section&id=Business%20Overview) Core operations include automobile services (**$1.19M revenue**) and Xixingtianxia ride-hailing platform (**$0.9M revenue**) Automobile Services Breakdown (Q1 2023 vs Q1 2022) | Service Type | Vehicles (2023) | Revenue (2023) | Vehicles (2022) | Revenue (2022) | | :--- | :--- | :--- | :--- | :--- | | Auto Operating Leasing | >1,000 | $1,056,000 | >1,100 | $853,000 | | Auto Sales | 1 | $5,000 | 13 | $70,000 | | Auto Financing | 148 | $14,000 | 136 | $11,000 | | Other Services | >530 | $114,000 | >770 | $221,000 | - For the three months ended June 30, 2023, the Xixingtianxia ride-hailing platform completed approximately **1.7 million rides** with a **gross fare of $5.3 million**, generating about **$0.9 million** in platform service fees[220](index=220&type=chunk) [Results of Operations](index=56&type=section&id=Results%20of%20Operations) Q2 2023 revenues decreased **11% to $2.1M**, gross profit rose to **$582K**, resulting in a **$421K net loss** Comparison of Operations (Three Months Ended June 30) | Metric | 2023 ($) | 2022 ($) | Change ($) | | :--- | :--- | :--- | :--- | | **Revenues** | 2,094,714 | 2,341,796 | (247,082) | | **Gross Profit** | 581,940 | 459,980 | 121,960 | | **Loss from Operations** | (788,422) | (1,440,595) | 652,173 | | **Change in fair value of derivative liabilities** | 304,173 | 1,628,510 | (1,324,337) | | **Net Income (Loss)** | (421,347) | 243,920 | (665,267) | - The overall gross profit margin increased to **27.8% in Q1 2023** from **19.6% in Q1 2022**, primarily due to the operating leasing business shifting from a gross loss to a **12.4% gross profit margin**[273](index=273&type=chunk) - Selling, general and administrative expenses decreased by **$676,058 (35.2%) year-over-year**, mainly due to reduced salary expenses from a lower employee headcount, decreased office expenditures, and lower advertising costs[274](index=274&type=chunk) [Liquidity and Going Concern](index=62&type=section&id=Liquidity%20and%20Going%20Concern) Liquidity is precarious with cash at **$1.17M**, and substantial doubt about going concern persists due to losses and commitments - The company's ability to continue as a going concern is in substantial doubt due to a **net loss of ~$0.4M** for the quarter, an **accumulated deficit of ~$38.1M**, a **working capital deficit of ~$0.5M**, and **purchase commitments of ~$1.2M** for 120 automobiles[285](index=285&type=chunk) Cash Flow Summary (Three Months Ended June 30) | Cash Flow Activity | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | | Net Cash from Operating Activities | 204,866 | 514,139 | | Net Cash from (Used in) Investing Activities | (330,066) | 24,332 | | Net Cash from (Used in) Financing Activities | (247,322) | 171,073 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=68&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is deemed not applicable by the company for the current report - The company states this item is 'Not applicable'[314](index=314&type=chunk) [Item 4. Controls and Procedures](index=68&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were ineffective as of June 30, 2023, due to material weaknesses in U.S. GAAP expertise and IT controls - Disclosure controls and procedures were concluded to be **ineffective** as of June 30, 2023[315](index=315&type=chunk) - Identified material weaknesses include insufficient personnel with adequate U.S. GAAP accounting knowledge, lack of an adequate internal audit function, and deficiencies in IT general controls related to security, change management, and operations[315](index=315&type=chunk) [PART II – OTHER INFORMATION](index=69&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Item 6. Exhibits](index=69&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including SOX certifications and XBRL interactive data files - The report includes required certifications from the CEO and CFO under **Sarbanes-Oxley Act Sections 302 and 906**[319](index=319&type=chunk) - Interactive data files (XBRL documents) are also filed as exhibits[319](index=319&type=chunk)

PART I [Business](index=7&type=section&id=Item%201.%20Business) Senmiao Technology, a U.S. holding company, operates in China through subsidiaries, focusing on automobile transaction services and an online ride-hailing platform, having terminated all VIE agreements - The company operates two primary business segments: Automobile Transaction and Related Services and Online Ride-hailing Platform Services[18](index=18&type=chunk) - As of March 31, 2022, Senmiao has terminated all its VIE Agreements and no longer consolidates any VIEs in its financial statements[17](index=17&type=chunk) Automobile Transaction and Related Services Key Metrics (Since Nov 2018 to Mar 2023) | Metric | Value | |:---|:---| | Automobiles Financed | 1,687 (Total Value: ~$24.4 million) | | Automobiles Sold | 1,466 (Total Value: ~$14.1 million) | | Automobiles under Operating Leases | ~2,936 | | Automobiles under Financing Leases | 144 | Online Ride-hailing Platform (Xixingtianxia) Performance (FY 2023) | Metric | Value | |:---|:---| | Completed Rides | ~6.1 million | | Gross Fare | ~$19.9 million | | Average Monthly Active Drivers | >5,100 | | Net Service Fees | ~$3.7 million (after ~$0.5M incentives) | [Automobile Transactions and Related Services](index=7&type=section&id=Automobile%20Transactions%20and%20Related%20Services) This segment offers auto operating leasing, purchase and NEV services, auto sales, auto financing, and auto management and guarantee services - This segment comprises several services: Auto Operating Leasing, Purchase and New Energy Vehicle (NEV) Services, Auto Sales, Auto Financing, and Auto Management and Guarantee Services[19](index=19&type=chunk) FY 2023 Revenue from Automobile Services (excluding Jinkailong) | Service Line | Revenue (USD) | |:---|:---| | Auto Operating Leasing | ~$3,453,000 | | Purchase and NEVs Services | $384,095 | | Auto Sales | $243,065 | | Auto Financing (Interest Income) | $41,738 | | Auto Management and Guarantee | $40,158 | [Ride-Hailing Platform Services](index=11&type=section&id=Ride-Hailing%20Platform%20Services) The company operates its "Xixingtianxia" ride-hailing platform, active in 26 cities, earning commissions from completed orders - The company operates its own ride-hailing platform, "Xixingtianxia," which launched in October 2020 and is now active in **26 cities**[30](index=30&type=chunk) - The platform collaborates with aggregation platforms like Gaode Map, earning commissions on each completed order calculated as the difference between the upfront fare and the driver's earnings[30](index=30&type=chunk) [Corporate History and Structure](index=12&type=section&id=Corporate%20History%20and%20Structure) Senmiao Technology, incorporated in Nevada in 2017, expanded through acquisitions and transitioned to a direct ownership structure by terminating VIE agreements - Senmiao Technology Limited was incorporated in Nevada in June 2017, growing through acquisitions like Hunan Ruixi in 2018 and XXTX in 2020, which became a wholly-owned subsidiary in December 2021[33](index=33&type=chunk)[35](index=35&type=chunk)[42](index=42&type=chunk) - The company terminated its VIE agreements with Sichuan Senmiao, Jinkailong, and Youlu by March 31, 2022, shifting to a direct ownership structure, with Jinkailong now a **35% equity investee**[47](index=47&type=chunk)[49](index=49&type=chunk)[51](index=51&type=chunk) [Recent Developments and COVID-19 Impact](index=16&type=section&id=Recent%20Developments%20and%20COVID-19%20Impact) Recent developments include a 1-for-10 reverse stock split and adverse impacts from the COVID-19 pandemic on both business segments - A **1-for-10 reverse stock split** was implemented on April 6, 2022, reducing authorized common stock from **100 million to 10 million shares**[52](index=52&type=chunk) - The COVID-19 pandemic adversely impacted business, with automobile services suffering from drivers rendering vehicles due to lower income, and the ride-hailing platform seeing order decreases of **20-35%** during local outbreaks and lockdowns[53](index=53&type=chunk)[54](index=54&type=chunk) [Regulations](index=23&type=section&id=Regulations) The company is subject to extensive PRC regulations on cybersecurity, data security, personal information protection, and ride-hailing operations, with compliance challenges - The company is subject to extensive PRC regulations covering cybersecurity, data security (including the Cybersecurity Review Measures), and personal information protection, requiring significant compliance efforts[72](index=72&type=chunk)[77](index=77&type=chunk)[82](index=82&type=chunk)[88](index=88&type=chunk) - For its ride-hailing business, the company must comply with national and local regulations requiring licenses for the platform, vehicles, and drivers, with approximately **57% of its drivers lacking required licenses** as of March 31, 2023, leading to fines[98](index=98&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk) - As of March 31, 2023, the company has not made adequate employee benefit contributions as required by PRC law, with a shortfall of **$1,086,526**, which may subject it to penalties[140](index=140&type=chunk)[391](index=391&type=chunk) - New CSRC rules effective March 31, 2023, require Chinese domestic companies to file with the CSRC for overseas securities offerings, including follow-on offerings, impacting future capital raising activities[180](index=180&type=chunk)[181](index=181&type=chunk) [Risk Factors](index=62&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks across its business, operations in China, and its securities, including internal control weaknesses, regulatory non-compliance, potential delisting, and evolving data security laws - The company has identified material weaknesses in its internal control over financial reporting, including insufficient personnel with U.S. GAAP knowledge, inadequate internal audit policies, and deficiencies in IT general controls[206](index=206&type=chunk)[308](index=308&type=chunk)[309](index=309&type=chunk) - A significant risk is that approximately **57% of its online ride-hailing drivers had not obtained the required driver's license** as of March 31, 2023, exposing the company to fines and penalties[203](index=203&type=chunk)[231](index=231&type=chunk) - The company faces the risk of its common stock being delisted from Nasdaq for failing to meet the minimum bid price requirement, having received a non-compliance notice on June 15, 2023[214](index=214&type=chunk)[405](index=405&type=chunk) - Compliance with China's new Data Security Law, Cybersecurity Review Measures, and Personal Information Protection Law entails significant expense and could be adversely impacted by greater oversight from the Cyberspace Administration of China (CAC), particularly for companies listed on foreign exchanges[210](index=210&type=chunk)[354](index=354&type=chunk)[363](index=363&type=chunk) [Unresolved Staff Comments](index=141&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments - Not Applicable[470](index=470&type=chunk) [Properties](index=141&type=section&id=Item%202.%20Properties) The company leases its principal executive offices in Chengdu, Sichuan, along with additional offices, parking lots, and an exhibition hall to support its automobile services - The principal executive office is a **965 square meter** space in Chengdu, with a lease expiring in March 2026 and monthly rent of approximately **$10,700**[470](index=470&type=chunk) - Additional leased properties include offices, parking lots, and an exhibition hall in Chengdu, Changsha, and Guangzhou to support its two business segments[471](index=471&type=chunk)[472](index=472&type=chunk) [Legal Proceedings](index=141&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently a party to any material legal or administrative proceedings but may be subject to claims arising in the ordinary course of business - As of the report date, there are no material legal proceedings against the company[473](index=473&type=chunk) [Mine Safety Disclosures](index=141&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[473](index=473&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=142&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq under "AIHS", has never paid dividends, and amended its 2018 Equity Incentive Plan to reserve 1,500,000 shares - The company's common stock is traded on the Nasdaq Capital Market under the ticker symbol "**AIHS**"[476](index=476&type=chunk) - The company has never paid cash dividends and does not intend to in the foreseeable future, citing the need to retain funds for business operations and growth[477](index=477&type=chunk) - The 2018 Equity Incentive Plan was amended to increase the number of reserved shares to **1,500,000**, with **1,470,371 shares** remaining available for future issuance as of March 31, 2023[480](index=480&type=chunk)[482](index=482&type=chunk) [Reserved](index=143&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=143&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Total revenues increased by 65% to $8.1 million in FY2023, with a shift from gross loss to gross profit, but substantial doubt exists about the company's ability to continue as a going concern Financial Performance Summary (Continuing Operations) | Metric | FY 2023 | FY 2022 | Change | |:---|:---:|:---:|:---:| | Total Revenues | $8,082,514 | $4,913,102 | +65% | | Gross Profit (Loss) | $1,492,513 | ($2,088,195) | +$3,580,708 | | Loss from Operations | ($6,140,908) | ($11,561,988) | +47% | | Net Loss | ($3,790,693) | ($5,606,145) | +32% | - Management has determined there is substantial doubt about the company's ability to continue as a going concern due to a net loss of **$3.8 million**, an accumulated deficit of **$37.7 million**, a working capital deficit of **$0.4 million**, and purchase commitments of **$1.36 million**[572](index=572&type=chunk)[573](index=573&type=chunk) - The significant improvement in gross profit was mainly driven by the online ride-hailing platform services, which turned a gross loss of **$1.1 million** in FY2022 into a gross profit of **$1.4 million** in FY2023, largely by reducing driver incentives[548](index=548&type=chunk) - As of March 31, 2022, the company deconsolidated its former VIE, Jinkailong, resulting in a one-time net gain from deconsolidation of **$10.98 million** in discontinued operations for FY2022[561](index=561&type=chunk)[568](index=568&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=179&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not required as the company qualifies as a smaller reporting company - Not required for smaller reporting companies[608](index=608&type=chunk) [Financial Statements and Supplementary Data](index=180&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's consolidated financial statements for FY2023 and FY2022, with the auditor's report highlighting substantial doubt about the company's going concern ability - The auditor's report for the fiscal year ended March 31, 2023, contains an explanatory paragraph expressing substantial doubt about the Company's ability to continue as a going concern[613](index=613&type=chunk) Consolidated Balance Sheet Highlights (As of March 31) | Metric | 2023 | 2022 | |:---|:---:|:---:| | Cash and cash equivalents | $1,610,090 | $1,185,221 | | Total Assets | $14,238,615 | $19,878,117 | | Total Liabilities | $5,741,549 | $6,488,379 | | Accumulated Deficit | ($37,715,294) | ($34,601,545) | | Total Equity | $8,227,680 | $12,568,939 | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=258&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reported no disagreements with its accountants on accounting and financial disclosure - None[884](index=884&type=chunk) [Controls and Procedures](index=258&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls were ineffective as of March 31, 2023, due to material weaknesses in internal control over financial reporting, with a remediation plan outlined - Management concluded that disclosure controls and procedures were not effective as of March 31, 2023[885](index=885&type=chunk) - Material weaknesses identified include: (1) insufficient accounting personnel with U.S. GAAP experience, (2) lack of adequate internal audit policies and procedures, and (3) deficiencies in IT general controls[886](index=886&type=chunk) - The company plans to remediate these weaknesses by hiring additional accounting staff, improving its internal audit function, and enhancing its IT environment and management[887](index=887&type=chunk) [Other Information](index=260&type=section&id=Item%209B.%20Other%20Information) The company reported no other information for this item - None[890](index=890&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=260&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[890](index=890&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=261&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section provides biographical information for directors and executive officers, details board committee composition, and confirms compliance with Nasdaq's independence and diversity requirements - The key executive officers are Xi Wen (CEO, Chairman), Xiaoyuan Zhang (CFO), and Haitao Liu (COO)[894](index=894&type=chunk)[895](index=895&type=chunk)[896](index=896&type=chunk) - The Board has three committees: Audit, Compensation, and Nominating and Corporate Governance, all composed of independent directors[910](index=910&type=chunk)[911](index=911&type=chunk)[914](index=914&type=chunk) - The company is in compliance with Nasdaq's board diversity requirements, with three female Asian directors and one male Asian director on its board of five[908](index=908&type=chunk)[909](index=909&type=chunk) [Executive Compensation](index=269&type=section&id=Item%2011.%20Executive%20Compensation) This section details executive compensation for FY2023 and FY2022, including CEO Xi Wen's total compensation of $237,570 in FY2023, and outlines employment agreement terms and non-executive director retainers Executive Compensation (FY 2023) | Name and Position | Total Compensation ($) | |:---|:---:| | Xi Wen (CEO, Chairman) | 237,570 | | Xiaoyuan Zhang (CFO) | 78,842 | | Haitao Liu (COO) | 78,813 | | Chunhai Li (Former CTO) | 68,261 | - Employment agreements for executive officers include provisions for severance payments in the event of termination without cause or termination following a change of control[928](index=928&type=chunk)[929](index=929&type=chunk)[935](index=935&type=chunk) - Non-employee directors receive an annual retainer of **$20,000**, with the exception of Trent Davis, who receives **$40,000**[944](index=944&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=275&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section discloses beneficial ownership of common stock as of July 10, 2023, with Senmiao International Investment Group Limited holding 13.2% and all directors and executive officers as a group owning 1.8% Beneficial Ownership (as of July 10, 2023) | Name of Beneficial Owner | Percentage of Outstanding Shares | |:---|:---:| | Senmiao International Investment Group Limited | 13.2% | | Xi Wen (CEO) | 1.5% | | All directors and executive officers as a group | 1.8% | [Certain Relationships and Related Transactions, and Director Independence](index=277&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The company discloses related-party office lease agreements and operational transactions with its equity investee, Jinkailong, while confirming the independence of three directors under Nasdaq rules - The company has engaged in office lease agreements with related parties, including a supervisor of Sichuan Senmiao and a company where an independent director is the legal representative[953](index=953&type=chunk)[954](index=954&type=chunk) - Significant operational transactions occurred with Jinkailong (a **35% equity investee**), including the company paying Jinkailong **$95,804** in promotion fees and leasing vehicles to and from Jinkailong in FY2023[955](index=955&type=chunk)[956](index=956&type=chunk) - The board of directors has determined that Trent D. Davis, Xiaojuan Lin, and Sichun Wang are independent directors[958](index=958&type=chunk) [Principal Accountant Fees and Services](index=279&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) This section details fees paid to Marcum Asia CPAs LLP, the company's auditor, totaling $341,700 for FY2023, primarily for audit and audit-related services, all pre-approved by the audit committee - Effective September 1, 2022, Friedman LLP combined with Marcum LLP, and the company subsequently engaged Marcum Asia CPAs LLP as its independent registered public accounting firm[959](index=959&type=chunk) Accountant Fees | Fee Category | FY 2023 | FY 2022 | |:---|:---:|:---:| | Audit Fees | $321,700 | $280,000 | | Audit-Related Fees | $10,000 | $35,000 | | Tax Fees | $10,000 | $8,000 | | All Other Fees | $0 | $0 | PART IV [Exhibits, Financial Statement Schedules](index=282&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the documents filed as part of the Form 10-K report, including financial statements and various exhibits - This item provides an index of all financial statements, schedules, and exhibits filed with the annual report[966](index=966&type=chunk)[967](index=967&type=chunk) [Form 10-K Summary](index=282&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable - Not applicable[967](index=967&type=chunk)

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q%20Filing%20Information) [Quarterly Report Details](index=1&type=section&id=FORM%2010-Q_Details) This Form 10-Q for Senmiao Technology Limited covers Q4 2022, detailing its non-accelerated filer status and 7.69 million shares outstanding - The report is a Quarterly Report on Form 10-Q for the period ended December 31, 2022[2](index=2&type=chunk) - Senmiao Technology Limited is incorporated in Nevada and is classified as a non-accelerated filer, smaller reporting company, and emerging growth company[3](index=3&type=chunk)[4](index=4&type=chunk) Key Company Information | Metric | Value | | :----- | :---- | | Commission File Number | 001-38426 | | Common Stock Outstanding (as of Feb 10, 2023) | 7,693,040 shares | | Trading Symbol | AIHS | | Exchange | The Nasdaq Stock Market LLC | [Table of Contents](index=2&type=section&id=Table%20of%20Contents) [Cautionary Note Regarding Forward-Looking Statements](index=3&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) [Forward-Looking Statements Disclosure](index=3&type=section&id=Forward-Looking%20Statements%20Disclosure) The report contains forward-looking statements, subject to material differences due to business expansion, public health, economic, regulatory, and competitive risks - The report contains forward-looking statements, which are subject to material differences from expectations due to various factors[8](index=8&type=chunk) - Key risk factors include: ability to expand automobile transaction and ride-hailing businesses, management's ability to achieve growth, impact of public health epidemics (e.g., COVID-19) in China, growth in disposable household income and credit availability, growth of online ride-hailing and auto financing/leasing industries, taxes/incentives for car purchases, fluctuations in car sales/prices, changes in transportation patterns, demand for products/services, customer base, investment plans, relationships with business partners, competition, macro-economic/political conditions, and relevant Chinese government policies/regulations - The company does not undertake any obligation to update or revise forward-looking statements[8](index=8&type=chunk) - Statistical data and estimates from industry publications are included but have not been independently verified, and actual market growth may differ from projections[8](index=8&type=chunk) [PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Unaudited Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section presents unaudited condensed consolidated financial statements, including balance sheets, income statements, equity changes, cash flows, and detailed notes [Unaudited Condensed Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased from **$19.88 million** to **$15.54 million**, with corresponding decreases in total liabilities and equity Condensed Consolidated Balance Sheet Highlights | Metric | Dec 31, 2022 (Unaudited) | Mar 31, 2022 | | :----- | :----------------------- | :----------- | | Total Assets | $15,538,593 | $19,878,117 | | Total Liabilities | $5,246,839 | $6,488,379 | | Total Equity | $10,005,952 | $12,568,939 | - Cash and cash equivalents increased from **$1,185,221** (Mar 31, 2022) to **$1,537,609** (Dec 31, 2022)[12](index=12&type=chunk) - Accounts receivable, net, current portion decreased from **$418,022** to **$204,763**[12](index=12&type=chunk) - Property and equipment, net, decreased from **$5,658,773** to **$3,530,196**[12](index=12&type=chunk) [Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Net loss for Q4 2022 significantly widened to **$986,269** from **$132,121** in Q4 2021, driven by derivative liabilities and doubtful accounts Condensed Consolidated Statements of Operations Highlights (Three Months Ended Dec 31) | Metric | 2022 (Unaudited) | 2021 (Unaudited) | | :----- | :--------------- | :--------------- | | Total Revenues | $1,740,920 | $1,660,119 | | Gross Profit (Loss) | $182,750 | $202,530 | | Loss from Operations | $(1,329,376) | $(2,508,292) | | Net Loss | $(986,269) | $(132,121) | | Net Income (Loss) Attributable to Stockholders | $(971,341) | $155,459 | | Basic and Diluted EPS | $(0.13) | $0.03 | Condensed Consolidated Statements of Operations Highlights (Nine Months Ended Dec 31) | Metric | 2022 (Unaudited) | 2021 (Unaudited) | | :----- | :--------------- | :--------------- | | Total Revenues | $6,323,918 | $3,152,592 | | Gross Profit (Loss) | $951,548 | $(2,225,819) | | Loss from Operations | $(4,355,177) | $(9,596,151) | | Net Loss | $(1,922,153) | $(7,624,682) | | Net Income (Loss) Attributable to Stockholders | $(1,721,978) | $(5,673,230) | | Basic and Diluted EPS | $(0.25) | $(1.02) | - Change in fair value of derivative liabilities significantly impacted net income, showing a gain of **$30,557** for the three months ended December 31, 2022, compared to a gain of **$3,536,859** for the same period in 2021[14](index=14&type=chunk) - Selling, general and administrative expenses decreased substantially for both three and nine-month periods, indicating cost-cutting efforts[14](index=14&type=chunk) [Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficiency)](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20(Deficiency)) Total equity decreased from **$12.57 million** to **$10.01 million** for the nine months ended December 31, 2022, influenced by net loss and foreign currency adjustments Changes in Stockholders' Equity (Nine Months Ended Dec 31, 2022) | Metric | March 31, 2022 | December 31, 2022 | | :----- | :------------- | :---------------- | | Common Shares* | 6,186,783 | 7,682,908 | | Par Value | $630 | $782 | | Additional Paid-in Capital | $42,803,033 | $43,337,879 | | Accumulated Deficit | $(34,601,545) | $(35,352,182) | | Accumulated Other Comprehensive Loss | $(109,454) | $(1,716,583) | | Non-controlling Interest | $4,476,275 | $4,392,584 | | Total Equity | $12,568,939 | $10,662,480 | - Net loss for the nine months ended December 31, 2022, was **$(971,341)** attributable to stockholders[17](index=17&type=chunk) - Conversion of preferred stock into common stock resulted in an increase in common shares and additional paid-in capital[17](index=17&type=chunk) - Significant foreign currency translation adjustment resulted in a loss of **$(1,177,365)** for the nine months ended December 31, 2022[17](index=17&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow significantly improved to **$249,287** provided, from **$6.46 million** used in prior year, with investing providing **$287,146** and financing using **$101,372** Condensed Consolidated Statements of Cash Flows Highlights (Nine Months Ended Dec 31) | Metric | 2022 (Unaudited) | 2021 (Unaudited) | | :----- | :--------------- | :--------------- | | Net Cash Provided by (Used in) Operating Activities | $249,287 | $(6,459,172) | | Net Cash Provided by (Used in) Investing Activities | $287,146 | $(3,538,102) | | Net Cash Provided by (Used in) Financing Activities | $(101,372) | $8,177,287 | | Net Increase (Decrease) in Cash and Cash Equivalents | $352,388 | $(1,646,364) | | Cash and Cash Equivalents, End of Period | $1,537,609 | $2,801,711 | - Operating cash flow improved significantly, moving from a large outflow in 2021 to an inflow in 2022, driven by reduced net loss and favorable changes in derivative liabilities[20](index=20&type=chunk) - Investing activities shifted from a net cash outflow in 2021 (due to property and equipment purchases) to an inflow in 2022, primarily from cash proceeds from disposal of long-lived assets[20](index=20&type=chunk) - Financing activities saw a net cash outflow in 2022, contrasting with a large inflow in 2021 from common stock and preferred stock issuances[20](index=20&type=chunk) [NOTES TO CONSOLIDATED FINANCIAL STATEMENTS](index=8&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed explanations for financial statement figures, covering organization, segments, accounting policies, discontinued operations, and specific account balances [1. Organization and Principal Activities](index=8&type=section&id=1.%20ORGANIZATION%20AND%20PRINCIPAL%20ACTIVITIES) Senmiao operates in automobile transaction and online ride-hailing segments, with recent full ownership of XXTX and deconsolidation of Jinkailong and Youlu - The Company operates in two segments: (i) automobile transaction and related services and (ii) online ride-hailing platform services (Xixingtianxia)[23](index=23&type=chunk)[24](index=24&type=chunk)[28](index=28&type=chunk) - The automobile transaction segment operates through subsidiaries like Yicheng, Corenel, Jiekai, and Hunan Ruixi, and equity investee Jinkailong[23](index=23&type=chunk)[24](index=24&type=chunk)[28](index=28&type=chunk) - The online ride-hailing platform segment operates through XXTX, a wholly-owned subsidiary since December 31, 2021, providing services in 26 cities in China[23](index=23&type=chunk)[24](index=24&type=chunk)[28](index=28&type=chunk) - Jinkailong was deconsolidated from the Company's consolidated financial statements effective March 31, 2022, due to the termination of voting agreements, resulting in a net gain on deconsolidation of **$10,951,545**[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) - Youlu VIE Agreements were terminated on March 31, 2022, with no significant impact due to limited operations[37](index=37&type=chunk) [2. Going Concern](index=11&type=section&id=2.%20GOING%20CONCERN) Substantial doubt about going concern exists due to **$1.9 million** net loss, **$36.3 million** accumulated deficit, **$0.8 million** working capital deficit, and purchase commitments - Substantial doubt about going concern exists due to: net loss of **$1.9 million** (nine months ended Dec 31, 2022), accumulated deficit of **$36.3 million** (as of Dec 31, 2022), working capital deficit of **$0.8 million** (as of Dec 31, 2022), and purchase commitments of approximately **$2.4 million** for 200 automobiles[42](index=42&type=chunk)[43](index=43&type=chunk)[45](index=45&type=chunk) - Management plans to alleviate risk through equity financing, debt financing from PRC banks, and financial support/credit guarantees from related parties[42](index=42&type=chunk)[43](index=43&type=chunk)[45](index=45&type=chunk) - Contingent liabilities for automobile purchasers were approximately **$46,641** as of December 31, 2022[42](index=42&type=chunk)[43](index=43&type=chunk)[45](index=45&type=chunk) - The company's ability to secure financing is subject to various external factors, including the impact of COVID-19, demand changes, PRC government policies, economic conditions, competition, and relationships with partners[45](index=45&type=chunk) [3. Summary of Significant Accounting Policies](index=12&type=section&id=3.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section outlines key accounting policies, including U.S. GAAP basis, consolidation, foreign currency, estimates, fair value, revenue recognition, and risks - Financial statements are prepared in accordance with U.S. GAAP and include accounts of the Company and its subsidiaries, with inter-company transactions eliminated[46](index=46&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk)[53](index=53&type=chunk) - The functional currency is Chinese Renminbi (RMB), with reporting in U.S. dollars (US$)[46](index=46&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk)[53](index=53&type=chunk) - Assets and liabilities are translated at balance sheet date rates, while revenues and expenses use average rates[46](index=46&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk)[53](index=53&type=chunk) - Management's estimates are crucial for revenue recognition, lease classification, allowances for doubtful accounts, impairment assessments, and valuation of derivative liabilities, among others[46](index=46&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk)[53](index=53&type=chunk) Foreign Currency Exchange Rates | Category | December 31, 2022 | March 31, 2022 | | :------- | :---------------- | :------------- | | Balance sheet items (except equity) | 6.8972 | 6.3400 | | Statements of operations (3 months) | 7.1120 | 6.3937 | | Statements of operations (9 months) | 6.8547 | 6.4408 | - The company uses the Black-Scholes valuation model to estimate the fair value of derivative liabilities, which are classified as Level 3 in the fair value hierarchy[58](index=58&type=chunk)[59](index=59&type=chunk)[61](index=61&type=chunk) - Revenue recognition follows ASC Topic 606, identifying performance obligations and recognizing revenue when control of goods/services transfers[92](index=92&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk)[103](index=103&type=chunk) - Automobile transaction revenues include operating lease rentals, NEVs leasing fees, automobile sales, management/guarantee services, and financing revenues[92](index=92&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk)[103](index=103&type=chunk) - Online ride-hailing platform services revenue is recognized on a net basis as commissions for completed rides, as the company acts as an agent[92](index=92&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk)[103](index=103&type=chunk) - Significant risks include credit risk (concentration in China, customer defaults), foreign currency risk (RMB depreciation), and the potential impact of the new CECL model on credit loss recognition[121](index=121&type=chunk)[124](index=124&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk) [4. Discontinued Operations](index=25&type=section&id=4.%20DISCONTINUED%20OPERATIONS) Online P2P lending was discontinued in 2019, and Jinkailong was deconsolidated in 2022, with its prior results reclassified as discontinued operations - Online P2P lending services were discontinued in October 2019 due to tightened regulations, leading to a **$4,048,210** provision for doubtful accounts[128](index=128&type=chunk)[129](index=129&type=chunk)[131](index=131&type=chunk)[133](index=133&type=chunk) - Jinkailong was deconsolidated effective March 31, 2022, after termination of voting agreements, and is now an equity investee[128](index=128&type=chunk)[129](index=129&type=chunk)[131](index=131&type=chunk)[133](index=133&type=chunk) - Discontinued operations liabilities for Online P2P lending services were **$485,736** as of December 31, 2022, and **$528,426** as of March 31, 2022[128](index=128&type=chunk)[129](index=129&type=chunk)[131](index=131&type=chunk)[133](index=133&type=chunk) Net Loss from Discontinued Operations (Three Months Ended Dec 31, 2021) | Metric | 2021 (Unaudited) | | :----- | :--------------- | | Revenues | $1,882,930 | | Gross Profit | $507,112 | | Loss from Operations | $(390,710) | | Net Loss | $(418,355) | | Net Loss Attributable to Stockholders | $(309,583) | Net Loss from Discontinued Operations (Nine Months Ended Dec 31, 2021) | Metric | 2021 (Unaudited) | | :----- | :--------------- | | Revenues | $5,096,441 | | Gross Profit | $800,780 | | Loss from Operations | $(2,182,402) | | Net Loss | $(2,418,757) | | Net Loss Attributable to Stockholders | $(1,789,880) | [5. Accounts Receivable, Net](index=27&type=section&id=5.%20ACCOUNTS%20RECEIVABLE,%20NET) Accounts receivable, net, decreased from **$418,091** to **$204,763**, driven by reduced automobile sales and ride-hailing receivables, and a zero allowance for doubtful accounts Accounts Receivable, Net | Category | Dec 31, 2022 (Unaudited) | Mar 31, 2022 | | :------- | :----------------------- | :----------- | | Receivables of automobile sales | $107,246 | $392,530 | | Receivables of service fees | $15,949 | $17,350 | | Receivables of online ride hailing fees | $46,848 | $121,116 | | Receivables of operating lease | $34,720 | — | | Less: Allowance for doubtful accounts | — | $(112,905) | | **Accounts receivable, net** | **$204,763** | **$418,091** | - Allowance for doubtful accounts decreased from **$112,905** to **$0**, with **$107,820** written off during the nine months ended December 31, 2022[137](index=137&type=chunk) - Accounts receivable from automobile sales and online ride-hailing fees saw notable decreases[137](index=137&type=chunk) [6. Inventories](index=27&type=section&id=6.%20INVENTORIES) Inventories of automobiles decreased from **$286,488** (36 units) to **$0** (0 units), with an impairment of **$3,085** recognized Inventories (Automobiles) | Metric | Dec 31, 2022 (Unaudited) | Mar 31, 2022 | | :----- | :----------------------- | :----------- | | Automobiles (value) | $0 | $286,488 | | Automobiles (number) | 0 | 36 | - An impairment of **$3,085** was recognized for inventories for the nine months ended December 31, 2022[138](index=138&type=chunk) [7. Prepayments, Other Receivables and Other Assets](index=28&type=section&id=7.%20PREPAYMENTS,%20OTHER%20RECEIVABLES%20AND%20OTHER%20ASSETS) Total prepayments, other receivables, and other assets decreased from **$2.71 million** to **$1.36 million**, mainly due to reduced VAT recoverable and prepaid expenses Prepayments, Other Receivables and Other Assets | Category | Dec 31, 2022 (Unaudited) | Mar 31, 2022 | | :------- | :----------------------- | :----------- | | Deposits | $618,689 | $731,279 | | Receivables from aggregation platforms | $253,168 | $163,384 | | Prepaid expenses | $242,779 | $957,200 | | Due from automobile purchasers, net | $103,333 | $238,421 | | VAT recoverable | $93,214 | $597,884 | | **Total** | **$1,362,817** | **$2,713,208** | - Deposits primarily represent security deposits to automobile leasing companies, financial institutions, and Didi Chuxing[142](index=142&type=chunk)[143](index=143&type=chunk)[146](index=146&type=chunk) - Receivables from aggregation platforms are amounts due from collaborated platforms for driver disbursements[142](index=142&type=chunk)[143](index=143&type=chunk)[146](index=146&type=chunk) - VAT recoverable significantly decreased, indicating reduced historical purchasing activities or increased utilization[142](index=142&type=chunk)[143](index=143&type=chunk)[146](index=146&type=chunk) [8. Property and Equipment, Net](index=29&type=section&id=8.%20PROPERTY%20AND%20EQUIPMENT,%20NET) Property and equipment, net, decreased from **$5.66 million** to **$3.53 million**, primarily due to fewer automobiles and increased accumulated depreciation Property and Equipment, Net | Category | Dec 31, 2022 (Unaudited) | Mar 31, 2022 | | :------- | :----------------------- | :----------- | | Automobiles | $4,652,593 | $6,463,698 | | Subtotal (Cost) | $4,957,491 | $6,791,908 | | Less: Accumulated Depreciation | $(1,427,295) | $(1,133,135) | | **Total Property and Equipment, Net** | **$3,530,196** | **$5,658,773** | - Depreciation expense from continuing operations for the nine months ended December 31, 2022, was **$873,480**[149](index=149&type=chunk) [9. Other Non-Current Assets](index=29&type=section&id=9.%20OTHER%20NON-CURRENT%20ASSETS) Other non-current assets increased to **$837,731** due to prepayments for automobile purchases, with remaining purchases expected by March 31, 2023 Other Non-Current Assets | Category | Dec 31, 2022 (Unaudited) | Mar 31, 2022 | | :------- | :----------------------- | :----------- | | Prepayments of automobiles purchased | $837,731 | $0 | - The company made prepayments of **$837,731** for 130 automobiles under purchase agreements, with the remaining purchase expected by March 31, 2023[151](index=151&type=chunk) [10. Intangible Assets, Net](index=29&type=section&id=10.%20INTANGIBLE%20ASSETS,%20NET) Intangible assets, net, decreased from **$959,551** to **$819,671** due to accumulated amortization, with **$128,538** amortization expense Intangible Assets, Net | Category | Dec 31, 2022 (Unaudited) | Mar 31, 2022 | | :------- | :----------------------- | :----------- | | Software | $793,195 | $796,042 | | Online ride-hailing platform operating licenses | $439,662 | $450,701 | | Subtotal (Cost) | $1,232,857 | $1,246,743 | | Less: Accumulated Amortization | $(413,186) | $(287,192) | | **Total Intangible Assets, Net** | **$819,671** | **$959,551** | - Amortization expense from continuing operations for the nine months ended December 31, 2022, was **$128,538**[154](index=154&type=chunk) Future Amortization Expenses | Period (Twelve months ending Dec 31) | Amortization Expenses | | :----------------------------------- | :-------------------- | | 2023 | $179,616 | | 2024 | $169,528 | | 2025 | $133,240 | | 2026 | $85,157 | | 2027 | $78,586 | | Thereafter | $173,544 | | **Total** | **$819,671** | [11. Borrowings from a Financial Institution](index=30&type=section&id=11.%20BORROWINGS%20FROM%20A%20FINANCIAL%20INSTITUTION) Short-term borrowings decreased from **$145,542** to **$22,857**, with an interest rate of **13.04%** and **$6,975** in interest expense Borrowings from a Financial Institution | Metric | Dec 31, 2022 (Unaudited) | Mar 31, 2022 | | :----- | :----------------------- | :----------- | | Short-term loans | $22,857 | $145,542 | | Interest Rate | 13.04% per annum | 13.04% per annum | - Interest expense from continuing operations for the nine months ended December 31, 2022, was **$6,975**[156](index=156&type=chunk) [12. Accrued Expenses and Other Liabilities](index=30&type=section&id=12.%20ACCRUED%20EXPENSES%20AND%20OTHER%20LIABILITIES) Accrued expenses and other liabilities increased from **$2.44 million** to **$2.72 million**, including payables to drivers, deposits, and loan repayments Accrued Expenses and Other Liabilities (Continuing Operations) | Category | Dec 31, 2022 (Unaudited) | Mar 31, 2022 | | :------- | :----------------------- | :----------- | | Payables to drivers from aggregation platforms | $1,305,857 | $1,176,442 | | Deposits | $845,726 | $806,921 | | Loan repayments received on behalf of financial institutions | $555,513 | $783,830 | | **Total (excluding discontinued operations)** | **$2,715,209** | **$2,444,367** | - Payables to drivers from aggregation platforms represent amounts collected by the company on behalf of drivers[157](index=157&type=chunk)[158](index=158&type=chunk) - Deposits are security deposits from operating and finance lease customers, refundable at lease end[157](index=157&type=chunk)[158](index=158&type=chunk) - Loan repayments received on behalf of financial institutions are amounts collected from automobile purchasers not yet remitted to financial institutions[157](index=157&type=chunk)[158](index=158&type=chunk) [13. Employee Benefit Plan](index=31&type=section&id=13.%20EMPLOYEE%20BENEFIT%20PLAN) Employee benefit contributions totaled **$338,279**, but inadequate contributions of **$885,967** were reported as of December 31, 2022 Employee Benefit Contributions (Continuing Operations) | Period | Contributions | | :----- | :------------ | | Three months ended Dec 31, 2022 | $107,638 | | Nine months ended Dec 31, 2022 | $338,279 | | Three months ended Dec 31, 2021 | $130,591 | | Nine months ended Dec 31, 2021 | $383,896 | - As of December 31, 2022, the company had inadequate employee benefit contributions of **$885,967** from continuing operations[160](index=160&type=chunk) [14. Equity](index=31&type=section&id=14.%20EQUITY) This section details equity structure, including warrants, RSUs, a 1-for-10 reverse stock split, derivative liabilities, and preferred stock conversions - Warrants issued in direct offerings and private placements are classified as derivative liabilities and recorded at fair value using the Black-Scholes model[162](index=162&type=chunk)[176](index=176&type=chunk)[310](index=310&type=chunk) - The change in fair value of derivative liabilities for the nine months ended December 31, 2022, was a gain of **$1,641,650**[162](index=162&type=chunk)[176](index=176&type=chunk)[310](index=310&type=chunk) - A 1-for-10 reverse stock split became effective on April 6, 2022, retroactively adjusting all shares and per share amounts[162](index=162&type=chunk)[176](index=176&type=chunk)[310](index=310&type=chunk) Warrants Outstanding | Metric | March 31, 2021 | March 31, 2022 | December 31, 2022 (Unaudited) | | :----- | :------------- | :------------- | :---------------------------- | | Warrants Outstanding | 110,107 | 6,091,298 | 6,066,298 | | Weighted Average Exercise Price | $11.60 | $2.28 | $2.29 | | Average Remaining Contractual Life (years) | 4.09 | 4.32 | 3.81 | - During the nine months ended December 31, 2022, **3,259** shares of Series A convertible preferred stock were converted into **1,496,125** shares of common stock[178](index=178&type=chunk) - The conversion price of Series A convertible preferred shares was reduced from **$4.10** to **$2.00** on August 9, 2022[178](index=178&type=chunk) [15. Income Taxes](index=34&type=section&id=15.%20INCOME%20TAXES) No income tax expense was recorded due to cumulative losses, with **$7.1 million** U.S. and **$10.5 million** PRC NOL carryforwards offset by a 100% valuation allowance - No income tax expense was recorded for the nine months ended December 31, 2022, due to cumulative losses in PRC subsidiaries[180](index=180&type=chunk)[181](index=181&type=chunk)[184](index=184&type=chunk) - Net operating loss carryforward for U.S. income taxes was approximately **$7.1 million** as of December 31, 2022, with a **100%** valuation allowance[180](index=180&type=chunk)[181](index=181&type=chunk)[184](index=184&type=chunk) - PRC entities from continuing operations had net operating loss carryforwards of approximately **$10.5 million** as of December 31, 2022, also with a **100%** valuation allowance[180](index=180&type=chunk)[181](index=181&type=chunk)[184](index=184&type=chunk) Deferred Tax Assets and Liabilities (Continuing Operations) | Category | Dec 31, 2022 (Unaudited) | Mar 31, 2022 | | :------- | :----------------------- | :----------- | | Net operating loss carryforwards in PRC | $2,732,507 | $2,315,793 | | Net operating loss carryforwards in U.S. | $1,508,215 | $1,234,789 | | Allowance for doubtful account | $131,775 | $29,129 | | Less: Valuation allowance | $(4,372,497) | $(3,579,711) | | **Deferred tax assets, net** | **$0** | **$0** | | Capitalized intangible assets cost (Deferred tax liabilities) | $42,746 | $46,386 | | **Deferred tax liabilities, net** | **$42,746** | **$46,386** | [16. Concentration](index=36&type=section&id=16.%20CONCENTRATION) Two key suppliers accounted for **20.3%** and **12.0%** of total cost of revenues for the nine months ended December 31, 2022, indicating concentration risk - For the three months ended December 31, 2022, three suppliers accounted for approximately **19.7%**, **12.0%**, and **11.8%** of total costs of revenue[190](index=190&type=chunk) - For the nine months ended December 31, 2022, two suppliers accounted for approximately **20.3%** and **12.0%** of total cost of revenues[190](index=190&type=chunk) [17. Related Party Transactions and Balances](index=36&type=section&id=17.%20RELATED%20PARTY%20TRANSACTIONS%20AND%20BALANCES) The company has significant related party balances, including **$5,992,152** due from Jinkailong and **$117,237** due to related parties, primarily from the CEO, with various rental and promotion fee transactions - Accounts receivable from a related party (Jinkailong) was **$9,816** as of December 31, 2022[191](index=191&type=chunk)[196](index=196&type=chunk) - Due from related parties (Jinkailong and Youlu) totaled **$5,992,152** as of December 31, 2022, with **$5,351,735** non-current[191](index=191&type=chunk)[196](index=196&type=chunk) - Due to related parties and affiliates totaled **$117,237** as of December 31, 2022, including **$114,425** from the CEO, Xi Wen[191](index=191&type=chunk)[196](index=196&type=chunk) Operating Lease ROU Assets and Liabilities - Related Parties | Category | Dec 31, 2022 (Unaudited) | Mar 31, 2022 | | :------- | :----------------------- | :----------- | | Operating lease right-of-use assets, net, related parties | $139,787 | $515,906 | | Operating lease liabilities - related parties (current) | $163,558 | $330,781 | | Operating lease liabilities, non-current - related parties | $52,205 | $226,896 | - Rental expenses to related parties (Hong Li and Dingchentai) were **$148,999** for the nine months ended December 31, 2022[200](index=200&type=chunk)[202](index=202&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk) - Promotion fees of **$87,692** were incurred to Jinkailong for the nine months ended December 31, 2022[200](index=200&type=chunk)[202](index=202&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk) - Corenel generated **$323,321** in revenues from leasing automobiles to Jinkailong for the nine months ended December 31, 2022[200](index=200&type=chunk)[202](index=202&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk) [18. Leases](index=38&type=section&id=18.%20LEASES) The company acts as both lessor and lessee for automobiles and properties, with total lease expenses of **$2,352,191** for the nine months ended December 31, 2022 - The company acts as a lessor for automobile rentals (operating and sales-type leases) and as a lessee for offices, showrooms, and automobiles (operating and finance leases)[206](index=206&type=chunk)[207](index=207&type=chunk)[210](index=210&type=chunk) - Lease expenses from continuing operations for the nine months ended December 31, 2022, totaled **$2,352,191**, an increase from **$1,655,424** in the prior year[206](index=206&type=chunk)[207](index=207&type=chunk)[210](index=210&type=chunk) - The weighted-average remaining operating lease term is **2.41 years**, and the finance lease term is **2.75 years**, with an effective interest rate of **6.0%**[206](index=206&type=chunk)[207](index=207&type=chunk)[210](index=210&type=chunk) Total Lease Expenses (Continuing Operations) | Period | Total Lease Expenses | | :----- | :------------------- | | Three months ended Dec 31, 2022 | $796,987 | | Nine months ended Dec 31, 2022 | $2,352,191 | | Three months ended Dec 31, 2021 | $686,450 | | Nine months ended Dec 31, 2021 | $1,655,424 | Future Minimum Lease Payments (as of Dec 31, 2022) | Period (Twelve months ending Dec 31) | Operating Lease Payments | Finance Lease Payments | Total | | :----------------------------------- | :----------------------- | :--------------------- | :---- | | 2023 | $265,601 | $278,610 | $544,211 | | 2024 | $95,690 | $269,675 | $365,365 | | 2025 | $63,120 | $202,256 | $265,376 | | 2026 | $14,982 | — | $14,982 | | **Total Lease Payments** | **$439,393** | **$750,541** | **$1,189,934** | | Less: Discount | $(22,205) | $(58,657) | $(80,862) | | **Present Value of Lease Liabilities** | **$417,188** | **$691,884** | **$1,109,072** | [19. Commitments and Contingencies](index=40&type=section&id=19.%20COMMITMENTS%20AND%20CONTINGENCIES) The company has **$2.4 million** in automobile purchase commitments and faces contingent liabilities of **$47,000** for its operations and **$4.8 million** for Jinkailong - Purchase commitments for automobiles total approximately **$2.4 million**, with **$0.7 million** remitted as prepayments for 100 automobiles[217](index=217&type=chunk)[218](index=218&type=chunk)[220](index=220&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk) - Maximum contingent liabilities for the company's own automobile purchasers were approximately **$47,000** as of December 31, 2022[217](index=217&type=chunk)[218](index=218&type=chunk)[220](index=220&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk) - Jinkailong (equity investee) has maximum contingent liabilities of approximately **$4.8 million**, with **$3.5 million** in past-due loans[217](index=217&type=chunk)[218](index=218&type=chunk)[220](index=220&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk) - Hunan Ruixi is exposed to a maximum contingent liability of approximately **$507,000** (RMB3.5 million) in case of Jinkailong's liquidation[217](index=217&type=chunk)[218](index=218&type=chunk)[220](index=220&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk) - The company recognized estimated provision losses of **$7,284** for the nine months ended December 31, 2022, for drivers who exited the ride-hailing business and could not make monthly payments[219](index=219&type=chunk) [20. Segment Information](index=41&type=section&id=20.%20SEGMENT%20INFORMATION) The company operates in automobile transaction and online ride-hailing segments, generating **$3.35 million** and **$2.97 million** in revenue respectively for 9M 2022 - The company operates in two reportable segments: automobile transaction and related services, and online ride-hailing platform services[225](index=225&type=chunk)[226](index=226&type=chunk) - Assets are not allocated to segments as the CODM does not evaluate performance using asset information[225](index=225&type=chunk)[226](index=226&type=chunk) Segment Performance (Three Months Ended Dec 31, 2022) | Metric | Automobile Transaction and Related Services | Online Ride-hailing Platform Services | Unallocated | Consolidated | | :----- | :---------------------------------------- | :------------------------------------ | :---------- | :----------- | | Revenues | $930,625 | $810,295 | — | $1,740,920 | | Loss from Operations | $(999,958) | $(69,672) | $(259,746) | $(1,329,376) | | Net Loss | $(700,414) | $(56,667) | $(229,188) | $(986,269) | Segment Performance (Nine Months Ended Dec 31, 2022) | Metric | Automobile Transaction and Related Services | Online Ride-hailing Platform Services | Unallocated | Consolidated | | :----- | :---------------------------------------- | :------------------------------------ | :---------- | :----------- | | Revenues | $3,353,400 | $2,970,518 | — | $6,323,918 | | Loss from Operations | $(2,854,231) | $(262,097) | $(1,238,849) | $(4,355,177) | | Net Loss | $(2,071,478) | $(253,477) | $402,802 | $(1,922,153) | [21. Subsequent Events](index=42&type=section&id=21.%20SUBSEQUENT%20EVENTS) Subsequent events were evaluated up to February 14, 2023, the issuance date of the unaudited condensed consolidated financial statements - Subsequent events were evaluated up to February 14, 2023, the date of issuance of the unaudited condensed consolidated financial statements[232](index=232&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.](index=43&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management discusses financial condition, operations, revenue drivers, cost structures, COVID-19 impact, competition, liquidity, going concern, and critical accounting estimates [Overview](index=43&type=section&id=Overview) Senmiao operates in China, offering automobile transaction services and its Xixingtianxia ride-hailing platform, with operating leases and platform services as key revenue drivers - The company provides automobile transaction and related services and operates an online ride-hailing platform (Xixingtianxia) in 26 cities in China[235](index=235&type=chunk)[236](index=236&type=chunk) - Automobile transaction services include operating leases, financing leases, automobile sales, and other supporting services[235](index=235&type=chunk)[236](index=236&type=chunk) - As of December 31, 2022, the company facilitated financing for **1,687** automobiles, sold **1,465** automobiles, and delivered **2,942** automobiles under operating leases and **139** under financing leases[235](index=235&type=chunk)[236](index=236&type=chunk) Automobile Transaction and Related Services Breakdown (Three Months Ended Dec 31) | Category | 2022 Vehicles | 2022 Revenue (Approx.) | 2021 Vehicles | 2021 Revenue (Approx.) | | :------- | :------------ | :--------------------- | :------------ | :--------------------- | | Auto Operating Leasing | 802 | $781,000 | 468 | $511,000 | | Auto Sales | — | — | — | — | | Auto Financing | 139 | $9,000 | 131 | $22,000 | | Other Services | >780 | $141,000 | >410 | $110,000 | Automobile Transaction and Related Services Breakdown (Nine Months Ended Dec 31) | Category | 2022 Vehicles | 2022 Revenue (Approx.) | 2021 Vehicles | 2021 Revenue (Approx.) | | :------- | :------------ | :--------------------- | :------------ | :--------------------- | | Auto Operating Leasing | 1,607 | $2,571,000 | 484 | $1,166,000 | | Auto Sales | 41 | $226,000 | — | — | | Auto Financing | 139 | $31,000 | 131 | $86,000 | | Other Services | >1,000 | $525,000 | >420 | $283,000 | - For the nine months ended December 31, 2022, approximately **4.8 million** rides with gross fare of **$15.7 million** were completed through Xixingtianxia, generating **$3.0 million** in service fees (net of **$0.4 million** incentives)[240](index=240&type=chunk)[242](index=242&type=chunk) - The company plans to expand its driver base and launch Xixingtianxia in more cities across China[240](index=240&type=chunk)[242](index=242&type=chunk) [Key Factors and Risks Affecting Results of Operations](index=45&type=section&id=Key%20Factors%20and%20Risks%20Affecting%20Results%20of%20Operations) Operations are influenced by expanding the driver base, efficient automobile management, retaining business partners, and timely receivable collection. Key risks include competition, COVID-19, and regulatory compliance - Revenue growth depends on expanding the automobile lessee and active driver base, with cross-selling strategies between leasing and ride-hailing platform services being crucial[243](index=243&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk)[247](index=247&type=chunk)[248](index=248&type=chunk)[249](index=249&type=chunk) - Efficient management and maintenance of leased automobiles are vital for income growth, with average utilization rates of **43%** (Q3 2022) and **65%** (9M 2022) for operating leases[243](index=243&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk)[247](index=247&type=chunk)[248](index=248&type=chunk)[249](index=249&type=chunk) - The company's ability to retain key business cooperators (NEV manufacturers, ride-hailing platforms) and financial institutions is important for resources and funding[243](index=243&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk)[247](index=247&type=chunk)[248](index=248&type=chunk)[249](index=249&type=chunk) - Timely collection of receivables from automobile purchasers and ride-hailing drivers is critical for daily operations and liquidity, with a risk of increased liquidity issues from advance payments[243](index=243&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk)[247](index=247&type=chunk)[248](index=248&type=chunk)[249](index=249&type=chunk) - The maximum contingent liabilities for the company's automobile purchasers was approximately **$47,000** as of December 31, 2022, with automobiles used as collateral[250](index=250&type=chunk)[252](index=252&type=chunk) - COVID-19 pandemic in China has adversely affected business, leading to decreased demand, slower collection of receivables, and potential guarantee expenditures[253](index=253&type=chunk)[255](index=255&type=chunk)[261](index=261&type=chunk) - Online ride-hailing platform services experienced decreased orders and income due to COVID-19 lockdowns and restrictions, with a **35%** decrease in rides in September 2022[253](index=253&type=chunk)[255](index=255&type=chunk)[261](index=261&type=chunk) - Approximately **53%** of ride-hailing drivers have not obtained the required driver's license, posing a risk of fines or service suspension for both drivers and the platform[253](index=253&type=chunk)[255](index=255&type=chunk)[261](index=261&type=chunk) - The online ride-hailing industry in China is highly competitive, with **298** licensed platforms and **2.12 million** transportation certificates issued as of December 31, 2022[259](index=259&type=chunk) [Results of Operations (Three Months Ended Dec 31, 2022 vs. 2021)](index=51&type=section&id=Results%20of%20Operations%20for%20the%20Three%20months%20ended%20December%2031,%202022%20Compared%20to%20the%20Three%20months%20ended%20December%2031,%202021) For Q4 2022, total revenues increased by **5%** to **$1.74 million**, but net loss widened to **$(0.99 million)** due to lower derivative liability gains and higher doubtful account provisions Financial Performance (Three Months Ended Dec 31) | Metric | 2022 (Unaudited) | 2021 (Unaudited) | Change ($) | Change (%) | | :----- | :--------------- | :--------------- | :--------- | :--------- | | Revenues | $1,740,920 | $1,660,119 | $80,801 | 4.9% | | Cost of Revenues | $(1,558,170) | $(1,457,589) | $(100,581) | 6.9% | | Gross Profit | $182,750 | $202,530 | $(19,780) | -9.8% | | Selling, General and Administrative Expenses | $(1,385,580) | $(2,701,921) | $1,316,341 | -48.7% | | Provision for Doubtful Accounts | $(126,546) | $(6,926) | $(119,620) | 1727.2% | | Change in Fair Value of Derivative Liabilities | $30,557 | $3,536,859 | $(3,506,302) | -99.1% | | Net Income (Loss) from Continuing Operations | $(986,269) | $286,234 | $(1,272,503) | -444.6% | - Operating lease revenues from automobile rentals increased by **$270,574** due to an increased number of leased automobiles (**800+** in 2022 vs. **460+** in 2021)[265](index=265&type=chunk)[269](index=269&type=chunk)[273](index=273&type=chunk)[277](index=277&type=chunk)[278](index=278&type=chunk) - Revenue from online ride-hailing platform services decreased due to fewer completed orders[265](index=265&type=chunk)[269](index=269&type=chunk)[273](index=273&type=chunk)[277](index=277&type=chunk)[278](index=278&type=chunk) - Selling, general and administrative expenses decreased by **48.7%** due to cost-cutting, including reduced professional service fees, salary/employee benefits, and advertising[265](index=265&type=chunk)[269](index=269&type=chunk)[273](index=273&type=chunk)[277](index=277&type=chunk)[278](index=278&type=chunk) - Provision for doubtful accounts increased significantly due to re-evaluation of unsettled balances from Jinkailong and a customer[265](index=265&type=chunk)[269](index=269&type=chunk)[273](index=273&type=chunk)[277](index=277&type=chunk)[278](index=278&type=chunk) [Results of Operations (Nine Months Ended Dec 31, 2022 vs. 2021)](index=55&type=section&id=Results%20of%20Operations%20for%20the%20Nine%20months%20ended%20December%2031,%202022%20Compared%20to%20the%20Nine%20months%20ended%20December%2031,%202021) For 9M 2022, total revenues increased by **101%** to **$6.32 million**, achieving a gross profit of **$951,548** from a prior-year loss, and net loss decreased to **$(1.92 million)** Financial Performance (Nine Months Ended Dec 31) | Metric | 2022 (Unaudited) | 2021 (Unaudited) | Change ($) | Change (%) | | :----- | :--------------- | :--------------- | :--------- | :--------- | | Revenues | $6,323,918 | $3,152,592 | $3,171,326 | 100.6% | | Cost of Revenues | $(5,372,370) | $(5,378,411) | $6,041 | -0.1% | | Gross Profit (Loss) | $951,548 | $(2,225,819) | $3,177,367 | -142.7% | | Selling, General and Administrative Expenses | $(4,832,658) | $(7,102,107) | $2,269,449 | -32.0% | | Provision for Doubtful Accounts | $(470,982) | $(125,709) | $(345,273) | 274.7% | | Change in Fair Value of Derivative Liabilities | $1,641,650 | $5,185,309 | $(3,543,659) | -68.3% | | Net Loss from Continuing Operations | $(1,922,153) | $(5,205,925) | $3,283,772 | -63.1% | - Operating lease revenues from automobile rentals increased by **$1,405,334** due to an increased number of leased automobiles (**1,600+** in 2022 vs. **480+** in 2021)[290](index=290&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk)[296](index=296&type=chunk)[299](index=299&type=chunk)[303](index=303&type=chunk) - Revenue from online ride-hailing platform services increased to **$2,970,518** from **$1,617,454**, despite a decrease in completed rides, due to reduced driver incentives[290](index=290&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk)[296](index=296&type=chunk)[299](index=299&type=chunk)[303](index=303&type=chunk) - Sales of automobiles generated **$225,900** from **41** used-automobiles in 2022, compared to none in 2021[290](index=290&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk)[296](index=296&type=chunk)[299](index=299&type=chunk)[303](index=303&type=chunk) - Selling, general and administrative expenses decreased by **32%** due to continuous cost control, including reduced advertising, professional service fees, and salary/employee benefits[290](index=290&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk)[296](index=296&type=chunk)[299](index=299&type=chunk)[303](index=303&type=chunk) [Results of Discontinued Operations (Three Months Ended Dec 31, 2021)](index=60&type=section&id=Results%20of%20Discontinued%20Operations%20for%20the%20Three%20months%20ended%20December%2031,%202021) For Q4 2021, discontinued operations generated **$1.88 million** in revenues, primarily from automobile rentals, but reported a net loss of **$(418,355)** due to significant operating and interest expenses Discontinued Operations Performance (Three Months Ended Dec 31, 2021) | Metric | 2021 (Unaudited) | | :----- | :--------------- | | Revenues | $1,882,930 | | Cost of Revenues | $(1,375,818) | | Gross Profit | $507,112 | | Loss from Operations | $(390,710) | | Net Loss | $(418,355) | - Operating lease revenues from automobile rentals were **$1,436,886**, from over **1,550** leased automobiles[315](index=315&type=chunk)[316](index=316&type=chunk)[319](index=319&type=chunk) - Commissions from online ride-hailing platforms (Meituan) were **$274,643**[315](index=315&type=chunk)[316](index=316&type=chunk)[319](index=319&type=chunk) - Selling, general and administrative expenses included **$602,966** in salary and employee benefits and **$195,529** in office rental[315](index=315&type=chunk)[316](index=316&type=chunk)[319](index=319&type=chunk) [Results of Discontinued Operations (Nine Months Ended Dec 31, 2021)](index=62&type=section&id=Results%20of%20Discontinued%20Operations%20for%20the%20Nine%20months%20ended%20December%2031,%202021) For 9M 2021, discontinued operations generated **$5.10 million** in revenues, primarily from automobile rentals, but incurred a net loss of **$(2.42 million)** due to high operating, amortization, and interest expenses Discontinued Operations Performance (Nine Months Ended Dec 31, 2021) | Metric | 2021 (Unaudited) | | :----- | :--------------- | | Revenues | $5,096,441 | | Cost of Revenues | $(4,295,661) | | Gross Profit | $800,780 | | Loss from Operations | $(2,182,402) | | Net Loss | $(2,418,757) | - Operating lease revenues from automobile rentals were **$4,274,900**, from over **1,600** leased automobiles[327](index=327&type=chunk)[329](index=329&type=chunk)[330](index=330&type=chunk) - Commissions from online ride-hailing platforms (Meituan) were **$274,643**[327](index=327&type=chunk)[329](index=329&type=chunk)[330](index=330&type=chunk) - Cost of revenues included **$2,245,354** in amortization/depreciation and **$2,050,307** in daily maintenance/insurance/rental costs[327](index=327&type=chunk)[329](index=329&type=chunk)[330](index=330&type=chunk) - Selling, general and administrative expenses included **$1,635,082** in salary and employee benefits and **$560,449** in office rental[327](index=327&type=chunk)[329](index=329&type=chunk)[330](index=330&type=chunk) [Liquidity and Going Concern](index=63&type=section&id=Liquidity%20and%20Going%20Concern) The company faces significant liquidity concerns with a **$1.9 million** net loss, **$36.3 million** accumulated deficit, and **$0.8 million** working capital deficit, pursuing financing to address going concern doubts - Substantial doubt about going concern due to: net loss of **$1.9 million** (9M 2022), accumulated deficit of **$36.3 million** (Dec 31, 2022), working capital deficit of **$0.8 million** (Dec 31, 2022), and **$2.4 million** in automobile purchase commitments[335](index=335&type=chunk)[337](index=337&type=chunk)[339](index=339&type=chunk) - Management plans to secure equity financing, debt from PRC banks, and financial support/credit guarantees from related parties[335](index=335&type=chunk)[337](index=337&type=chunk)[339](index=339&type=chunk) - Net cash provided by operating activities was **$249,287** for the nine months ended December 31, 2022, a significant improvement from **$6,459,172** used in the prior year[335](index=335&type=chunk)[337](index=337&type=chunk)[339](index=339&type=chunk) Cash Flow Summary (Nine Months Ended Dec 31) | Metric | 2022 (Unaudited) | 2021 (Unaudited) | | :----- | :--------------- | :--------------- | | Net Cash Provided by (Used in) Operating Activities | $249,287 | $(6,459,172) | | Net Cash Provided by (Used in) Investing Activities | $287,146 | $(3,538,102) | | Net Cash Provided by (Used in) Financing Activities | $(101,372) | $8,177,287 | | Cash and Cash Equivalents at End of Period | $1,537,609 | $2,801,711 | [Off-Balance Sheet Arrangements](index=65&type=section&id=Off-Balance%20Sheet%20Arrangements) Off-balance sheet arrangements include **$2.4 million** in automobile purchase commitments and contingent liabilities of **$47,000** for its operations and **$4.8 million** for Jinkailong - Purchase commitments for automobiles total approximately **$2.4 million**, with **$0.7 million** remitted as prepayments[344](index=344&type=chunk)[345](index=345&type=chunk) - Contingent liabilities for the company's own automobile purchasers are approximately **$47,000**[344](index=344&type=chunk)[345](index=345&type=chunk) - Jinkailong (former VIE) has maximum contingent liabilities of approximately **$4.8 million**, including **$3.5 million** in past-due loans[344](index=344&type=chunk)[345](index=345&type=chunk) - Hunan Ruixi is exposed to a maximum of **$507,000** (RMB3.5 million) in Jinkailong's liabilities if liquidated[345](index=345&type=chunk)[347](index=347&type=chunk) [Critical Accounting Estimates](index=66&type=section&id=Critical%20Accounting%20Estimates) This section details critical accounting estimates, including fair value of derivative liabilities, revenue recognition for leases, share-based awards, lessee accounting, impairment, doubtful accounts, inventory obsolescence, and deferred tax assets - Derivative liabilities are valued using the Black-Scholes model, with changes recorded in results of operations[349](index=349&type=chunk)[350](index=350&type=chunk)[352](index=352&type=chunk)[353](index=353&type=chunk)[354](index=354&type=chunk)[356](index=356&type=chunk)[357](index=357&type=chunk)[358](index=358&type=chunk)[360](index=360&type=chunk)[362](index=362&type=chunk)[363](index=363&type=chunk) - Revenue recognition for leases (ASC 842) involves classifying transactions as sales-type or operating leases and allocating revenue in bundled lease arrangements based on standalone selling prices[349](index=349&type=chunk)[350](index=350&type=chunk)[352](index=352&type=chunk)[353](index=353&type=chunk)[354](index=354&type=chunk)[356](index=356&type=chunk)[357](index=357&type=chunk)[358](index=358&type=chunk)[360](index=360&type=chunk)[362](index=362&type=chunk)[363](index=363&type=chunk) - Share-based awards are measured at fair value on grant date, with compensation expense recognized over the service period[349](index=349&type=chunk)[350](index=350&type=chunk)[352](index=352&type=chunk)[353](index=353&type=chunk)[354](index=354&type=chunk)[356](index=356&type=chunk)[357](index=357&type=chunk)[358](index=358&type=chunk)[360](index=360&type=chunk)[362](index=362&type=chunk)[363](index=363&type=chunk) - Lease accounting for lessees involves recognizing ROU assets and lease liabilities based on the present value of lease payments, using the incremental borrowing rate[349](index=349&type=chunk)[350](index=350&type=chunk)[352](index=352&type=chunk)[353](index=353&type=chunk)[354](index=354&type=chunk)[356](index=356&type=chunk)[357](index=357&type=chunk)[358](index=358&type=chunk)[360](index=360&type=chunk)[362](index=362&type=chunk)[363](index=363&type=chunk) - Impairment assessments for long-lived assets and goodwill involve comparing carrying amounts to undiscounted future cash flows or fair values[349](index=349&type=chunk)[350](index=350&type=chunk)[352](index=352&type=chunk)[353](index=353&type=chunk)[354](index=354&type=chunk)[356](index=356&type=chunk)[357](index=357&type=chunk)[358](index=358&type=chunk)[360](index=360&type=chunk)[362](index=362&type=chunk)[363](index=363&type=chunk) - Allowances for doubtful accounts are based on historical collection trends, aging of receivables, and individual customer financial conditions[349](index=349&type=chunk)[350](index=350&type=chunk)[352](index=352&type=chunk)[353](index=353&type=chunk)[354](index=354&type=chunk)[356](index=356&type=chunk)[357](index=357&type=chunk)[358](index=358&type=chunk)[360](index=360&type=chunk)[362](index=362&type=chunk)[363](index=363&type=chunk) - Inventory obsolescence is assessed by comparing cost to net realizable value, with write-downs if cost is higher[349](index=349&type=chunk)[350](index=350&type=chunk)[352](index=352&type=chunk)[353](index=353&type=chunk)[354](index=354&type=chunk)[356](index=356&type=chunk)[357](index=357&type=chunk)[358](index=358&type=chunk)[360](index=360&type=chunk)[362](index=362&type=chunk)[363](index=363&type=chunk) - Valuation of deferred tax assets includes a valuation allowance when realization is not probable[349](index=349&type=chunk)[350](index=350&type=chunk)[352](index=352&type=chunk)[353](index=353&type=chunk)[354](index=354&type=chunk)[356](index=356&type=chunk)[357](index=357&type=chunk)[358](index=358&type=chunk)[360](index=360&type=chunk)[362](index=362&type=chunk)[363](index=363&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk.](index=70&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk.) [Market Risk Disclosure](index=70&type=section&id=Market%20Risk%20Disclosure) The company has no applicable quantitative and qualitative disclosures regarding market risk - The company has no applicable quantitative and qualitative disclosures about market risk[365](index=365&type=chunk) [Item 4. Controls and Procedures.](index=70&type=section&id=Item%204.%20Controls%20and%20Procedures.) [Evaluation of Disclosure Controls and Procedures](index=70&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Disclosure controls were ineffective as of December 31, 2022, due to material weaknesses in accounting, internal audit, system access, data management, and IT general controls - As of December 31, 2022, disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting[366](index=366&type=chunk) - Material weaknesses include: insufficient accounting personnel for complex U.S. GAAP issues, inadequate internal audit function, lack of periodic review for unauthorized financial system access, deficiencies in data management/cybersecurity, and insufficient IT general controls[366](index=366&type=chunk) - The company plans to address weaknesses by ameliorating internal audit and improving system security environment, including regular backup and penetration testing[366](index=366&type=chunk) - There have been no material changes in internal control over financial reporting during the quarter ended December 31, 2022[366](index=366&type=chunk) [PART II - OTHER INFORMATION](index=71&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 6. Exhibits](index=71&type=section&id=Item%206.%20Exhibits) This section lists Form 10-Q exhibits, including SOX 302/906 certifications from CEO/CFO and various XBRL documents - Includes Certifications of Principal Executive Officer and Principal Financial Officer (Sections 302 and 906 of Sarbanes-Oxley Act)[367](index=367&type=chunk) - Contains various XBRL Taxonomy Extension Documents (Schema, Calculation, Definition, Label, Presentation) and the Cover Page Interactive Data File[367](index=367&type=chunk) [Signatures](index=72&type=section&id=SIGNATURES) The report was signed on February 14, 2023, by CEO Xi Wen and CFO Xiaoyuan Zhang, as per Securities Exchange Act requirements - The report was signed on February 14, 2023, by Xi Wen (CEO) and Xiaoyuan Zhang (CFO)[368](index=368&type=chunk)[369](index=369&type=chunk)

PART I – FINANCIAL INFORMATION [Item 1. Unaudited Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These unaudited statements detail Senmiao Technology's financial position, operations, and cash flows, reflecting reduced net loss and Jinkailong's deconsolidation [Unaudited Condensed Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2022, total assets and liabilities decreased, driven by reductions in property, equipment, and derivative liabilities, resulting in lower total equity Balance Sheet Highlights | Balance Sheet Highlights | September 30, 2022 (Unaudited) | March 31, 2022 | | :--- | :--- | :--- | | **Total Current Assets** | $4,532,604 | $5,599,538 | | **Total Assets** | **$15,821,316** | **$19,878,117** | | **Total Current Liabilities** | $4,506,565 | $6,165,811 | | **Total Liabilities** | **$4,873,034** | **$6,488,379** | | **Total Equity** | **$10,662,480** | **$12,568,939** | [Unaudited Consolidated Statements of Operations and Comprehensive Loss](index=5&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) For the six months ended September 30, 2022, revenues surged, leading to a gross profit turnaround and a significantly narrowed net loss from continuing operations Statement of Operations (Six Months Ended Sep 30) | Statement of Operations (Six Months Ended Sep 30) | 2022 (Unaudited) | 2021 (Unaudited) | | :--- | :--- | :--- | | **Total Revenues** | $4,582,998 | $1,492,473 | | **Gross Profit (Loss)** | $768,798 | $(2,428,349) | | **Loss from Operations** | $(3,025,801) | $(7,087,859) | | **Net Loss from Continuing Operations** | $(935,884) | $(5,492,159) | | **Net Loss Attributable to Stockholders** | $(750,637) | $(5,828,689) | | **Loss Per Share (Basic & Diluted)** | $(0.11) | $(1.07) | [Unaudited Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended September 30, 2022, operating cash flow significantly improved, investing activities provided cash, while financing activities saw a sharp decrease Cash Flow Summary (Six Months Ended Sep 30) | Cash Flow Summary (Six Months Ended Sep 30) | 2022 (Unaudited) | 2021 (Unaudited) | | :--- | :--- | :--- | | **Net Cash Provided by (Used in) Operating Activities** | $512,205 | $(6,004,863) | | **Net Cash Provided by (Used in) Investing Activities** | $414,261 | $(2,140,995) | | **Net Cash Provided by Financing Activities** | $32,075 | $5,439,491 | | **Net Increase (Decrease) in Cash** | $780,311 | $(2,681,971) | | **Cash and Cash Equivalents, End of Period** | $1,965,532 | $1,766,104 | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes detail the company's structure, accounting policies, segment performance, and significant disclosures, including Jinkailong's deconsolidation and going concern doubt - The company operates in two segments: (i) automobile transaction and related services, and (ii) online ride-hailing platform services (Xixingtianxia)[26](index=26&type=chunk)[27](index=27&type=chunk) - Management has determined there is substantial doubt about the company's ability to continue as a going concern due to an accumulated deficit of approximately **$35.4 million** and purchase commitments of about **$2.8 million**[46](index=46&type=chunk)[47](index=47&type=chunk) - On March 31, 2022, the company terminated voting agreements related to Jinkailong, leading to its deconsolidation, and Jinkailong is now treated as a discontinued operation and an equity method investee[38](index=38&type=chunk)[39](index=39&type=chunk)[41](index=41&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=51&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%20(MD&A)) MD&A discusses business overview, operational factors, financial results, and liquidity, highlighting revenue growth, improved margins, and significant risks including COVID-19, competition, and going concern doubt [Overview](index=51&type=section&id=Overview) The company operates automobile transaction services and the 'Xixingtianxia' online ride-hailing platform in China, serving ride-hailing drivers across 26 cities - The company's two primary business lines are Automobile Transactions and Related Services, and the Online Ride-hailing Platform Services (Xixingtianxia)[240](index=240&type=chunk)[241](index=241&type=chunk)[245](index=245&type=chunk) - For the six months ended September 30, 2022, the Xixingtianxia platform completed approximately **3.4 million rides** with a gross fare of about **$11.4 million**, generating service fees of approximately **$2.2 million**[249](index=249&type=chunk) [Key Factors and Risks Affecting Results of Operations](index=53&type=section&id=Key%20Factors%20and%20Risks%20Affecting%20Results%20of%20Operations) Performance is influenced by driver base growth and fleet management, facing significant risks from COVID-19, regulatory non-compliance, and intense ride-hailing competition - The COVID-19 pandemic in China poses a significant risk, with outbreaks and lockdowns previously causing ride-hailing orders to decrease by **20-30%**, and a suspension in Chengdu leading to a **35% drop** in completed rides for September 2022[266](index=266&type=chunk)[267](index=267&type=chunk) - A key regulatory risk is that approximately **48%** of the company's ride-hailing drivers had not obtained the required driver's license as of September 30, 2022, which could result in fines and service suspensions[280](index=280&type=chunk)[281](index=281&type=chunk) - The average utilization rate of automobiles for operating leases was approximately **74.9%** for the six months ended September 30, 2022, up from **70%** in the prior year period[252](index=252&type=chunk) [Results of Operations](index=63&type=section&id=Results%20of%20Operations) For the six months ended September 30, 2022, revenue increased significantly, leading to a gross profit turnaround and a substantially narrowed net loss from continuing operations Financial Performance (Six Months Ended Sep 30) | Financial Performance (Six Months Ended Sep 30) | 2022 | 2021 | Change (%) | | :--- | :--- | :--- | :--- | | **Revenues** | $4,582,998 | $1,492,473 | +207% | | **Gross Profit (Loss)** | $768,798 | $(2,428,349) | N/A | | **Loss from Operations** | $(3,025,801) | $(7,087,859) | +57.3% | | **Net Loss from Continuing Operations** | $(935,884) | $(5,492,159) | +82.9% | - The significant improvement in gross profit was mainly due to a **$2.9 million** increase in the gross profit of the online ride-hailing platform services, which turned from a loss of **$2.07 million** to a profit of **$0.84 million**, primarily by reducing driver incentives[320](index=320&type=chunk) [Liquidity and Going Concern](index=81&type=section&id=Liquidity%20and%20Going%20Concern) The company faces substantial doubt about its ability to continue as a going concern due to its accumulated deficit and purchase commitments, necessitating additional financing - The company's ability to continue as a going concern is in substantial doubt due to a **$35.4 million** accumulated deficit and **$2.8 million** in purchase commitments[354](index=354&type=chunk) - Management plans to alleviate the going concern risk through equity financing, debt from PRC banks, and financial support from related parties[355](index=355&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=88&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section is not applicable for the reporting period - This section is not applicable for the reporting period[389](index=389&type=chunk) [Item 4. Controls and Procedures](index=88&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective due to material weaknesses in U.S. GAAP expertise, internal audit, and IT general controls - Management concluded that disclosure controls and procedures were not effective as of September 30, 2022[390](index=390&type=chunk) - Material weaknesses identified include: insufficient U.S. GAAP accounting expertise, lack of adequate internal audit policies, and deficiencies in IT general controls, data management, and system security[390](index=390&type=chunk)[391](index=391&type=chunk) PART II - OTHER INFORMATION [Item 6. Exhibits](index=90&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL interactive data files - The exhibits include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, as well as XBRL data files[394](index=394&type=chunk)