Senmiao Technology Limited
Annual Report 2023

Plain-text annual report

SENMIAO TECHNOLOGY LTD FORM 10-K (Annual Report) Filed 07/13/23 for the Period Ending 03/31/23 Telephone CIK Symbol SIC Code Industry 86 28 88678707 0001711012 AIHS 6199 - Finance Services Auto Vehicles, Parts & Service Retailers Sector Consumer Cyclicals Fiscal Year 03/31 http://www.edgar-online.com © Copyright 2023, EDGAR Online, a division of Donnelley Financial Solutions. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, a division of Donnelley Financial Solutions, Terms of Use. Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549Form 10-K☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended March 31, 2023☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission file number: 001-38426SENMIAO TECHNOLOGY LIMITED(Exact name of registrant as specified in its charter)Nevada 35-2600898(State or other jurisdiction ofincorporation or organization)(I.R.S. EmployerIdentification No.)16F, Shihao Square, Middle Jiannan Blvd.,High-Tech Zone Chengdu,Sichuan, People’s Republic of China 610000(Address of principal executive offices) (Zip Code)Registrant’s telephone number, including area code: +86 28 61554399Securities registered pursuant to Section 12(b) of the Act:Title of each class:Trading SymbolName of each exchange on which registered:Common Stock, par value $0.0001 per shareAIHSThe Nasdaq Stock Market LLCSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growthcompany. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.Large accelerated filer ☐Accelerated filer ☐Non-accelerated filer ☒Smaller reporting company ☒ Emerging growth company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financialreporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect thecorrection of an error to previously issued financial statements. ☐Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of theregistrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒The registrant’s common stock trades on the Nasdaq Capital Market under the symbol “AIHS.” The aggregate market value of the common stock held by non-affiliatescomputed by reference to the price at which registrant’s common stock was last sold as of September 30, 2022, was approximately $5,771,347. Common stock held by each officer anddirector and by each person known to the registrant who owned 10% or more of the outstanding voting and non-voting common stock have been excluded in that such persons may bedeemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.As of July 10, 2023, there were 7,993,040 shares of common stock, par value $0.0001 per share, of the registrant issued and outstanding.DOCUMENTS INCORPORATED BY REFERENCENone.Exhibit 3.5Table of Contents2SENMIAO TECHNOLOGY LIMITEDTABLE OF CONTENTS PAGECautionary Note Regarding Forward-Looking Statements4PART I6Item 1.Business6Item 1A.Risk Factors35Item 1B.Unresolved Staff Comments77Item 2.Properties77Item 3.Legal Proceedings77Item 4.Mine Safety Disclosures77 PART II78Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities78Item 6.[Reserved]79Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations79Item 7A.Quantitative and Qualitative Disclosures About Market Risk99Item 8.Financial Statements and Supplementary Data100Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure101Item 9A.Controls and Procedures101Item 9B.Other Information102Item 9C.Disclosure Regarding Foreign Jurisdictions that Prevent Inspections102 PART III103Item 10.Directors, Executive Officers and Corporate Governance103Item 11.Executive Compensation107Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters110Item 13.Certain Relationships and Related Transactions, and Director Independence111Item 14.Principal Accounting Fees and Services112 PART IV114Item 15.Exhibits and Financial Statement Schedules114Item 16.Form 10-K Summary114Table of Contents3Unless otherwise stated in this Annual Report on Form 10-K (this “Report”), references to:●“China” or the “PRC” refers to the People’s Republic of China, excluding, for the purposes of this Report only, Hong Kong, Macau andTaiwan;●“Corenel” refers to Chengdu Corenel Technology Limited, a PRC limited liability company and wholly owned subsidiary of SenmiaoConsulting;●“Hunan Ruixi” refers to Hunan Ruixi Financial Leasing Co., Ltd., our majority owned subsidiary in China;●“Jiekai” refers to Chengdu Jiekai Technology Ltd., a PRC limited liability company in China and a majority owned subsidiary of Corenel;●“Jinkailong” refers to Sichuan Jinkailong Automobile Leasing Co., Ltd., our former variable interest entity, a PRC limited liability companywith 35% equity interest held by Hunan Ruixi;●“Operating Entities” refers to Corenel, Hunan Ruixi, Jiekai, Senmiao Consulting, XXTX and Yicheng;●“Restructuring” refers to the establishment of a wholly foreign owned entity and the execution of a series of agreements among the Company,Senmiao Consulting, Sichuan Senmiao and the equity holders of Sichuan Senmiao, pursuant to which we have gained control of and becomethe primary beneficiary to Sichuan Senmiao;●“RMB” and “Renminbi” refer to the legal currency of China;●“Senmiao” refers to Senmiao Technology Limited;●“Senmiao Group,” “we,” “us,” “the Company”, “our company” and “our” refer to Senmiao Technology Limited., its subsidiaries and itsformer consolidated variable interest entities;●“Senmiao Consulting” refers to Sichuan Senmiao Zecheng Business Consulting Co., Ltd.;●“Sichuan Senmiao” refers to Sichuan Senmiao Ronglian Technology Co., Ltd., a PRC limited liability company, the majority ownedsubsidiary of Senmiao Consulting and our former variable interest entity in China;●“US$,” “U.S. dollars,” “$,” and “dollars” refer to the legal currency of the United States;●“XXTX” refers to Hunan Xixingtianxia Technology Co., Ltd. and its subsidiaries, a PRC limited liability company and wholly ownedsubsidiary of Senmiao Consulting;●“Yicheng” refers to Sichuan Senmiao Yicheng Assets Management Co., Ltd., formerly named Yicheng Financial Leasing Co., Ltd., a PRClimited liability company and our wholly owned subsidiary in China; and●“Youlu” refers to Chengdu Youlu Technology Ltd. (“Youlu”), our former variable interest entity in China.We use U.S. dollars as reporting currency in our financial statements and in this Report. Monetary assets and liabilities denominated inRenminbi are translated into U.S. dollars at the rates of exchange as of the balance sheet date, equity accounts are translated at historical exchangerates, and revenues, expenses, gains and losses are translated using the average rate for the period. In other parts of this Report, any Renminbidenominated amounts are accompanied by translations. We make no representation that the Renminbi or U.S. dollar amounts referred to in thisReport could have been or could be converted into U.S. dollars or Renminbi, as the case may be, at any particular rate or at all. The PRCgovernment restricts or prohibits the conversion of Renminbi into foreign currency and foreign currency into Renminbi for certain types oftransactions.Table of Contents4CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTSThis Report, including, without limitation, statements under the heading “Management’s Discussion and Analysis of Financial Condition andResults of Operations,” includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statementscan be identified by the use of forward-looking terminology, including the words “believes,” “estimates,” “anticipates,” “expects,” “intends,”“plans,” “may,” “will,” “potential,” “projects,” “predicts,” “continues,” or “should,” or, in each case, their negative or other variations orcomparable terminology. There can be no assurance that actual results will not materially differ from expectations. Such statements include, but arenot limited to, any statements relating to our ability to consummate any acquisition or other business combination and any other statements that arenot statements of current or historical facts. These statements are based on management’s current expectations, but actual results may differmaterially due to various factors, including, but not limited to:●our goals and strategies, including our ability to expand our automobile transaction and related services business and our online ride-hailingplatform services business in China;●our management’s ability to properly develop and achieve any future business growth and any improvements in our financial condition andresults of operations;●the regulations and the impact by public health epidemics in China on the industries we operate in and our business, results of operations andfinancial condition;●the growth or lack of growth in China of disposable household income and the availability and cost of credit available to finance carpurchases;●the growth or lack of growth of China’s online ride-hailing, automobile financing and leasing industries;●taxes and other incentives or disincentives related to car purchases and ownership;●fluctuations in the sales and price of new and used cars and consumer acceptance of financing car purchases;●changes in online ride-hailing, transportation networks, and other fundamental changes in transportation pattern in China;●our expectations regarding demand for and market acceptance of our products and services;●our expectations regarding our customer base;●our plans to invest in our automobile transaction and related services business and our online ride-hailing platform services business;●our ability to maintain positive relationships with our business partners;●competition in the online ride-hailing, automobile financing and leasing industries in China;●macro-economic and political conditions affecting the global economy generally and the market in China specifically; and●relevant Chinese government policies and regulations relating to the industries in which we operate.The forward-looking statements contained in this Report are based on our current expectations and beliefs concerning future developmentsand their potential effects on us. Future developments affecting us may not be those that we have anticipated or over which we may not have anycontrol. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) and other assumptionsthat may cause actual results or performance to be materially different from those that are expressed or implied by these forward-lookingstatements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors” in this Reportand our other periodic reports filed by us with the SEC. Should one or more of these risks or unanticipated risks or uncertainties materialize, orshould any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-lookingstatements. We undertake no obligation to update or revise anyTable of Contents5forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicablesecurities laws. These risks and others described in our periodic reports are not exhaustive.By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances thatmay or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actualresults of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from thosemade in or suggested by the forward-looking statements contained in this Report. In addition, even if our results or operations, financial conditionand liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Report,those results or developments may not be indicative of results or developments in subsequent periods.Table of Contents6PART IItem 1.BusinessOverviewSenmiao is not a Chinese operating company but a U.S. holding company incorporated in the State of Nevada on June 8, 2017. As a holdingcompany with no material operations of its own, Senmiao conducts a substantial majority of its operations through its operating entities establishedin the PRC, including its subsidiaries and former variable interest entities (“VIEs”). Senmiao received the economic benefits of its former VIEs’business operations through certain contractual arrangements. The VIE structure was used to allow non-Chinese companies to consolidate thefinancial statements of the China-based companies where Chinese law prohibits or restricts direct foreign investment in the operating companies,and that investors may never directly hold equity interests in the Chinese operating entities. However, Senmiao has terminated all its VIEAgreements and has no VIEs in its consolidation scope for its financial statements since March 31, 2022.Since November 2018, we have been providing automobile transaction and related services focusing on the online ride-hailing industry in thePeople’s Republic of China (“PRC” or “China”) through our wholly owned subsidiaries, Yicheng, Corenel and Jiekai, and our majority ownedsubsidiary, Hunan Ruixi, and its equity investee company and former VIE, Jinkailong. Since October 2020, we have been operating an online ride-hailing platform through XXTX, which is a wholly owned subsidiary of Senmiao Consulting. XXTX’s platform enables qualified ride-hailingdrivers to provide transportation services mainly in Chengdu, Changsha, Guangzhou and other 23 cities in China as of the date of this Report. Ourbusiness includes Automobile Transaction and Related Services (as defined hereinbelow) and Online Ride-hailing Platform Services, whichconstituted a series of services as follows:Automobile Transactions and Related ServicesOur automobile transaction and related services (the “Automobile Transaction and Related Services”) are mainly comprised of (i) automobileoperating lease where we provide car rental services to individual customers to meet their personal needs with lease term no more than twelvemonths (the “Auto Operating Leasing”); (ii) service fees from new energy vehicles (“NEVs”) leasing, automobile purchase and managementservices where we charge NEVs lessees or automobile purchasers for a series of the services provided to them throughout the leasing or purchaseprocess based on the chosen product solutions, such as ride-hailing driver training, assisting with a series of administrative procedures and otherconsulting services (the “Purchase and NEVs Services”); (iii) automobile sales where we sell new purchased or used cars to our customers (the“Auto Sales”); (iv) automobile financing where we provide our customers with auto finance solutions through financing leases (the “AutoFinancing”); (v) auto management and guarantee services provided to online ride-hailing drivers after the delivery of automobiles (the “AutoManagement and Guarantee Services”); and (vi) other supporting services provided to online ride-hailing drivers. Our Operating Entities startedthe Purchase and NEVs Services, Auto Management and Guarantee Services, and other supporting services in November 2018, the Auto Sales inJanuary 2019, and Auto Operating Leasing and Auto Financing in March 2019, respectively.The following chart illustrates the constitution of our automobile transactions and related services:Table of Contents7Auto Operating LeasingWe, through our subsidiaries, Hunan Ruixi, Corenel, Jiekai and former VIE, Jinkailong (the “Auto Business Entities”) in China, havegenerated revenue since March 2019 from operating lease services, where the Auto Business Entities lease their own automobiles, subleaseautomobiles leased from third-parties or rendered from certain online ride-hailing drivers they served before with their authorization, to otherindividuals, including new online ride-hailing drivers, for a lease term of no more than twelve months. Due to the intense competition and theCOVID-19 pandemic, as of March 31, 2022, approximately 1,327 historical online ride-hailing drivers have exited the online ride-hailing businessand rendered their automobiles to Hunan Ruixi and Jinkailong. We have shifted our business focus to automobile leasing in accordance with thechange of market condition and industry development. Hunan Ruixi is and Jinkailong was authorized to sublease or sell these drivers’ automobilesin order to offset the repayments those drivers owed to us and the financial institutions. We also purchase and lease NEVs for subleasing withrental periods of twelve months or less. Excluding Jinkailong, our other Auto Business Entities leased over 1,800 automobiles with an averagemonthly rental income of approximately $478 per automobile for the year ended March 31, 2023.Purchase and NEVs ServicesOur Auto Business Entities charge lease service fees to lessees who rent NEVs from us, in accordance with the increasing demand for NEVsin the online ride-hailing industry in Chengdu and Changsha. We also charge automobile purchasers services fees for a series of the servicesprovided to them throughout the purchase process such as credit assessment, installment of GPS devices, ride-hailing driver qualification and otheradministrative procedures. The amount of services fees for NEVs leasing and purchase is based on the product solutions. Excluding Jinkailong, ourother Auto Business Entities had revenue of services of $350,510 from NEVs leasing and $33,585 from automobile purchase, for the year endedMarch 31, 2023, respectively.Auto Management and Guarantee ServicesThe management and guarantee services of Hunan Ruixi are provided to online ride-hailing drivers after the delivery of automobiles, covering(i) management services including, without limitation, ride-hailing driver training, assisting with purchase of insurances, insurance claims andafter-sale automobile services, handling traffic violations and other consulting services; and (ii) guarantee services for the obligations of onlineride-hailing drivers under their financing arrangement with financial institutions. The management and guarantee fees of Hunan Ruixi are and themanagement and guarantee fees of Jinkailong were based on the costs of our services and the results of our credit assessment of the automobilepurchasers. Excluding Jinkailong, our other Auto Business Entities had revenue of $40,158 for the year ended March 31, 2023.As of March 31, 2023, the maximum contingent liabilities Hunan Ruixi would be exposed to, was approximately $10,000, assuming all theautomobile purchasers were in default, which may cause an increase in guarantee expense and cash outflow in financing activities.Auto SalesOur Auto Business Entities are also engaged in the sales of automobiles through Hunan Ruixi and our former VIE, Jinkailong. ExcludingJinkailong, our other Auto Business Entities sold one new and 42 used automobiles, resulting in income of $243,065 during the year ended March31, 2023.Auto FinancingHunan Ruixi began offering auto financing services in March 2019. In a self-operated financing transaction, Hunan Ruixi is a lessor and acustomer (i.e., online ride-hailing driver) is a lessee. Hunan Ruixi offers to the customer a selection of automobiles that were purchased by HunanRuixi in advance. The customer will choose the desirable automobile to be purchased and enter into a financing lease with Hunan Ruixi. Duringthe term of the financing lease, the customer will have use rights with respect to the automobile. Hunan Ruixi will obtain title to the automobileupfront and retain such title during the term of the financing lease, as lessor. At the end of the lease term, the customer will pay a minimal priceand obtain full title of the automobile after the financing lease is repaid in full. In connection with the financing lease, the customer will enter intoa service agreement with Hunan Ruixi. We recognized a total interest income of $41,738 for the year ended March 31, 2023.Since November 22, 2018, the acquisition date of Hunan Ruixi, and as of March 31, 2023, the Auto Business Entities have facilitatedfinancing for an aggregate of 1,687 automobiles with a total value of approximately $24.4 million, sold an aggregate of 1,466Table of Contents8automobiles with a total value of approximately $14.1 million and delivered approximately 2,936 automobiles under operating leases (including1,826 automobiles used to be delivered by Jinkailong before March 31, 2022) and 144 automobiles under financing leases to customers, the vastmajority of whom are online ride-hailing drivers.Ride-Hailing Platform ServicesAs part of our goal to provide an all-solution for online ride-hailing drivers as well as to increase our competitive power in an increasinglycompetitive online ride-hailing industry and to take advantage of the market potential, in October 2020, we, through XXTX, began operating anonline ride-hailing platform (called Xixingtianxia) in Chengdu. Our ride hailing platform enables qualified ride-hailing drivers to provideapplication-based transportation services in China. XXTX holds a national online reservation taxi operating license. The platform is presentlyservicing ride-hailing drivers in 26 cities in China, including Chengdu, Changsha, Guangzhou and so on, providing them with a platform to viewand take customer orders for rides. XXTX currently collaborates with Gaode Map, a well-known aggregation platform in China on our ride-hailingplatform services. Under the collaboration, when a rider searches for taxi/ride-hailing services on the aggregation platform, the platform providessuch rider a number of online ride-hailing platforms for selection, including ours and if our platform is selected by the rider, the order will then bedistributed to registered drivers on our platform for viewing and acceptance. The rider may also simultaneously select multiple online ride-hailingplatforms, in which case, the aggregation platform will distribute the requests to different online ride-hailing platforms which they cooperate with,based on the number of available drivers using the platform in a certain area and these drivers’ historical performance, among other things. XXTXgenerates revenue from providing services to online ride-hailing drivers to assist them in providing transportation services to the riders looking fortaxi/ride-hailing services. XXTX earns commissions for each completed order as the difference between an upfront quoted fare and the amountearned by a driver based on actual time and distance for the ride charged to the rider (the “Online Ride-hailing Platform Services”). XXTX settlesits commissions with the aggregation platforms on a weekly basis.The following chart illustrates our typical process of our ride-hailing platform services:The acquisition of XXTX has brought us a new stream of revenue and helped achieve our goal of providing an all-encompassing solution foronline ride-hailing drivers. During the year ended March 31, 2023, approximately 6.1 million rides with gross fare of approximately $19.9 millionwere completed through Xixingtianxia and an average of over 5,100 ride-hailing drivers completed rides and earned income through Xixingtianxia(the “Active Drivers”) each month. During the year ended March 31, 2023, we earned online ride-hailing platform service fees of approximately$3.7 million, after netting off approximately $0.5 million incentives paid to Active Drivers.Our executive offices are located in Chengdu City, Sichuan Province, China. Substantially all of our operations are conducted in China. Weplan to expand our driver base for the platform and automobile rental business while strengthening the royalty of the drivers who both lease ourcars and use our platform while expanding, but our platform is available to others. We plan to launch Xixingtianxia in more cities across China inthe next 12 months.Table of Contents9Our Corporate HistorySenmiao Technology Limited was incorporated in the State of Nevada on June 8, 2017. It established a wholly owned subsidiary, SenmiaoConsulting in China in July 2017. Sichuan Senmiao, our former VIE, now a majority owned subsidiary of Senmiao Consulting, was established inChina in June 2014. Senmiao Consulting provided services to Sichuan Senmiao, pursuant to a series of contractual arrangements (the “VIEAgreements”) with Sichuan Senmiao and each of its equity holders. Senmiao Consulting became the primary beneficiary of Sichuan Senmiao. Thecontractual arrangements had been in place since the establishment of Senmiao Consulting (the “Restructuring”). On March 23, 2022, shareholderswith 94.5% equity interests of Sichuan Senmiao and Senmiao Consulting terminated the VIE Agreements. On March 28, 2022, these shareholdersfurther sold a total of 94.5% equity interests of Sichuan Senmiao to Senmiao Consulting with a total consideration of zero due to continuous loss.Sichuan Senmiao became the majority owned subsidiary of Senmiao Consulting accordingly.On September 25, 2016, Sichuan Senmiao acquired a P2P platform (including website, internet content provider (“ICP”) registration,operating systems, servers, management system, employees and users) from Sichuan Chenghexin Investment and Asset Management Co., Ltd.(“Chenghexin”), which had established and operated the platform for two years prior to our acquisition (the “Acquisition”), for a total cashconsideration of RMB69,690,000 (approximately $10.1 million). Prior to the Acquisition, Sichuan Senmiao was a holding company that owned a60% equity interest in an equity investment fund management company. Sichuan Senmiao sold its 60% equity interest for a cash consideration ofRMB60 million (approximately $8.9 million) immediately following the Acquisition, in order to focus on the online marketplace lending business.We ceased the online lending services business in October 2019.On November 21, 2018, Senmiao entered into an Investment and Equity Transfer Agreement (the “Investment Agreement”) with Hunan Ruixiand all the shareholders of Hunan Ruixi, pursuant to which Senmiao acquired an aggregate of 60% of the equity interest of Hunan Ruixi with aconsideration of zero. Senmiao closed the acquisition on November 22, 2018 and agreed to make a cash contribution of $6,000,000 to HunanRuixi, representing 60% of its registered capital, in accordance with the Investment Agreement. As of the date of this Report, Senmiao has madethe full cash contributions (in the aggregate amount of $6,000,000) to Hunan Ruixi. Hunan Ruixi holds a business license for automobile sales andfinancial leasing and has been engaged in automobile financial leasing services and automobile sales since March 2019 and January 2019,respectively.Hunan Ruixi had a wholly owned subsidiary, Ruixi Leasing, a PRC limited liability company formed in April 2018 with a registered capital ofRMB10 million (approximately $1.5 million). Ruixi Leasing had no operations and was dissolved in June 2022.Hunan Ruixi also owns 35% equity interest in Jinkailong and used to receive economic benefits of the remaining 65% equity interest throughtwo voting agreements with other shareholders of Jinkailong. On March 31, 2022, the voting agreements were terminated by other shareholders ofJinkailong and Hunan Ruixi. As a result, Jinkailong ceased to be a VIE. Jinkailong is an automobile transaction and related services company inChengdu City, Sichuan Province, China, which primarily targets drivers in the ride-hailing service sector, focus on automobile operating lease, andfacilitates sales and financing transactions for its clients and provides relevant after-transaction services to them. Although Jinkailong was ceasedfrom our consolidation scope since March 31, 2022, Huana Ruixi, Corenel and Jiekai continuously provide automobile transaction and relatedservices similar to Jinkailong in Changsha and Chengdu.In May 2019, Senmiao formed its wholly owned subsidiary, Yicheng, with a registered capital of $50 million in Chengdu City, SichuanProvince, China. Yicheng obtained its business licenses for automobiles sale and has engaged in the sales of automobiles since June 2019. Yichengused to have a license of financial leasing, which was terminated since June 2022. As of the date of this Report, Senmiao has made contributions inan aggregate amount of $5,750,000 to Yicheng.On September 11, 2020, Senmiao Consulting entered into an Investment Agreement relating to XXTX with all the original shareholders ofXXTX, pursuant to which Senmiao Consulting would make an investment of RMB3.16 million (approximately $0.5 million) in XXTX in cash andobtain 51% equity interest accordingly. As of the date of this Report, the Company had remit approximately full amount of investment to XXTXpertained to above mentioned XXTX Investment Agreement. On October 23, 2020, the registration procedures for the change in shareholders andregistered capital were completed and XXTX became a majority owned subsidiary of Senmiao Consulting. On February 5, 2021, SenmiaoConsulting and all the original shareholders of XXTX entered into a supplementary agreement related to XXTX’s Investment agreement (the“XXTX Increase Investment Agreement”). Under the XXTX Increase Investment Agreement, all the shareholders of XXTX agreed to increase thetotal registered capital of XXTX to RMB50.8 million (approximately $7.40 million). Senmiao Consulting shall pay another investment amountedto RMB36.84 million (approximately $5.36 million) in cash in exchange of additional 27.74% of XXTX’s equity interest. As of the date of thisReport, theTable of Contents10Company had remitted approximately RMB36.60 million ($5.33 million) to XXTX pertained to above mentioned XXTX Increase InvestmentAgreement.On October 22, 2021, the Company, Senmiao Consulting, XXTX and its other shareholders further entered into a Share Swap Agreement (the“Share Swap Agreement”), pursuant to which the Company, through Senmiao Consulting, purchased all of the remaining equity interests theoriginal shareholders held in XXTX at a total purchase price of $3.5 million, payable in the Company’s shares of common stock, par value $0.0001per share at a per share price of the average closing price of a share of common stock reported on the Nasdaq Capital Market for ten (10) tradingdays immediately preceding the date of the Share Swap Agreement. On November 9, 2021, the issuance of 533,167 (5,331,667 pre reverse split)shares of the Company’s common stock for this transaction has been completed and on December 31, 2021, the registration procedures for thechange in shareholders was completed. As a result, XXTX became a wholly-owned subsidiary of Senmiao Consulting.As of the date of this Report, Senmiao Consulting has made a cumulative capital contribution of RMB39.76 million (approximately $5.79million) to XXTX and the remaining amount is expected to be paid before December 31, 2025. As of the date of this Report, XXTX had sevenwholly owned subsidiaries and two of them have operations.In December 2020, Senmiao Consulting formed a wholly owned subsidiary, Corenel, with a registered capital of RMB10.0 million(approximately $1.6 million) in Chengdu City, Sichuan Province. Corenel is engaged in automobile operating lease since March 2021.In December 2020, Hunan Ruixi and a third party jointly formed a subsidiary, Chengdu Xichuang Technology Service Co., Ltd. (“Xichuang”),with a registered capital of RMB200,000 (approximately $32,000) in Chengdu City, Sichuan Province. Hunan Ruixi holds 70% of the equityinterests of Xichuang. In August 2021, Hunan Ruixi signed an equity transfer agreement with the remaining shareholder of Xichuang. Pursuant tothe equity transfer agreement, the remaining shareholder of Xichuang would transfer 30% of his shares to Hunan Ruixi for free. However, inNovember 2021, Xichuang was dissolved. The dissolution of Xichuang did not have a material impact to the Company’s financial results.In April 2021, Senmiao formed Senmiao Technology (Hong Kong), Ltd. (“Senmiao HK”), a limited liability company with a registered capitalof $10,000 in Hong Kong. We hold 99.99% of the equity interests of Senmiao HK. As of the date of this Report, Senmiao HK has no operations.In March 2022, Corenel and another company in Chengdu formed a subsidiary, Jiekai, with a registered capital of RMB500,000(approximately $80,000) in Chengdu City, Sichuan Province. Corenel holds 51% equity interests of Jiekai. Jiekai is engaged in automobileoperating lease business since April 2022.Our Corporate StructureThe following diagram illustrates the Company’s corporate structure, including its subsidiaries and equity investment as of the date of thisReport:Table of Contents11Former VIE Agreements with Sichuan SenmiaoSenmiao Consulting, Sichuan Senmiao and all the shareholders of Sichuan Senmiao (the “Sichuan Senmiao Shareholders”) entered into anEquity Interest Pledge Agreement, an Exclusive Business Cooperation Agreement, an Exclusive Option Agreement, Power of Attorneys, andTimely Report Agreements in September 2017 (collectively, the “Sichuan Senmiao VIE Agreements”). For the details of such agreements, pleaserefer to the audited financial statements contained in the annual report on Form 10-K filed with the SEC on July 8, 2021. According to SichuanSenmiao VIE Agreements, Senmiao Consulting was the primary beneficiary of Sichuan Senmiao, and the financial statements of Sichuan Senmiaoare consolidated in the accompanying consolidated financial statements. On March 23, 2022, Senmiao Consulting and other shareholders holding94.5% equity interests of Sichuan Senmiao terminated the Sichuan Senmiao VIE Agreements and purchased Sichuan Senmiao’s 94.5% equityinterests with total consideration of zero. Sichuan Senmiao became the majority owned subsidiary of Senmiao Consulting accordingly. Thetermination and equity transaction had no significant impact on the consolidated financial statements.Former Voting Agreements with Jinkailong’s Other ShareholdersHunan Ruixi entered into two voting agreements signed in August 2018 and February 2020, respectively, as amended (the “VotingAgreements”), with Jinkailong and other Jinkailong’s shareholders holding aggregate of 65% equity interest. Pursuant to the Voting Agreements,all other Jinkailong’s shareholders will vote in concert with Hunan Ruixi on all fundamental corporate transactions in the event of a disagreementfor periods of 20 years and 18 years, respectively, ending on August 25, 2038.On March 31, 2022, Ruixi entered into an Agreement for the Termination of the Agreement for Concerted Action by Shareholders ofJinkailong (the “Termination Agreement”), pursuant to which the Voting Agreements mentioned above shall be terminated as of the date of theTermination Agreement. The termination will not impair the past and future legitimate rights and interests of all parties in Jinkailong. As of March31, 2023 and 2022, the parties no longer maintained a concerted action relationship with respect to the decision required to take concerted action atits shareholders meetings as stipulated in the Voting Agreements. Each party shall independently express opinions and exercise various rights suchas voting rights and perform relevant obligations in accordance with the provisions of laws, regulations, normative documents and the Jinkailong’sarticles of association.As a result of the Termination Agreement, we no longer have a controlling financial interest in Jinkailong and have determined that Jinkailongwas deconsolidated from our consolidated financial statements effective as of March 31, 2022. However, as Hunan Ruixi still holds 35% equityinterests in Jinkailong, Jinkailong is our equity investee company since then. As of March 31, 2023, the paid-in capital of Jinkailong was zero.Former VIE Agreements with YouluOn December 7, 2021, XXTX entered into a series of contractual arrangements (collectively, the “Youlu VIE Agreements”) with Youlu andeach of its equity holders (“Youlu Shareholders”). The term of Youlu is similar to the VIE Agreements with Sichuan Senmiao as described above.According to the VIE Agreements, Youlu was obligated to pay XXTX service fees approximately equal to its net income. Youlu’s entire operationswere, in fact, directly controlled by XXTX. There were no unrecognized revenue-producing assets that were held by Youlu. However, on March31, 2022, the Youlu VIE Agreements were terminated by XXTX and Youlu Shareholders. As Youlu had limited operation, the termination had nosignificant impact on our consolidated financial statements.Recent Developments1-for-10 Shares Reverse SplitWe implemented a 1-for-10 reverse stock split on our common stock which became effective on April 6, 2022. In connection with the reversestock split, we filed a Certificate of Change with the State of Nevada to reduce the authorized number of shares of our common stock from100,000,000 shares to 10,000,000 shares, the reduction at the same ratio as its issued and outstanding shares of common stock. No amendment toour Articles of Incorporation and no stockholder’s approval are required pursuant to Nevada Revised States 78.207 and 78.209.Table of Contents12Actual and Potential Impact of Coronavirus (COVID-19) in China on Our BusinessImpact on the Automobile Transactions and Related ServicesOur Automobile Transactions and Related Services have been gradually recovering from the adverse impact of COVID-19 pandemic. As ofMarch 31, 2023, 108 online ride-hailing drivers Hunan Ruixi serviced rendered their automobiles to Hunan Ruixi. As a result, we recordedaccumulated allowance for doubtful accounts of approximately $378,941 for them. As most of the leasing term of the automobiles we delivered inChangsha in prior periods has come to the end, during the year ended March 31, 2023, the number of newly rendered automobiles decreased to 8as compared with 25 during the year ended March 31, 2022. Meanwhile, over 1,200 online ride-hailing drivers rendered their automobiles toJinkailong as of March 31, 2023. However, our daily cash flow will be adversely impacted as a result of the unsatisfied collection from the onlineride-hailing drivers and our potential guarantee expenditure pursuant to the financing agreements we guaranteed. Our cash flow has been adverselyimpacted by local resurgences of COVID 19 in Chengdu, Changsha and Guangzhou while China kept applying the zero-COVID policy controland prevention measures especially from September to November 2022, which had negative impact on the online ride-hailing market accordinglydue to travel restriction. In addition, our automobile purchasers and lessees may be unable to generate sufficient income to make their monthlyinstallment payments, which may create a significant risk of continuing default from our automobile purchasers or lessees. As a result, we mayhave to repay the defaulted amount as a guarantor or lose the monthly rental revenue. If we experience a widespread default by our automobilepurchasers/lessees, our cash flow and results of operations will be materially and adversely affected. As a consequence, we could face shortfalls inliquidity without extra financing resources for the foreseeable future and lose the ability to grow our business or may even be required to scaledown or restructure our operations.Impact on the Ride-Hailing Platform ServicesXXTX commenced the operation of its online ride-hailing platform since late October 2020 and have witnessed the decrease in online ride-hailing orders in July 2021, November 2021, February 2022, September 2022 and December 2022, when Chengdu, Changsha and Guangzhoureported several confirmed COVID-19 cases, the local government usually ensured concrete and effective measures to fight against the resurgence,including suspending some traffic activities in certain medium-risk and high-risk areas. Fewer people took ride-hailing trips as a result and theaverage daily rides completed through our platform decreased and our income increased accordingly. The average daily rides completed throughour platform decreased by approximately 20% to 30% compared to that before the reporting of the new COVID-19 cases in these cities andrecovered one to two weeks later as the new confirmed cases were fully under control. Furthermore, the online ride-hailing services in Chengduwas temporally suspended by the Municipal Communications Commission of Chengdu from September 1 to September 18, 2022, when Chengdureported accumulated over 1,000 COVID-19 cases since late August 2022. We also had no income from the online ride-hailing platform services inChengdu during those periods. The total number of rides completed through our platform in September 2022 decreased by approximately 35%compared with the prior months. Consequently, the income of our Automobile Transaction and Related Services customers who ran their businessthrough the online ride-hailing platforms also decreased during this period.Since March 2022, major outbreaks of the Omicron variant of COVID-19 occurred in many parts of China. These outbreaks resulted inlockdowns, highway closures and other restrictive measures across China, which caused severe hardships to countless dealers and consumers.Furthermore, Chengdu suffered an infection peak in the middle of December, after China shifted the prevention and control of COVID-19infection strategy in December 2022. Base on the surveys released from Sichuan Provincial Center for Disease Control and Prevention, the actualinfection rate of the surveyed population was estimated to be over 80 percent. And the peak of positive detection in the whole province wasconcentrated from December 12 to 23, which caused significant decreasing orders for online ride-hailing in December. The central government ofChina has adjusted the prevention and control measures of COVID-19, and gradually restored the order of production and life, which would bringoptimism for us to operate our online ride-hailing platform in the next 12 months. We may have a larger cash outflow in our daily operations in thenext twelve months as we expand our Online Ride-hailing Platform Services in more cities in China and incur more marketing and promotionexpenses. Our cash flow situation may worsen if the economy in China does not improve as expected. Any of these factors related to COVID-19and other similar or currently unforeseen factors beyond our control could have an adverse effect on our overall business environment, causinguncertainties in the regions in China where we conduct business, and causing our business to suffer in ways that we cannot predict and materiallyand adversely impact our business, financial condition and results of operations.Table of Contents13CustomersThe significant majority of our Operating Entities’ customers are online ride-hailing drivers. Due to the complexity and difficulty of obtainingregistration of various licenses required for driving an online ride-hailing car, our customers choose to lease automobile from us or becomeaffiliated with us who offer them a simplified and smooth process to obtain qualified cars for online ride-hailing. The automobile lessees typicallylease automobiles which meet the criteria of cars used for online ride-hailing for their own business in the industry. The automobile purchaserstypically become affiliated with Hunan Ruixi and Jinkailong through affiliation agreements pursuant to which Hunan Ruixi and Jinkailong, as aqualified management company, provide them post-transaction management services during the affiliation period, which is usually the same as theterm of the Financing Agreements. The users of Xixingtianxia platform typically use it to view and take customer orders for rides.Our Auto Business Entities acquire customers through the network of third-party sales teams, cooperated lease companies and our own effortsincluding online advertising and billboard advertising. Our operating entities also send out fliers and participate in trade shows to advertise ourservices. During the year ended March 31, 2023, we have serviced over 7,000 customers, including approximately 4,000 customers of Jinkailong,for our Automobile Transaction and Related Services. During the year ended March 31, 2023, approximately 6.1 million rides with gross fare ofapproximately $19.9 million were completed through our platform orders.Risk ManagementTo mitigate risk associate with our Automobile Transaction and Related Services and Online Ride-hailing Platform Services, our operatingentities conduct assessments and evaluations of prospective online ride-hailing drivers and leases separately, including identity verification andbackground checks. For an online ride-hailing platform driver who uses our platform as well as purchases or leases automobile from our AutoBusiness Entities, the assessments typically involve two rounds from our subsidiaries who operate Automobile Transaction and Related Servicesand Online Ride-hailing Platform Services, respectively. We believe our manual review and verification process is sufficient for the requirementsof our current operations.Our Operating Entities conduct an initial screening when they receive an application from a prospective automobile buyer/lessee based oncredit reports from People’s Bank of China (the “PBOC”) and third party credit rating companies, and personal information including residence,ethnicity group, driving history and involvement in legal proceeding. An automobile buyer/lessee must meet the following preliminary criteria:●be between 18-65 years old;●reside in the mainland of China and have the local residential identification;●have a driving history of at least three years;●not be subject to on-going legal proceedings or enforcement;●not be listed on a national delinquent debtor’s list;●the value of purchased automobile matches the income of the candidate.Additionally, our Operating Entities arrange a simple in-person interview with the applicant where we gather information on marital/familystatus, income, assets, borrowing history and default history, if any. This interview is typically conducted by our operating entities’ riskmanagement staff who will verify the accuracy of information on the prospective driver by cross-checking information provided by the applicantwith other sources. Our Operating Entities will also assess the prospective customer’s potential repayment ability.Applicants with any of the follow attributes will be rejected:●engaging in illegal or criminal activities;●involvement in pornography, gambling, drug dealing and gangster activities and experiences;●engaging in usury lending; orTable of Contents14●providing fraudulent information.Our Operating Entities also conduct an assessment and evaluation when they receive an application from a prospective online ride-hailingdriver. Under our online ride-hailing platform’s standards, a qualified driver must meet certain minimum criteria:●have obtained online booking taxi driver’s license with age of 21 to 60 years old for males; 21 to 55 years old for females;●have a driving history of at least three years with driving license of (i) A1, A2, A3, B1, B2, C1 and C2 (referring to the different classes ofdriver’s license in China based on vehicle types);●must not have committed any hit-and-run accidents;●have no record of dangerous driving, drug use, driving under alcoholic influence, and violent crime;●have no traffic violation of 12 demerit points or more in any year of the past three years; and●have not been investigated or disciplined for unlawfully engaging in taxi services or other passenger transportation operations within the pastfive years.XXTX’s online ride-hailing platform also sets criteria for the automobiles used for online ride-hailing business, which need to be completedbefore the driver commences to use the automobile for online ride-hailing business:●has obtained online booking taxi transportation certificate and be registered as “reserved taxi service” with less than 7 seats and localregistered number; or in accordance with the requirements by local government;●has installed vehicle satellite positioning device and emergency alarm device with driving record function;●motor vehicle driving permit is still in use;●has been covered with compulsory insurance for motor vehicle traffic accident liability and compulsory insurance for third party liability ofmotor vehicle, and within the insurance period, or in accordance with the requirements by local government;●vehicle miles traveled is less than 600,000 km and the service life is less than 8 years;●other requirements by local government.Post-Financing Services and Collection MonitorOur Auto Business Entities’ post financing management department is in charge of monitoring and managing monthly payments by thepurchaser/lessee. Our Auto Business Entities send text messages and make phone calls as reminders three business days prior to the payment duedate. If a purchaser/lessee fails to pay on the due date, our Auto Business Entities will pay the financial institution on behalf of the defaultedautomobile purchaser but continue to contact the automobile purchaser and request for payments. If the delinquency continues for more than 15days, our Auto Business Entities then seek to repossess the car. Every car purchased or leased through us has a GPS device installed, which helpsus locate the car. Our Drivers & Automobile Management and Services department also monitor the daily gross income of our served online ride-hailing drivers through our cooperated online ride-hailing platforms as well as trace the location of each car at least once a week. If there is anyindicator such as the driver’s daily income is far behind the average level or the trajectory is unusual, our Drivers & Automobile Management andServices department shall contact the driver immediately and repose the car if necessary. After a car is repossessed, our Auto Business Entitiesstore it in a warehouse and later re-lease it to new customers or dispose of the automobile in accordance with law and relevant financingdocuments. If our Auto Business Entities are unable to repossess collateral from a delinquent automobile purchaser/lessee, they may commence alawsuit against such purchaser/lessee.CompetitionThe online ride-hailing industry in China is large and evolving. There were approximately 300 automobile financing and leasing companiesthat provide automobile purchasing and leasing services to online ride-hailing drivers in Chengdu and Changsha City as ofTable of Contents15June 2023. We face significant competition primarily from companies that operate in Chengdu City, such as Sichuan Hengchuang TimesAutomobile Serving Co., Ltd., and Changsha Huolongguo Automobile Leasing Co., Ltd.Meanwhile, Didi Chuxing Technology Co., Ltd. (“Didi”) takes over 80% market share of the online ride-hailing platforms in China accordingto the public information. We choose to cooperate with well-known aggregation platforms to commence our online ride-hailing platform businessrather than competing with Didi directly. As of June 2023, there were over 110 companies who operate their own online ride-hailing platforms andhave established business relationships with Gaode in Chengdu, Changsha and Guangzhou, our major operation cities and are engaged in the samebusiness as ours. We face significant competition primarily from platforms that have operation in Chengdu and Changsha City, such as Caocao,Robotaxi and Feima Chuxing. We expect to have more cooperation with other aggregation platforms in the online ride-hailing industries to havemore competitive advantage in the industry.Many of our competitors are well-capitalized and offer discounted services, driver incentives, consumer discounts and promotions, innovativeservice and product offerings, and alternative pricing models, which may be more attractive to consumers than those that we offer. Further, some ofour current or potential competitors have, and may in the future continue to have, greater resources and access to larger driver and consumer basesin a particular geographic market. In addition, our competitors in certain geographic markets enjoy substantial competitive advantages such asgreater brand recognition, longer operating histories, better localized knowledge, and more supportive regulatory regimes. As a result, suchcompetitors may be able to respond more quickly and effectively than us in such markets to new or changing opportunities, technologies,consumer preferences, regulations, or standards, which may render our products or offerings less attractive. In addition, future competitors mayshare in the effective benefit of any regulatory or governmental approvals and litigation victories we may achieve, without having to incur thecosts we have incurred to obtain such benefits.RegulationsThis section sets forth a summary of the most significant rules and regulations that affect our business activities in China or the rights of ourstockholders to receive dividends and other distributions from us.Regulations Related to Cybersecurity, Information Security and Confidentiality of User InformationPRC government authorities have enacted laws and regulations with respect to Internet information security and protection of personalinformation from any abuse or unauthorized disclosure. Internet information in China is regulated and restricted from a national securitystandpoint.The Ministry of Public Security of the People’s Republic of China (the “MPS”) has promulgated measures that prohibit use of the Internet inways that, among other things, result in leaks of government secrets or the spread of socially destabilizing content. The MPS and its localcounterparts have authority to supervise and inspect domestic websites to carry out its measures. Internet information service providers that violatethese measures may have their licenses revoked and their websites shut down.Cybersecurity and Information SecurityOn June 22, 2007, the MPS, the State Secrecy Administration and other relevant authorities jointly issued the Administrative Measures for theHierarchical Protection of Information Security, which divides information systems into five categories and requires the operators of informationsystems ranking above Grade II to file an application with the local Bureau of Public Security within 30 days of the date of its security protectiongrade determination or since its operation. The Company completed its registration with the local Bureau of Public Security in April, 2017.The PRC government regulates the security and confidentiality of Internet users’ information. The Administrative Measures on InternetInformation Service, the Regulations on Technical Measures of Internet Security Protection and the Provisions on Protecting Personal Informationof Telecommunication and Internet Users, which were issued on July 16, 2013 by the General Office of the Ministry of Transport (the “MIIT”), setforth strict requirements to protect personal information of Internet users and require Internet information service providers to maintain adequatesystems to protect the security of such information. Personal information collected must be used only in connection with the services provided bythe Internet information service provider. Moreover, the Rules for Regulating the Order in the Market for Internet Information Service also protectInternet users’ personal information by (i) prohibiting Internet information service providers from unauthorized collection, disclosure or use oftheir users’ personal information and (ii) requiring Internet information service providers to take measures to safeguard their users’ personalinformation. In December 2012, the Standing Committee of the National People’s Congress (the “SCNPC”) passed the Decision on StrengtheningInternet InformationTable of Contents16Protection, which provides that all Internet service providers in China, including Internet information service providers, must require that theirusers provide identification information before entering into service agreements or providing services.On November 7, 2016, the SCNPC released the Cyber Security Law, which came into effect on June 1, 2017 (“Cyber Security Law”). TheCyber Security Law requires network operators to perform certain functions related to cyber security protection and the strengthening of networkinformation management. For instance, under the Cyber Security Law, network operators of key information infrastructure generally shall, duringtheir operations in the PRC, store the personal information and important data collected and produced within the territory of PRC.Besides, mobile internet applications and the internet application store are specifically regulated by the Administrative Provisions on MobileInternet Application Information Services (the “Mobile Application Administrative Provisions”) which were promulgated by the CyberspaceAdministration of China (the “CAC”) on June 28, 2016 and effective on August 1, 2016 and amended on August 1, 2022. Pursuant to the MobileApplication Administrative Provisions, application information service providers shall obtain the relevant qualifications prescribed by laws andregulations, strictly implement their information security management responsibilities and carry out certain duties, including user real nameauthentication, establish and complete user information security protection mechanism and information content inspection and managementmechanisms, protect users’ right to know and right to choose in the process of usage. Furthermore, internet application store service providers andinternet application information service providers shall sign service agreements to determinate both sides’ rights and obligations.Furthermore, on December 16, 2016, MIIT promulgated the Interim Measures on the Administration of Pre-Installation and Distribution ofApplications for Mobile Smart Terminals (the “Mobile Application Interim Measures”), effective on July 1, 2017. The Mobile Application InterimMeasures requires, among others, that internet information service providers must ensure that a mobile application, as well as its ancillary resourcefiles, configuration files and user data can be uninstalled by a user on a convenient basis, unless it is a basic function software, which refers to asoftware that supports the normal functioning of hardware and operating system of a mobile smart device.On April 11, 2017, the CAC announced the Measures for the Security Assessment of Personal Information and Important Data to beTransmitted Abroad (consultation draft) (the “Consultation Draft of Security Assessment Measures”). The Consultation Draft of SecurityAssessment Measures requires network operators to conduct security assessments and obtain consents from owners of personal information priorto transmitting personal information and other important data abroad. Moreover, under the Consultation Draft of Security Assessment Measures,the network operators are required to apply to the relevant regulatory authorities for security assessments under several circumstances.On November 28, 2019, the Secretary Bureau of the CAC, the General Office of the MIIT, the General Office of the MPS and the GeneralOffice of the State Market Supervision and Administration (the “MSA”) jointly issued the Notice on Measures for Determining the IllegalCollection and Use of Personal Information through Mobile Applications, which aims to provide reference for supervision and administrationdepartments of the PRC government and provide guidance for mobile applications operators’ self-examination and self-correction and socialsupervision by avid internet users (so called “netizens”), and further elaborates the forms of behavior constituting the illegal collection and use ofpersonal information through mobile applications including: (i) failing to publish the rules on the collection and use of personal information;(ii) failing to explicitly explain the purposes, methods and scope of the collection and use of personal information; (iii) collecting and usingpersonal information without the users’ consent; (iv) collecting personal information unrelated to the services the collector of the informationprovided and beyond the necessary principle of such services; (v) providing personal information to others without the users’ consent; (vi) failingto provide the function of deleting or correcting personal information according to PRC laws or failing to publish information such as ways forinternet users to file complaints and reports.On June 10, 2021, the SCNPC promulgated the Data Security Law, which took effect in September 2021. The Data Security Law imposes datasecurity and privacy obligations on entities and individuals carrying out data activities. The Data Security Law also introduces a data classificationand hierarchical protection system based on the importance of data in economic and social development, as well as the degree of harm it will causeto national security, public interests, or legitimate rights and interests of individuals or organizations when such data is tampered with, destroyed,leaked, or illegally acquired or used. The appropriate level of protection measures is required to be taken for each respective category of data. Forexample, a processor of important data shall have designated personnel and management body in responsible for data security, conduct riskassessments for its data processing activities and file risk assessment reports with the competent authorities. In addition, the Data Security Lawprovides a national security review procedure forTable of Contents17those data activities which may affect national security and imposes export restrictions on certain data and information. We may be required tomake further adjustments to our business practices to comply with this law.On July 30, 2021, the State Council promulgated the Regulations on Security Protection of Critical Information Infrastructure, effective onSeptember 1, 2021. According to the Regulations on Security Protection of Critical Information Infrastructure, a “critical informationinfrastructure” refers to an important network facility and information system in important industries such as, among others, publiccommunications and information services, as well as other important network facilities and information systems that may severely endangernational security, economy, people’s livelihood, or the public interests in the event of damage, loss of function, or data leakage. The competentgovernmental authorities and supervision and management authorities of the aforementioned important industries will be responsible for (i)organizing the identification of critical information infrastructures in their respective industries in accordance with certain identification rules, and(ii) promptly notifying the identified operators and the public security department of the State Council of the identification results.On November 14, 2021, the CAC promulgated the draft Regulations on the Administration of Cyber Data Security for public comment,pursuant to which data processors conducting the following activities must apply for cybersecurity review: (i) merger, reorganization or division ofinternet platform operators that have acquired a large number of data resources related to national security, economic development or publicinterests affects or may affect national security; (ii) listing abroad of data processors processing over one million users’ personal information; (iii)listing in Hong Kong which affects or may affect national security; or (iv) other data processing activities that affect or may affect nationalsecurity. The draft regulations also provide that operators of large internet platforms that set up headquarters, operation centers or R&D centersoverseas shall report to the CAC and competent authorities. The draft regulations also require that data processors processing important data orgoing public overseas shall conduct an annual data security self-assessment or entrust a data security service institution to do so, and submit thedata security assessment report of the previous year to the local branch of the CAC before January 31 each year. Further, the draft regulationswould require internet platform operators to establish platform rules, privacy policies and algorithm strategies related to data, and solicit publiccomments on their official websites and personal information protection related sections for no less than 30 working days when they formulateplatform rules or privacy policies or makes any amendments that may have a significant impact on users’ rights and interests. In addition, platformrules and privacy policies formulated by operators of large internet platforms with more than 100 million daily active users, or amendments to suchrules or policies by operators of large internet platforms with more than 100 million daily active users that may have significant impacts on users’rights and interests shall be evaluated by a third-party organization designated by the CAC and reported to local branch of the CAC for approval.The CAC has solicited comments on this draft until December 13, 2021, but there is no definite timetable as to when the draft regulations will beenacted. As such, substantial uncertainties exist with respect to the enactment timetable, final content, interpretation and implementation of suchregulations.On December 28, 2021, the CAC, together with certain other PRC governmental authorities, promulgated the Cybersecurity Review Measuresthat replaced the previous version and took effect from February 15, 2022. Pursuant to these measures, the purchase of network products andservices by an operator of critical information infrastructure or the data processing activities of a network platform operator that affect or mayaffect national security will be subject to a cybersecurity review. According to the Cybersecurity Review Measures, a cybersecurity review assessespotential national security risks that may be brought about by any procurement, data processing, or overseas listing. The Cybersecurity ReviewMeasures require that an online platform operator which possesses the personal information of at least one million users must apply for acybersecurity review by the CAC if it intends to be listed in foreign countries.Article 10 of the Cybersecurity Review Measures also set out certain general factors which would be the focus in assessing the nationalsecurity risk during a cybersecurity review, including (i) risks of critical information infrastructure being illegally controlled or subject tointerference or destruction; (ii) the harm caused by the disruption of the supply of the product or service to the business continuity of criticalinformation infrastructure; (iii) the security, openness, transparency and diversity of sources of the product or service, the reliability of supplychannels, and risks of supply disruption due to political, diplomatic, trade and other factors; (iv) compliance with PRC laws, administrativeregulations and departmental rules by the provider of the product or service; (v) the risk of core data, important data or a large amount of personalinformation being stolen, leaked, damaged, illegally used, or illegally transmitted overseas; (vi) the risk that critical information infrastructure,core data, important data or a large amount of personal information being affected, controlled, and maliciously used by foreign governments for alisting, as well as network information security risks; and (viii) other factors that may endanger the security of critical information infrastructure,cybersecurity and data security.Table of Contents18Personal Information ProtectionThe Several Provisions on Regulating the Market Order of Internet Information Services, issued by the MIIT on December 29, 2011 andeffective on March 15, 2012, stipulate that internet information service providers may not collect any user personal information or provide anysuch information to third parties without the consent of a user, unless otherwise stipulated by laws and administrative regulations. “User Personalinformation” is defined as information relevant to the users that can lead to the recognition of the identity of the users independently or incombination with other information. An internet information service provider must expressly inform the users of the method, content and purposeof the collection and processing of such user personal information and may only collect such information as necessary for the provision of itsservices. An internet information service provider is also required to properly store user personal information, and in case of any leak or likely leakof the user personal information, the internet information service provider must take immediate remedial measures and, in severe circumstances,make an immediate report to the telecommunications regulatory authority.The Decision on Strengthening the Protection of Online Information, issued by the SCNPC on December 28, 2012, and the Order for theProtection of Telecommunication and Internet User Personal Information, issued by the MIIT on July 16, 2013, stipulate that any collection anduse of user personal information must be subject to the consent of the user, abide by the principles of legality, rationality and necessity and bewithin the specified purposes, methods and scope. An internet information service provider must also keep such information strictly confidential,and is further prohibited from divulging, tampering with or destroying any such information, or selling or proving such information to otherparties. An internet information service provider is required to take technical and other measures to prevent the collected personal informationfrom any unauthorized disclosure, damage or loss. Any violation of the above decision or order may subject the internet information serviceprovider to warnings, fines, confiscation of illegal gains, revocation of licenses, cancelation of filings, closedown of websites or even criminalliabilities.With respect to the security of information collected and used by mobile apps, pursuant to the Announcement of Conducting SpecialSupervision against the Illegal Collection and Use of Personal Information by Apps, which was issued by the CAC, the MIIT, the Ministry ofPublic Security, and the State Administration for Market Regulation on January 23, 2019, app operators shall collect and use personal informationin compliance with the Cybersecurity Law and shall be responsible for the security of personal information obtained from users and take effectivemeasures to strengthen personal information protection. Furthermore, app operators shall not force their users to make authorization by means ofdefault settings, bundling, suspending installation or use of the app or other similar means and shall not collect personal information in violation oflaws, regulations or breach of user agreements. Such regulatory requirements were emphasized by the Notice on the Special Rectification of AppsInfringing upon User’s Personal Rights and Interests, which was issued by MIIT on October 31, 2019. On November 28, 2019, the CAC, the MIIT,the Ministry of Public Security and the State Administration for Market Regulation jointly issued the Methods of Identifying Illegal Acts of Appsto Collect and Use Personal Information. This regulation further illustrates certain commonly seen illegal practices of app operators in terms ofpersonal information protection.On March 12, 2021, the Secretary Bureau of the CAC, the General Office of the MIIT, the General Office of the MPS and the General Officeof the MSA jointly issued the Provision on Scope of Necessary Personal Information for Common Types of Mobile Internet Applications, whichprescribed the scope of necessary personal information that may be collected by common applications, include map navigation applications, onlinecar booking applications and other 37 common applications. For online car booking applications, the necessary personal information includes cellphone numbers of registered users; rider’s departure place, arrival place, location information, travel track and payment information such aspayment time, payment amount and payment channel. Applications shall not deny users’ access to the basic functional services if the users do notagree to provide personal information outside those necessary ones.On August 20, 2021, the SCNPC promulgated the Personal Information Protection Law, which took effect on November 1, 2021. Pursuant tothe Personal Information Protection Law, “personal information” refers to any kind of information related to an identified or identifiable individualas electronically or otherwise recorded and exclude anonymized information. The processing of personal information includes the collection,storage, use, processing, transmission, provision, disclosure and deletion of personal information. The Personal Information Protection Law appliesto the processing of personal information of individuals within the territory of the PRC, as well as personal information processing activitiesoutside the territory of PRC, for the purpose of providing products or services to natural persons located within PRC, for analyzing or evaluatingthe behaviors of natural persons located within PRC, or for other circumstances as prescribed by laws and administrative regulations. A personalinformation processor may process the personal information of this individual only under the following circumstances: (i) where consent isobtained from the individual; (ii) where it is necessary for the execution or performance of a contract to which the individual is a party, or where itis necessary for carrying outTable of Contents19human resource management pursuant to employment rules or collective contracts made and executed in accordance with laws; (iii) where it isnecessary for performing a statutory responsibility or statutory obligation; (iv) where it is necessary in response to a public health emergency, orfor protecting the life, health or property of a natural person in the case of an emergency; (v) where the personal information is processed within areasonable scope to carry out news reporting, supervision by public opinions or any other activity for public interest purposes; (vi) where thepersonal information, which has already been disclosed by the individual or otherwise legally disclosed, is processed within a reasonable scope; or(vii) any other circumstance as provided by laws or administrative regulations. In principle, the consent of an individual must be obtained for theprocessing of his or her personal information, except under the circumstances of the aforementioned items (ii) to (vii). Where personal informationis to be processed based on the consent of an individual, such consent shall be a voluntary and explicit indication of intent given by such individualon a fully informed basis. If laws or administrative regulations provide that the processing of personal information shall be subject to a separateconsent or written consent of the individual concerned, such provisions shall prevail. In addition, the processing of the personal information of aminor under 14 years old must obtain the consent by a parent or a guardian of such minor and the personal information processors must adoptspecial rules for processing personal information of minors under 14 years old.In the meantime, the PRC regulatory authorities have also enhanced the supervision and regulation on cross-border data transmission. Forexample, on October 29, 2021, the Measures for the Security Assessment of Cross-border Data Transmission (Draft for Comment) were proposedby the CAC for public comments, which require that any data processor providing important data collected and generated during operations withinthe PRC or personal information that should be subject to security assessment according to law to an overseas recipient shall conduct securityassessment. The final Measures was promulgated on July 7, 2022 and shall take effective from September 1, 2022. The measures provide fivecircumstances, under any of which data processors shall, through the local cyberspace administration at the provincial level, apply to the CAC forsecurity assessment of data cross-border transfer. These circumstances include: (i) where the data to be transferred to an overseas recipient arepersonal information or important data collected and generated by operators of critical information infrastructure; (ii) where the data to betransferred to an overseas recipient contain important data; (iii) where a personal information processor that has processed personal information ofmore than one million people provides personal information overseas; (iv) where the personal information of more than 100,000 people orsensitive personal information of more than 10,000 people are transferred overseas accumulatively; or (v) other circumstances under whichsecurity assessment of data cross-border transfer is required as prescribed by the CAC. As of the date of this Report, the above measures have notbeen formally adopted, and substantial uncertainties still exist with respect to the enactment timetable, final content, interpretation andimplementation of these measures and how they will affect our business operation.Our Chinese subsidiaries and affiliates have incurred, and will continue to incur, significant expenses in an effort to comply with cybersecurityand information security standards and protocols imposed by law, regulation, industry standards or contractual obligations to the date of thisReport in all material respects. However, changes in existing laws or regulations or adoption of new laws and regulations relating to cybersecurityand information security, particularly any new or modified laws or regulations that require enhanced protection of certain types of data or newobligations with regard to data retention, transfer or disclosure, could greatly increase the cost to us of providing our service offerings, requiresignificant changes to our operations or even prevent us from providing certain service offerings in jurisdictions in which we currently operate orin which we may operate in the future.Regulations Related to Online Ride-Hailing ServicesOur ride hailing business is regulated by certain laws and regulations relating to online ride hailing services. As a ride hailing platform, we arerequired to obtain permits for an online ride hailing business in the cities in China where we operate such a business, and specific licenses andpermits are also required for the drivers and vehicles on our platform engaged in our ride hailing business.In order to manage the rapidly growing online ride-hailing service market and control relevant risks, on July 27, 2016, seven ministries andcommissions, including the Ministry of Transport (the “MOT”), jointly promulgated the Interim Measures for the Administration of Online TaxiBooking Business Operations and Services , which was amended on December 28, 2019 and November 30, 2022, which legalizes online ride-hailing services such as XXTX and requires the online ride-hailing services to meet the requirements set out by the Interim Measures and obtainrequisite service licenses and take full responsibility of the ride services to ensure the safety of riders. According to the Interim Measures, (i) thecompetent transport department of the State Council shall be responsible for guiding the administration of online ride hailing services nationwide,(ii) the competent transport department of the government of a province or an autonomous region shall be responsible for guiding theadministration of online ride hailing services within its respective administrative region, and (iii) the competent transport department of amunicipality directly under the central government, a city divided into districts, a county, or other competent administrative department designatedby the government shall be responsible for the specific administration of online ride hailing service. Before carrying out online ride hailingservices, an online rideTable of Contents20hailing service platform must obtain a permit for the online ride hailing business and complete the record filing of internet information serviceswith the provincial communications administration in the place of its enterprise registration. Such platform must be capable of exchanging andprocessing the relevant information and data with its servers located within the PRC, establish a sound operational management system, worksafety management system and service quality assurance system, and fulfill other conditions as prescribed. Platforms that conduct the online ridehailing business without obtaining the necessary permit may be subject to an order of correction, a warning by the local authority, a fine ofRMB10,000 (approximately US$1,456) to RMB30,000 (approximately US$4,370), or even criminal liabilities if a violation constitutes a crime.Vehicles used for online ride hailing services must also satisfy certain conditions in order to obtain the transportation permit for vehicles used foronline ride hailing services, including, among others, installation of satellite navigation system and emergency alarm devices, and meeting certainoperational safety criteria. The Interim Measures also impose certain requirements on drivers engaged in online ride hailing services, including,among others, a driving experience of more than three years and no transport or driving related or violent criminal offense or violent crime record.Drivers must meet the prescribed conditions and pass the relevant exams before they can obtain the driver’s license for online ride hailing services.Platforms may be subject to an order of correction and a fine of RMB5,000 (approximately US$728) to RMB10,000 (approximately US$1,456),and in severe cases a fine of RMB10,000 (approximately US$1,456) to RMB30,000 (approximately US$4,370), if the relevant vehicle or driverproviding the online ride hailing services has not obtained the applicable permit. Furthermore, the Interim Measures also provide that competentlocal governmental authorities may formulate detailed implementing rules for their respective regions in accordance with the Interim Measures andin light of local conditions.Following the promulgation of the Interim Measures, various local governmental authorities have promulgated implementing rules to furtherstipulate the detailed requirements for online ride hailing service platforms, vehicles and drivers, including the major cities of our operations. OnNovember 5, 2016, the Municipal Communications Commission of Chengdu City and a number of municipal departments jointly issued theImplementation Rules for the Administration of Taxi Management Services for Chengdu Network, which was replace by the one promulgated onJuly 26, 2021. On August 10, 2017, the Transportation Commission of Chengdu further issued guidelines on compliance requirements for onlineride-hailing businesses, including Working Process for the Online Appointment of Taxi Drivers Qualification Examination and Issuance andOnline Appointment Taxi Transportation Certificate Issuance Process. On November 28, 2016, Guangzhou Municipal People’s Governmentpromulgated Interim Measures for the Management of Online Ride Hailing Operation and Service in Guangzhou, as amended on November 14,2019. On July 23, 2018, the General Office of Changsha Municipal People’s Government issued the “Detailed Rules for the Administration ofOnline Booking Taxi Management Services for Changsha”. On June 12, 2019, the Municipal Communications Commission of Changsha Cityfurther issued “Transfer and Registration Procedures of Changsha Online Booking of Taxi”. According to these regulations and guidelines, threelicenses or certificates are required for operating the online ride-hailing business: (1) online ride-hailing service platforms such as XXTX isrequired to obtain the online reservation taxi operating license; (2) automobiles used for online ride-hailing are required to obtain the onlinereservation taxi transport certificate (the “automobile certificate”); (3) online ride-hailing drivers are required obtain the online reservation taxidriver’s license (the “driver’s license”). Those regulations also stipulate a series of detailed requirements for the online ride-hailing platforms,drivers and automobiles in different cities.In addition to the national online reservation taxi operating license, XXTX and its subsidiaries also obtained the local online reservation taxioperating license in Chengdu, Changsha, and Guangzhou, the three major cities, and other 25 cities from April 2020 to June 2023, issued by localauthorities, to operate the online ride-hailing platform services. Without a requisite automobile certificate or driver’s license, ride-hailing driversmay be suspended from providing online ride-hailing services, their illegal income may be confiscated and they may be subject to fines amountingto RMB200 (approximately US$29) to RMB2,000 (approximately US$291) for each offense.However, approximately 57% of our online ride-hailing drivers had not obtained the driver’s license as of March 31, 2023 while all of the carsused for online ride-hailing services which we provided management services to have the automobile certificate. Without requisite automobilecertificate or driver’s license, these drivers may be suspended from providing online ride-hailing services, confiscated their illegal income andsubject to fines of up to 10 times of their illegal income.Furthermore, according to the Interim Measures, no enterprise or individual is allowed to provide information form online ride-hailingservices to unqualified vehicles and drivers. During the year ended March 31, 2023, we have been fined by approximately $19,000 by TrafficManagement Bureaus in Chengdu and Changsha, of which, approximately $4,000 was further compensated by drivers or cooperated third parties.If we are deemed in serious violation of the Interim Measures, our Online Ride-hailing Platform Services may be suspended and the relevantlicenses may be revoked by certain government authorities. We are in the process of assisting the drivers to obtain the required certificate andlicense, such as providing registered and training services. However, there is noTable of Contents21guarantee that all of the drivers who run their online ride-hailing business through our platform would be able to obtain all the certificates andlicenses.On February 7, 2022, the MIIT, the MPS and several other governmental authorities jointly promulgated the Notice on Strengthening the JointSupervision of the Entire Chain of Online Ride Hailing Industry, which provides that the departments of transportation, telecommunications,public security, human resources and social security, the People’s Bank of China, taxation, market regulation and internet information shallaccelerate the establishment of a collaborative supervision mechanism led by the transportation department for new forms of transportation at theprovincial and municipal levels, or the joint supervision mechanism. This notice requires relevant governmental authorities to optimize serviceprocesses, strictly control industry access, and urge online ride hailing platforms not to grant access to drivers and vehicles with no valid licenses.In case certain violations by online ride hailing platforms trigger the supervisions of various governmental authorities or different provinces andhave serious adverse impacts, the relevant authorities of the State Council may organize joint regulatory talks and urge the online ride hailingplatforms to rectify. If the online ride hailing platforms commit serious violations but refuse to rectify, the relevant governmental authorities of themunicipal level or above may initiate joint supervision and report such violations to the inter-ministerial joint meeting mechanism, and theMinistry of Transport shall take the lead and work together with the CAC, the MIIT, the MPS and other governmental authorities, or instruct theirrelevant local counterparts, to take measures in accordance with laws, including ordering online ride hailing platforms to suspend services in theregion, suspend the release of apps or take down the apps, etc. According to this notice, the joint supervision mechanism shall apply to certainviolations of laws and regulations by online ride hailing platforms, which include (i) engaging in online ride hailing business or in a disguised formwithout obtaining the permit for online ride hailing business; (ii) failing to secure that the vehicles and drivers providing services have relevantlicenses and professional qualifications, dispatching orders to drivers and vehicles that have not obtained the corresponding licenses, failing totransmit relevant data information to online ride hailing supervision information exchange platform as required or other serious violations of lawsand regulations occurring in the process of operating online ride hailing business; (iii) low-price dumping, fraud, and unreasonably differentialtreatment of individuals in terms of transaction conditions; (iv) endangering network security, data security, or infringing on the rights and interestsof users’ personal information; (v) illegal operation of payment and settlement business; (vi) serious infringement of the labor security rights andinterests of the drivers; (vii) failure to pay taxes in accordance with the law; and (viii) other serious violations that endanger public interests,disrupt social order, and affect social security and stability.Regulations Related to Financial LeasingIn September 2013, the Ministry of Commerce of the People’s Republic of China (the “MOFCOM”) issued the Administration Measures ofSupervision on Financing Lease Enterprises (the “Leasing Measures”), to regulate and administer the business operations of financial leasingenterprises. According to the Leasing Measures, financial leasing enterprises are allowed to carry out financial leasing businesses in such forms asdirect lease, sublease, sale-and-lease-back, leveraged lease, entrusted lease and joint lease in accordance with the provisions of relevant laws,regulations and rules. However, the Leasing Measures prohibit financial leasing enterprises from engaging in financial businesses such asaccepting deposits, and providing loans or entrusted loans. Without the approval from relevant authorities, financial leasing enterprises may notengage in inter-bank borrowing and other businesses. In addition, financial leasing enterprises are prohibited from carrying out illegal fund-raisingactivities in the name of financial leases. The Leasing Measures require financial leasing enterprises to establish and improve their financial andinternal risk control systems, and a financial leasing enterprise’s risk assets may not exceed ten times that of its total net assets.In April 2018, China Banking and Insurance Regulatory Commission, currently known as the National Financial Regulatory Administration ofChina (the “NFRAC”) took over the authority over supervision of financing lease companies from MOFCOM.On May 26, 2020, NFRAC issued the Interim Measures for Supervision and Administration of Financial Leasing Companies (the “FinancialLeasing Measures”), which clarified the business scope, the scope of the leased property and the prohibited business or activity of the financialleasing company, as well as other business-related definitions, such as purchase, registration, retrieval and value management of financial leasingproducts. Financial leasing companies may conduct some or all of the following businesses: (1) financial leasing business; (2) leasing business;(3) purchase, disposal of residual value and repair of leased assets related to financial leasing and leasing business, consulting of the leasingtransaction, receipt of leasing deposit; (4) transfer of financial leases or leased assets or acceptance of financial leases or leased assets transferred;(5) fixed income securities investment business. The measures have also discussed certain regulatory standards, including the proportion offinancial leasing assets, the proportion of fixed income securities investment business, business concentration and so on. Financial leasingcompanies shall not conduct the following businesses or activities: (1) illegal fund-raising, acceptance or disguised acceptance of deposits;(2) extension of loans or entrusted loans; (3) placements with or from other financial leasing companies or in disguise; (4) financing or transferringassets through InternetTable of Contents22Lending Information Intermediaries, private equity funds; (5) other businesses or activities prohibited by laws and regulations, the NFRAC andlocal financial regulatory authorities in provinces, autonomous regions and municipalities.The Financial Leasing Measures clarify and enumerate the scopes of the financing lease business activities, the leased properties and theactivities prohibited to be conducted by the financing lease companies, and set forth the regulatory indexes applicable to financing lease companiesincluding, among others, (i) the assets for financial leasing and other lease arrangements accounting for not less than 60% of the total assets of afinancial leasing company; (ii) the risk assets of a financing lease company not exceeding eight times of its total net assets, and the term “riskassets” of a financing lease company refers to its total assets, net of cash, bank deposits, Chinese treasury bonds; (iii) the fixed-income securitiesinvestment business carried out by a financial leasing company not exceeding 20% of its net assets. The Financial Leasing Measures also requiresfinancial leasing companies should comply with the following regulatory indicators: (1) degree of concentration of single client financing,meaning the balance of all financial leasing business of a financial leasing company to a single lessee shall not exceed 30% of its net assets;(2) degree of concentration of single group client financing, meaning the balance of all financial leasing business of a financial leasing company toa single group shall not exceed 50% of its net assets; (3) ratio of a single related client, meaning the balance of all financial leasing business of afinancial leasing company to a related party shall not exceed 30% of its net assets; (4) ratio of all related parties, meaning the balance of allfinancial leasing business of a financial leasing company to all related parties shall not exceed 50% of its net assets, and (5) ratio of a single relatedshareholder, meaning the financing balance to a single shareholder and all its related parties shall not exceed the shareholder’s capital contributionin the financial leasing company, and at the same time meet the provisions of the measures on the ratio of a single related client. The NFRAC maymake adjustments to the above indicators according to regulatory needs.Financial leasing companies that were established before the implementation of the Interim Measures for the Supervision and Administrationof Financial Leasing Companies are required meet the requirements stipulated in the Measures within the transition period prescribed by theprovincial local financial supervision department. In principle, the transition period shall not exceed three years. Provincial local financialsupervision departments can appropriately extend the transition period arrangement according to the actual situation of specific industries.The PRC Civil Code promulgated by the National People’s Congress effective from January 1, 2021 regulates the civil contractualrelationship among natural persons, legal persons and other organizations. Chapter 15 of the PRC Civil Code sets forth related rules aboutfinancing lease contracts including that financing lease contracts shall be in written form and normally include terms such as the name, quantity,specifications, technical performance and inspection method of the leased property, the lease term, the composition, payment term, paymentmethod and currency of the rent and the ownership of the leased property upon expiration of the lease. The PRC Civil Code further provides thatthe lessor and the lessee may agree on the ownership of the leased property upon expiry of the lease term. If the ownership of the leased property isnot or is not clearly agreed between the parties, and is still cannot be determined pursuant to the PRC Civil Code, the leased property shall beowned by the lessor.As of the date of this Report, Hunan Ruixi, our proprietary financing lease subsidiary, has utilized our own capital to fund financing leases toautomobile purchasers. Hunan Ruixi has not complied with all the requirements stipulated under the Financial Leasing Measures and intends torectify and to comply with all the requirements stipulated under the Financial Leasing Measure during the transition period, failing which, HunanRuixi cannot carry out financial leasing business.Regulation Related to Financing Guarantee CompaniesThe State Council of China promulgated the Regulations on the Administration of Financing Guarantee Companies on August 2, 2017, and onApril 2, 2018, the NFRAC, together with several other governmental authorities, jointly adopted four supplemental rules over the Administrationof Financing Guarantee Companies: (i) the Administrative Measures for the Financing Guarantee Business Permit, (ii) Measures for Measuring theOutstanding Amount of Financing Guarantee Liabilities, (iii) Administrative Measures for the Asset Percentages of Financing GuaranteeCompanies and (iv) Guidelines on Business Cooperation between Banking Financial Institutions and Financing Guarantee Companies, or the FourSupporting Measures of the Financing Guarantee Rules. In addition, the NFRAC, together with several other governmental authorities, jointlyissued the Supplementary Provisions on the Supervision and Administration of Financing Guarantee Companies on October 9, 2019.According to the above rules on financing guarantee companies, or the Financing Guarantee Rules, “financing guarantee” refers to theactivities that guarantors provide guarantee to the guaranteed parties as to loans, bonds or other types of debt financing, including, among otherthings, the activities whereby a guarantor provides guarantee for loans, online lending, financial leasing, commercial factoring, bill acceptance,letters of credit or other forms of debt financing. “Financing guarantees companies” refer to companies legallyTable of Contents23established and engaged in financing guarantee business. According to those rules, the establishment of a financing guarantee company is subjectto the approval by the competent government authority, and unless otherwise stipulated, no entity may operate financing guarantee businesswithout such approval. If any entity violates these regulations and operates financing guarantee business without approval, the entity may besubject to penalties including ban or suspension of business, fines of RMB500,000 to RMB1,000,000, and confiscation of illegal gains, if any. Ifthe violation constitutes a criminal offense, criminal liability will be imposed in accordance with the law.In connection with our historical automotive financing facilitation business, Hunan Ruixi provides and Jinkailong provided guarantees to ourfinancing partners in connection with the financing of the purchase of automobiles and such guarantee business is not our principal business,which had no significant impact on our operation result. It is uncertain whether this practice would be deemed as operations in financing guaranteebusiness. See “Risk—Risks Relating to Our Industry and Business—We are required to obtain certain licenses and permits for our businessoperations, and we may not be able to obtain or maintain such licenses or permits.”Regulations Related to Value-Added Telecommunication Business Certificates and Foreign Investment RestrictionsAmong all of the applicable laws and regulations, the Telecommunications Regulations of the People’s Republic of China, or the TelecomRegulations, promulgated by the PRC State Council in September 25, 2000 and amended on July 29, 2014 and February 6, 2016, respectively, isthe primary governing law, and sets out the general framework for the provision of telecommunications services by domestic PRC companies.Under the Telecom Regulations, telecommunications service providers are required to procure operating licenses prior to their commencement ofoperations. The Telecom Regulations distinguish “basic telecommunications services” from “value-added telecommunications services”, or“VATS”. VATS are defined as telecommunications and information services provided through public networks, and are further divided into Class IVATS and Class II VATS. The Telecom Catalogue was issued as an attachment to the Telecom Regulations to categorize telecommunicationsservices as either basic or value-added. The Telecom Catalogue was most recently updated in June 2019, categorizing online data and transactionprocessing, information services, among others, as Class II VATS.The Administrative Measures on Telecommunications Business Operating Licenses, promulgated by the MIIT in 2009 and most recentlyamended in July 2017, which set forth more specific provisions regarding the types of licenses required to operate VATS, the qualifications andprocedures for obtaining such licenses and the administration and supervision of such licenses. Under these regulations, a commercial operator ofVATS must first obtain a VATS License, from the MIIT or its provincial level counterparts, otherwise such operator might be subject to sanctionsincluding corrective orders and warnings from the competent administration authority, fines and confiscation of illegal gains and, in the case ofsignificant infringements, the websites may be ordered to close.According to the Special Entry Management Measures (Negative List) for the Access of Foreign Investment (2021 version) and theAdministrative Regulations on Foreign-Invested Telecommunications Enterprises, which were most recently amended by the State Council onApril 7, 2022 and took effect on May 1, 2022, the equity interest of foreign investors in value-added telecommunications enterprises that are openfor foreign investment according to China’s WTO commitment may not exceed 50%, except as otherwise stipulated by the state. Foreigninvestment in entities holding VATS Licenses for internet data center services, content delivery network services, domestic internet protocol virtualprivate network services and internet access services, which are not open for foreign investment according to China’s WTO commitment, aregenerally prohibited, except that qualified telecommunication service providers incorporated in Hong Kong or Macau may hold up to 50% equityinterest in such entities according to the Mainland and Hong Kong Closer Economic Partnership Agreement or the Mainland and Macao CloserEconomic Partnership Agreement, respectively. From May 1, 2022, the amended Administrative Regulations on Foreign-InvestedTelecommunications Enterprises canceled the qualification requirement on the primary foreign investor in a foreign invested value-addedtelecommunications enterprise for having a good track record and operational experience in the value-added telecommunications industry asstipulated in the previous version.Meanwhile, the Circular of Ministry of Industry and Information Technology Concerning Lifting Restrictions on the Proportion of ForeignEquity in Online Data Processing and Transaction Processing Business (E-commerce) (the “Circular 196”), which was promulgated on June 19,2015, provides that foreign investors are permitted to invest up to 100% of the registered capital in a foreign-invested telecommunicationenterprise engaging in the operation of online data processing and transaction processing (E-commerce). However, foreign investors are onlypermitted to invest up to 50% of the registered capital in a foreign-invested telecommunication enterprise that engages in the operation of Internetinformation services. While Circular 196 permits foreign ownership, in whole or in part, of online data and deal processing businesses (E-commerce), a sub-set of value-added telecommunications services, it is not clear whether our online ride-hailing platform would be deemed asonline data and deal processing. See “Risk Factors — Risks Related to Doing Business in China — We may be adversely affected by the complexity,uncertainties and changes in PRC regulation of internet-Table of Contents24related businesses and companies, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverseeffect on our business and results of operations.”Regulations Related to Internet AdvertisingThe Measures for Administration of Internet Advertising (the “Internet Advertising Measures”), were adopted by the MSA and becameeffective on May 1, 2023. The Internet Advertising Measures regulate Internet advertising activities. According to the Internet AdvertisingMeasures, Internet advertisers are responsible for the authenticity of the content of advertisements. The identity, administrative license, citedinformation and other certificates that advertisers are required to obtain in publishing Internet advertisements shall be true and valid. Internetadvertisements shall be distinguishable and prominently marked as “advertisements” in order to enable consumers to identify them asadvertisements. Publishing and circulating advertisements through the Internet shall not affect the normal use of the Internet by users. It is notallowed to induce users to click on the content of advertisements by any fraudulent means, or to attach advertisements or advertising links in theemails without permission. The Internet Advertising Measures also impose several restrictions on the forms of advertisements and activities usedin advertising. “Internet advertising” as defined in the Internet Advertising Measures refers to commercial advertisements that directly or indirectlypromote goods or services through websites, web pages, Internet applications or other Internet media in various forms, including texts, pictures,audio clips and videos. Where Internet advertisements are not identifiable and marked as “advertisements”, a fine of not more than RMB100,000(approximately US$14,560) may be imposed in accordance with Advertising Law. A fine ranging from RMB5,000 (approximately US$728) toRMB30,000 (approximately US$4,370) may be imposed for any failure to provide a prominently marked “CLOSE” button to ensure “one-clickclosure”. Advertisers who induce users to click on the content of advertisements by fraudulent means or without permission, attach advertisementsor advertising links in the emails shall be imposed a fine ranging from RMB5,000 (approximately US$728) to RMB30,000 (approximatelyUS$4,370). Our marketplace is in the process of complying with the new Internet Advertising Measures during our advertising activities.Regulations Related to Company Establishment, Dividend Distribution and Foreign InvestmentThe establishment, operation and management of corporate entities in China is governed by the Company Law of the PRC (the “CompanyLaw”), which was issued by the SCNPC and was last amended in October 2018. The Company Law applies to both PRC domestic companies andforeign-invested companies. All of our subsidiaries in China are subject to the Company Law. According to the Company Law, companiesestablished in the PRC are either limited liability companies or joint stock limited liability companies. The Company Law applies to both PRCdomestic companies and foreign-invested companies.The establishment procedures, approval procedures, registered capital requirements, foreign exchange matters, accounting practices, taxationand labor matters of a wholly foreign-owned enterprise are regulated by the Foreign Investment Law and the Implementing Rules to FurtherClarify and Elaborate the Relevant Provisions of the PRC Foreign Investment Law (the “Implementing Rules”), which was approved by theNational People’s Congress of China in March 2019 and December 2019, respectively. The PRC Foreign Investment Law and the ImplementingRules both took effect on January 1, 2020 and replaced three major previous laws on foreign investments in China, namely, the Sino-foreignEquity Joint Venture Law, the Sino-foreign Cooperative Joint Venture Law and the Wholly Foreign-owned Enterprise Law, and their respectiveimplementing rules. According to these regulations, foreign-invested enterprises in the PRC may only pay dividends out of their accumulatedprofit, if any, determined in accordance with PRC accounting standards and regulations. However, relevant PRC laws and regulations permitpayments of dividends by the Group’s entities incorporated in the PRC only out of their retained earnings, if any, as determined in accordance withPRC accounting standards and regulations. A PRC company is required to set aside general reserves of at least 10% of its after-tax profit, until thecumulative amount of such reserves reaches 50% of its registered capital unless the provisions of laws regarding foreign investment provideotherwise. As of March 31, 2023, the total respective registered capital of all the Company’s direct subsidiaries was approximately RMB492million (approximately $71.6 million).In addition, PRC companies may allocate a portion of their after-tax profits based on PRC accounting standards to employee welfare andbonus funds at their discretion. These reserves and employee welfare and bonus funds are not distributable as cash dividends. A PRC companymay not distribute any profits until any losses from prior fiscal years have been offset. Profits retained from prior fiscal years may be distributedtogether with distributable profits from the current fiscal year.As of March 31, 2023, all the Company’s subsidiaries incorporated in the PRC have suffered accumulated loss and the Company concludedthose subsidiaries did not have abilities to transfer a portion of their net assets to the Company either in the form of dividends, loans or advances.Furthermore, even though the Company currently does not require any such dividends, loans or advances from theTable of Contents25PRC entities for working capital and other funding purposes, the Company may in the future require additional cash resources from them due tochanges in business conditions, to fund future acquisitions and development, or merely to declare and pay dividends or distributions to itsshareholdersExcept for the above, there is no other restriction under PRC laws and regulations for PRC companies on use of proceeds generated by theGroup’s subsidiaries to satisfy any obligations of the Company, as long as the PRC companies completed all required procedures, including the taxpayment certification and tax declaration.The investment activities in China of foreign investors are also governed by the Foreign Investment Law and the Implementing Rules.Pursuant to the Foreign Investment Law, “foreign investments” refer to investment activities conducted by foreign investors (including foreignnatural persons, foreign enterprises or other foreign organizations) directly or indirectly in the PRC, which include any of the followingcircumstances: (i) foreign investors setting up foreign-invested enterprises in the PRC solely or jointly with other investors, (ii) foreign investorsobtaining shares, equity interests, property portions or other similar rights and interests of enterprises within the PRC, (iii) foreign investorsinvesting in new projects in the PRC solely or jointly with other investors, and (iv) investment in other methods as specified in laws, administrativeregulations, or as stipulated by the State Council. The Implementing Rules introduce a see-through principle and further provide that foreign-invested enterprises that invest in the PRC are also governed by the PRC Foreign Investment Law and the Implementing Rules.The Foreign Investment Law and the Implementing Rules provide that a system of pre-entry national treatment and negative list shall beapplied for the administration of foreign investment, where “pre-entry national treatment” means that the treatment given to foreign investors andtheir investments at market entry stage is no less favorable than that given to domestic investors and their investments, and “negative list” meansthe special administrative measures for foreign investment’s entry to specific fields or industries, which will be proposed by the competentinvestment department of the State Council in conjunction with the competent commerce department of the State Council and other relevantdepartments, and be reported to the State Council for promulgation, or be promulgated by the competent investment department or competentcommerce department of the State Council after being reported to the State Council for approval. Foreign investments beyond the negative list willbe granted national treatment. Foreign investors shall not invest in the prohibited fields as specified in the negative list, and foreign investors whoinvest in the restricted fields shall comply with the special requirements on the shareholding, senior management personnel, etc. In the meantime,relevant competent government departments will formulate a catalogue of industries for which foreign investments are encouraged according tothe needs for national economic and social development, to list the specific industries, fields and regions in which foreign investors are encouragedand guided to invest.The current industry entry clearance requirements governing investment activities in the PRC by foreign investors are set out in twocategories, namely the Special Entry Management Measures (Negative List) for the Access of Foreign Investment (2021 version), or the 2021Negative List, as promulgated by the National Development and Reform Commission (the “NDRC”) and the MOFCOM on December 27, 2021and taking effect on January 1, 2022, and the Encouraged Industry Catalogue for Foreign Investment (2022 version) as promulgated by the NDRCand the MOFCOM on October 26, 2022 and taking effect on January 1, 2023. Industries not listed in these two catalogues are generally deemed“permitted” for foreign investment unless specifically restricted by other PRC laws. Neither our Automobile Transaction and Related Services norour Online Ride-hailing Platform Services is listed in 2021 Negative List.Meanwhile, the PRC Foreign Investment Law provides that foreign-invested enterprises established according to the existing laws regulatingforeign investment may maintain their structure and corporate governance within five years after the implementing of the Foreign Investment Law.Furthermore, the PRC Foreign Investment Law provides several protective rules and principles for foreign investors and their investments in thePRC, including, among others, that a foreign investor may freely transfer into or out of China, in Renminbi or a foreign currency, its contributions,profits, capital gains, income from disposition of assets, royalties of intellectual property rights, indemnity or compensation lawfully acquired, andincome from liquidation, among others, within China; local governments shall abide by their commitments to the foreign investors; governments atall levels and their departments shall enact local normative documents concerning foreign investment in compliance with laws and regulations andshall not impair legitimate rights and interests, impose additional obligations onto foreign-invested enterprises, set market access restrictions andexit conditions, or intervene with the normal production and operation activities of foreign-invested enterprises; except for special circumstances,in which case statutory procedures shall be followed and fair and reasonable compensation shall be made in a timely manner, expropriation orrequisition of the investment of foreign investors is prohibited; and mandatory technology transfer is prohibited.In addition, Pursuant to the Foreign Investment Law, the Implementing Rules, and the Information Reporting Measures for ForeignInvestment jointly promulgated by the MOFCOM and the MSA, which took effect on January 1, 2020, a foreign investment informationTable of Contents26reporting system was established and foreign investors or foreign-invested enterprises must report investment information to competent commercedepartments of the PRC government through the enterprise registration system, the enterprise credit information publicity system and the foreigninvestment information reporting system, and the relevant government authorities shall share such investment information to the competentcommerce departments in a timely manner. We are subject to these regulatory requirements.Regulations Relating to Vehicle Rental ServicesPursuant to the Administration Measures for Operations and Services of Small and Micro Passenger Vehicles issued by the Ministry ofTransport on December 20, 2020 and last amended on August 11, 2021, rental business operators of small and micro passenger vehicles shall carryout record-filing procedures with the city or county level counterparts of the Ministry of Transport where the business operations are conducted,within 60 days after completing the relevant registration formalities with the local counterparts of the State Administration for Market Regulation,or within 60 days after establishing new service agencies to carry out relevant business activities. To qualify for the record filing procedures, anapplicant entity shall satisfy, among others, the following requirements: (i) being an independent legal person registered under the PRC law; (ii)the vehicles used for rental business operations passing quality inspections, and the registered nature of these vehicles being “rental”; (iii) havingthe business premises and management personnel eligible for the rental business; (iv) establishing corresponding service institutions and havingcorresponding service capabilities locally; (v) developing comprehensive operation and management systems, service procedures, safetymanagement systems, and emergency response plans. Failure to complete the record-filing procedures may subject the rental business operators ofsmall and micro passenger vehicles to orders to rectify and fines ranging from RMB3,000 (approximately US$437) to RMB10,000 (approximatelyUS$1,456). All vehicles used for our Auto Operating Leasing have obtained the required licenses and completed the registration.Regulations Related to Labor and Social SecurityPursuant to the PRC Labor Law, the PRC Labor Contract Law and the Implementing Regulations of the Employment Contracts Law, laborrelationships between employers and employees must be executed in written form. Wages may not be lower than the local minimum wage.Employers must establish a system for labor safety and sanitation, strictly abide by state standards and provide relevant education to its employees.Employees are also required to work in safe and sanitary conditions.Under PRC laws, rules and regulations, including the Social Insurance Law, the Interim Regulations on the Collection and Payment of SocialSecurity Funds and the Regulations on the Administration of Housing Accumulation Funds, employers are required to contribute, on behalf of theiremployees, to a number of social security funds, including funds for basic pension insurance, unemployment insurance, basic medical insurance,occupational injury insurance, maternity leave insurance and housing accumulation funds. These payments are made to local administrativeauthorities and any employer who fails to contribute may be fined and ordered to pay the deficit amount. See “Risk Factors — Risks Related toDoing Business in China — Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subjectus to penalties.”Anti-money Laundering RegulationThe PRC Anti-money Laundering Law, which became effective in January 2007, sets forth the principal anti-money laundering requirementsapplicable to financial institutions, as well as non-financial institutions with anti-money laundering obligations, including the adoption ofprecautionary and supervisory measures, establishment of various systems for client identification, retention of clients’ identification informationand transactions records, and reports on large transactions and suspicious transactions. According to the PRC Anti-money Laundering Law,financial institutions subject to the PRC Anti-money Laundering Law include banks, credit unions, trust investment companies, stock brokeragecompanies, futures brokerage companies, insurance companies and other financial institutions as listed and published by the State Council, whilethe list of the non-financial institutions with anti-money laundering obligations will be published by the State Council. The PBOC and othergovernmental authorities issued a series of administrative rules and regulations to specify the anti-money laundering obligations of financialinstitutions and certain non-financial institutions, such as payment institutions. However, the State Council has not promulgated the list of the non-financial institutions with anti-money laundering obligations.Regulation Related to the Payment Services of Non-financial InstitutionsAccording to Measures for the Administration of Payment Services of Non-Financial Institutions which were promulgated by PBOC onJune 14, 2010, effective on September 1, 2010 and amended on April 29, 2020, and Implementing Rules for the Measures for the Administration ofPayment Services of Non-Financial Institution which were promulgated by the PBOC, effective on December 1, 2010Table of Contents27and amended on June 2, 2020, the payment services provided by non-financial institutions refer to some or all of the following monetary capitaltransfer services provided by the non-financial institutions as intermediary agencies between payers and payees: (1) payment through the internet;(2) issuance and acceptance of prepaid cards; (3) bankcard acquiring; and (4) other payment services as determined by the PBOC. Non-financialinstitutions which provide payment services shall obtain a “Payment Business License” and become a “payment institution.” Payment BusinessLicense is valid for five years from the date of issuance. Payment institutions shall carry out business activities in compliance with the scope ofbusiness approved by the Payment Business License, and shall not outsource any business, transfer, lease, or lend its Payment Business License.Any non-financial institution or individual shall not directly or indirectly engage in payment business without the approval of the PBOC.On May 9, 2019, the MOT, the PBOC, the NDRC, the MPS, the State Administration of Market Regulation (the “SAMR”) and NFRAC,jointly issued the Measures for the Administration of User Funds in New Forms of Transport Business (Trial) (the “Trial Measures onAdministration of User Funds”) which became effective on June 1, 2019. According to the Trial Measures on Administration of User Funds, anoperating enterprise shall open a special deposit account for user deposits and a special deposit account for prepayments, respectively, as arenationwide unique at the bank in the place of its registration in mainland China, and the bank where the special deposit accounts are opened shallbe the depository bank to preserve user funds.Regulations on Intellectual PropertyThe PRC has adopted legislation governing intellectual property rights, including copyrights, trademarks and patents. The PRC is a signatoryto major international conventions on intellectual property rights and is subject to the Agreement on Trade Related Aspects of Intellectual PropertyRights as a result of its accession to the World Trade Organization in December 2001.The SCNPC amended the Copyright Law in 2001, 2010 and 2020 to widen the scope of works and rights that are eligible for copyrightprotection. The amended, the Copyright Law extends copyright protection to Internet activities, products disseminated over the Internet andsoftware products. In addition, there is a voluntary registration system administered by the China Copyright Protection Center. To addresscopyright infringement related to content posted or transmitted over the Internet, the National Copyright Administration and former Ministry ofInformation Industry jointly promulgated the Administrative Measures for Copyright Protection Related to the Internet in April 2005. Thesemeasures became effective in May 2005.On December 20, 2001, the SCNPC promulgated the new Regulations on Computer Software Protection, effective from January 1, 2002, andrevised in 2013, which are intended to protect the rights and interests of the computer software copyright holders and encourage the developmentof software industry and information economy. In the PRC, software developed by PRC citizens, legal persons or other organizations isautomatically protected immediately after its development, without an application or approval. Software copyrights may be registered with thedesignated agency and if registered, the certificate of registration issued by the software registration agency will be the primary evidence of theownership of the copyright and other registered matters. On February 20, 2002, the National Copyright Administration of the PRC introduced theMeasures on Computer Software Copyright Registration, which outline the operational procedures for registration of software copyright, as well asregistration of software copyright license and transfer contracts. The Copyright Protection Center of China is mandated as the software registrationagency.The PRC Trademark Law, adopted in 1982 and revised in 1993, 2001, 2013 and 2019, respectively, protects the proprietary rights to registeredtrademarks. The Trademark Office under the SAIC handles trademark registrations and may grant a term of ten years for registered trademarks,which may be extended for another ten years upon request. Trademark license agreements shall be filed with the Trademark Office for record. Inaddition, if a registered trademark is recognized as a well-known trademark, the protection of the proprietary right of the trademark holder mayreach beyond the specific class of the relevant products or services.The Patent Law of the PRC and its Implementation Rules provide for three types of patents: invention, utility model and design. The durationof a patent right is either 10 years or 20 years from the date of application, depending on the type of patent right.Domain names are protected under the Administrative Measures on Internet Domain Names promulgated by the MIIT on August 24, 2017 andeffective as of November 1, 2017. Our domain name registrations are handled through domain name service agencies established under therelevant regulations, and applicants become domain name holders upon successful registration.Regulations Related to Foreign ExchangeThe principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations, which weremost recently amended in August 2008. Payments of current account items, such as profit distributions and trade and service-Table of Contents28related foreign exchange transactions, can usually be made in foreign currencies without prior approval from the State Administration of ForeignExchange (“SAFE”) by complying with certain procedural requirements. By contrast, approval from or registration with appropriate PRCauthorities or banks authorized by appropriate PRC authorities is required where RMB capital is to be converted into foreign currency and remittedout of China to pay capital expenses.SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming the Administration of Foreign ExchangeSettlement of Capital of Foreign-invested Enterprises (“Circular 19”), effective on June 1, 2015, in replacement of SAFE Circular 142 (theCircular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign CurrencyCapital of Foreign-Invested Enterprises. According to Circular 19, the flow and use of the RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company is regulated such that RMB capital may not be used for the issuance of RMBentrusted loans or the repayment of inter-enterprise loans or the repayment of banks loans that have been transferred to a third party. AlthoughCircular 19 allows RMB capital converted from foreign currency-denominated registered capital of a foreign-invested enterprise to be used forequity investments within the PRC, it also reiterates the principle that RMB converted from the foreign currency-denominated capital of a foreign-invested company may not be directly or indirectly used for purposes beyond its business scope. Thus, it is unclear whether SAFE will permit suchcapital to be used for equity investments in the PRC in actual practice. SAFE promulgated the Notice of the State Administration of ForeignExchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital Account (the “Circular 16”), effectiveon June 9, 2016, which reiterates some of the rules set forth in Circular 19, but changes the prohibition against using RMB capital converted fromforeign currency-denominated registered capital of a foreign-invested company to issue RMB entrusted loans to a prohibition against using suchcapital to issue loans to non-associated enterprises. Violations of SAFE Circular 19 or Circular 16 could result in administrative penalties.From 2012, SAFE has promulgated several circulars to substantially amend and simplify the current foreign exchange procedure. Pursuant tothese circulars, the opening of various special purpose foreign exchange accounts, the reinvestment of RMB proceeds by foreign investors in thePRC and remittance of foreign exchange profits and dividends by a foreign-invested enterprise to its foreign shareholders no longer require theapproval or verification of SAFE. In addition, domestic companies are no longer limited to extend cross-border loans to their offshore subsidiariesbut are also allowed to provide loans to their offshore parents and affiliates and multiple capital accounts for the same entity may be opened indifferent provinces. SAFE also promulgated the Circular on Printing and Distributing the Provisions on Foreign Exchange Administration overDomestic Direct Investment by Foreign Investors and the Supporting Documents in May 2013, which specifies that the administration by SAFE orits local branches over direct investment by foreign investors in the PRC shall be conducted by way of registration and banks shall process foreignexchange business relating to the direct investment in the PRC based on the registration information provided by SAFE and its branches. InFebruary 2015, SAFE promulgated SAFE Circular 13, which took effect on June 1, 2015. SAFE Circular 13 delegates the power to enforce theforeign exchange registration in connection with inbound and outbound direct investments under relevant SAFE rules from local branches ofSAFE to banks, thereby further simplifying the foreign exchange registration procedures for inbound and outbound direct investments.On January 26, 2017, SAFE issued the Notice of State Administration of Foreign Exchange on Improving the Check of Authenticity andCompliance to Further Promote Foreign Exchange Control (the “SAFE Circular 3”), which stipulates several capital control measures with respectto the outbound remittance of profit from domestic entities to offshore entities, including (i) under the principle of genuine transaction, banks shallcheck board resolutions regarding profit distribution, the original version of tax filing records and audited financial statements; and (ii) domesticentities shall hold income to account for previous years’ losses before remitting the profits. Moreover, pursuant to SAFE Circular 3, domesticentities shall make detailed explanations of the sources of capital and utilization arrangements, and provide board resolutions, contracts and otherproof when completing the registration procedures in connection with an outbound investment.On October 23, 2019, SAFE promulgated the Circular of the State Administration of Foreign Exchange on Further Promoting the Facilitationof Cross-border Trade and Investment, or Circular 28, which permits non-investment foreign-invested enterprises to use their capital funds to makeequity investments in China, with genuine investment projects and in compliance with effective foreign investment restrictions and otherapplicable laws. However, as the Circular 28 was newly issued, there are still substantial uncertainties as to its interpretation and implementationsin practice.Regulations Relating to Offshore Special Purpose Companies Held by PRC ResidentsSAFE promulgated the Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investmentthrough Special Purpose Vehicles (the “SAFE Circular 37”) in July 2014 that requires PRC residents or entities to register with SAFE or its localbranch in connection with their establishment or control of an offshore entity established for the purpose ofTable of Contents29overseas investment or financing. In addition, such PRC residents or entities must update their SAFE registrations when the offshore specialpurpose vehicle undergoes material events relating to any change of basic information (including change of such PRC citizens or residents, nameand operation term), increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions.SAFE Circular 37 was issued to replace SAFE Circular 75 (the Notice on Relevant Issues Concerning Foreign Exchange Administration forPRC Residents Engaging in Financing and Roundtrip Investments via Overseas Special Purpose Vehicles). SAFE further enacted the Notice onFurther Simplifying and Improving the Foreign Exchange Management Policies for Direct Investment (the “SAFE Circular 13”) effective fromJune 1, 2015, which allows PRC residents or entities to register with qualified banks in connection with their establishment or control of anoffshore entity established for the purpose of overseas investment or financing. However, remedial registration applications made by PRC residentsthat previously failed to comply with the SAFE Circular 37 continue to fall under the jurisdiction of the relevant local branch of SAFE. In theevent that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries ofthat special purpose vehicle may be prohibited from distributing profits to the offshore parent and from carrying out subsequent cross-borderforeign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiaries.Moreover, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for evasionof foreign exchange controls.See “Risk Factors — Risks Related to Doing Business in China — PRC regulations relating to offshore investment activities by PRC residentsmay limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits to us or otherwise expose us or our PRC residentbeneficial owners to liability and penalties under PRC law.”SAFE Regulations Relating to Employee Stock Incentive PlansOn February 15, 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic IndividualsParticipating in Stock Incentive Plans of Overseas Publicly-Listed Companies (the “Stock Option Rules”), which replaced the ApplicationProcedures of Foreign Exchange Administration for Domestic Individuals Participating in Employee Stock Ownership Plans or Stock Option Plansof Overseas Publicly-Listed Companies issued by SAFE on March 28, 2007. Under the Stock Option Rules and other relevant rules andregulations, PRC residents who participate in a stock incentive plan in an overseas publicly listed company are required to register with SAFE orits local branches and complete certain other procedures. Participants of a stock incentive plan who are PRC residents must retain a qualified PRCagent, which could be a PRC subsidiary of such overseas publicly listed company or another qualified institution selected by such PRC subsidiary,to conduct the SAFE registration and other procedures with respect to the stock incentive plan on behalf of its participants. Such participants mustalso retain an overseas entrusted institution to handle matters in connection with their exercise of stock options, the purchase and sale ofcorresponding shares or interests and fund transfers. In addition, the PRC agent is required to amend the SAFE registration with respect to ourshare incentive plans if there are any material changes to the share incentive plans, the PRC agent or the overseas entrusted institution or othermaterial changes. In addition, SAFE Circular 37 provides that PRC residents who participate in a share incentive plan of an overseas unlistedspecial purpose company may register with SAFE or its local branches before exercising rights. See “Risk Factors — Risks Related to DoingBusiness in China — Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans maysubject the PRC plan participants or us to fines and other legal or administrative sanctions.”Regulations Related to Enterprise Income TaxUnder the PRC Enterprise Income Tax Law (the “EIT Law”), which became effective on January 1, 2008, an enterprise established outside thePRC with “de facto management bodies” within the PRC is considered a “resident enterprise” for PRC enterprise income tax purposes and isgenerally subject to a uniform 25% enterprise income tax rate on its worldwide income. In 2009, the State Administration of Taxation (the “SAT”)issued the Notice Regarding the Determination of Chinese-Controlled Overseas Incorporated Enterprises as PRC Tax Resident Enterprise on theBasis of De Facto Management Bodies (the “SAT Circular 82”), which provides certain specific criteria for determining whether the “de factomanagement body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Further to SAT Circular 82, in 2011, the SATissued the Administrative Measures for Enterprise Income Tax of Chinese-Controlled Offshore Incorporated Resident Enterprises (Trial) (the “SATBulletin 45”) to provide more guidance on the implementation of SAT Circular 82.According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will beconsidered a PRC resident enterprise by virtue of having its “de facto management body” in China and will be subject to PRCTable of Contents30enterprise income tax on its worldwide income only if all of the following conditions are met: (a) the senior management and core managementdepartments in charge of its daily operations function have their presence mainly in the PRC; (b) its financial and human resources decisions aresubject to determination or approval by persons or bodies in the PRC; (c) its major assets, accounting books, company seals, and minutes and filesof its board of directors and shareholders’ meetings are located or kept in the PRC; and (d) more than half of the enterprise’s directors or seniormanagement with voting rights habitually reside in the PRC.Although SAT Circular 82 and SAT Bulletin 45 only apply to offshore-incorporated enterprises controlled by PRC enterprises or PRCenterprise groups and not those controlled by PRC individuals or foreigners, the determination criteria set forth therein may reflect the SAT’sgeneral position on how the term “de facto management body” could be applied in determining the tax resident status of offshore enterprises,regardless of whether they are controlled by PRC enterprises, individuals or foreigners.The State Administration of Taxation has promulgated several rules and notices to tighten the scrutiny over acquisition transactions in recentyears, including the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises (the“SAT Circular 698”), the Notice on Several Issues Regarding the Income Tax of Non-PRC Resident Enterprises (the “SAT Circular 24”) and theBulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises (the “SAT Bulletin 7”). Pursuant tothese rules and notices, if a non-PRC resident enterprise transfers its equity interests in a PRC tax resident enterprise, such non-PRC residenttransferor must report to the tax authorities at the place where the PRC tax resident enterprise is located and is subject to a PRC withholding tax ofup to 10%. In addition, if a non-PRC resident enterprise indirectly transfers so-called PRC Taxable Properties, referring to properties of anestablishment or a place of business in China, real estate properties in China and equity investments in a PRC tax resident enterprise, bydisposition of the equity interests in an overseas non-public holding company without a reasonable commercial purpose and resulting in theavoidance of PRC enterprise income tax, the transfer will be re-characterized as a direct transfer of the PRC Taxable Properties and gains derivedfrom the transfer may be subject to a PRC withholding tax of up to 10%. SAT Bulletin 7 has listed several factors to be taken into consideration bythe tax authorities in determining if an indirect transfer has a reasonable commercial purpose. However, regardless of these factors, an indirecttransfer satisfying all the following criteria will be deemed to lack a reasonable commercial purpose and be taxable in the PRC: (i) 75% or more ofthe equity value of the intermediary enterprise being transferred is derived directly or indirectly from PRC Taxable Properties; (ii) at any timeduring the one year period before the indirect transfer, 90% or more of the asset value of the intermediary enterprise (excluding cash) is compriseddirectly or indirectly of investments in the PRC, or 90% or more of its income is derived directly or indirectly from the PRC; (iii) the functionsperformed and risks assumed by the intermediary enterprise and any of its subsidiaries that directly or indirectly hold the PRC Taxable Propertiesare limited and are insufficient to prove their economic substance; and (iv) the foreign tax payable on the gain derived from the indirect transfer ofthe PRC Taxable Properties is lower than the potential PRC tax on the direct transfer of those assets. On the other hand, indirect transfers fallinginto the scope of the safe harbors under SAT Bulletin 7 may not be subject to PRC tax. The safe harbors include qualified group restructurings,public market trades and exemptions under tax treaties.Under SAT Bulletin 7 and other PRC tax regulations, in the case of an indirect transfer, entities or individuals obligated to pay the transferprice to the transferor must act as withholding agents and are required to withhold the PRC tax from the transfer price. If they fail to do so, theseller is required to report and pay the PRC tax to the PRC tax authorities. If neither party complies with the tax payment or withholdingobligations under SAT Bulletin 7, the tax authority may impose penalties such as late payment interest on the seller. In addition, the tax authoritymay also hold the withholding agents liable and impose a penalty of 50% to 300% of the unpaid tax on them. The penalty imposed on thepurchasers may be reduced or waived if the withholding agents have submitted the relevant materials in connection with the indirect transfer to thePRC tax authorities in accordance with SAT Bulletin 7.In January 2019, the SAT issued Announcement on the Implementation of the Preferential Income Tax Reduction Policy for Small and LowProfit Enterprises (the “SAT 2019 Circular 2”). Pursuant to SAT 2019 Circular 2, from January 1, 2019 to December 31, 2021, for small low profitenterprises, (i) the tax rate for the first RMB1 million the annual income does not exceed RMB1 million is 20% and the taxable income is 25% ofthe annual taxable income; (ii) the tax rate for the portion of annual income that exceeds RMB1 million but does not exceed RMB3 million is 20%and the taxable income is 50% of the annual income. SAT 2019 Circular 2 also defines “small low profit enterprises” as enterprises who areengaged in industries not restricted or prohibited and meet the three conditions of (i) annual taxable income of RMB3 million or lower, (ii)employees’ number of 300 or lower; and (iii) total assets of RMB50 million or lower. On March 18, 2022, the SAT issued Announcement on theFurther Implementation of the Preferential Income Tax Reduction Policy for Small and Low Profit Enterprises (the “SAT 2022 Circular 13”).Pursuant to SAT 2022 Circular 13, the preferential income tax reduction policy for small low profit enterprise shall be expanded from January 1,2022 to December 31, 2024. During the calendar years ended December 31, 2021 and 2022, all our subsidiaries in China met the three criteria andenjoyed the preferential tax rates.Table of Contents31Regulations Related to PRC Value-Added TaxIn March 2016, the Ministry of Finance and the State Administration of Taxation further promulgated the Notice on Fully Promoting the PilotPlan for Replacing Business Tax by Value-Added Tax (“VAT”), which became effective on May 1, 2016. Pursuant to the pilot plan and relevantnotices, VAT is generally imposed in lieu of business tax in the modern service industries, including the value-added telecommunication services,on a nationwide basis. VAT of a rate of 6% applies to revenue derived from the provision of some modern services. Certain small taxpayers underPRC law are subject to reduced value-added tax at a rate of 3%. Unlike business tax, a taxpayer is allowed to offset the qualified input VAT paid ontaxable purchases against the output VAT chargeable on the modern services provided.On April 4, 2018, the Ministry of Finance and the State Administration of Taxation issued the Notice on Adjustment of VAT Rates, whichcame into effect on May 1, 2018. According to the abovementioned notice, the taxable goods previously subject to VAT rates of 17% and 11%respectively become subject to lower VAT rates of 16% and 10% respectively starting from May 1, 2018. Furthermore, according to theAnnouncement on Relevant Policies for Deepening Value-added Tax Reform jointly promulgated by the Ministry of Finance, the StateAdministration of Taxation and the General Administration of Customs, which became effective on April 1, 2019, the taxable goods previouslysubject to VAT rates of 16% and 10% respectively become subject to lower VAT rates of 13% and 9% respectively starting from April 1, 2019.Pursuant to applicable PRC regulations promulgated by the Ministry of Finance of China and the SAT, we are required to pay a VAT at a rateof 6% for our services and 13% for our automobile sales, operating lease and financial leasing, with respect to revenues derived from the provisionof Automobile Transaction and Related Services. In addition, as part of the Chinese government’s effort to ease the burden of businesses affectedby COVID-19, the Ministry of Finance and the State Administration of Taxation temporarily reduced or exempted VAT on revenues derived fromthe provision of certain transportation services from January 2020 to March 2021 and from January 1, 2022 to December 31, 2022. Accordingly,during the year ended March 31, 2022, our revenues generated from our Online Ride-hailing Platform Services was exempted from duty sinceJanuary 1, 2022 to March 31, 2022. And during the year ended March 31, 2023, our revenues generated from our Online Ride-hailing PlatformServices was exempted from duty since April 1, 2022 to December 31, 2022. A taxpayer is allowed to offset the qualified input VAT paid ontaxable purchases against the output VAT chargeable on the revenue from services provided.Regulations Related to Mergers and AcquisitionsOn August 8, 2006, six PRC regulatory agencies, including China Securities Regulatory Commission (the “CSRC”), promulgated theRegulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the “M&A Rules”), which became effective onSeptember 8, 2006 and were amended on June 22, 2009. The M&A Rules, among other things, require offshore special purpose vehicles formedfor overseas listing purposes through acquisitions of PRC domestic companies and controlled by PRC domestic enterprises or individuals to obtainthe approval of the CSRC prior to publicly listing their securities on an overseas stock exchange. On September 21, 2006, the CSRC published anotice specifying the documents and materials that are required to be submitted for obtaining CSRC approval.The M&A Rules, and other recently adopted regulations and rules concerning mergers and acquisitions established additional procedures andrequirements that could make merger and acquisition activities by foreign investors more time consuming and complex. For example, the M&ARules require that MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRCdomestic enterprise, if (i) any important industry is concerned, (ii) such transaction involves factors that impact or may impact national economicsecurity, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honoredbrand. Moreover, the Anti-Monopoly Law promulgated by the SCNPC on August 30, 2007 and effective as of August 1, 2008 requires thattransactions which are deemed concentrations and involve parties with specified turnover thresholds must be cleared by MOFCOM before theycan be completed. In addition, on February 3, 2011, the General Office of the State Council promulgated a Notice on Establishing the SecurityReview System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the “Circular 6”), which officially established asecurity review system for mergers and acquisitions of domestic enterprises by foreign investors. Further, on August 25, 2011, MOFCOMpromulgated the Regulations on Implementation of Security Review System for the Merger and Acquisition of Domestic Enterprises by ForeignInvestors (the “MOFCOM Security Review Regulations”), which became effective on September 1, 2011, to implement Circular 6. Under Circular6, a security review is required for mergers and acquisitions by foreign investors having “national defense and security” concerns and mergers andacquisitions by which foreign Investors may acquire the “de facto control” of domestic enterprises with “national security” concerns. Under theMOFCOM Security Review Regulations, MOFCOM will focus on the substance and actual impact of the transaction when decidingTable of Contents32whether a specific merger or acquisition is subject to security review. If MOFCOM decides that a specific merger or acquisition is subject tosecurity review, it will submit it to the Inter-Ministerial Panel, an authority established under Circular 6 led by the NDRC and MOFCOM under theleadership of the State Council, to carry out the security review. The regulations prohibit foreign investors from bypassing the security review bystructuring transactions through trusts, indirect investments, leases, loans, control through contractual arrangements or offshore transactions. Thereis no explicit provision or official interpretation stating that the merger or acquisition of a company engaged in the marketplace lending businessrequires security review.Regulations Related to Overseas ListingsOn February 17, 2023, the CSRC promulgated the Overseas Listing Trial Measures (the “Trial Measures”), and relevant five guidelines on theapplication of regulatory rules, which took effect from March 31, 2023, requiring Chinese domestic companies’ overseas offerings and listings ofequity securities be filed with the CSRC. On the same date, the CSRC circulated Supporting Guidance Rules No. 1 through No. 5, Notes on theTrial Measures, Notice on Administration Arrangements for the Filing of Overseas Listings by Domestic Enterprises and relevant CSRC Answersto Reporter Questions, or collectively, the Guidance Rules and Notice, on CSRC’s official website. The Trial Measures clarify the scope ofoverseas offerings and listings by Chinese domestic companies which are subject to the filing and reporting requirements thereunder, and provide,among others, that Chinese domestic companies that have already directly or indirectly offered and listed securities in overseas markets prior to theeffectiveness of the Overseas Listing Trial Measures shall fulfil their filing obligations and report relevant information to the CSRC within threeworking days after conducting a follow-on offering of equity securities on the same overseas market, and follow the relevant reportingrequirements within three working days upon the occurrence and public disclosure of any specified circumstances provided thereunder, including(i) change of control; (ii) investigations or sanctions imposed by overseas securities regulatory agencies or other relevant competent authorities;(iii) change of listing status or transfer of listing segment and (iv) voluntary or mandatory delisting. In addition, where the main business of anissuer undergoes material change after overseas offering and listing, and is therefore beyond the scope of business stated in the filing documents,such issuer shall follow the relevant reporting requirements within three working days after occurrence of the changes. Any future securitiesofferings and listings outside mainland China by Chinese domestic companies, including but not limited to follow-on offerings, secondary listingsand going private transactions, will be subject to the filing with the CSRC under the Overseas Listing Trial Measures. For violations of theseprovisions or measures, the competent Chinese authorities may impose administrative regulatory measures, such as orders for correction,warnings, fines, and may pursue legal liability in accordance with law.The Trial Measures, together with the Guidance Rules and Notice reiterate the basic principles of the Draft Administrative Provisions andDraft Filing Measures and impose substantially the same requirements for the overseas securities offering and listing by domestic enterprises, andclarified and emphasized several aspects, which include but are not limited to: (1) criteria to determine whether an issuer will be required to gothrough the filing procedures under the Trial Measures; (2) exemptions from immediate filing requirements for issuers including those that havealready been listed in foreign securities markets, including U.S. markets, prior to the effective date of the Trial Measures, but these issuers shallstill be subject to filing procedures if they conduct refinancing or are involved in other circumstances that require filing with the CSRC; (3) anegative list of types of issuers banned from listing or offering overseas, such as issuers whose affiliates have been recently convicted of briberyand corruption; (4) issuers’ compliance with web security, data security, and other national security laws and regulations; (5) issuers’ filing andreporting obligations, such as obligation to file with the CSRC after it submits an application for initial public offering to overseas regulators, andobligation after offering or listing overseas to file with the CSRC after it completes subsequent offerings and to report to the CSRC material eventsincluding change of control or voluntary or forced delisting of the issuer; and (6) the CSRC’s authority to fine both issuers and their relevantshareholders for failure to comply with the Trial Measures, including failure to comply with filing obligations or committing fraud andmisrepresentation.The Overseas Listing Trial Measures provide that if an issuer meets both of the following criteria, the overseas securities offering and listingconducted by such issuer will be deemed as an indirect overseas offering and listing by PRC domestic companies: (i) 50% or more of any of theissuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recentfiscal year is accounted for by domestic companies; and (ii) the main parts of the issuer’s business activities are conducted in mainland China, orits main place(s) of business are located in mainland China, or the majority of senior management staff in charge of its business operations andmanagement are PRC citizens or have their usual place(s) of residence located in mainland China. Where an issuer submits an application forinitial public offering to competent overseas regulators, such issuer must file with the CSRC within three business days after such application issubmitted.The Trial Measures provide the CSRC with power to warn, fine, and issue injunctions against both PRC domestic companies, their controllingshareholders, and their advisors in listing or offering securities (collectively, the “Subject Entities”), as well as individuals directly responsible forthese Subject Entities (the “Subject Individuals”). For failure to comply with the Trial Measures Negative ListTable of Contents33or the Trial Measures Filing Obligations, or materially false or misleading statements in the filing and reporting required by the Trial Measures: (1)PRC domestic companies, and their controlling shareholders if the controlling shareholders induced the PRC domestic companies’ failure tocomply, severally, may face warnings, injunctions to comply, and fines between RMB1 million and RMB10 million (approximately $145,647 and$1,456,473); the Subject Individuals in these entities may severally, face warnings and fines between RMB0.5 million and RMB5 million(approximately $72,824 and $728,237). (2) Advisors in listing or offering securities that failed to dutifully advise the PRC domestic companies andtheir controlling shareholders in complying with the Trial Measures and caused such failures to comply can face warnings and fines betweenRMB0.5 million and 5 million (approximately $72,824 and $728,237); the Subject Individuals in these advisor entities may, severally, facewarnings and fines between RMB0.2 million and RMB2 million (approximately $29,129 and $291,295).Furthermore, on February 24, 2023, the CSRC, together with certain other PRC governmental authorities, promulgated the Provisions onStrengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, or the RevisedConfidentiality and Archives Administration Provisions, which took effect on March 31, 2023. According to the Revised Confidentiality andArchives Administration Provisions, Chinese companies that directly or indirectly conduct overseas offerings and listings, shall strictly abide bythe relevant laws and regulations on confidentiality when providing or publicly disclosing, either directly or through their overseas listed entities,documents and materials to securities services providers such as securities companies and accounting firms or overseas regulators in the process oftheir overseas offering and listing. In the event such documents or materials contain state secrets or working secrets of government agencies, theChinese companies shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department atthe same level with the approving authority. In the event that such documents or materials, if divulged, will jeopardize national security or publicinterest, the Chinese companies shall strictly fulfill relevant procedures stipulated by applicable national regulations. The Chinese companies shallalso provide a written statement of the specific state secrets and sensitive information provided when providing documents and materials tosecurities companies and securities service providers, and the securities companies and securities service providers shall properly retain suchwritten statements for inspection. According to the Revised Confidentiality and Archives Administration Provisions, where overseas securitiesregulators or relevant competent authorities request to inspect, investigate or collect evidence from Chinese domestic companies concerning theiroverseas offering and listing or their securities firms and securities service providers that undertake securities business for such Chinese domesticcompanies, such inspection, investigation and evidence collection must be conducted under the cross-border regulatory cooperation mechanism,and the CSRC or competent authorities of the Chinese government will provide necessary assistance pursuant to bilateral and multilateralcooperation mechanism.Human CapitalAs of the date of this Report, we had a total of 97 full-time employees including three executive officers, 63 employees in our AutomobileTransaction and Related Services segment and 31 employees in our Online Ride-hailing Platform Services segment. Meanwhile, there were 102full-time employees in our equity investee company, Jinkailong.The following table sets forth the breakdown of our employees by function in our Automobile Transaction and Related Services segment:Function Number of EmployeesManagement 2Legal & Risk Management 11Operations 7Marketing 9Drivers & Automobile Management and Services 13Technology 2Human Resources & Administration 9Finance and Accounting 9Internal Control and Audit 1Total 63Table of Contents34The following table sets forth the breakdown of our employees by function in our Online Ride-hailing Platform Services segment:Function Number of EmployeesManagement 2Operations 16Drivers & Risk Management and Services 6Technology 2Human Resources & Administration 1Finance and Accounting 4Total 31All of our employees are based in the cities of Chengdu, Changsha and Guangzhou, where our main operations are located.We believe we offer our employees competitive compensation packages and work environment that encourages initiative and is based onmerit, and as a result, we have generally been able to develop and maintain our human capital, including attracting and retaining qualifiedpersonnel and a stable core management team. We plan to continue developing our human capital and hire additional employees as we expand ourbusiness.As required by PRC regulations, we participate in various government statutory employee benefit plans, including social insurance funds,namely a pension contribution plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan and amaternity insurance plan and a housing provident fund. We are required under PRC law to make contributions to employee benefit plans atspecified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the localgovernment from time to time. We have not made adequate employee benefit payments, and may be required to make up the contributions forthese plans as well as to pay late fees and fines. See “Risk Factors — Risks Related to Doing Business in China — Failure to make adequatecontributions to various employee benefit plans as required by PRC regulations may subject us to penalties.” We are subject to and comply withPRC regulations regarding labor and social security. See “Regulations – Regulations Related to Labor and Social Security.”We enter into standard labor and confidentiality agreements with each of our employees. We believe that we maintain a good workingrelationship with our employees, and we have not experienced any major labor disputes.SeasonalityWe have observed seasonal trends or patterns in revenues related to our Automobile Transaction and Related Services. Because of the PRCNational Holiday in October, New Year’s Day, and the traditional Lunar New Year in January or February, there is a seasonal decrease in thedemand of automobile purchase/leasing in certain months during the six months ended March 31 (our third and fourth fiscal quarter). We alsoexpect to experience seasonality in our Online Ride-hailing Platform Services, which may differ from the one in our Automobile Transaction andRelated Services. For example, we expect to experience higher user traffic during the Chinese National holiday due to the strong demand in thetourism. Other seasonal trends that may affect us or China’s online ride-hailing industry generally may develop, and current seasonal trends maybecome more extreme, all of which would contribute to fluctuations in our results of operations.Our results of operations in future quarters or years may fluctuate and deviate from the expectations of our investors, and any occurrence thatdisrupts our business during any particular quarters could have a disproportionately material adverse effect on our liquidity and results ofoperations.Research and DevelopmentWith an aim to standardize our transaction process and achieve higher operating efficiency, we are developing an integrated informationsystem for our Automobile Transaction and Related Services. The system comprises modules for procurement, qualification assessment, deliveryand post-transaction management which covers the whole transaction process. We have completed the development of certain functions such asinformation entry and delivery which are being tested by us. We launched the system in March 2020 and keep upgrading the system to support ourbusiness expansion. We are also in the progress of developing the managing system for online ride-hailing platform, and the comprehensivemanagement system which could link all key information between Automobile Transaction and Related Services and Online Ride-hailing PlatformServices for our internal manage purpose.Table of Contents35Intellectual PropertyWe regard our trademarks, domain names, know-how, proprietary technologies and similar intellectual property as critical to our success, andwe rely on PRC trademark and trade secret law and confidentiality, invention assignment and non-compete agreements with our employees andothers to protect our proprietary rights. We own 19 software copyrights and 52 trademarks. We have two trademark applications pending at thePRC Trademark Office. We have also registered numerous domain names, including www.51ruixi.com, www.91xixing.com/, 91xixingcd.com,www.coreneltech.com, www.senmiaotech.com and senmiaotechir.com. The information on our websites is not part of, or incorporated in, thisReport.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our technology.Monitoring unauthorized use of our technology is difficult and costly, and we cannot be certain that the steps we have taken will preventmisappropriation of our technology. From time to time, we may have to resort to litigation to enforce our intellectual property rights, which couldresult in substantial costs and diversion of our resources.In addition, third parties may initiate litigations against us alleging infringement of their proprietary rights or respond to our litigationsdeclaring their non-infringement of our intellectual property rights. In the event of a successful claim of infringement and our failure or inability todevelop non-infringing technology or license the infringed or similar technology on a timely basis, our business could be harmed. Moreover, evenif we are able to license the infringed or similar technology, license fees could be substantial and may adversely affect our results of operations.See “Risk Factors — Risks Related to Our Business — We may not be able to prevent others from unauthorized use of our intellectual property,which could harm our business and competitive position.” and “— We may be subject to intellectual property infringement claims, which may beexpensive to defend and may disrupt our business and operations.”InsuranceWe consider our insurance coverage to be adequate as we have in place all the mandatory insurance policies required by Chinese laws andregulations and in accordance with the commercial practices in our industry. The Auto Business Entities have obtained accident insurance andcommercial liability insurance, which are mandatory, on all the automobiles they purchased for sales, leasing or financing and pass on the costs ofsuch insurance to their customers in the sale/leasing/financing transaction. We also maintain the mandatory insurance with respect to carrier’sliability in connection with our Online Ride-hailing services. We provide social security insurance including pension insurance, unemploymentinsurance, work-related injury insurance and medical insurance for our employees. We do no maintain any property insurance policies, businessinterruption insurance or general third-party liability insurance, nor do we maintain product liability insurance or key-man insurance. We considerour insurance coverage to be sufficient for our business operations in China.Item 1A.Risk FactorsAn investment in our company is subject to a high degree of risk. The risk factors described below and similar risk factors we may face areimportant to understanding other statements in this Report and should be reviewed carefully. The following information should be read inconjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidatedfinancial statements and related notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Report.Our business, financial condition and operating results can be affected by a number of factors, whether currently known or unknown, including butnot limited to those described below, any one or more of which could, directly or indirectly, cause our actual financial condition and operatingresults to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part,could materially and adversely affect our business, financial condition, operating results and stock price.Because of the following factors, as well as other factors affecting our financial condition and operating results, past financial performance shouldnot be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends infuture periods.Table of Contents36Risk Factors SummaryRisks Related to Our Business and Industry●We have limited experience in the operation of our own online ride-hailing platform, which makes it difficult for investors to evaluate thesuccess of this business to date and to assess the future viability of this business.●Relationship between us, our affiliates and Gaode Maps and other cooperated partners is crucial to our ability to grow our business, results ofoperations and financial condition.●Our customers’ failure to fully comply with PRC online ride-hailing-related laws may expose us to potential penalties and negatively affectour operations.●If we are unable to repossess the car collateral for delinquent financing payments of the automobile purchasers referred by us or do so in acost-effective manner or if our ability to collect delinquent financing payments is impaired, our business and results of operations would bematerially and adversely affected. We may also be subject to risks relating to third-party debt collection service providers whom we engage forthe recovery and collection of loans.●We are exposed to credit risk in our auto financing and prior auto financing facilitation businesses.●Our failure to lease cars that we purchased from dealers or leased from other automobile rental companies with a satisfied utilization may havea material and adverse effect on our business, financial condition and results of operations.●If data provided by automobile lessees and other third-party sources or collected by us are inaccurate, customer trust in us could decline.●We may be subject to product liability claims if people or property are harmed by vehicles purchased through us.●If our safety system fails to ensure user safety while using our online ride-hailing platform, our business, results of operations and financialcondition could be materially and adversely affected.●If we fail to cost-effectively attract and retain online ride-hailing drivers, or to increase utilization of our platform by existing users, ourbusiness, results of operations and financial condition could be materially and adversely affected.●Any significant disruption in our IT systems could materially and adversely affect our business.●If we fail to obtain and maintain the requisite licenses and approvals required for our online ride-hailing business, our business may bematerially and adversely affected.●We rely primarily on a third-party insurance policy to insure our auto-related risks.●We rely on third-party payment processors to process payments made by our business partners.●Government policies on automobile purchases and usage in the online ride-hailing industry may materially affect our results of operations.●Our business is subject to laws, regulations and regulatory policies that are being continuously amended and improved, and the interpretationand implementation of newly established policies may remain uncertain, which could have an adverse impact on our business and futureprospects.●We have identified material weaknesses in our internal control over financial reporting.●Our common stock will be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, or the HFCAAct, in the future if the PCAOB is unable to inspect or investigate completely our auditors. The delisting of our common stock, or the threat oftheir being delisted, may materially and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conductinspections of our auditors would deprive our investors of the benefits of such inspections.Table of Contents37●We face risks related to natural disasters, health epidemics and other outbreaks, such as COVID-19, which could significantly disrupt ouroperations.Risks Related to Doing Business in China●Our current corporate structure and business operations may be affected by the Foreign Investment Law.●Our previous contractual arrangements in relation to Sichuan Senmiao may be subject to scrutiny by the PRC tax authorities and they maydetermine that we or Sichuan Senmiao owe additional taxes, which could negatively affect our financial condition and the value of yourinvestment.●If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable taxconsequences to us and our non-PRC stockholders.●Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we maypursue in the future.●We are required to obtain a value-added telecommunication business certificate and be subject to foreign investment restrictions.●Substantial uncertainties and restrictions with respect to the political and economic policies of the PRC government and PRC laws andregulations could have a significant impact upon the business that we may be able to conduct in the PRC and accordingly on the results of ouroperations and financial condition.●Adverse regulatory developments in China may subject us to additional regulatory review, and additional disclosure requirements andregulatory scrutiny to be adopted by the SEC in response to risks related to recent regulatory developments in China may impose additionalcompliance requirements for companies like us with significant China-based operations, all of which could increase our compliance costs,subject us to additional disclosure requirements.●Compliance with China’s new Data Security Law, Measures on Cybersecurity Review, Personal Information Protection Law, regulations andguidelines relating to the multi-level protection scheme and any other future laws and regulations may entail significant expenses and couldmaterially affect our business.●Recent greater oversight by the CAC over data security, particularly for companies seeking to list on a foreign exchange, could adverselyimpact our business and our offering.●We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet-related businesses and companies,and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business andresults of operations.●PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currencyconversion may delay or prevent us from using the proceeds of from our public offerings to make loans to or make additional capitalcontributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand ourbusiness.●We rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we mayhave, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability toconduct our business.●Fluctuations in exchange rates could have a material adverse effect on our results of operations and the value of your investment.●Governmental control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of yourinvestment.●Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.Table of Contents38●The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of PRC companies by foreigninvestors, which could make it more difficult for us to pursue growth through acquisitions in China.●PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries’ ability to increase their registeredcapital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC law.Risks Related to Our Securities●Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our common stock.●The market price for our common stock may be volatile.●A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future.●We have a significant number of outstanding warrants.Other General Risk Factors●We may need additional capital, and financing may not be available on terms acceptable to us.●Any harm to our brands or reputation may materially and adversely affect our business.●A severe or prolonged downturn in the Chinese or global economy could materially and adversely affect our business and financial condition.●From time to time, we may evaluate and potentially consummate strategic investments or acquisitions, which could require significantmanagement attention, disrupt our business and adversely affect our financial results.●Our ability to protect the confidential information of our customers may be adversely affected by cyber-attacks, computer viruses, physical orelectronic break-ins or similar disruptions.Risks Related to Our Business and IndustryWe have limited experience in the operation of our own online ride-hailing platform, which makes it difficult for investors to evaluate thesuccess of this business to date and to assess the future viability of this business.We launched our online ride-hailing platform in late October 2020. This short operating history may make it difficult for investors to evaluateour prospects for success for this business. We may not have sufficient experience to address the risks to which our operation in new or rapidlyevolving markets may be exposed. There can be no assurances that we will be able to do so.As a relatively new business, our online ride-hailing platform may encounter unforeseen expenses, difficulties, complications, delays andother known and unknown factors that may alter or delay our plans. Before the year ended March 31, 2022, we used to pay a large number ofdriver incentives to acquire and maintain the large customer base. However, we shifted the expansion strategy of our online ride-hailing platformto launch our platform in more cities, rather than maintaining the customer base when the industry condition changed, especially the cyber securityinvestigation on Didi performed by PRC authorities in July 2021. There is no assurance that we will continue to be successful with this businessand the likelihood of success of our online ride-hailing platform must be considered in light of our relatively early stage of operations. Any growthin this business will put significant demands on our processes, systems and personnel. If we are unable to successfully manage and support ourgrowth and the challenges and difficulties associated with managing our ride-hailing platform as a larger, more complex business, this could causea material adverse effect on our business, financial position and results of operations, and the market value of our securities could decline.Table of Contents39We face intense competition, which could lead to our inability to secure market share or cause us to lose market share to our competitors, anyof which could materially and adversely affect our business, results of operations and financial condition.The online ride-hailing market in China, especially in our key target markets of Chengdu, Changsha and Guangzhou, is intensely competitiveand characterized by rapid changes in technology, shifting user preferences, and frequent introductions of new services and offerings. We faceintense competition in the Automobile Transaction and Financing Services, as well as the Online Ride-hailing Platform Services. We facesignificant competition from existing, well-established, and low-cost alternatives, and in the future we expect to face competition from new marketentrants. Our competitors may have significantly more resources than we do, including financial, technological, marketing and others and may beable to devote greater resources to the development and promotion of their services. As a result, they may have deeper relationships with onlineride-hailing drivers, automobile dealers, automobile leasing companies and other third-party service providers than we do. This could allow themto develop new services, adapt more quickly to changes in technology and to undertake more extensive marketing campaigns, which allow them toderive greater revenue and profits from their existing user bases, enlarge their user base at lower costs, or respond more quickly to new andemerging technologies and trends. As a consequence, our services may be less attractive to consumers and cause us to lose market share.Furthermore, they may be able to devote greater resources to the development, promotion and sale of offerings and offer lower prices than wedo, which could further adversely affect our results of operations. Moreover, intense competition in the markets we operate in may reduce ourservice fees and revenue, increase our operating expenses and capital expenditures, and lead to departures of our qualified employees. We may alsobe harmed by negative publicity instigated by our competitors, regardless of its validity. We may in the future continue to encounter disputes withour competitors, including lawsuits involving claims asserted under unfair competition laws and defamation which may adversely affect ourbusiness and reputation. Failure to compete with current and potential competitors could materially harm our business, financial condition and ourresults of operations.We expect competition to continue, both from current competitors and new entrants in the market that may be well-established and enjoygreater resources or other strategic advantages. If we are unable to anticipate or react to these competitive challenges, our competitive positioncould weaken, or fail to improve, and we could experience growth stagnation or even a decline in revenue that could materially and adverselyaffect our business, results of operations and financial condition.The relationship between us, our affiliates and Gaode Maps, the leading aggregation platform in China, and other cooperated partners iscrucial to our ability to grow our business, results of operations and financial condition.The strategic relationship between us, our affiliates and Gaode Maps, the leading aggregation platform, and other local online ride-hailingplatforms is crucial to our business as most of customers we provide services to are online ride-hailing drivers. Those drivers earn income on ourplatform from the trip orders distributed from Gaode Maps, or directly from other platforms. If our collaboration with these platforms wasterminated, we may not be able to maintain our existing customers or attract new customers who are and will be online ride-hailing drivers, whichcould materially and adversely affect our business and impede our ability to continue our operations. Our annual cooperative arrangements withDidi on Automobile Transaction and Related Services are non-exclusive basis, and Didi may have cooperative arrangements with our competitors.We also cooperate with automobile dealers like BYD Auto Sales Co., Ltd. (“BYD”), automobile leasing companies, financial institutions andothers to attract online ride-hailing drivers to run their business through our platform and provide automobile transaction and financing services.Our ability to acquire customers depends on our own marketing efforts through online advertising and billboard advertising, as well as the networkof different third party sales teams. We intend to strengthen relationships with existing financing partners and develop new relationships for ourautomobile transaction and financing business. If we are not able to attract or retain cooperative automobile dealers, automobile leasing companieswith favorable term as new business partners on acceptable terms, our business growth will be hindered and our results of operations and financialcondition will suffer.Illegal, improper or otherwise inappropriate activities of customers while utilizing our online ride-hailing platform or receiving our servicescould expose us to liabilities and harm our reputation, business, results of operations and financial condition.Illegal, improper or otherwise inappropriate activities by customers while utilizing our online ride-hailing platform or receiving our servicescould expose us to liabilities and materially and adversely affect our reputation, business, results of operations and financial condition. Theseactivities may include abuse, assault, theft, false imprisonment, sexual harassment, identity theft, unauthorized use of credit and debit cards orbank accounts, and other misconduct. The relevant regulations also require the licensed online ride-hailing platforms to ensure that the drivers andcars engaged in providing ride services meet the requirements stipulated by the regulations. WeTable of Contents40are not able to fully control or predict the actions of our customers and third parties, either during the process of providing services or otherwise.While we have implemented various measures to anticipate, identify and address risks associated with these activities, we may not adequatelyaddress or prevent all illegal, improper or otherwise inappropriate activities by our users, which could damage our brand and the viability of thisbusiness.At the same time, if the measures we have taken to guard against these illegal, improper or otherwise inappropriate activities are too restrictiveand inadvertently prevent qualified online ride-hailing drivers otherwise in good standing from using our platform and services, or if we are unableto implement and communicate these measures fairly and transparently or are perceived to have failed to do so, the growth and retention of ourusers and their utilization of our online ride-hailing platform could be negatively impacted. For example, if we cannot complete background checksof potential online ride-hailing drivers who apply to utilize our platform on a timely basis, we may not be able to onboard potential online ride-hailing drivers in time and, as a result, our platform may be less attractive to qualified online ride-hailing drivers.Further, we may be subject to claims of significant liability based on traffic accidents, deaths, injuries, or other incidents that are caused byride-hailing drivers, consumers, or third parties. Our auto liability and general liability insurance policies may not cover all potential claims towhich we are exposed, and may not be adequate to indemnify us for all liabilities. These incidents may subject us to liability and negativepublicity, which would increase our operating costs and adversely affect our business, operating results, and future prospects. Even if these claimsdo not result in liability, we will incur significant costs in investigating and defending against them. And any negative publicity related to theforegoing, whether such incident occurred on our platform or on our competitors’ platforms, could materially and adversely affect our reputationand brand and more importantly, public perception of the online ride-hailing industry as a whole, which could negatively affect the demand forplatforms like ours, and potentially lead to increased regulatory or litigation exposure. Any of the foregoing risks could harm our business, resultsof operations and financial condition.Our customers’ failure to fully comply with PRC online ride-hailing-related laws may expose us to potential penalties and negatively affect ouroperations.The online ride-hailing industry is highly regulated in China. According to the guidelines issued by the different local authorities in China,including our major operations, Chengdu, Changsha and Guangzhou, online reservation taxi operating license, automobile certificate and onlinereservation taxi driver’s license are required for a driver to operate the online ride-hailing business. Approximately 57% of our served online ride-hailing drivers have not obtained the online reservation taxi driver’s certificates as of March 31, 2023. During the year ended March 31, 2023, wehave been fined by approximately $19,000 by Traffic Management Bureaus in Chengdu and Changsha for the non-compliance on taxi driver’scertificates, of which, approximately $4,000 was further compensated by drivers or cooperated third parties. We cannot assure you that we will notbe subject to further fines, penalties or more severe administrative actions or proceedings in the future. If we or drivers or vehicles on our platformfail to obtain or maintain any required licenses, permits or approvals or make any necessary filings in a timely matter or at all, we may be subjectto a variety of penalties, including fines or potentially being forced to suspend, terminate or significantly reduce our operations in the city orjurisdiction. Our business and results of operations will be materially affected if our affiliated drivers are suspended from providing ride-hailingservices or receive substantial fines.We are in the process of assisting the drivers to obtain the required certificates and licenses. However, there is no guarantee that all of thedrivers affiliated with us would be able to obtain all the certificates and licenses. Our ability and method to provide the automobile transactionrelated services might be affected or restricted if our affiliated drivers or automobiles do not possess the requisite licenses. Further, there is noassurance that each of the drivers who use our platform or the cars used by such drivers in providing ride-hailing services possesses the requisitelicense or certificate. Our business and results of operations will be materially and adversely affected if our affiliated drivers are suspended fromproviding ride-hailing services or imposed substantial fines or if we are found to be in serious violation of the Interim Measures due to the drivers’failure to obtain requite licenses and/or automobile certificates in connection with providing services through our platform.If we fail to effectively manage the behaviors of order skipping, disintermediation and other misconduct and fraud by our users, our business,results of operations and financial condition could be materially and adversely affected.Online ride-hailing drivers on our platform may skip orders and fail to pick up riders, or circumvent our platform and complete the transactionoffline and in private. Our users may also maliciously misappropriate subsidies provided on our platform. For example, if we detect users engagingin cheating behaviors to earn incentives we have offered, we may be required to disqualify them from using such incentives. We have alsoimplemented various measures to prevent order skipping. For example, we monitor the order completionTable of Contents41rate for our online ride-hailing drivers, and those with low credit scores based on riders’ feedback or behavior scores will be less likely to receiveorders on our platform. If we detect a persistent skipping pattern, we will permanently close their user accounts on our platform.In addition, we may incur losses from various types of fraud by our users, including use of stolen or fraudulent credit card data, attemptedpayments by riders with insufficient funds and fraud committed by riders in concert with online ride-hailing drivers. Bad actors use increasinglysophisticated methods to engage in illegal activities involving personal information, such as unauthorized use of another person’s identity, accountinformation or payment information and unauthorized acquisition or use of credit or debit card details, bank account information and mobile phonenumbers and accounts. Under current credit card practices, we may be liable for rides facilitated on our online ride-hailing platform withfraudulent credit card data, even if the associated financial institution approved the credit card transaction. We are in the process of takingmeasures to detect and prevent fraudulent transactions by our users, such as cross-checking a driver’s travel path against the proposed itinerary toverify the authenticity of an order.Despite our efforts, our measures may not eliminate order skipping, disintermediation, and other user misconducts and fraud. Our failure toadequately detect and prevent such user behaviors could materially and adversely affect our business, results of operations and financial condition.Our affiliate or equity investee company did not have written agreements in place with certain financing partners and adverse change in ourrelationship with such financing partners may materially and adversely impact our business and results of operations.Hunan Ruixi and Jinkailong relied on a limited number of financing partners to fund automobile transactions for automobile purchasers.However, we did not have written agreements in place with these financing partners obligating them to provide financing. Because such financingpartners are not contractually bound by any specific commitment to provide financing, they may determine not to collaborate with Hunan Ruixiand Jinkailong or limit the funding that was available for financing transactions we facilitated, which will materially and adversely affect ourbusiness, financial condition and results of operations.Prior consent from financial institutions which provided financing to our online ride-hailing driver customers for the purchase of automobileshas not been obtained for us to sublease or sell the drivers’ automobiles.As described in the section titled “Business” above, as of March 31, 2023, approximately 108 online ride-hailing drivers in Changsha and over1,200 online ride-hailing drivers in Chengdu exited the online ride-hailing business and rendered their purchased automobile to Hunan Ruixi andJinkailong for sublease or sales in order to offset monthly payment owed to Hunan Ruixi and Jinkailong and the financial institutions. TheirFinancing Agreements with the financial institutions are still valid and in effect. Pursuant to the Financing Agreements, the right of the automobilecollateral to the financial institution belongs to the financial institution and without their consent, we may not dispose of, use, or take possession ofthose automobiles. To prevent the default in payments to the financial institutions and us, the drivers authorized us orally or in writing to subleaseor sell the automobiles to other parties, and use the cash generated from the sublease or sales to cover the monthly installment payments to thefinancial institution and the monthly installment service fees as well as the automobile registration related fees that we previously advanced duringthe remaining original lease terms to us. As prior consent from the financial institutions have not been obtained, the financial institutions mayrequire us to stop sublease and return the automobiles immediately. We may also be required to pay penalties to the financial institutions. Althoughwe have not received any demand from any financial institution to stop the sublease practice, there is no assurance that future demand to stop suchpractice may not come along; if so, we may experience economic loss and reputation damage as a result.If we are unable to repossess the car collateral for delinquent financing payments of the automobile purchasers referred by us or do so in acost-effective manner or if our ability to collect delinquent financing payments is impaired, our business and results of operations would bematerially and adversely affected. We may also be subject to risks relating to third-party debt collection service providers whom we engage forthe recovery and collection of loans.Under most of the Financing Agreements between the automobile purchasers and third-party financing partners, Hunan Ruixi and Jinkailongguarantee the lease/loan payments including principal and the accrued and unpaid interest for the automobile purchase funded by these financingpartners. Therefore, failure to collect lease/loan payments or to repossess the collateral may have a material adverse effect on our businessoperations and financial positions. Although the lease/loan payments are secured by the cars, we may not be able to repossess the car collateralwhen our customers default. Our measures to track the cars include installing GPS trackers on cars. We cannot assure you that we will be able tosuccessfully locate and recover the car collateral. We have in the past failed to repossess one car as the GPS trackers failed to function properly orhad been disabled, and we cannot assure you that this incident will not happen again the future. We also cannot assure you that there will not beregulatory changes that prohibit the installation of GPS trackers, or theTable of Contents42realized value of the repossessed cars will be sufficient to cover our customers’ payment obligations. If we cannot repossess some of these cars orthe residual values of the repossessed cars are lower than we expected and not sufficient to cover the automobile purchaser’ payment obligation,our business, results of operations and financial condition may be materially and adversely affected.Moreover, the current regulatory regime for debt collection in the PRC remains unclear. We aim to ensure our collection efforts carried out byour asset management department comply with the relevant laws and regulations in the PRC. However, if our collection methods are viewed by theautomobile purchasers or regulatory authorities as harassments, threats or other illegal means, we may be subject to risks relating to our collectionpractice, including lawsuits initiated by the borrowers or prohibition from using certain collection methods by the regulatory authorities. Anyperception that our collection practices are aggressive and not compliant with the relevant laws and regulations in the PRC may result in harm toour reputation and business, decrease in the willingness of prospective customers to apply for and utilize our service, or fines and penaltiesimposed by the relevant regulatory authorities, any of which may have a material adverse effect on our business, financial condition and results ofoperations.We are exposed to credit risk in our auto financing and prior auto financing facilitation businesses. Our current risk management system maynot be able to accurately assess and mitigate all risks to which we are exposed, including credit risk.We are exposed to credit risk as Hunan Ruixi and Jinkailong provide automobile financing to automobile purchasers and are required toprovide guarantees to most of their financing partners on the financing for automobile purchases facilitated by them in prior years. As of March 31,2023, the maximum contingent liabilities we and our equity investee company, Jinkailong would be exposed to was approximately $10,000 and$3.9 million, respectively, assuming all the automobile purchasers were in default. As Hunan Ruixi holds 35% of equity interest of Jinkailong andhas not made any consideration towards to the investment, Hunan Ruixi will subject to the maximum amount of RMB3.5 million (approximately$570,000) of which is equivalent to 35% of liabilities in case Jinkailong is liquidated in accordance with PRC’s company registry compliance. Forthe year ended March 31, 2023, we recognized estimated provisions loss of approximately $7,000 for the guarantee services as a result of defaultby the automobile purchasers. Customers may default on their lease/loan payments for a number of reasons including those outside of their or ourcontrol. The credit risk may be exacerbated in automobile financing due to the relatively limited credit history and other available information ofmany consumers in China. If we experience a widespread default by our automobile purchasers/lessees, our cash flow and results of operationswill be materially and adversely affected. As a consequence, we could face shortfalls in liquidity without extra financing resources for theforeseeable future and lose the ability to grow our business or may even be required to scale down or restructure our operations.We are required to obtain licenses and permits related to financing and lending in China for our business operations, and we may not be ableto obtain or maintain such licenses or permits.We may be deemed to operate financing guarantee business by the PRC regulatory authorities. Under certain arrangements in the services,Hunan Ruixi and Jinkailong provide guarantees to their customers who applied for financing in prior years with certain of their financing partners.In August 2017, the PRC State Council promulgated the Regulations on the Administration of Financing Guarantee Companies (the “FinancingGuarantee Rules”), which became effective on October 1, 2017. Pursuant to the Financing Guarantee Rules, “financing guarantee” refers to theactivities in which guarantors provide guarantee to the guaranteed parties as to loans, bonds or other types of debt financing, and “financingguarantee companies” refer to companies legally established and operating financing guarantee business. According to the Financing GuaranteeRules, the establishment of financing guarantee companies are subject to the approval by the relevant governmental authority, and unless otherwisestipulated, no entity may operate financing guarantee business without such approval.We do not believe that the Financing Guarantee Rules apply to our prior car financing facilitation business as we provide guarantees to ourfinancing partners in connection with the financing of the purchase of automobiles and such guarantees are not provided independently as ourprincipal business. However, due to the lack of further interpretations, the exact definition and scope of “operating financing guarantee business”under the Financing Guarantee Rules is unclear. It is uncertain whether we would be deemed to operate financing guarantee business in violationof relevant PRC laws or regulations because of our current arrangements with certain financial institutions. If the relevant regulatory authoritiesdetermine that we are operating financing guarantee business, we may be required to obtain approval or license for financing guarantee business tocontinue our collaboration arrangement with certain financial institutions.In addition, based on our business model, we prepaid the purchase price of automobiles and all service related expenses and collect theadvance payment (without any interest) through monthly installment payments from the automobile purchaser.Table of Contents43Pursuant to Provisions on Several Questions Concerning the Application of Law in the Trial of Private Lending Cases released by theSupreme People’s Court in June 2015, private lending refers to the act of financing between natural persons, legal persons and other organizationsand among them. According to the Approval on How to Confirm the Effectiveness of Lending Behavior between Citizens and Enterprises issuedby the PRC Supreme People’s Court in 1999, the private lending refers to the lending between citizens and non-financial enterprises (hereinafterreferred to as enterprises). As long as all parties’ declaration of intention is true, it can be recognized as valid (the “Private Lending Rules”).We do not believe that the Private Lending Rules apply to our automobile purchase services business as we need to pay in advance to differentsuppliers to complete our services such as preparation of financing application materials, assistance with closing of financing transactions, licenseand plate registration, payment of taxes and fees, purchase of insurance, installment of GPS devices, ride-hailing driver qualification and otheradministrative procedures. We have no intention to lend money to and gain interest from automobile purchasers. We collect payments in a periodlonger than 12 months based on current product designs.However, it is uncertain whether we would be deemed to operate private lending business in violation of relevant PRC laws or regulationsbecause we prepay on behalf of automobile purchasers and collect payments over a period of more than 12 months. If the relevant regulatoryauthorities determine that we are operating private lending business, we may be penalized for engaging in businesses out of the scope of ourbusiness license. Pursuant to the Regulations on the Registration of Enterprise Legal Persons, we may be given warnings, fined, confiscated ofillegal income, required to suspension and rectification, or our business license might be withheld and revoked by relevant regulatory authorities.Consequently, we may be required to obtain approval or license for financing business to continue our current collection method of payments.If we are no longer able to maintain our current collection method of payments, or become subject to penalties, our business, financial condition,results of operations and prospects could be materially and adversely affected.Our failure to lease cars that we purchased from dealers or leased from other automobile rental companies with a satisfied utilization mayhave a material and adverse effect on our business, financial condition and results of operations.In January 2019, we started to purchase automobiles from automotive dealers for sales. As we shifted our business focus to automobile rentalsince March 2020, we purchase and lease automobiles mainly for operating lease during the year ended March 31, 2023. We primarily purchase orlease automobile models that are reliable, affordable and based on the local regulation requirement of the automobiles used for online ride-hailing,feedback from and market analysis as to perception and demand for such models, and that will appeal to lessees in lower-tier cities. We adopt astable pricing formula, considering the historical and future expenditure, remaining available leasing months and market price to determine ourrental price for various rental solutions. During the year ended March 31, 2023, our average utilization of the automobiles for operating lease,including the ones operated by Jinkailong, was approximately 64.9%, as compared with 56.3% in the year ended March 31, 2022. However, wehave limited experience in the operating lease of automobiles, and there is no assurance that we will be able to do so effectively and the utilizationof automobiles held for operating lease is satisfied to generate sufficient profit and cash. Demand for the automobiles that we purchase or lease canchange significantly between the time the automobiles are purchased and the date of sale or lease. Demand may be affected by new automobilelaunches, changes in the pricing of such automobiles, market conditions for the online ride-hailing, defects, changes in consumer preference andother factors, and dealers may not purchase them in the quantities that we expect. We may also need to adopt more aggressive pricing strategies forthese cars than originally anticipated. We also face inventory risk in connection with the automobiles purchased, including the risk of inventoryobsolescence, a decline in values, and significant inventory write-downs or write-offs. If we were to adopt more aggressive pricing strategies, ourprofit margin may be negatively affected as well. We may also face increasing costs associated with the storage of these automobiles. Any of theabove may materially and adversely affect our financial condition and results of operations.If data provided by automobile lessees and other third-party sources or collected by us are inaccurate, incomplete or fraudulent, the accuracyof our credit assessment could be compromised, customer trust in us could decline, and our business, financial position and results ofoperations would be harmed.China’s credit infrastructure is still at an early stage of development. The Credit Reference Center established by the PBOC in 2002 has beenthe only credit reporting system in China. This centrally managed nationwide credit database operated by the Credit Reference Center only recordslimited credit information, such as tax payments, civil lawsuits, foreclosures and bankruptcies. Moreover, this credit database is only accessible tobanks and a limited number of market players authorized by the Credit Reference Center and does not support sophisticated credit scoring andassessment. In 2015, the PBOC announced that it would open the credit reporting market toTable of Contents44private sectors with a view to spurring competition and innovation, but it may be a long-term process to establish a widely-applicable, reliable andsophisticated credit infrastructure in the market we operate.For the purpose of credit assessment, we obtain credit information from prospective customers, including online ride-hailing drivers,automobile lessees, and with their authorization, obtain credit data from external parties to assess applicants’ creditworthiness. We may not be ableto source credit data from such external parties at a reasonable cost or at all. Such credit data may have limitations in measuring prospectiveautomobile purchasers’ creditworthiness. If there is an adverse change in the economic condition, credit data provided by external parties may nolonger be a reliable reference to assess an applicant’s creditworthiness, which may compromise our risk management capabilities. As a result, ourassessment of an automobile purchaser’s credit profile may not reflect that particular car buyer’s actual creditworthiness because assessment maybe based on outdated, incomplete or inaccurate information.To the extent that our customers provide inaccurate or fraudulent information to us, or the data provided by third-party sources is outdated,inaccurate or incomplete, our credit evaluation may not accurately reflect the associated credit risks of automobile purchasers. Among other things,we rely on data from external sources, such as the personal credit report from PBOC. These checks may fail and fraud may occur as we may fail todiscover or reveal fake documents or identities used by fraudulent automobile purchasers. Additionally, once we have obtained an automobilepurchaser’s information, the automobile purchaser may subsequently (i) become delinquent in the payment of an outstanding obligation; (ii)default on a pre-existing debt obligation; (iii) take on additional debt; or (iv) experience other adverse financial events, making the information wepreviously obtained inaccurate. We also collect car collateral location data by installing GPS trackers for lease/loan payment monitoring purposes.The location data we collected may not be accurate. As a result, our ability to repossess the car collateral could be severely impaired. If we areunable to collect the lease/loan payments we facilitated or repossess the car collateral due to inaccurate or fraudulent information, our results ofoperations and profitability would be harmed.We may be subject to product liability claims if people or property are harmed by vehicles purchased through us.Vehicles purchased through us may be defectively designed or manufactured. As a result, we may be exposed to product liability claimsrelating to personal injury or property damage. Third parties subject to such injury or damage may bring claims or legal proceedings against usbecause we facilitate the financing/purchase of the product. Although we would have legal recourse against the automobile manufacturers ordealers under PRC law, attempting to enforce our rights against the automobile manufacturers or dealers may be expensive, time-consuming andultimately futile. We currently maintain valid third-party liability insurance and product liability insurance in relation to vehicles purchasedthrough us, and also ensure that appropriate insurances have covered automobiles leased from rental companies. As a result, any material productliability claim or litigation could have a material and adverse effect on our business, financial condition and results of operations. Evenunsuccessful claims could result in the expenditure of funds and managerial efforts in defending them and could have a negative impact on ourreputation.If our safety system fails to ensure user safety while using our online ride-hailing platform, our business, results of operations and financialcondition could be materially and adversely affected.According to the Emergency Notice on Further Strengthening the Safety Management of Online Reservation of Taxis and Carpooling ofPrivate Vehicles jointly promulgated by the General Office of the MOT and the General Office of the PRC Ministry of Public Security onSeptember 10, 2018, online ride-hailing platforms shall carry out background checks on all online ride-hailing drivers according to relevantrequirements of taxi driver background check and supervision.We are in the process of improving a safety system to build up trust among our users and ensure the safety level, including conductingbackground checks to screen our potential online ride-hailing drivers and their vehicles to identify those that are not qualified to utilize ourplatform pursuant to applicable laws and regulations or our internal standards. We have also established a 24/7 emergency response mechanism todeal with emergency safety issues. Gaode Maps, Meituan and other online ride-hailing platforms also have various safety measures through mobileapps, such as one-button emergency calls, to protect riders during the trips.We cannot assure you, however, that our own safety system and the safety measures of our cooperated platforms will always meet ourexpectations or the requirements under applicable laws and regulations, and that we will always be able to filter out unqualified online ride-hailingdrivers or timely respond to and deal with emergency matters. We may also fail to effectively control the behaviors of these drivers, or cause themto fully comply with our platform policies and standards. Any negative publicity resulting from any failures, mistakes or omissions of our safetysystem, including any safety incidents or data security breaches, could materially and adversely affect our reputation and brand, and couldpotentially lead to increased regulatory or litigation exposure. We also take measures to help increase safety, prevent privacy and security breaches,and protect against fraud which may make our platform less convenientTable of Contents45or accessible for some drivers and discourage or diminish their use of our platform. Any reduction in the number or availability of drivers wouldlikely lead to a reduction in platform usage by consumers, which in turn would make our platform less attractive to drivers. Any decline in thenumber of drivers or consumers using our platform would reduce the value of our network and would harm our future results of operations. If oursafety system fails to ensure user safety while using our platform, our business, results of operations and financial condition could be materiallyand adversely affected.We may be considered as conducting payment services as a non-financial institution without a Payment Business Permit.Gaode Maps settles payments to XXTX’s accounts in Alipay once a week. Meituan and other online ride-hailing platforms settles payments toaccounts of Auto Business Entities in Alipay or Qiandaibao once a week or a month. In general, after deducting service fees of these platforms, theremaining amounts, including the earnings of the drivers and our service fees, are transferred to those accounts in Alipay, Qiandaibao or otherbanks. Then we settle the payments with the online ride-hailing drivers we served.According to the Measures for the Administration of Payment Services of Non-Financial Institutions which were promulgated by the PRCgovernment on June 14, 2010, effective on September 1, 2010 and amended on April 29, 2020, non-financial institutions are required to obtain apayment business permit (the “Payment Business Permit”) to provide payment services. Neither non-financial institutions nor individuals ispermitted to engage in any form of payment business without the approval of the Chines government, including payment through the Internet.The relevant PRC rules and regulations lack clear guidance as to what practice or process constitutes payment or settlement services without aPayment Business Permit. Therefore, there is a risk that our settlement practice may cause us to be deemed as engaging in payment and settlementservices without a license. As of the date of this Report, to our knowledge, we were not required by the relevant regulatory authorities to obtain thePayment Business Permit for our past settlement practice, nor have we received any penalty in connection with any purported operations ofpayment and settlement services without a Payment Business Permit or otherwise in violation of the above-described rules and regulations. If weencounter issues in this regard, we will consider engaging a licensed commercial bank to escrow our bank account and manage the prepaymentsreceived from our enterprise users and refund balances attributable to our individual users. However, we cannot assure you that our cooperationwith a commercial bank in this regard would completely address the payment-related risk or such cooperation would suffice for all of our presentor future businesses. In addition, the settlement services provided by licensed third-parties and financial institutions are subject to various rules andregulations, which may be amended or reinterpreted to encompass additional requirements. In response to that, we may have to adjust ourcooperation with such licensed commercial bank or any other financial institutions and may thus incur higher transaction and compliance costs.Any of the circumstances would have a material and adverse effect on our business, results of operations and financial condition.If we fail to cost-effectively attract and retain online ride-hailing drivers, or to increase utilization of our platform by existing users, ourbusiness, results of operations and financial condition could be materially and adversely affected.The growth of our online ride-hailing platform depends in part on our ability to cost-effectively attract and retain online ride-hailing driverswho satisfy our screening criteria and procedures, and to increase their utilization of our platform. To attract and retain qualified drivers, we have,among other things, offered incentives for drivers. We have experienced and expect to continue to experience ride-hailing drivers shortage incertain geographic markets in which we operate. To the extent that we experience ride-hailing drivers shortage in a given market, we may need toincrease or may not be able to reduce the driver incentives that we offer without adversely affecting the liquidity network effect that we experiencein that market, which would have adverse impact on our financial performance.We believe that our sales and marketing initiatives is promoting awareness of our offerings, which in turn drives the growth of our driver pooland the utilization rate of our marketplace. However, we may fail to retain and attract qualified online ride-hailing drivers due to a number ofreasons, such as our lack of brand recognition and reputation or our failure to provide subsidies that are comparable or superior to those of ourcompetitors. Other factors beyond of our control, such as laws and regulations limiting in the markets in which we operate, vehicles or insurance,and the vehicle quantity control of PRC government, may also reduce the number of Active Drivers on our platform or their utilization of ouronline ride-hailing platform. However, the increasing number of online ride-hailing drivers in the market may cause the decrease of averageincome of each driver, which, in return would make our platform, or the whole industry less attractive to drivers. For example, according to theMOT of the People’s Republic of China, the total volume of online ride-hailing orders was approximately 735 million in May 2023 as comparedwith 706 in April 2023 and 527 million in May 2022. Considering the number of online ride-hailing drivers are keep increasing while theconsumer demand has no significant increase in current months in China, the MOT of certain cities, such as Changsha, Sanya has suspendedissuing new online booking taxi transportation certificates and transport certificates since April and May 2023 accordingly. In addition, changes indriver qualificationTable of Contents46and background check requirements may increase our costs and reduce our ability to onboard additional drivers to our platform. Our driverqualification and background check procedure varies by jurisdiction. Any changes in the legal requirements for the qualification, screening, andbackground check procedure could reduce the number of drivers in those markets or extend the time required to recruit new drivers to ourplatform, which would adversely impact our business and growth.Our failure to continuously attract and retain Active Drives and to increase utilization of our online ride-hailing platform in a cost-effectiveway would impair the network effect of our platform, which would in turn materially and adversely affect our business, results of operations andfinancial condition.Changes to pricing for our online ride-hailing services could materially and adversely affect our ability to attract or retain riders and qualifieddrivers.Demand for our online ride-hailing services is sensitive to ride fares, which takes into consideration, among other things, incentives paid toonline ride-hailing drivers and our service fees. Our pricing strategies could be affected by a number of factors, including operating costs, legal andregulatory requirements or constraints, our current and future competitors’ pricing and marketing strategies, the principal requirement of pricingmodel of our cooperated platforms, and the perception of ride fares as a non-compensatory sharing of travel cost by online ride-hailing drivers.Some competitors offer, or may in the future offer, lower-priced services. Similarly, some competitors may use marketing strategies to attract orretain riders and qualified online ride-hailing drivers at lower costs than us. Certain competitors may also attract and retain riders and qualifiedonline ride-hailing drivers with significant subsidies. As such, we may be forced by competition, regulation or other reasons to reduce ride faresand service fees, increase incentives we pay to online ride-hailing drivers on our platform, reduce our service fees, or to increase our marketing andother expenses. Furthermore, our users’ price sensitivity may vary by geographic locations, and as we expand, our pricing methodologies may notenable us to compete effectively in these locations. We may launch new pricing strategies and initiatives, or modify existing pricingmethodologies, any of which may not ultimately be successful in attracting and retaining riders and qualified online ride-hailing drivers.Any significant disruption in our IT systems, including service on our online ride-hailing platform, malfunctions of our technology systems,errors and quality issues in our software, hardware and systems, or human errors in operating these systems, could materially and adverselyaffect our business, results of operation and financial condition.Our businesses are dependent on the ability of our information technology systems to process massive amounts of information andtransactions in a consistently stable and timely manner. Our information technology infrastructure for our online ride-hailing business in Hangzhouis hosted by third-party service providers. Our IT systems infrastructure is currently deployed, and our data is currently maintained through acustomized cloud computing system. Our servers are housed at third-party data centers, and our operations depend on the service providers’ abilityto protect our systems in their facilities as well as their own systems against damage or interruption from natural disasters, power ortelecommunications failures, air quality issues, environmental conditions, computer viruses or attempts to harm our systems, criminal acts andsimilar events, many of which may be beyond our control. Many of our mobile applications are also provided through third-party app stores andany disruptions to the services of these app stores may negatively affect the delivery of our mobile applications to users. If our arrangement withthe current host is terminated, or there is a lapse of service or damage to the host’s facilities, we could experience interruptions in our service aswell as delays and incur additional expenses in arranging new facilities. In the event of a system outage, malfunction or data loss, our ability toprovide services would be materially and adversely affected. In addition, a prolonged failure of our information technology system could damageour reputation and materially and adversely affect our prospects and profitability.We may continue to experience, system failures and other events or conditions from time to time that interrupt the availability or reduce oraffect the speed or functionality of our offerings. These events could result in material losses of revenue. A prolonged interruption in theavailability or reduction in the availability, speed or other functionality of our services could adversely affect our business and reputation and couldresult in the loss of users. Also, our software, hardware and systems may contain undetected errors, which could have a material adverse impact onour online ride-hailing business, particularly where such errors are not timely detected and remedied. In addition, our platform and services usecomplex software, and may have coding defects or errors that may impair our users’ ability to use our platform and services. The models andalgorithms that we use for our platform and services may also contain design or performance defects that are not detectable even after extensiveinternal testing. We cannot assure you that we would be able to detect and resolve all such defects and issues through our quality control measures.The satisfactory performance, reliability and availability of our technology and our underlying network infrastructure are critical to our operations,user service, reputation and our ability to attract new and retain existing car buyers and financial institutions.Table of Contents47Any errors, defects and disruptions in services, or other performance problems with our online ride-hailing platform and other services,whether as a result of third-party error, our error, natural disasters or security breaches, whether accidental or willful, could hurt our reputation,affect user experience or cause economic loss or other types of damage to our users. Software and system errors or human errors could delay orinhibit order dispatching, matching of users, route calculation, settlement of payments, and reporting of errors, or prevent us from collectingservice fees or providing services. We may not have sufficient capacity to recover all data and services lost in the event of an outage. These factorscould prevent us from processing information and other business operations, damage our brands and reputation, divert our employees’ attention,reduce our revenue, subject us to liability and cause car buyers and financial institutions to abandon our solutions and services, any of which couldadversely affect our business, financial condition and results of operations. In addition, if we fail to adopt new technologies or adapt our mobileapps, websites and systems to changing user preferences or emerging industry standards, our business and prospects may be materially andadversely affected.If we fail to obtain and maintain the requisite licenses and approvals required for our online ride-hailing business, or if we are required to takecompliance actions that are time-consuming or costly, our business, results of operations and financial condition may be materially andadversely affected.As of the date of this Report, we believe we have obtained all licenses and permits and made all necessary filings that are essential to theoperation of our online ride-hailing platform, many of which are generally subject to regular PRC government review or renewal. However, wecannot assure you that we can successfully update or renew the licenses required for our business in a timely manner or that these licenses aresufficient to conduct all of our present or future business. If the relevant authorities determine that our platform has not obtained the requisitelicenses or our operations are not in compliance with the relevant regulations, we may be required to suspend our operations, which may causesignificant loss of our users and materially and adversely affect our business, results of operations and financial condition. If we fail to complete,obtain or maintain any of the required licenses or approvals or make the necessary filings, we may be subject to various activities, including theimposition of fines and the discontinuation or restriction of our operations. Any such penalties may disrupt our business operations and materiallyand adversely affect our business, results of operations and financial condition.We rely primarily on a third-party insurance policy to insure our auto-related risks relating to our online ride-hailing platform services. If ourinsurance coverage is insufficient for the needs of our business or our insurance providers are unable to meet their obligations, we may not beable to mitigate the risks facing our business, which could adversely affect our business, results of operations and financial condition.We may become subject to claims arising primarily from our online ride-hailing platform services and automobile operating leasing forautomobile-related incidents, including bodily injury, property damage and uninsured and underinsured liability. If we are held liable to theseautomobile-related claims under court orders and the amounts exceed our applicable aggregate coverage limits, we would bear the excess, inaddition to amounts already incurred in connection with deductibles or otherwise paid by our insurance provider. Insurance providers maycontinue to raise premiums and deductibles in the future. As a result, our insurance and claims expenses could increase, or we may decide to raiseour deductibles when our policies are renewed or replaced. Our business, results of operations and financial condition could be adversely affectedif cost per claim, premiums or the number of claims significantly exceeds our historical experience and coverage limits, we experience a claim inexcess of our coverage limits, our insurance providers fail to pay on our insurance claims, we experience a claim for which coverage is notprovided, or the number of claims under our deductibles differs from historic averages.Our business would be adversely affected if drivers were classified as employees, workers or quasi-employees.The classification of drivers is currently being challenged in courts, by legislators and by government agencies in a number of jurisdictions.We may become involved in legal proceedings, including lawsuits, demands for arbitration, charges and claims before administrative agencies, andinvestigations or audits by labor, social security, and tax authorities that claim that drivers should be treated as our employees (or as workers orquasi-employees where those statuses exist), rather than as independent contractors. We generally treat drivers as independent contractors.However, we may not be successful in defending the classification of drivers in some or all jurisdictions where it is challenged. Furthermore, thecosts associated with defending, settling, or resolving pending and future lawsuits (including demands for arbitration) relating to the classificationof drivers have been and may continue to be material to our business. In addition, even if we prevail under current law, the process can be time-consuming and cost-inefficient. The law may also be changed in the future in ways that are unfavorable to us. Reclassification of drivers asemployees, workers or quasi-employees where those statuses exist could require us to fundamentally change our business model, withrepercussions that are difficult to anticipate. Among other things, reclassification could subject us to vicarious liability for any misconduct ofdrivers, require us to pay them wages, makeTable of Contents48social insurance contributions or provide other benefits, or reduce our attractiveness to drivers given the loss of flexibility under an employeemodel.In December 2021, media reported that China plans to amend laws to allow ride-hailing drivers and food delivery workers to form unions.Unions of ride-hailing drivers and food delivery worker in China may complicate our relationship with them and our supply of drivers may beaffected adversely.Reclassification could also impact our current financial statement presentation, including the calculation of our revenues, cost of revenues andexpenses, as further described in our significant and critical accounting policies in Note 3 to our consolidated financial statements.We rely on third-party payment processors to process payments made by our business partners and payments made to private car owners andtaxi drivers on our platform, and if we cannot manage our relationships with such third parties and other payment-related risks, our business,results of operations and financial condition could be adversely affected.We rely on third-party payment processors, such as Alipay and Qiandaibao, and rarely, commercial banks, to process payments made by ourbusiness partners and payments made to online ride-hailing drivers on our platform. If any of our third-party payment processors terminates itsrelationship with us or refuses to renew its agreement with us on commercially reasonable terms, we would need to find an alternative paymentprocessor, and may not be able to secure similar terms or replace such payment processor in an agreeable timeframe. Further, the software andservices provided by our third-party payment processors may fail to meet our expectations, contain errors or vulnerabilities, encounter disruptionor compromise, or experience outages. Our third-party payment processors may also be penalized or suspended if they fail to protect personalinformation in compliance with relevant laws and regulations. Any of these risks could cause us to lose our ability to accept online payments orother payment transactions or make timely payments to private car owners and taxi drivers on our platform, any of which could make our platformless convenient and attractive to users and adversely affect our ability to attract and retain users.We may in the future offer new payment options to users that may be subject to additional regulations and risks. We are also subject to anumber of other laws and regulations relating to the payments we accept from our business partners, including with respect to money laundering,money transfers, privacy and information security. If we fail to comply with applicable rules and regulations, we may be subject to civil or criminalpenalties, fines or higher transaction fees and may lose our ability to accept online payments or other payment card transactions, which could makeour services less convenient and attractive to our users. If any of these events occurs, our business, results of operations and financial conditioncould be adversely affected.We depend on the ability of our online ride-hailing platform to operate across third-party applications and platforms that we do not control.In connection with our online ride-hailing business, we have integrations with Gaode Maps, Meituan, Alipay, Qiandaibao and other third-partyservice providers. As our online ride-hailing services expand and evolve, we may have an increasing number of integrations with third-partyapplications, products and services. Third party applications, products and services are constantly evolving, and we may not be able to maintain ormodify our platform to ensure its compatibility with third-party offerings following such changes. In addition, some of our competitors ortechnology partners may take actions which disrupt the interoperability of our platform with their own products or services, or exert strongbusiness influence on our ability to and the terms on which we operate and distribute our platform. As our online ride-hailing services continue toevolve, we expect the types and levels of competition to increase. Should any of our competitors or technology partners modify their products,standards or terms of use in a manner that degrades the functionality or performance of our platform or gives preferential treatment to competitiveproducts or services or is otherwise disadvantageous to us, our business, results of operations and financial condition could be materially andadversely affected.Government policies on automobile purchases and usage in the online ride-hailing industry may materially affect our results of operations.Government policies on automobile purchases and ownership may have a material effect on our business due to their influence on consumerbehaviors. Since 2009, the PRC government has changed the purchase tax on automobiles with 1.6 liter or smaller engines several times. Inaddition, in August 2014, several PRC governmental authorities jointly announced that from September 2014 to December 2017, purchases ofNEVs designated on certain catalogs will be exempted from the purchase taxes. In April 2015, several PRC governmental authorities also jointlyannounced that from 2016 to 2020, NEV purchasers designated on certain catalogs will enjoyTable of Contents49subsidies. In December 2016, relevant PRC governmental authorities further adjusted the subsidy policy for NEVs. On March 26, 2019, the PRCgovernmental authorities updated government subsidy policy for NEVs which raises the threshold for the subsidy and reduces the amount ofsubsidies. On April 23, 2020, relevant PRC governmental authorities issue a notice, amongst others, that the subsidy policy for NEVs will beextended to the end of 2022, while the amount of subsidies will be reduced year by year. According to a notice effective from January 1, 2021, thesubsidies will be declined by 20% on 2020’s basis. On March 24, 2021, Chengdu Ecological Environment Bureau issued the Action Plan forPrevention and Control of Air Pollution in Chengdu in 2021, pursuant to which, all the new cars (including the replaced ones) used for online ride-hailing should be NEVs or hydrogen fuel cell vehicles. Pursuant to the Action Plan for Prevention and Control of Air Pollution in Chengdu in 2022issued on March 23, 2022, the whole city shall strive to ensure bus and cars used for online ride-hailing be NEVs. On August 21, 2018, GeneralOffice of Changsha Municipal People’s Government issued the Provisional Detailed Rules of the Implementation Rules for the Administration ofOnline Booking Taxi Management Services for Changsha, pursuant to which, the company who operates online ride-hailing platform shall givepriority to the use of NEVs, and the number of NEVs put into operation shall not be less than 30%. On April 7, 2021, General Office of ChangshaMunicipal People’s Government issued the Three-year Action Plan of Blue Sky Defense for Changsha, pursuant to which, at least 50% of the newcars used for online ride-hailing should be NEVs or hydrogen fuel cell vehicles at the end of calendar year 2023.We have been developing strategic collaboration with BYD, a leading NEV manufacturer in China, and other automobile rental companieswho are able to lease us qualified NEVs. As we witness the emergence of NEVs in the automotive industry, as well as the online ride-hailingindustry, as the next-generation trend, we have consistently focused on strengthening our cooperation with leading NEV manufacturers to obtainsufficient NEVs with favorable terms for our businesses. However, we cannot ensure we are able to retain long-term stable cooperativerelationships with these NEVs companies. Our business growth will be hindered and our results of operations and financial condition will suffer ifwe could not obtain considerable resources for our business expansions.Besides, we cannot predict whether government subsidies will remain in the future or whether similar incentives will be introduced, and ifthey are, their impact on automobile retail transactions in China. It is possible that automobile retail transactions may decline significantly uponexpiration of the existing government subsidies if consumers have become used to such incentives and delay purchase decisions in the absence ofnew incentives. If automobile retail transactions indeed decline, our revenues may fluctuate and our results of operations may be materially andadversely affected.Our business is subject to laws, regulations and regulatory policies that are being continuously amended and improved, and the interpretationand implementation of newly established policies may remain uncertain, which could have an adverse impact on our business and futureprospects.As of March 31, 2023, our business are available in 26 cities in China. As the online ride-hailing industry is still at a relatively early stage ofdevelopment, new laws and regulations may be adopted from time to time to address new issues that come to the authorities’ attention. In addition,considerable uncertainties still exist with respect to the interpretation and implementation of existing laws and regulations governing our businessactivities. For example, we generally treat drivers as independent contractors, but that determination may be challenged. See “Risks—Our businesswould be adversely affected if drivers were classified as employees, workers or quasi-employees”. A large number of proposals are before variousregional, and local legislative bodies and regulatory entities regarding issues related to our industry or our business model. As of March 31, 2023,we had not been subject to any material fines or other penalties under any PRC laws or regulations as to our business operations. As we expandinto new cities or as we add new products and services to our platform, we may become subject to additional laws and regulations that we are notsubject to now. However, if the PRC government tightens regulatory for industries our business been involved in the future, and subject industryparticipants to new or specific requirements (including without limitation, capital requirements and licensing requirements), our business, financialcondition and prospects would be materially and adversely affected. Meanwhile, compliance with existing and future rules, laws and regulationscan be costly and if our practice is deemed to violate any existing or future rules, laws and regulations, it may face injunctions, including orders tocease non-compliant activities, and may be exposed to other penalties as determined by the relevant government authorities as well.Table of Contents50Our business is subject to risks related to China’s automobile leasing and financing industry, including industry-wide and macroeconomicrisks.We operate in China’s automobile leasing and financing industry. We cannot assure you that this market will continue to grow rapidly in thefuture. Further, the growth of China’s automobile leasing and financing industry could be affected by many factors, including:●general economic conditions in China and around the world;●the impact by public health epidemics, including epidemic prevention policies in China on the industries we operate in and our business,results of operations and financial condition●the growth of disposable household income and the availability and cost of credit available to finance car purchases and lease;●the growth of China’s automobile industry;●taxes and other incentives or disincentives related to NEV purchases and ownership;●environmental concerns and measures taken to address these concerns;●the cost of energy, including gasoline prices, and the cost of car license plates in various cities with license plate lottery or auction systems inChina;●the improvement of the highway system and availability of parking facilities;●other government policies relating to automobile leasing and financing in China;●fluctuations in the sales and price of new and used cars;●consumer acceptance of financing car purchases;●changes in demographics and preferences of car purchasers;●ride sharing, transportation networks, and other fundamental changes in transportation pattern; and●other industry-wide issues, including supply and demand for cars and supply chain challenges.Any adverse change to these factors could reduce demand for used cars and hence demand for our services, and our results of operations andfinancial condition could be materially and adversely affected.We have incurred net losses and may continue to incur net losses in the future.We had net losses from our continuing operations of $3,790,693 and $5,606,145 in the years ended March 31, 2023 and 2022, respectively.We had net loss from our discontinued operations of $2,747,209 for the year ended March 31, 2022. We may continue to incur losses in the future.We anticipate that our operating expenses will increase in the foreseeable future as we seek to continue to grow our business, attract morecustomers and further enhance and develop our businesses. These efforts may prove more expensive than we currently anticipate, and we may notsucceed in increasing our revenue sufficiently to offset these higher expenses. Our net revenue growth may slow, our net income margins maydecline or we may incur additional net losses in the future and may not be able to achieve and maintain profitability on a quarterly or annual basis.In addition, our net revenue growth rate will likely decline as our net revenue grows to higher levels.Our operations depend on the performance of the internet infrastructure and fixed telecommunications networks in China.Almost all access to the internet in China is maintained through state-owned telecommunication operators under the administrative control andregulatory supervision of the MIIT. We primarily rely on a limited number of telecommunication service providers to provide us with datacommunications capacity through local telecommunications lines and internet data centers to host our servers. WeTable of Contents51have limited access to alternative networks or services in the event of disruptions, failures or other problems with China’s internet infrastructure orthe fixed telecommunications networks provided by telecommunication service providers. With the expansion of our business, we may be requiredto upgrade our technology and infrastructure to keep up with the requirements of our operations. We cannot assure you that the internetinfrastructure and the fixed telecommunications networks in China will be able to support the demands associated with the continued growth ininternet usage.In addition, we have no control over the costs of the services provided by telecommunication service providers. If the prices we pay fortelecommunications and internet services rise significantly, our results of operations may be adversely affected. Furthermore, if internet access feesor other charges to internet users increase, our user traffic may decline and our business may be harmed.We have identified material weaknesses in our internal control over financial reporting. If we fail to develop and maintain an effective systemof internal control over financial reporting, we may be unable to accurately report our financial results or prevent fraud.In connection with the audit of our consolidated financial statements for the year ended March 31, 2023, we have identified “materialweaknesses” and other control deficiencies including significant deficiencies in our internal control over financial reporting. As defined in thestandards established by the Public Company Accounting Oversight Board of the United States (the “PCAOB”), a “material weakness” is adeficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a materialmisstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.The material weaknesses that have been identified include: (i) insufficient personnel with appropriate levels of accounting knowledge andexperience to address complex U.S. GAAP accounting issues and to prepare and review financial statements and related disclosures under U.S.GAAP; (ii) be lacking adequate policies and procedures in internal audit function to ensure that our policies and procedures have been carried outas planned; and (iii) had deficiencies in our IT general control regarding to the Logical Access Security, Change Management, IT Operations andCybersecurity of our financial system and key application system.We have implemented, and will continue to implement, measures designed to improve our internal control over financial reporting andremediate the control deficiencies that led to these material weaknesses. We plan to (i) continuously hire additional accounting staffs withcomprehensive knowledge of U.S. GAAP and SEC reporting requirements; (ii) ameliorate our internal audit to assist with assessment of Sarbanes-Oxley compliance requirements and improvement of internal controls related to financial reporting; and (iii) improving our IT environment anddaily management.We cannot assure you that the measures we have taken to date, and actions we intend to take in the future, will be sufficient to remediatematerial weaknesses in our internal control over financial reporting or that they will prevent or avoid potential future material weaknesses. Inaddition, neither our management nor an independent registered public accounting firm has performed an evaluation of our internal control overfinancial reporting in accordance with the provisions of the Sarbanes-Oxley Act because no such evaluation has been required. Had we or ourindependent registered public accounting firm performed an evaluation of our internal control over financial reporting in accordance with theprovisions of the Sarbanes-Oxley Act, additional material weaknesses may have been identified. If we are unable to successfully remediate ourexisting or any future material weaknesses in our internal control over financial reporting, or identify any additional material weaknesses, theaccuracy and timing of our financial reporting may be adversely affected, potentially resulting in restatements of our financial statements, we maybe unable to maintain compliance with securities law requirements regarding timely filing of periodic reports and applicable Nasdaq listingrequirements, investors may lose confidence in our financial reporting, and our share price may decline as a result.We have limited business insurance coverage.Insurance companies in China currently do not offer as extensive an array of insurance products as insurance companies in more developedeconomies. Currently, we do not have any business liability or disruption insurance to cover our operations other than the accident insurance andcommercial liability insurance, which are mandatory, on all the automobiles we purchase for sales or financing. We have determined that the costsof insuring for these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical forus to have such insurance. Any uninsured business disruptions may result in our incurring substantial costs and the diversion of resources, whichcould have an adverse effect on our results of operations and financial condition.Table of Contents52Our common stock will be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, or the HFCAAct, in the future if the PCAOB is unable to inspect or investigate completely our auditors. The delisting of our common stock, or the threat oftheir being delisted, may materially and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conductinspections of our auditors would deprive our investors of the benefits of such inspections.The Holding Foreign Companies Accountable Act, or the HFCAA, was enacted on December 18, 2020. The HFCAA states if the SECdetermines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB forthree consecutive years beginning in 2021, the SEC shall prohibit our shares from being traded on a national securities exchange or in the over-the-counter trading market in the United States.Our current auditor, Marcum Asia CPAs LLP, or Marcum Asia, the independent registered public accounting firm that issues the audit reportincluded elsewhere in this annual report, as an auditor of companies that are traded publicly in the United States and a firm registered with thePCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with theapplicable professional standards. Marcum Asia is headquartered in New York, New York, and was not included in the list of PCAOB IdentifiedFirms in the PCAOB Determination Report issued in December 2021. We are required by the HFCAA to have an auditor that is subject to theinspection by the PCAOB. While our present auditor is located in the United States and the PCAOB is able to conduct inspections on such auditor,to the extent this status changes in the future and our auditor’s audit documentation related to their audit reports for our company becomes outsideof the inspection by the PCAOB or if the PCAOB is unable to inspect or investigate completely our auditor because of a position taken by anauthority in a foreign jurisdiction, trading in our common stock could be prohibited under the HFCAA, and as a result our common stock could bedelisted from Nasdaq.On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirementsof the HFCAA, which became effective on May 5, 2021. We will be required to comply with these rules if the SEC identifies our auditors ashaving a “non-inspection” year under a process to be subsequently established by the SEC.On May 13, 2021, the PCAOB proposed a new rule for implementing the HFCAA. Among other things, the proposed rule provides aframework for the PCAOB to use when determining, under the HFCAA, whether it is unable to inspect or investigate completely registered publicaccounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction. The proposed rulewould also establish the manner of the PCAOB’s determinations; the factors the PCAOB will evaluate and the documents and information it willconsider when assessing whether a determination is warranted; the form, public availability, effective date, and duration of such determinations;and the process by which the board of the PCAOB can modify or vacate its determinations. The proposed rule was adopted by the PCAOB onSeptember 22, 2021 and approved by the SEC on November 5, 2021.On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act which proposed to reduce thenumber of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two, thus reducing thetime period before the securities of such foreign companies may be prohibited from trading or delisted. On December 29, 2022, the AcceleratingHolding Foreign Companies Accountable Act was signed into law by the U.S. House of Representatives, which officially reduce the number ofyears that the auditor is not subject to inspection to two consecutive years. On December 16, 2021, the PCAOB issued a report on itsdeterminations that it is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland Chinaand in Hong Kong because of positions taken by mainland China and Hong Kong authorities in those jurisdictions. The PCAOB has made suchdesignations as mandated under the HFCA Act. Pursuant to each annual determination by the PCAOB, the SEC will, on an annual basis, identifyissuers that have used non-inspected audit firms and thus are at risk of such suspensions in the future. As of the date of this annual report, ourauditor is not subject to the determinations announced by the PCAOB on December 16, 2021.The SEC is assessing how to implement other requirements of the HFCAA, including the listing and trading prohibition requirementsdescribed above. The SEC may propose additional rules or guidance that could impact us if our auditor is not subject to the PCAOB inspection.For example, on August 6, 2020, the President’s Working Group on Financial Markets, or the PWG, issued the Report on Protecting United StatesInvestors from Significant Risks from Chinese Companies to the then President of the United States. This report recommended the SEC implementfive recommendations to address companies from jurisdictions that do not provide the PCAOB with sufficient access to fulfill its statutorymandate. Some of the concepts of these recommendations were implemented with the enactment of the HFCAA. However, some of therecommendations were more stringent than the HFCAA. For example, if a company was not subject to the PCAOB inspection, the reportrecommended that the transition period before a company would be delisted would end on January 1, 2022.Table of Contents53On August 26, 2022, the PCAOB signed a Statement of Protocol with the CSRC and the Ministry of Finance of the PRC (the “Statement ofProtocol”), which is intended to enable the PCAOB to inspect and investigate completely registered public accounting firms in mainland Chinaand Hong Kong. According to a statement released by the PCAOB, the Statement of Protocol (i) provides the PCAOB with sole discretion to selectthe firms, audit engagements and potential violations it inspects and investigates without consultation with, nor input from, Chinese authorities, (ii)puts procedures in place for PCAOB inspectors and investigators to view complete audit work papers with all information included and for thePCAOB to retain information as needed and (iii) provides the PCAOB with direct access to interview and take testimony from all personnelassociated with the audits the PCAOB inspects or investigates. While the Chairs of both the PCAOB and the SEC made statements supporting theStatement of Protocol, both emphasized that this is only the first step in the process. As such, uncertainties remain regarding how the Statement ofProtocol will be implemented and how it will impact China-based issuers and there is no assurance that the PCAOB will be able to execute, in atimely manner, its future inspections and investigations in a manner that satisfies the Statement of Protocol. While the Statement of Protocol maylead to resolution of the previously identified issues, there can be no assurance that this will be the case.On December 15, 2022, the PCAOB issued a new Determination Report which: (1) vacated the December 16, 2021 Determination Report;and (2) concluded that the PCAOB has been able to conduct inspections and investigations completely in the PRC in 2022. The December 15,2022 Determination Report cautions, however, that authorities in the PRC might take positions at any time that would prevent the PCAOB fromcontinuing to inspect or investigate completely. As required by the HFCAA, if in the future the PCAOB determines it no longer can inspect orinvestigate completely because of a position taken by an authority in the PRC, the PCAOB will act expeditiously to consider whether it shouldissue a new determination.While the HFCAA is not currently applicable to the Company because the Company’s current auditors are subject to PCAOB review, if thischanges in the future for any reason, the Company may be subject to the HFCAA. The implications of this regulation if the Company were tobecome subject to it are uncertain. Such uncertainty could cause the market price of our common stock to be materially and adversely affected, andour securities could be delisted or prohibited from being traded on Nasdaq earlier than would be required by the HFCAA. If our common stock isunable to be listed on another securities exchange by then, such a delisting would substantially impair your ability to sell or purchase the commonstock when you wish to do so, and the risk and uncertainty associated with a potential delisting would have a negative impact on the price of thecommon stock.We face risks related to natural disasters, health epidemics and other outbreaks, such as COVID-19, which could significantly disrupt ouroperations.We are vulnerable to other natural disasters and calamities. Fire, floods, typhoons, earthquakes, power loss, telecommunications failures,break-ins, war, riots, terrorist attacks or similar events may give rise to server interruptions, breakdowns, system failures, technology platformfailures or internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affectour ability to provide products and services. The COVID-19 pandemic has materially and adversely affected the global economy, our markets in China and our business. Our businesswas adversely affected by the effects of COVID-19 coronavirus, the prevention and control policies, including the zero-COVID policy in China.Although China has adjusted the prevention and control policies against COVID-19 and the market has been gradually recovering from theCOVID-19 pandemic, we could not forecast whether the prevention and control policies shall be similar if other epidemics incur in the future.Upon such occurrence, our operation may be materially and adversely impacted. Our business could also be adversely affected by the effects ofother epidemics. Our business operations could be disrupted if any of our employees is infected, since it could require our employees to bequarantined and/or our offices to be disinfected. In addition, our results of operations could be adversely affected to the extent that any of theseepidemics harms the Chinese economy in general.Table of Contents54Risks Related to Doing Business in China1.Corporate StructureOur current corporate structure and business operations may be affected by the Foreign Investment Law. If the PRC government deems thatour business falls within certain relevant industries that are subject to restriction or limitation, or if these regulations or the interpretation ofexisting regulations change in the future, we may have to adjust our corporate structure, switch our business focus, or even be forced torelinquish our interests in those operations.The PRC Foreign Investment Law grants national treatment to foreign-invested entities, except for those foreign-invested entities that operatein industries specified as either “restricted” or “prohibited” from foreign investment in a “Negative List”. Foreign ownership of internet-basedbusinesses, such as distribution of online information, is subject to restrictions under current PRC laws and regulations. For example, foreigninvestors are not allowed to own more than 50% of the equity interests in a value-added telecommunication service provider (except e-commerce,domestic multiparty communication, store-and-forward and call center) in accordance with the Provisions on the Administration of Foreign-invested Telecommunication Enterprises and the Special Administrative Measures for Entrance of Foreign Investment (Negative List) (2021Version) (which came into force and replaced the 2020 Version on January 1, 2022). The PRC Foreign Investment Law provides that foreign-invested entities operating in “restricted” or “prohibited” industries will require market entry clearance and other approvals from relevant PRCgovernment authorities. If any of our business is “restricted” or “prohibited” from foreign investment under the “Negative List” effective at thetime, we may be deemed to be in violation of the Foreign Investment Law, and we may be required to unwind or restructure our businessoperations, any of which may have a material adverse effect on our business operation.Furthermore, if future laws, administrative regulations or provisions mandate further actions to be taken by companies with respect to ourbusiness operation, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all. Failure to taketimely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect ourcurrent corporate structure and business operations.Our Previous Contractual arrangements in relation to Sichuan Senmiao may be subject to scrutiny by the PRC tax authorities and they maydetermine that we or Sichuan Senmiao owe additional taxes, which could negatively affect our financial condition and the value of yourinvestment.Under applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by thePRC tax authorities within ten years after the taxable year when the transactions are conducted. The EIT Law requires every enterprise in China tosubmit its annual enterprise income tax return together with a report on transactions with its related parties to the relevant tax authorities. The taxauthorities may impose reasonable adjustments on taxation if they have identified any related party transactions that are inconsistent with arm’slength principles. We may face material and adverse tax consequences if the PRC tax authorities determine that our previous contractualarrangements among Senmiao Consulting, Sichuan Senmiao, and Sichuan Senmiao Shareholders were not entered into on an arm’s length basis insuch a way as to result in an impermissible reduction in taxes under applicable PRC laws, rules and regulations, and adjust Sichuan Senmiao’sincome in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction of expensedeductions recorded by Sichuan Senmiao for PRC tax purposes, which could in turn increase its tax liabilities without reducing SenmiaoConsulting’s tax expenses. In addition, if the equity interest transfer between Senmiao Consulting and certain shareholders of Sichuan SenmiaoShareholders in March 2022 was viewed as a gift and subject Senmiao Consulting to PRC income tax, the PRC tax authorities may impose latepayment fees and other penalties on Sichuan Senmiao for the adjusted but unpaid taxes according to the applicable regulations. Our financialposition could be materially and adversely affected if Sichuan Senmiao’s tax liabilities increase or if it is required to pay late payment fees andother penalties.If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable taxconsequences to us and our non-PRC stockholders.Under the EIT Law and its implementation rules, an enterprise established outside of the PRC with a “de facto management body” within thePRC is considered a resident enterprise and will be subject to the enterprise income tax on its global income at the rate of 25%. Theimplementation rules define the term “de facto management body” as the body that exercises full and substantial control over and overallmanagement of the business, productions, personnel, accounts and properties of an enterprise. In April 2009, the State Administration of Taxationissued a circular, known as Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of aPRC-controlled enterprise that is incorporated offshore is located in China. Although this circularTable of Contents55only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreignerslike us, the criteria set forth in the circular may reflect the State Administration of Taxation’s general position on how the “de facto managementbody” test should be applied in determining the tax resident status of all offshore enterprises. According to Circular 82, an offshore incorporatedenterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de factomanagement body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met:(i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and humanresource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accountingbooks and records, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of votingboard members or senior executives habitually reside in the PRC.We believe none of our entities outside of China is a PRC resident enterprise for PRC tax purposes. However, the tax resident status of anenterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de factomanagement body.” As substantially all of our management members are based in China, it remains unclear how the tax residency rule will applyto our case. If the PRC tax authorities determine that the Company or any of our subsidiaries outside of China is a PRC resident enterprise for PRCenterprise income tax purposes, then the Company or such subsidiary could be subject to PRC tax at a rate of 25% on its world-wide income,which could materially reduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations.Furthermore, if the PRC tax authorities determine that we are a PRC resident enterprise for enterprise income tax purposes, gains realized on thesale or other disposition of our securities may be subject to PRC tax, at a rate of 10% in the case of non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty), if such gains are deemed to be from PRC sources. It isunclear whether non-PRC stockholders of our company would be able to claim the benefits of any tax treaties between their country of taxresidence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in oursecurities.Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we maypursue in the future.The PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of certain taxable assets, including, in particular,equity interests in a PRC resident enterprise, by a non-resident enterprise by promulgating and implementing SAT Circular 59 and Circular 698,which became effective in January 2008, and a SAT Bulletin 7 in replacement of some of the existing rules in Circular 698, which becameeffective in February 2015.Under Circular 698, where a non-resident enterprise conducts an “indirect transfer” by transferring the equity interests of a PRC “residententerprise” indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise, being the transferor, may besubject to PRC enterprise income tax, if the indirect transfer is considered to be an abusive use of company structure without reasonablecommercial purposes. As a result, gains derived from such indirect transfer may be subject to PRC tax at a rate of up to 10%. Circular 698 alsoprovides that, where a non-PRC resident enterprise transfers its equity interests in a PRC resident enterprise to its related parties at a price lowerthan the fair market value, the relevant tax authority has the power to make a reasonable adjustment to the taxable income of the transaction.In February 2015, the SAT issued SAT Bulletin 7 to replace the rules relating to indirect transfers in Circular 698. SAT Bulletin 7 hasintroduced a new tax regime that is significantly different from that under Circular 698. SAT Bulletin 7 extends its tax jurisdiction to not onlyindirect transfers set forth under Circular 698 but also transactions involving transfer of other taxable assets, through the offshore transfer of aforeign intermediate holding company. In addition, SAT Bulletin 7 provides clearer criteria than Circular 698 on how to assess reasonablecommercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a publicsecurities market. SAT Bulletin 7 also brings challenges to both the foreign transferor and transferee (or other person who is obligated to pay forthe transfer) of the taxable assets. Where a non-resident enterprise conducts an “indirect transfer” by transferring the taxable assets indirectly bydisposing of the equity interests of an overseas holding company, the non-resident enterprise being the transferor, or the transferee, or the PRCentity which directly owned the taxable assets may report to the relevant tax authority such indirect transfer. Using a “substance over form”principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and wasestablished for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such indirect transfer may be subject toPRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes,currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise.Table of Contents56On October 17, 2017, the SAT issued the Public Notice on Issues Relating to Withholding at Source of Income Tax of Non-residentEnterprises, or the SAT Notice 37, which came into effect on December 1, 2017. According to SAT Notice 37, where the non-resident enterprisefails to declare its tax payable pursuant to Article 39 of the EIT Law, the tax authority may order it to pay its tax due within required time limits,and the non-resident enterprise shall declare and pay its tax payable within such time limits specified by the tax authority. If the non-residententerprise voluntarily declares and pays its tax payable before the tax authority orders it to do so, it shall be deemed that such enterprise has paidits tax payable in time.We face uncertainties on the reporting and consequences on future private equity financing transactions, share exchange or other transactionsinvolving the transfer of shares in our company by investors that are non-PRC resident enterprises. The PRC tax authorities may pursue such non-resident enterprises with respect to a filing or the transferees with respect to withholding obligation, and request our PRC subsidiaries to assist inthe filing. As a result, we and non-resident enterprises in such transactions may become at risk of being subject to filing obligations or being taxed,under Circular 59, SAT Bulletin 7 or SAT Notice 37, and may be required to expend valuable resources to comply with Circular 59, SAT Bulletin 7and SAT Notice 37 or to establish that we and our non-resident enterprises should not be taxed under these circulars, which may have a materialadverse effect on our financial condition and results of operations.The PRC tax authorities have the discretion under SAT Circular 59, SAT Bulletin 7 and SAT Notice 37 to make adjustments to the taxablecapital gains based on the difference between the fair value of the taxable assets transferred and the cost of investment. Although we currently haveno plans to pursue any acquisitions in China or elsewhere in the world, we may pursue acquisitions in the future that may involve complexcorporate structures. If we are considered a non-resident enterprise under the EIT Law and if the PRC tax authorities make adjustments to thetaxable income of the transactions under SAT Circular 59, SAT Bulletin 7 and SAT Notice 37, our income tax costs associated with such potentialacquisitions will be increased, which may have an adverse effect on our financial condition and results of operations.2.Other RisksWe are required to obtain a value-added telecommunication business certificate and be subject to foreign investment restrictions.PRC regulations impose sanctions for engaging in Internet information services of a commercial nature without having obtained an ICPcertificate. PRC regulations also impose sanctions for engaging in the operation of online data processing and transaction processing withouthaving obtained an online data processing and transaction processing, or ODPTP, certificate (ICP and ODPTP are both sub-sets of value-addedtelecommunication business certificates). These sanctions include corrective orders and warnings from the PRC communication administrationauthority, fines and confiscation of illegal gains and, in the case of significant infringements, the websites may be ordered to cease operation. Tothe extent that the PRC regulatory authorities require such value-added telecommunication certificate to be obtained or set forth rules that imposeadditional requirements. As of the date of this Report, none of our subsidiaries have been authorized VATS licenses as we are do not operate thevalue-added telecommunications services as defined by the regulations. However, it is uncertain whether any of our business are defined as theoperation of a value-added telecommunication business in the future and we do not obtain such certificate, we may be subject to the sanctionsdescribed above.According to the Provisions on the Administration of Foreign-Invested Telecommunication Enterprises, the ratio of investment by foreigninvestors in a foreign-invested telecommunication enterprise that engages in the operation of a value-added telecommunication business shall notexceed 50%. Foreign investors are only permitted to invest up to 50% of the registered capital in a foreign-invested telecommunication enterprisethat engages in the operation of commercial Internet information services or general online data processing and transaction processing services.As an exception, Circular 196, which was promulgated on June 19, 2015, provides that foreign investors are permitted to invest up to 100% ofthe registered capital in a foreign-invested telecommunication enterprise engaging in the operation of online data processing and transactionprocessing (E-commerce). While Circular 196 permits foreign ownership, in whole or in part, of online data processing and transaction processingbusinesses (E-commerce), a sub-set of value-added telecommunications services, there is still uncertainty regarding whether foreign investmentrestrictions may be applied to our business and industry.Further, under either circumstance, the largest foreign investor will be required to have a satisfactory business track record and operationalexperience in the value-added telecommunication business. Any restructuring to meet the requirements may be costly and may involveinterruptions to our business. If we are unable to obtain the telecommunication business certificate in a timely fashion, our business may bematerially and adversely affected.Table of Contents57Substantial uncertainties and restrictions with respect to the political and economic policies of the PRC government and PRC laws andregulations could have a significant impact upon the business that we may be able to conduct in the PRC and accordingly on the results of ouroperations and financial condition.Our business operations conducted through our PRC operating entities may be adversely affected by the current and future politicalenvironment in the PRC. Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations inChina with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-basedcompanies listed overseas, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopolyenforcement. The Chinese government exerts substantial influence and control over the manner in which we must conduct our business activities.Our ability to operate in China may be adversely affected by changes in Chinese laws and regulations. Under the current government leadership,the government of the PRC has been pursuing reform policies which have adversely affected China-based operating companies whose securitiesare listed in the United States, with significant policies changes being made from time to time without notice. There are substantial uncertaintiesregarding the interpretation and application of PRC laws and regulations, including, but not limited to, the laws and regulations governing ourbusiness, or the enforcement and performance of our contractual arrangements with borrowers in the event of the imposition of statutory liens,death, bankruptcy or criminal proceedings. Only after 1979 did the Chinese government begin to promulgate a comprehensive system of laws thatregulate economic affairs in general, deal with economic matters such as foreign investment, corporate organization and governance, commerce,taxation and trade, as well as encourage foreign investment in China. Although the influence of the law has been increasing, China has notdeveloped a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities inChina. Also, because these laws and regulations are relatively new, and because of the limited volume of published cases and their lack of force asprecedents, interpretation and enforcement of these laws and regulations involve significant uncertainties. New laws and regulations that affectexisting and proposed future businesses may also be applied retroactively. In addition, there have been constant changes and amendments of lawsand regulations over the past 30 years in order to keep up with the rapidly changing society and economy in China. Because government agenciesand courts provide interpretations of laws and regulations and decide contractual disputes and issues, their inexperience in adjudicating newbusiness and new polices or regulations in certain less developed areas causes uncertainty and may affect our business. Consequently, we cannotpredict the future direction of Chinese legislative activities with respect to either businesses with foreign investment or the effectiveness onenforcement of laws and regulations in China. The uncertainties, including new laws and regulations and changes of existing laws, as well asjudicial interpretation by inexperienced officials in the agencies and courts in certain areas, may cause possible problems to foreign investors.Although the PRC government has been pursuing economic reform policies for more than two decades, the PRC government continues to exercisesignificant control over economic growth in the PRC through the allocation of resources, controlling payments of foreign currency, settingmonetary policy and imposing policies that impact particular industries in different ways. We cannot assure you that the PRC government willcontinue to pursue policies favoring a market oriented economy or that existing policies will not be significantly altered, especially in the event ofa change in leadership, social or political disruption, or other circumstances affecting political, economic and social life in the PRC.Accordingly, given the PRC government’s significant oversight and discretion over the conduct of our operating subsidiaries’ business, itmay intervene or influence the operations of our PRC subsidiaries at any time and to exert control over an offering of securities conductedoverseas and/or foreign investment in China-based issuers, which may cause us to make material changes to the operations of our PRC subsidiariesand could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of oursecurities to significantly decline or be worthless.Adverse regulatory developments in China may subject us to additional regulatory review, and additional disclosure requirements andregulatory scrutiny to be adopted by the SEC in response to risks related to recent regulatory developments in China may impose additionalcompliance requirements for companies like us with significant China-based operations, all of which could increase our compliance costs,subject us to additional disclosure requirements. In addition, uncertainties with respect to the PRC legal system could adversely affect us.We conduct all of our business through our subsidiaries in China. Our operations in China are governed by PRC laws and regulations. OurPRC subsidiaries are generally subject to laws and regulations applicable to foreign investments in China and, in particular, laws and regulationsapplicable to wholly foreign-owned enterprises. The PRC legal system is based on statutes. Prior court decisions may be cited for reference buthave limited precedential value.The recent regulatory developments in China, in particular with respect to restrictions on China-based companies raising capital offshore, maylead to additional regulatory review in China over our financing and capital raising activities in the United States. In addition, we may be subject toindustry-wide regulations that may be adopted by the relevant PRC authorities, which may have theTable of Contents58effect of limiting our service offerings, restricting the scope of our operations in China, or causing the suspension or termination of our businessoperations in China entirely, all of which will materially and adversely affect our business, financial condition and results of operations. We mayhave to adjust, modify, or completely change our business operations in response to adverse regulatory changes or policy developments, and wecannot assure you that any remedial action adopted by us can be completed in a timely, cost-efficient, or liability-free manner or at all.On July 30, 2021, in response to the recent regulatory developments in China and actions adopted by the PRC government, the Chairman ofthe SEC issued a statement asking the SEC staff to seek additional disclosures from offshore issuers associated with China-based operatingcompanies before their registration statements will be declared effective. On August 1, 2021, the CSRC stated in a statement that it had taken noteof the new disclosure requirements announced by the SEC regarding the listings of Chinese companies and the recent regulatory development inChina, and that both countries should strengthen communications on regulating China-related issuers. To the best knowledge of this Company, asof the date of this Report, current Chinese laws and regulations do not forbid us from issuing securities overseas. On December 24, 2021, theCSRC published the Administration of Overseas Securities Offering and Listing by Domestic Companies (the “Draft Administrative Provisions”)and the Administration Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies (the “Draft Filing Measures”).The Draft Administrative Provisions and the Draft Filing Measures lay out requirements for filing and include unified regulation management,strengthening regulatory coordination, and cross-border regulatory cooperation. On February 17, 2023, the CSRC promulgated the TrialAdministrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the “Trial Measures”), which took effect on March31, 2023. On the same date, the CSRC circulated Supporting Guidance Rules No. 1 through No. 5, Notes on the Trial Measures, Notice onAdministration Arrangements for the Filing of Overseas Listings by Domestic Enterprises and relevant CSRC Answers to Reporter Questions, orcollectively, the Guidance Rules and Notice, on CSRC’s official website. The Trial Measures, together with the Guidance Rules and Noticereiterate the basic principles of the Draft Administrative Provisions and Draft Filing Measures and impose substantially the same requirements forthe overseas securities offering and listing by domestic enterprises, and clarified and emphasized several aspects, which include but are not limitedto: (1) criteria to determine whether an issuer will be required to go through the filing procedures under the Trial Measures; (2) exemptions fromimmediate filing requirements for issuers including those that have already been listed in foreign securities markets, including U.S. markets, priorto the effective date of the Trial Measures, but these issuers shall still be subject to filing procedures if they conduct refinancing or are involved inother circumstances that require filing with the CSRC; (3) a negative list of types of issuers banned from listing or offering overseas, such asissuers whose affiliates have been recently convicted of bribery and corruption; (4) issuers’ compliance with web security, data security, and othernational security laws and regulations; (5) issuers’ filing and reporting obligations, such as obligation to file with the CSRC after it submits anapplication for initial public offering to overseas regulators, and obligation after offering or listing overseas to file with the CSRC after itcompletes subsequent offerings and to report to the CSRC material events including change of control or voluntary or forced delisting of theissuer; and (6) the CSRC’s authority to fine both issuers and their relevant shareholders for failure to comply with the Trial Measures, includingfailure to comply with filing obligations or committing fraud and misrepresentation. Specifically, pursuant to the Trial Measures, our futuresecurities offerings in the Nasdaq Capital Market where we have previously offered and listed shall also be filed with the CSRC within 3 workingdays after the offering is completed. The Trial Measures provide the CSRC with power to warn, fine, and issue injunctions against both PRCdomestic companies, their controlling shareholders, and their advisors in listing or offering securities (collectively, the “Subject Entities”), as wellas individuals directly responsible for these Subject Entities (the “Subject Individuals”). For failure to comply with the Trial Measures NegativeList or the Trial Measures Filing Obligations, or materially false or misleading statements in the filing and reporting required by the TrialMeasures: (1) PRC domestic companies, and their controlling shareholders if the controlling shareholders induced the PRC domestic companies’failure to comply, severally, may face warnings, injunctions to comply, and fines between RMB1 million and RMB10 million (approximately$145,647 and $1,456,473); the Subject Individuals in these entities may severally, face warnings and fines between RMB0.5 million and RMB5million (approximately $72,824 and $728,237). (2) Advisors in listing or offering securities that failed to dutifully advise the PRC domesticcompanies and their controlling shareholders in complying with the Trial Measures and caused such failures to comply can face warnings and finesbetween RMB0.5 million and RMB5 million (approximately $72,824 and $728,237); the Subject Individuals in these advisor entities may,severally, face warnings and fines between RMB0.2 million and RMB2 million (approximately $29,129 and $291,295). As the Trial Measures arenewly issued, there remain uncertainties regarding its interpretation and implementation. Therefore, we cannot assure you that we will be able tocomplete the filings for our future offerings and fully comply with the relevant new rules on a timely basis, if at all. In addition, we cannotguarantee that we will not be subject to tightened regulatory review and we could be exposed to government interference in China.Since 1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments inChina. However, China has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover allaspects of economic activities in China. In particular, because these laws and regulations are relatively new, and because of the limited volume ofpublished decisions and their nonbinding nature, the interpretation and enforcement of these lawsTable of Contents59and regulations involve uncertainties. In addition, the PRC legal system is based in part on government policies and internal rules (some of whichare not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policiesand rules until some time after the violation. In addition, any litigation in China may be protracted and result in substantial costs and diversion ofresources and management attention.Compliance with China’s new Data Security Law, Measures on Cybersecurity Review, Personal Information Protection Law, regulations andguidelines relating to the multi-level protection scheme and any other future laws and regulations may entail significant expenses and couldmaterially affect our business.China has implemented or will implement rules and is considering a number of additional proposals relating to data protection. China’s DataSecurity Law promulgated by the SCNPC in June 2021, took effect in September 2021. The Data Security Law provides that the data processingactivities must be conducted based on “data classification and hierarchical protection system” for the purpose of data protection and prohibitsentities in China from transferring data stored in China to foreign law enforcement agencies or judicial authorities without prior approval by theChinese government. As the Data Security Law has not yet come into effect, we may need to make adjustments to our data processing practices tocomply with this law.Additionally, China’s Cyber Security Law, requires companies to take certain organizational, technical and administrative measures and othernecessary measures to ensure the security of their networks and data stored on their networks. Specifically, the Cyber Security Law provides thatChina adopt a multi-level protection scheme (MLPS), under which network operators are required to perform obligations of security protection toensure that the network is free from interference, disruption or unauthorized access, and prevent network data from being disclosed, stolen ortampered. Under the MLPS, entities operating information systems must have a thorough assessment of the risks and the conditions of theirinformation and network systems to determine the level to which the entity’s information and network systems belong-from the lowest Level 1 tothe highest Level 5 pursuant to the Measures for the Graded Protection and the Guidelines for Grading of Classified Protection of Cyber Security.The grading result will determine the set of security protection obligations that entities must comply with. Entities classified as Level 2 or aboveshould report the grade to the relevant government authority for examination and approval.During the year ended March 31, 2022, the CAC has taken action against several Chinese internet companies in connection with their initialpublic offerings on U.S. securities exchanges, for alleged national security risks and improper collection and use of the personal information ofChinese data subjects. According to the official announcement, the action was initiated based on the National Security Law, the Cyber SecurityLaw and the Measures on Cybersecurity Review, which are aimed at “preventing national data security risks, maintaining national security andsafeguarding public interests.”It is unclear at the present time how widespread the cybersecurity review requirement and the enforcement action will be and what effect theywill have on the life sciences sector generally and the Company in particular. China’s regulators may impose penalties for non-compliance rangingfrom fines or suspension of operations, and this could lead to us delisting from the U.S. stock market.Also, on August 20, 2021, the SCNPC promulgated the Personal Information Protection Law, started to be implemented on November 1,2021. The law creates a comprehensive set of data privacy and protection requirements that apply to the processing of personal information andexpands data protection compliance obligations to cover the processing of personal information of persons by organizations and individuals inChina, and the processing of personal information of persons in China outside of China if such processing is for purposes of providing productsand services to, or analyzing and evaluating the behavior of, persons in China. The law also proposes that critical information infrastructureoperators and personal information processing entities who process personal information meeting a volume threshold to-be-set by Chinesecyberspace regulators are also required to store in China personal information generated or collected in China, and to pass a security assessmentadministered by Chinese cyberspace regulators for any export of such personal information. Lastly, the draft contains proposals for significantfines for serious violations of up to RMB50 million or 5% of annual revenues from the prior year.Interpretation, application and enforcement of these laws, rules and regulations evolve from time to time and their scope may continuallychange, through new legislation, amendments to existing legislation and changes in enforcement. Compliance with the Cyber Security Law and theData Security Law could significantly increase the cost to us of providing our service offerings, require significant changes to our operations oreven prevent us from providing certain service offerings in jurisdictions in which we currently operate or in which we may operate in the future.Despite our efforts to comply with applicable laws, regulations and other obligations relating to privacy, data protection and information security,and our belief that we are currently in compliance therewith, it is possible that our practices, offerings or platform could fail to meet all of therequirements imposed on us by the Cyber Security Law, the Data SecurityTable of Contents60Law and/or related implementing regulations. Any failure on our part to comply with such law or regulations or any other obligations relating toprivacy, data protection or information security, or any compromise of security that results in unauthorized access, use or release of personallyidentifiable information or other data, or the perception or allegation that any of the foregoing types of failure or compromise has occurred, coulddamage our reputation, discourage new and existing counterparties from contracting with us or result in investigations, fines, suspension or otherpenalties by Chinese government authorities and private claims or litigation, any of which could materially adversely affect our business, financialcondition and results of operations. Even if our practices are not subject to legal challenge, the perception of privacy concerns, whether or notvalid, may harm our reputation and brand and adversely affect our business, financial condition and results of operations. Moreover, the legaluncertainty created by the Data Security Law and the recent Chinese government actions could materially adversely affect our ability, on favorableterms, to raise capital, including engaging in follow-on offerings of our securities in the U.S. market or the Stock Exchange of Hong Kong. Whilewe believe that our current operations are in compliance with the laws and regulations of the Cyberspace Administration of China, our operationscould be adversely affected, directly or indirectly, by existing or future laws and regulations relating to its business or industry.Recent greater oversight by the CAC over data security, particularly for companies seeking to list on a foreign exchange, could adverselyimpact our business and our offering.On December 28, 2021, the CAC and other relevant PRC governmental authorities jointly promulgated the Cybersecurity Review Measures,which took effect on February 15, 2022. The Cybersecurity Review Measures provide that, in addition to critical information infrastructureoperators (“CIIOs”) that intend to purchase Internet products and services, online platform operators engaging in data processing activities thataffect or may affect national security must be subject to cybersecurity review by the Cybersecurity Review Office of the PRC. According to theCybersecurity Review Measures, a cybersecurity review assesses potential national security risks that may be brought about by any procurement,data processing, or overseas listing. The Cybersecurity Review Measures require that an online platform operator which possesses the personalinformation of at least one million users must apply for a cybersecurity review by the CAC if it intends to be listed in foreign countries.On November 14, 2021, the CAC promulgated the draft Regulations on the Administration of Cyber Data Security for public comment,pursuant to which data processors conducting certain activities must apply for cybersecurity review. The draft regulations also require that dataprocessors processing important data or going public overseas shall conduct an annual data security self-assessment or entrust a data securityservice institution to do so, and submit the data security assessment report of the previous year to the local branch of the CAC before January 31each year. Further, the draft regulations would require internet platform operators to establish platform rules, privacy policies and algorithmstrategies related to data, and solicit public comments on their official websites and personal information protection related sections for no lessthan 30 working days when they formulate platform rules or privacy policies or makes any amendments that may have a significant impact onusers’ rights and interests. In addition, platform rules and privacy policies formulated by operators of large internet platforms with more than 100million daily active users, or amendments to such rules or policies by operators of large internet platforms with more than 100 million daily activeusers that may have significant impacts on users’ rights and interests shall be evaluated by a third-party organization designated by the CAC andreported to local branch of the CAC for approval. The CAC has solicited comments on this draft until December 13, 2021, but there is no definitetimetable as to when the draft regulations will be enacted. As such, substantial uncertainties exist with respect to the enactment timetable, finalcontent, interpretation and implementation of such regulations.We have made our determinations based on Yuantai Law Offices, our PRC counsel, to the extent that the discussion relates to matters ofCSRC, CAC and other government authorities on our PRC subsidiaries’ operations and concluded that: as of the date of this Report, we, our PRCsubsidiaries and equity investee company, (i) are not required to obtain permissions from the CSRC, CAC or any other government authorities onour PRC subsidiaries’ operations, and (ii) have not received or were denied such permissions by any PRC government authorities. If the SecurityAdministration Draft is enacted as proposed, we believe that the operations of our PRC subsidiaries and our listing will not be affected and that wewill not be subject to cybersecurity review by the CAC, given that our PRC subsidiaries possess personal data of fewer than one million individualclients and do not collect data that affects or may affect national security in their business operations as of the date of this Report and do notanticipate that they will be collecting over one million users’ personal information or data that affects or may affect national security in the nearfuture. There remains uncertainty, however, as to how the Cybersecurity Review Measures and the Security Administration Draft will beinterpreted or implemented and whether the PRC regulatory agencies, including the CAC, may adopt new laws, regulations, rules, or detailedimplementation and interpretation related to the Cybersecurity Review Measures and the Security Administration Draft. If any such new laws,regulations, rules, or implementation and interpretation come into effect, we will take all reasonable measures and actions to comply and tominimize the adverse effect of such laws on us. We cannot guarantee, however, that we will not be subject to cybersecurity review and networkdata security review in the future. During such reviews, we may be required to suspend our operation or experience other disruptions to ourTable of Contents61operations. Cybersecurity review and network data security review could also result in negative publicity with respect to our Company anddiversion of our managerial and financial resources, which could materially and adversely affect our business, financial conditions, and results ofoperations.As of the date of this Report, we have not received any notice from any authorities identifying our PRC subsidiaries as CIIOs. However, giventhe uncertainties surrounding the interpretation and implementation of the Cyber Security Law, Data Security Law and relevant regulations, wecannot rule out the possibility that we, or certain of our customers or suppliers may be deemed as a CIIO, or an operator processing “importantdata.” First, if we are deemed as a CIIO, our purchase of network products or services, if deemed to be affecting or may affect national security,will need to be subject to cybersecurity review, before we can enter into agreements with relevant customers or suppliers, and before theconclusion of such procedure, these customers will not be allowed to use our products or services, and we are not allowed to purchase products orservices from our suppliers. There can be no assurance that we would be able to complete the applicable cybersecurity review procedures in atimely manner, or at all, if we are required to follow such procedures. Any failure or delay in the completion of the cybersecurity reviewprocedures may prevent us from using certain network products and services, and may result in fines of up to ten times the purchase price of suchnetwork products and services being imposed upon us, if we are deemed a CIIO using network products or services without having completed therequired cybersecurity review procedures. If the reviewing authority is of the view that the use of such network products or services by us, or bycertain of our customers or suppliers, involves risk of disruption, is vulnerable to external attacks, or may negatively affect, compromise, orweaken the protection of national security, we may not be able to provide such products or services to relevant customers, or purchase products orservices from relevant suppliers. This could have a material adverse effect on our results of operations and business prospects. Second, the notionof “important data” is not clearly defined by the Cyber Security Law or the Data Security Law. In order to comply with the statutory requirements,we will need to determine whether we possess important data, monitor the important data catalogs that are expected to be published by localgovernments and departments, perform risk assessments and ensure we are complying with reporting obligations to applicable regulators. We mayalso be required to disclose to regulators business-sensitive or network security-sensitive details regarding our processing of important data, andmay need to pass the government security review or obtain government approval in order to share important data with offshore recipients, whichcan include foreign licensors, or share data stored in China with judicial and law enforcement authorities outside of China. If judicial and lawenforcement authorities outside China require us to provide data stored in China, and we are not able to pass any required government securityreview or obtain any required government approval to do so, we may not be able to meet the foreign authorities’ requirements. The potentialconflicts in legal obligations could have adverse impact on our operations in and outside of China.We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet-related businesses and companies,and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business andresults of operations.The PRC government extensively regulates the internet industry, including foreign ownership of, and the licensing and permit requirementspertaining to, companies in the internet industry. These internet-related laws and regulations are relatively new and evolving, and theirinterpretation and enforcement involve significant uncertainties. As a result, in certain circumstances it may be difficult to determine what actionsor omissions may be deemed to be in violation of applicable laws and regulations.The evolving PRC regulatory system for the internet industry may lead to the establishment of new regulatory agencies. For example, in May2011, the State Council announced the establishment of a new department, the State Internet Information Office (with the involvement of the StateCouncil Information Office, the MIIT, and the MPS). The primary role of this new agency is to facilitate the policy-making and legislativedevelopment in this field, to direct and coordinate with the relevant departments in connection with online content administration and to deal withcross-ministry regulatory matters in relation to the internet industry.The Circular on Strengthening the Administration of Foreign Investment in and Operation of Value-added Telecommunications Business,issued by the MIIT in July 2006, prohibits domestic telecommunication service providers from leasing, transferring or selling telecommunicationsbusiness operating licenses to any foreign investor in any form, or providing any resources, sites or facilities to any foreign investor for their illegaloperation of a telecommunications business in China. According to this circular, either the holder of a value-added telecommunication servicesoperation permit or its shareholders must directly own the domain names and trademarks used by such license holders in their provision of value-added telecommunication services. The circular also requires each license holder to have the necessary facilities, including servers, for itsapproved business operations and to maintain such facilities in the regions covered by its license.Table of Contents62The interpretation and application of existing PRC laws, regulations and policies and possible new laws, regulations or policies relating to theinternet industry have created substantial uncertainties regarding the legality of existing and future foreign investments in, and the businesses andactivities of, internet businesses in China, including our business. We cannot assure you that we have obtained all the permits or licenses requiredfor conducting our business in China or will be able to maintain our existing licenses or obtain new ones. If the PRC government considers that wewere operating without the proper approvals, licenses or permits or promulgates new laws and regulations that require additional approvals orlicenses or imposes additional restrictions on the operation of any part of our business, it has the power, among other things, to levy fines,confiscate our income, revoke our business licenses, and require us to discontinue our relevant business or impose restrictions on the affectedportion of our business. Any of these actions by the PRC government may have a material adverse effect on our business and results of operations.PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currencyconversion may delay or prevent us from using the proceeds of from our public offerings to make loans to or make additional capitalcontributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand ourbusiness.Under PRC laws and regulations, we are permitted to utilize the proceeds from our public offerings to fund our PRC subsidiaries by makingloans to or additional capital contributions to our PRC subsidiaries, subject to applicable government registration and approval requirements.Any loans to our PRC subsidiaries, which are treated as foreign-invested enterprises under PRC laws, are subject to PRC regulations andforeign exchange loan registrations. For example, loans by us to our PRC subsidiaries to finance their activities cannot exceed statutory limits andmust be registered with the local counterpart of SAFE. The statutory limit for the total amount of foreign debts of a foreign-invested company isthe difference between the amount of total investment as approved by the MOFCOM or its local counterpart and the amount of registered capitalof such foreign-invested company or 2.5 times of the net assets of such foreign-invested company.We have financed and expect to continue to finance our PRC subsidiaries by means of capital contributions. These capital contributions mustbe approved by the MOFCOM or its local counterpart. In addition, SAFE issued a circular in September 2008, SAFE Circular 142, regulating theconversion by a foreign-invested enterprise of foreign currency registered capital into RMB by restricting how the converted RMB may be used.SAFE Circular 142 provides that the RMB capital converted from foreign currency registered capital of a foreign-invested enterprise may only beused for purposes within the business scope approved by the applicable government authority and unless otherwise provided by law, may not beused for equity investments within the PRC. On July 4, 2014, the SAFE issued the Circular of the SAFE on Relevant Issues Concerning the PilotReform in Certain Areas of the Administrative Method of the Conversion of Foreign Exchange Funds by Foreign-invested Enterprises, or SAFECircular 36, which launched a pilot reform of the administration of the settlement of the foreign exchange capitals of foreign-invested enterprisesin certain designated areas from August 4, 2014 and some of the restrictions under SAFE Circular 142 will not apply to the settlement of theforeign exchange capitals of the foreign-invested enterprises established within the designate areas and such enterprises are allowed to use its RMBcapital converted from foreign exchange capitals to make equity investment. On March 30, 2015, SAFE promulgated Circular 19, to expand thereform nationwide. Circular 19 came into force and replaced both Circular 142 and Circular 36 on June 1, 2015. Circular 19 allows foreign-invested enterprises to make equity investments by using RMB fund converted from foreign exchange capital. However, Circular 19 continues toprohibit foreign-invested enterprises from, among other things, using RMB fund converted from its foreign exchange capitals for expenditurebeyond its business scope, providing entrusted loans or repaying loans between non-financial enterprises. In addition, SAFE strengthened itsoversight of the flow and use of the RMB capital converted from foreign currency registered capital of a foreign-invested company. The use ofsuch RMB capital may not be altered without SAFE’s approval, and such RMB capital may not in any case be used to repay RMB loans if theproceeds of such loans have not been used. On June 9, 2016, SAFE issued the Circular on Reforming and Regulating Policies on the Control overForeign Exchange Settlement of Capital Accounts (“Circular 16”), which became effective simultaneously. Pursuant to Circular 16, enterprisesregistered in the PRC may also convert their foreign debts from foreign currency to RMB on self-discretionary basis. Circular 16 provides anintegrated standard for conversion of foreign exchange under capital account items (including but not limited to foreign currency capital andforeign debts) on self-discretionary basis which applies to all enterprises registered in the PRC. Circular 16 reiterates the principle that RMBconverted from foreign currency-denominated capital of a company may not be directly or indirectly used for purpose beyond its business scope orprohibited by PRC Laws or regulations, while such converted RMB shall not be provide as loans to its non-affiliated entities. SAFE has notprovided detailed guidelines with respect to its interpretation or implementation, it is uncertain how these rules will be interpreted andimplemented. Violations of these Circulars could result in severe monetary or other penalties. These circulars may significantly limit our ability touse RMB converted from the net proceeds of our public offerings to fund the establishment of new entities in China by our PRC subsidiaries, toinvest in or acquire any other PRC companies through our PRC subsidiaries.Table of Contents63As March 31, 2023, the Company has made accumulated capital contributions and loans of $21.1 million and $2.9 million directly to thesubsidiaries, respectively. The contributions were generated from our historical offering proceeds. Besides, the Company also loaned accumulatedapproximately $2.2 million to our former VIE, Jinkailong, through our subsidiaries in PRC. The loans were from the daily operation of thesesubsidiaries.In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holdingcompanies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary governmentapprovals on a timely basis, if at all, with respect to future capital contributions or future loans by us to our PRC subsidiaries. If we fail tocomplete such registrations or obtain such approvals, our ability to use the proceeds we expect to receive from our public offerings and tocapitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and ourability to fund and expand our business.We rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we mayhave, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability toconduct our business.We are a holding company, and we rely on dividends and other distributions on equity paid by our PRC subsidiaries for our cash and financingrequirements, including the funds necessary to pay dividends and other cash distributions to our stockholders and service any debt we may incur. Ifour PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends ormake other distributions to us.Under PRC laws and regulations, our PRC subsidiaries, as a wholly foreign-owned enterprise in China, may pay dividends only out of theirrespective accumulated after-tax profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund certain statutory reserve funds,until the aggregate amount of such funds reaches 50% of its registered capital. At its discretion, a wholly foreign-owned enterprise may allocate aportion of its after-tax profits based on PRC accounting standards to staff welfare and bonus funds. These reserve funds and staff welfare andbonus funds are not distributable as cash dividends.Our PRC subsidiaries currently suffer accumulated loss and are unable to pay us any dividend given their financial condition. If our PRCsubsidiaries’ financial condition improves, the above discussed PRC laws will likely limit their ability to pay dividends or make other distributionsto us. Such limitations could materially and adversely impact our cash flows and limit our ability to grow, make investments or acquisitions thatcould be beneficial to our business, pay dividends, or otherwise fund and conduct our business.Fluctuations in exchange rates could have a material adverse effect on our results of operations and the value of your investment.Substantially all of our revenues and expenditures are denominated in RMB, whereas our reporting currency is the U.S. dollar. As a result,fluctuations in the exchange rate between the U.S. dollar and RMB will affect the relative purchasing power in RMB terms of our U.S. dollarassets and the proceeds from our public offerings. Our reporting currency is the U.S. dollar while the functional currency for our PRC subsidiariesis RMB. Gains and losses from the remeasurement of assets and liabilities that are receivable or payable in RMB are included in our consolidatedstatements of operations. The remeasurement has caused the U.S. dollar value of our results of operations to vary with exchange rate fluctuations,and the U.S. dollar value of our results of operations will continue to vary with exchange rate fluctuations. A fluctuation in the value of RMBrelative to the U.S. dollar could reduce our profits from operations and the translated value of our net assets when reported in U.S. dollars in ourfinancial statements. This could have a negative impact on our business, financial condition or results of operations as reported in U.S. dollars. Ifwe decide to convert our RMB into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or for other businesspurposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount available to us. In addition,fluctuations in currencies relative to the periods in which the earnings are generated may make it more difficult to perform period-to-periodcomparisons of our reported results of operations.The value of the RMB against the U.S. dollar and other currencies is affected by, among other things, changes in China’s political andeconomic conditions and China’s foreign exchange policies. It is difficult to predict how long such depreciation of RMB against the U.S. dollarmay last and when and how the relationship between the RMB and the U.S. dollar may change again.There remains significant international pressure on the PRC government to adopt a flexible currency policy. Any significant appreciation ordepreciation of the RMB may materially and adversely affect our revenues, earnings and financial position, and theTable of Contents64value of, and any dividends payable on, our securities in U.S. dollars. For example, to the extent that we need to convert U.S. dollars we receivefrom our public offerings into RMB to pay our operating expenses, appreciation of the RMB against the U.S. dollar would have an adverse effecton the RMB amount we would receive from the conversion. Conversely, a significant depreciation of the RMB against the U.S. dollar maysignificantly reduce the U.S. dollar equivalent of our earnings, which in turn could adversely affect the price of our securities.Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered intoany hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedgingtransactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge ourexposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability toconvert RMB into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on your investment.Governmental control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of yourinvestment.The PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance ofcurrency out of China. We receive substantially all of our net revenues in RMB. Under our current corporate structure, we rely on dividendpayments from our PRC subsidiaries to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations,payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreigncurrencies without prior approval from SAFE by complying with certain procedural requirements. Therefore, our PRC subsidiaries are able to paydividends in foreign currencies to us without prior approval from SAFE, subject to the condition that the remittance of such dividends outside ofthe PRC complies with certain procedures under PRC foreign exchange regulation, such as the overseas investment registrations by the beneficialowners of our company who are PRC residents. But approval from or registration with appropriate government authorities is required where RMBis to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreigncurrencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If theforeign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not beable to pay dividends in foreign currencies to our stockholders.Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.We are required under PRC laws and regulations to participate in various government sponsored employee benefit plans, including certainsocial insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentagesof salaries, including bonuses and allowances, of our employees up to a maximum amount specified by the local government from time to time atlocations where we operate our businesses. The requirement of employee benefit plans has not been implemented consistently by the localgovernments in China given the different levels of economic development in different locations. We have not made adequate employee benefitpayments. As of March 31, 2023 and 2022, we did not make adequate employee benefit contributions in the amount of $1,086,526 and $963,824,respectively, for our continuing operations. We accrued the amount in accrued payroll and welfare. We may be required to make up thecontributions for these plans as well as to pay late fees and fines. If we are subject to late fees or fines in relation to the underpaid employeebenefits, our financial condition and results of operations may be adversely affected.The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of PRC companies by foreigninvestors, which could make it more difficult for us to pursue growth through acquisitions in China.The Rules on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the “M&A Rules”) and some other regulations andrules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities byforeign investors more time consuming and complex, including requirements in some instances that the MOFCOM be notified in advance of anychange-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise. Moreover, the Anti-Monopoly Law requiresthat the MOFCOM shall be notified in advance of any concentration of undertaking if certain thresholds are triggered. In addition, the securityreview rules issued by the MOFCOM that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise“national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domesticenterprises that raise “national security” concerns are subject to strict review by the MOC, and the rules prohibit any activities attempting to bypassa security review,Table of Contents65including by structuring the transaction through a proxy or contractual control arrangement. In the future, we may grow our business by acquiringcomplementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete suchtransactions could be time consuming, and any required approval processes, including obtaining approval from the MOFCOM or its localcounterparts may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain ourmarket share.If the chops of our PRC subsidiaries are not kept safely, are stolen or are used by unauthorized persons or for unauthorized purposes, thecorporate governance of these entities could be severely and adversely compromised.In China, a company chop or seal serves as the legal representation of the company towards third parties even when unaccompanied by asignature. Each legally registered company in China is required to maintain a company chop, which must be registered with the local PublicSecurity Bureau. In addition to this mandatory company chop, companies may have several other chops which can be used for specific purposes.The chops of our PRC subsidiaries are generally held securely by personnel designated or approved by us in accordance with our internal controlprocedures. To the extent those chops are not kept safely, are stolen or are used by unauthorized persons or for unauthorized purposes, thecorporate governance of these entities could be severely and adversely compromised and those corporate entities may be bound to abide by theterms of any documents so chopped, even if they were chopped by an individual who lacked the requisite power and authority to do so. Inaddition, if the chops are misused by unauthorized persons, we could experience disruption to our normal business operations. We may have totake corporate or legal action, which could involve significant time and resources to resolve while distracting management from our operations.Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRCplan participants or us to fines and other legal or administrative sanctions.In February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic IndividualsParticipating in Stock Incentive Plans of Overseas Publicly-Listed Companies, replacing earlier rules promulgated in March 2007. Pursuant tothese rules, PRC citizens and non-PRC citizens who reside in China for a continuous period of not less than one year who participate in any stockincentive plan of an overseas publicly listed company, subject to a few exceptions, are required to register with SAFE through a domestic qualifiedagent, which could be the PRC subsidiaries of such overseas listed company, and complete certain other procedures. In addition, an overseasentrusted institution must be retained to handle matters in connection with the exercise or sale of stock options and the purchase or sale of sharesand interests. We and our executive officers and other employees who are PRC citizens or who have resided in the PRC for a continuous period ofnot less than one year and who are granted options or other awards under our 2018 Equity Incentive Plan will be subject to these regulations.Failure to complete the SAFE registrations may subject them to fines and legal sanctions and may also limit our ability to contribute additionalcapital into our PRC subsidiaries and limit our PRC subsidiaries’ ability to distribute dividends to us. We also face regulatory uncertainties thatcould restrict our ability to adopt additional incentive plans for our directors, executive officers and employees under PRC law.PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries’ ability to increase their registeredcapital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC law.SAFE promulgated the SAFE Circular 37 in July 2014 that requires PRC residents or entities to register with SAFE or its local branch inconnection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing. In addition,such PRC residents or entities must update their SAFE registrations when the offshore special purpose vehicle undergoes material events relatingto any change of basic information (including change of such PRC citizens or residents, name and operation term), increases or decreases ininvestment amount, transfers or exchanges of shares, or mergers or divisions. SAFE Circular 37 is issued to replace the Notice on Relevant IssuesConcerning Foreign Exchange Administration for PRC Residents Engaging in Financing and Roundtrip Investments via Overseas Special PurposeVehicles, or SAFE Circular 75. SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign ExchangeConcerning Direct Investment in February 2015, which took effect on June 1, 2015. This notice has amended SAFE Circular 37 requiring PRCresidents or entities to register with qualified banks rather than SAFE or its local branch in connection with their establishment or control of anoffshore entity established for the purpose of overseas investment or financing.If our stockholders who are PRC residents or entities do not complete their registration as required, our PRC subsidiaries may be prohibitedfrom distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may beTable of Contents66restricted in our ability to contribute additional capital to our PRC subsidiaries. Moreover, failure to comply with the SAFE registration describedabove could result in liability under PRC laws for evasion of applicable foreign exchange restrictions.To our knowledge, all of our pre-IPO PRC stockholders who are subject to the registration requirements of Circular 37 have completed therequired foreign exchange registrations.In addition, we may not be informed of the identities of all the PRC residents or entities holding direct or indirect interest in our company, norcan we compel our beneficial owners to comply with SAFE registration requirements. As a result, we cannot assure you that all of our stockholdersor beneficial owners who are PRC residents or entities have complied with, and will in the future make or obtain any applicable registrations orapprovals required by, SAFE regulations. Failure by such stockholders or beneficial owners to comply with SAFE regulations, or failure by us toamend the foreign exchange registrations of our PRC subsidiaries, could subject us to fines or legal sanctions, restrict our overseas or cross-borderinvestment activities, limit our PRC subsidiaries’ ability to make distributions or pay dividends to us or affect our ownership structure, which couldadversely affect our business and prospects.Risks Related to Our SecuritiesOur failure to meet the continued listing requirements of Nasdaq could result in a delisting of our common stock.Our common stock is currently listed for trading on The Nasdaq Capital Market, and the continued listing of our common stock on TheNasdaq Capital Market is subject to our compliance with a number of listing standards. On August 16, 2021, we received a notice from Nasdaqthat because the closing bid price for our common stock had fallen below $1.00 per share for 30 consecutive business days, we no longer compliedwith the $1.00 minimum bid price requirement for continued listing on The Nasdaq Capital Market under Rule 5550(a)(2) of the Nasdaq ListingRules. On February 15, 2022, we received a letter from Nasdaq informing that trading of the Company’s common stock will be suspended at theopening of business on February 24, 2022, unless the Company requests an appeal of Nasdaq’s determination. The Company has timely requestedan appeal and on May 5, 2022, the Nasdaq Hearings Panel (the “Panel”) confirmed the Company has regained compliance with the minimum bidprice through a reserve stock split effective on April 6, 2022. The Panel has also determined to impose a Panel Monitor for a period of one yearfrom the date of the letter, or until May 5, 2023 to monitor the Company’s continued compliance with all Nasdaq continued listing requirements,pursuant to Nasdaq Listing Rule 5815(d)(4)(A). Should the Company fail to meet the minimum bid price requirement for a period of 30consecutive trading days or any other requirements for continued listing on Nasdaq, the staff will issue a Delist Determination Letter and promptlyschedule a new hearing. On May 8, 2023, we received a notice from Nasdaq to inform the Company was in compliance with the applicable NasdaqListing Rules. On June 15, 2023, we received a notice from Nasdaq that because the closing bid price for our common stock had fallen below$1.00 per share for 30 consecutive business days, we no longer complied with the $1.00 minimum bid price requirement for continued listing onThe Nasdaq Capital Market under Rule 5550(a)(2) of the Nasdaq Listing Rules. We are provided a compliance period of 180 calendar days inwhich to regain compliance.If our common stock were no longer listed on The Nasdaq Capital Market, investors might only be able to trade on one of the over-the-countermarkets. This would impair the liquidity of our common stock not only in the number of shares that could be bought and sold at a given price,which might be depressed by the relative illiquidity, but also through delays in the timing of transactions and reduction in media coverage. Inaddition, we could face significant material adverse consequences, including:●a limited availability of market quotations for our securities;●a limited amount of news and analyst coverage for us; and●a decreased ability to issue additional securities or obtain additional financing in the future.We may take actions to maintain our compliance with Nasdaq’s listing requirements, but we can provide no assurance that any such actiontaken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock orprevent future non-compliance with Nasdaq’s listing requirements.The market price for our common stock may be volatile.The trading prices of our common stock are likely volatile and could fluctuate widely due to factors beyond our control. This may happenbecause of broad market and industry factors, like the performance and fluctuation in the market prices or the underperformance or deterioratingfinancial results of internet or other companies based in China that have listed their securities in the United States inTable of Contents67recent years. The securities of some of these companies have experienced significant volatility since their initial public offerings, including, insome cases, substantial decline in their trading prices. The trading performances of other Chinese companies’ securities after their offerings mayaffect the attitudes of investors toward Chinese companies listed in the United States, which consequently may impact the trading performance ofour common stock, regardless of our actual operating performance. In addition, any negative news or perceptions about inadequate corporategovernance practices or fraudulent accounting, corporate structure or other matters of other Chinese companies may also negatively affect theattitudes of investors towards Chinese companies in general, including us, regardless of whether we have conducted any inappropriate activities. Inaddition, securities markets may from time to time experience significant price and volume fluctuations that are not related to our operatingperformance, which may have a material adverse effect on the market price of our common stock.In addition to the above factors, the price and trading volume of our common stock may be highly volatile due to multiple factors, includingthe following:●regulatory developments affecting us, our customers, or our industry;●announcements of studies and reports relating to our loan products and service offerings or those of our competitors;●changes in the economic performance or market valuations of other online finance marketplaces;●actual or anticipated fluctuations in our quarterly results of operations and changes or revisions of our expected results;●changes in financial estimates by securities research analysts;●conditions in the automobile finance and ride-hailing industries in China;●announcements by us or our competitors of new product and service offerings, acquisitions, strategic relationships, joint ventures or capitalcommitments;●additions to or departures of our senior management;●detrimental negative publicity about us, our management or our industry;●fluctuations of exchange rates between the RMB and the U.S. dollar;●release or expiry of lock-up or other transfer restrictions on our outstanding shares of common stock; and●sales or perceived potential sales of additional shares of common stock.We have a significant number of outstanding warrants, some of which contain full-ratchet anti-dilution protection and reset provisions, whichmay cause significant dilution to our stockholders, have a material adverse impact on the market price of our common stock and make it moredifficult for us to raise funds through future equity offerings.Pursuant to the Purchase Agreements with investors in our offerings in June 2019 and May 2021, we issued to the investors a series ofwarrants. The issuance of shares of common stock upon the exercise of the warrants would dilute the percentage ownership interest of allstockholders, might dilute the book value per share of our common stock and would increase the number of our publicly traded shares, whichcould depress the market price of our common stock. In addition, the so-called full-ratchet anti-dilution protections and reset provisions, subject tolimited exceptions, would reduce the exercise price of the warrants in the event that we in the future issue common stock, or securities convertibleinto or exercisable to purchase common stock, at a lower price per share.As of the date of this Report, there were 6,062,504 shares of common stock issuable upon exercise of outstanding warrants at a weightedaverage exercise price of $2.26 per share, and we may issue additional options, warrants and other types of equity in the future as part of stock-based compensation, capital raising transactions or other strategic transactions. To the extent these options and warrants are ultimately exercised,existing holders of our common stock would experience dilution which may cause the price of our common stock to decline.Table of Contents68In addition to the dilutive effects described above, the perceived risk of dilution as a result of the significant number of outstanding warrantsmay cause our common stockholders to be more inclined to sell their shares, which would contribute to a downward movement in the price of ourcommon stock. Moreover, the perceived risk of dilution and the resulting downward pressure on our common stock price could encourageinvestors to engage in short sales of our common stock, which could further contribute to price declines in our common stock. The fact that ourstockholders, warrant holders and option holders can sell substantial amounts of our common stock in the public market, whether or not sales haveoccurred or are occurring, as well as the existence of full-ratchet anti-dilution provisions and reset provisions in a substantial number of ouroutstanding warrants could make it more difficult for us to raise additional funds through the sale of equity or equity-related securities in the futureat a time and price that we deem reasonable or appropriate, or at all.Certain judgments obtained against us by our stockholders may not be enforceable.We conduct substantially all of our operations in China and substantially all of our assets are located in China. In addition, most of ourdirectors and executive officers reside within China, and most of the assets of these persons are located within China. As a result, it may bedifficult or impossible for you to effect service of process within the United States upon these individuals, or to bring an action against us oragainst these individuals in the United States in the event that you believe your rights have been infringed under the U.S. federal securities laws orotherwise. Even if you are successful in bringing an action of this kind, the laws of the PRC may render you unable to enforce a judgment againstour assets or the assets of our directors and officers.Our articles of incorporation and by-laws could deter a change of our management, which could discourage or delay offers to acquire us.Certain provisions of our articles of incorporation (the “Articles of Incorporation”) and by-laws could discourage or make it more difficult toaccomplish a proxy contest or other change in our management or the acquisition of control by a holder of a substantial amount of our votingstock. It is possible that these provisions could make it more difficult to accomplish, or could deter transactions that stockholders may otherwiseconsider to be in their best interests or in our best interests. These provisions include:●requiring stockholders who wish to request a special meeting of the stockholders to disclose certain specified information in such request andto deliver such request in a specific way within a certain timeframe, which may inhibit or deter stockholders from requesting special meetingsof the stockholders;●requiring that stockholders who wish to act by written consent request a record date from us for such action and such request must includedisclosure of certain specified information, which may inhibit or deter stockholders from acting by written consent;●establishing the board as the sole entity to fill vacancies of the board, which lengthens the time needed to elect a new majority of the board;●establishing a two-thirds majority vote of the stockholders to remove a director from the board, as opposed to a simple majority, whichlengthens the time needed to elect a new majority of the board; and●establishing that any person who acquires equity in us shall be deemed to have notice and consented to the forum selection provision of ourBylaws requiring actions to be brought only in Nevada, which may inhibit or deter stockholders actions (i) on behalf of us; (ii) assertingclaims of breach of fiduciary duty by officers or directors of us; or (iii) arising out of the Nevada Revised Statutes, and establishing moredetailed disclosure in any stockholder’s advance notice to nominate a new member of the board, including specified information regardingsuch nominee, which may inhibit or deter such nomination and lengthen the time needed to elect a new majority of the board.Because we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of our common stock for return onyour investment.We currently intend to retain most, if not all, of our available funds and any future earnings to fund the development and growth of ourbusiness. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in ourcommon stock as a source for any future dividend income.Our board of directors has discretion as to whether to distribute dividends, subject to certain restrictions under Nevada law. Even if our boardof directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, ourfuture results of operations and cash flow, our capital requirements and surplus, the amount of distributions, ifTable of Contents69any, received by us from our subsidiary, our financial condition, contractual restrictions and other factors deemed relevant by our board ofdirectors. Accordingly, the return on your investment in our common stock will likely depend entirely upon any future price appreciation of ourcommon stock.Other General Risk FactorsWe may need additional capital to pursue business objectives and respond to business opportunities, challenges or unforeseen circumstances,and financing may not be available on terms acceptable to us, or at all.We have been financing our Automobile Transaction and Related Services and Online Ride-hailing Platform Services through proceeds fromour IPO and follow-on public offerings, and borrowing from third parties and related parties. As we intend to continue to make investments tosupport the growth of this business, we may require additional capital to pursue our business objectives and respond to business opportunities,challenges or unforeseen circumstances, including developing new solutions and services, further enhance our risk management capabilities,increasing our sales and marketing expenditures to improve brand awareness and engage automobile purchasers through expanded online channels,enhancing our operating infrastructure and acquiring complementary businesses and technologies. To be in line with our strategy to cross sell ourautomobile leasing business with the online ride-hailing platform services business, we may need to make additional capital contribution forpromotion activities as a result. Accordingly, we may need to engage in equity or debt financings to secure additional funds. However, additionalfunds may not be available when we need them, on terms that are acceptable to us, or at all. Repayment of the debts may divert a substantialportion of cash flow to repay principal and service interest on such debt, which would reduce the funds available for expenses, capitalexpenditures, acquisitions and other general corporate purposes; and we may suffer default and foreclosure on our assets if our operating cash flowis insufficient to service debt obligations, which could in turn result in acceleration of obligations to repay the indebtedness and limit our sourcesof financing.Volatility in the credit markets may also have an adverse effect on our ability to obtain debt financing. If we raise additional funds throughfurther issuances of equity or convertible debt securities, our existing shareholders could suffer significant dilution, and any new equity securitieswe issue could have rights, preferences and privileges superior to those of holders of our common stock. If we are unable to obtain adequatefinancing or financing on terms satisfactory to us when we require it, our ability to continue to pursue our business objectives and to respond tobusiness opportunities, challenges or unforeseen circumstances could be significantly limited, and our business, financial condition, results ofoperations and prospects could be adversely affected.Fluctuations in interest rates could negatively affect our results of operations.We charge service fees to automobile purchasers for facilitating financing transactions. If prevailing market interest rates increase, automobilepurchasers would be less likely to finance automobile purchases with credit or we may need to reduce our service fees to mitigate the impact ofincreased interest rates. If we do not sufficiently lower our service fees and keep our fees competitive in such instances, automobile purchasersmay decide not to utilize our services because of our less competitive service fees and may take advantage of lower service fees offered by othercompanies, and our ability to attract prospective automobile purchasers as well as our competitive position may be severely undermined. On theother hand, if prevailing market interest rates decline, the operating margins of financial institutions may decrease, which may make the financialinstitutions less likely to finance automobile purchases. Under either circumstance, our financial condition and profitability could also bematerially and adversely affected.Our operating results may fluctuate significantly and may not fully reflect the underlying performance of our business.Our results of operations, including the levels of our net revenues, expenses, net (loss)/income and other key metrics, may vary significantly inthe future due to a variety of factors, some of which are outside of our control, and period-to-period comparisons of our operating results may notbe meaningful, especially given our limited operating history. Accordingly, the results for any one quarter are not necessarily an indication offuture performance. Fluctuations in quarterly results may adversely affect the price of our common stock. Factors that may cause fluctuations inour quarterly financial results include:●our ability to attract new customers and maintain relationships with existing customers;●our ability to maintain existing relationship with existing business partners and establish new relationships with additional partners for ourAutomobile Transaction and Related Services and Online Ride-hailing Platform Services;●the revenue generated from automobile leasing and online ride-hailing platform services;Table of Contents70●overdue ratios of automobile financing transactions we serve;●financial institutions’ willingness and ability to fund financing transactions through us on reasonable terms;●changes in our services and introduction of new products and services;●the amount and timing of operating expenses related to acquiring customers and the maintenance and expansion of our business, operationsand infrastructure;●our ability to manage transaction volume growth during the period;●the timing of expenses related to the development or acquisition of technologies or businesses;●network outages or security breaches;●general economic, industry and market conditions;●our emphasis on customer experience instead of near-term growth; and●the timing of expenses related to the development or acquisition of technologies or businesses.If we fail to promote and maintain our brands in an effective and cost-efficient way, our business and results of operations may be harmed.We believe that developing and maintaining awareness of our brands effectively is critical to attracting new and retaining existing customers.Successful promotion of our brands and our ability to attract customers depend largely on the effectiveness of our marketing efforts and thesuccess of the channels we use to promote our services. Our efforts to build our brands have caused us to incur expenses, and it is likely that ourfuture marketing efforts will require us to incur additional expenses. These efforts may not result in increased revenues in the immediate future orat all and, even if they do, any increases in revenues may not offset the expenses incurred. If we fail to successfully promote and maintain ourbrands while incurring substantial expenses, our results of operations and financial condition would be adversely affected, which may impair ourability to grow our business.Any harm to our brands or reputation or any damage to the reputation of our business partners or other third parties, or the automobilefinancing or ride-hailing industries in China may materially and adversely affect our business and results of operations.Maintaining and enhancing the recognition and reputation of our brands is critical to our business and competitiveness. Factors that are vital tothis objective include but are not limited to our ability to:●maintain and develop relationships with dealers, leasing companies, ride-hailing platforms and financial institutions;●provide prospective and existing customers with superior experiences;●enhance and improve our credit assessment and decision-making models;●effectively manage and resolve any user complaints of financial institutions or customers; and●effectively protect personal information and privacy of customers.Any malicious or innocent negative allegation made by the media or other parties about the foregoing or other aspects of our company,including but not limited to our management, business, compliance with law, financial conditions or prospects, whether with merit or not, couldseverely hurt our reputation and harm our business and operating results. As the markets for China’s automobile financing and online ride-hailingare new and the regulatory framework for this market is also evolving, negative publicity about these markets may arise from time to time.Negative publicity about China’s automobile financing and ride-hailing industries in general may also have a negative impact on our reputation,regardless of whether we have engaged in any inappropriate activities.Table of Contents71In addition, certain factors that may adversely affect our reputation are beyond our control. Negative publicity about our partners, outsourcedservice providers or other counterparties, such as negative publicity about any failure by them to adequately protect the information of users, tocomply with applicable laws and regulations or to otherwise meet required quality and service standards could harm our reputation. Furthermore,any negative development in any of the automobile financing or ride-hailing industries, such as bankruptcies or failures of other companies in anyof this these, and especially a large number of such bankruptcies or failures, or negative perception of any of the industries as a whole, couldcompromise our image, undermine the trust and credibility we have established and impose a negative impact on our ability to attract new clients.Negative developments in these industries, such as widespread automobile purchaser/borrower defaults, unethical or illegal activities by industryplayers and/or the closure of companies providing similar services, may also lead to tightened regulatory scrutiny of these sectors and limit thescope of permissible business activities that may be conducted by us. If any of the foregoing takes place, our business and results of operationscould be materially and adversely affected.Our reputation may be harmed if information supplied by customers is inaccurate, misleading or incomplete.Our customers supply a variety of information that is in the applications to financing partners. We do not verify all the information we receivefrom our customers, and such information may be inaccurate or incomplete. If financing partners provide funding to the automobile purchasersbased on information supplied by automobile purchasers that is inaccurate, misleading or incomplete, those financing partners may not receivetheir expected returns and our reputation may be harmed. Moreover, inaccurate, misleading or incomplete customer information could alsopotentially subject us to liability as an intermediary under the PRC Contract Law. See “Business — Regulations.”Misconduct, errors and failure to function by our employees and third-party service providers could harm our business and reputation.We are exposed to many types of operational risks, including the risk of misconduct and errors by our employees and third-party serviceproviders. Our business depends on our employees and third-party service providers to interact with potential customers, process large numbers oftransactions and support the loan/lease payment collection process, all of which involve the use and disclosure of personal information. We couldbe materially adversely affected if transactions were redirected, misappropriated or otherwise improperly executed, if personal information wasdisclosed to unintended recipients or if an operational breakdown or failure in the processing of transactions occurred, whether as a result ofhuman error, purposeful sabotage or fraudulent manipulation of our operations or systems. In addition, the manner in which we store and usecertain personal information and interact with our customers is governed by various PRC laws. It is not always possible to identify and determisconduct or errors by employees or third-party service providers, and the precautions we take to detect and prevent this activity may not beeffective in controlling unknown or unmanaged risks or losses. If any of our employees or third-party service providers take, convert or misusefunds, documents or data or fail to follow protocol when interacting with customers, we could be liable for damages and subject to regulatoryactions and penalties. We could also be perceived to have facilitated or participated in the illegal misappropriation of funds, documents or data, orthe failure to follow protocol, and therefore be subject to civil or criminal liability. Aggressive practices or misconduct by any of our third-partyservice providers in the course of collecting loans could damage our reputation.Furthermore, as we rely on certain third-party service providers, such as third-party payment platforms and custody and settlement serviceproviders, to conduct our business, if these third-party service providers failed to function properly, we cannot assure you that we would be able tofind an alternative in a timely and cost-efficient manner or at all. Any of these occurrences could result in our diminished ability to operate ourbusiness, potential liability to borrowers and investors, inability to attract borrowers and investors, reputational damage, regulatory interventionand financial harm, which could negatively impact our business, financial condition and results of operations.A severe or prolonged downturn in the Chinese or global economy could materially and adversely affect our business and financial condition.Any prolonged slowdown in the Chinese or global economy may have a negative impact on our business, results of operations and financialcondition. In particular, general economic factors and conditions in China or worldwide, including the general interest rate environment andunemployment rates, may affect automobile purchasers and lessees’ willingness to seek working opportunities and financing partners’ ability anddesire to provide financing. Economic conditions in China are sensitive to global economic conditions. The COVID-19 pandemic resulted indeclines in economic activities in China and other parts of the world and raised concerns about the prospects of the global economy. There isconsiderable uncertainty over the long-term effects of the expansionary monetary and fiscalTable of Contents72policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States and China.There have also been concerns over unrest in Ukraine, the Middle East and Africa, which have resulted in volatility in financial and other markets.There have also been concerns about the economic effect of the tensions in the relationship between China and the United States. If presentChinese and global economic uncertainties persist, our business partners may suspend their collaboration or reduce their business with us. Adverseeconomic conditions could also reduce the number of customers seeking to utilize our services. Should any of these situations occur, ourtransaction volume will decline, and our business and financial conditions will be negatively impacted. Additionally, continued turbulence in theinternational markets may adversely affect our ability to access the capital markets to meet liquidity needs. As of the date of this Report, we areunable to assess the full impact of the outbreak on our business, results of operations and financial condition.Our ability to protect the confidential information of our customers may be adversely affected by cyber-attacks, computer viruses, physical orelectronic break-ins or similar disruptions.We collect, store and process certain personal and other sensitive data from our customers, which makes it an attractive target and potentiallyvulnerable to cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions. While we have taken steps to protect theconfidential information that we have access to, our security measures could be breached. Because techniques used to sabotage or obtainunauthorized access to systems change frequently and generally are not recognized until they are launched against a target, we may be unable toanticipate these techniques or to implement adequate preventative measures. Any accidental or willful security breaches or other unauthorizedaccess to our operation systems could cause confidential user information to be stolen and used for criminal purposes. Security breaches orunauthorized access to confidential information could also expose us to liability related to the loss of the information, time-consuming andexpensive litigation and negative publicity. If security measures are breached because of third-party action, employee error, malfeasance orotherwise, or if design flaws in our technology infrastructure are exposed and exploited, our relationships with customers could be severelydamaged, we could incur significant liability and our business and operations could be adversely affected.Moreover, the platforms we cooperate with, which have their own apps, are facing an increasingly tense regulatory environment. With respectto the security of information collected and used by mobile apps, the Announcement of Conducting Special Supervision against the IllegalCollection and Use of Personal Information requires that these app operators shall collect and use personal information in compliance with theCyber Security Law, shall be responsible for the security of personal information obtained from users and take effective measures to strengthenpersonal information protection. If they are investigated or fined by China’s Cyber Security Review Office, we may be required to cooperate withthe government and there is uncertainty as to the potential impact on our business.We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitiveposition.We regard our trademarks, domain names, know-how, proprietary technologies and similar intellectual property as critical to our success, andwe rely on a combination of intellectual property laws and contractual arrangements, including confidentiality and non-compete agreements withour employees and others to protect our proprietary rights. We have 19 software copyrights, 52 trademarks and two trademark applications pendingat the PRC Trademark Office. Thus, we cannot assure you that any of our intellectual property rights would not be challenged, invalidated,circumvented or misappropriated, or such intellectual property will be sufficient to provide us with competitive advantages. In addition, because ofthe rapid pace of technological change in our industries, parts of our business rely on technologies developed or licensed by third parties, and wemay not be able to obtain or continue to obtain licenses and technologies from these third parties on reasonable terms, or at all.Intellectual property protection may not be sufficient in the jurisdiction in China. Statutory laws and regulations are subject to judicialinterpretation and enforcement and may not be applied consistently due to the lack of clear guidance on statutory interpretation. Confidentialityand non-compete agreements may be breached by counterparties, and there may not be adequate remedies available to us for any such breach.Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights in China. Preventing anyunauthorized use of our intellectual property is difficult and costly and the steps we take may be inadequate to prevent the misappropriation of ourintellectual property. In the event that we resort to litigation to enforce our intellectual property rights, such litigation could result in substantialcosts and a diversion of our managerial and financial resources. We can provide no assurance that we will prevail in such litigation. In addition, ourtrade secrets may be leaked or otherwise become available to, or be independently discovered by, our competitors. To the extent that ouremployees or consultants use intellectual property owned by others in their work for us, disputes may arise as to the rights in related know-howand inventions. Any failure in protectingTable of Contents73or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business andoperations.We cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate trademarks,patents, copyrights, know-how or other intellectual property rights held by third parties. We may be from time to time in the future subject to legalproceedings and claims relating to the intellectual property rights of others. In addition, there may be third-party trademarks, patents, copyrights,know-how or other intellectual property rights that are infringed by our products, services or other aspects of our business without our awareness.Holders of such intellectual property rights may seek to enforce such intellectual property rights against us in China, the United States or otherjurisdictions. If any third-party infringement claims are brought against us, we may be forced to divert management’s time and other resourcesfrom our business and operations to defend against these claims, regardless of their merits.Additionally, the application and interpretation of China’s intellectual property right laws and the procedures and standards for grantingtrademarks, patents, copyrights, know-how or other intellectual property rights in China are still evolving and are uncertain, and we cannot assureyou that PRC courts or regulatory authorities would agree with our analysis. If we were found to have violated the intellectual property rights ofothers, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property, and we may incurlicensing fees or be forced to develop alternatives of our own. As a result, our business and results of operations may be materially and adverselyaffected.Some aspects of our digital operations include open source software, and any failure to comply with the terms of one or more of these opensource licenses could negatively affect our business.Some aspects of our digital operations include software covered by open source licenses. The terms of various open source licenses have notbeen interpreted by PRC courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions orrestrictions on our online and mobile-based channels. If portions of our proprietary software are determined to be subject to an open source license,we could be required to publicly release the affected portions of our source code, re-engineer all or a portion of our technologies if required so bythe license, or otherwise be limited in the licensing of our technologies, each of which could reduce or eliminate the value of our technologies andloan products. In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-partycommercial software, as open source licensors generally do not provide warranties or controls on the origin of the software. Many of the risksassociated with use of open source software cannot be eliminated, and could adversely affect our business.From time to time, we may evaluate and potentially consummate strategic investments or acquisitions, which could require significantmanagement attention, disrupt our business and adversely affect our financial results.Although we do not currently have any plans to consummate any acquisitions, we may in the future evaluate and consider strategicinvestments, combinations, acquisitions or alliances to further increase the value of our services and better serve our customers. These transactionscould be material to our financial condition and results of operations if consummated. If we are able to identify an appropriate businessopportunity, we may not be able to successfully consummate the transaction and, even if we do consummate such a transaction, we may be unableto obtain the benefits or avoid the difficulties and risks of such transaction.Strategic investments or acquisitions will involve risks commonly encountered in business relationships, including:●difficulties in assimilating and integrating the operations, personnel, systems, data, technologies, products and services of the acquiredbusiness;●inability of the acquired technologies, products or businesses to achieve expected levels of revenue, profitability, productivity or otherbenefits;●difficulties in retaining, training, motivating and integrating key personnel;●diversion of management’s time and resources from our normal daily operations;Table of Contents74●difficulties in successfully incorporating licensed or acquired technology and rights into our business;●difficulties in maintaining uniform standards, controls, procedures and policies within the combined organizations;●difficulties in retaining relationships with customers, employees and suppliers of the acquired business;●risks of entering markets in which we have limited or no prior experience;●regulatory risks, including remaining in good standing with existing regulatory bodies or receiving any necessary pre-closing or post-closingapprovals, as well as being subject to new regulators with oversight over an acquired business;●assumption of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectual property rightsor increase our risk for liability;●failure to successfully further develop the acquired technology;●liability for activities of the acquired business before the acquisition, including intellectual property infringement claims, violations of laws,commercial disputes, tax liabilities and other known and unknown liabilities;●potential disruptions to our ongoing businesses; and●unexpected costs and unknown risks and liabilities associated with strategic investments or acquisitions.We may not make any investments or acquisitions, or any future investments or acquisitions may not be successful, may not benefit ourbusiness strategy, may not generate sufficient revenues to offset the associated acquisition costs or may not otherwise result in the intendedbenefits. In addition, we cannot assure you that any future investment in or acquisition of new businesses or technology will lead to the successfuldevelopment of new or enhanced loan products and services or that any new or enhanced loan products and services, if developed, will achievemarket acceptance or prove to be profitable.Our business depends on the continued efforts of our senior management. If one or more of our key executives were unable or unwilling tocontinue in their present positions, our business may be severely disrupted.Our business operations depend on the continued services of our senior management, particularly the executive officers named in this Report.While we have provided different incentives to our management, we cannot assure you that we can continue to retain their services. If one or moreof our key executives were unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all, our futuregrowth may be constrained, our business may be severely disrupted and our financial condition and results of operations may be materially andadversely affected, and we may incur additional expenses to recruit, train and retain qualified personnel. In addition, although we have entered intoconfidentiality and non-competition agreements with our management, there is no assurance that any member of our management team will notjoin our competitors or form a competing business. If any dispute arises between our current or former officers and us, we may have to incursubstantial costs and expenses in order to enforce such agreements in China or we may be unable to enforce them at all.Competition for employees is intense, and we may not be able to attract and retain the qualified and skilled employees needed to support ourbusiness.We believe our success depends on the efforts and talent of our employees, including risk management, driver and automobile management,post-financing management, financial and marketing personnel. Our future success depends on our continued ability to attract, develop, motivateand retain qualified and skilled employees. Competition for highly skilled technical, risk management and financial personnel is extremely intense.We may not be able to hire and retain these personnel at compensation levels consistent with our existing compensation and salary structure. Someof the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractiveterms of employment.In addition, we invest significant time and expenses in training our employees, which increases their value to competitors who may seek torecruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements, and the quality of ourservices and our ability to serve borrowers and investors could diminish, resulting in a material adverse effect to our business.Table of Contents75Increases in labor costs in the PRC may adversely affect our business and results of operations.The economy in China has experienced increases in inflation and labor costs in recent years. As a result, average wages in the PRC areexpected to continue to increase. In addition, we are required by PRC laws and regulations to pay various statutory employee benefits, includingpension, housing fund, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to designatedgovernment agencies for the benefit of our employees. The relevant government agencies may examine whether an employer has made adequatepayments to the statutory employee benefits, and those employers who fail to make adequate payments may be subject to late payment fees, finesand/or other penalties. We expect that our labor costs, including wages and employee benefits, shall continue to increase, without regarding to theinfluence of resignation. Furthermore, if the drivers on our platform believe that their earnings on our platform are not competitive with wages thatthey can earn elsewhere, either with competitors or in other lines of work, we may have to increase their earnings to ensure an adequate supply ofdrivers on our platform, and we may be unable to pass that cost on to riders. In addition, if drivers on our platform are reclassified as employeesinstead of independent contractors, our labor costs will be substantially increased, which could adversely affect our business and results ofoperations. See also “Risks Factors—Risks Relating to Our Business—Our business would be adversely affected if drivers were classified asemployees, workers or quasi-employees”.Pursuant to the Labor Contract Law and its implementation rules, employers are subject to stricter requirements in terms of signing laborcontracts, minimum wages, paying remuneration and statutory benefits, determining the term of employee’s probation and unilaterally terminatinglabor contracts. In addition, enterprises are forbidden to force laborers to work beyond the time limit and employers shall pay laborers for overtimework in accordance with the laws and regulations. In the event that we decide to terminate some of our employees or otherwise change ouremployment or labor practices, the Labor Contract Law and its implementation rules may limit our ability to effect those changes in a desirable orcost-effective manner, which could adversely affect our business and results of operations.To date, inflation in China has not materially impacted our results of operations. According to the National Bureau of Statistics of China, theyear-over-year percent changes in the consumer price index for December 2020, 2021 and 2022 were increases of 2.5%, 0.9% and 2.0%,respectively. Although we have not been materially affected by inflation in the past, we may be affected by higher rates of inflation in China in thefuture, particularly if it affects labor costs. Unless we are able to control our labor costs or pass on these increased labor costs to our customers byincreasing the fees of our services, our financial condition and results of operations may be adversely affected.Furthermore, on July 16, 2021, the Ministry of Human Resources and Social Security, the NDRC, the Ministry of Transport, together withseveral other governmental authorities jointly promulgated Guiding Opinions on Safeguarding the Rights and Interests of Labors in New Forms ofEmployment, which require, among others, platform enterprises adopting labor outsourcing and other cooperative labor methods to undertakecorresponding responsibilities in accordance with laws and regulations when labors’ rights and interests are damaged, call for organizing andlaunching pilot programs for occupational injury protection of flexible employment personnel, focusing on platform enterprises in industries suchas mobility, takeout, instant delivery and intra-city freight, and encourage platform enterprises to improve the protection for flexible employmentpersonnel on the platform by purchasing personal accident, employer liability and other commercial insurances. On November 17, 2021, theMinistry of Transport, the NDRC, the CAC and certain other governmental authorities jointly promulgated the Opinions on Strengthening theProtection of the Rights and Interests of Labors in New Forms of Transportation Industry, which provide that the relevant departments shall urgeonline ride hailing platform enterprises to announce pricing rules and income distribution rules to relevant parties such as drivers and passengers.The total amount paid by the passengers and the remuneration of the driver, and the ratio of the difference between the aforementioned amounts tothe total amount paid by the passengers shall be displayed to the drivers. In addition, these opinions aim to strengthen the occupational injuryprotection of online ride hailing drivers, encourage online ride hailing platform to actively participate in the occupational injury protection pilot,and urge online ride hailing platform to pay social insurance for drivers who meet the labor relationship conditions in accordance with the law, andguide and support drivers who do not fully meet the conditions for establishing labor relations with online ride hailing platform enterprises toparticipate in corresponding social insurance. These opinions also emphasize to safeguard the rights of the drivers to have reasonable remunerationand rest, among others.As the interpretation and implementation of labor-related laws and regulations are still evolving, we cannot assure you that our employmentpractices do not and will not violate labor-related laws and regulations in China, which may subject us to labor disputes or governmentinvestigations. We cannot assure you that we have complied or will be able to comply with all labor-related law and regulations. If we are deemedto have violated relevant labor laws and regulations, we could be required to provide additional compensation to our employees and our business,financial condition and results of operations will be adversely affected.Table of Contents76If we cannot maintain our corporate culture as we grow, we could lose the innovation, collaboration and focus that contribute to our business.We believe that a critical component of our success is our corporate culture, which we believe fosters innovation, encourages teamwork andcultivates creativity. As we develop the infrastructure of a public company and continue to grow, we may find it difficult to maintain these valuableaspects of our corporate culture. Any failure to preserve our culture could negatively impact our future success, including our ability to attract andretain employees, encourage innovation and teamwork and effectively focus on and pursue our corporate objectives.Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to ourtechnologies.We may seek additional capital through a combination of public and private equity offerings, debt financings, collaborations and licensingarrangements. To the extent that we raise additional capital through the sale of equity or debt securities, your ownership interest will be diluted andthe terms may include liquidation or other preferences that adversely affect your rights as a stockholder. The incurrence of indebtedness wouldresult in increased fixed payment obligations and could involve restrictive covenants, such as limitations on our ability to incur additional debt,limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability toconduct our business. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, wemay have to relinquish valuable rights to our technologies or grant licenses on terms unfavorable to us.We will incur increased costs as a result of operating as a smaller reporting public company after we no longer qualify to be an emerginggrowth company, and our management will be required to devote substantial time to new compliance initiatives.A smaller reporting company is defined as a company that has a public float of less than $75 million in common equity as of the last businessday of its most recently completed second fiscal quarter, or if a public float of zero, has less than $50 million in annual revenues as of its mostrecently completed fiscal year-end. As a smaller reporting public company, and particularly after we were no longer an emerging growth companysince April 1, 2023, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, theSarbanes-Oxley Act and rules subsequently implemented by the SEC and Nasdaq have imposed various requirements on public companies,including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management andother personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increaseour legal and financial compliance costs and will make some activities more time consuming and costly. For example, we expect that these rulesand regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could make itmore difficult for us to attract and retain qualified members of our board of directors.Pursuant to Section 404, we were not required to furnish a report by our management on our internal control over financial reporting,including an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. However,since we are a smaller reporting company, we are not required to include an attestation report on internal control over financial reporting issued byour independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in aprocess to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need tocontinue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacyof internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls arefunctioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despiteour efforts, there is a risk that neither we nor our independent registered public accounting firm will be able to conclude within the prescribedtimeframe that our internal control over financial reporting is effective as required by Section 404. This could result in an adverse reaction in thefinancial markets due to a loss of confidence in the reliability of our financial statements.If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market pricefor our common stock and trading volume could decline.The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about usor our business. If research analysts do not establish and maintain adequate research coverage or if one or more of the analysts who cover usdowngrade our common stock or publish inaccurate or unfavorable research about our business, the market price for ourTable of Contents77common stock would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, wecould lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for our common stock to decline.Item 1B.Unresolved Staff CommentsNot Applicable.Item 2.PropertiesWe currently maintain our principal executive offices at 16F, Shihao Square, Middle Jiannan Blvd., High-Tech Zone, Chengdu, Sichuan,People’s Republic of China 610000, comprising an aggregate of 965 square meters under a lease agreement that expire in March 2026. The costfor these offices is approximately $10,700 per month in aggregate.We maintain another three offices for our Automobile Transaction and Related Services and Online Ride-hailing Platform Services in thecities of Changsha and Guangzhou, China. The total area of our offices in Changsha is 680 square meters. We lease those offices for a totalmonthly rent of approximately $4,200 under two lease agreements that expire in October 2023 and May 2025, respectively. The total area of ouroffice in Guangzhou is 101 square meters. We lease the office for a total monthly rent of approximately $960 under a lease agreement that expirein December 2023. The total area of the offices of our equity investee company, Jinkailong, is approximately 2,907 square meters in Chengdu.Jinkailong leases those offices for a total monthly rent of approximately $6,800 under two lease agreements that expire in August 2024 andDecember 2023, respectively.We also lease a parking lot for automobiles and an exhibition hall in Changsha, with total areas of 2,750 square meters. The monthly rent forthe parking lot and the exhibition hall is approximately $1,100 and approximately $3,500, respectively. Jinkailong leases a parking lot with totalarea of approximately 7,300 square meters in Chengdu. The monthly rent was approximately $2,900.We consider our current facilities adequate for our current operations.Item 3.Legal ProceedingsWe are not currently a party to any material legal or administrative proceedings. We may from time to time be subject to legal oradministrative claims and proceedings arising in the ordinary course of business. Litigation or any other legal or administrative proceeding,regardless of the outcome, is likely to result in substantial cost and diversion of our resources, including our management’s time and attention.Please see “Risk Factors.”Item 4.Mine Safety DisclosuresNot applicable.Table of Contents78PART IIItem 5.Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity SecuritiesMarket InformationOur common stock trades on the Nasdaq Capital Market under the symbol “AIHS.”HoldersBased upon information furnished by our transfer agent, as of July 10, 2023, the Company had approximately 24 stockholders of record.Because some of our common stock is held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total numberof stockholders represented by these record holders.DividendsWe have never declared or paid cash dividends on our shares. We do not have any present plan to pay any cash dividends on our commonstock in the foreseeable future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and grow ourbusiness.Our board of directors will have the discretion to declare and pay dividends in the future as we are a holding company and we rely ondividends and other distributions on equity paid by our PRC subsidiaries for our cash and financing requirements, including the funds necessary topay dividends and other cash distributions to our stockholders and service any debt we may incur. The Foreign Investment Law, and the CompanyLaw of the PRC (2006), as amended, contain the principal regulations governing dividend distributions by wholly foreign owned enterprises.Under these regulations, wholly foreign owned enterprises may pay dividends only out of their accumulated profits, if any, determined inaccordance with PRC accounting standards and regulations. Additionally, such companies are required to set aside 10% of their after-tax profits ofthe year, if any, to statutory reserve funds until such time as the accumulated reserve funds reach and remain above 50% of the registered capitalamount. These reserves are not distributable as cash dividends except in the event of liquidation and cannot be used for working capital purposes.A PRC company is not permitted to distribute any profits until any losses from prior fiscal years have been offset. Profits retained from prior fiscalyears may be distributed together with distributable profits from the current fiscal year. As of March 31, 2023, the total respective registered capitalof all the Company’s direct subsidiaries was approximately RMB492 million (approximately $71.6 million). And as of March 31, 2023, all theCompany’s subsidiaries incorporated in the PRC have suffered accumulated loss and the Company concluded those subsidiaries did not haveabilities to transfer a portion of their net assets to the Company either in the form of dividends, loans or advances.Furthermore, if our subsidiaries and affiliates in China incur debt on their own in the future, the instruments governing the debt may restrict itsability to pay dividends or make other payments. If we or our subsidiary and affiliates are unable to receive all of the revenues from our operationsthrough the current contractual arrangements, we may be unable to pay dividends on our common stock.Equity Compensation Plan InformationIn September 2018, our board of directors adopted and in November 2018, our stockholders approved, the 2018 Equity Incentive Plan,pursuant to which a maximum of 200,000 (2,000,000 pre-reverse stock split) shares of common stock were reserved for issuance to our employees,officers, directors, consultants. The plan permits the grant of nonqualified stock options, incentive stock options, restricted stock, restricted stockunits (“RSUs”), stock appreciation rights, stock bonus awards, and performance compensation awards. In March 2023, our annual meeting ofstockholders for the year ended March 31, 2022 further approved the amendment to the 2018 Equity Incentive Plan, to increase the number ofshares of common stock reserved under the Plan to 1,500,000 shares. As of the date of this Report, an aggregate of 29,630 RSUs were issued and3,182 RSUs were vested but have not been issued under the plan.Table of Contents79The following table provides information as of March 31, 2023 with respect to the shares of our common stock that may be issued under ourexisting equity incentive plan:Number of securities remainingNumber of securities to beWeighted-average exerciseavailable for future issuanceissued upon exercise ofprice of outstandingunder equity compensationoutstanding options, warrantsoptions, warrants andplans (excluding securitiesPlan category and rights rights reflected in column (a))2018 Equity Incentive Plan — — 1,470,371Purchases of Our Equity SecuritiesNone.Recent Sales of Unregistered SecuritiesNone.Use of ProceedsNot applicable.Item 6.[Reserved]Item 7.Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe following discussion and analysis of our results of operations and financial condition should be read together with our consolidatedfinancial statements and the notes thereto and other financial information, which are included elsewhere in this Report. Our financial statementshave been prepared in accordance with U.S. GAAP. In addition, our financial statements and the financial information included in this Reportreflect our organizational transactions and have been prepared as if our current corporate structure had been in place throughout the relevantperiods.OverviewWe are a provider of automobile transaction and related services, connecting auto dealers, financial institutions, and consumers, who aremostly existing and prospective ride-hailing drivers affiliated with different operators of online ride-hailing platforms in the People’s Republic ofChina (“PRC” or “China”). We provide automobile transaction and related services through our wholly owned subsidiaries, Yicheng FinancialLeasing Co., Ltd., a PRC limited liability company (“Yicheng”), Chengdu Corenel Technology Limited, a PRC limited liability company(“Corenel”), and our majority owned subsidiaries, Chengdu Jiekai Technology Ltd. (“Jiekai”), and Hunan Ruixi Financial Leasing Co., Ltd.(“Hunan Ruixi”), a PRC limited liability company, and equity investee company, Sichuan Jinkailong Automobile Leasing Co., Ltd. (“Jinkailong”).Since October 2020, we also operate an online ride-hailing platform through Hunan Xixingtianxia Technology Co., Ltd. (“XXTX”), a wholly-owned subsidiary of Sichuan Senmiao Zecheng Business Consulting Co., Ltd., our wholly-owned subsidiary (“Senmiao Consulting”). Ourplatform enables qualified ride-hailing drivers to provide application-based transportation services mainly in Chengdu, Changsha, Guangzhou, andother 23 cities in China. Substantially all of our operations are conducted in China.Our Automobile Transactions and Related ServicesOur Automobile Transaction And Related Services are mainly comprised of (i) automobile operating lease where we provide car rentalservices to individual customers to meet their personal needs with lease term no more than twelve months (the “Auto Operating Leasing”); (ii)service fees from new energy vehicles (“NEVs”) leasing, automobile purchase and management services where we charge NEVs lessees orautomobile purchasers for a series of the services provided to them throughout the leasing or purchase process based on the chosen productsolutions, such as ride-hailing driver training, assisting with a series of administrative procedures and other consulting services (the “Purchase andNEVs Services”); (iii) automobile sales where we sell new purchased or used cars to our customers (the “Auto Sales”); (iv) automobile financingwhere we provide our customers with auto finance solutions through financing leases (the “Auto Financing”); (v) auto management and guaranteeservices provided to online ride-hailing drivers after the delivery of automobiles (the “Auto Management and Guarantee Services”); and (vi) othersupporting services provided to online ride-hailingTable of Contents80drivers. We started our facilitation and supporting services in November 2018, the sale of automobiles in January 2019, and financial and operatingleasing in March 2019, respectively.Since November 22, 2018, the acquisition date of Hunan Ruixi, and as of March 31, 2023, we and our former VIEs have facilitated financingfor an aggregate of 1,687 automobiles with a total value of approximately $24.4 million, sold an aggregate of 1,466 automobiles with a total valueof approximately $14.1 million and delivered approximately 2,936 automobiles under operating leases (including 1,826 automobiles used to bedelivered by Jinkailong before March 31, 2022) and 144 automobiles under financing leases to customers, the vast majority of whom are onlineride-hailing drivers.The table below provides a breakdown of the number of vehicles sold or delivered under different leasing arrangements ormanaged/guaranteed by us and corresponding revenue generated for the years ended March 31, 2023 and 2022:For the Years EndedMarch 31,20232022Number ofNumber of Vehicles Revenue* Vehicles Revenue*Auto Operating Leasing 1,802$ 3,453,000 486$ 1,722,000Auto Sales 43$ 243,000 6$ 26,000Auto Financing 144$ 42,000 131$ 102,000Other Services >1,000$ 635,000 >420$ 398,000* The number excluded operation information of our former VIEs and was rounded to the nearest thousand for disclosure purpose.As of March 31, 2022, we deconsolidated Jinkailong and its operation result was not included in our consolidated statements of operations andcomprehensive income (loss) during the year ended March 31, 2023. However, although Jinkailong ceased to be within our consolidation scopesince March 31, 2022, Hunan Ruixi, Corenel and Jiekai continuously provide automobile transaction and related services, mainly Auto OperatingLeasing, similar to Jinkailong in Changsha and Chengdu. During the year ended March 31, 2023, our Auto Operating Leasing, Auto Sales, AutoFinancing and other services income accounted for approximately 79.0%, 5.6%, 1.0% and 14.4% of our total revenue from our automobiletransactions and related services, respectively, while our Auto Operating Leasing, Auto Sales, Auto Financing and other services income accountedfor approximately 76.6%, 1.2%, 4.5% and 17.7% for the year ended March 31, 2022, respectively, excluding the income which Jinkailonggenerated.Our Ride-Hailing Platform ServicesAs part of our goal to provide an all-round solution for online ride-hailing drivers as well as to increase our competitive power in anincreasingly competitive online ride-hailing industry and to take advantage of the market potential, in October 2020, we began operating our ownonline ride-hailing platform in Chengdu. The platform (called Xixingtianxia) was owned and operated by XXTX, of which Senmiao Consultingacquired the 100% equity interest pursuant to a series of investment and supplementary agreements. As of the date of this Report, SenmiaoConsulting has made accumulated capital contribution of RMB39.76 million (approximately $5.79 million) to XXTX and the remaining amount isexpected to be paid before December 31, 2025.XXTX operates Xixingtianxia and holds a national online reservation taxi operating license. The platform is presently servicing online ride-hailing drivers in 26 cities in China, including Chengdu, Changsha, Guangzhou and so on, providing them with a platform to view and takecustomer orders for rides. We currently collaborate with Gaode Map, a well-known aggregation platform in China on our ride-hailing platformservices. Under our collaboration, when a rider uses the platform to search for taxi/ride-hailing services on the aggregation platform, the platformprovides such rider a number of online ride-hailing platforms for selection, including ours and if our platform is selected by the rider, the order willthen be distributed to registered drivers on our platform for viewing and acceptance. The rider may also simultaneously select multiple online ride-hailing platforms in which case, the aggregation platform will distribute the requests to different online ride-hailing platforms which theycooperate with, based on the number of available drivers using the platform in a certain area and these drivers’ historical performance, among otherthings. XXTX generates revenue from providing services to online ride-hailing drivers to assist them in providing transportation services to theriders looking for taxi/ride-hailing services. XXTX earns commissions for each completed order as the difference between an upfront quoted fareand the amount earned by a driver based on actual time and distance for the ride charged to the rider. XXTX settles its commissions with theaggregation platforms on a weekly basis.Table of Contents81Meanwhile, in order to strengthen our market position in certain cities, our collaboration model with Meituan has been changed from the onesame as Gaode, to the one focusing on automobile operating lease and drivers’ management services since August 2021. During the year endedMarch 31, 2023, our subsidiary, Jiekai, and equity investee company and former VIE, Jinkailong, signed cooperation contracts with other onlineride-hailing platforms (“Partner Platforms”), such as Chengdu Anma Zhixing Technology Co., Ltd. and Hangzhou Xiehua Network TechnologyCo., Ltd., whereby the online ride-hailing requests and orders shall be completed on Partner Platforms utilizing the network of cars and drivers ofus and Jinkailong. Jiekai and Jinkailong earned rental income from drivers and earned commissions from Partner Platforms.The acquisition of XXTX has brought us a new stream of revenue and enhanced our goal of providing an all-round solution for online ride-hailing drivers. We launched Xixingtianxia in specific markets within Chengdu in late October 2020, focusing on current driver customers. As ofthe date of this Report, we have expanded marketing of our ride-hailing platform to a larger pool of potential drivers and riders in Chengdu,Changsha, Guangzhou and other 23 cities through cooperation with certain local car rental companies and through offering attractive incentivesand awards to drivers.During the year ended March 31, 2023, approximately 6.1 million rides with gross fare of approximately $19.9 million were completedthrough Xixingtianxia and an average of over 5,100 Active Drivers each month. During the year ended March 31, 2023, we earned online ride-hailing platform service fees of approximately $3.7 million, after netting off approximately $0.5 million incentives paid to Active Drivers.During the year ended March 31, 2022, approximately 11.5 million rides with gross fare of approximately $37.3 million were completedthrough Xixingtianxia and an average of over 9,500 Active Drivers each month. During the year ended March 31, 2022, we earned online ride-hailing platform service fees of $2.7 million, after netting off approximately $3.4 million incentives paid to Active Drivers.We plan to expand our driver base for the platform and automobile rental business while strengthening the royalty of the drivers who bothlease our cars and use our platform while expanding, but our platform is available to others. We plan to launch Xixingtianxia in more cities acrossChina the next 12 months.Key Factors and Risks Affecting Results of OperationsAbility to Increase Our Automobile Lessee and Active Driver BaseOur revenue growth has been largely driven by the expansion of our automobile lessee base and the corresponding revenue generated fromoperating and financial leasing. After the acquisition of XXTX, our revenue growth also depends on the number of completed online ride-hailingorders on our platform, which largely depends on the number of Active Drivers who complete ride-hailing transactions on our platform. Weacquire customers for our Automobile Transaction and Related Services, as well as for our Online Ride-hailing Platform Services, through thenetwork of third-party sales teams, referral from online ride-hailing platforms and our own efforts including online advertising and billboardadvertising. We also send out fliers and participate in trade shows to advertise our services. We plan to increase the number of our Active Driversby expanding our platform to more cities during the next five years as well as marketing our platform to our existing and prospective automobilelessees. We expect the expansion of our Active Driver base to promote the growth of our automobile rental business because we offer automobilerental solutions/incentives specifically targeted at drivers using our platform. An effective cross-selling strategies between our automobile leasingbusiness and Online Ride-hailing Platform Services business is important to our expansion and revenue growth. We also plan to strengthen ourmarketing efforts through the collaboration with certain automobile dealers and through our own team by employing more experienced staffs andimproving the quality and variety of our services. As of March 31, 2023, we had 10 and 59 employees in our own sales department and salesdepartment of our equity investee company, Jinkailong, respectively.Management of Automobile RentalsDue to the fierce competition of online ride-hailing industry in Chengdu and the adverse impact from COVID-19 pandemic across mainlandChina, a significant number of online ride-hailing drivers exited the ride-hailing business and rendered their automobiles to us for sublease or salesin order to generate income/proceeds to cover their payments owed to the financial institutions and us. The demand for short-term car rentalsincreased accordingly, which remained stable during the year ended March 31, 2023. To meet the demand of business expansion in Chengdu,Changsha, and Guangzhou, we also purchased and leased automobiles from third parties for our operating lease. The daily management and timelymaintenance of leased automobiles will have a significant effect on the growth ofTable of Contents82our income from leasing automobiles in the next twelve months. The effective management of our automobiles through our proprietary system andexperienced auto-management team could provide qualified automobiles to potential lessees, either for personal use or providing online ride-hailing services. As of March 31, 2023, we had one parking lot, an exhibition hall and 6 employees in Changsha, and our equity investee company,Jinkailong, had one parking lot and 12 employees in Chengdu, for parking and management of automobiles for operating lease. During the yearsended March 31, 2023 and 2022, the average utilization of the automobiles for operating lease was approximately 64.9% and 56.3%, respectively.Our Service Offerings and PricingThe growth of our revenue depends on our ability to improve existing solutions and services provided, continue identifying evolving businessneeds, refine our collaborations with business partners and provide value-added services to our customers. The attraction of new automobile leasesdepends on our leasing solutions with attractive rental price and flexible leasing terms. We have also adopted a stable pricing formula, consideringthe historical and future expenditure, remaining available leasing months and market price to determine our rental price for varied rental solutions.Furthermore, our product designs affect the type of automobile leases we attract, which in turn affect our financial performance. The attraction ofnew Active Drivers depends on the comprehensive income they could earn from our own or cooperated platform, which is mainly affected by thenumber of orders distributed to them through our platform and the amount of the incentives paid to them from platforms. Our revenue growth alsodepends on our abilities to effectively price our services, which enables us to attract more customers and improve our profit margin.Ability to Retain Key Business CooperatorsHistorically, we have set up a series of strategy and business relationships with certain affiliates of some famous and leading companies ofNEVs manufacturers, online ride-hailing platforms, local NEVs leasing companies, and travel service providers to develop our AutomobileTransaction and Related Services and Online Ride-hailing Platform Services. We earned commission or services fee from them, purchased andleased automobiles for our business at a favorable price. The close relationships have provided us with the necessary capacity to support thedevelopment of our online ride-hailing platform and leasing business. To retain these valuable cooperators and continuously explore opportunitiesto collaborate with them in more areas is important to us to have considerable resources to support the exploration and expansion of our businessinto new cities.Ability to Collect Receivables on a Timely BasisWe used to advance the purchase price of automobiles and all service expenses when we provide related services to the purchasers. We collectthe receivables due from automobile purchasers from their monthly installment payments and repay financial institutions on behalf of thepurchasers every month. As of March 31, 2023, we had accounts receivable, net of allowance of approximately $76,000 and advanced payments ofapproximately $45,000 due from the historical automobile purchasers, net of allowance, which will be collected through installment payments on amonthly basis during the relevant affiliation periods. For receivables from Auto Operating Leasing, we usually settle the rental income with eachonline ride-hailing driver monthly based on the product solutions they chose. In accordance with the development of the operating lease business,our Partner Platforms, such as Gaode, agree to temporarily “lock-up” the fares of the rides which Active Drivers earn from the platform to ensurethe timely collection of its rental receivables from those Active Drivers. Besides, during the year ended March 31, 2023, we settle our commissionswith the Partner Platforms for our online ride-hailing platform services and automobile rental income on a monthly basis. As of March 31, 2023,we had accounts receivable of online ride-hailing service fees of approximately $51,000 in total.The efficiency of collection of the monthly and weekly payments has a material impact on our daily operation. Our risk and asset managementdepartment has set up a series of procedures to monitor the collection from drivers. Our business department has also set up a stable and closerelationship with cooperated platform to ensure the timely collection of commissions. The accounts receivable and advance payments may increaseour liquidity risk. We have used the majority of the proceeds from our equity offerings and plan to seek equity and/or debt financings to pay for theexpenditure related to the automobile purchase. To pay for the expenditure in advance will enhance the stability of our daily operation and lowerthe liquidity risk, and attract more customers.Ability to Manage Defaults and Potential Guarantee Liability EffectivelyOur subsidiary, Hunan Ruixi, and its equity investee company and former VIE, Jinkailong are exposed to credit risk as they are required bycertain financial institutions to provide guarantee on the lease/loan payments (including principal and interests) of theTable of Contents83automobile purchasers referred by us. If a default occurs, they are required to make the monthly payments on behalf of the defaulted purchasers tothe financial institution.We manage the credit risk arising from the default of automobile purchasers and lessees by performing credit checks on each automobilepurchaser or lessee based on the credit reports from People’s Bank of China and third-party credit rating companies, and personal informationincluding residence, ethnicity group, driving history and involvement in legal proceeding. Our risk department continuously monitors the paymentby each purchaser and sends them payment reminders. We also keep monitoring the daily gross fare earned by the online ride-hailing drivers, whoare our majority customers and run their business through our online ride-hailing platform During the year ended March 31, 2023. We do this sothat we can evaluate their financial conditions and provide them with assistance including the transfer of automobile to a new driver if they are nolonger interested in providing ride-hailing services or are unable to earn enough income to make monthly lease/loan payments.In addition, automobiles are used as collateral to secure purchasers’ payment obligations under the financing arrangement. In the event of adefault, Hunan Ruixi and Jinkailong can track the automobile through an installed GPS system and repossess and handover the automobile over tothe financial institution so that they can be released from their guarantee liability. However, if a financial institution initiates a legal proceeding tocollect payments due from a defaulted automobile purchaser, Hunan Ruixi and Jinkailong may be required to repay the defaulted amount as aguarantor. If they are unable to undertake the responsibility as a guarantor, their own assets, such as cash and cash equivalents, may be frozen bythe court if the financial institution successfully requests for an order to freeze our assets or bank accounts, which may adversely affect ouroperations.As of March 31, 2023, 108 online ride-hailing drivers we serviced rendered their automobiles to Hunan Ruixi for sublease or sale. In general,most of the defaulted automobile purchasers who want to remain in online ride-hailing business would pay the default amounts within one to threemonths. Our risk management department typically starts to interact with overdue purchasers if they have missed one monthly installmentpayment. However, if the balances are overdue for more than two months or the purchasers decide to exit the online ride-hailing business andsublease or sell their automobiles, we would fully record an allowance against receivables from those purchasers. As of March 31, 2023, werecognized an accumulated allowance against receivables of $378,941 from these purchasers served by Hunan Ruixi. For the year ended March 31,2023, we recognized approximately $7,300 expenses for the guarantee services as the drivers exited the online ride-hailing business and would nolonger make the monthly repayments to us. During the year ended March 31, 2023, we sub-leased approximately 49 rendered automobiles in totalto other customers. By subleasing automobiles from these drivers, we believe we can cope with the defaults and control associated risks.Further, the automobiles subject to our financing leases are not collateralized by us. As of March 31, 2023, the total value of non-collateralizedautomobiles was approximately $356,000. We believe our risk exposure of financing leasing is immaterial as we have experienced limited defaultcases and we are able to re-lease those automobiles to drivers under financing leases.Actual and Potential Impact of Coronavirus (COVID-19) in China on Our BusinessImpact on the Automobile Transactions and Related ServicesOur Automobile Transactions and Related Services have been gradually recovering from the adverse impact of COVID-19 pandemic. As ofMarch 31, 2023, 108 online ride-hailing drivers we serviced rendered their automobiles to Hunan Ruixi. As a result, we recorded accumulatedallowance for doubtful accounts of approximately $378,941 for them. As most of the leasing term of the automobiles we delivered in Changsha inprior periods has come to the end, during the year ended March 31, 2023, the number of newly rendered automobiles decreased to 8 as comparedwith 25 during the year ended March 31, 2022. Meanwhile, over 1,200 online ride-hailing drivers rendered their automobiles to Jinkailong as ofMarch 31, 2023.However, our daily cash flow will be adversely impacted as a result of the unsatisfied collection from the online ride-hailing drivers and ourpotential guarantee expenditure pursuant to the financing agreements we guaranteed. Our cash flow has been adversely impacted by localresurgences of COVID-19 in Chengdu, Changsha and Guangzhou while the COVID-19 measures in China keep applying the current control andprevention measures especially from September to November 2022, which had negative impact on the online ride-hailing market accordingly dueto travel restriction. In addition, our automobile purchasers and lessees may be unable to generate sufficient income to make their monthlyinstallment payments, which may create a significant risk of continuing default from our automobile purchasers or lessees. As a result, we mayhave to repay the defaulted amount as a guarantor or lose the monthly rental revenue. If we experience a widespread default by our automobilepurchasers/lessees, our cash flow and results of operations will beTable of Contents84materially and adversely affected. As a consequence, we could face shortfalls in liquidity without extra financing resources for the foreseeablefuture and lose the ability to grow our business or may even be required to scale down or restructure our operations.Impact on the Ride-Hailing Platform ServicesXXTX commenced the operation of its online ride-hailing platform since late October 2020 and have witnessed the decrease in online ride-hailing orders in July 2021, November 2021, February 2022, September 2022 and December 2022, when Chengdu, Changsha and Guangzhoureported several confirmed COVID-19 cases. Under the zero-tolerance approach to smothering Covid outbreaks in China, the local governmentusually ensured concrete and effective measures to fight against the resurgence, including suspending some traffic activities in certain medium-riskand high-risk areas. Fewer people took ride-hailing trips as a result and the average daily rides completed through our platform decreased and ourincome decreased accordingly. The average daily rides completed through our platform decreased by approximately 20% to 30% compared to thatbefore the reporting of the new COVID-19 cases in these cities and recovered one to two weeks later as the new confirmed cases were fully undercontrol. Furthermore, the online ride-hailing services in Chengdu was temporally suspended by the Municipal Communications Commission ofChengdu from September 1 to September 18, 2022, when Chengdu reported accumulated over 1,000 COVID-19 cases since late August 2022. Wealso had no income from the online ride-hailing platform services in Chengdu during those periods. The total number of rides completed throughour platform in September 2022 decreased by approximately 35% compared with the prior months. Consequently, the income of our AutomobileTransaction and Related Services customers who ran their business through the online ride-hailing platforms also decreased during this period.Since March 2022, major outbreaks of the Omicron variant of COVID-19 occurred in many cities of China. These outbreaks resulted inlockdowns, highway closures and other restrictive measures across China, which caused severe hardships to countless dealers and consumers.Furthermore, Chengdu suffered an infection peak in the middle of December, after China shifted the prevention and control of COVID-19infection strategy in December 2022. Base on the surveys released from Sichuan Provincial Center for Disease Control and Prevention, the actualinfection rate of the surveyed population was estimated to be over 80 percent. And the peak of positive detection in the whole province wasconcentrated from December 12 to 23, which caused significant decreasing orders for online ride-hailing in December. The central government ofChina has adjusted the prevention and control measures of COVID-19, and gradually restored the order of production and life, which would bringoptimism for us to operate our online ride-hailing platform in the next 12 months.We may have a larger cash outflow in our daily operations in the next twelve months as we expand our Online Ride-hailing Platform Servicesin more cities in China and incur more marketing and promotion expenses. Our cash flow situation may worsen if the economy in China does notimprove as expected.Any of these factors related to COVID-19 and other similar or currently unforeseen factors beyond our control could have an adverse effect onour overall business environment, causing uncertainties in the regions in China where we conduct business, and causing our business to suffer inways that we cannot predict and materially and adversely impact our business, financial condition and results of operations.Ability to Manage and Grow New Ride-Hailing BusinessDue to the fierce competition of online ride-hailing industry in Chengdu, Changsha and Guangzhou, our ability to increase our revenue overtime may be limited if we focus only on our current Automobile Transaction and Related Services business model. As part of our strategy toprovide an all-encompassing solution for online ride-hailing drivers, we have expanded our services to drivers through the operation ofXixingtianxia, our own online ride-hailing platform, which has brought us a new stream of revenue. We generate revenue from commissionsearned from each completed order, which represent the difference between an upfront quoted fare and the amount earned by a driver based onactual time and distance for the ride charged to the rider. As the aggregation platforms distribute the demand orders to different online ride-hailingplatforms, the flow of drivers in our area of operations is enhanced, leading to a higher probability that more ride orders will be distributed to ourplatform, which in turn will increase the revenue of the drivers who use our platform (and our revenue). This also allows us to attract more driversto engage their online ride-hailing business on our platform. Through a series of promotion and effective daily management and training services,we expect our own online ride-hailing platform will offer us a stable revenue source which can also help grow our automobile financing andleasing business. Besides, we are dealing with other trip platforms to attract more riders choosing their trip through our platform.Pursuant to the cooperation agreement signed with Didi Chuxing Technology Co., Ltd. (“Didi”) for our Automobile Transaction and RelatedServices, we may be penalized by Didi, or our partnership with Didi may be terminated as we now operate a businessTable of Contents85competitive with Didi. However, the service fees we earned from Didi for automobile transaction and related services currently represent less than0.1% of our total revenue. Therefore, we believe that the risk of termination of cooperation with Didi on automobile transaction and relatedservices will not have a material influence on our business or results of operations.Ability to Compete EffectivelyOur business and results of operations depend on our ability to compete effectively. Overall, our competitive position may be affected by,among other things, our service quality and our ability to price our solutions and services competitively. We will set up and continuously optimizeour own business system to improve our service quality and user experience. Our competitors may have more resources than we do, includingfinancial, technological, marketing and others and may be able to devote greater resources to the development and promotion of their services. Wewill need to continue to introduce new or enhance existing solutions and services to continue to attract automobile dealers, financial institutions,car buyers, lessees, ride-hailing drivers and other industry participants. Whether and how quickly we can do so will have a significant impact onthe growth of our business.Market Opportunity and Government Regulations in ChinaThe demand for our services depends on overall market conditions of the online ride-hailing industry in China. The continuous growth of theurban population places increasing pressure on the urban transportation and the improvement of living standards has increased the market demandfor quality travel in China. Traditional taxi service is limited, and the emerging online platforms have created good opportunities for thedevelopment of the online ride-hailing service market. According to the 51th Statistical report on Internet Development in China published inMarch 2023 by the China Internet Network Information Center (the “CNNIC”), the number of online ride-hailing service users had reached 473million by the end of December 2022, and took approximately 40.9% of the total number of Chinese internet users. The online ride-hailingindustry is facing increasing competition in China and is attracting more capital investment. According to the Ministry of Transportation (the“MOT”) of the People’s Republic of China, as of May 31, 2023, approximately 313 online ride-hailing platforms have obtained booking taxioperating licenses and the total volume of online ride-hailing orders was approximately 735 million in May 2023 in China. Meanwhile,approximately 2.36 million online booking taxi transportation certificates and approximately 5.58 million online booking taxi driver’s licenseswere issued nationwide in China. Since 2019, in addition to the traditional online ride-hailing platforms, automobile manufacturers, offlineoperation service companies, financial and map service providers, among others, have built cooperation relationships with each other to make theonline ride-hailing industry a more aggregated industry.The online ride-hailing industry may also be affected by, among other factors, the general economic conditions in China. The interest rates andunemployment rates may affect the demand of ride-hailing services and automobile purchasers’ willingness to seek credit from financialinstitutions. Adverse economic conditions could also reduce the number of qualified automobile purchasers and online ride-hailing drivers seekingcredit from the financial institutions, as well as their ability to make payments. Should any of those negative situations occur, the volume and valueof the automobile transactions we service will decline, and our revenue and financial condition will be negatively impacted.In order to manage the rapidly growing ride-hailing service market and control relevant risks, on July 27, 2016, seven ministries andcommissions in China, including the MOT, jointly promulgated the “Interim Measures for the Administration of Online Taxi Booking BusinessOperations and Services” (“Interim Measures”) and amended it on December 28, 2019 and November 30, 2022, which legalizes online ride-hailingservices such as XXTX and requires the online ride-hailing services to meet the requirements set out by the measures and obtain taxi-bookingservice licenses and take full responsibility of the ride services to ensure the safety of riders.On November 5, 2016, the Municipal Communications Commission of Chengdu City and a number of municipal departments jointly issuedthe “Implementation Rules for the Administration of Online Booking Taxi Management Services for Chengdu”, which was abolished and replacedby the updated version issued on July 26, 2021. On August 10, 2017, the Transportation Commission of Chengdu further issued the guidelines oncompliance requirements for online ride-hailing businesses, including Working Process for the Online Appointment of Taxi Drivers QualificationExamination and Issuance and Online Appointment Taxi Transportation Certificate Issuance Process. On November 28, 2016, GuangzhouMunicipal People’s Government promulgated Interim Measures for the Management of Online Ride Hailing Operation and Service in Guangzhou,as amended on November 14, 2019. According to these regulations and guidelines, three licenses /certificates are required for operating the onlineride-hailing business in Chengdu and Guangzhou: (1) the ride-hailing service platform such as XXTX should obtain the online booking taxioperating license; (2) the automobiles used for online ride-hailing should obtain the online booking taxi transportation certificate (“automobilecertificate”); (3)Table of Contents86the drivers should obtain the online booking taxi driver’s license (“driver’s license”). Besides, all the new cars used for online ride-hailing inChengdu should be NEVs since July 2021.On July 23, 2018, the General Office of Changsha Municipal People’s Government issued the “Detailed Rules for the Administration ofOnline Booking Taxi Management Services for Changsha.” On June 12, 2019, the Municipal Communications Commission of Changsha Cityfurther issued “Transfer and Registration Procedures of Changsha Online Booking of Taxi.” According to the regulations and guidelines, to operatea ride-hailing business in Changsha requires similar licenses in Chengdu, except those automobiles used for online ride-hailing services arerequired to meet certain standards, including that the sales price (including taxes) is over RMB120,000 (approximately $17,000). In practice,Hunan Ruixi is also required to employ a safety administrator for every 50 automobiles used for online ride-hailing services and submit dailyoperation information of these automobiles such as traffic violation to the Transport Management Office of the Municipal CommunicationsCommission of Changsha City every month. On November 28, 2016, Guangzhou Municipal People’s Government also promulgated InterimMeasures for the Management of Online Ride Hailing Operation and Service in Guangzhou, as amended on November 14, 2019.In addition to the national online reservation taxi operating license, XXTX and its subsidiaries also obtained the online reservation taxioperating license in 31 cities, including Chengdu, Changsha, Guangzhou, Tianjin, Shenyang, Harbin, Nanchang, Haikou, Xining, two cities inZhejiang, Shandong, and Guangxi Province, respectively, three cities in Guizhou Province, five cities in Jiangsu Province, other two cities inHunan and Guangdong Province, respectively, and other four cities in Sichuan Province from June 2020 to May 2023, to operate the online ride-hailing platform services.However, approximately 57% of our ride-hailing drivers have not obtained the driver’s license as of March 31, 2023 while all of the cars usedfor online ride-hailing services which we provided management services have the automobile certificate. Without requisite automobile certificateor driver’s license, these drivers may be suspended from providing ride-hailing services, confiscated their illegal income and subject to fines of upto 10 times of their illegal income. Starting in December 2019, Didi began to enforce such limitation on drivers in Chengdu who have a driver’slicense but operate automobiles without the automobile certificate.Furthermore, according to the Interim Measures, no enterprise or individual is allowed to provide information for conducting online ride-hailing services to unqualified vehicles and drivers. Pursuant to the Interim Measures, XXTX and its subsidiaries may be fined betweenRMB5,000 to RMB30,000 (approximately $728 to $4,370) for violations of the Interim Measures, including providing online ride-hailing platformservices to unqualified drivers or vehicles. During the year ended December 31, 2023, we have been fined by approximately $19,000 by TrafficManagement Bureaus in Chengdu and Changsha, of which, approximately $4,000, respectively, was further compensated by drivers or cooperatedthird parties, respectively. If we are deemed in serious violation of the Interim Measures, our Online Ride-hailing Platform Services may besuspended and the relevant licenses may be revoked by certain government authorities.We are in the process of assisting the drivers to obtain the required certificate and license both for our Automobile Transaction and RelatedServices and our Online Ride-hailing Platform Services. However, there is no guarantee that all of the drivers who run their online ride-hailingbusiness through our platform would be able to obtain all the certificates and licenses. Our business and results of operations will be materially andadversely affected if our affiliated drivers are suspended from providing ride-hailing services or imposed substantial fines or if we are found to bein serious violation of the Interim Measures due to the drivers’ failure to obtain requite licenses and/or automobile certificates in connection withproviding services through our platform.The Chinese government has exercised and continued to exercise substantial control over virtually every sector of the Chinese economythrough regulation and state ownership. For example, the Chinese cybersecurity regulator announced on July 2, 2021 that it had begun aninvestigation of Didi and two days later ordered that the company’s app be removed from smartphone app stores. We believe that our currentoperations are in compliance with the laws and regulations of the Chinese cybersecurity regulator. However, the Company’s operations could beadversely affected, directly or indirectly, by existing or future laws and regulations relating to its business or industry.Table of Contents87Results of Continuing Operations for the year ended March 31, 2023 Compared to the year ended March 31, 2022For the Years EndedMarch 31, 2023 2022 ChangeRevenues$ 8,082,514$ 4,913,102$ 3,169,412Cost of revenues (6,590,001) (7,001,297) 411,296Gross profit (loss) 1,492,513 (2,088,195) 3,580,708Operating expenses Selling, general and administrative expenses (6,142,447) (9,035,142) 2,892,695Provision for doubtful accounts, net of recovery (1,487,889) (235,279) (1,252,610)Impairments of inventories (3,085) (60,398) 57,313Impairments of long-lived assets and goodwill — (142,974) 142,974Total operating expenses (7,633,421) (9,473,793) 1,840,372Loss from operations (6,140,908) (11,561,988) 5,421,080Other income (expenses), net 664,001 (107,444) 771,445Interest expense — (5,893) 5,893Interest expense on finance leases (25,675) (55,844) 30,169Change in fair value of derivative liabilities 1,711,889 6,951,482 (5,239,593)Issuance cost incurred for issuing series A convertible preferred stock — (821,892) 821,892Loss before income taxes (3,790,693) (5,601,579) 1,810,886Income tax expenses — (4,566) 4,566Net loss from continuing operations$(3,790,693)$ (5,606,145)$ 1,815,452RevenuesWe started generating revenue from Automobile Transaction and Related Services from our acquisition of Hunan Ruixi on November 22,2018 and revenue from online ride-hailing platform services from our acquisition of XXTX on October 23, 2020, respectively.Revenue for the year ended March 31, 2023 increased by $3,169,412, or approximately 65%, as compared with the year ended March 31,2022. The increase was mainly due to the increase of operating lease revenues from automobile rentals and revenues from online ride-hailingplatform services, as a result of the expansion and our continuous “efficiency - improving” strategy of those two businesses.As we have focused on our automobile rental and Online Ride-hailing Platform Services business, we expect revenue from our online ride-hailing platform services and automobile rental to keep stable over the next twelve months. We also expect them to continuously account for amajority of our revenues. We plan to provide a series of product solutions to sustain and further increase the number of our automobiles foroperating leases.Table of Contents88The following table sets forth the breakdown of revenues by revenue source for the years ended March 31, 2023 and 2022:For the Years EndedMarch 31, 2023 2022Revenue from automobile transactions and related services$ 4,372,569$ 2,247,645- Operating lease revenues from automobile rentals 3,453,392 1,722,480- Service fees from NEVs leasing 350,510 126,227- Revenues from sales of automobiles 243,065 26,019- Financing revenues 41,738 101,828- Service fees from automobile management and guarantee services 40,158 73,554- Service fees from automobile purchase services 33,585 1,468- Other service fees 210,121 196,069Revenue from online ride-hailing platform services 3,709,945 2,665,457Total Revenue$ 8,082,514$ 4,913,102Revenue from Automobile Transactions and Related ServicesRevenue from our automobile transaction and related services mainly includes operating lease revenues from automobile rentals, service feesfrom NEVs leasing, sales revenue of automobiles, financing revenues, service fees from automobile management and guarantee services, servicefees from automobile purchase services, and other services fees, which accounted for approximately 79.0%, 8.0%, 5.6%, 1.0%, 0.9%, 0.8% and4.7%, respectively, of the total revenue from automobile transaction and related services during the year ended March 31, 2023. Meanwhile,operating lease revenues from automobile rentals, service fees from NEVs leasing, financing revenues, service fees from automobile managementand guarantee services, sales revenue of automobiles, and other services fees, which accounted for approximately 76.6%, 5.6%, 4.5%, 3.3%, 1.2%and 8.8%, respectively, of the total revenue from automobile transaction and related services during the year ended March 31, 2022.Operating lease revenues from automobile rentalsWe generate revenues from leasing our own automobiles, sub-leasing automobiles leased from third-parties or rendered by online ride-hailingdrivers with their authorization for a lease term of no more than twelve months. The increase of rental income of $1,730,912 during the year endedMarch 31, 2023 was due to the increased number of leased automobiles. We leased over 1,800 automobiles with an average monthly rental incomeof $478 per automobile, resulting in a rental income of $3,453,392, including rental income of $344,120 from Jinkailong, for the year ended March31, 2023. While we leased over 480 automobiles with an average monthly rental income of $485 per automobile, resulting in a rental income of$1,722,480, for the year ended March 31, 2022. Meanwhile, the rental income of approximately $1.28 million generated from Jinkailong waseliminated in the revenue of continuing operations while the sub-leasing income from these automobiles of approximately $1.8 million wasrecorded in the revenue of discontinued operations for the year ended March 31, 2022.Service fees from NEVs leasingWe generated revenues of $350,510 and $126,227 from leasing NEVs by charging leases service fees during the years ended March 31, 2023and 2022, respectively, in accordance with the increasing demand for NEVs in the online ride-hailing industry in Chengdu, Changsha andGuangzhou. The amount of services fees for NEVs leasing is based on its product solutions. The increase of $224,283 was mainly due to theincrease in the number of NEVs we own and lease to drivers.Sales of automobilesAs we have shifted our business focus to automobile leasing, we sold one new and 42 used automobiles with income of $243,065 during theyear ended March 31, 2023. Meanwhile, we sold one new and five used automobiles with income of $26,019 during the year ended March 31,2022.Table of Contents89Financing revenuesWe started our financial leasing business in March 2019 and began to generate interest income from providing financial leasing services toride-hailing drivers in April 2019. We also charge the customers of our automobile financing facilitation services interest on their monthlypayments which cover purchase price of automobile and our services fees and facilitation fees for terms of 36 or 48 months. We recognized a totalinterest income of $41,738 from an average monthly number of 44 automobiles and $101,828 from an average monthly number of 75 automobilesduring the years ended March 31, 2023 and 2022, respectively. The decrease was further aggravated by the decrease in the monthly amortization ofinterest income for automobiles leased in prior periods.Service fees from automobile management and guarantee services and Service fees from automobile purchase servicesThe majority of our customers are online ride-hailing drivers. Some of them also entered into affiliation service agreements in prior periodswith us pursuant to which we provide them post-transaction management services and guarantee services. The decrease of $33,396 was due to thedecrease in the accumulated number of rendered automobiles which were subsequently rented to ride-hailing drivers whom we charge rent ratherthan charging management and guarantee services fee. We had management and guarantee services for over 110 and 200 automobiles during theyears ended March 31, 2023 and 2022, respectively.We generate revenues from providing a series of automobile purchase services throughout the automobile purchase transaction process,including sales-type lease. We had revenue from 15 new automobiles purchase transactions during the year ended March 31, 2023 while we hadrevenue from only two new automobile purchase services during the year ended March 31, 2022.Other service feesWe generate other revenues such as monthly services commissions from Partner Platforms and other companies, and other miscellaneousservice fees charged to our customers, which accounted for approximately 85.3%, and 14.7% of revenues from other service fees during the yearended March 31, 2023, respectively. The commissions from insurance companies, Ride-hailing platform companies and other companies, andother miscellaneous service fees charged to the automobile purchasers, which accounted for approximately 53.4%, and 46.6% of revenues fromother service fees during the year ended March 31, 2022, respectively.Revenue from online ride-hailing platform servicesWe generate revenue from providing services to online ride-hailing drivers to assist them in providing transportation service to the ridersthough our platform and earn commissions for each completed order equal to the difference between an upfront quoted fare and the amount earnedby a driver based on actual time and distance for the ride charged to the rider since October 2020. During the year ended March 31, 2023,approximately 6.1 million rides with gross fare of approximately $19.9 million were completed through our Xixingtianxia platform and we earnedonline ride-hailing platform service fees of $3,709,945, after netting off approximately $0.5 million incentives paid to Active Drivers.During the year ended March 31, 2022, approximately 11.5 million rides with gross fare of approximately $37.3 million were completedthrough our Xixingtianxia platform and we earned online ride-hailing platform service fees of $2,665,457, after netting off approximately $3.4million incentives paid to Active Drivers. We paid excess driver incentives to attract drivers to our platform during the year ended March 31, 2022based on the historical market strategy while reduced the expenditure in the year ended March 31, 2023 in accordance with the market change.Cost of RevenuesCost of revenues represents (1) the amortization, daily maintenance and insurance expense related to our Auto Operating Leasing of$3,975,857; (2) technical service charges, insurance and other expenses related to our Online Ride-Hailing Platform Services of $2,295,233; and(3) costs of our Auto Sales of $318,911. Cost of revenues decreased by $411,296 during the year ended March 31, 2023 as compared with the lastyear, mainly due to the decrease of $1,510,910 in direct expense and technical service fees of online ride-hailing platform services due to thedecrease in the number of completed orders, partially offset by the increase of $818,259 in costs of automobiles under operating leases as a resultof business expansion and $281,355 in costs of automobile sold as the number of automobiles sold increased from 5 to 43. During the year endedMarch 31, 2023, the costs of automobiles under operating leases with amount of $509,904 was from one of our related parties.Table of Contents90Gross Profit (Loss)We had gross profit of $1,492,513 during the year ended March 31, 2023 as compared with the gross loss of $2,088,195 in the last year. Thechange of $3,580,708 was mainly due to the increase in profit in our online ride-hailing platform services and operating lease, partially offset bythe gross loss of $75,846 from sales of automobiles. The following table sets forth the breakdown of gross profit (loss) by major revenue source forthe years ended March 31, 2023 and 2022: For the Years Ended March 31,20232022- Auto Operating Leasing$ (522,465)$ (1,435,118)- Auto Sales (75,846) (11,537)- Other Services 676,112 499,146- Online Ride-Hailing Platform Services 1,414,712 (1,140,686)Total Gross Profit (Loss)$ 1,492,513$ (2,088,195)We had a gross profit of $1,414,712 in our online ride-hailing platform services during the year ended March 31, 2023, which increased by$2,555,398 from a gross loss of $1,140,686 in the same period in 2022. We paid excess driver incentives to attract drivers to our platform duringthe year ended March 31, 2022 based on the historical market strategy while reduced the driver incentives in the year ended March 31, 2023 inaccordance with the market change. We had a gross loss of $522,465 in our automobile operating leasing during the year ended March 31, 2023,which decreased by $912,653 from a gross loss of $1,435,118 in the same period in 2022. The decrease was mainly due to the increase in theaverage utilization and the decrease in the average daily maintenance and insurance expense of the automobiles for operating lease as we usedmore NEVs in the year ended March 31, 2023.Selling, General and Administrative ExpensesSelling, general and administrative expenses primarily consist of salary and employee benefits, office rental expense, travel expenses, andother costs. Selling, general and administrative expenses decreased from $9,035,142 for the year ended March 31, 2022 to $6,142,447 for the yearended March 31, 2023, representing a decrease of $2,892,695, or approximately 32.0%. The decrease was attributable to that our continuouscontrol on costs and streamline expenses during the year ended March 31, 2023. The decrease mainly consists of (1) a decrease of $912,317 inprofessional service fees such as financial, legal and market consulting as we incurred a consulting fee of approximately $653,000 for certainmarket research and business development advisory services during the year ended March 31, 2022; (2) a decrease of $704,955 in salary andemployee benefits as the average monthly number of our employee decreased from 199 to 175; (3) a decrease of $782,337 in advertising andpromotion for the online ride-hailing platform services as the number of completed orders decreased and we cut down market promotionexpenditure in accordance with the market change in the year ended March 31, 2023; (4) a decrease of $526,646 in offices expenditure as a resultof reducing office rental and insurance charges; (5) a decrease of $51,598 in amortization of intangible assets and automobiles which wererendered to us but have not been sub-leased as we leased more automobiles; and partially offset by (6) a liquidated damages compensation of$86,250 for investors in November 2021 Private Placement during the year ended March 31, 2023.Provision for doubtful accounts, net of recoveryWe re-evaluated the possibility of collection of unsettled balances from customers of our automobile transactions and related services, andprovided bad debt expense for the receivables of $1,484,495 and $3,394, respectively, against receivables from Jinkailong and an automobilepurchaser during the year ended March 31, 2023. While we provided additional allowance for doubtful accounts of $123,744 for unsettledbalances from historical customers, allowance of $111,536 for a historical business cooperator who did not settle its balance on time, respectively,during the year ended March 31, 2022.Impairments of inventoriesFor the year ended March 31, 2023 and 2022, we evaluated the net realizable value of our inventories and recognized an impairment loss of$3,085 and $60,398, respectively, for certain automobiles for sale based on their selling price in the market.Table of Contents91Impairments of Long-lived Assets and GoodwillFor the years ended March 31, 2023, we evaluated the future cash flow of our right-of-use assets and our own vehicles used for operatingleases during their remaining useful life. We did not recognize any impairment loss for the year ended March 31, 2023. While we recognized animpairment loss of $3,044 for certain right-of-use assets and our own vehicles as property and equipment that could not generate sufficient cash,and fully recognized impairment of $139,930 against goodwill during the year ended March 31, 2022.Other income, netFor the year ended March 31, 2023, we had other income, net of $664,001, which primarily consist of the income of approximately $453,000from the disposal of our right-of-use assets and our own vehicles used for operating leases; and the miscellaneous income of approximately$211,000. For the year ended March 31, 2022, we had other expenses, net of $107,444, primarily consist of: (1) a donation by Hunan Ruixi ofapproximately $190,000 (RMB1,200,000) to a public welfare foundation in Changsha, China; (2) penalty fines of $97,000 for our served onlineride-hailing drivers who failed to obtain the ride-hailing driver’s licenses approximately; which was offset by (2) income of approximately$198,000 from some leases.Interest Expense and Interest Expense on Finance LeasesInterest expense for the year ended March 31 2022 resulted from the borrowings of Corenel from a financial institution for its automobilecommercial insurance by installment.Interest expense on finance leases for the year ended March 31, 2023 was $25,675, representing the interest expense accrued under financingleases for the leased automobiles rendered to us for sublease or sale by the online ride-hailing drivers who exited the ride-hailing business. Interestexpense on finance leases decreased by $30,169, or approximately 54%, as compared with the year ended March 31, 2022, mainly due to thedecreased weighted average number of rendered automobiles during the year ended March 31, 2023.Change in Fair Value of Derivative LiabilitiesWarrants issued in our registered direct offerings that took place in June 2019, February 2021 and May 2021, and the August 2020underwritten public offering, and November 2021 private placement were classified as liabilities under the caption “Derivative Liabilities” in theconsolidated balance sheet and recorded at estimated fair value at each reporting date, computed using the Black-Scholes valuation model. Thechange in fair value of derivative liabilities for the year ended March 31, 2023 was a gain of $1,711,889 in total as our stock price as of March 31,2023 was lower than the price on March 31, 2022. The gain consists of a gain of $12,432 for the warrants issued in our June 2019 registered directoffering, a gain of $36,131 for the warrants issued in our August 2020 underwritten public offering, a gain of $54,052 for the warrants issued in ourFebruary 2021 registered direct offering, a gain of $662,767 for the warrants issued in our May 2021 registered direct offering, and a gain of$946,507 for the warrants issued in our November 2021 private placement.The change in fair value of derivative liabilities for the year ended March 31, 2022 was a gain of $6,951,482 in total, which consists of a gainof $185,727 for the warrants issued in our June 2019 registered direct offering, a gain of $352,944 for the warrants issued in our August 2020underwritten public offering, a gain of $572,018 for the warrants issued in our February 2021 registered direct offering, a gain of $2,725,530 forthe warrants issued in our May 2021 registered direct offering, and a gain of $3,115,263 for the warrants issued in our November 2021 privateplacement.Income Tax ExpenseGenerally, our subsidiaries are subject to enterprise income tax on their taxable income in China at a rate of 25%. The enterprise income tax iscalculated based on the entity’s global income as determined under PRC tax laws and accounting standards. All subsidiaries in China incurredcumulative losses and no tax expense was recorded for the year ended March 31, 2023, while for the year ended March 31, 2022, income taxexpense of $4,566 mainly represented the provision of enterprise income tax resulting from the taxable income of $18,264 from Hunan Ruixi.Net loss from continuing operationsAs a result of the foregoing, net loss from our continuing operations for the year ended March 31, 2023 was $3,790,693, representing adecrease of $1,815,452 from net loss of $5,606,145 for the year ended March 31, 2022.Table of Contents92Results of Discontinued Operations for the year ended March 31, 2022For the Year Ended March 31, 2022Revenues$ 6,830,116Cost of revenues (5,183,806)Gross profit 1,646,310Operating expenses Selling, general and administrative expenses (4,139,800)Provision for doubtful accounts (11,746)Impairments of long-lived assets (32,479)Total operating expenses (4,184,025)Loss from operations (2,537,715)Other income, net 118,344Interest expense (50,472)Interest expense on finance leases (277,366)Loss before income taxes (2,747,209)Income tax expenses —Loss from discontinued operations, net of applicable income taxes (2,747,209)Net gain from deconsolidation of VIEs - discontinued operations 10,975,101Gain from discontinued operations$ 8,227,892The results of discontinued operations mainly consist of the financial figures of our former VIE, Jinkailong. As of March 31, 2022, wedeconsolidated Jinkailong and its operation result was not included in our consolidated statements of operations and comprehensive income (loss)during the year ended March 31, 2023.RevenuesThe following table sets forth the breakdown of revenues by revenue source for the year ended March 31, 2022:For the Year Ended March 31, 2022- Operating lease revenues from automobile rentals$ 5,452,483- Commission from an online ride-hailing platform 399,600- Service fees from NEVs leasing 232,295- Service fees from automobile management and guarantee services 217,838- Financing revenues 15,855- Other service fees 512,045Total revenues from discontinued operations$ 6,830,116Revenue from the automobile transaction and related services (discontinued operations) mainly included operating lease revenues fromautomobile rentals, commissions from online ride-hailing platforms, service fees from NEVs leasing, service fees from automobile managementand guarantee services, and other revenues, which accounted for approximately 79.8%, 5.9%, 3.4%, 3.2% and 7.7%, respectively, of the totalrevenue from discontinued operations during the year ended March 31, 2022.Jinkailong leased over 1,700 automobiles with an average monthly rental income of $442 per automobile, resulting in a rental income of$5,452,483, for the year ended March 31, 2022. Among them, approximately 400 automobiles were leased or sub-leased from Cornel, whichbrought rental income of approximately $1.8 million to Jinkailong. And the leasing costs of approximately $1.3 million was recorded as costs ofrevenue in the loss of discontinued operations of the consolidated financial statements.Jinkailong earned commissions from online ride-hailing platforms, such as Meituan, a leading aggregation platform before, and XXTX fordrivers serviced and introduced by Jinkailong, who ran their business through these platforms. During the year ended March 21, 2022, Jinkailongearned commissions of $399,600 from Meituan. Meanwhile, it earned commissions of $553,760 from XXTX, which was eliminated in the loss ofdiscontinued operations of the consolidated financial statements.Table of Contents93Jinkailong generated revenues of $232,295 from leasing NEVs by charging leases service fees during the year ended March 31, 2022 inaccordance with the increasing demand for NEVs in the online ride-hailing industry in Chengdu. The amount of services fees for NEVs leasing isbased on its product solutions.Jinkailong also generated other revenues such as monthly services commissions from insurance companies, and other miscellaneous servicefees charged to our customers, which accounted for approximately 41.1% and 58.9% of revenues from services commissions from insurancecompanies, and other miscellaneous service fees during the year ended March 31, 2022, respectively.Cost of RevenuesCost of revenues represents the amortization and depreciation of $2,590,277, daily maintenance and insurance expense, and rental costs ofautomobiles leased to online ride-hailing drivers of $2,593,529 during the year ended March 31, 2022. Jinkailong leased approximately another500 automobiles, including approximately 400 from Corenel and Yicheng, to expand leasing scale during the year ended March 31, 2022.Meanwhile, the rental costs of approximately $1.3 million belong to Corenel and Yicheng was eliminated in the loss of discontinued operations ofthe consolidated financial statements during the year ended March 31, 2022.Selling, General and Administrative ExpensesSelling, general and administrative expenses primarily consist of $2,334,672 in salary and employee benefits, $712,949 in amortization ofrendered automobiles which were rendered to Jinkailong but have not been sub-leased, $558,840 in office rental and charges, and $191,371 inadvertising and promotion, during the year ended March 31, 2022.Provision for doubtful accountsJinkailong re-evaluated the possibility of collection of unsettled balances from additional 13 online ride-hailing drivers who rendered theirautomobiles and provided additional allowance for doubtful accounts of $11,746 for those receivables during the year ended March 31, 2022.Impairments of Long-lived AssetsFor the year ended March 31, 2022, Jinkailong evaluated the future cash flow of our right-of-use assets and its own vehicles used for operatingleases during their remaining useful life and recognized an additional impairment loss of $32,479 for those assets that could not generate sufficientcash.Other income, netFor the year ended March 31, 2022, Jinkailong had other income, net of $118,344, primarily consist of the penalty income amounted to$302,131 from some online ride-hailing drivers for their violence on the contracts, which was offset by expenditures of approximately $159,000such as penalty fines for served drivers who failed to obtain the ride-hailing driver’s licenses.Interest Expense and Interest Expense on Finance LeasesInterest expense for the year ended March 31, 2022 was $50,472, resulting from the borrowings from financial institutions. Interest expenseon finance leases for the year ended March 31, 2022 was $277,366, representing the interest expense accrued under financing leases for the leasedautomobiles rendered to Jinkailong for sublease or sale by the online ride-hailing drivers who exited the ride-hailing business.Loss from discontinued operations, net of applicable income taxesAs a result of the foregoing, net loss from our discontinued operations, net of applicable income taxes, for the year ended March 31, 2022 was$2,747,209.Net gain from deconsolidation of VIEs - discontinued operationsAs fully described above, we had terminated series of VIE agreements with other shareholders of our former VIEs as of March 31, 2022. Wehad a gain of $10,951,545 from the termination of Jinkailong due to its accumulated loss in historical period. We had a gain of $23,556 from thetermination of Youlu as it suffered loss during the year ended March 31, 2022. On March 23, 2022, SenmiaoTable of Contents94Consulting and other shareholders with 94.5% equity interests of Sichuan Senmiao terminated the VIE Agreements and purchased SichuanSenmiao’s 94.5% equity interests with total consideration of zero. The gain of non-controlling interest from acquired equity interest of SichuanSenmiao amounted to $366,604 was recognized in the consolidated statements of changes in stockholders’ equity. The detailed analysis were inNote 3 to our consolidated financial statements.Liquidity and Going ConcernWe have financed our operations primarily through proceeds from our equity offerings, stockholder loans, commercial debt and cash flowfrom operations.We had cash and cash equivalents of $1,610,090 as of March 31, 2023 as compared to $1,185,221 as of March 31, 2022 for our continuingoperations. We primarily hold our excess unrestricted cash in short-term interest-bearing bank accounts at financial institutions.Our business is capital intensive. We have considered whether there is substantial doubt about our ability to continue as a going concern due to(1) the net loss of approximately $3.8 million for the year ended March 31, 2023; (2) accumulated deficit of approximately $37.7 million as ofMarch 31, 2023; (3) the working capital deficit of approximately $0.4 million as of March 31, 2023; and (4) two purchase commitments ofapproximately $1.36 million for 120 automobiles. As of the date of this Report, we have entered into two purchase contracts with two automobiledealers to purchase a total of 150 automobiles in the amount of approximately $2.4 million, of which, 30 automobiles amounted to approximately$0.34 million have been purchased in cash and delivered to us, and approximately $0.7 million has been remitted as purchase prepayments. Theremaining purchase commitment of approximately $1.36 million shall be remit in installment to be completed before December 31, 2023.We do not believe that the proceeds from our public offerings and our anticipated cash flows would be sufficient to meet our anticipatedworking capital requirements and capital expenditures in the ordinary course of business for the next 12 months from the date of this Report. Wehave determined there is substantial doubt about our ability to continue as a going concern. If we are unable to generate significant revenue, wemay be required to cease or curtail our operations. We are trying to alleviate the going concern risk through the following sources:●equity financing to support our working capital;●other available sources of financing (including debt) from PRC banks and other financial institutions; and●financial support and credit guarantee commitments from our related parties.Based on the above considerations, we are of the opinion that we will probably not have sufficient funds to meet our working capitalrequirements and debt obligations as they become due one year from the filing date of this Report, if we are unable to obtain additional financing.However, there is no assurance that we will be successful in implementing the foregoing plans or that additional financial will be available to us oncommercially reasonable terms, or at all. There are a number of factors that could potentially arise that could undermine our plans, such as (i) theimpact of the COVID-19 pandemic on our business and areas of operations in China, (ii) changes in the demand for our services, (iii) PRCgovernment policies, (iv) economic conditions in China and worldwide, (v) competitive pricing in the automobile transaction and related serviceand ride-hailing industries, (vi) changes in our relationships with key business partners, (vii) that financial institutions in China may not able toprovide continued financial support to our customers, and (viii) the perceptionTable of Contents95of PRC-based companies in the U.S. capital markets. Our inability to secure needed financing when required could require material changes to ourbusiness plans and could have a material adverse effect on our viability and results of operations.For the Years Ended March 31, 2023 2022Net Cash Provided by (Used in) Operating Activities$ 557,837$ (9,159,281)Net Cash Provided by (Used in) Investing Activities 320,528 (3,477,125)Net Cash Provided by (Used in) Financing Activities (373,834) 9,755,410Effect of Exchange Rate Changes on Cash and Cash Equivalents (79,662) (381,858)Cash and Cash Equivalents at Beginning of Year 1,185,221 4,448,075Cash and cash equivalents at End of year$ 1,610,090$ 1,185,221Cash Flow in Operating ActivitiesFor the year ended March 31, 2023, net cash provided by operating activities was $557,837. While for the year ended March 31, 2022, netcash used in operating activities was $9,159,281, which consists of outflows of $9,036,114 from continuing operations and $123,167 discontinuedoperations.The total net cash provided by operating activities from continuing operations for the year ended March 31, 2023 primarily comprised of therevenue received of $8,361,688, and the net collection of $258,932 on automobiles used for financial lease to be collected within the lease terms,partially offset by the payment of salary and employee benefits of $1,977,230, maintenance fees, insurance and other costs for automobiles andrelated transactions of $4,952,281, and other operating costs of $1,133,272. The change of $9,593,951 in net cash provided by operating activitiesfrom continuing operations for the year ended March 31, 2023 as compared with last year was primarily attributable to (1) decrease of $1,815,452in net loss; (2) decrease of $5,239,593 in change in fair value of derivative liabilities; (3) increase of $1,548,475 in the change of accrued expensesand other liabilities;(4) increase of $1,252,610 in the change of provision for doubtful accounts; (5) increase of $1,018,211 in the change ofprepayments, other receivables and other assets; (6) increase of $576,603 in the change of inventories, and partially offset by (7) decrease in theissuance cost of $821,892 which incurred for issuing series A convertible preferred stock in the year ended March 31, 2022; (8) decreased of thestock compensation expense of $653,000 which incurred in the year ended March 31, 2022, and (9) gain on disposal of long-lived assets of$452,522 in the year ended March 31, 2023.For the year ended March 31, 2022, net cash used in operating activities from discontinued operation was primarily the payment to investorsof the discontinued P2P platform of $1.7 million, offset by the net cash inflow of approximately $1.6 million for the year ended March 31, 2022.Cash Flow in Investing ActivitiesFor the year ended March 31, 2023, we had net cash provided by investing activities of $320,528. The majority net cash provided by investingwas for the proceeds from sales of the used-automobiles and rendered automobiles of $1,498,024, which was offset by the expenditures on thelicenses of $26,420 for online ride-hailing platforms in different cities in China and purchase of automobiles for operating lease purpose of$1,151,076.For the year ended March 31, 2022, we had net cash used in investing activities of $3,477,125, which consisted of the net cash used ininvesting activities of $3,365,915 from continuing operations and $111,210 from discontinued operations. The majority net cash used in investingwas for the purchase of automobiles for operating lease purpose of $3,223,992 and expenditures on the licenses of $141,730 for online ride-hailingplatforms in different cities in China.Cash Flow in Financing ActivitiesFor the year ended March 31, 2023, we had net cash used in financing activities of $373,834, which primarily consisted of: (1) principalpayments made for finance lease liabilities of $392,145, (2) repayments of current borrowings from a financial institution of $125,840, partiallyoffset by (3) repayment from related parties and affiliates of $144,151.For the year ended March 31, 2022, we had net cash provided by financing activities of $9,755,410, which primarily consisted of: (1) total netproceeds of approximately $5.8 million from our registered public offering in May 2021, approximately $4.4 million fromTable of Contents96our private placement in November 2021, and $22,015 from exercised warrants from investors, respectively; (2) borrowings from a financialinstitution of $183,390, partially offset by (3) principal payments made for finance lease liabilities of $433,611, and (4) repayments to relatedparties and the financial institution of $157,374.Off-Balance Sheet ArrangementsAs of the date of this Report, we have the following off-balance sheet arrangements that are likely to have a future effect on our financialcondition, revenues or expenses, results of operations and liquidity:●Purchase CommitmentsOn February 22, 2021, we entered into a purchase contract with an automobile dealer to purchase a total of 200 automobiles for the amount ofapproximately $3.4 million. Pursuant to the contract, we are required to purchase 100 automobiles in cash with the amount of approximately $1.7million. The remaining 100 automobiles purchase commitment with the amount of approximately $1.7 million shall be completed with financingoption through the dealer’s designated financial institutions. As of the date of this Report, 100 automobiles of the contract signed in February 2021have been purchased in cash and delivered to us. And on May 15, 2023, both parties decided to terminate the remaining 100 automobiles purchasethrough a termination agreement.On September 23, 2022, we entered into a purchase contract with an automobile dealer to purchase a total of 100 automobiles for the amountof approximately $1.6 million, of which approximately $0.7 million has been remitted as purchase prepayments, and we expect to fulfill thepurchase commitment before December 31, 2023.On March 28, 2023, we entered into another purchase contract with an automobile dealer to purchase a total of 50 automobiles for the amountof approximately $0.8 million, of which 30 automobiles of approximately $0.34 million have been purchased in cash and delivered to us, and weexpect to fulfill the purchase commitment before December 31, 2023.●Contingent LiabilitiesWe are exposed to credit risk as we are required by certain financial institutions to provide guarantee on the lease/loan payments (includingprincipal and interests) of the automobile purchasers referred by us. As of March 31, 2023, the maximum contingent liabilities we would beexposed to was approximately $9,691, assuming all the automobile purchasers were in default, which may cause an increase in guarantee expenseand cash outflow in financing activities. Besides, the maximum contingent liabilities our former VIE, Jinkailong, would be exposed to wasapproximately $3.9 million, assuming all the automobile purchasers were in default, which may cause an increase in guarantee expense and cashoutflow in its own financing activities. As Hunan Ruixi holds 35% of equity interest of Jinkailong and has not made any consideration towards tothe investment, Hunan Ruixi will subject to the maximum amount of RMB3.5 million (approximately $510,000) of which is equivalent to 35% ofliabilities in case Jinkailong is liquidated in accordance with PRC’s company registry compliance.InflationWe do not believe our business and operations have been materially affected by inflation.Critical Accounting EstimatesOur consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of theseconsolidated financial statements and accompanying notes requires us to make estimates and judgments that affect the reported amounts of assets,liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and onvarious other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgmentsabout the carrying values of assets and liabilities that are not readily apparent from other sources. We have identified certain accounting estimatesthat are significant to the preparation of our financial statements. These estimates are important for an understanding of our financial condition andresults of operation. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of thepossibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe the followingcritical accounting estimates involve the most significant estimates and judgments used in the preparation of our financial statements.Table of Contents97In presenting the consolidated financial statements in accordance with U.S. GAAP, management make estimates and assumptions that affectthe amounts reported and related disclosures. Estimates, by their nature, are based on judgement and available information. Accordingly, actualresults could differ from those estimates. On an ongoing basis, management reviews these estimates and assumptions using the currently availableinformation. Changes in facts and circumstances may cause us to revise our estimates. we base our estimates on past experience and on variousother assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assetsand liabilities. Estimates are used when accounting for items and matters including, but not limited to the critical accounting estimates as follows.When reading our consolidated financial statements, you should consider our selection of critical accounting policies, the judgment and otheruncertainties affecting the application of such policies and the sensitivity of reported results to changes in conditions and assumptions. Our criticalaccounting policies and practices include the following: (i) fair values of financial instruments, including derivative liabilities; (ii) accountsreceivable, net; (iii) inventories; (iv) property and equipment, net; (v) intangible assets, net; (vi) goodwill; (vii) revenue recognition; and (viii)leases - lessee. See Note 2—Summary of Significant Accounting Policies to our consolidated financial statements for the disclosure of theseaccounting policies. We believe the following accounting estimates involve the most significant judgments used in the preparation of our financialstatements.(a)Derivative liabilitiesA contract is designated as an asset or a liability and is carried at fair value on a company’s balance sheet, with any changes in fair valuerecorded in a company’s results of operations. We then determine which options, warrants and embedded features require liability accounting andrecords the fair value as a derivative liability by using Black-Scholes model. The changes in the values of these instruments are shown in theaccompanying consolidated statements of operations and comprehensive income (loss) as “change in fair value of derivative liabilities”.(b)Revenue recognitionLeases - LessorWe recognized revenue as lessor in accordance with ASC 842. We recognized sales from sales-type leases equal to the present value of theminimum lease payments discounted using the implicit interest rate in the lease and cost of sales equal to carrying amount of the asset being leasedand any initial direct costs incurred, less the present value of the unguaranteed residual. Interest income from the lease is recognized in financingrevenues over the lease term. Operating leases and revenue is recognized over the term of the lease. The basis of the amount of revenue that isrecognized since it isn’t straight-line basisWe exclude from the measurement of our lease revenues any tax assessed by a governmental authority that is both imposed on and concurrentwith a specific revenue-producing transaction and collected from a customer.We consider the economic life of most of automobile to be three to five years, since this represents the most common long-term lease term forour automobile and the automobile will be used for online ride-hailing services. We believe three to five years is representative of the periodduring which the automobile is expected to be economically usable, with normal service, for the purpose for which it is intended.Our lease pricing interest rates, which are used in determining customer payments in a bundled lease arrangement, are developed based uponthe local prevailing rates in the marketplace where its customer will be able to obtain an automobile loan under similar terms from the bank. Wereassess our pricing interest rates quarterly based on changes in the local prevailing rates in the marketplace. As of March 31, 2023, our pricinginterest rate is 6.0% per annum.(c)Share-based awardsShare-based awards are measured at fair value on grant date and share-based compensation expense is recognized (i) immediately at the grantdate if no vesting conditions are required, or (ii) using the straight-line basis, net of estimated forfeitures, over the requisite service period. The fairvalue of restricted shares is determined with reference to the fair value of the underlying shares.At each date of measurement, we review internal and external sources of information to assist in the estimation of various attributes todetermine the fair value of the share-based awards granted by us, including but not limited to the fair value of the underlying shares, expected life,expected volatility and expected forfeiture rates. We are required to consider many factors and make certain assumptionsTable of Contents98during this assessment. If any of the assumptions used to determine the fair value of the share-based awards changes significantly, share-basedcompensation expense may differ materially in the future from that recorded in the current reporting period.(d)Leases - LesseeFinance and operating lease ROU assets and lease liabilities are recognized at the commencement date based on the present value of leasepayments over the lease term. Since the implicit rate for our leases is not readily determinable, we use our incremental borrowing rate based on theinformation available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate ofinterest that we would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments, in a similar economic environmentand over a similar term.Lease terms used to calculate the present value of lease payments generally do not include any options to extend, renew, or terminate the lease,as we do not have reasonable certainty at lease inception that these options will be exercised. We generally consider the economic life of itsoperating lease ROU assets to be comparable to the useful life of similar owned assets. We have elected the short-term lease exception; therefore,operating lease ROU assets and liabilities do not include leases with a lease term of twelve months or less. The leases generally do not provide aresidual guarantee. The finance or operating lease ROU asset also excludes lease incentives. Lease expense is recognized on a straight-line basisover the lease term for operating lease. Meanwhile, we recognize the finance leases ROU assets and interest on an amortized cost basis. Theamortization of finance ROU assets is recognized on a straight-line basis as amortization expense, while the lease liability is increased to reflectinterest on the liability and decreased to reflect the lease payments made during the period. Interest expense on the lease liability is determinedeach period during the lease term as the amount that results in a constant periodic interest rate of the automobile loans on the remaining balance ofthe liability.We review the impairment of our ROU assets consistent with the approach applied for our other long-lived assets. We review therecoverability of its long-lived assets when events or changes in circumstances occur, indicating that the carrying value of the asset may not berecoverable. The assessment of possible impairment is based on its ability to recover the carrying value of the asset from the expectedundiscounted future pre-tax cash flows of the related operations. We have elected to include the carrying amount of operating lease liabilities inany tested asset group and include the associated operating lease payments in the undiscounted future pre-tax cash flows.(e)Business acquisitionsThe Company accounts for its business combinations using the acquisition method of accounting in accordance with ASC 805 “BusinessCombinations.” The cost of an acquisition is measured at the aggregate of the acquisition date fair value of the assets transferred to the sellers andliabilities incurred by the Company and equity instruments issued. Transaction costs directly attributable to the acquisition are expensed asincurred. Identifiable assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition date, irrespective ofthe extent of any non-controlling interests.(f)Impairment of long-lived assets and goodwillLong-lived assetsLong-lived assets, including property and equipment and intangible assets with finite lives are reviewed for impairment whenever events orchanges in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that thecarrying value of an asset may not be recoverable. We assess the recoverability of the assets based on the undiscounted future cash flows the assetsare expected to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use of theasset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is identified, wewould reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available andappropriate, to comparable market values.GoodwillWe review the carrying value of intangible assets not subject to amortization, including goodwill, to determine whether impairment may existannually or more frequently if events and circumstances indicate that it is more likely than not that an impairment has occurred. The Companyassesses qualitative factors to determine whether it is necessary to perform the two-step in accordance with ASC 350-20. If the Company believes,as a result of the qualitative carrying amount, the two-step quantitative impairment test described below is required.Table of Contents99The first step compares the fair values of each reporting unit to its carrying amount, including goodwill. If the fair value of each reporting unitexceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required.If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carryingvalue of a reporting unit’s goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business acquisitionwith the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fairvalue of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. Estimating fair value isperformed by utilizing various valuation techniques, with the primary technique being a discounted cash flow.For the year ended March 31, 2023, we did not record impairment against goodwill. For the year ended March 31, 2022, we recorded animpairment of $139,930 against goodwill.(g)Allowances for doubtful accountsManagement reviews the adequacy of the allowance for doubtful accounts on an ongoing basis, using historical collection trends and aging ofaccount receivable, finance receivable, prepayment, other receivables and other assets, and due from related parties. Management also periodicallyevaluates above mentioned account’s corresponding parties’ financial condition, credit history and the current economic conditions to makeadjustments in the allowance when necessary. Above mentioned account balances are charged off against the allowance after all means ofcollection have been exhausted and the potential for recovery is considered remote.(h)Inventory obsolescenceInventories consist of automobiles which are held primarily for sale and for leasing purposes, and are stated at lower of cost or net realizablevalue, as determined using the weighted average cost method. Management compares the cost of inventories with the net realizable value and ifapplicable, an allowance is made for writing down the inventory to its net realizable value, if lower than cost. On an ongoing basis, inventories arereviewed for potential write-down for estimated obsolescence or unmarketable inventories which equals the difference between the costs ofinventories and the estimated net realizable value based upon forecasts for future demand and market conditions. When inventories are written-down to the lower of cost or net realizable value, it is not marked up subsequently based on changes in underlying facts and circumstances.(i)Valuation of deferred tax assetsDeferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion orall of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxingauthorities.Item 7A.Quantitative and Qualitative Disclosures about Market RiskNot required for smaller reporting companies.Table of Contents100Item 8.Financial Statements and Supplementary DataThe financial statements required by this item begin on page F-1 hereof.Index to Financial StatementsReports of Independent Registered Public Accounting Firm (PCAOB ID 5395) F-1Report of Independent Registered Public Accounting Firm (PCOAB ID 711)F-2Financial Statements: Consolidated Balance Sheets as of March 31, 2023 and 2022F-3Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years Ended March 31, 2023 and 2022F-4Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended March 31, 2023 and 2022F-5Consolidated Statements of Cash Flows for the Years Ended March 31, 2023 and 2022F-6Notes to Consolidated Financial StatementsF-7Table of ContentsF-1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of Directors ofSenmiao Technology LimitedOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheet of Senmiao Technology Limited (the “Company”) as of March 31, 2023, the relatedconsolidated statement of operation, comprehensive loss, changes in stockholders’ equity and cash flow for the year ended March 31, 2023, andthe related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements presentfairly, in all material respects, the financial position of the Company as of March 31, 2023, and the results of its operation and its cash flow for theyear ended March 31, 2023, in conformity with accounting principles generally accepted in the United States of America.Explanatory Paragraph – Going ConcernThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As morefully described in Note 2, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additionalfunds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a goingconcern. Management's plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include anyadjustments that might result from the outcome of this uncertainty.Basis for OpinionThese consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on theCompany's consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company AccountingOversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federalsecurities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. TheCompany is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit weare required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on theeffectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due toerror or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding theamounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significantestimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our auditprovides a reasonable basis for our opinion.Critical Audit MattersCritical audit matters are matters arising from the current year audit of the consolidated financial statements that were communicated or required tobe communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and(2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters./s/ Marcum Asia CPAs LLPMarcum Asia CPAs LLPWe have served as the Company’s auditor since 2018(such date takes into account the acquisition of certain assets of Friedman LLP by Marcum Asia CPAs LLP effective September 1, 2022)New York, New YorkJuly 12, 2023Table of ContentsF-2REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors andStockholders of Senmiao Technology LimitedOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Senmiao Technology Limited (collectively, the “Company”) as of March 31, 2022 and2021, and the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity, and cash flows for each ofthe years in the two-year period ended March 31, 2022, and the related notes (collectively referred to as the consolidated financial statements). In ouropinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2022 and 2021,and the results of its operations and its cash flows for each of the years in the two-year period ended March 31, 2022, in conformity with accountingprinciples generally accepted in the United States of America.Consideration of the Company’s Ability to Continue as a Going ConcernThe accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2to the consolidated financial statements, the Company had incurred significant working capital deficiency and accumulated deficit at March 31, 2022, netloss from continuing operations and net operating cash flows for the year ended March 31, 2022. These factors raise substantial doubt about theCompany’s ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 2. These consolidatedfinancial statements do not include any adjustments that might result from the outcome of these uncertainties. If the Company is unable to successfullyobtain the necessary additional financial support as specified in Note 2, there could be a material adverse effect on the Company.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on theCompany’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company AccountingOversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securitieslaws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is notrequired to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtainan understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’sinternal control over financial reporting. Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error orfraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts anddisclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basisfor our opinion./s/ Friedman LLPWe have served as the Company’s auditor since 2018 through 2022New York, New YorkJuly 14, 2022One Liberty Plaza, 165 Broadway, 21st Floor, New York, NY 10006 p 212.842.7000friedmanllp.comYour livelihood, empowered.An Independent Member Firm of DFK with offices worldwide.Table of ContentsF-3SENMIAO TECHNOLOGY LIMITEDCONSOLIDATED BALANCE SHEETS(Expressed in U.S. dollar, except for the number of shares) March 31, March 31, 20232022ASSETS Current assets Cash and cash equivalents$1,610,090$1,185,221Accounts receivable, net, current portion158,435 418,022Accounts receivable, a related party6,312—Inventories 6,678 286,488Finance lease receivables, net, current portion 146,114 314,264Prepayments, other receivables and other assets, net1,438,243 2,713,208Due from related parties, current portion, net 1,488,914 682,335Total current assets 4,854,786 5,599,538 Property and equipment, net 3,343,457 5,658,773Other assets Operating lease right-of-use assets, net121,672109,621Operating lease right-of-use assets, net, related parties92,916515,906Financing lease right-of-use assets, net623,714305,933Intangible assets, net 774,324 959,551Accounts receivable, net, noncurrent— 69Finance lease receivables, net, noncurrent71,13392,980Due from a related party, noncurrent3,640,2066,635,746Other non-current assets716,407 —Total other assets 6,040,372 8,619,806Total assets$14,238,615$19,878,117 LIABILITIES, MEZZANNIE EQUITY AND EQUITY Current liabilities Borrowings from a financial institution$8,813$145,542Accounts payable183,64514,446Advances from customers 148,188 120,629Accrued expenses and other liabilities 3,377,507 2,444,367Due to related parties and affiliates8,667 11,682Operating lease liabilities60,87850,177Operating lease liabilities - related parties143,462330,781Financing lease liabilities264,052304,557Derivative liabilities501,7822,215,204Current liabilities - discontinued operations487,829 528,426Total current liabilities 5,184,823 6,165,811 Other liabilitiesOperating lease liabilities, non-current83,48547,910Operating lease liabilities, non-current - related parties42,247226,896Financing lease liabilities, non-current388,064 1,376Deferred tax liability42,93046,386Total other liabilities 556,726 322,568 Total liabilities5,741,5496,488,379Commitments and contingencies (note 19) Mezzanine EquitySeries A convertible preferred stock (par value $1,000 per share, 5,000 shares authorized; 1,641 and 5,000 shares issued and outstanding at March 31, 2023 and2022, respectively)269,386820,799Stockholders’ equity Common stock (par value $0.0001 per share, 500,000,000 shares authorized; 7,743,040 and 6,186,783 shares issued and outstanding at March 31, 2023 and 2022,respectively) * 773 618Additional paid-in capital 43,355,834 42,803,045Accumulated deficit (37,715,294) (34,601,545)Accumulated other comprehensive loss (1,247,099) (109,454)Total Senmiao Technology Limited stockholders’ equity 4,394,214 8,092,664 Non-controlling interests 3,833,466 4,476,275Total equity 8,227,680 12,568,939Total liabilities, mezzanine equity and equity$14,238,615$19,878,117*Giving retroactive effect to the 1-for-10 reverse stock split effected on April 6, 2022The accompanying notes are an integral part of the consolidated financial statementsTable of ContentsF-4SENMIAO TECHNOLOGY LIMITEDCONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)(Expressed in U.S. dollar, except for the number of shares)For the Years Ended March 31, 2023 2022RevenuesRevenues$7,738,394$4,913,102Revenues, a related party344,120—Total revenues8,082,5144,913,102Cost of revenuesCost of revenues (6,080,097) (7,001,297)Cost of revenues, a related party(509,904)—Total cost of revenues(6,590,001)(7,001,297)Gross profit (loss) 1,492,513 (2,088,195) Operating expenses Selling, general and administrative expenses (6,142,447) (9,035,142)Provision for doubtful accounts, net of recovery(1,487,889)(235,279)Impairments of inventories(3,085)(60,398)Impairments of long-lived assets and goodwill—(142,974)Total operating expenses (7,633,421) (9,473,793) Loss from operations (6,140,908) (11,561,988)Other income (expense) Other income (expense), net664,001(107,444)Interest expense — (5,893)Interest expense on finance leases (25,675) (55,844)Change in fair value of derivative liabilities 1,711,889 6,951,482Issuance cost incurred for issuing series A convertible preferred stock—(821,892)Total other income, net 2,350,215 5,960,409Loss before income taxes(3,790,693) (5,601,579) Income tax expense— (4,566) Net loss from continuing operations(3,790,693)(5,606,145)Loss from discontinued operations, net of applicable income taxes— (2,747,209)Net gain from deconsolidation of VIEs - discontinued operations — 10,975,101Gain from discontinued operations—8,227,892Net (loss) income(3,790,693)2,621,747 Net loss (income) attributable to non-controlling interests from continuing operations676,944(3,872,645)Net loss attributable to non-controlling interests from discontinued operations—714,274Net loss attributable to the Company’s stockholders$(3,113,749)$(536,624)Net (loss) income$(3,790,693)$2,621,747Other comprehensive (loss) incomeForeign currency translation adjustment(1,103,510) 64,470 Comprehensive (loss) income(4,894,203) 2,686,217less: Total comprehensive (loss) income attributable to noncontrolling interests(642,809)3,142,520 Total comprehensive loss attributable to stockholders$(4,251,394)$(456,303)Weighted average number of common stock Basic and diluted* 7,195,781 5,726,997 Earning (loss) per share - basic and diluted* Continuing operations$(0.43)$(1.66)Discontinued operations—1.56Net Loss per share - basic and diluted*$(0.43)$(0.10)*Giving retroactive effect to the 1-for-10 reverse stock split effected on April 6, 2022The accompanying notes are an integral part of the consolidated financial statementsTable of ContentsF-5SENMIAO TECHNOLOGY LIMITEDCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITYFor the Years Ended March 31, 2023 and 2022(Expressed in U.S. dollar, except for the number of shares)AccumulatedAdditionalotherCommon stockpaid-inAccumulatedcomprehensiveNon-controllingTotal Shares* Par value capital deficit loss interest equityBALANCE, March 31, 2021 4,978,073$498$40,759,807$(34,064,921)$(838,671)$(3,284,143)$2,572,570Net income (loss) — — — (536,624) — 3,158,371 2,621,747Issuance of common stock and warrants in a registered direct offering,net of issuance costs 553,192 55 2,208,594 — — — 2,208,649Issuance of restricted stock units 9,546 1 104,999 — — — 105,000Exercise of Series A warrants into common stock 4,403 1 22,014 — — — 22,015Fair value of derivative liabilities upon exercise of warrants——45,674———45,674Issuance of common stock in purchase of XXTX’s remaining NCI533,16753(1,357,637)—(21,762)1,379,346—Issuance of common stock for consulting service100,00010652,990———653,000Foreign currency translation adjustment————80,321(15,851)64,470Recognition of non-controlling interest from acquired equity interest ofSichuan Senmiao upon termination of the VIE agreement——366,604——(366,604)—Deconsolidation of discontinued operation————670,6583,605,1564,275,814Additional shares of common stock round up adjustment due toretroactive effect of 1-for-10 reverse stock split 8,402 — — — — — —BALANCE, March 31, 2022 6,186,78361842,803,045(34,601,545)(109,454)4,476,27512,568,939Net loss———(3,113,749)—(676,944)(3,790,693)Conversion of preferred stock into common stock1,546,125155551,256———551,411Cashless exercise of November 2021 Investor warrants into commonstock10,132——————Fair value of derivative liabilities upon exercise of warrants——1,533———1,533Foreign currency translation adjustment————(1,137,645)34,135(1,103,510)BALANCE, March 31, 20237,743,040$773$43,355,834$(37,715,294)$(1,247,099)$3,833,466$8,227,680*Giving retroactive effect to the 1-for-10 reverse stock split effected on April 6, 2022The accompanying notes are an integral part of the consolidated financial statementsTable of ContentsF-6SENMIAO TECHNOLOGY LIMITEDCONSOLIDATED STATEMENTS OF CASH FLOWS(Expressed in U.S. dollar, except for the number of shares)For the Years Ended March 31, 2023 2022Cash Flows from Operating Activities: Net income (loss)$(3,790,693)$2,621,747Net income from discontinued operations—8,227,892Net loss from continuing operations(3,790,693)(5,606,145)Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation of property and equipment1,095,518 956,400Stock compensation expense— 653,000Issuance cost incurred for issuing series A convertible preferred stock—821,892Amortization of right-of-use assets711,630955,443Amortization of intangible assets184,215160,831Provision for doubtful accounts, net of recovery1,487,889235,279Impairments of inventories3,08560,398Impairments of long-lived assets and goodwill— 142,974Gain on disposal of equipment(452,522)—Change in fair value of derivative liabilities (1,711,889) (6,951,482)Change in operating assets and liabilities Accounts receivable 224,673 4,456Accounts receivable, a related party(6,327)—Inventories 316,139 (260,464)Finance lease receivables258,932634,103Prepayments, other receivables and other assets1,046,46528,254Accounts payable 170,703 (31,434)Advances from customers 36,911 6,678Accrued expenses and other liabilities1,170,510(377,965)Operating lease liabilities(53,620)(240,051)Operating lease liabilities - related parties(133,782)(228,281)Net cash provided by (used in) operating activities from continuing operations557,837(9,036,114)Net cash used in operating activities from discontinued operations—(123,167)Net Cash Provided by (Used in) Operating Activities557,837 (9,159,281) Cash Flows from Investing Activities: Purchases of property and equipment (1,151,076) (3,223,992)Cash proceed from disposal of property and equipment 1,498,024 —Purchases of intangible assets(26,420)(141,730)Cash released upon termination of a VIE—(193)Net cash provided by (used in) investing activities from continuing operations320,528(3,365,915)Net cash used in investing activities from discontinued operations—(111,210)Net Cash Provided by (Used in) Investing Activities 320,528 (3,477,125) Cash Flows from Financing Activities: Net proceeds from issuance of common stock in registered direct offering—5,771,053Net proceeds from issuance of common stock upon warrants exercised—22,015Net proceeds from issuance of series A convertible preferred stock and warrants in a private placement offering—4,369,937Borrowings from a financial institution — 183,390Repayments to related parties and affiliates—(117,761)Repayments from related parties and affiliates144,151—Repayments of current borrowings from financial institutions(125,840)(39,613)Principal payments of finance lease liabilities(392,145)(433,611)Net cash provided by (used in) financing activities from continuing operations (373,834) 9,755,410Net Cash Provided by (Used in) Financing Activities (373,834) 9,755,410 Effect of exchange rate changes on cash and cash equivalents (79,662)(381,858) Net increase (decrease) in cash and cash equivalents 424,869(3,262,854)Cash and cash equivalents, beginning of the year 1,185,2214,448,075Cash and cash equivalents, end of the year$1,610,090$1,185,221 Supplemental Cash Flow Information Cash paid for interest expense$—$5,893Cash paid for income tax——Non-cash Transaction in Investing and Financing Activities Recognition of other receivables from Jinkailong upon deconsolidation$—$7,298,208Recognition of right-of-use assets and lease liabilities$917,687$273,555Recognition of right-of-use assets and lease liabilities, related parties$121,742$181,620Termination of right-of use assets and lease liabilities$47,438$—Termination of right-of use assets and lease liabilities, related parties$302,010$—Cashless exercise of November 2021 Investor warrants into common stock$1,533$—Allocation of fair value of derivative liabilities for issuance of common stock$—$7,932,341Allocation of fair value of derivative liabilities to additional paid in capital upon warrants exercised$—$45,674Acquisition of XXTX'S minority interest with issuance of common stock at fair value$—$1,972,717The accompanying notes are an integral part of the consolidated financial statementsTable of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-71. ORGANIZATION AND PRINCIPAL ACTIVITIESSenmiao Technology Limited (the “Company”) is a U.S. holding company incorporated in the State of Nevada on June 8, 2017. The Companyoperates its business in two segments:(i)automobile transaction and related services focusing on the online ride-hailing industry in the People’s Republic of China (“PRC” or “China”)through the Company’s wholly owned subsidiaries, Sichuan Senmiao Yicheng Assets Management Co., Ltd., formerly named Yicheng FinancialLeasing Co., Ltd., a PRC limited liability company (“Yicheng”), Chengdu Corenel Technology Co., Ltd., a PRC limited liability company(“Corenel”), and its majority owned subsidiaries, Chengdu Jiekai Yunli Technology Co., Ltd. (“Jiekai”), and Hunan Ruixi Financial Leasing Co.,Ltd., a PRC limited liability company (“Hunan Ruixi”), and its equity investee company (an entity 35% owned by Hunan Ruixi) and formervariable interest entity (“VIE”), Sichuan Jinkailong Automobile Leasing Co., Ltd., a PRC limited liability company (“Jinkailong”).(ii)online ride-hailing platform services through its own platform (known as Xixingtianxia) as described further below, since October 2020,through Hunan Xixingtianxia Technology Co., Ltd., a PRC limited liability company (“XXTX”), which is a wholly owned subsidiary of SichuanSenmiao Zecheng Business Consulting Co., Ltd. (“Senmiao Consulting”), a PRC limited liability company and wholly-owned subsidiary of theCompany. The Company’s ride hailing platform enables qualified ride-hailing drivers to provide transportation services in Chengdu, Changsha,Guangzhou, and other 23 cities in China as of the filing date of these consolidated financial statements.Hunan Ruixi holds a business license for automobile sales and financial leasing and has been engaged in automobile financial leasing services andautomobile sales since March 2019 and January 2019, respectively. Yicheng holds a business license for automobiles sale and has been engaged inautomobile sales since June 2019. Yicheng used to have a license of financial leasing, which has been terminated since June 2022. The Companyalso has been engaged in operating leasing services through Hunan Ruixi and its equity investee company, Jinkailong since March 2019.Jinkailong used to facilitate automobile sales and financing transactions for its clients, who are primarily ride-hailing drivers and provides themoperating lease and relevant after-transaction services.On September 11, 2020, Senmiao Consulting entered into an investment agreement relating to XXTX with all the original shareholders of XXTX(the “XXTX Investment Agreement”), pursuant to which Senmiao Consulting would make an investment of RMB3.16 million (approximately$0.46 million) in XXTX in cash and obtain a 51% equity interest. As of the filing date of these consolidated financial statements, the Company hadremitted the full amount of investment to XXTX pertained to above mentioned XXTX Investment Agreement.On October 23, 2020, the registration procedures for the change in shareholders and registered capital were completed and XXTX became amajority owned subsidiary of Senmiao Consulting. On February 5, 2021, Senmiao Consulting and all the original shareholders of XXTX enteredinto a supplementary agreement related to XXTX’s Investment agreement (the “XXTX Increase Investment Agreement”). Under the XXTXIncrease Investment Agreement, all the shareholders of XXTX agreed to increase the total registered capital of XXTX to RMB50.8 million(approximately $7.40 million). Senmiao Consulting shall pay another investment amounted to RMB36.84 million (approximately $5.36 million) incash in exchange of additional 27.74% of XXTX’s equity interest. As of the filing date of these consolidated financial statements, the Companyhad remitted approximately RMB36.60 million ($5.33 million) to XXTX pertained to above mentioned XXTX Increase Investment Agreement.On October 22, 2021, the Company, Senmiao Consulting, XXTX and its other shareholders further entered into a Share Swap Agreement (the“Share Swap Agreement”), pursuant to which the Company, through Senmiao Consulting, purchased all of the remaining equity interests theoriginal shareholders hold in XXTX at a total purchase price of $3.5 million, payable in the Company’s shares of common stock, par value$0.0001 per share at a per share price of the average closing price of a share of common stock reported on the Nasdaq Capital Market for ten (10)trading days immediately preceding the date of the Share Swap Agreement. On November 9, 2021, the issuance of 533,167 (5,331,667 pre reversesplit) shares of the Company’s common stock for this transaction has been completed and on December 31, 2021, the registration procedures forthe change in shareholders was completed. As a result, XXTX became a wholly-owned subsidiary of Senmiao Consulting.As of the filing date of these consolidated financial statements, Senmiao Consulting has made a cumulative capital contribution of RMB39.76million (approximately $5.79 million) to XXTX and the remaining amount is expected to be paid before December 31, 2025. As of March 31,2023, XXTX had seven wholly owned subsidiaries and two of them had operations.Table of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-8In December 2020, Senmiao Consulting formed Corenel, with a registered capital of RMB10 million (approximately $1.6 million) in ChengduCity, Sichuan Province. Corenel is engaged in automobile operating leases since March 2021.In December 2020, Hunan Ruixi and a third party jointly formed a subsidiary, Chengdu Xichuang Technology Service Co., Ltd. (“Xichuang”),with a registered capital of RMB200,000 (approximately $32,000) in Chengdu City, Sichuan Province. Hunan Ruixi holds 70% of the equityinterests of Xichuang. In August 2021, Hunan Ruixi signed an equity transfer agreement with another shareholder of Xichuang. Pursuant to theequity transfer agreement, another shareholder of Xichuang would transfer 30% of its shares to Hunan Ruixi for a consideration of zero. However,in November 2021, Xichuang was dissolved. The dissolution of Xichuang did not have a material impact to the Company’s financial results.In April 2021, the Company formed Senmiao Technology (Hong Kong)., Ltd. (“Senmiao HK”), with a registered capital of $10,000 in Hongkong.The Company holds 99.99% of the equity interests of Senmiao HK. As of the filing date of these consolidated financial statements, Senmiao HKhas no operations.In March 2022, Corenel and another company in Chengdu formed Jiekai, with a registered capital of RMB500,000 (approximately $80,000).Corenel holds 51% of the equity interests of Jiekai. Jiekai is engaged in automobile operating lease business since April 2022.The following diagram illustrates the Company’s corporate structure, including its subsidiaries and equity investee company, as of the filing date ofthese consolidated financial statements:Former VIE Agreements with Sichuan SenmiaoSenmiao Consulting, Sichuan Senmiao Ronglian Technology Co., Ltd. (“Sichuan Senmiao”) and all the shareholders of Sichuan Senmiao (the“Sichuan Senmiao Shareholders”) entered into an Equity Interest Pledge Agreement, an Exclusive Business Cooperation Agreement, an ExclusiveOption Agreement, Power of Attorneys, and Timely Report Agreements in September 2017 (collectively, the “Sichuan Senmiao VIEAgreements”). For the details of such agreements, refer to the audited financial statements contained in the annual report on Form 10-K filed withthe SEC on July 15, 2022. According to the VIE Agreements, Senmiao Consulting was the primary beneficiary of Sichuan Senmiao and thefinancial statements of Sichuan Senmiao are consolidated in the accompanying consolidated financial statements. Sichuan Senmiao sufferedaccumulated loss of approximately $18.0 million as of March 31, 2022 with shareholders’ deficiency of $7.6 million. Due to such loss fromSichuan Senmiao, on March 23, 2022, Senmiao Consulting and other shareholders with 94.5% equity interests of Sichuan Senmiao terminated theVIE Agreements and acquired Sichuan Senmiao’s 94.5% equity interests with total consideration of zero. Sichuan Senmiao became the majorityowned subsidiary of Senmiao Consulting accordingly. The termination of the Sichuan Senmiao VIE Agreements had no significant impact on theconsolidated financial statements.Former Voting Agreements with Jinkailong’s Other ShareholdersHunan Ruixi entered into two voting agreements signed in August 2018 and February 2020, respectively, as amended (the “Voting Agreements”),with Jinkailong and other Jinkailong’s shareholders holding an aggregate of 65% equity interests. Pursuant to the VotingTable of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-9Agreements, all other Jinkailong’s shareholders will vote in concert with Hunan Ruixi on all fundamental corporate transactions in the event of adisagreement for periods of 20 years and 18 years, respectively, ending on August 25, 2038.On March 31, 2022, Ruixi entered into an Agreement for the Termination of the Agreement for Concerted Action by Shareholders of Jinkailong(the “Termination Agreement”), pursuant to which the Voting Agreements mentioned above was terminated as of the date of the TerminationAgreement. The termination will not impair the past and future legitimate rights and interests of all parties in Jinkailong. As of March 31, 2023 and2022, the parties no longer maintain a concerted action relationship with respect to the decision required to take concerted action at its shareholdersmeetings as stipulated in the Voting Agreements. Each party shall independently express opinions and exercise various rights such as voting rightsand perform relevant obligations in accordance with the provisions of laws, regulations, normative documents and the Jinkailong’s articles ofassociation.As a result of the Termination Agreement, the Company no longer has a controlling financial interest in Jinkailong and has determined thatJinkailong was deconsolidated from the Company’s Consolidated Financial Statements effective as of March 31, 2022. However, as Hunan Ruixistill holds 35% equity interests in Jinkailong, Jinkailong is the equity investee company of the Company since then. As of March 31, 2023 and2022, the paid-in capital of Jinkailong is zero.In connection with the deconsolidation and in accordance with ASC 810-10-40-5, the Company recorded a gain on deconsolidation of Jinkailongon March 31, 2022 as follows: March 31,2022Carrying amount of net deficit of Jinkailong as of March 31, 2022$15,227,359Carrying amount of non-controlling interest (3,605,156)Cumulative currency translation adjustment removal (670,658)Net gain on deconsolidation of Jinkailong$10,951,545In addition, the Company recognized $7,298,208 of related party receivable from Jinkailong as of March 31, 2022, of which, $6,635,746 isrequired to be repaid over a period from April 2023 to December 2026 based on the agreement between the Company and Jinkailong, classified asdue from related parties, noncurrent. Besides, the deconsolidation also excluded $31,263 receivables due from related parties, which was recordedby Jinkailong. As of March 31, 2023, the Company has outstanding balance due from Jinkailong amounted to $5,106,100, net of allowance, ofwhich, $3,640,206 is to be repaid over a period from April 2024 to December 2026, classified as due from related party, noncurrent (refer to Note 4and Note 17).As of March 31, 2023 and 2022, allowance for doubtful accounts due from Jinkailong amounted to $1,481,036 and $0, respectively. During theyear ended March 31, 2023, the Company recorded allowances against the balance due from Jinkailong of $1,484,495.The Company determined that the deconsolidation of Jinkailong represented a major shift that had a major effect on the Company’s operations andfinancial results for the year ended March 31, 2022, which triggers discontinued operations accounting in accordance with ASC 205-20-45 asdiscussed in note 4.Former VIE Agreements with YouluOn December 7, 2021, XXTX entered into a series of contractual arrangements (collectively, the “Youlu VIE Agreements”) with Youlu and each ofits equity holders (“Youlu Shareholders”). The terms of Youlu VIE Agreements were similar to the Sichuan Senmiao VIE Agreements. Accordingto the Youlu VIE Agreements, Youlu was obligated to pay XXTX service fees approximately equal to its net income. Youlu’s entire operationswere, in fact, directly controlled by XXTX. There were no unrecognized revenue-producing assets that were held by Youlu. However, on March31, 2022, the Youlu VIE Agreements were terminated by XXTX and Youlu Shareholders. As Youlu had limited operation, the termination had nosignificant impact on the consolidated financial statements.After Jinkailong and Youlu were deconsolidated from the Company’s consolidated financial statements at March 31, 2022, there were no assetsand liabilities from the Company’s former VIEs included in the Company’s financial statements going forward. Net revenue,Table of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-10loss from operations and net loss of the former VIEs that were included in the Company’s consolidated financial statements for the years endedMarch 31, 2023 and 2022 are as follows:For the Years EndedMarch 31, 2023 2022Net revenue from continuing operations$—$32,817Net revenue from discontinued operations$—$6,830,116Loss from operations from continuing operations$—$(179,068)Loss from operations from discontinued operations$—$(2,537,715)Net loss from continuing operations attributable to stockholders$—$(175,283)Net loss from discontinued operations attributable to stockholders—(2,032,934)Net loss attributable to stockholders$—$(2,208,218)2. GOING CONCERNIn assessing the Company’s liquidity, the Company monitors and analyzes its cash on-hand and its operating and capital expenditure commitments.The Company’s liquidity needs are to meet its working capital requirements, operating expenses and capital expenditure obligations. Debtfinancing from financial institutions and equity financings have been utilized to finance the working capital requirements of the Company.The Company’s business is capital intensive. The Company’s management has considered whether there is substantial doubt about its ability tocontinue as a going concern due to (1) the net loss of approximately $3.8 million for the year ended March 31, 2023; (2) accumulated deficit ofapproximately $37.7 million as of March 31, 2023; (3) the working capital deficit of approximately $0.4 million as of March 31, 2023; and (4) twopurchase commitments of approximately $1.36 million for 120 automobiles. As of the filing date of these consolidated financial statements, theCompany has entered into two purchase contracts with two automobile dealers to purchase a total of 150 automobiles in the amount ofapproximately $2.4 million, of which, 30 automobiles of approximately $0.34 million have been purchased in cash and delivered to the Company,and approximately $0.7 million has been remitted as purchase prepayments. The remaining purchase commitment of approximately $1.36 millionshall be remitted in installment to be completed before December 31, 2023.Management has determined there is substantial doubt about its ability to continue as a going concern. If the Company is unable to generatesignificant revenue, the Company may be required to curtail or cease its operations. Management is trying to alleviate the going concern riskthrough the following sources:●Equity financing to support its working capital;●Other available sources of financing (including debt) from PRC banks and other financial institutions; and●Financial support and credit guarantee commitments from the Company’s related parties.Based on the above considerations, management is of the opinion that the Company will probably not have sufficient funds to meet its workingcapital requirements and debt obligations as they become due one year from the filing date of these consolidated financial statements, if theCompany is unable to obtain additional financing. There is no assurance that the Company will be successful in implementing the foregoing plansor that additional financing will be available to the Company on commercially reasonable terms, or at all. There are a number of factors that couldpotentially arise that could undermine the Company’s plans, such as (i) changes in the demand for the Company’s services, (ii) PRC governmentpolicies, (iii) economic conditions in China and worldwide, (iv) competitive pricing in the automobile transaction and related service and ride-hailing industries, (v) changes in the Company’s relationships with key business partners, (vi) the ability of financial institutions in China toprovide continued financial support to the Company’s customers, and (vii) the perception of PRC-based companies in the U.S. capital markets. TheCompany’s inability to secure needed financing when required could require material changes to the Company’s business plans and could have amaterial adverse effect on the Company’s ability to continue as a going concern and results of operations. The consolidated financial statementshave been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities in the normal course ofbusiness. The consolidated financial statements do not include any adjustments that might result from the outcome of such uncertainties.Table of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-113. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Basis of presentationThe accompanying consolidated financial statements of the Company has been prepared in accordance with accounting principles generallyaccepted in the United States of America (“U.S. GAAP”).(b) Basis of consolidationThe consolidated financial statements include the accounts of the Company and include the assets, liabilities, revenues, and expenses of thesubsidiaries. All inter-company accounts and transactions have been eliminated in consolidation. A subsidiary is an entity in which the Company,directly or indirectly, controls more than one half of the voting power; or has the power to govern the financial and operating policies, to appoint orremove the majority of the members of the board of directors, or to cast a majority of votes at the meeting of directors.(c) Foreign currency translationTransactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange ratesprevailing on the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency aretranslated into the functional currency using the applicable exchange rates on the date of the balance sheet. The resulting exchange differences arerecorded in the statement of operations.The reporting currency of the Company and its subsidiaries and former VIEs is U.S. dollars (“US$”) and the consolidated financial statementshave been expressed in US$. However, the Company maintains the books and records in its functional currency, Chinese Renminbi (“RMB”),being the functional currency of the economic environment in which its operations are conducted.In general, for consolidation purposes, assets and liabilities of the Company and its subsidiaries whose functional currency is not the US$, aretranslated into US$, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during theperiod. The gains and losses resulting from translation of financial statements of the Company and its subsidiaries and former VIEs are recorded asa separate component of accumulated other comprehensive loss within the consolidated statements of changes in stockholders’ equity.Translation of amounts from RMB into US$ has been made at the following exchange rates for the respective periods: March 31, March 31, 20232022Balance sheet items, except for equity accounts 6.8676 6.3400For the years ended March 31, 2023 2022Items in the statements of operations and comprehensive income (loss), and statements of cash flows 6.8516 6.4178(d) Use of estimatesIn presenting the consolidated financial statements in accordance with U.S. GAAP, management make estimates and assumptions that affect theamounts reported and related disclosures. Estimates, by their nature, are based on judgment and available information. Accordingly, actual resultscould differ from those estimates. On an ongoing basis, management reviews these estimates and assumptions using the currently availableinformation. Changes in facts and circumstances may cause the Company to revise its estimates. The Company bases its estimates on pastexperience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about thecarrying values of assets and liabilities. Estimates are used when accounting for items and matters including, but not limited to, revenuerecognition, residual values of property and equipment, lease classification and liabilities, inventory obsolescence, right-of-use assets,determinations of the useful lives and valuation of long-lived assets, estimates of allowances for doubtful accounts and prepayments, estimates ofimpairment of long-lived assets and goodwill, valuation of deferred taxTable of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-12assets, estimated fair value used in business acquisitions, valuation of derivative liabilities, allocation of fair value of derivative liabilities, fairvalue used in issuance of common stock and warrants exercised and other provisions and contingencies.(e) Fair values of financial instrumentsAccounting Standards Codification (“ASC”) Topic 825, Financial Instruments (“Topic 825”) requires disclosure of fair value information offinancial instruments, whether or not recognized in the balance sheets, for which it is practicable to estimate that value. In cases where quotedmarket prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques aresignificantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Topic 825 excludes certain financialinstruments and all nonfinancial assets and liabilities from its disclosure requirements. Accordingly, the aggregate fair value amounts do notrepresent the underlying value of the Company. The three levels of valuation hierarchy are defined as follows:Level 1 Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.Level 2 Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that areobservable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value.The following table sets forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on arecurring basis as of March 31, 2023 and 2022:Carrying Value as ofFair Value Measurement as of March 31, 2023 March 31, 2023 Level 1 Level 2 Level 3Derivative liabilities $501,782 $— $— $501,782Carrying Value as ofFair Value Measurement as ofMarch 31, 2022March 31, 2022 Level 1 Level 2 Level 3Derivative liabilities$2,215,204$—$—$2,215,204The following is a reconciliation of the beginning and ending balance of the assets and liabilities measured at fair value on a recurring basis for theyears ended March 31, 2023 and 2022:AugustFebruary20202021UnderwrittenRegisteredMay 2021November 20212019 Registered Direct OfferingPublicDirectRegistered Direct OfferingPrivate Placement Series A Placement Offering OfferingInvestorsPlacementInvestorsPlacement Warrants Warrants Warrants Warrants Warrants Warrants Warrants Warrants TotalBALANCE as of March 31, 2021$80,268$163,572$397,525$637,561$—$—$—$—$1,278,926Derivative liabilities recognized at grant date————3,313,864248,5414,060,857310,1737,933,435Change in fair value of derivative liabilities(32,680)(153,047)(352,944)(572,018)(2,535,376)(190,154)(2,895,392)(219,871)(6,951,482)Fair value of warrants exercised(45,675)———————(45,675)BALANCE as of March 31, 2022 1,913 10,525 44,581 65,543778,48858,3871,165,46590,3022,215,204Change in fair value of derivative liabilities (1,912) (10,520) (36,131) (54,052)(616,527)(46,240)(879,170)(67,337)(1,711,889)Cashless exercise on November 2021 investorwarrants — — — ———(1,533)—(1,533)BALANCE as of March 31, 2023$1$5$8,450$11,491$161,961$12,147$284,762$22,965$501,782Table of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-13The Company’s Series A and Series B warrants, the June 2019 Placement Agent Warrants, the Underwriters’ Warrants, the ROFR Warrants, theMay 2021 Investors Warrants, the May 2021 Placement Agent Warrants, and the November 2021 Investors Warrants and November 2021Placement Agent Warrants are not traded in an active securities market; therefore, the Company estimates the fair value to those warrants using theBlack-Scholes valuation model on June 20, 2019 (the grant date), August 4, 2020 (the grant date), February 10, 2021 (the grant date), May 13,2021 (the grant date), November 10, 2021 (the grant date), as of March 31, 2023 and 2022.June 20, 2019 August 4, 2020February 10, 2021May 13, 2021November 10, 2021 Series A Series B Placement Agent Underwriters’Placement AgentROFRInvestorPlacement AgentInvestorPlacement AgentWarrantsWarrantsWarrants WarrantsWarrantsWarrantsWarrantsWarrantsWarrantsWarrants# of shares exercisable* 133,602 111,632 14,25156,80038,04415,218553,19241,4905,310,76355,148Valuation date 6/20/2019 6/20/2019 6/20/20198/4/20202/10/20212/10/20215/13/20215/13/202111/10/202111/10/2021Exercise price*$37.20$37.20$33.80$6.30$13.80$17.30$10.50$10.50$1.13$6.80Stock price*$28.00$28.00$28.00$5.10$16.30$16.30$7.20$7.20$6.70$6.70Expected term (years) 4 1 45555555Risk-free interest rate 1.77% 1.91% 1.77%0.19%0.46%0.46%0.84%0.84%1.23%1.23%Expected volatility 86% 91% 86%129%132%132%131%131%126%126%As of March 31, 2023August 4,June 20, 20192020February 10, 2021May 13, 2021November 10, 2021Series APlacement AgentUnderwriters’Placement AgentROFR InvestorPlacement AgentInvestorPlacement AgentGranted DateWarrantsWarrantsWarrantsWarrantsWarrants WarrantsWarrantsWarrantsWarrants# of shares exercisable 2,59014,25131,80838,04415,218553,19241,4905,310,76355,148 Valuation date 3/31/20233/31/20233/31/20233/31/20233/31/20233/31/20233/31/20233/31/20233/31/2023 Exercise price$5.00$5.00$6.30$13.8$17.30$10.50$10.50$1.13$6.80Stock price$0.90$0.90$0.90$0.90$0.90$0.90$0.90$0.90$0.90Expected term (years) 0.220.222.350.870.873.123.123.623.62Risk-free interest rate 1.02% 1.02% 4.02% 3.95% 4.43%3.80% 3.80% 3.74% 3.74% Expected volatility 120% 120% 120% 120% 120%120% 120% 120% 120% As of March 31, 2022June 20, 2019August 4, 2020February 10, 2021May 13, 2021November 10, 2021 Series A Placement Agent Underwriters’ Placement Agent ROFR InvestorPlacement AgentInvestorPlacement AgentGranted DateWarrants Warrants Warrants Warrants WarrantsWarrantsWarrantsWarrantsWarrants# of shares exercisable* 2,590 14,25131,80838,04415,218553,19241,4905,335,76355,148Valuation date 3/31/2022 3/31/20223/31/20223/31/20223/31/20223/31/20223/31/20223/31/20223/31/2022Exercise price*$5.00$5.00$6.30$13.80$17.30$10.50$10.50$1.13$6.80Stock price*$2.30$2.30$2.30$2.30$2.30$2.30$2.30$2.30$2.30Expected term (years) 1.22 1.223.353.873.874.124.124.624.62Risk-free interest rate 1.77% 1.77% 2.44%2.44% 2.44%2.43%2.43%2.43%2.43%Expected volatility 123% 123% 123%123% 123%123%123%123%123%*Giving retroactive effect to the 1-for-10 reverse stock split effected on April 6, 2022.As of March 31, 2023 and 2022, financial instruments of the Company comprised primarily current assets and current liabilities including cash andcash equivalents, accounts receivable, inventories, finance lease receivables, prepayments, other receivables and other assets, due from relatedparties, borrowings from financial institutions, accounts payable, advance from customers, lease liabilities, accrued expenses and other liabilities,due to related parties and affiliates, and operating and financing lease liabilities, which approximate their fair values because of the short-termnature of these instruments, and non-current liabilities of borrowings from financial institutions, which approximate their fair values because of thestated loan interest rate to the rate charged by similar financial institutions.The non-current portion of accounts receivables, finance lease receivables, and operating and financing lease liabilities were recorded at grossadjusted for the interest using the effective interest rate method. The Company believes that the effective interest rates underlying theseinstruments approximate their fair values because the Company used its incremental borrowing rate to recognize the present value of theseinstruments as of March 31, 2023 and 2022.Other than as listed above, the Company did not identify any assets or liabilities that are required to be presented on the balance sheet at fair value.Table of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-14(f) Equity method investmentsThe Company accounts for investments in private company by using equity method as the Company determined that it does not have control overJinkailong under either voting or VIE models in accordance with ASC 323 “Investments- Equity Method and Joint Ventures”. As of March 31,2023 and 2022, the Company had equity investment in Jinkailong of 35% that the Company has significant influence over Jinkailong. TheCompany records equity method investments initially at cost and subsequently records its share of the earnings or losses of the investee in theperiods for which they are reported by the investee in its financial statements rather than in the period in which an investee declares a dividend.The Company adjusts the carrying amount of an investment for its share of the earnings or losses of the investee after the date of investment andshare report the recognized earnings or loses in income. If an investment balance is reduced to zero as a result of cumulative losses, the Companywill need to pause the recognition of losses until its share of earnings exceeds the accumulated losses resulting in the investment balance returningto zero. As of March 31, 2023 and 2022, the carrying value of the investment is $0 for both periods presented.(g) Business combinations and non-controlling interestsThe Company accounts for its business combinations using the acquisition method of accounting in accordance with ASC 805 “BusinessCombinations.” The cost of an acquisition is measured at the aggregate of the acquisition date fair value of the assets transferred to the sellers andliabilities incurred by the Company and equity instruments issued. Transaction costs directly attributable to the acquisition are expensed asincurred. Identifiable assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition date, irrespective ofthe extent of any non-controlling interests. The excess of (i) the total costs of acquisition, fair value of the non-controlling interests and acquisitiondate fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recordedas goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly inthe consolidated income statements. During the measurement period, which can be up to one year from the acquisition date, the Company mayrecord adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of themeasurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequentadjustments are recorded to the consolidated income statements.For the Company’s non-wholly owned subsidiaries, a non-controlling interest is recognized to reflect portion of equity that is not attributable,directly or indirectly, to the Company. The cumulative results of operations attributable to non-controlling interests are also recorded as non-controlling interests in the Company’s consolidated balance sheets and consolidated statements of operations and comprehensive loss. Cash flowsrelated to transactions with non-controlling interests are presented under financing activities in the consolidated statements of cash flows.(h) Segment reportingOperating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker (the “CODM”),which is comprised of certain members of the Company’s management team. During the years ended March 31, 2019 and 2021, the Companyacquired Hunan Ruixi and XXTX, respectively. The Company evaluated how the CODM manages the businesses of the Company to maximizeefficiency in allocating resources and assessing performance. Consequently, the Company presents two operating and reportable segments ofautomobile transaction and related services and online ride-hailing platform services as set forth in Notes 1 and 20.(i) Cash and cash equivalentsCash and cash equivalents primarily consist of bank deposits with original maturities of three months or less, which are unrestricted as towithdrawal and use. Cash and cash equivalents also consist of funds received from automobile purchasers as payments for automobiles, fundsreceived from automobile lessees as payments for rentals, which were held at the third-party platforms’ fund accounts and which are unrestrictedand immediately available for withdrawal and use.(j) Accounts receivable, netAccounts receivable are recorded at the invoiced amount less an allowance for any uncollectible accounts and do not bear interest, and are due ondemand. Management reviews the adequacy of the allowance for doubtful accounts on an ongoing basis, using historical collection trends andaging of receivables. Management also periodically evaluates individual customer’s financial condition, credit history and the current economicconditions to make adjustments in the allowance when necessary. Account balances are charged offTable of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-15against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. As of March 31, 2023and 2022, allowance for doubtful accounts amounted to $0 and $112,905, respectively.(k) InventoriesInventories consist of automobiles which are held primarily for sale or sales-type leases purpose and are stated at lower of cost or net realizablevalue, as determined using the weighted average cost method. Management compares the cost of inventories with the net realizable value and ifapplicable, an allowance is made for writing down the inventory to its net realizable value, if lower than cost. On an ongoing basis, inventories arereviewed for potential write-down for estimated obsolescence or unmarketable inventories which equals the difference between the costs ofinventories and the estimated net realizable value based upon forecasts for future demand and market conditions. When inventories are written-down to the lower of cost or net realizable value, it is not marked up subsequently based on changes in underlying facts and circumstances. For theyears ended March 31, 2023 and 2022, $3,085 and $60,398 impairment of inventories was recorded, respectively.(l) Finance lease receivables, netFinance lease receivables, which result from sales-type leases, are measured at discounted present value of (i) future minimum lease payments, (ii)any residual value not subject to a bargain purchase option as finance lease receivables on its balance sheet and (iii) accrued interest on the balanceof the finance lease receivables based on the interest rate inherent in the applicable lease over the term of the lease. Management also periodicallyevaluates individual customer’s financial condition, credit history and the current economic conditions to make adjustments in the allowance whennecessary. Finance lease receivables is charged off against the allowance after all means of collection have been exhausted and the potential forrecovery is considered remote. As of March 31, 2023 and 2022, the Company determined no allowance for doubtful accounts was necessary forfinance lease receivables.As of March 31, 2023 and 2022, finance lease receivables consisted of the following: March 31, March 31, 20232022Minimum lease payments receivable$297,960$511,030Less: Unearned interest(80,713) (103,786)Financing lease receivables, net$217,247$407,244Finance lease receivables, net, current portion$146,114$314,264Finance lease receivables, net, non-current portion$71,133$92,980Future scheduled minimum lease payments for investments in sales-type leases as of March 31, 2023 are as follows: Minimum futurepayments receivableTwelve months ending March 31, 2024$176,891Twelve months ending March 31, 2025 94,643Twelve months ending March 31, 2026 26,426Total$297,960(m) Property and equipment, netProperty and equipment primarily consist of automobiles, leasehold improvements, computers and other equipment, which are stated at cost lessaccumulated depreciation less any provision required for impairment in value. Depreciation is computed using the straight-line method with noresidual value based on the estimated useful life. The useful life of property and equipment is summarized as follows:CategoriesUseful lifeLeasehold improvementsShorter of the remaining lease terms or estimated useful livesComputer equipment 2 - 5 yearsOffice equipment, fixture and furniture 3 - 5 yearsAutomobiles 3 - 5 yearsTable of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-16The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount ofan asset may not be recoverable. An asset is considered impaired if its carrying amount exceeds the future net undiscounted cash flows that theasset is expected to generate. If such asset is considered to be impaired, the impairment recognized is the amount by which the carrying amount ofthe asset, if any, exceeds its fair value determined using a discounted cash flow model. For the years ended March 31, 2023 and 2022, theCompany did not recognize impairment for property and equipment from continuing operations. For the years ended March 31, 2023 and 2022, theimpairment for property and equipment was $0 and $32,479 from discontinued operations, respectively.Costs of repairs and maintenance are expensed as incurred and asset improvements are capitalized. The cost and related accumulated depreciationof assets disposed of or retired are removed from the accounts, and any resulting gain or loss is reflected in the consolidated statements ofoperations and comprehensive loss.(n) Intangible assets, netPurchased intangible assets are recognized and measured at fair value upon acquisition. Separately identifiable intangible assets that havedeterminable lives continue to be amortized over their estimated useful lives using the straight-line method as follows:CategoriesUseful lifeSoftware 5-10 yearsOnline ride-hailing platform operating license2-10 yearsSeparately identifiable intangible assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicatethat the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted futurecash flows resulting from the use of the asset and its eventual disposition. Measurement of any impairment loss for identifiable intangible assets isbased on the amount by which the carrying amount of the assets exceeds the fair value of the assets. For the years ended March 31, 2023 and 2022,there was no impairment of intangible assets.(o) GoodwillGoodwill represents the excess of the consideration paid of an acquisition over the fair value of the net identifiable assets of the acquiredsubsidiaries at the date of acquisition. Goodwill is not amortized and is tested for impairment at least annually, more often when circumstancesindicate impairment may have occurred. Goodwill is carried at cost less accumulated impairment losses. If impairment exists, goodwill isimmediately written off to its fair value and the loss is recognized in the consolidated statements of operations and comprehensive loss.Impairment losses on goodwill are not reversed.The Company reviews the carrying value of intangible assets not subject to amortization, including goodwill, to determine whether impairmentmay exist annually or more frequently if events and circumstances indicate that it is more likely than not that an impairment has occurred. TheCompany assesses qualitative factors to determine whether it is necessary to perform the two-step in accordance with ASC 350-20. If the Companybelieves, as a result of the qualitative carrying amount, the two-step quantitative impairment test described below is required.The first step compares the fair values of each reporting unit to its carrying amount, including goodwill. If the fair value of each reporting unitexceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required.If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying valueof a reporting unit’s goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business acquisition withthe allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value ofthe reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. Estimating fair value is performed byutilizing various valuation techniques, with the primary technique being a discounted cash flow.For the years ended March 31, 2023 and 2022, the Company recorded an impairment of $0 and $139,930 against goodwill, respectively.Table of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-17(p) Earnings (loss) per shareBasic earnings (loss) per share is computed by dividing net income (loss) attributable to stockholders by the weighted average number ofoutstanding shares of common stock, adjusted for outstanding shares of common stock that are subject to repurchase.For the calculation of diluted income (loss) per share, net income (loss) attributable to stockholders for basic earnings (loss) per share is adjustedby the effect of dilutive securities, including share-based awards, under the treasury stock method and convertible securities under the if-convertedmethod. Potentially dilutive securities, of which the amounts are insignificant, have been excluded from the computation of diluted net earnings(loss) per share if their inclusion is anti-dilutive.As of March 31, 2023, the Company’s dilutive securities from the outstanding series A convertible preferred stock are convertible intoapproximately 820,706 shares of common stock. This amount is not included in the computation of dilutive loss per share because their impact isanti-dilutive.(q) Mezzanine Equity (redeemable)The Company evaluates its convertible preferred stock in accordance with ASU 2020-06, Debt – Debt with Conversion and Other Options(Subtopic 470-20), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instrumentsand Contracts in an Entity’s Own Equity, to determine if its convertible preferred stock should be treated as a liability or an equity. As a result, theCompany determined that the convertible preferred stock should be treated as an equity as it did not meet the definition of liability instrument. Inaccordance with ASC 480-10-S99, the convertible preferred stock should be classified as a mezzanine equity, since it contained a change of controlredemption right feature which is not solely within the control of the Company. The Company believes the future event of change of control is notprobable as of March 31, 2023; therefore, the convertible preferred stock has not been remeasured to its redemption value. Subsequently, theCompany adjust the initial carrying amount of the convertible preferred stock by the at redemption value method. As of March 31, 2023, there wasno change to the initial carrying amount of the convertible preferred stock.(r) Derivative liabilitiesA contract is designated as an asset or a liability and is carried at fair value on the Company’s balance sheet, with any changes in fair valuerecorded in the Company’s results of operations. The Company then determines which options, warrants and embedded features require liabilityaccounting and records the fair value as a derivative liability. The changes in the values of these instruments are shown in the consolidatedstatements of operations and comprehensive loss as “change in fair value of derivative liabilities”.(s) Revenue recognitionThe Company recognized its revenue under Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (ASC606). ASC 606 establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arisingfrom the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict thetransfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for thosegoods or services recognized as performance obligations are satisfied. It also requires the Company to identify contractual performance obligationsand determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to acustomer.To achieve that core principle, the Company applies the five steps defined under ASC 606: (i) identify the contract(s) with a customer, (ii) identifythe performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations inthe contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation.The Company accounts for a contract with a customer when the contract is entered into by the parties, the rights of the parties, including paymentterms, are identified, the contract has commercial substance and consideration to collect is substantially probable.As of March 31, 2023, the Company had outstanding contracts for automobile transaction and related services amounting to $18,952, of which$18,560 is expected to be completed within twelve months after March 31, 2023, and $392 is expected to be completed after March 31, 2024.Table of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-18Disaggregated information of revenues by business lines are as follows:For the Years EndedMarch 31, 2023 2022Automobile Transaction and Related Services (Continuing Operations) - Operating lease revenues from automobile rentals$3,453,392$1,722,480 - Service fees from NEVs leasing350,510126,227- Revenues from sales of automobiles 243,065 26,019 - Financing revenues41,738101,828- Service fees from management and guarantee services 40,158 73,554- Service fees from automobile purchase services33,5851,468- Other service fees 210,121 196,069Total revenues from Automobile Transaction and Related Services (Continuing Operations)4,372,5692,247,645Online Ride-hailing Platform Services (Continuing Operations)3,709,9452,665,457Total Revenues from Continuing Operations8,082,5144,913,102Automobile Transaction and Related Services (Discontinued Operations)-Operating lease revenues from automobile rentals—5,452,483- Service fees from NEVs leasing—232,295- Commission from Online Ride-hailing platforms—399,600-Service fees from management and guarantee services—217,838-Financing revenues—15,855-Other service fees—512,045Total revenues from Automobile Transaction and Related Services (Discontinued Operations)—6,830,116Total revenues$8,082,514$11,743,218Automobile transaction and related servicesOperating lease revenues from automobile rentals –The Company generates revenue from sub-leasing automobiles to some online ride-hailingdrivers or third-parties and leasing its own automobiles. The Company recognizes revenue wherein an automobile is transferred to the lessees andthe lessees has the ability to control the asset, is accounted for under ASC Topic 842. Rental transactions are satisfied over the rental period and isrecognized over time. As the operating lease revenue are variable in nature which is based on online ride-hailing drivers or third-parties’performance for a certain period, the Company recognized the revenue from operating lease by using the output method based on periodicsettlement between the Company and the online ride-hailing drivers or third-parties when such revenue is probable that a significant reversal in theamount of cumulative revenue recognized will not occur. Rental periods are short term in nature, generally are twelve months or less.Service fees from NEVs leasing and automobile purchase services – Services fees from NEVs leasing and automobile purchase services are paidby lessees who rent new energy electric vehicles from the Company or automobile purchasers for a series of the services provided to themthroughout the purchase process such as credit assessment, installment of GPS devices, ride-hailing driver qualification and other administrativeprocedures. The amount of services fees for NEVs leasing is based on the product solutions while the fees for purchase is based on the sales priceof the automobiles and relevant services provided. The Company recognizes revenue when all the services are completed and an automobile isdelivered to the lessee or purchaser at a point in time. Accounts receivable related to the revenue from NEVs leasing and automobile purchaseservices is collected upon the NEVs are delivered to lessees or purchaser.Sales of automobiles – The Company generated revenue from sales of automobiles to the customers of Hunan Ruixi. The control over theautomobile is transferred to the purchaser along with the delivery of automobiles. The amount of the revenue is based on the sale price agreed byHunan Ruixi and the customers. The Company recognizes revenues when an automobile is delivered and control is transferred to the purchaser at apoint in time. Accounts receivable related to the revenue are being collected within 12 months.Service fees from management and guarantee services – Over 95% of the Company’s customers are online ride-hailing drivers. Some of the driverssign affiliation agreements with the Company, pursuant to which the Company provides them with management and guarantee services during theaffiliation period. Service fees for management and guarantee services are paid by such automobile purchasers on a monthly basis for themanagement and guarantee services provided during the affiliation period. The Company recognizes revenue over the affiliation period whenperformance obligations are completed.Table of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-19Financing revenues – Interest income from the lease arising from the Company’s sales-type leases and bundled lease arrangements are recognizedas financing revenues over the lease term based on the effective rate of interest in the lease.Online ride-hailing platform servicesThe Company generates revenue from providing services to online ride-hailing drivers (“Drivers”) to assist them in providing transportationservices to riders (“Riders”) looking for taxi/ride-hailing services. The Company earns commissions for each completed ride in an amount equal tothe difference between an upfront quoted fare and the amount earned by a Driver based on actual time and distance for the ride charged to theRider. As a result, the Company bears a single performance obligation in the transaction of connecting Drivers with Riders to facilitate thecompletion of a successful transportation service for Riders. The Company recognizes revenue upon completion of a ride as the singleperformance obligation is satisfied and the Company has the right to receive payment for the services rendered upon the completion of the ride.The Company evaluates the presentation of revenue on a gross or net basis based on whether it controls the service provided to the Rider and is theprincipal (i.e., “gross”), or it arranges for other parties to provide the service to the Rider and is an agent (i.e., “net”). Since the Company is notprimarily responsible for ride-hailing services provided to Riders, it does not have discretion in establishing the price of the online ride-hailingservice and inventory risk related to the services as the Company earns commissions for each completed order as the difference between an upfrontquote fare and the amount earned by a driver based on actual time and distance for ride charged to the rider. Thus, the Company recognizesrevenue at a net basis.Leases - LessorThe Company recognized revenue as lessor in accordance with ASC 842.The two primary accounting provisions the Company uses to classifytransactions as sales-type or operating leases are: (i) a review of the lease term to determine if it is for the major part of the economic life of theunderlying equipment (defined as greater than 75%); and (ii) a review of the present value of the lease payments to determine if they are equal toor greater than substantially all of the fair market value of the equipment at the inception of the lease (defined as greater than 90%). Automobilesincluded in arrangements meeting these conditions are accounted for as sales-type leases. Interest income from the lease is recognized in financingrevenues over the lease term. Automobile included in arrangements that do not meet these conditions are accounted for as operating leases andrevenue is recognized over the term of the lease.The Company excludes from the measurement of its lease revenues any tax assessed by a governmental authority that is both imposed on andconcurrent with a specific revenue-producing transaction and collected from a customer.The Company considers the economic life of most of the automobiles to be three to five years, since this represents the most common long-termlease term for its automobiles and the automobiles will be used for online ride-hailing services. The Company believes three to five years isrepresentative of the period during which an automobile is expected to be economically usable, with normal service, for the purpose for which it isintended.The Company’s lease pricing interest rates, which are used in determining customer payments in a bundled lease arrangement, are developed basedupon the local prevailing rates in the marketplace where its customer will be able to obtain an automobile loan under similar terms from the bank.The Company reassesses its pricing interest rates quarterly based on changes in the local prevailing rates in the marketplace. As of March 31, 2023,the Company’s pricing interest rate was 6.0% per annum.(t) Income taxesDeferred income tax liabilities and assets are recognized for the expected future tax consequences of temporary differences between the income taxbasis and financial reporting basis of assets and liabilities. Provisions or benefits for income taxes consists of tax estimated from taxable incomeplus or minus deferred tax expenses (benefits) if applicable.Deferred tax is calculated using the balance sheet liability method in respect of temporary differences arising from differences between thecarrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax basis. In principle, deferred taxliabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized to the extent that it is probable that taxableincome will be utilized with prior net operating loss carried forwards using tax rates that are expected to apply to the period when the asset isrealized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or chargeddirectly to equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not thatsome portion or all of the deferred tax assets will not be utilized. Current income taxes are provided for in accordance with the laws of the relevanttax authorities.Table of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-20An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a taxexamination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50%likely of being realized on examination. Penalties and interest incurred related to underpayment of income tax are classified as income tax expensein the period incurred. The Company did not have any significant unrecognized uncertain tax positions or any unrecognized liabilities, interest orpenalties associated with unrecognized tax benefit as of March 31, 2023 and 2022. As of March 31, 2023, the calendar years ended December 31,2018 through 2022 for the Company’s PRC entities remain open for statutory examination by PRC tax authorities. The Company presents deferredtax assets and liabilities as non-current in the balance sheet based on an analysis of each taxpaying component within a jurisdiction.(u) Comprehensive income (loss)Comprehensive income (loss) includes net income (loss) and foreign currency adjustments. Comprehensive income (loss) is reported in theconsolidated statements of operations and comprehensive income (loss). Accumulated other comprehensive loss, as presented on the consolidatedbalance sheets are the cumulative foreign currency translation adjustments.(v) Share-based awardsShare-based awards granted to the Company’s employees are measured at fair value on grant date and share-based compensation expense isrecognized (i) immediately at the grant date if no vesting conditions are required, or (ii) using the straight-line basis, net of estimated forfeitures,over the requisite service period. The fair value of restricted shares is determined with reference to the fair value of the underlying shares.At each date of measurement, the Company reviews internal and external sources of information to assist in the estimation of various attributes todetermine the fair value of the share-based awards granted by the Company, including but not limited to the fair value of the underlying shares,expected life, expected volatility and expected forfeiture rates. The Company is required to consider many factors and make certain assumptionsduring this assessment. If any of the assumptions used to determine the fair value of the share-based awards changes significantly, share-basedcompensation expense may differ materially in the future from that recorded in the current reporting period.(w) Leases - lesseeThe Company accounts for leases in accordance with ASC 842. The Company enters into certain agreements as a lessee to lease automobiles andto conduct its automobiles rental operations. If any of the following criteria are met, the Company classifies the lease as a direct financing or sales-type lease (as a lessee):●The lease transfers ownership of the underlying asset to the lessee by the end of the lease term;●The lease grants the lessee an option to purchase the underlying asset that the Company is reasonably certain to exercise;●The lease term is for 75% or more of the remaining economic life of the underlying asset, unless the commencement date falls within the last25% of the economic life of the underlying asset;●The present value of the sum of the lease payments equals or exceeds 90% of the fair value of the underlying asset; or●The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term.Leases that do not meet any of the above criteria are accounted for as operating leases.The Company combines lease and non-lease components in its contracts under Topic 842, when permissible.Finance and operating lease ROU assets and lease liabilities are recognized at the commencement date based on the present value of leasepayments over the lease term. Since the implicit rate for the Company’s leases is not readily determinable, the Company uses its incrementalborrowing rate based on the information available at the commencement date in determining the present value of leaseTable of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-21payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized basis, anamount equal to the lease payments, in a similar economic environment and over a similar term.Lease terms used to calculate the present value of lease payments generally do not include any options to extend, renew, or terminate the lease, asthe Company does not have reasonable certainty at lease inception that these options will be exercised. The Company generally considers theeconomic life of its operating lease ROU assets to be comparable to the useful life of similar owned assets. The Company has elected the short-term lease exception, therefore operating lease ROU assets and liabilities do not include leases with a lease term of twelve months or less. Itsleases generally do not provide a residual guarantee. The finance or operating lease ROU asset also excludes lease incentives. Lease expense isrecognized on a straight-line basis over the lease term for operating lease. Meanwhile, the Company recognizes the finance leases ROU assets andinterest on an amortized cost basis. The amortization of finance ROU assets is recognized on a straight-line basis as amortization expense, whilethe lease liability is increased to reflect interest on the liability and decreased to reflect the lease payments made during the period. Interest expenseon the lease liability is determined each period during the lease term as the amount that results in a constant periodic interest rate of the automobileloans on the remaining balance of the liability.The Company reviews the impairment of its ROU assets consistent with the approach applied for its other long-lived assets. The Company reviewsthe recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may notbe recoverable. The assessment of possible impairment is based on its ability to recover the carrying value of the asset from the expectedundiscounted future pre-tax cash flows of the related operations. The Company has elected to include the carrying amount of finance and operatinglease liabilities in any tested asset group and include the associated lease payments in the undiscounted future pre-tax cash flows. For the yearsended March 31, 2023 and 2022, the Company recognized impairment loss of $0 and $3,044 on its finance lease ROU assets, respectively.(x) Significant risks and uncertainties1) Credit riska. Assets that potentially subject the Company to significant concentration of credit risk primarily consist of cash and cash equivalents. Themaximum exposure of these assets to credit risk is their carrying amounts as of the balance sheet dates. On March 31, 2023 and 2022,approximately $79,000 and $117,000, respectively, were deposited with a bank in the United States which is insured by the U.S. governmentup to $250,000. On March 31, 2023 and 2022, approximately $1,190,000 and $874,000, respectively, were deposited in financial institutionslocated in mainland China, which were insured by the government authority. Under the Deposit Insurance System in China, an enterprise’sdeposits at one bank are insured for a maximum of approximately $73,000 (RMB500,000). To limit exposure to credit risk relating to deposits,the Company primarily places cash deposits with large financial institutions in China which management believes are of high credit quality.The Company’s operations are carried out entirely in mainland China. Accordingly, the Company’s business, financial condition and results ofoperations may be influenced by the social, political, economic and legal environments in the PRC as well as by the general state of the PRCeconomy. In addition, the Company’s business may be influenced by changes in PRC government laws, rules and policies with respect to,among other matters, the response to the COVID-19 pandemic, anti-inflationary measures, currency conversion and remittance of currencyoutside of China, rates and methods of taxation and other factors.b. In measuring the credit risk of accounts receivables due from the automobile purchasers (the “customers”), the Company mainly reflects the“probability of default” by the customer on its contractual obligations and considers the current financial position of the customer and the riskexposures to the customer and its likely future development.Table of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-22Historically, most of the automobile purchasers would pay the Company their previously defaulted amounts within one to three months. As aresult, the Company would provide full provisions on accounts receivable if the customers default on repayments for over three months. As ofMarch 31, 2023 and 2022, allowance for doubtful accounts amounted to $0 and $112,905, respectively. For years ended March 31, 2023 and2022, the Company wrote off accounts receivable of $107,868 and $44,227 from continuing operations, respectively, which represent duefrom automobile purchasers from continuing operation. For the year ended March 31, 2022, the Company wrote off accounts receivable of$16,273 from discontinued operations, which represent due from automobile purchasers, respectively.2) Foreign currency riskAs of March 31, 2023 and 2022, substantially all of the Company’s operating activities and major assets and liabilities, except for the cashdeposit of approximately $79,000 and $117,000, respectively, in U.S. dollars, are denominated in RMB, which are not freely convertible intoforeign currencies. All foreign exchange transactions take place through either the People’s Bank of China (the “PBOC”) or other authorizedfinancial institutions at exchange rates quoted by PBOC. Approval of foreign currency payments by the PBOC or other regulatory institutionsrequires a payment application together with invoices and signed contracts. The value of RMB is subject to change in central governmentpolicies and international economic and political developments affecting supply and demand in the China Foreign Exchange Trading Systemmarket. When there is a significant change in value of RMB, the gains and losses resulting from translation of financial statements of a foreignsubsidiary will be significantly affected. RMB depreciated from 6.34 RMB into US$1.00 on March 31, 2022 to 6.87 RMB into US$1.00 onMarch 31, 2023.(y) ReclassificationCertain items of common stock and additional paid-in capital in the consolidated balance sheets, cost of revenues and operating expenses in theconsolidated statements of operations and comprehensive income (loss) of comparative period have been reclassified to conform to theconsolidated financial statements for the current period. The reclassification has no impact on net income (loss).(z) Recently issued accounting standardsIn June 2016, the FASB issued new accounting guidance ASU 2016-13 for recognition of credit losses on financial instruments, which is effectiveJanuary 1, 2020, with early adoption permitted on January 1, 2019. The guidance introduces a new credit reserving model known as the CurrentExpected Credit Loss (“CECL”) model, which is based on expected losses, and differs significantly from the incurred loss approach used today.The CECL model requires measurement of expected credit losses not only based on historical experience and current conditions, but also byincluding reasonable and supportable forecasts incorporating forward-looking information and will likely result in earlier recognition of creditreserves. In November 2019, the FASB issued ASU No. 2019-10, which is to update the effective date of ASU No. 2016-13 for private companies,not-for-profit organizations and certain smaller reporting companies applying for credit losses standard. The new effective date for these preparersis for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company has adopted this update onApril 1, 2023, and the adoption does not have material impact on Company’s consolidated financial statements and related disclosures.CECL adoption will have broad impact on the financial statements of financial services firms, which will affect key profitability and solvencymeasures. Some of the more notable expected changes include:- Higher allowance on financial guarantee reserve and finance lease receivable levels and related deferred tax assets. While different asset typeswill be impacted differently, the expectation is that reserve levels will generally increase across the board for all financial firms.- Increased reserve levels may lead to a reduction in capital levels.- As a result of higher reserving levels, the expectation is that CECL will reduce cyclicality in financial firms’ results, as higher reserving in“good times” will mean that less dramatic reserve increases will be loan related income (which will continue to be recognized on a periodicbasis based on the effective interest method) and the related credit losses (which will be recognized up front at origination). This will makeperiods of loan expansion seem less profitable due to the immediate recognition of expected credit losses. Periods of stable or declining loanlevels will look comparatively profitable as the income trickles in for loans, where losses had been previously recognized.Table of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-23In March 2023, the FASB issued new accounting guidance, ASU 2023-01, for leasehold improvements associated with common control leases,which is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption ispermitted for both interim and annual financial statements that have not yet been made available for issuance. The new guidance introduced twoissues: terms and conditions to be considered with leases between related parties under common control and accounting for leaseholdimprovements. The goals for the new issues are to reduce the cost associated with implementing and applying Topic 842 and to promote diversityin practice by entities within the scope when applying lease accounting requirements.The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effecton the consolidated financial position, statements of operations and cash flows of the Company.4. DISCONTINUED OPERATIONSDiscontinued operations- Online P2P lending servicesOn October 17, 2019, the Board approved the plan under which the Company has discontinued and is winding down its online P2P lendingservices business (the “Plan”). The Company determined that the operation of its online P2P lending services business was not viable in light ofthe tightened regulations on online peer-to-peer lending in China generally and the unofficial request from local regulator to reduce the Company’sonline peer-to-peer lending transaction volume on a monthly basis. The Company also determined that the discontinuation of its online P2Plending services business would allow the Company to focus its resources on its automobile financing facilitation and transaction business. Inconnection with the Plan, the Company ceased facilitation of loan transactions on its online lending platform and assumed all the outstanding loansfrom investors on the platform. The decision and action taken by the Company of discontinuing the online lending services business represented amajor shift that had a major effect on the Company’s operations and financial results, which triggers discontinued operations accounting inaccordance with ASC 205-20-45.The fair value of discontinued operations, determined as of October 17, 2019, includes estimated consideration expected to be received, less coststo sell. After consideration of the determination of fair value of the discontinued operations including the assumption of all the outstanding loansfrom investors on the platform, $143,668 of accounts receivable, $3,760,599 of other receivables, and $143,943 of prepayments for impairedintangible assets were indicated as of the date the Company’s Board of Directors approved the Plan on October 17, 2019, and the Companyrecognized $4,048,210 provision for doubtful accounts as of December 31, 2019 related to the Company’s online lending services business, whilethe Company did not recognize any additional provision for doubtful accounts for the year ended March 31, 2023.The following table sets forth the reconciliation of the carrying amounts of major classes liabilities from discontinued operations of Online P2Plending services in consolidated balance sheet as of March 31, 2023 and 2022.Carrying amounts of major classes of liabilities included as part of discontinued operations of Online P2P lending services: March 31, March 31, 20232022Current liabilities Accrued expenses and other liabilities487,829528,426Discontinued operation- JinkailongOn March 31, 2022, Ruixi, a majority owned subsidiary of the Company, holding 35% equity interest of Jinkailong, entered into an Agreement forthe Termination of the Agreement for Concerted Action by Shareholders of Jinkailong (the “Termination Agreement”), pursuant to which theAgreement for Concerted Action by Shareholders with respect to Jinkailong signed on August 26, 2018 (“Voting Agreement No.1”) and theAgreement for Concerted Action by Shareholders with respect to Jinkailong signed on February 13, 2020 (“Voting Agreement No.2”, collectively,“Voting Agreements”) shall be terminated as of the date of the Termination Agreement. As a result, the Company no longer has a controllingfinancial interest in Jinkailong and has determined that Jinkailong was deconsolidated from the Company’s consolidated financial statementseffective as of March 31, 2022. However, as Hunan Ruixi still holds 35% equity interests in Jinkailong, Jinkailong is the equity investee companyof the Company since then. As of March 31, 2023, the paid-in capital of Jinkailong is zero.Table of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-24The following table sets forth the reconciliation of the amounts of major classes of income and losses from discontinued operations of Jinkailongin the consolidated statements of operations and comprehensive income (loss) for the years ended March 31, 2023 and 2022.For the Years EndedMarch 31, 2023 2022Revenues$—$6,830,116Cost of revenue — (5,183,806)Gross profit — 1,646,310Operating expenses Selling, general and administrative expenses — (4,139,800)Impairment of long-live assets — (32,479)Provision for doubtful account — (11,746)Total operating expenses — (4,184,025)Loss from discontinued operations — (2,537,715)Other expense, net — (209,494)Loss before income taxes — (2,747,209)Income tax expenses — —Net loss — (2,747,209)Less: net loss from discontinued operations attributable to noncontrolling interest — 714,274Net loss attributable to stockholders$—$(2,032,935)Discontinued operation- YouluOn March 31, 2022, the Youlu VIE Agreements were terminated by XXTX and Youlu Shareholders. As Youlu had limited operation, the Companyrecognized a gain of $23,556 from the termination.5. ACCOUNTS RECEIVABLE, NETAccounts receivable include a portion of bundled lease arrangements on fixed minimum monthly payments to be paid by the automobilepurchasers arising from automobile sales and services fees, net of unearned interest income, discounted using the Company’s lease pricing interestrates. It also includes online ride-hailing services fees due from online ride-hailing drivers and rental receivables due from operating lessees.As of March 31, 2023 and 2022, accounts receivables were comprised of the following: March 31, March 31, 20232022Receivables of automobile sales due from automobile purchasers$76,106$392,530Receivables of service fees due from automobile purchasers—17,350Receivables of online ride hailing fees from online ride-hailing drivers51,290121,116Receivables of operating lease31,039—Less: Allowance for doubtful accounts—(112,905)Accounts receivable, net$158,435$418,091Accounts receivable, net, current portion$158,435$418,022Accounts receivable, net, non-current portion$—$69Table of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-25Movement of allowance for doubtful accounts for March 31, 2023 and 2022 are as follows: March 31, March 31, 20232022Beginning balance$112,905$78,167Addition 3,394 153,988Write off(107,868)(44,227)Deconsolidation of Jinkailong—(76,428)Translation adjustment (8,431) 1,405Ending balance$—$112,9056. INVENTORIESMarch 31, March 31, 2023 2022Automobiles (i)$6,678$286,488(i)As of March 31, 2023 and 2022, the Company owned 1 and 36 automobiles with a total value of $6,678 and $286,488, net of impairment, forsale or sales-type leases, respectively.As of March 31, 2023 and 2022, the Company compared the cost of automobiles with their net realizable value and recognized impairments of$3,085 and $60,398, respectively for certain automobiles for sale for the years ended March 31, 2023 and 2022, respectively.7. PREPAYMENTS, OTHER RECEIVABLES AND OTHER ASSETSAs of March 31, 2023 and 2022, the prepayments, other receivables and other assets were comprised of the following: March 31, March 31, 20232022Deposits (i)$679,794$731,279Prepaid expenses (ii) 334,297 957,200Receivables from aggregation platforms (iii) 271,791 163,384Value added tax (“VAT”) recoverable (iv) 86,051 597,884Due from automobile purchasers, net (v) 45,489 238,421Employee advances11,48211,054Others9,33913,986Total prepayments, other receivables and other assets$1,438,243$2,713,208(i) DepositsThe balance of deposits mainly represented the security deposit made by the Company to various automobile leasing companies, financialinstitutions and Didi Chuxing Technology Co., Ltd., who runs an online ride-hailing platform.(ii) Prepaid expenseThe balance of prepaid expense represented automobile liability insurance premium for automobiles for operating lease and othermiscellaneous expense such as office lease, office remodel expense and etc. that will expire within one year.(iii) Receivables from aggregation platformsThe balance of receivables from aggregation platforms represented the amount due from the collaborated aggregation platforms based on theconfirmed billings, which will be disbursed to the drivers who completed their rides through the Company’s online ride-hailing platform.Table of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-26(iv) Value added tax (“VAT”) recoverableThe balance represented the amount of VAT, which resulted from historical purchasing activities and could be further used for deductingfuture VAT in PRC.(v) Due from automobile purchasers, netThe balance due from automobile purchasers represented the payments of automobiles and related insurances and taxes made on behalf of theautomobile purchasers. The balance is expected to be collected from the automobile purchasers in installments. As of March 31, 2023 andduring the year ended March 31, 2023, the Company did not record allowance against doubtful receivables due from automobile purchasers.As of March 31, 2022, the allowance against doubtful receivables due from automobile purchasers was zero. During the year ended March31, 2022, the Company recorded additional allowance of $84,600, while wrote off balance due from automobile purchase of $84,600, andrecovered allowance against the balance due from automobile purchases $3,308 from continuing operations, against doubtful receivables.During the year ended March 31, 2022, the Company recorded additional allowances of $35,983, while wrote off balance due fromautomobile purchases of $1,134, and recovered allowance against the balance due from automobile purchasers of $12,352 from discontinuedoperations.8. PROPERTY AND EQUIPMENT, NETProperty and equipment consist of the following: March 31, March 31, 20232022Leasehold improvements$183,216$198,463Computer equipment37,93247,849Office equipment, fixtures and furniture78,37281,898Automobiles4,679,9276,463,698Subtotal 4,979,4476,791,908Less: accumulated depreciation and amortization (1,635,990)(1,133,135)Total property and equipment, net$3,343,457$5,658,773Depreciation expense from continuing operations for years ended March 31, 2023 and 2022 were amounted to $1,095,518 and $956,400,respectively. Depreciation expense from discontinued operations for the year ended March 31, 2022 amounted to $170,177.9. OTHER NON-CURRENT ASSETS March 31 March 31, 2023 2022Prepayments of automobiles purchased (i) $716,407 $—(i)In March and September 2022, the Company entered into two automobile purchase agreements (“Purchase Agreements”) with two thirdparties to purchase a total of 150 automobiles which amounted to $2,444,813. As of March 31, 2023, the Company has made prepayments of$716,407 towards the remaining purchase pertaining to the Purchase Agreements. The Company expects to complete the remaining purchaseby December 31, 2023.Table of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-2710. INTANGIBLE ASSETS, NETIntangible assets consisted of the following: March 31, March 31, 20232022Software $793,381$796,042Online ride-hailing platform operating licenses 441,557 450,701Subtotal1,234,9381,246,743Less: accumulated amortization(460,614)(287,192)Total intangible assets, net$774,324$959,551Amortization expense from continuing operations totaled $184,215 and $160,831 for the years ended March 31, 2023 and 2022, respectively.The following table sets forth the Company’s amortization expense for the next five years ending: Amortization expensesTwelve months ending March 31, 2024$177,316Twelve months ending March 31, 2025 170,232Twelve months ending March 31, 2026 115,868Twelve months ending March 31, 2027 79,211Twelve months ending March 31, 202877,511Thereafter 154,186Total$774,32411. BORROWINGS FROM A FINANCIAL INSTITUTIONThe borrowings from a financial institution in China represented the short-term loans of $8,813 and $145,542 as of March 31, 2023 and 2022,respectively. Such borrowings bearing interest rate of 13.04% per annum as of March 31, 2023 and 2022, which are to be repaid within the next 12months.The interest expense for the years ended March 31, 2023 and 2022 was $0 and $5,893 from continuing operations, respectively. The interestexpense for the year ended March 31, 2022 was $501,361 from discontinued operations, of which, $450,889 was due to continuing operations andeliminated in the consolidation statements of operations and comprehensive income (loss).Table of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-2812. ACCRUED EXPENSES AND OTHER LIABILITIES March 31, March 31, 20232022Accrued payroll and welfare$1,636,092$1,176,442Payables to drivers from aggregation platforms (i)1,103,892806,921Deposits (ii)730,002783,830Accrued expenses 226,72194,106Other taxes payable 83,4325,260Loan repayments received on behalf of financial institutions (iii) 16,13028,704Payables for expenditures on automobile transaction and related services31,71956,222Other payables 37,34821,308Total accrued expenses and other liabilities3,865,3362,972,793Total accrued expenses and other liabilities - discontinued operations (487,829)(528,426)Total accrued expenses and other liabilities - continuing operations$3,377,507$2,444,367(i)Payables to drivers from aggregation platformsThe balance of payables to drivers from aggregation platforms represented the amount the Company collected on behalf of drivers whocompleted their transaction through the Company’s online ride-hailing platform base on the confirmed billings.(ii)DepositsThe balance of deposits represented the security deposit from operating and finance lease customers to cover lease payment and relatedautomobile expense in case the customers’ accounts are in default. The balance is refundable at the end of the lease term, after deducting anymissed lease payment and applicable fee.(iii)Loan repayments received on behalf of financial institutionsThe balance of loan repayments received on behalf of financial institutions represented the loan repayments made by the automobilepurchasers to financial institutions through the Company, which has not been paid to the financial institutions.13. EMPLOYEE BENEFIT PLANThe Company has made employee benefit plan in accordance with relevant PRC regulations, including retirement insurance, unemploymentinsurance, medical insurance, housing fund, work injury insurance and maternity insurance.The contributions made by the Company were $452,796 and $602,641 for the years ended March 31, 2023 and 2022, respectively, from continuingoperations of the Company. The contributions made by the Company were $464,159 for the year ended March 31 2022 for the Company’sdiscontinuing operations.As of March 31, 2023 and 2022, the Company did not make adequate employee benefit contributions in the amount of $1,086,526 and $963,824,respectively, from continuing operations of the Company.14. EQUITYWarrantsIPO WarrantsThe registration statement relating to the Company’s initial public offering also included the underwriters’ common stock purchase warrants topurchase 33,794 (337,940 pre reverse split) shares of common stock (“IPO Underwriter’s Warrants”). Each five-year warrant entitles warrantholder to purchase one share of the Company’s common stock at the price of $48.0 ($4.80 before reverse split) per share and is not exercisable fora period of 180 days from March 16, 2018. As of March 31, 2023, there were 3,794 (37,940 pre reverse split) IPO Underwriter’s Warrantsoutstanding.Table of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-29Warrants in OfferingsThe Company adopted the provisions of ASC 815 on determining what types of instruments or embedded features in an instrument held by areporting entity can be considered indexed to its own stock for the purpose of evaluating the first criteria of the scope exception in ASC 815.Warrants issued in connection with the direct equity offering with exercise prices denominated in US dollars are no longer considered indexed tothe Company’s stock, as their exercise prices are not in the Company’s functional currency (RMB), and therefore no longer qualify for the scopeexception and must be accounted for as a derivative. These warrants are classified as liabilities under the caption “Derivative liabilities” in theconsolidated statements of balance sheets and recorded at estimated fair value at each reporting date, computed using the Black-Scholes valuationmodel. Changes in the liability from period to period are recorded in the consolidated statements of operations and comprehensive income (loss)under the caption “Change in fair value of derivative liabilities.”2019 Registered Direct Offering WarrantsAs of March 31, 2023 and 2022, there were 16,841 (168,411 pre reverse split) 2019 registered direct offering warrants outstanding. During yearsended March 31, 2023 and 2022, the change of fair value was a gain of $12,432 and $185,727 in the consolidated statements of operations andcomprehensive income (loss) based on the decrease in fair value of the liabilities since March 31, 2021, respectively. As of March 31, 2023 and2022, the fair value of the derivative instrument totaled $6 and $12,438, respectively.August 2020 Underwriters’ WarrantsAs of March 31, 2023 and 2022, there were 31,808 (318,080 pre reverse split) underwriters’ warrants outstanding. During the years ended March31, 2023 and 2022, the change of fair value was a gain of $36,131 and $352,944 recognized in the consolidated statements of operations andcomprehensive income (loss) based on the decrease in fair value of the liabilities since March 31, 2021, respectively. As of March 31, 2023 and2022, the fair value of the derivative instrument totaled $8,450 and $44,581, respectively.February 2021 Registered Direct Offering WarrantsAs of March 31, 2023 and 2022, there were 53,262 (532,609 pre reverse split) February 2021 registered direct offering warrants outstanding.During the years ended March 31, 2023 and 2022, the change of fair value was a gain of $54,052 and $572,018 recognized in the consolidatedstatements of operations and comprehensive income (loss) based on the decrease in fair value of the liabilities since March 31, 2021, respectively.As of March 31, 2023 and 2022, the fair value of the derivative instrument totaled $11,491 and $65,543, respectively.May 2021 Registered Direct Offering WarrantsAs of March 31, 2023 and 2022, there were 594,682 (5,946,810 pre reverse split) May 2021 registered direct offering warrants outstanding. Duringthe years ended March 31, 2023 and 2022, the change of fair value was a gain of $662,767 and $2,725,530 recognized in the consolidatedstatements of operations and comprehensive income (loss) based on the decrease in fair value of the liabilities since March 31, 2021. As of March31, 2023 and 2022, the fair value of the derivative instrument totaled $174,108 and $836,875, respectively.November 2021 Private Placement WarrantsPursuant to November 2021 Investors Warrants, if at any time and from time to time on or after the issuance date there occurs any stock split, stockdividend, stock combination recapitalization or other similar transaction involving the Common Stock (“Stock Combination Event”) and the EventMarket Price (which is defined as with respect to any Stock Combination Event date, the quotient determined by dividing (x) the sum of theVWAP of the Common Stock for each of the five (5) lowest trading days during the twenty (20) consecutive trading day period ending andincluding the trading day immediately preceding the sixteenth (16th) trading day after such Stock Combination Event date, divided by (y) five (5))is less than the original exercise price of $0.82 then in effect, then on the sixteenth (16th) trading day immediately following such StockCombination Event, the exercise price then in effect on such sixteenth (16th) trading day shall be reduced (but in no event increased) to the eventmarket price. As the 1-for-10 reverse stock split on the Company’s common stock became effective on April 6, 2022, the exercise price of theNovember 2021 Investors Warrants was adjusted to $1.13, and the total number of shares of the November 2021 Investors Warrants was adjustedto 5,335,763.Table of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-30As of March 31, 2023 and 2022, there were 5,365,911 (7,869,971 per reverse split), and 5,390,911 (7,904,422 pre reverse split) respectively forNovember 2021 Private Placement Warrants outstanding. During the years ended March 31, 2023 and 2022, the change of fair value was a gain of$946,507 and $3,115,263 recognized in the consolidated statements of operations and comprehensive income (loss) based on the decrease in fairvalue of the liabilities since insurance. On November 18, 2022, a holder of November 2021 private placement warrants exercised the warrants on a“cashless” basis. Upon exercise of above-mentioned warrants, the Company reduced the fair value of the warrants and increased the additionalpaid in capital by $1,533. As of March 31, 2023 and 2022, the fair value of the derivative instrument totaled $307,727 and $1,255,767,respectively.The Company has warrants outstanding as follows giving retroactive effect to the 1-for-10 reverse stock split effected on April 6, 2022: Weighted AverageAverage Remaining WarrantsWarrantsExerciseContractualOutstandingExercisablePriceLifeBalance, March 31, 2021 110,107 110,107$11.60 4.09Granted 5,985,591 5,985,591$2.11 5.00Exercised (4,400) (4,400)— —Balance, March 31, 2022 6,091,298 6,091,298$2.28 4.32Exercised (25,000) (25,000) — —Balance, March 31, 2023 6,066,298 6,066,298$2.29 3.56Restricted Stock UnitsOn October 29, 2020, the Board approved the issuance of an aggregate of 127,273 restricted stock units (“RSUs”) to directors, officers and certainemployees as stock compensation for their services for the year ended March 31, 2022. Total RSUs granted to these directors, officers andemployees were valued at an aggregate fair value of $140,000. These RSUs will vest in four equal quarterly installments on January 29, 2021,April 29, 2021, July 29, 2021 and October 29, 2021 or in full upon the occurrence of a change in control of the Company, provided that thedirector, officer or the employee remains in service through the applicable vesting date. The RSUs will be settled by the Company’s issuance ofshares of common stock in certificated or uncertificated form upon the earlier of (i) vesting date, (ii) a change in control and (ii) termination of theservices of the director, officer or employee due to a “separation of service” within the meaning of Section 409A of the Internal Revenue Code of1986, as amended, or the death or disability of such director, officer or employee. As of the filing date of these consolidated financial statements,all installment of RSUs with an aggregate of 12,727 (127,273 pre reverse split) was vested and 9,545 (95,457 pre reverse split) was settled by theCompany. The Company expects to settle the remaining vested RSUs by issuance of shares of common stock before December 31, 2023 andaccount for the vested RSUs as an addition to both expenses and additional paid-in capital.Equity Incentive PlanAt the 2018 Annual Meeting of Stockholders of the Company held on November 8, 2018, the Company’s stockholders approved the Company’s2018 Equity Incentive Plan for employees, officers, directors and consultants of the Company and its affiliates. At the 2022 Annual Meeting ofStockholders of Company held on March 30, 2023, the Company’s stockholders approved the amendment to the 2018 Equity Incentive Plan, toincrease the number of shares of common stock reserved under the Plan to 1,500,000 shares. A committee consisting of at least two independentdirectors would be appointed by the Board or in the absence of such a committee, the board of directors, will be responsible for the generaladministration of the Equity Incentive Plan. All awards granted under the Equity Incentive Plan will be governed by separate award agreementsbetween the Company and the participants. As of March 31, 2023, the Company has granted an aggregate of RSUs and issued an aggregate ofshares upon vest under the Equity Incentive Plan and RSUs were forfeited due to two directors ceased to serve on the board of the Company sinceNovember 8, 2018.Table of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-311-for-10 shares reverse split on common stockThe Company considered the above transactions after giving a retroactive effect to a 1-for-10 reverse stock split of its common stock whichbecame effective on April 6, 2022. The Company believed it is appropriate to reflect the above transactions on a retroactive basis similar to thoseafter a stock split or dividend pursuant to ASC 260. All shares and per share amounts used herein and in the accompanying consolidated financialstatements have been retroactively stated to reflect the effect of the reverse stock split. Upon execution of the 1-for-10 reverse stock split, theCompany recognized additional 8,402 shares of common stock due to round up issue.Conversion Price Adjustment for November 2021 Preferred SharesPursuant to the COD signed by the Company and certain institutional investors in November 2021 Private Placement, the initial conversion priceof the series A convertible Preferred Shares was $0.68. If as of the applicable date the conversion price then in effect is greater than the greater of(1) $0.41 (the “floor Price”) (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations and similar events) and (2) 85% ofthe closing bid price on the applicable date (the “Adjustment Price”), the conversion price shall automatically lower to the Adjustment Priceaccordingly. As the 1-for-10 reverse stock split on the Company’s Common Stock became effective on April 6, 2022, the conversion price of thePreferred Shares was adjusted to $4.1. As of March 31, 2023 and March 31, 2022, there were 1,641 and 5,000 shares of Series A convertiblepreferred stock outstanding, respectively. During the year ended March 31, 2023, 3,359 shares of Series A convertible preferred stock wasconverted into 1,546,125 shares of the Company’s common stock. Further, on August 9, 2022, the Company and the investors agreed to reduce theconversion price of the series A convertible Preferred Shares from $4.10 to $2.00 and to increase the number of the shares of common stock thatare available to be issued upon conversion of the Preferred Shares from 1,092,683 to 2,240,000.15. INCOME TAXESThe United States of AmericaThe Company is incorporated in the State of Nevada in the U.S., and is subject to U.S. federal corporate income taxes with tax rate of 21%. TheState of Nevada does not impose any state corporate income tax.On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “TaxAct”). The Tax Act imposes a one-time transition tax on deemed repatriation of historical earnings of foreign subsidiaries, and future foreignearnings are subject to U.S. taxation. The Tax Act also stablished the Global Intangible Low-Taxed Income (GILTI), a new inclusion rule affectingnon-routine income earned by foreign subsidiaries. For the years ended March 31, 2023 and 2022, the Company’s foreign subsidiaries in Chinawere operating at loss and as such, did not record a liability for GILTI tax.The Company’s net operating loss for U.S. income taxes from U.S for the years ended March 31, 2023 and 2022 amounted to approximately $1.3million and $2.3 million respectively. As of March 31, 2023 and 2022, the Company’s net operating loss carryforward for U.S. income taxes wasapproximately $7.1 million and $5.9 million, respectively. The net operating loss carryforward will not expire and is available to reduce futureyears’ taxable income, but limited to 80% of income until utilized. Management believes that the utilization of the benefit from this loss appearsuncertain due to the Company’s operating history. Accordingly, the Company has recorded a 100% valuation allowance on the deferred tax asset toreduce the deferred tax assets to zero on the consolidated balance sheets. As of March 31, 2023 and 2022, valuation allowances for deferred taxassets related to net operating loss carry forward for U.S. income taxes were approximately $1.5 million and $1.2 million, respectively.Management reviews the valuation allowance periodically and makes changes accordingly.PRCSenmiao Consulting, Sichuan Senmiao, Hunan Ruixi, Ruixi Leasing, Jinkailong (deconsolidated in the year ended March 31, 2022), Yicheng,Jiekai, Youlu and XXTX and its subsidiaries are subject to PRC Enterprise Income Tax (“EIT”) on the taxable income in accordance with therelevant PRC income tax laws. The EIT rate for companies operating in the PRC is 25%.Table of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-32Income taxes in the PRC are consist of:For the Years EndedMarch 31, 2023 2022Deferred income tax expenses$—$4,566Total income tax expenses$—$4,566Below is a reconciliation of the statutory tax rate to the effective tax rate:For the Years Ended March 31, 2023 2022 PRC Statutory tax rate*25.0% 25.0%Differential of local statutory tax rate0.3% —%Permanent difference of write-off of receivables from guarantee of loans —% (0.5)%Permanent difference of gain from change in fair value of derivative liabilities not taxable in PRC 9.5% 26.1%Non-deductible expenses(1.1)% (8.3)%Valuation allowance on deferred income tax asset(30.7)%(43.6)%Others(3.0)%1.2%Effective tax rate —% (0.1)%*As the Company business operation mainly concentrated PRC, the Company determined to apply PRC statutory tax rate in reconciliation of thestatutory tax rate to the effective tax rateAs of March 31, 2023 and 2022, the Company’s PRC entities from continuing operations had net operating loss carryforwards of approximately$9.6 million and $8.5 million, respectively, which will expire starting from 2025 and ending in 2027. In addition, allowance for doubtful accountsmust be approved by the Chinese tax authority prior to being deducted as an expense item on the tax return. The bad debt allowances are incurredin Company’s PRC subsidiaries and former VIEs which were operating at losses, the Company believes it is more likely than not that its PRCoperations will be unable to fully utilize its deferred tax assets related to the net operating loss carryforwards in the PRC. As a result, the Companyprovided 100% allowance on all deferred tax assets on net operating loss carryforwards in the PRC of $2,403,785 and $2,315,793 related to itscontinuing operations in the PRC as of March 31, 2023 and 2022, respectively and provided 100% allowance on all deferred tax assets onallowance for doubtful account of $402,599 and $29,129 related to its continuing operations in the PRC as of March 31, 2023 and 2022,respectively.The tax effects of temporary differences from continuing operations that give rise to the Company’s deferred tax assets and liabilities are asfollows: March 31, March 31, 20232022Deferred Tax AssetsNet operating loss carryforwards in the PRC$2,403,785$2,315,793Net operating loss carryforwards in the U.S. 1,499,6071,234,789Allowance for doubtful account 402,59929,129Less: valuation allowance(4,305,991)(3,579,711)Deferred tax assets, net$—$—Deferred tax liabilities:Capitalized intangible assets cost$42,930$46,386Deferred tax liabilities, net$42,930$46,386As of March 31, 2023 and 2022, the Company’s PRC entities associated with discontinued operations had net operating loss carryforwards ofapproximately $1.9 million and $10.3 million, respectively which will start to expire from 2024 to 2027. Meanwhile, net operating loss carryforward as of March 31, 2023 in the PRC from discontinued operations was reduced due to certain adjustments by PRC tax authorities. For Inaddition, allowance for doubtful accounts must be approved by the Chinese tax authority prior to being deducted as an expense item on the taxreturn. The Company reviews deferred tax assets for a valuation allowance based upon whetherTable of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-33it is more likely than not that the deferred tax asset will not be fully realized. As of March 31, 2023 and 2022, full valuation allowance is providedagainst the deferred tax assets related to the Company’s discontinued operations based upon management’s assessment as to their realization.The tax effects of temporary differences from discontinued operations that give rise to the Company’s deferred tax assets are as follows: March 31, 2023 March 31, 2022Net operating loss carry forwards in the PRC$479,377$2,595,919Less: valuation allowance(479,377)(2,595,919)Total$—$—16. CONCENTRATIONMajor SuppliersFor the year ended March 31, 2023, two suppliers accounted for approximately 21.2% and 12.4% of the total costs of revenue from continuingoperations of the Company.For the year ended March 31, 2022, three suppliers accounted for approximately 23.65%,13.92%, and 13.18% of the total costs of revenue fromcontinuing operations of the Company, and one supplier accounted for approximately 18.18% of the total cost of revenues for discontinuedoperations of the Company.17. RELATED PARTY TRANSACTIONS AND BALANCES1. Related Party Balances1) Account receivable, a related partyAs of March 31, 2023 and 2022, account receivable from a related party from the Company’s continuing operations of $6,312 and $0, respectively,represented balance due from operating lease revenue recognized from Jinkailong, the Company’s equity investee company.2) Due from related partiesAs of March 31, 2023 and March 31, 2022, balances due from related parties from the Company’s continuing operations were comprised of thefollowing: March 31, March 31, 20232022Total due from related parties$6,610,156$7,318,081Less: Allowance for doubtful accounts (1,481,036)—Due from related parties, net$5,129,120$7,318,081Due from related parties, net, current portion$1,488,914$682,335Due from a related party, net, non-current portion$3,640,206$6,635,746As of March 31, 2023, balances due from Jinkailong of $5,106,100, net of allowance, of which, $3,640,206 is to be repaid over a period from April2024 to December 2026, which was classified as due from a related party, net, non-current (refer to Note 4).As of March 31, 2022, balances due from Jinkailong of $7,298,208, represented balance due from Jinkailong as result of Jinkailong’sdeconsolidation, of which, $6,635,746 is to be repaid over a period from April 2023 to December 2026, which was classified as due from a relatedparty, non-current.Movement of allowance for doubtful accounts due from Jinkailong for March 31, 2023 and 2022 are as follows:Table of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-34 March 31, March 31,20232022Beginning balance$—$—Addition 1,484,495 —Translation adjustment (3,459) —Ending balance$1,481,036$—As of March 31, 2023 and 2022, balance due from Youlu, the Company’s former VIE as result of Youlu’s deconsolidation in March 2022 wereamounted to $23,020 and $19,873, respectively.3) Due to related parties and affiliates March 31, March 31, 20232022Loan payable to a related party (i)$8,667$9,897Others (ii)—1,785Total due to related parties and affiliates$8,667$11,682(i)As of March 31, 2023 and 2022, the balances represented borrowings from Xi Wen, the CEO of the Company, of which, $8,667 and $9,897are unsecured, interest free and due on demand, respectively.(ii)As of March 31, 2023 and 2022, the balances of $0 and $1,785, respectively, represented payables to Jinkailong, the Company’s equityinvestee company, for operational purposes.4) Operating lease right-of-use assets, net, related parties and Operating lease liabilities - related parties March 31, March 31,20232022Lease I (i)$—$446,372Lease II (ii) 92,916 69,534Total Operating lease right-of-use assets - related parties$92,916$515,906 March 31, March 31,20232022Lease I (i)$82,069$246,516Lease II (ii) 61,393 84,265Total Operating lease liabilities, current - related parties$143,462$330,781 March 31, March 31,20232022Lease I (i)$—$211,953Lease II (ii) 42,247 14,943Total Operating lease liabilities, non-current - related parties$42,247$226,896(i)The Company entered into two office lease agreements with Hong Li, supervisor of Sichuan Senmiao, which were set to expire on January 1,2020. On April 1, 2020, the two office leases were updated with a leasing term from April 1, 2020 to March 31, 2023. On March 1, 2021, theCompany entered into an additional office lease which was set to expire on February 1, 2026. On April 1, 2021, the Company entered intoanother office lease which was set to expire on April 1, 2024. In October 2022, the Company terminated the leases signed on March 1, 2021and April 1, 2021 as mentioned above.(ii)In November 2018, Hunan Ruixi entered into an office lease agreement with Hunan Dingchentai Investment Co., Ltd. (“Dingchentai”), acompany where one of the Company’s independent directors serves as legal representative and general manager. The term of the leaseagreement was from November 1, 2018 to October 31, 2023 and the rent was approximately $44,250 per year, payable on a quarterly basis.The original lease agreement with Dingchentai was terminated on July 1, 2019. The Company enteredTable of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-35into another lease with Dingchentai on substantially similar terms on September 27, 2019, and a renewal lease contract was signed on June2022 which extended the original lease to May 2025.2. Related Party TransactionsFor the years ended March 31, 2023 and 2022, the Company incurred $177,414 and $237,968, respectively, in rental expenses to Hong Li,supervisor of Sichuan Senmiao, pursuant to four office lease agreements in total.For the years ended March 31, 2023 and 2022, the Company incurred $47,043 and $45,651, respectively, in rental expenses to Dingchentai, acompany where one of the Company’s independent directors serves as legal representative and general manager.The Company had reached cooperation with Jinkailong, the Company’s equity investee company, that the drivers who leased automobile fromJinkailong completed their online ride-hailing requests and orders through the company’s ride-hailing platform, and the company will payJinkailong a certain promotion service fee. During the year ended March 31, 2023, the company incurred promotion fee of $95,804 payable toJinkailong. During the year ended March 31, 2022, the company incurred promotion fee of $553,761 to Jinkailong, which was eliminated in theloss of continuing operations of the consolidated financial statements.During the year ended March 31, 2023, Corenel leased automobiles to Jinkailong and generated revenues of $344,120, while Jiekai leasedautomobiles from Jinkailong and had a rental cost of $509,904. During the years ended March 31, 2022, Corenel and Yicheng leased automobilesto Jinkailong and generated revenues of $1,280,993, which was eliminated in the loss of continuing operations of the consolidated financialstatements.During the year ended March 31, 2022, Hunan Ruixi and Yicheng had loans due from Jinkailong, the Company’s equity investee company, andhad interest income of $450,889, which was eliminated in the loss of continuing operations of the consolidated financial statements.18. LEASESLessorThe Company’s operating leases for automobile rentals have rental periods that are typically short term, generally is twelve months or less.Revenue recognition section of Note 3 (s), the Company discloses that revenue earned from automobile rentals, wherein an identified asset istransferred to the customer and the customer has the ability to control that asset, is accounted for under Topic 842 upon adoption for the year endedMarch 31, 2020.LesseeAs of March 31, 2023 and 2022, the Company has engaged in offices and showroom leases which were classified as operating leases.The Company leased automobiles under operating lease agreements with a term shorter than twelve months which it elected not to recognize leaseassets and lease liabilities under ASC 842. Instead, the Company recognized the lease payments in profit or loss on a straight-line basis over thelease term and variable lease payments in the period in which the obligation for those payments is incurred. In addition, the Company hadautomobiles leases which were classified as finance lease.The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.The Company recognized lease expense on a straight-line basis over the lease term for operating lease. Meanwhile, the Company recognized thefinance leases ROU assets and interest on an amortized cost basis. The amortization of finance ROU assets is recognized on a straight-line basis asamortization expense, while the lease liability is increased to reflect interest on the liability and decreased to reflect the lease payments madeduring the period. Interest expense on the lease liability is determined each period during the lease term as the amount that results in a constantperiodic interest rate of the automobile loans on the remaining balance of the liability.The ROU assets and lease liabilities are determined based on the present value of the future minimum rental payments of the lease as of theadoption date, using an effective interest rate of 6.0%, which is determined using an incremental borrowing rate with similar term inTable of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-36the PRC. As of March 31, 2023, the weighted-average remaining operating and finance lease term of its existing leases is approximately 2.67 and2.53 years, respectively.Operating and finance lease expenses consist of the following:For the Years Ended Classification March 31, 2023 March 31, 2022Operating lease cost Automobile lease costsCost of revenues$2,020,276$1,749,959Lease expenses Selling, general and administrative355,814585,719Finance lease cost Amortization of leased asset Cost of revenue 230,0222,844,167Amortization of leased asset General and administrative 100,814974,422Interest on lease liabilities Interest expenses on finance leases 25,675333,210Total lease expenses$2,732,601$6,487,477Total Lease expenses – discontinued operations—(4,150,972)Total Lease expenses- continuing operations$2,732,601$2,336,505Operating lease expenses for automobiles from continuing operations totaled $2,140,395 and $1,390,767 for the years ended March 31, 2023 and2022, respectively. Operating lease expenses for automobiles from discontinued operations totaled $359,192 for the year ended March 31, 2022.Operating lease expenses for offices and showroom leases from continuing operations totaled $355,814 and $460,209 for the years ended March31, 2023 and 2022, respectively. Operating lease expenses for offices and showroom leases from discontinued operations totaled $125,510 for theyear ended March 31, 2022.Interest expenses on finance leases from continuing operations totaled $25,675 and $55,844 for the years ended March 31, 2023 and 2022,respectively. Interest expenses on finance leases from discontinued operations totaled $277,366 for the year ended March 31, 2022.The following table sets forth the Company’s minimum lease payments in future periods: *Operating lease Finance lease paymentspaymentsTotalTwelve months ending March 31, 2024$205,894$294,410$500,304Twelve months ending March 31, 2025 86,897270,837357,734Twelve months ending March 31, 2026 50,391135,418185,809Twelve months ending March 31, 2027 3,591—3,591Total lease payments 346,773700,6651,047,438Less: discount (16,701)(48,549)(65,250)Present value of lease liabilities$330,072$652,116$982,188*As of March 31, 2023, the outstanding balance of operating lease payments due to related parties was $185,709.19. COMMITMENTS AND CONTINGENCIESContingenciesIn measuring the credit risk of guarantee services to automobile purchasers, the Company primarily reflects the “probability of default” by theautomobile purchasers on its contractual obligations and considers the current financial position of the automobile purchasers and its likely futuredevelopment.The Company manages the credit risk of automobile purchasers by performing preliminary credit checks of each automobile purchaser andongoing monitoring every month. By using the current credit loss model, management is of the opinion that the Company is bearing the credit riskto repay the principal and interests to the financial institutions if automobile purchasers’ default on their payments forTable of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-37more than three months. Management also periodically re-evaluates probability of default of automobile purchasers to make adjustments in theallowance, when necessary, as the Company is the guarantor of the loans.Purchase commitmentsOn September 23, 2022, the Company entered into a purchase contract with an automobile dealer to purchase a total of 100 automobiles for theamount of approximately $1.6 million. As of the date of filing of these consolidated financial statements, the Company has remit approximately$0.7 million as purchase prepayments, and expects to fulfill the purchase commitment before December 31, 2023.On March 28, 2023, the Company entered into a purchase contract with an automobile dealer to purchase a total of 50 automobiles for the amountof approximately $0.8 million. As of the date of filing of these consolidated financial statements, 30 automobiles of approximately $0.34 millionhave been purchased in cash and delivered to the Company, and the Company expects to fulfill the purchase commitment before December 31,2023.Contingent liabilities for automobile purchasersHistorically, most of the automobile purchasers would pay the Company their previous defaulted amounts within one to three months. InDecember 2019, a novel strain of coronavirus, or COVID-19, surfaced and it has spread rapidly to many parts of China and other parts of theworld, including the United States. The epidemic has resulted in quarantines, travel restrictions, and the temporary closure of stores and facilitiesin China and elsewhere. Because substantially all of the Company’s operations are conducted in China, the COVID-19 outbreak has materially andadversely affected the Company’s business operations, financial condition and operating results for 2021 and 2022, including but not limited todecrease in revenues, slower collection of accounts receivables and additional allowance for doubtful accounts. Some of the Company’s customersexited the ride-hailing business and rendered their automobiles to the Company for sublease or sale to generate income or proceeds to coverpayments owed to financial institutions and the Company. For years ended March 31, 2023 and 2022, the Company recognized an estimatedprovision loss of approximately $7,287 and $8,000, respectively, for drivers who exited the ride-hailing business were not able to make themonthly payments from continuing operations. For the year ended March 31, 2022, the Company recognized an estimated provision loss ofapproximately $716, for the guarantee services for drivers who exited the ride-hailing business were not able to make the monthly payments fromdiscontinued operations.As of March 31, 2023, the maximum contingent liabilities Hunan Ruixi would be exposed to was approximately $10,000, assuming all theautomobile purchasers were in default. Automobiles are used as collateral to secure the payment obligations of the automobile purchasers underthe financing agreements. The Company estimated the fair market value of the collateral represents approximately all of the maximum contingentliabilities as of March 31, 2023, based on the market price and the useful life of such collateral.Contingent liability of JinkailongDespite that the Company holds 35% of equity interest of Jinkailong through Hunan Ruixi, and has not make any consideration towards to theinvestment, the Company will be subjected to the maximum amount of RMB3.5 million (approximately $510,000) of which is equivalent to 35%of liabilities in case Jinkailong is liquidated in accordance with PRC’s company registry compliance.As of March 31, 2023, the maximum contingent liabilities of Jinkailong, the Company’s equity investee company and former VIE, would beexposed to was approximately $3.9 million, assuming all the automobile purchasers were in default. Automobiles are used as collateral to securethe payment obligations of the automobile purchasers under the financing agreements. Jinkailong estimated the fair market value of the collateralto be approximately $2.5 million as of March 31, 2023, based on the market price and the useful life of such collateral, which representsapproximately 65% of the maximum contingent liabilities. Meanwhile, approximately $2.6 million, including interests of approximately $232,000,due to financial institutions, of all the automobile purchases Jinkailong serviced were past due mainly due to the COVID-19 pandemic in China inprior years.Besides, as of March 31, 2023, due to Jinkailong has undertaken the joint and several liability guarantee for all loans of Langyue AutomobileService Co., Ltd. from Chengdu Industrial Impawn Co., Ltd (“Impawn”) for certain historical business, Jinkailong may be required to pay all theoutstanding balance of approximately $881,000 to Impawn in the future.From time to time, the Company and its equity investee company may be subject to certain legal proceedings, claims and disputes that arise in theordinary course of business. The total amount of reasonable possible losses with the respect to such matters, individually and in the aggregate, arenot deemed to be material to the consolidated financial statements.Table of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-3820. SEGMENT INFORMATIONThe Company presents segment information after elimination of inter-company transactions. In general, revenue, cost of revenue and operatingexpenses are directly attributable, or are allocated, to each segment. The Company allocates costs and expenses that are not directly attributable toa specific segment, such as those that support infrastructure across different segments, to different segments mainly on the basis of usage, revenueor headcount, depending on the nature of the relevant costs and expenses. The Company does not allocate assets to its segments as the CODM doesnot evaluate the performance of segments using asset information.By assessing the qualitative and quantitative criteria established by Accounting Standards Codification (“ASC”) 280, “Segment Reporting”, theCompany considers itself to be operating in two reportable segments which comprise of automobile transaction and related services and onlineride-hailing platform. The segments are organized based on type of service offered.The following tables present the summary of each segment’s revenue, loss from operations, loss before income taxes and net loss which isconsidered as a segment operating performance measure, for the years ended March 31, 2023 and 2022:For the Year ended March 31, 2023AutomobileTransaction andOnline ride-Relatedhailing platform Services Services UnallocatedConsolidatedRevenues$4,372,569$3,709,945$—$8,082,514Interest income$1,533$197$52$1,782Depreciation and amortization$1,842,745$64,217$84,401$1,991,363Loss from operations$(4,319,384)$(357,916)$(1,463,608)$(6,140,908)Loss before income taxes$(3,682,810)$(356,164)$248,281$(3,790,693)Net loss$(3,682,810)$(356,164)$248,281$(3,790,693)Capital expenditure$1,151,076$26,420$—$1,177,496For the Year ended March 31, 2022 Automobile Online ride- Transaction andhailingrelated platformDiscontinuedContinuing serviceservicesUnallocatedTotaloperationsoperationsRevenues$9,077,761$2,665,457 $—$11,743,218$6,830,116$4,913,102Interest income$983$863$682$2,528$646$1,882Depreciation and amortization$5,444,010$38,365$87,124$5,569,499$3,496,825$2,072,674Loss from operations$(3,957,831)$(6,962,113)$(3,179,759)$(14,099,703)$(2,537,715)$(11,561,988)loss before income taxes$(4,682,007)$(7,438,693)$3,771,912$(8,348,788)$(2,747,209)$(5,601,579)Net income (loss)$(4,686,573)$(7,438,693)$3,771,912$(8,353,354)$(2,747,209)$(5,606,145)Capital Expenditure$3,225,395$141,730$—$3,367,125$1,403$3,365,722The accounting principles for the Company’s revenue by segment are set out in Note 3(h).As of March 31, 2023, the Company’s total assets were comprised of $12,579,764 for automobile transaction and related services, $937,400 foronline ride-hailing platform services and $721,451 unallocated.As of March 31, 2022, the Company’s total assets were comprised of $12,022,387 for automobile transaction and related services, $7,003,867 foronline ride-hailing platform services and $851,863 unallocated.As substantially all of the Company’s long-lived assets are located in the PRC and substantially all of the Company’s revenue is derived fromwithin the PRC, no geographical information is presented.Table of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-3921. PARENT-ONLY FINANCIALSSENMIAO TECHNOLOGY LIMITEDCONDENSED BALANCE SHEETS March 31, March 31, 20232022(Unaudited)(Unaudited)ASSETS Current Assets Cash and cash equivalents$78,693$116,613Due from subsidiaries 11,889,775 12,587,739Prepayments, other receivables and other assets, net 35,251 135,252Total Current Assets 12,003,719 12,839,604 Other Assets Intangible assets525,000600,000Total Assets$12,528,719$13,439,604 LIABILITIES AND EQUITY Current LiabilitiesAccrued expenses and other liabilities$340,151$—Derivative liabilities501,7822,215,204Total Current Liabilities841,9332,215,204Other LiabilitiesExcess of investments in subsidiaries7,023,1862,310,937Total Liabilities7,865,1194,526,141Commitments and ContingenciesMezzanine Equity (redeemable) Series A convertible preferred stock (par value $1,000 per share, 5,000 shares authorized; 1,641 and5,000 shares issued and outstanding at March 31, 2023 and 2022, respectively)269,386820,799Stockholders’ Equity Common stock (par value $0.0001 per share, 500,000,000 shares authorized; 7,743,040 and 6,186,783shares issued and outstanding at March 31, 2023 and 2022, respectively)* 773618Additional paid-in capital 43,355,83442,803,045Accumulated deficit (37,715,294)(34,601,545)Accumulated other comprehensive loss (1,247,099)(109,454)Total Senmiao Technology Limited Stockholders’ Equity 4,394,2148,092,664Total Liabilities, Mezzanine Equity and Equity$12,528,71913,439,604*Giving retroactive effect to the 1-for-10 reverse stock split effected on April 6, 2022Table of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-40SENMIAO TECHNOLOGY LIMITEDCONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSSFor the Years Ended March 31, 2023 2022General and administrative expenses$(1,451,038)$(2,339,378)Other Income, net — 16,189Change in fair value of derivative liabilities1,711,8896,951,482Issuance costs for issuing series A convertible preferred stock—(821,892)Equity of losses in subsidiaries (3,374,600) (4,343,025)Net loss (3,113,749) (536,624)Foreign currency translation adjustment (1,137,645) 80,321Comprehensive loss attributable to stockholders$(4,251,394)$(456,303)Table of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-41SENMIAO TECHNOLOGY LIMITEDCONDENSED STATEMENTS OF CASH FLOWSFor the Years Ended March 31, 2023 2022Cash Flows from Operating Activities: Net loss$(3,113,749)$(536,624)Adjustments to reconcile net loss to net cash used in operating activities: Equity of loss of subsidiaries 3,374,600 4,343,025Amortization of intangible asset75,00075,000Issuance cost incurred for issuing series A convertible preferred stock—821,892Stock compensation expense—653,000Change in fair value of derivative liabilities(1,711,889)(6,951,482)Prepayments, receivables and other assets 100,002 1,651Accrued expenses and other liabilities 421,815 175,008Net Cash Used in Operating Activities (854,221) (1,418,530) Cash Flows from Investing Activities: Working capital contribution for subsidiaries — (5,749,950)Net Cash Used in Investing Activities — (5,749,950) Cash Flows from Financing Activities: Net proceeds from issuance of common stock and warrants in a registered direct public offering — 5,771,053Net proceeds from issuance of common stock upon warrants exercised—22,015Net proceeds from issuance of series A convertible preferred stock and warrants in a private placement offering — 4,369,937Repayment from subsidiaries750,000—Borrowings from subsidiaries66,301—Borrowings paid to subsidiaries — (4,487,690)Net Cash Provided by Financing Activities 816,301 5,675,315Net decrease in cash and cash equivalents (37,920) (1,493,165)Cash and cash equivalents, beginning of year 116,613 1,609,778Cash and cash equivalents, end of year$78,693$116,613 Supplemental Cash Flow Information Cash paid for interest expense$—$—Cash paid for income tax$—$— Non-cash Transaction in Investing and Financing Activities Allocation of fair value of derivative liabilities for issuance of common stock proceeds$—$7,932,341Allocation of fair value of derivative liabilities to additional paid in capital upon warrants exercised$—$45,674a) Basis of presentationThe condensed financial information of Senmiao Technology Limited, has been prepared using the same accounting policies as set out in theconsolidated financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordancewith U.S. GAAP have been condensed or omitted by reference to the consolidated financial statements.b) Investments in subsidiaries and equity of loss in subsidiariesThe investments in subsidiaries consist of investments in Senmiao Consulting, Hunan Ruixi and Yicheng. The equity losses in subsidiaries consistof equity loss in Senmiao Consulting, Hunan Ruixi, Yicheng, XXTX, Sichuan Senmiao, Corenel and Jiekai.Table of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-42c) Stockholders’ equityRestricted Stock UnitsOn October 29, 2020, the Board approved the issuance of an aggregate of 127,273 restricted stock units (“RSUs”) to directors, officers and certainemployees as stock compensation for their services for the year ended March 31, 2022. Total RSUs granted to these directors, officers andemployees were valued at an aggregate fair value of $140,000. These RSUs will vest in four equal quarterly installments on January 29, 2021,April 29, 2021, July 29, 2021 and October 29, 2021 or in full upon the occurrence of a change in control of the Company, provided that thedirector, officer or the employee remains in service through the applicable vesting date. The RSUs will be settled by the Company’s issuance ofshares of common stock in certificated or uncertificated form upon the earlier of (i) vesting date, (ii) a change in control and (ii) termination of theservices of the director, officer or employee due to a “separation of service” within the meaning of Section 409A of the Internal Revenue Code of1986, as amended, or the death or disability of such director, officer or employee. As of the filing date of these consolidated financial statements,all installment of RSUs with an aggregate of 12,727 (127,273 pre reverse split) was vested and 9,545 (95,457 pre reverse split) was settled by theCompany. The Company expects to settle the remaining vested RSUs by issuance of shares of common stock before December 31, 2023 andaccount for the vested RSUs as an addition to both expenses and additional paid-in capital.2019 Registered Direct OfferingOn April 15, 2019, the SEC declared effective the Company’s Registration Statement on Form S-3, pursuant to which, along with theaccompanying prospectus, the Company registered up to $80,000,000 in aggregate principal amount of its common stock, preferred stock, debtsecurities, warrants, rights and/or units. On June 21, 2019, the Company closed a registered direct offering of an aggregate of 178,136 (1,781,360pre reverse split) shares of its common stock, and in connection therewith, issued to the investors (i) for no additional consideration, Series Awarrants to purchase up to an aggregate of 133,602 (1,336,021 pre reverse split) shares of common stock and (iii) for nominal additionalconsideration, Series B warrants to purchase up to a maximum aggregate of 111,632 (1,116,320 pre reverse split) shares of common stock. TheCompany sold the shares of common stock at a price of $33.8 ($3.38 pre reverse split) per share (the “Share Purchase Price”). The Companyreceived gross proceeds from the offering of approximately $6.0 million, and net proceeds from the offering of approximately $5.1 million afterdeducting estimated offering expenses payable by the Company.The Series A warrants are exercisable immediately upon issuance at an exercise price of $37.2 ($3.72 pre reverse split) per share and will expire onthe fourth (4th) anniversary of the original issue date. In the event that on December 20, 2019, the exercise price is greater than the Six MonthAdjustment Price as defined below, on the trading day immediately following December 20, 2019 (the “Six Month Measuring Date”), the exerciseprice shall automatically adjust to the Six Month Adjustment Price (as adjusted for stock splits, stock dividends, stock combinations,recapitalizations and similar events). Six Month Adjustment Price means the greater of (x) $15.0 ($1.50 pre reverse split) (as adjusted for any stockdividend, stock split, stock combination, reclassification or similar transaction) and (y) 100% of the quotient of (I) the sum of the five lowestVWAPs of the common stock during the ten consecutive trading day period ending and including the Six Month Measuring Date, divided by (II)five. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similartransaction during such period. The exercise price of the Series A warrant was adjusted pursuant to this formula from $37.2 ($3.72 pre reversesplit) to $15.00 ($1.50 pre reverse split) per share on December 20, 2019. The Company used the adjusted exercise price to value its derivativeliability on its December 31, 2019 financial statements and reporting periods onwards with changes in fair value of warrant liabilities from periodto period are recorded in the consolidated statements of operations and comprehensive loss under the caption “Change in fair value of derivativeliabilities”. The exercise price of the Series A warrant was further adjusted to $5.0 ($0.50 pre reverse split) per share on August 7, 2020 as a resultof the Company’s issuance of shares of common stock in its underwritten public offering in August 2020, which has been recorded in the financialstatements in the year ended March 31, 2021. In addition, the exercise price of the placement agent warrants from the June 2019 registered directoffering was voluntarily adjusted by the Company from $37.2 ($3.72 pre reverse split) to $5.0 ($0.50 pre reverse split) per share on August 18,2020.The Series B warrants are pre-funded warrants and were issued as a true-up with respect to the shares of common stock. The maximum aggregatenumber of shares of common stock issuable upon exercise of the Series B warrants is 111,632 (1,116,320 pre reverse split). Initially, the Series Bwarrants shall not be exercisable for any shares of common stock. In the event that on the fiftieth (50th) day after the closing date (the “AdjustmentMeasuring Time”), the closing price of the common stock is less than the Share Purchase Price, then the number of shares of common stockissuable upon exercise of the Series B warrants shall be adjusted (upward or downward, as applicable) to the greater of (i) zero (0) and (ii) suchaggregate number of shares of common stock equal to fifty percent (50%) of the difference of (A) the quotient of (x) the Share Purchase Pricedivided by (y) the Market Price (as defined in Purchase Agreement) as ofTable of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-43the Adjustment Measuring Time, less (B) the aggregate number of shares of common stock issued to the investors at the closing (as adjusted forshare splits, share dividends, share combinations, recapitalizations and similar events). The exercise price of the Series B warrant was adjustedfrom $37.2 ($3.72 pre reverse split) to $0.001 ($0.0001 pre reverse split) per share on August 12, 2019. The Company used the adjusted exerciseprice to value its derivative liability on its September 30, 2019 financial statements and reporting period onwards with changes in fair value ofwarrant liabilities from period to period are recorded in the consolidated statements of operations and comprehensive loss under the caption“Change in fair value of derivative liabilities. As of March 31, 2021, the Company has issued an aggregate of 111,319 (1,113,188 pre reverse split)shares of common stock to certain investors in the June 2019 offering upon exercise of the pre-funded Series B warrants for a total consideration of$111.Underwritten Public Offering and Exercise of the Over-Allotment OptionOn August 4, 2020, the Company entered into an underwriting agreement with The Benchmark Company, LLC and Axiom Capital Management,Inc., as representatives of the Underwriters, relating to an underwritten public offering of 1,200,000 (12,000,000 pre reverse split) shares of theCompany’s common stock at the Offering Price. Pursuant to the terms of the Underwriting Agreement, the Company granted the Underwriters a45-day option to purchase up to an additional 180,000 (1,800,000 pre reverse split) shares of common stock to cover over-allotments, if any, at theOffering Price less the underwriting discounts and commissions. An underwriting discount of 7% was applied to the Offering Price, except forshares of common stock purchased by certain existing investors of the Company (the “Excluded Investors”), an underwriting discount of 6% wasapplied. On August 6, 2020, the Company completed the underwritten offering. The net proceeds to the Company from this offering, afterdeducting the underwriting discounts and commissions and other estimated offering expenses payable by the Company, were approximately $5.3million.On August 13, 2020, the Underwriters exercised their over-allotment option to purchase an additional 180,000 (1,800,000 pre reverse split) sharesof common stock at $5.0 ($0.50 pre reverse split) per share. This transaction was completed on August 13, 2020. Net proceeds from the exercise ofthe underwriters’ over-allotment option were approximately $0.8 million net of underwriting discounts and commissions and offering expenses.In connection with the underwritten offering, the Company issued the Underwriters or their permitted designees, on a private placement basis, theUnderwriters’ Warrants to purchase up to 56,800 (568,000 pre reverse split) shares of common stock. These warrants are valid for a period of fiveyears and exercisable commencing six months from August 4, 2020 at a price per share equal to 125% of the Offering Price and are exercisable ona “cashless” basis.February 2021 Registered Direct OfferingOn February 8, 2021, the Company entered into a placement agency agreement with FT Global Capital, Inc., to act as exclusive placement agent inconnection with the registered direct public offering. Pursuant to the terms of the placement agency agreement, the Company agreed to pay thePlacement Agent a cash fee equal to 7.5% of the gross proceeds raised in the Offering, and to reimburse the Placement Agent for certain expenses,including legal fees and expenses, up to $60,000 in the aggregate. The Placement Agent is also entitled to additional tail compensation for anyfinancings consummated within the 12-month period following the termination of the Placement Agent Agreement to the extent that such financingis provided to the Company by investors that the Placement Agent had introduced to the Company. On February 10, 2021, the Company completedthe registered direct offering. The net proceeds to the Company from this offering, after deducting the underwriting discounts and commissionsand other estimated offering expenses payable by the Company, were approximately $5.7 million.In connection with the offering, the Company issued the placement agent warrants to purchase up to 38,044 (380,435 pre reverse split) shares of itscommon stock. These warrants are exercisable for a period of five years commencing 180 days from February 8, 2020 at a price of $13.8 ($1.38pre reverse split) per share and are exercisable on a “cashless” basis. In addition, the company issued The Benchmark Company, LLC and AxiomCapital Management, Inc. ss from the offering and warrants to purchase up to 15,218 (152,174 pre reverse split) shares of its common stock, inconsideration for the termination of the ROFR. These warrants are exercisable for a period of five years from February 8, 2020 at a price of $17.25($1.725 pre reverse split) per share.May 2021 Registered Direct OfferingOn May 11, 2021, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain purchasers (the“Investors”) pursuant to which the Company will sell to the Investors, in a registered direct offering, an aggregate of 553,192 (5,531,916 prereverse split) units (the “Units”), each consisting of 0.1 (one pre reverse split) share (the “Shares”) of the Company’sTable of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-44common stock, par value $0.0001 per share (“Common Stock”) and a warrant to purchase 0.1 (one pre reverse split) share of the Company’sCommon Stock (the “Warrants”), at a purchase price of $1.175 per unit, for aggregate gross proceeds to the Company of $6,500,000, beforededucting fees to the placement agent and other estimated offering expenses payable by the Company. On May 13, 2021, the Company completedthe registered direct offering. The net proceeds to the Company from this offering, after deducting the underwriting discounts and commissionsand other estimated offering expenses payable by the Company, were approximately $5.8 million.The Warrants have a term of five years and are exercisable by the holders at any time after the date of issuance at an exercise price of $10.5 ($1.05pre reverse split) per share. The exercise price and the number of shares issuable upon exercise of the Warrants are subject to an adjustment uponthe occurrence of certain events, including, but not limited to, stock splits or dividends, business combinations, sale of assets, similarrecapitalization transactions, or other similar transactions. The exercise price of the Warrants is also subject to an adjustment in the event that theCompany issues or is deemed to issue shares of Common Stock for less than the applicable exercise price of such Warrants. However, the exerciseprice of the Warrants shall not be lower than $10.5 ($1.05 pre reverse split) as a result of an adjustment, unless the Company has obtained thestockholder approval. The exercisability of the Warrants may be limited if, upon exercise, the holder or any of its affiliates would beneficially ownmore than 4.99%.FT Global Capital, Inc. (“FT Global Capital”) acted as the exclusive placement agent in connection with this offering pursuant to the terms of aplacement agency agreement, dated May 11, 2021, between the Company and FT Global Capital (the “Placement Agent Agreement”). Pursuant tothe Placement Agent Agreement, the Company agreed to pay FT Global Capital a cash fee equal to seven point five percent (7.5%) of theaggregate proceeds received by the Company from the sale of its securities to the investors introduced to the Company by FT Global Capital. FTGlobal Capital is also entitled to additional tail compensation for any financings consummated within the 12-month period following thetermination of the Placement Agent Agreement to the extent that such financing is provided to the Company by investors that FT Global Capitahad introduced to the Company. In addition to the cash fees, the Company agreed to issue to the Placement Agent warrants to purchase anaggregate of up to seven point five percent (7.5%) of the aggregate number of shares of our Common Stock sold in the offering (the “PlacementAgent Warrants”). The Placement Agent Warrants shall generally be on the same terms and conditions as the Warrants, exercisable at a price of$10.5 ($1.05 pre reverse split) per share, provided that Placement Agent Warrants will not provide for certain anti-dilution protections included inthe Warrants.In connection with the offering, the Company issued the investors warrants and placement agent warrants to purchase up to 553,192 (5,531,916 prereverse split) and 41,490 (414,894 pre reverse split) shares of its common stock, respectively. These warrants are exercisable at any time on or afterthe issuance date and expire on the fifth-year anniversary of their issuance.November 2021 Private PlacementOn November 8, 2021, the Company, entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors(the “Investors”) pursuant to which the Company will sell to the Investors, in a private placement (the “Private Placement”), an aggregate of$5,000,000 worth of securities of the Company, consisting of up to 5,000 shares (the “Preferred Shares”) of Series A Convertible Preferred Stock,par value $0.0001 per share (the “Series A Preferred Stock”) and warrants (the “Investor Warrants”) to initially acquire up to an aggregate numberof shares of common stock of the Company, par value $0.0001 per share (the “Common Stock”) that equals to the number of shares of CommonStock to be issued upon conversion of the Preferred Shares at $0.68 per share (the “Initial Conversion Price”) (as exercised, collectively, the“Warrant Shares”). The purchase price for the Preferred Shares shall be $1,000 per each Preferred Share (and related Investor Warrant). OnNovember 10, 2021, the Company completed the Private Placement. The net proceeds to the Company from this offering, after deducting theplacement agent commissions and other estimated offering expenses payable by the Company, were approximately $4.4 million. The Series AConvertible Preferred Stock is included in mezzanine equity on the consolidated balance sheets, because it is redeemable by the holders uponevents of change of control which are not within the Company’s control. A discount to the redemption amount of a contingently redeemablepreferred share should be amortized only once it is probable the share will become redeemable. The Company determined that the redemption isuncertain as the cash redemption feature upon change of control is at the option of the holder, and the redemption date upon the change of controlis uncertain.Pursuant to the certificate of designations for the Series A Preferred Stock (the “COD”), at any time after the initial issuance date, each holder shallbe entitled to convert any portion of the outstanding Preferred Shares held by such holder into shares of Common Stock (the “Conversion Shares”)at Initial Conversion Price, which shall be adjusted to the greater of $0.41 per share or 85% of the closing bid price of the Company’s CommonStock reported on the NASDAQ Capital Market on the Applicable Date, which is the earlier of the first date on which the registration statementcovering the resale of the Conversion Shares and Warrant Shares is declared effectiveTable of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-45by the SEC or the first date on which all such shares are eligible to be resold by the Investors pursuant to Rule 144 or Rule 144A promulgatedunder the Securities Act. As the 1-for-10 reverse stock split on the Company's Common Stock became effective on April 6, 2022, the conversionprice of the Preferred Shares was adjusted to $4.1. As of March 31, 2023 and 2022, there were 1,641 and 5,000 shares of Series A convertiblepreferred stock outstanding, respectively. During the year ended March 31, 2023, 3,359 shares of Series A convertible preferred stock wasconverted into 1,546,125 shares of the Company's common stock. Further, on August 9, 2022, the Company and the investors agreed to reduce theconversion price of the series A convertible Preferred Shares from $4.10 to $2.00 and to increase the number of the shares of common stock thatare available to be issued upon conversion of the Preferred Shares from 1,092,683 to 2,240,000.The Investor Warrants have a term of five years and are exercisable by the holders at any time after six months and one day of the date of issuanceat an exercise price of $8.2 ($0.82 pre reverse split) per share. The exercise price and the number of shares issuable upon exercise of the InvestorWarrants are subject to an adjustment upon the occurrence of certain events, including, but not limited to, stock splits or dividends, businesscombinations, sale of assets, similar recapitalization transactions, or other similar transactions. The exercise price of the Investor Warrants are alsosubject to an adjustment in the event that the Company issues or is deemed to issue shares of Common Stock for less than the applicable exerciseprice of such Investor Warrants. However, the exercise price of the Investor Warrants shall not be lower than $7.1 ($0.7125 pre reverse split) as aresult of an adjustment, unless the Company has obtained the stockholder approval. The exercisability of the Investor Warrants may be limited if,upon exercise, the holder or any of its affiliates would beneficially own more than 4.99% or 9.99% as the Investor chooses. As the 1-for-10 reversestock split on the Company's common stock became effective on April 6, 2022, the exercise price of the November 2021 Investors Warrants wasadjusted to $1.13, the Event Market Price and the total number of shares of the November 2021 Investors Warrants was adjusted to 5,335,763.FT Global Capital acted as the exclusive placement agent in connection with this Private Placement pursuant to the terms of a placement agencyagreement, dated November 7, 2021, between the Company and FT Global Capital (the “Placement Agent Agreement”). Pursuant to the PlacementAgent Agreement, the Company agreed to pay FT Global Capital a cash fee equal to 7.5% of the aggregate proceeds received by the Companyfrom the sale of its securities to the Investors. FT Global Capital is also entitled to additional tail compensation for any financings consummatedwithin the 12-month period following the termination of the Placement Agent Agreement to the extent that such financing is provided to theCompany by investors that FT Global Capital had introduced to the Company. In addition to the cash fees, the Company agreed to issue to thePlacement Agent warrants to purchase an aggregate of up to 7.5% of the aggregate number of the Conversion Shares (the “Placement AgentWarrants”). The Placement Agent Warrants shall generally be on the same terms and conditions as the Investor Warrants, exercisable at a price of$6.8 ($0.68 pre reverse split) per share, provided that Placement Agent Warrants will not provide for certain anti-dilution protections included inthe Investor Warrants.In connection with the Private Placement, the Company issued warrants to the Investors to purchase up to an aggregate number of shares ofcommon stock that equals to the number of shares of common stock to be issued upon conversion of the Series A Preferred Stock at the InitialConversion Price. Meanwhile, the Company paid the placement agent cash commission of approximately $375,000 and issued to it warrants topurchase up to 55,148 (551,480 pre reverse split) shares of common stock at an exercise price of $6.8 ($0.68 pre reverse split) per share, whichwarrants will be exercisable at any time on or after the date of six months from the issuance date and expire on the fifth-year anniversary of theirissuance.Share Swap in purchase of XXTX’s remaining minority interestIn October 2021, the Company, Senmiao Consulting, XXTX and its shareholders entered into a Share Swap Agreement, pursuant to which theCompany, through Senmiao Consulting, shall purchase all of the equity shares of XXTX held by its shareholders by issuing a total of 533,167(5,331,667 pre reverse split) shares of the Company’s common stock to XXTX’s Shareholders. Upon closing, the Company, through SenmiaoConsulting, shall own 100% of the equity interests in XXTX.Common stock issued for consulting servicesOn October 22, 2021, the Company entered into a consulting agreement (the “Consulting Agreement”) with Jolly Good River Group Limited. (the“Consultant”), pursuant to which the Company engaged the Consultant to provide certain market research and business development advisoryservices for a period of twelve months. As compensation for the services, the Company agreed to issue the Consultant an aggregate of 100,000(1,000,000 pre reverse split) shares of the Common Stock, par value $0.0001, payable within ten working days from the signing of the ConsultingAgreement. As of November 9, 2021, the issuance of 100,000 (1,000,000 pre reverse split) shares of the Company’s common stock has beencompleted and the Company recorded the consulting fee of $653,000 pursuant to the fair value on November 3, 2021, the grant date.Table of ContentsSENMIAO TECHNOLOGY LIMITEDNOTES TO CONSOLIDATED FINANCIAL STATEMENTSF-461-for-10 shares reverse split on common stockThe Company considered the above transactions after giving a retroactive effect to a 1-for-10 reverse stock split of its common stock whichbecame effective on April 6, 2022. The Company believed it is appropriate to reflect the above transactions on a retroactive basis similar to thoseafter a stock split or dividend pursuant to ASC 260. All shares and per share amounts used herein and in the accompanying consolidated financialstatements have been retroactively stated to reflect the effect of the reverse stock split. Upon execution of the 1-for-10 reverse stock split, theCompany recognized additional 8,402 shares of common stock due to round up issue.22. SUBSEQUENT EVENTSSince March 31, 2023 to the filing date of these consolidated financial statements, 500 shares of Series A convertible preferred stock in theNovember 2021 Private Placement were converted into 250,000 shares of the Company’s common stock.Table of Contents101Item 9Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.None.Item 9A.Controls and Procedures.Evaluation of Disclosure Controls and ProceduresAs of the end of the period covered by this Report, we carried out an evaluation, of the effectiveness of the design and operation of ourdisclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) under the supervision and with theparticipation of our management, including our principal executive officer and principal financial officer, Based on the foregoing evaluation, ourprincipal executive officer and principal financial officer concluded that, as of March 31, 2023, our disclosure controls and procedures were noteffective at the reasonable assurance level due to the material weaknesses described below.Management’s Report on Internal Control over Financial ReportingOur management, including our principal executive officer and principal financial officer, is responsible for establishing and maintainingadequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control overfinancial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with U.S. GAAP. Under the supervision and with the participation of our management,including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control overfinancial reporting as of March 31, 2023, based on the Internal Control-Integrated Framework (2013) issued by the Committee of SponsoringOrganizations of the Treadway Commission (COSO) (2013 Framework). Based on this evaluation under the 2013 Framework, our principalexecutive officer and principal financial officer have concluded that our internal control over financial reporting was not effective March 31, 2023due to the following material weaknesses:●We did not have sufficient personnel with appropriate levels of accounting knowledge and experience to address complex U.S. GAAPaccounting issues and to prepare and review financial statements and related disclosures under U.S. GAAP. Specifically, our control did notoperate effectively to ensure the appropriate and timely analysis of and accounting for unusual and non-routine transactions and certainfinancial statement accounts;●We are lacking adequate policies and procedures in internal audit function to ensure that our policies and procedures have been carried out asplanned; and●We had deficiencies in our IT general controls regarding to the Logical Access Security, Change Management, IT Operations andCybersecurity of our financial system and key application system, etc.A material weakness is a deficiency, or a combination of deficiencies, within the meaning of PCAOB Auditing Standard AS 2201, in internalcontrol over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interimfinancial statements will not be prevented or detected on a timely basis. During the year ended March 31, 2023, we are in the progress ofimproving our system security environment and conducting regular backup plans and penetration testing to ensure network and informationsecurity. We also kept refining the operational and financial system for our businesses to warn of risks and support management’s ability to makesignificant decisions. We are also developing a comprehensive system which could combine interactive information between our AutomobileTransaction and Related Services and Online Ride-hailing Platform Services. We plan to address the weaknesses identified above by implementingthe following measures:(i)Continuously hiring additional accounting staffs with comprehensive knowledge of U.S. GAAP and SEC reporting requirements;(ii)Ameliorating our internal audit to assist with assessment of Sarbanes-Oxley compliance requirements and improvement of internalcontrols related to financial reporting; and(iii)improving our IT environment and daily management.Changes in Internal Control over Financial ReportingThere has been no change in our internal control over financial reporting that occurred during the fourth quarter of the year ended March 31,2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.Table of Contents102Item 9B.Other InformationNone.Item 9C.Disclosure Regarding Foreign Jurisdictions that Prevent InspectionsNot applicable.Table of Contents103PART IIIItem 10.Directors, Executive Officers and Corporate GovernanceDirectors and Executive OfficersOur current directors and officers are as follows:Name Age PositionXi Wen 40 Chief Executive Officer, Chairman of the Board, President and Secretary, ExecutiveDirector of Sichuan SenmiaoXiaoyuan Zhang 35 Chief Financial Officer and TreasurerHaitao Liu 51 Chief Operating OfficerXiaojuan Lin 58 DirectorTrent D. Davis 55 DirectorSichun Wang 35 DirectorJie Gao 44 DirectorXi Wen has been serving as President, Secretary and Director of the Company since June 2017, was appointed as Chairman of the board onJuly 20, 2017 and our Chief Executive Officer on August 1, 2018. Mr. Wen has over 10 years of experience in finance and investmentmanagement. He has been serving as Executive Director of Sichuan Senmiao since February 2017, in charge of all aspects of Senmiao’soperations. Immediately prior to joining Senmiao, Mr. Wen served as a director of Chenghexin, where he was responsible for overseeing theoperations of the Aihongsen lending platform from May 2015 to February 2017. He also founded Chengdu Fubang Zhuoyue Investment Co. inSeptember 2013 and served as General Manager until May 2015. From January 2009 to August 2013, Mr. Wen was the General Manager ofChengdu Haiyuan Trading Co., Ltd., in charge of the company’s daily operations. Mr. Wen holds a Bachelor’s degree in Business and Economicsfrom Manchester Metropolitan University in Manchester, United Kingdom. Mr. Wen is qualified to serve on our board of directors due to hisknowledge of our businesses and expertise in business management, finance and investment.Xiaoyuan Zhang has been serving as our Chief Financial Officer since September 17, 2018. She has served as a director and the chairpersonof the Audit Committee of Color Star Technology Co., Ltd. (Nasdaq: CSCW), a provider of online and offline education services in China, sinceJuly 2019 to March 29, 2021. Ms. Zhang previously served as Senior Auditor and Assurance Manager of Ernst & Young Hua Ming LLP, ChengduBranch, from October 2010 to September 2018 where she participated in audits of several public companies listed in China, Hong Kong andSingapore, as well as large state-owned and foreign investment enterprises. Ms. Zhang received her dual bachelor’s degrees in accounting and lawfrom Southwestern University of Finance and Economics in Chengdu, China. Ms. Zhang is an intermediate accountant and a Certified PublicAccountant of the Chinese Institute of Certified Public Accountants.Haitao Liu has been serving as the Chief Executive Officer of Sichuan Senmiao since August 1, 2018. On September 10, 2020, Mr. HaitaoLiu tendered his voluntary resignation as Chief Executive Officer of Sichuan Senmiao. On the same date, the Board appointed Mr. Haitao Liu toserve as the Company’s Chief Operating Officer. Mr. Liu previously served as Chief Executive Officer of Shenzhen Qianhai Tuteng InternetFinancial Services Co., Ltd., a peer-to-peer online lending company specialized in auto loans, from May 2015 to April 2018. Prior to that, heserved as the Deputy General Manager of Chengdu High-Tech Zone Xingrui Microfinance Co., Ltd., a company offering loans to small businessesand individuals, from May 2012 to April 2015, as the Chief Financial Officer of Sichuan Information Industry Co., Ltd., an information technologycompany, from July 2006 to May 2012, and as the Deputy General Manager of Sichuan Zhongxin Hengde CPA Co., Ltd. from June 2000 toJuly 2006. He also served as a civil servant in Chenghua District People’s Government of Chengdu from June 1993 to June 2000. Mr. Liu receiveda master’s degree in EMBA (Finance) from Southwestern University of Finance and Economics, a bachelor’s degree in Business Administrationfrom Southwest Jiaotong University and an associate degree in Commercial Economy from Southwestern University of Finance and Economics inChina.Xiaojuan Lin has been a director of the Company since July 20, 2017. Since March 2011, Ms. Lin has been the legal representative andExecutive General Manager of Hunan Dinchentai Investment Co. Ltd. She previously served as Deputy General Manager and Finance Manager ofHunan Xinhongxin Group from April 2004 to February 2010 where she was in charge of the group’s finance, tax and accounting matters. FromAugust 2000 to March 2004, Ms. Lin served as Finance Manager for Northwest Region at Tianjin Jiashijian Commercial Group, where shemanaged the group’s finance, tax and accounting matters. She also acted as Budgeting and Accounting Manager of Cygent Hotel from 1986 to2000. Ms. Lin holds a Bachelor’s degree in Statistics from Hunan Finance University in Hunan, China. She is a Certified Public Accountant inChina. Ms. Lin is qualified to serve on our board of directors due to her expertise in accounting and finance.Table of Contents104Trent D. Davis has been a director of the Company since March 21, 2018. Mr. Davis is currently the Chief Executive Officer of PaulsonInvestment Company, LLC, which is a boutique investment firm specializing in private equity offerings for small to mid-cap markets. Formerly,from December 2014 to December 2018, Mr. Davis was President and Chief Operating Officer of Whitestone Investment Network, Inc., whichspecializes in providing executive advisory services to small entrepreneurial companies, as well as restructuring, recapitalizing, and makingstrategic investments in small to midsize companies. Currently, Mr. Davis is a Director for INVO Bioscience (OTC: INVOD), which is a medicaldevice company focused on creating simplified, lower cost treatments for patients diagnosed with infertility. Formerly, from September 2016 toAugust 2019, Mr. Davis was Vice Chairman and Lead Director of Eastside Distilling Inc. (Nasdaq: EAST), a manufacturer of high-quality, master-crafted spirits. As the Lead Independent Director Dataram Corporation (Nasdaq: DRAM), which develops, manufactures, and markets memoryproducts primarily used in enterprise servers and workstations worldwide, from July 2015 to April 2017, Mr. Davis helped the companysuccessfully complete the reverse merger with U.S. Gold Corp (Nasdaq: USAU), a gold exploration and development company. Previously, fromDecember 2014 to July 2015, Mr. Davis was Chairman of the Board for Majesco Entertainment Company (Nasdaq: COOL), an innovativedeveloper, marketer, publisher, and distributor of interactive entertainment for consumers around the world. From November 2013 until July 2014,Mr. Davis served as the President and Director of Paulson Capital Corp. (Nasdaq: PLCC) until he successfully completed the reverse merger ofPaulson with VBI Vaccines (Nasdaq: VBIV). He went on to serve as a member of its Board of Directors and Audit Committee until May 2016.Mr. Davis was also the Chief Executive Officer of Paulson Investment Company, Inc., a subsidiary of Paulson Capital Corp, from July 2005 toOctober 2014, and is credited with overseeing the syndication of approximately $600 million for over 50 client companies in both public andprivate transactions. In 2003, Mr. Davis served as Chairman of the Board of the National Investment Banking Association. Mr. Davis holds a B.S.in Business and Economics from Linfield College and an M.B.A. from University of Portland. Mr. Davis is qualified to serve on our board ofdirectors because of his deep knowledge of finance and public company issues, capital market, advisory and entrepreneurial experiences, andextensive expertise in operational and executive management.Sichun Wang has been a director of the Company since November 8, 2018. Ms. Wang has served as the senior investment manager andfinancial controller of SWHY SDH Equity Investment Management, an equity investment and management company, since October 2016, whereshe leads the financial department of the company and participated in several pre-initial-public offering, mergers and acquisitions and secondaryoffering projects. From February 2016 to April 2016, she served as the trust manager of JIC Trust Company Limited, a trust and financialcompany. Prior to that, Ms. Wang served as the assistant manager of KPMG Huazhen from September 2011 to January 2016, where sheparticipated in audits of multiple companies and achieved Bravo Award for outstanding performance. Ms. Wang received her Bachelor of Artsdegree in accounting with honors from Michigan State University in East Lansing, MI. She is a Certified Public Accountant in China. Ms. Wang isqualified to serve on our board of directors due to her expertise in accounting and auditing and her experience with capital market and corporatefinancing.Jie Gao has served as a director of the Company since November 8, 2018. She has been the general manager of Hunan Ruixi, our majorityowned subsidiary, since February 2018. She has also served as the executive director of Ruixi Leasing, a wholly owned subsidiary of Hunan Ruixi,since April 2018. Prior to that, she was the executive director of Guangdong Hu Mao Sheng Tang Fund Management Co., Ltd., a fund managementcompany, from May 2017 to January 2018, where she was responsible for the establishment and management of the finance and investmentdepartment. She served as the project director of finance and investment department of Resgreen Biotechnology Group Co., Ltd., a biotechnologycompany, from October 2003 to March 2017. Before that, she also served in administrative positions in electronic technology companies inChangsha, Hunan, China. She received an associate’s degree in hotel secretary from Hunan University of Commerce in Changsha, Hunan, China.Ms. Gao is qualified to serve on our board of directors due to her experience in business management, investment and finance.Chunhai Li had been serving as the Chief Technology Officer of the Company since July 20, 2017 and Chief Technology Officer of SichuanSenmiao since September 2016. He resigned from these positions on March 31, 2023.Family RelationshipsThere are no family relationships, or other arrangements or understandings between or among any of the directors, executive officers or otherpersons pursuant to which such person was selected to serve as a director or officer.Board DiversityThe Nominating and Corporate Governance Committee does not have a formal policy with respect to diversity. However, the Board ofDirectors and the Nominating and Corporate Governance Committee believe that it is essential that the members of the Board of Directorsrepresent diverse viewpoints. In considering candidates for the Board of Directors, the Board of Directors and the Nominating and CorporateGovernance Committee consider the entirety of each candidate’s credentials in the context of the factors mentionedTable of Contents105above. The Company is currently in compliance with the diversity requirements of Nasdaq Rule 5605(f) and 5606, with three female Asiandirectors and one male Asian director.Board Diversity Matrix (As of March 31, 2023)Total Number of Directors5 Did NotDiscloseFemaleMaleNon-BinaryGenderPart I: Gender Identity Directors 3 2 — —Part II: Demographic Background African American or Black — — — —Alaskan Native or Native American — — — —Asian 3 1 — —Hispanic or Latinx — — — —Native Hawaiian or Pacific Islander — — — —White — 1 — —Two or More Races or Ethnicities — — — —LGBTQ+ —Did Not Disclose Demographic Background —Board CommitteesOur board of directors currently have an Audit Committee, Compensation Committee, and Nomination and Corporate Governance Committee.Each committee’s members and functions are described below.Audit Committee. Our audit committee consists of Ms. Lin, Mr. Davis and Ms. Wang, and is chaired by Ms. Wang. Each of our auditcommittee members satisfies the “independence” requirements of the Nasdaq listing rules of and meet the independence standards underRule 10A-3 under the Exchange Act. We have determined that Ms. Lin qualifies as an “audit committee financial expert.” The audit committeeoversees our accounting and financial reporting processes and the audits of the financial statements of our company. The audit committee isresponsible for, among other things:●selecting the independent registered public accounting firm and pre-screening all auditing and non-auditing services permitted to be performedby the independent registered public accounting firm;●reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s response;●reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act;●discussing the annual audited financial statements with management and the independent registered public accounting firm;●reviewing the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies;●annually reviewing and reassessing the adequacy of our audit committee charter;●meeting separately and periodically with management and the independent registered public accounting firm; and●reporting to the board of directors.Compensation Committee. Our compensation committee consists of Ms. Lin, Ms. Wang and Mr. Davis and is chaired by Ms. Lin. Each of thecompensation committee members satisfies the “independence” requirements of the listing rules of Nasdaq. The compensation committee assiststhe board of directors in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors andexecutive officers. Our executive officers may not be present at any committee meeting during which their compensation is deliberated upon. Thecompensation committee is responsible for, among other things:●reviewing the total compensation package for our executive officers and making recommendations to the board of directors with respect to it;Table of Contents106●approving and overseeing the total compensation package for our executives other than the three most senior executives;●reviewing the compensation of our directors and making recommendations to the board of directors with respect to it; and●periodically reviewing and approving any long-term incentive compensation or equity plans, programs or similar arrangements, annualbonuses, and employee pension and welfare benefit plans.Nominating and Corporate Governance Committee. Our nominating and corporate governance committee consists of Ms. Lin, Ms. Wangand Mr. Davis, and is chaired by Ms. Lin. Each member of our nominating and corporate governance commit satisfies the “independence”requirements of the Nasdaq listing rules. The nominating and corporate governance committee assists the board of directors in selectingindividuals qualified to become our directors and in determining the composition of the board of directors and its committees. The nominating andcorporate governance committee is responsible for, among other things:●recommending nominees to the board of directors for election or re-election to the board of directors, or for appointment to fill any vacancy onthe board of directors;●reviewing annually with the board of directors the current composition of the board of directors with regards to characteristics such asindependence, age, skills, experience and availability of service to us;●selecting and recommending to the board of directors the names of directors to serve as members of the audit committee and the compensationcommittee, as well as of the nominating and corporate governance committee itself; and●monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures toensure proper compliance.Compensation Committee Interlocks and Insider ParticipationNone of the members of our compensation committee is or has been an officer or employee of our Company. None of our officers anddirectors currently serves, or in the past years has served, as a member of the compensation committee or other board committee performingequivalent functions of any entity that has one or more executive officers serving on our board of directors or Compensation Committee.Delinquent Section 16(a) ReportsSection 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers, directors and persons who beneficially own morethan ten percent of our common stock to file reports of ownership and changes in ownership with the SEC. These reporting persons are alsorequired to furnish us with copies of all Section 16(a) forms they file. Based solely upon a review of such forms, we believe that during the yearended March 31, 2023 there were no delinquent filers.Code of EthicsWe have adopted a written code of ethics that applies to all of our directors, officers and employees in accordance with the rules of the NasdaqStock Market and the SEC. We have filed copies of our code of ethics, our audit committee charter, our compensation committee charter and ournominating committee charter as exhibits to our registration statement in connection with our IPO. You may review these documents by accessingour public filings at the SEC’s web site at www.sec.gov. In addition, a copy of the code of ethics will be provided without charge upon request tous.Involvement in Certain Legal ProceedingsNone of our directors and executive officers have been involved in any of the following events during the past ten years:1.any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officereither at the time of the bankruptcy or within two years prior to that time;2.any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minoroffenses);Table of Contents1073.being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction,permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or bankingactivities or to be associated with any person practicing in banking or securities activities;4.being found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to haveviolated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;5.being subject of, or a party to, any federal or state judicial or administrative order, judgment decree, or finding, not subsequentlyreversed, suspended or vacated, relating to an alleged violation of any federal or state securities or commodities law or regulation, anylaw or regulation respecting financial institutions, or any law or regulation prohibiting mail or wire fraud or fraud in connection with anybusiness entity; or6.being subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization,any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members orpersons associated with a member.Item 11.Executive CompensationSummary Compensation TableThe following table sets forth the cash and non-cash compensation awarded to or earned by: (i) each individual who served as the executiveofficers of our company during the years ended March 31, 2023 and 2022. For purposes of this document, these individuals are collectivelyreferred to as the “named executive officers” of the Company.NonqualifiedNon-equitydeferredName andStockOptionincentive plancompensationAll otherprincipalSalaryBonusawardsawardscompensationearnings compensationTotalposition Year ($) ($) ($) ($) ($) ($) ($) ($)Xi Wen 2023 187,570 50,000 — — — — — 237,570Chief Executive Officer, Chairman,President and Secretary (1) 2022 193,490 40,000 15,000 — — — — 248,490Xiaoyuan Zhang, Chief Financial 2023 78,842 — — — — — — 78,842Officer and Treasurer 2022 84,172 — 11,250 — — — — 95,422Chunhai Li, Chief Technology 2023 54,615 — — — — — 13,646 68,261Officer (3) 2022 58,198 — 3,750 — — — — 61,948Haitao Liu 2023 78,813 — — — — — — 78,813Chief Operating Officer 2022 84,141 — 7,500 — — — — 91,641(1)The amount represents the total compensation Mr. Wen received as the Company’s Chairman and executive officer. Mr. Wen did not receiveany compensation for his services as President and Secretary until June 20, 2019.(2)Except Mr. Wen’s salaries paid for his services as Chief Executive Officer of the Company, other executive officers received their salaries inRenminbi which were translated into U.S. dollars at the average exchange rate used to translate statement of operations items, which wasRMB6.8516 to US$1.00 for the year ended March 31, 2023 and RMB6.4178 to US$1.00 for the year ended March 31, 2022.(3)Mr. Chunhai Li resigned from his position as the Chief Technology Officer of the Company on March 31, 2023. The Company shall pay him acompensation of $13,646.Table of Contents108Employment Agreements and Potential Payments Upon TerminationXi Wen, Chief Executive Officer, Chairman of the Board, President and SecretaryOn May 27, 2019, the Company and Mr. Wen entered into an employment agreement (the “Wen Agreement”) to memorialize thecompensation arrangement and the other terms of Mr. Wen’s continuing employment with the Company and Sichuan Senmiao. Under the WenAgreement, Mr. Wen is entitled to the following compensation: (i) an annual salary of US$100,000 for his service as Chief Executive Officer of theCompany, payable quarterly in arrears, starting upon the Company’s receipt of proceeds from a financing of at least $1,000,000; (ii) an annualsalary of RMB600,000 (approximately US$87,354) for his service as the Executive Director for Sichuan Senmiao, payable monthly in arrearsstarting upon the Company’s receipt of proceeds from a financing of at least $1 million; and (iii) a cash bonus of up to US$50,000 for his servicesas Chief Executive Officer of the Company for the fiscal year ended March 31, 2020 upon satisfaction of the performance targets as reviewed bythe Compensation Committee.Mr. Wen is also entitled to participate in the Company’s equity incentive plans and other Company benefits (including health insurance,vacation and expense reimbursement), each in accordance with the Company’s policies as determined by the Board from time to time. The WenAgreement has an initial term of three years and is subject to successive, automatic one-year extensions unless either party gives notice of non-extension to the other party at least 30 days prior to the end of the applicable term.Pursuant to the Wen Agreement, the Company may terminate Mr. Wen’s employment for cause (as defined in the Wen Agreement), at anytime, without notice. Upon a termination for cause, Mr. Wen will not be entitled to receive payment of any severance benefits or other amounts byreason of the termination, and his right to all other benefits will terminate, except as required by any applicable law.The Company may also terminate Mr. Wen’s employment without cause upon 30 days’ advance written notice. In the case of such atermination by the Company, the Company is required to provide the following severance payments and benefits to Mr. Wen: (1) a lump sum cashpayment equal to three (3) months of the base salary as of the date of such termination; (2) a lump sum cash payment equal to a pro-rated amountof his target annual bonus for the year immediately preceding the termination, if any; (3) payment of premiums for continued health benefits underthe Company’s health plans for three (3) months following the termination, if any; and (4) immediate vesting of 100% of the then-unvested portionof any outstanding equity awards held by Mr. Wen.In addition, if the Company or its successor terminates the Wen Agreement upon a merger, consolidation, or transfer or sale of all orsubstantially all of the assets of the Company with or to any other individual(s) or entity, Mr. Wen shall be entitled to the following severancepayments and benefits upon such termination: (1) a lump sum cash payment equal to three months of the base salary at a rate equal to the greaterof his annual salary in effect immediately prior to the termination, or his then current annual salary as of the date of such termination; (2) a lumpsum cash payment equal to a pro-rated amount of his target annual bonus for the year immediately preceding the termination; (3) payment ofpremiums for continued health benefits under the Company’s health plans for three months following the termination; and (4) immediate vestingof 100% of the then-unvested portion of any outstanding equity awards held by Mr. Wen.Pursuant to the Wen Agreement, Mr. Wen may terminate his employment at any time with 30 days’ advance written notice without cause or ifthere is any significant change in his authority, duties and responsibilities or a material reduction in his annual salary. In such case, Mr. Wen will beentitled to receive compensation equivalent to three months of his base salary.In order to receive any severance benefits under the Wen Agreement, Mr. Wen will be required to execute and deliver to the Company ageneral release of claims in a form reasonably satisfactory to the Board.The Wen Agreement also contains customary restrictive covenants relating to confidentiality, non-competition and non-solicitation.Xiaoyuan Zhang, Chief Financial Officer and TreasurerOn September 17, 2018, the Company and Ms. Zhang entered into an employment agreement (the “Zhang Agreement”). Under the ZhangAgreement, Ms. Zhang is entitled to an annual salary of RMB540,000 (approximately $78,620) for her services as Chief Financial Officer andTreasurer of the Company. She is also entitled to participate in the Company’s equity incentive plans and other Company benefits, each asdetermined by the Board from time to time. Her employment has an initial term of one year and is subject to successive, automatic one-yearextensions unless either party gives notice of non-extension to the other party at least 30 days prior to the end of the applicable term.Pursuant to the Zhang Agreement, the Company may terminate Ms. Zhang’s employment for cause, at any time, without notice orremuneration, for certain acts, such as conviction or plea of guilty to a felony or grossly negligent or dishonest acts to the detriment of theCompany, or misconduct or a failure to perform agreed duties. In such case, Ms. Zhang will not be entitled to receive payment ofTable of Contents109any severance benefits or other amounts by reason of the termination, and her right to all other benefits will terminate, except as required by anyapplicable law. The Company may also terminate Ms. Zhang’s employment without cause upon 30 days’ advance written notice. In such case oftermination by the Company, the Company is required to provide the following severance payments and benefits to Ms. Zhang: a cash payment ofone month of base salary as of the date of such termination for each year (which is any period longer than six months but no more than one year)and a cash payment of half month of base salary as of the date of such termination for any period of employment no more than six months,provided that the total severance payments shall not exceed twelve months of base salary.Pursuant to the Zhang Agreement, Ms. Zhang may terminate her employment at any time with 30 days’ advance written notice if there is anysignificant change in her duties and responsibilities or a material reduction in her annual salary. In such case, Ms. Zhang will be entitled to receivecompensation equivalent to 3 months of her base salary. In addition, if the Company or its successor terminates the Zhang Agreement upon amerger, consolidation, or transfer or sale of all or substantially all of the assets of the Company with or to any other individual(s) or entity,Ms. Zhang shall be entitled to the following severance payments and benefits upon such termination: (1) a lump sum cash payment equal to3 months of base salary at a rate equal to the greater of her annual salary in effect immediately prior to the termination, or her then current annualsalary as of the date of such termination; (2) a lump sum cash payment equal to a pro-rated amount of target annual bonus for the year immediatelypreceding the termination; (3) payment of premiums for continued health benefits under the Company’s health plans for 3 months following thetermination; and (4) immediate vesting of 100% of the then-unvested portion of any outstanding equity awards held by Ms. Zhang.The Zhang Agreement also contains customary restrictive covenants relating to confidentiality, non-competition and non-solicitation.Chunhai Li, Former Chief Technology OfficerMr. Li had served as Chief Technology Officer of the Company pursuant to an employment agreement dated July 20, 2017. Under hisemployment agreement, Mr. Li was entitled to an annual salary of $1.00 for his services Chief Technology Officer of the Company. Mr. Li also hadserved as Chief Technology Officer of Sichuan Senmiao pursuant to an employment agreement with Sichuan Senmiao for a term of three yearsending September 11, 2022. Pursuant to the renewed employment agreement with Sichuan Senmiao in September 2019, Mr. Li received an annualsalary of RMB374,004 (approximately US$53,835) for his services and is entitled to benefits under PRC government statutory employee benefitplans.Mr. Li resigned from his position as the Chief Technology Officer of the Company and Chief Technology Officer of Sichuan Senmiao onMarch 31, 2023.Haitao Liu, Chief Operating OfficerMr. Liu serves as the Chief Executive Officer of Sichuan Senmiao pursuant to his employment agreement with Sichuan Senmiao, datedAugust 1, 2018. The term of his employment was for one year, subject to a one-month probation period. He is entitled to a monthly salary ofRMB45,000 (approximately US$6,551) except that he will receive RMB36,000 (approximately US$5,241) for his probation period. Theemployment may be terminated (i) by mutual consent, (ii) immediately for cause by Sichuan Senmiao, (iii) for incapacity after non-work relatedillness or injury by Sichuan Senmiao with a 30-day prior written notice or a one-month salary as severance payment, (iii) by a 30-day prior writtennotice from Mr. Liu and a three-day prior notice during the probation period, or (iv) immediately for cause by Mr. Liu. In connection with theemployment agreement, Mr. Liu and Sichuan Senmiao entered into a confidentiality agreement, pursuant to which Mr. Liu agreed not to release ordisclose Sichuan Senmiao’s confidential information.Despite the expiration of his employment agreement, Mr. Liu has agreed to continue to serve as the Chief Executive Officer of SichuanSenmiao as well as assist to oversee our Automobile Transaction and Related Services after the discontinuation of our P2P business under the sameterms of his employment agreement.On September 10, 2020, Mr. Haitao Liu tendered his voluntary resignation as Chief Executive Officer of Sichuan Senmiao. On the same date,the Board appointed Mr. Haitao Liu to serve as the Company’s Chief Operating Officer. Effective September 11, 2020, the Company and Mr. Liuentered into an employment agreement (the “Liu Agreement”). Under the Liu Agreement, Mr. Liu is entitled to an annual salary of RMB540,000(approximately $77,000) for his service as Chief Operating Officer of the Company. He is also entitled to participate in the Company’s equityincentive plans and other Company benefits, each as determined by the Board from time to time. His employment has an initial term of one yearand is subject to successive, automatic one-year extensions unless either party gives notice of non-extension to the other party at least 30 days priorto the end of the applicable term.Table of Contents110Outstanding Equity Awards at Fiscal Year-EndAs of Mach 31, 2023, there was no outstanding equity awards of executive officers.Director CompensationThe following table sets forth certain information concerning the compensation of our then serving executive directors for the fiscal yearended March 31, 2023, except that the compensation of Xi Wen as a director is included in “– Summary Compensation Table”:FeesNonqualified earnedNon-equitydeferred orStockOptionincentive plancompensationAll other paid inawardsawardscompensationearningscompensationTotal cash $ $ $ $ $ $ $Xiaojuan Lin 20,000 — — — — — 20,000Trent Davis 40,000 — — — — — 40,000Sichun Wang 20,000 — — — — — 20,000Jie Gao 20,000 — — — — — 20,000Each of our directors receives an annual retainer of $20,000 except that Mr. Trent receives an annual retainer of $40,000. They will also bereimbursed for reasonable, pre-approved expenses in connection with the performance of their services.As of March 31, 2023, the Company has issued accumulated 259,925 RSUs to directors, of which,2,273 was vested but not settled by theCompany. During the year ended March 31, 2023, the Company did not issue RSUs to directors. The Company accounted for the vested RSUs asexpenses and charged to common stock. The fair value of the vested RSUs is calculated at the grant date market price of the Company’s commonstock multiplying by the number of vested shares. The Company expects to settle the vested RSUs by issuance of shares of common stock withinDecember 2022.Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersOn July 10, 2023, there were 7,993,040 shares of common stock outstanding, which does not include the shares of common stock underlyingthe vested RSUs. The following table sets forth certain information known to us with respect to the beneficial ownership of common stock as ofthat date by (i) each of our directors, (ii) each of our executive officers, (iii) all of our directors and executive officers as a group, and (iv) eachperson, or group of affiliated persons, whom we know to beneficially own more than 5% of our common stock.Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all sharesbeneficially owned by them.Amount and Nature ofPercentage of BeneficialOutstanding Name and Address of Beneficial Owner (1) Ownership Shares 5% Stockholders Senmiao International Investment Group Limited (2) 1,057,500 13.2%Officers and Directors Xiaoyuan Zhang (3) 1,364 *Haitao Liu (4) 909 *Chunhai Li (5) 455 *Xi Wen (6) 117,624 1.5%Xiaojuan Lin (7) 5,349 *Trent D. Davis (7) 5,349 *Jie Gao (8) 4,849 *Sichun Wang (8) 4,849 *All directors and executive officers as a group (eight individuals) 140,748 1.8%* Less than 1%.Table of Contents111(1)Unless otherwise indicated, the business address of each of the individuals is 16F, Building A, Shihao Square, Middle Jiannan Avenue,High-Tech Zone, Chengdu, Sichuan, China.(2)Xiang Hu, through Senmiao International Investment Group Limited, a British Virgin Islands company wholly owned by him, owns1,057,500 shares of common stock of the Company.(3)Represents 1,364 shares of common stock underlying 1,364 RSUs, of which, 341 RSUs have been vested but the underlying shares ofcommon stock of which have not been issued as of the date of this Report. (4)Represents 909 shares of common stock underlying 909 RSUs, of which, 227 RSUs have been vested but the underlying shares ofcommon stock of which have not been issued as of the date of this Report. (5)Represents 455 shares of common stock underlying 455 RSUs, of which, 114 RSUs have been vested but the underlying shares ofcommon stock of which have not been issued as of the date of this Report. (6)Includes 112,275 shares of common stock of the Company held in the name of Mr. Wen’s spouse and 5,349 shares of common stockunderlying 5,349 RSUs, of which, 455 RSUs have been vested but the underlying shares of common stock of which have not been issuedas of the date of this Report.(7)Represents 5,349 shares of common stock underlying 5,349 RSUs, of which, 455 RSUs have been vested but the underlying shares ofcommon stock of which have not been issued as of the date of this Report. (8)Represents 4,849 shares of common stock underlying 4,849 RSUs, of which, 455 RSUs have been vested but the underlying shares ofcommon stock of which have not been issued as of the date of this Report. Item 13.Certain Relationships and Related Transactions, and Director IndependenceCertain Relationships and Related TransactionsOur audit committee must review and approve any related person transaction we propose to enter into which would need to be disclosed underItem 404(a) of Regulation S-K. Our audit committee charter details the policies and procedures relating to transactions that may present actual,potential or perceived conflicts of interest and may raise questions as to whether such transactions are consistent with the best interest of ourcompany and our stockholders.Related Parties’ LoansIn December 2017, Sichuan Senmiao entered into loan agreements with two of its former shareholders, who agreed to grant lines of credit ofapproximating $955,000 and $159,000, respectively, to Sichuan Senmiao for five years. The lines of credit are non-interest bearing, effective fromJanuary 2017. As of March 31, 2022, the loan due to one of former shareholder was fully settled. As of March 31, 2023 and 2022, the outstandingbalances due to the other one in the discontinued operations were $17,434 and $18,886, respectively.In July 28, 2021 and August 17, 2021, Xi Wen, Chief Executive Officer and President of the Company, signed two Loan Agreements withSenmiao, under which Xi Wen agreed to lend $500,000 and $300,000 to the Company for its operation of business, with a term of six months andthree months, respectively. The loan is interest-free and may be repaid in advance. As of March 31, 2022, the loans were fully settled.During the year ended March 31, 2022, Hunan Ruixi and Yicheng had loans due from Jinkailong, our equity investee company, and hadinterest income of $450,889, which was eliminated in the loss of continuing operations of the consolidated financial statements of operations andcomprehensive income (loss).Related Parties’ Office LeasingSenmiao Consulting entered into two office lease agreements with a shareholder of Sichuan Senmiao. which were set to expire on January 1,2020. On April 1, 2020, the two office leases were amended with a leasing term from April 1, 2020 to March 31, 2023. For the years ended March31, 2023 and 2022, we incurred $177,414 and $237,968, respectively, in rental expenses to the shareholder.In September 2019, Hunan Ruixi entered into an office lease agreement which was set to expire in October 2023 with Hunan DingchentaiInvestment Co., Ltd. (“Dingchentai”), a Company where one of our independent directors serves as legal representativeTable of Contents112and general manager. The rent was approximately $44,250 per year, payable on a quarterly basis. For the years ended March 31, 2023 and 2022,we incurred expense of $47,043 and $45,651, respectively, in rent to Dingchentai.We had reached cooperation with Jinkailong, our equity investee company, that the drivers who leased automobile from Jinkailong completedtheir online ride-hailing requests and orders through our ride-hailing platform, and we will pay Jinkailong a certain promotion service fee. Duringthe years ended March 31, 2023 and 2022, we incurred promotion fee of $95,804 and $553,761 payable to Jinkailong. respectively. The decreasewas in accordance with the decrease in the number of rides completed through XXTX.During the years ended March 31, 2023, Corenel leased automobiles to Jinkailong and generated revenues of $344,120, while Jiekai leasedautomobiles from Jinkailong and had a rental cost of $509,904. During the years ended March 31, 2022, Corenel and Yicheng leased automobilesto Jinkailong and generated revenues of $1,280,993.OthersIn June 2019 and January 2020, our former VIE, Jinkailong, entered into two automobile maintenance services contracts with SichuanQihuaxin Automobile Services Co., Ltd and Sichuan Yousen Automobile Maintenance Service Co., Ltd, the companies which are controlled byone of the noncontrolling shareholder of Jinkailong. During the year ended March 31, 2022, Jinkailong incurred automobile maintenance servicefees of an aggregate of $942,581 to those companies, respectively.Director IndependenceOur board of directors has determined that each of Mr. Davis, Ms. Lin and Ms. Wang qualifies as an “independent director” under the Nasdaqlisting rules, which is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individualhaving a relationship, which, in the opinion of the company’s board of directors would interfere with the director’s exercise of independentjudgment in carrying out the responsibilities of a director. Our independent directors will have regularly scheduled meetings at which onlyindependent directors are present.Item 14.Principal Accountant Fees and Services.Effective September 1, 2022, Friedman LLP, our then independent registered public accounting firm, combined with Marcum LLP andcontinued to operate as an independent registered public accounting firm. On October 12, 2022, our Board of Directors approved the dismissal ofFriedman LLP and the engagement of Marcum Asia CPAs LLP (“Marcum Asia”) to serve as our independent registered public accounting firm.The services previously provided by Friedman LLP are now provided by Marcum Asia.The following table shows the fees that we paid or accrued for the audit and other services provided by our independent registered publicaccounting firms for the fiscal years ended March 31, 2023 and 2022.Fiscal YearFiscal YearEndedEndedMarch 31,March 31,Fee Category 2023 2022Audit Fees (1)$ 321,700$ 280,000Audit-Related Fees (2)$ 10,000$ 35,000Tax Fees (3)$ 10,000$ 8,000All Other Fees (4)$ —$ —(1)This category consists of fees for professional services rendered by our principal independent registered public accountants for the audit of ourannual financial statements, review of financial statements included in our quarterly reports and services that are normally provided by theindependent registered public accounting firms in connection with statutory and regulatory filings or engagements for those fiscal years.(2)This category consists of fees for assurance and related services by our independent registered public accountant that are reasonably related tothe performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the feesdisclosed under this category include consultations concerning financial accounting and reporting standards.(3)This category consists of fees for professional services rendered by our independent registered public accountant for tax compliance, taxadvice, and tax planning.Table of Contents113(4)This category consists of fees for services provided by our independent registered public accountants other than the services described above.Policy on Pre-Approval of Audit ServicesOur audit committee pre-approves all services, including both audit and non-audit services, provided by our independent registered publicaccounting firm.Table of Contents114PART IVItem 15.Exhibits, Financial Statement Schedules(a)The following documents are filed as part of this Report:(1)The Financial Statements in Item 8 herein; and(2)Index to the Financial Statements in Item 8 herein.All financial statement schedules are omitted because they are not applicable or the amounts are immaterial and not required, or the requiredinformation is presented in the financial statements and notes thereto in Item 15 of Part IV below.(3)ExhibitsWe hereby file as part of this Report the exhibits listed in the attached Exhibit Index. Exhibits which are incorporated herein by reference canbe inspected and copied at the public reference facilities maintained by the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Copiesof such material can also be obtained from the Public Reference Section of the SEC, 100 F Street, N.E., Washington, D.C. 20549, at prescribedrates or on the SEC website at www.sec.gov.Item 16.Form 10-K SummaryNot applicable.EXHIBIT INDEXExhibit No. Description3.1 Articles of Incorporation of the Company, incorporated herein by reference to Exhibit 3.1 to the Amendment No.7 to RegistrationStatement on Form S-1 filed with the SEC on March 14, 2018 3.2 Certificate of Amendment to Articles of Incorporation of the Company, incorporated herein by reference to Exhibit 3.2 to theAmendment No.7 to Registration Statement on Form S-1 filed with the SEC on March 14, 2018 3.3Certificate of Change of the Company filed with the State of Nevada on March 30, 2022, incorporated herein by reference toExhibit 3.1 on the Current Report on Form 8-K filed by the Company with the SEC on April 6, 20223.4Certificate of Correction filed with the State of Nevada on April 5, 2022, incorporated herein by reference to Exhibit 3.1 on theCurrent Report on Form 8-K filed by the Company with the SEC on April 6, 20223.5Certificate of Amendment to Articles of Incorporation of the Company, on May 2, 2022, regarding the increase of authorizedshares.*3.6 Bylaws of the Company, incorporated herein by reference to Exhibit 3.2 to the Registration Statement on Form S-1 filed by theCompany with the SEC on October 30, 2017. 4.1 Description of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, incorporatedherein by reference to Exhibit 4.4 on the Annual Report on Form 10-K filed by the Company with the SEC on July 9, 2020 4.2 Form of Warrant relating to the August 2020 offering, incorporated herein by reference to Exhibit 4.1 to the Current Report onForm 8-K filed with the SEC on August 4, 2020 4.3 Form of Placement Agent Warrant relating to the February 2021 offering, incorporated herein by reference to Exhibit 4.1 to theCurrent Report on Form 8-K filed with the SEC on February 9, 2021Table of Contents115 4.4 Form of the Investor’s Common Stock Purchase Warrant relating to the May 2021 offering, incorporated herein by reference toExhibit 4.1 to the Current Report on Form 8-K filed with the SEC on May 11, 2021 4.5 Form of the Placement Agent’s Common Stock Purchase Warrant relating to the May 2021 offering, incorporated herein byreference to Exhibit 4.2 to the Current Report on Form 8-K filed with the SEC on May 11, 2021 10.1Lease Agreement, dated April 1, 2018, by and between Xiaodong Yang, Pin Li and Hong Li, as landlord, and Senmiao Consulting,as tenant, incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed with the SEC on August 14,2018 10.2 Lease Agreement, dated April 1, 2018, by and between Xiaodong Yang, Pin Li and Hong Li, as landlord, and Sichuan Senmiao, astenant, incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q filed with the SEC on August 14,2018 10.3 Employment Agreement, dated August 1, 2018, by and between Sichuan Senmiao and Haitao Liu, incorporated hereinExhibit 10.5 to the Quarterly Report on Form 10-Q filed with the SEC on August 14, 2018 10.4 Employment Agreement between the Company and Chunhai Li, incorporated herein by reference to Exhibit 10.18 to theAmendment No. 7 to Registration Statement on Form S-1 filed with the SEC on March 14, 2018 10.5 Form of Director Offer Letter, incorporated herein by reference to Exhibit 10.19 to the Amendment No. 7 to RegistrationStatement on Form S-1 filed with the SEC on March 14, 2018 10.6 Loan Agreement, effective January 1, 2017, by and between Xiang Hu and Sichuan Senmiao Ronglian Technology Co., Ltd.,incorporated herein by reference to Exhibit 10.22 to the Amendment No. 7 to Registration Statement on Form S-1 filed with theSEC on March 14, 2018 10.7 Investment and Equity Transfer Agreement, dated as of November 21, 2018, by and among Senmiao Technology Limited, HunanRuixi Financial Leasing Co., Ltd., Hunan Ruipin Cultural Industry Co., Ltd., Luziyun International Group (Southeast Asia) SharesLimited and Chengdu Little Monkey Information and Technology Co., Ltd. incorporated herein by reference to Exhibit 10.1 to theCurrent Report on Form 8-K filed by the Company with the SEC on November 28, 2018 10.8 Business Cooperation Agreement and Valuation Adjustment Mechanism and Indemnification Agreement, dated August 26, 2018,by and among Sichuan Jinkailong Automobile Leasing Co., Ltd., Hunan Ruixi Financial Leasing Co., Ltd., Xiaoliang Chen, XiYang, Yiqiang He and Xiaohui Luo, incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filedby the Company with the SEC on February 19, 2019 10.9 Amendment to Business Cooperation Agreement and Valuation Adjustment Mechanism and Indemnification Agreement, datedOctober 16, 2018, by and among Sichuan Jinkailong Automobile Leasing Co., Ltd., Hunan Ruixi Financial Leasing Co., Ltd.,Xiaoliang Chen, Xi Yang, Yiqiang He and Xiaohui Luo, incorporated herein by reference to Exhibit 10.3 to the Quarterly Reporton Form 10-Q filed by the Company with the SEC on February 19, 2019 10.10 Collaboration Agreement, dated August 13, 2019, by and between Didi Chuxing Technology Co., Ltd. and Sichuan JinkailongAutomobile Leasing Co., Ltd., incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed withthe SEC on February 14, 202010.11Collaboration Agreement, dated December 6, 2019, by and between Didi Chuxing Technology Co., Ltd. and Hunan RuixiFinancial Leasing Co., Ltd., incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q filed with theSEC on February 14, 2020Table of Contents116 10.12 Consulting Service Agreement, dated March 26, 2019, by and between Didi Chuxing Technology Co., Ltd. and Sichuan JinkailongAutomobile Leasing Co., Ltd., incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed withthe SEC on February 14, 2020 10.13 Voting Agreement, dated August 26, 2018, by and among Hunan Ruixi Financial Leasing Co., Ltd. and certain shareholders ofSichuan Jinkailong Automobile Leasing Co., Ltd., incorporated herein by reference to Exhibit 10.7 to the Quarterly Report onForm 10-Q filed by the Company with the SEC on February 19, 2019 10.14 Amendment to the Voting Agreement, dated November 11, 2018, by and among Hunan Ruixi Financial Leasing Co., Ltd. andcertain shareholders of Sichuan Jinkailong Automobile Leasing Co., Ltd., incorporated herein by reference to Exhibit 10.8 to theQuarterly Report on Form 10-Q filed by the Company with the SEC on February 19, 2019 10.15 Employment Agreement, dated as of May 27, 2019, by and between Senmiao Technology Limited and Xi Wen, incorporatedherein by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on May 30, 2019 10.16 Employment Agreement, dated as of September 17, 2018, by and between the Company and Xiaoyuan Zhang, incorporated hereinby reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on September 20, 2018 10.17 Form of Hunan Ruixi Financial Leasing Contract, incorporated herein by reference to Exhibit 10.30 to the Annual Report onForm 10-K filed with the SEC on July 5, 2019 10.18 Form of Hunan Ruixi Service Agreement, incorporated herein by reference to Exhibit 10.31 to the Annual Report on Form 10-Kfiled with the SEC on July 5, 2019 10.19 Form of Jinkailong Automobile Affiliation Agreement, incorporated herein by reference to Exhibit 10.32 to the Annual Report onForm 10-K filed with the SEC on July 5, 2019 10.20 Voting Agreement, dated February 13, 2020, by and between Hunan Ruixi Financial Leasing Co., Ltd. and Chengdu SimushiTechnology Co., Ltd., incorporated herein by reference to Exhibit 10.30 to the Annual Report on Form 10-K filed with the SEC onJuly 9, 2020 10.21 English Translation to Investment Agreement, dated July 4, 2020, by and among Hongyi Industrial Group Co., Ltd., Hunan RuixiFinancial Leasing Co., Ltd., Sichuan Jinkailong Automobile Leasing Co., Ltd. and other shareholders of Jinkailong, incorporatedherein by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on July 8, 202010.22Employment Agreement, dated as of September 11, 2020, by and between the Company and Haitao Liu, incorporated herein byreference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on September 14, 2020 10.23 English Translation to Investment Agreement, dated July 4, 2020, by and among Hongyi Industrial Group Co., Ltd., Hunan RuixiFinancial Leasing Co., Ltd., Sichuan Jinkailong Automobile Leasing Co., Ltd. and other shareholders of Jinkailong, incorporatedherein by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on July 8, 2020 10.24 Form of Securities Purchase Agreement relating to the May 2021 offering, incorporated herein by reference to Exhibit 10.1 to theCurrent Report on Form 8-K filed with the SEC on May 11, 2021 10.25 Placement Agency Agreement dated May 11,2021 (including Form of Lock-Up Agreement in the exhibit) relating to theMay 2021 offering, incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC onMay 11, 2021 Table of Contents11710.26 English Translation of the Investment Agreement, dated September 11, 2020, by and among Sichuan Senmiao Zecheng BusinessConsulting Co., Ltd., Hunan Xixingtianxia Technology Co., Ltd. and its shareholders, incorporated herein by reference to Exhibit10.40 to the Annual Report on Form 10-K filed with the SEC on July 8, 2021 10.27 English Translation of the Supplementary Agreement to the Investment Agreement, dated February 5, 2021, by and amongSichuan Senmiao Zecheng Business Consulting Co., Ltd., Hunan Xixingtianxia Technology Co., Ltd. and its shareholders,incorporated herein by reference to Exhibit 10.41 to the Annual Report on Form 10-K filed with the SEC on July 8, 2021 10.28 English Translation of the Termination Agreement of the Investment Agreement, dated July 2, 2021, by and among HongyiIndustry Group Co., Ltd., Sichuan Jinkailong Automobile Leasing Co., Ltd. and its shareholders, incorporated herein by referenceto Exhibit 10.42 to the Annual Report on Form 10-K filed with the SEC on July 8, 202110.29English Translation of Agreement for the Termination of the Agreement for Concerted Action by Shareholders of Jinkailong,incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on April 6, 202210.30Loan Agreement, effective July 28, 2021, by and between Xi Wen and Senmiao Technology Limited, incorporated by reference toExhibit 10.44 to the Annual Report on Form 10-K filed with the SEC on July 15, 202210.31Loan Agreement, effective August 17, 2021, by and between Xi Wen and Senmiao Technology Limited, incorporated by referenceto Exhibit 10.44 to the Annual Report on Form 10-K filed with the SEC on July 15, 202214.1 Code of Ethics, incorporated herein by reference to Exhibit 14.1 to the Amendment No. 7 to Registration Statement on Form S-1filed with the SEC on March 14, 2018 21.1 List of Subsidiaries* 23.1Independent registered public accounting firm’s consent*31.1 Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanes-Oxley Act of 2002* 31.2 Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of theSarbanes-Oxley Act of 2002* 32.1 Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002** 32.2 Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002** 101.INS XBRL Instance Document* 101.SCH XBRL Taxonomy Extension Schema* 101.CAL XBRL Taxonomy Calculation Linkbase*101.DEF XBRL Definition Linkbase Document* 101.LAB XBRL Taxonomy Label Linkbase* 101.PRE XBRL Definition Linkbase Document*Table of Contents118 104.Cover Page Interactive Data File** Filed herewith** Furnished herewithTable of Contents119SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this Report to be signed on itsbehalf by the undersigned, thereunto duly authorized.Date: July 12, 2023SENMIAO TECHNOLOGY LIMITED By:/s/ Xi Wen Name:Xi Wen Title:Chief Executive Officer (Principal Executive Officer) By:/s/ Xiaoyuan Zhang Name:Xiaoyuan Zhang Title:Chief Financial Officer (Principal Financial and Accounting Officer)Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.Name Position Date /s/ Xi Wen Chief Executive Officer, President and Chairman of the Board July 12, 2023Xi Wen /s/ Xiaoyuan Zhang Chief Financial Officer July 12, 2023Xiaoyuan Zhang (Principal Financial and Accounting Officer) /s/ Trent Davis Director July 12, 2023Trent Davis /s/ Xiaojuan Lin Director July 12, 2023Xiaojuan Lin /s/ Sichun Wang Director July 12, 2023Sichun Wang /s/ Jie Gao Director July 12, 2023Jie Gao STATE OF NEVADABARBARA KCEGAVSKE SecretaryofStateKIMBERLEYPERONDIDeputy Secretary forCommercialRecordings WorkOrder Number:Reference Number:Through Date:Corporate Name:OFFICE OF THESECRETARY OFSTATE Certified CopyW202204290223920222292769 5/2/20229:12:03 AM SENMIAOTECHNOLOGYLIMITED CommercialRecordings Division202 N Carson StreetCarson City, NV 89701Telephone (775) 684-5708 Fax (775) 684-7138 North Las VegasCity Hall 2250 LasVegas Blvd North,Suite 400 North LasVegas, NV 89030Telephone (702) 486-2880 Fax (702) 486-2888 5/2/2022 9:12:03AM The undersignedfiling officer herebycertifies that theattached copies aretrue and exact copiesof all requestedstatements and relatedsubsequentdocumentation filedwith the Secretary ofState's Office,CommercialRecordings Divisionlisted on the attachedreport. DocumentNumber DescriptionNumber of Pages20222288563Amendment AfterIssuance of Stock 2Certified By: BeckySkretta CertificateNumber:B202205022631029You may verify thiscertificate online athttp://www.nvsos.govRespectfully,BARBARA K.CEGAVSKE NevadaSecretary of StateBARBARA K.CEGAVSKESecretary of State 202North Carson StreetCarson City, Nevada89701-4201 (775)684-5708 Website:www.nvsos.gov Filedin the Office ofBusiness NumberE0275732017-1 KFiling, Number 2022-2288563 Secretary ofState State OfNevadaFiled On 4/29/20228:17:00 AM Numberof Pages 2 ProfitCorporation:Certificate ofAmendment(PURSUANT TO NRS78.380 &78.385/78.390)Certificate toAccompany RestatedArticles or Amendedand Restated Articles(PURSUANT TO NRS78.403) Officer'sStatement(PURSUANT TO NRS80.030) TYPE ORPRINT - USE DARKINK ONLY - DO NOTHIGHLIGHT 1. Entityinformation: Name ofentity as on file withthe Nevada Secretaryof State: 1 ISenmiaoTechnology LimitedEntity or NevadaBusiness IdentificationNumber (NVID):E0275732017-1 2.Restated or Amendedand Restated Articles:(Select one) (Ifamending andCertificate toAccompany RestatedArticles or AmendedRestated Articles - Noamendments; articlesare officer of thecorporation who hasbeen authorizedresolution of the boardof directors adoptedon: The certificatecorrectly sets forth thetext of the to the dateof the certificate. DAmended andRestated Articles "Restated or Amendedand Restated Articlesmust be included andRestated Articlesrestated only and aresigned by to executethe certificate by anarticles or certificateas amended with thisfiling type. restatingonly, complete section1,23, 5 and 6) 3. Typeof Amendment FilingBeing Completed:(Select only one box)(If amending,complete section 1, 3,5 and 6.) Certificate ofAmendment toArticles ofIncorporation(Pursuant to NRS78.380 - BeforeIssuance of Stock)The undersigneddeclare that theyconstitute at least two-thirds of the following:(Check only one box)incorporators board ofdirectors Theundersignedaffirmatively declarethat to the date of thiscertificate, no stock ofthe corporation hasbeen issued xiCertificate ofAmendment toArticles ofIncorporation(Pursuant to NRS78.385 and I 78.390 -After Issuance ofStock) The vote bywhich thestockholders holdingshares in thecorporation entitlingthem to exercise atleast a majority of thevoting power, or suchgreater proportion ofthe voting power asmay be required in thecase of a vote byclasses or series, oras may be required bythe provisions of thearticles ofincorporation* havevoted in favor of theamendment is: 50.5%Officer's Statement(foreign qualifiedentities only) - Namein home state, if usinga modified name inNevada: I _1Jurisdiction offormation: ,-- —Changes to takes thefollowing effect: Theentity name has beenamended. I Thepurpose of the entityhas been amended.The authorized shareshave been amended.Other: (specifychanges) " Officer'sStatement must besubmitted with eithera certified copy of anydocument,amendatory orotherwise, relating tothe original creation. EDissolution riMergerOConversion of or acertificate evidencingthe filing articles in theplace of thecorporations This formmust be accompaniedby appropriate fees.Page 1 of 2 Revised:1/1/2019BARBARA K.CEGAVSKESecretary of State 202North Carson StreetCarson City, Nevada89701-4201 (775)684-5708 Website:www.nvsos.gov ProfitCorporation:Certificate ofAmendment(PURSUANT TO NRS78.380 &78.385/78.390)Certificate toAccompany RestatedArticles or Amendedand Restated Articles(PURSUANT TO NRS78.403) Officer'sStatement(PURSUANT TO NRS80.030) 4. EffectiveDate and Time:(Optional) Date: Time:(must not be laterthan 90 days after thecertificate is filed) 5.Information BeingChanged: (Domesticcorporations only)Changes to takes thefollowing effect: 0 Theentity name has beenamended. LI Theregistered agent hasbeen changed. (attachCertificate ofAcceptance from newregistered agent) 0The purpose of theentity has beenamended. Ec Theauthorized shareshave been amended.LII The directors,managers or generalpartners have beenamended. Li IRS taxlanguage has beenadded. Articles havebeen added. LIIArticles have beendeleted. ri Other. Thearticles have beenamended as follows:(provide articlenumbers, if available)Article 3(a) isamended andrestated as follows:(see below) (attachadditional page(s) ifnecessary) 6.Signature: (Required)X /s/ Xi Wen [ChiefExecutive OfficerSignature of Officer orAuthorized SignerTitle X i Signature ofOfficer or AuthorizedSigner Title *If anyproposed amendmentwould alter or changeany preference or anyrelative or other rightgiven to any class orseries of outstandingshares, then theamendment must beapproved by the vote,in addition to theaffirmative voteotherwise required, ofthe holders of sharesrepresenting amajority of the votingpower of each classor series affected bythe amendmentregardless tolimitations orrestrictions on thevoting power thereof.Please include anyrequired or optionalinformation in spacebelow: (attachadditional page(s) ifnecessary) Article 3(a)is amended andrestated as follows:The total number ofshares of capital stockwhich the Corporationshall have authority toissue is five hundredfifty million(550,000,000) shares,of which (i) fivehundred million(500,000,000) sharesare designated ascommon stock with apar value of $0.0001per share ("CommonStock"), and (ii) fiftymillion (50,000,000)shares are designatedas preferred stock,with a par value of$0.0001 per share("Preferred Stock").This form must beaccompanied byappropriate fees.Page 2 of 2 Revised:1/1/2019Exhibit 21.1SENMIAO TECHNOLOGY LIMITEDList of SubsidiariesAs of March 31, 2023, the subsidiaries of Senmiao Technology Limited, are listed as follows: Place ofSubsidiaryIncorporationSenmiao Technology (Hong Kong), LimitedHong KongSichuan Senmiao Yicheng Assets Management Co., Ltd. formerly known as Yicheng Financial Leasing Co., Ltd.PRCSichuan Senmiao Zecheng Business Consulting Co., Ltd.PRCHunan Xixingtianxia Technology Co., Ltd.*PRCChengdu Corenel Technology Co., Ltd.PRCHunan Ruixi Financial Leasing Co., Ltd.PRCChengdu Xichuang Technology Service Co., Ltd.PRCSichuan Senmiao Ronglian Technology Co., Ltd.PRCChengdu Jiekai Technology Ltd.PRC*The seven wholly owned subsidiaries of Hunan Xixingtianxia Technology Co., Ltd. are:Chengdu Xixingtianxia Technology Co., Ltd.Chongqing Xixingtianxia Technology Co., Ltd.Haikou Xixingtianxia Technology Co., Ltd.Jingdezhen Xixingtianxia Technology Co., Ltd.Guiyang Xixingtianxia Technology Co., Ltd.Guizhou SouthEast of Qian Xixingtianxia Technology Co., Ltd.Fuquan Xixingtianxia Technology Co., Ltd.Exhibit 23.1INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENTWe consent to the incorporation by reference in this Registration Statement of Senmiao Technology Limited on Form S-1 Amendment No.1 [FILENO. 333-271689] of our report dated July 12, 2023 which includes an explanatory paragraph as to the company’s ability to continue as a goingconcern, with respect to our audit of the consolidated financial statements of Senmiao Technology Limited as of March 31, 2023 and for the yearended March 31, 2023 appearing in the Annual Report on Form 10-K of Senmiao Technology Limited for the year ended March 31, 2023. We alsoconsent to the reference to our firm under the heading “Experts” in the Prospectus, which is part of this Registration Statement./s/ Marcum Asia CPAs LLPMarcum Asia CPAs LLPNew York, New YorkJuly 12, 2023EXHIBIT 31.1CERTIFICATIONI, Xi Wen, Chief Executive Officer of Senmiao Technology Limited, certify that:1.I have reviewed this Annual Report on Form 10-K of Senmiao Technology Limited;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to theperiod covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange ActRules 13a-15(f) and 15d-15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed underour supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions aboutthe effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on suchevaluation; andd)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant'smost recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or isreasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the registrant's auditors and audit committee:a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant'sinternal control over financial reporting.Date: July 12, 2023/s/ Xi Wen Name:Xi Wen Title:Chief Executive Officer (Principal Executive Officer)EXHIBIT 31.2CERTIFICATIONI, Xiaoyuan Zhang, Chief Financial Officer of Senmiao Technology Limited, certify that:1.I have reviewed this Annual Report on Form 10-K of Senmiao Technology Limited;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to theperiod covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange ActRules 13a-15(f) and 15d-15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed underour supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions aboutthe effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on suchevaluation; andd)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant'sfourth fiscal quarter in that has materially affected, or is reasonably likely to materially affect, the registrant's internal control overfinancial reporting; and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the registrant's auditors and audit committee:a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant'sinternal control over financial reporting.Date: July 12, 2023/s/ Xiaoyuan Zhang Name:Xiaoyuan Zhang Title:Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)EXHIBIT 32.1CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the annual report of Senmiao Technology Limited (the “Company”) on Form 10-K for the year ended March 31, 2023,as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Xi Wen, Chief Executive Officer of the Company,certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and2.The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of theCompany.Date: July 12, 2023/s/ Xi Wen Name:Xi Wen Title:Chief Executive Officer (Principal Executive Officer)EXHIBIT 32.2CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the annual report of Senmiao Technology Limited (the “Company”) on Form 10-K for the year ended March 31, 2023,as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Xiaoyuan Zhang, Chief Financial Officer of theCompany, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and2.The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of theCompany.Date: July 12, 2023/s/ Xiaoyuan Zhang Name:Xiaoyuan Zhang Title:Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

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