Senmiao Technology(AIHS) - 2023 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Unaudited Condensed Consolidated Financial Statements 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 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 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 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 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][27] - 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][47] - 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][39][41] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (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 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][241][245] - 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] Key Factors and Risks Affecting Results of Operations 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][267] - 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][281] - 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] Results of Operations 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] Liquidity and Going Concern 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] - Management plans to alleviate the going concern risk through equity financing, debt from PRC banks, and financial support from related parties[355] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section is not applicable for the reporting period - This section is not applicable for the reporting period[389] Item 4. Controls and Procedures 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] - 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][391] PART II - OTHER INFORMATION Item 6. Exhibits 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]