Senmiao Technology(AIHS) - 2023 Q3 - Quarterly Report

FORM 10-Q Filing Information Quarterly Report 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] - Senmiao Technology Limited is incorporated in Nevada and is classified as a non-accelerated filer, smaller reporting company, and emerging growth company[3][4] 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 Cautionary Note Regarding Forward-Looking Statements Forward-Looking Statements Disclosure 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] - 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] - Statistical data and estimates from industry publications are included but have not been independently verified, and actual market growth may differ from projections[8] PART I - FINANCIAL INFORMATION Item 1. Unaudited Condensed Consolidated Financial Statements 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 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] - Accounts receivable, net, current portion decreased from $418,022 to $204,763[12] - Property and equipment, net, decreased from $5,658,773 to $3,530,196[12] Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss 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] - Selling, general and administrative expenses decreased substantially for both three and nine-month periods, indicating cost-cutting efforts[14] Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity (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] - Conversion of preferred stock into common stock resulted in an increase in common shares and additional paid-in capital[17] - Significant foreign currency translation adjustment resulted in a loss of $(1,177,365) for the nine months ended December 31, 2022[17] Unaudited Condensed Consolidated Statements of Cash Flows 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] - 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] - Financing activities saw a net cash outflow in 2022, contrasting with a large inflow in 2021 from common stock and preferred stock issuances[20] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 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][24][28] - The automobile transaction segment operates through subsidiaries like Yicheng, Corenel, Jiekai, and Hunan Ruixi, and equity investee Jinkailong[23][24][28] - 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][24][28] - 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][35][36] - Youlu VIE Agreements were terminated on March 31, 2022, with no significant impact due to limited operations[37] 2. Going Concern 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][43][45] - Management plans to alleviate risk through equity financing, debt financing from PRC banks, and financial support/credit guarantees from related parties[42][43][45] - Contingent liabilities for automobile purchasers were approximately $46,641 as of December 31, 2022[42][43][45] - The company's ability to secure financing is subject to various external factors, including the impact of COVID-19, demand changes, PRC government policies, economic conditions, competition, and relationships with partners[45] 3. Summary of Significant Accounting Policies This section outlines key accounting policies, including U.S. GAAP basis, consolidation, foreign currency, estimates, fair value, revenue recognition, and risks - Financial statements are prepared in accordance with U.S. GAAP and include accounts of the Company and its subsidiaries, with inter-company transactions eliminated[46][48][49][53] - The functional currency is Chinese Renminbi (RMB), with reporting in U.S. dollars (US$)[46][48][49][53] - Assets and liabilities are translated at balance sheet date rates, while revenues and expenses use average rates[46][48][49][53] - Management's estimates are crucial for revenue recognition, lease classification, allowances for doubtful accounts, impairment assessments, and valuation of derivative liabilities, among others[46][48][49][53] 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][59][61] - Revenue recognition follows ASC Topic 606, identifying performance obligations and recognizing revenue when control of goods/services transfers[92][96][97][103] - Automobile transaction revenues include operating lease rentals, NEVs leasing fees, automobile sales, management/guarantee services, and financing revenues[92][96][97][103] - 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][96][97][103] - 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][124][126][127] 4. Discontinued Operations 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][129][131][133] - Jinkailong was deconsolidated effective March 31, 2022, after termination of voting agreements, and is now an equity investee[128][129][131][133] - 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][129][131][133] 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 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] - Accounts receivable from automobile sales and online ride-hailing fees saw notable decreases[137] 6. Inventories 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] 7. Prepayments, Other Receivables and Other Assets 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][143][146] - Receivables from aggregation platforms are amounts due from collaborated platforms for driver disbursements[142][143][146] - VAT recoverable significantly decreased, indicating reduced historical purchasing activities or increased utilization[142][143][146] 8. Property and Equipment, Net 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] 9. Other Non-Current Assets 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] 10. Intangible Assets, Net 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] 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 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] 12. Accrued Expenses and Other Liabilities 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][158] - Deposits are security deposits from operating and finance lease customers, refundable at lease end[157][158] - Loan repayments received on behalf of financial institutions are amounts collected from automobile purchasers not yet remitted to financial institutions[157][158] 13. Employee Benefit Plan 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] 14. Equity 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][176][310] - The change in fair value of derivative liabilities for the nine months ended December 31, 2022, was a gain of $1,641,650[162][176][310] - A 1-for-10 reverse stock split became effective on April 6, 2022, retroactively adjusting all shares and per share amounts[162][176][310] 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] - The conversion price of Series A convertible preferred shares was reduced from $4.10 to $2.00 on August 9, 2022[178] 15. Income Taxes 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][181][184] - 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][181][184] - 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][181][184] 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 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] - For the nine months ended December 31, 2022, two suppliers accounted for approximately 20.3% and 12.0% of total cost of revenues[190] 17. Related Party Transactions and Balances 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][196] - Due from related parties (Jinkailong and Youlu) totaled $5,992,152 as of December 31, 2022, with $5,351,735 non-current[191][196] - Due to related parties and affiliates totaled $117,237 as of December 31, 2022, including $114,425 from the CEO, Xi Wen[191][196] 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][202][204][205] - Promotion fees of $87,692 were incurred to Jinkailong for the nine months ended December 31, 2022[200][202][204][205] - Corenel generated $323,321 in revenues from leasing automobiles to Jinkailong for the nine months ended December 31, 2022[200][202][204][205] 18. Leases 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][207][210] - 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][207][210] - 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][207][210] 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 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][218][220][222][223] - Maximum contingent liabilities for the company's own automobile purchasers were approximately $47,000 as of December 31, 2022[217][218][220][222][223] - Jinkailong (equity investee) has maximum contingent liabilities of approximately $4.8 million, with $3.5 million in past-due loans[217][218][220][222][223] - Hunan Ruixi is exposed to a maximum contingent liability of approximately $507,000 (RMB3.5 million) in case of Jinkailong's liquidation[217][218][220][222][223] - 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] 20. Segment Information 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][226] - Assets are not allocated to segments as the CODM does not evaluate performance using asset information[225][226] 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 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Management discusses financial condition, operations, revenue drivers, cost structures, COVID-19 impact, competition, liquidity, going concern, and critical accounting estimates 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][236] - Automobile transaction services include operating leases, financing leases, automobile sales, and other supporting services[235][236] - 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][236] 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][242] - The company plans to expand its driver base and launch Xixingtianxia in more cities across China[240][242] Key Factors and Risks Affecting Results of Operations 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][244][245][247][248][249] - 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][244][245][247][248][249] - The company's ability to retain key business cooperators (NEV manufacturers, ride-hailing platforms) and financial institutions is important for resources and funding[243][244][245][247][248][249] - 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][244][245][247][248][249] - 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][252] - COVID-19 pandemic in China has adversely affected business, leading to decreased demand, slower collection of receivables, and potential guarantee expenditures[253][255][261] - 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][255][261] - 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][255][261] - 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] Results of Operations (Three Months Ended Dec 31, 2022 vs. 2021) 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][269][273][277][278] - Revenue from online ride-hailing platform services decreased due to fewer completed orders[265][269][273][277][278] - Selling, general and administrative expenses decreased by 48.7% due to cost-cutting, including reduced professional service fees, salary/employee benefits, and advertising[265][269][273][277][278] - Provision for doubtful accounts increased significantly due to re-evaluation of unsettled balances from Jinkailong and a customer[265][269][273][277][278] Results of Operations (Nine Months Ended Dec 31, 2022 vs. 2021) 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][294][295][296][299][303] - 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][294][295][296][299][303] - Sales of automobiles generated $225,900 from 41 used-automobiles in 2022, compared to none in 2021[290][294][295][296][299][303] - Selling, general and administrative expenses decreased by 32% due to continuous cost control, including reduced advertising, professional service fees, and salary/employee benefits[290][294][295][296][299][303] Results of Discontinued Operations (Three Months Ended Dec 31, 2021) 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][316][319] - Commissions from online ride-hailing platforms (Meituan) were $274,643[315][316][319] - Selling, general and administrative expenses included $602,966 in salary and employee benefits and $195,529 in office rental[315][316][319] Results of Discontinued Operations (Nine Months Ended Dec 31, 2021) 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][329][330] - Commissions from online ride-hailing platforms (Meituan) were $274,643[327][329][330] - Cost of revenues included $2,245,354 in amortization/depreciation and $2,050,307 in daily maintenance/insurance/rental costs[327][329][330] - Selling, general and administrative expenses included $1,635,082 in salary and employee benefits and $560,449 in office rental[327][329][330] Liquidity and Going Concern 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][337][339] - Management plans to secure equity financing, debt from PRC banks, and financial support/credit guarantees from related parties[335][337][339] - 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][337][339] 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 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][345] - Contingent liabilities for the company's own automobile purchasers are approximately $47,000[344][345] - Jinkailong (former VIE) has maximum contingent liabilities of approximately $4.8 million, including $3.5 million in past-due loans[344][345] - Hunan Ruixi is exposed to a maximum of $507,000 (RMB3.5 million) in Jinkailong's liabilities if liquidated[345][347] Critical Accounting Estimates 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][350][352][353][354][356][357][358][360][362][363] - 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][350][352][353][354][356][357][358][360][362][363] - Share-based awards are measured at fair value on grant date, with compensation expense recognized over the service period[349][350][352][353][354][356][357][358][360][362][363] - 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][350][352][353][354][356][357][358][360][362][363] - Impairment assessments for long-lived assets and goodwill involve comparing carrying amounts to undiscounted future cash flows or fair values[349][350][352][353][354][356][357][358][360][362][363] - Allowances for doubtful accounts are based on historical collection trends, aging of receivables, and individual customer financial conditions[349][350][352][353][354][356][357][358][360][362][363] - Inventory obsolescence is assessed by comparing cost to net realizable value, with write-downs if cost is higher[349][350][352][353][354][356][357][358][360][362][363] - Valuation of deferred tax assets includes a valuation allowance when realization is not probable[349][350][352][353][354][356][357][358][360][362][363] Item 3. Quantitative and Qualitative Disclosures about Market Risk. Market Risk Disclosure 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] Item 4. Controls and Procedures. Evaluation of Disclosure Controls and Procedures 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] - 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] - The company plans to address weaknesses by ameliorating internal audit and improving system security environment, including regular backup and penetration testing[366] - There have been no material changes in internal control over financial reporting during the quarter ended December 31, 2022[366] PART II - OTHER INFORMATION Item 6. Exhibits 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] - Contains various XBRL Taxonomy Extension Documents (Schema, Calculation, Definition, Label, Presentation) and the Cover Page Interactive Data File[367] 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][369]