Senmiao Technology(AIHS) - 2024 Q2 - Quarterly Report

Front Matter This section contains preliminary information including the report type, company details, and a cautionary note regarding forward-looking statements Cover Page 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] - The company is Senmiao Technology Limited (AIHS)[3] - The reporting period ended on September 30, 2023[2] - 9,568,040 shares of common stock were outstanding as of November 10, 2023[3] Cautionary Note Regarding Forward-Looking Statements 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] - Key risk factors include business expansion, public health epidemics, Chinese economic growth, competition, and policy changes[6] - The company operates in an evolving environment with emerging risks and disclaims any obligation to update forward-looking statements[7][8] PART I – FINANCIAL INFORMATION This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis Unaudited Condensed Consolidated Financial Statements 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 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][26] - The ride-hailing platform operates in 27 cities across China[26] - On March 31, 2022, the company deconsolidated Jinkailong, which is now a 35% equity investee[31][32] - As of September 30, 2023, a net balance of $4,250,553 was due from Jinkailong[33] Note 2. GOING CONCERN 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] - 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] - Management plans to seek equity financing, debt from PRC banks, and related party support, though success is not assured[40][41] Note 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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][44] - 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][52] - 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][79][83] - The company adopted the CECL model for credit losses on April 1, 2023, with no material financial impact[95] Note 4. DISCONTINUED OPERATIONS 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] 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 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] - 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] - Operating lease agreements with related parties resulted in rental expenses of $80,901 for the six months ended September 30, 2023[167][169] - 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] Note 19. COMMITMENTS AND CONTINGENCIES 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] - 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][185] - Jinkailong, an equity investee, has maximum contingent liabilities of approximately $3.1 million, with Senmiao's exposure capped at approximately $480,000[186][187] Note 20. SEGMENT INFORMATION 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] Note 21. SUBSEQUENT EVENTS 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] - 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] Management's Discussion and Analysis of Financial Condition and Results of Operations 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][203] - The online ride-hailing platform, Xixingtianxia, operates in 27 cities and collaborates with major aggregation platforms[208] - Key operational risks include intense competition, regulatory compliance, managing vehicle defaults, and the adverse impacts of the COVID-19 pandemic[214][220][231] Results of Operations 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] - 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] Liquidity and Going Concern 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] - 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] 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 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] - 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] Critical Accounting Policies and Estimates 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] - 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][309][312][313][317] Quantitative and Qualitative Disclosures About Market Risk This section is not applicable as the company qualifies as a smaller reporting company - This section is not applicable for the company[319] Controls and Procedures 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] - Identified material weaknesses include insufficient U.S. GAAP expertise, inadequate internal audit function, and deficiencies in IT general controls[319] - Remediation plans involve hiring qualified accounting staff, improving internal audit, and enhancing system security[320] - No material changes to internal control over financial reporting occurred during the quarter[321] PART II - OTHER INFORMATION This part includes exhibits filed with the report and the official signatures Exhibits 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] - Various Inline XBRL documents are included for financial data tagging[323] 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] - Signatories are Xi Wen (CEO) and Xiaoyuan Zhang (CFO)[326]