Senmiao Technology(AIHS) - 2025 Q4 - Annual Report

Part I Business Overview Senmiao Technology, a U.S. holding company, focuses on automobile transaction and related services in the PRC, having discontinued its ride-hailing platform to concentrate on core auto services - The company operates as a U.S. holding company with all substantial operations conducted through its PRC-based operating entities[21] - In August 2024, the company disposed of its XXTX online ride-hailing platform, ceasing operations in that segment to focus on automobile transaction and related services[22][34] - As of March 31, 2025, the company facilitated financing for 312 automobiles, sold 1,516 automobiles, and delivered 2,116 automobiles under operating leases and 191 under financing leases since November 2018[32] Corporate History and Structure Senmiao was incorporated in Nevada in 2017 and operates through PRC subsidiaries, with key historical events including acquisitions and recent streamlining through termination of VIE control and disposal of non-core assets - The company acquired a 60% equity interest in Hunan Ruixi in November 2018, increasing to 65% in February 2024 via a share swap agreement[37] - In August 2024, the company disposed of its 100% equity interest in XXTX, its online ride-hailing platform subsidiary, for zero consideration with the acquirer assuming certain liabilities[43][34] - In April 2025, the company transferred its 100% equity in its subsidiary Corenel to Jinkailong for zero consideration[44] - The company terminated voting agreements with Jinkailong's shareholders on March 31, 2022, ceasing controlling financial interest, and now treats Jinkailong as an equity investee[50] Competition The company faces intense competition in China's online ride-hailing and automobile services market, particularly from large, well-capitalized players like Didi Chuxing - The company competes with approximately 300 automobile financing and leasing companies in Chengdu and Changsha as of June 2025[60] - Didi Chuxing dominates the online ride-hailing platform market with over 80% market share, also operating its own automobile purchasing and leasing channels, creating direct competition[61] - Competitors possess significant advantages including greater financial resources, brand recognition, and longer operating histories, enabling more effective responses to market changes[62] Regulations The company's operations are subject to a complex and evolving PRC regulatory framework, including strict requirements for cybersecurity, data protection, online ride-hailing licenses, and financial leasing compliance - The company is subject to PRC cybersecurity and data protection laws, including the Personal Information Protection Law (effective November 2021) and new cross-border data flow regulations (March 2024), imposing strict requirements on user data handling[67][73] - The online ride-hailing industry requires platform, vehicle, and driver licenses; as of March 31, 2025, approximately 43% of affiliated drivers lacked required licenses, posing a compliance risk[79][80] - Hunan Ruixi, the company's financial leasing subsidiary, has not yet fully complied with NFRAC Financial Leasing Measures and must rectify within a transition period to continue operations[89] - As of March 31, 2023, CSRC's Trial Measures require PRC domestic companies to file for overseas securities offerings and listings, applicable to the company's future offerings[136][137] Human Capital As of the report date, the company had 35 full-time employees, primarily in its Automobile Transaction and Related Services segment, and faces potential penalties for inadequate employee benefit contributions Employee Breakdown by Function | Function | Number of Employees | | :--- | :--- | | Management | 2 | | Legal & Risk Management | 2 | | Operations | 7 | | Marketing | 2 | | Drivers & Automobile Management and Services | 10 | | Human Resources & Administration | 2 | | Finance and Accounting | 6 | | Internal Control and Audit | 1 | | Total | 32 | - The company has not made adequate employee benefit payments as required by PRC regulations and may face required make-up contributions, late fees, or fines[145] Risk Factors The company faces significant business, China-specific, internal control, and securities risks, including intense competition, evolving PRC regulations, material weaknesses in financial controls, and potential Nasdaq delisting - Business Risks: The company faces intense competition, relies on key partners like Gaode Maps, and is exposed to risks from customer illegal activities and driver licensing non-compliance[167][170][175] - China-Specific Risks: The business faces significant uncertainty from PRC regulations on data security, cybersecurity reviews, and overseas listings, with HFCAA posing a future delisting risk if the auditor becomes uninspectable by PCAOB[213][250][257] - Internal Control Risks: Management identified material weaknesses in internal control over financial reporting, including insufficient U.S. GAAP expertise, inadequate internal audit policies, and IT general control deficiencies[208][209] - Securities Risks: The company has a history of failing to meet Nasdaq's minimum bid price requirement, risking delisting, and faces stock price volatility and potential dilution from outstanding warrants[288][293] Unresolved Staff Comments The company reports that there are no unresolved staff comments - Not applicable[342] Cybersecurity The company's board, primarily through its audit committee, oversees cybersecurity risk, integrating it into overall risk management with third-party assessments and data outflow controls, and experienced no material incidents in FY2025 - The board of directors, through the audit committee, oversees major financial risk exposures, including cybersecurity risks[344] - The company relies on third-party security assessments and data outflow controls, such as desensitizing sensitive information, to manage cybersecurity threats[346] - For the fiscal year ended March 31, 2025, the company incurred no material fines or penalties and experienced no material cybersecurity incidents[343] Properties The company operates from leased facilities in Chengdu and Changsha, considering them adequate for current operations, and does not own any real estate Leased Properties | Property | Location | Size (sq. meters) | Lease Expiration | | :--- | :--- | :--- | :--- | | Principal Executive Office | Chengdu, Sichuan | 143 | July 31, 2025 | | Office | Changsha, China | 650 | May 31, 2027 | | Parking Lot | Changsha, China | 1,800 | N/A | Legal Proceedings 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, the company is not a party to any material legal proceedings[352] Mine Safety Disclosures This item is not applicable to the company - Not applicable[353] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq under 'AIHS', with approximately 33 stockholders of record, and it has no plans to pay cash dividends due to a focus on growth and PRC regulatory restrictions - The company's common stock trades on the Nasdaq Capital Market under the symbol AIHS[356] - The company has never paid cash dividends and does not intend to in the foreseeable future[357] - The ability to pay dividends is limited by PRC regulations and the accumulated losses of most PRC subsidiaries as of March 31, 2025[358] Management's Discussion and Analysis of Financial Condition and Results of Operations For FY2025, total revenues from continuing operations decreased by 21.5% to $3.39 million, while net loss narrowed to $3.47 million, but the company faces substantial doubt about its going concern ability due to recurring losses and a working capital deficit Results of Continuing Operations For FY2025, revenues from continuing operations decreased by 21.5% to $3.39 million, primarily due to lower operating lease revenues, while gross margin improved to 25.1% and net loss from continuing operations narrowed to $3.47 million Results of Continuing Operations (FY2025 vs FY2024) | Metric | FY 2025 | FY 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $3,389,072 | $4,320,031 | (21.5)% | | Gross Profit | $849,803 | $924,731 | (8.1)% | | Loss from Operations | ($3,867,516) | ($4,375,528) | 11.6% | | Net Loss from Continuing Operations | ($3,467,165) | ($3,854,206) | 10.0% | - The revenue decrease was primarily due to a 26.9% decline in operating lease revenues, driven by a lower number of leased automobiles (826 in FY2025 vs. over 1,400 in FY2024) and lower average monthly rental income per vehicle ($410 vs. $485)[390][392][401] - Selling, general and administrative expenses decreased by 16.2% to $2.62 million, primarily due to reduced salary and office rental costs[402] - The company recorded a provision for credit losses of $2.09 million, primarily against receivables from its equity investee, Jinkailong[403] Results of Discontinued Operations Discontinued operations, reflecting the XXTX ride-hailing platform disposed of in August 2024, generated $0.34 million in revenue for the period it operated in FY2025, a significant drop from FY2024, with a net loss of $0.21 million Results of Discontinued Operations (XXTX) (FY2025 vs FY2024) | Metric | FY 2025 | FY 2024 | | :--- | :--- | :--- | | Revenues | $344,241 | $2,494,397 | | Gross Profit | $97,216 | $635,840 | | Loss from Operations | ($242,999) | ($349,383) | | Net Loss from Discontinued Operations | ($213,647) | ($380,008) | - The sharp decline in revenue reflects the reduced scale of operations leading up to the disposal of XXTX in August 2024[414][415] Liquidity and Going Concern The company's financial condition, marked by a $3.7 million net loss, $45.1 million accumulated deficit, and $3.0 million working capital deficit as of March 31, 2025, raises substantial doubt about its ability to continue as a going concern - Management has determined there is substantial doubt about the company's ability to continue as a going concern[426] - Key factors contributing to the going concern issue include a net loss of approximately $3.7 million for FY2025, an accumulated deficit of approximately $45.1 million, and a working capital deficit of approximately $3.0 million as of March 31, 2025[425] - Management's plans to mitigate this risk include seeking equity financing, debt financing from PRC institutions, and financial support from related parties[426] Cash Flow Summary (FY2025 vs FY2024) | Cash Flow Activity | FY 2025 | FY 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $500,303 | $7,241 | | Net Cash Used in Investing Activities | ($464,778) | ($569,608) | | Net Cash Used in Financing Activities | ($123,720) | ($168,340) | Quantitative and Qualitative Disclosures About Market Risk This item is not required for smaller reporting companies - Not required for smaller reporting companies[441] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for FY2025 and FY2024, including an auditor's report with a going concern explanatory paragraph, detailing assets, liabilities, equity, operations, and cash flows - Marcum Asia CPAs LLP, the independent registered public accounting firm, issued an audit opinion on the financial statements[446][452] - The auditor's report includes an explanatory paragraph highlighting substantial doubt about the company's ability to continue as a going concern due to significant working capital deficiency and recurring losses[447] Consolidated Balance Sheet Summary (As of March 31) | Account | 2025 | 2024 | | :--- | :--- | :--- | | Total Assets | $5,800,792 | $9,861,484 | | Total Liabilities | $5,218,172 | $5,573,116 | | Total Equity | $348,256 | $4,054,004 | Consolidated Statement of Operations Summary (For the Year Ended March 31) | Account | 2025 | 2024 | | :--- | :--- | :--- | | Total Revenues (Continuing) | $3,389,072 | $4,320,031 | | Net Loss from Continuing Operations | ($3,467,165) | ($3,854,206) | | Net Loss from Discontinued Operations | ($213,647) | ($380,008) | | Net Loss | ($3,680,812) | ($4,234,214) | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reported no changes in or disagreements with its accountants on accounting and financial disclosure - None[680] Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of March 31, 2025, due to material weaknesses including insufficient U.S. GAAP expertise, inadequate internal audit policies, and IT general control deficiencies, with remediation plans outlined - Management concluded that disclosure controls and procedures were not effective as of March 31, 2025[681] - Three material weaknesses were identified: insufficient U.S. GAAP accounting expertise, inadequate internal audit policies, and deficiencies in IT general controls[682][686] - Remediation plans include hiring additional accounting staff, improving the internal audit function, and enhancing the IT environment[683][687] Other Information During the fiscal year ended March 31, 2025, none of the company's directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No directors or officers adopted or terminated a Rule 10b5-1 trading plan in fiscal year 2025[688] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable[689] Part III Directors, Executive Officers and Corporate Governance The company's leadership includes CEO Xi Wen, CFO Xiaoyuan Zhang, and COO Haitao Liu, supported by a board with three independent directors and established Audit, Compensation, and Nominating and Corporate Governance Committees Executive Officers | Name | Position | | :--- | :--- | | Xi Wen | Chief Executive Officer, Chairman of the Board, President and Secretary | | Xiaoyuan Zhang | Chief Financial Officer and Treasurer | | Haitao Liu | Chief Operating Officer | - The Board has three committees: Audit, Compensation, and Nominating and Corporate Governance, all composed of independent directors[699][700][701][702] - The company has adopted a code of ethics and filed its committee charters as exhibits[706] Executive Compensation Executive compensation for FY2025 saw reduced salaries for top executives, with CEO Xi Wen's salary at $83,145, and director compensation consisting of annual cash retainers, with no new equity awards granted Summary Compensation Table (Named Executive Officers) | Name and Principal Position | Year | Salary ($) | Total ($) | | :--- | :--- | :--- | :--- | | Xi Wen, CEO | 2025 | 83,145 | 83,145 | | | 2024 | 183,716 | 183,716 | | Xiaoyuan Zhang, CFO | 2025 | 56,151 | 56,151 | | | 2024 | 75,372 | 75,372 | | Haitao Liu, COO | 2025 | 56,123 | 56,123 | | | 2024 | 75,344 | 75,344 | - In FY2025, CEO Xi Wen's annual salary was modified to approximately $84,000, while the CFO and COO's annual salaries were modified to approximately $38,000 each, effective September 1, 2024[718][723][727] - Independent directors receive an annual cash retainer of $20,000, with Mr. Trent Davis receiving $40,000[729] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of July 7, 2025, there were 11,082,746 shares outstanding, with Senmiao International Investment Group Limited holding 9.5%, and all directors and executive officers collectively owning approximately 1.3% - As of July 7, 2025, 11,082,746 shares of common stock were outstanding[731] - Senmiao International Investment Group Limited is the only known beneficial owner of more than 5% of the company's common stock, holding a 9.5% stake[733] - All directors and executive officers as a group beneficially own 140,748 shares, representing approximately 1.3% of the outstanding common stock[733] - As of March 31, 2025, 1,770,371 securities were available for future issuance under the 2018 Equity Incentive Plan[735] Certain Relationships and Related Transactions, and Director Independence The company engages in related party transactions, including office leases and automobile leasing with affiliated entities and its equity investee Jinkailong, all reviewed by the audit committee, and has determined three directors are independent - The company leases office space from Hunan Dingchentai Investment Co., Ltd., an entity where an independent director serves as legal representative, incurring $41,691 in rent expense for FY2025[738] - The company engages in automobile leasing transactions with its equity investee, Jinkailong, and other related parties, with its subsidiary Jiekai incurring $93,872 in rental costs from Jinkailong in FY2025[742] - The board of directors has determined that Mr. Davis, Ms. Lin, and Ms. Wang are independent directors under Nasdaq listing rules[743] Principal Accountant Fees and Services Marcum Asia CPAs LLP serves as the company's independent registered public accounting firm, with all services pre-approved by the audit committee, and total fees for FY2025 were $315,300, exclusively for audit services Accountant Fees (FY2025 vs FY2024) | Fee Category | Fiscal Year 2025 | Fiscal Year 2024 | | :--- | :--- | :--- | | Audit Fees | $315,300 | $302,000 | | Audit-Related Fees | $0 | $20,600 | | Tax Fees | $0 | $0 | | All Other Fees | $0 | $0 | - The company's audit committee pre-approves all audit and non-audit services provided by the independent registered public accounting firm[752] Part IV Exhibits, Financial Statement Schedules This section lists the documents filed as part of the Form 10-K report, including financial statements and an index of all exhibits such as corporate documents and certifications - This section contains the list of financial statements and the exhibit index for documents filed with the report[755][757] Form 10-K Summary This item is not applicable to the company - Not applicable[756]