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What changed in Senmiao Technology Ltd's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Senmiao Technology Ltd's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+454 added−601 removedSource: 10-K (2024-06-27) vs 10-K (2023-07-13)

Top changes in Senmiao Technology Ltd's 2024 10-K

454 paragraphs added · 601 removed · 381 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

108 edited+14 added−76 removed236 unchanged
Biggest changeArticle 10 of the Cybersecurity Review Measures also set out certain general factors which would be the focus in assessing the national security risk during a cybersecurity review, including (i) risks of critical information infrastructure being illegally controlled or subject to interference or destruction; (ii) the harm caused by the disruption of the supply of the product or service to the business continuity of critical information infrastructure; (iii) the security, openness, transparency and diversity of sources of the product or service, the reliability of supply channels, and risks of supply disruption due to political, diplomatic, trade and other factors; (iv) compliance with PRC laws, administrative regulations and departmental rules by the provider of the product or service; (v) the risk of core data, important data or a large amount of personal information 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 a listing, as well as network information security risks; and (viii) other factors that may endanger the security of critical information infrastructure, cybersecurity and data security. 17 Table of Contents Personal Information Protection The Several Provisions on Regulating the Market Order of Internet Information Services, issued by the MIIT on December 29, 2011 and effective on March 15, 2012, stipulate that internet information service providers may not collect any user personal information or provide any such information to third parties without the consent of a user, unless otherwise stipulated by laws and administrative regulations.
Biggest changePersonal Information Protection The Several Provisions on Regulating the Market Order of Internet Information Services, issued by the MIIT on December 29, 2011 and effective on March 15, 2012, stipulate that internet information service providers may not collect any user personal information or provide any such information to third parties without the consent of a user, unless otherwise stipulated by laws and administrative regulations.
All of our subsidiaries in China are subject to the Company Law. According to the Company Law, companies established in the PRC are either limited liability companies or joint stock limited liability companies. The Company Law applies to both PRC domestic companies and foreign-invested companies.
The Company Law applies to both PRC domestic companies and foreign-invested companies. All of our subsidiaries in China are subject to the Company Law. According to the Company Law, companies established in the PRC are either limited liability companies or joint stock limited liability companies.
See “ Risk Factors — Risks Related to Doing Business in China — Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions .” Regulations Related to Enterprise Income Tax Under the PRC Enterprise Income Tax Law (the “EIT Law”), which became effective on January 1, 2008, an enterprise established outside the PRC with “de facto management bodies” within the PRC is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income.
See “ Risk Factors — Risks Related to Doing Business in China — Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions .” 22 Regulations Related to Enterprise Income Tax Under the PRC Enterprise Income Tax Law (the “EIT Law”), which became effective on January 1, 2008, an enterprise established outside the PRC with “de facto management bodies” within the PRC is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income.
In principle, the transition period shall not exceed three years. Provincial local financial supervision 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 contractual relationship among natural persons, legal persons and other organizations.
In principle, the transition period shall not exceed three years. Provincial local financial supervision departments can appropriately extend the transition period arrangement according to the actual situation of specific industries. 14 The PRC Civil Code promulgated by the National People’s Congress effective from January 1, 2021 regulates the civil contractual relationship among natural persons, legal persons and other organizations.
We provide social security insurance including pension insurance, unemployment insurance, work-related injury insurance and medical insurance for our employees. We do no maintain any property insurance policies, business interruption insurance or general third-party liability insurance, nor do we maintain product liability insurance or key-man insurance. We consider our insurance coverage to be sufficient for our business operations in China. ​
We provide social security insurance including pension insurance, unemployment insurance, work-related injury insurance and medical insurance for our employees. We do no maintain any property insurance policies, business interruption insurance or general third-party liability insurance, nor do we maintain product liability insurance or key-man insurance. We consider our insurance coverage to be sufficient for our business operations in China. 28
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 shall be terminated as of the date of the Termination Agreement.
On March 31, 2022, Hunan 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 shall be terminated as of the date of the Termination Agreement.
A personal information processor may process the personal information of this individual only under the following circumstances: (i) where consent is obtained 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 it is necessary for carrying out 18 Table of Contents human resource management pursuant to employment rules or collective contracts made and executed in accordance with laws; (iii) where it is necessary for performing a statutory responsibility or statutory obligation; (iv) where it is necessary in response to a public health emergency, or for protecting the life, health or property of a natural person in the case of an emergency; (v) where the personal information is processed within a reasonable scope to carry out news reporting, supervision by public opinions or any other activity for public interest purposes; (vi) where the personal 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.
A personal information processor may process the personal information of this individual only under the following circumstances: (i) where consent is obtained 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 it is necessary for carrying out human resource management pursuant to employment rules or collective contracts made and executed in accordance with laws; (iii) where it is necessary for performing a statutory responsibility or statutory obligation; (iv) where it is necessary in response to a public health emergency, or for protecting the life, health or property of a natural person in the case of an emergency; (v) where the personal information is processed within a reasonable scope to carry out news reporting, supervision by public opinions or any other activity for public interest purposes; (vi) where the personal 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.
According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be considered a PRC resident enterprise by virtue of having its “de facto management body” in China and will be subject to PRC 29 Table of Contents enterprise income tax on its worldwide income only if all of the following conditions are met: (a) the senior management and core management departments in charge of its daily operations function have their presence mainly in the PRC; (b) its financial and human resources decisions are subject to determination or approval by persons or bodies in the PRC; (c) its major assets, accounting books, company seals, and minutes and files of 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 senior management with voting rights habitually reside in the PRC.
According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be considered a PRC resident enterprise by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its worldwide income only if all of the following conditions are met: (a) the senior management and core management departments in charge of its daily operations function have their presence mainly in the PRC; (b) its financial and human resources decisions are subject to determination or approval by persons or bodies in the PRC; (c) its major assets, accounting books, company seals, and minutes and files of 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 senior management with voting rights habitually reside in the PRC.
Furthermore, even though the Company currently does not require any such dividends, loans or advances from the 24 Table of Contents PRC entities for working capital and other funding purposes, the Company may in the future require additional cash resources from them due to changes in business conditions, to fund future acquisitions and development, or merely to declare and pay dividends or distributions to its shareholders Except for the above, there is no other restriction under PRC laws and regulations for PRC companies on use of proceeds generated by the Group’s subsidiaries to satisfy any obligations of the Company, as long as the PRC companies completed all required procedures, including the tax payment certification and tax declaration.
Furthermore, even though the Company currently does not require any such dividends, loans or advances from the PRC entities for working capital and other funding purposes, the Company may in the future require additional cash resources from them due to changes in business conditions, to fund future acquisitions and development, or merely to declare and pay dividends or distributions to its shareholders Except for the above, there is no other restriction under PRC laws and regulations for PRC companies on use of proceeds generated by the Group’s subsidiaries to satisfy any obligations of the Company, as long as the PRC companies completed all required procedures, including the tax payment certification and tax declaration.
Our ride hailing platform enables qualified ride-hailing drivers to provide application-based transportation services in China. XXTX holds a national online reservation taxi operating license. The platform is presently servicing ride-hailing drivers in 26 cities in China, including Chengdu, Changsha, Guangzhou and so on, providing them with a platform to view and take customer orders for rides.
Our ride hailing platform enables qualified ride-hailing drivers to provide application-based transportation services in China. XXTX holds a national online reservation taxi operating license. The platform is presently servicing ride-hailing drivers in 22 cities in China, including Chengdu, Changsha, Guangzhou and so on, providing them with a platform to view and take customer orders for rides.
We face significant competition primarily from companies that operate in Chengdu City, such as Sichuan Hengchuang Times Automobile 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 according to the public information.
We face significant competition primarily from companies that operate in Chengdu City, such as Sichuan Hengchuang Times Automobile Serving Co., Ltd., and Changsha Zitai Automobile Leasing Co., Ltd. Meanwhile, Didi Chuxing Technology Co., Ltd. (“Didi”) takes over 80% market share of the online ride-hailing platforms in China according to the public information.
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- 23 Table of Contents 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 and results of operations. ” Regulations Related to Internet Advertising The Measures for Administration of Internet Advertising (the “Internet Advertising Measures”), were adopted by the MSA and became effective on May 1, 2023.
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-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 and results of operations. ” Regulations Related to Internet Advertising The Measures for Administration of Internet Advertising (the “Internet Advertising Measures”), were adopted by the MSA and became effective on May 1, 2023.
The final Measures was promulgated on July 7, 2022 and shall take effective from September 1, 2022. The measures provide five circumstances, under any of which data processors shall, through the local cyberspace administration at the provincial level, apply to the CAC for security assessment of data cross-border transfer.
The final Measures was promulgated on July 7, 2022 and was effective on September 1, 2022. The measures provide five circumstances, under any of which data processors shall, through the local cyberspace administration at the provincial level, apply to the CAC for security assessment of data cross-border transfer.
Financial leasing companies 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 transferring assets through Internet 21 Table of Contents Lending Information Intermediaries, private equity funds; (5) other businesses or activities prohibited by laws and regulations, the NFRAC and local financial regulatory authorities in provinces, autonomous regions and municipalities.
Financial leasing companies 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 transferring assets through Internet Lending Information Intermediaries, private equity funds; (5) other businesses or activities prohibited by laws and regulations, the NFRAC and local financial regulatory authorities in provinces, autonomous regions and municipalities.
In addition, Pursuant to the Foreign Investment Law, the Implementing Rules, and the Information Reporting Measures for Foreign Investment jointly promulgated by the MOFCOM and the MSA, which took effect on January 1, 2020, a foreign investment information 25 Table of Contents reporting system was established and foreign investors or foreign-invested enterprises must report investment information to competent commerce departments of the PRC government through the enterprise registration system, the enterprise credit information publicity system and the foreign investment information reporting system, and the relevant government authorities shall share such investment information to the competent commerce departments in a timely manner.
In addition, pursuant to the Foreign Investment Law, the Implementing Rules, and the Information Reporting Measures for Foreign Investment jointly promulgated by the MOFCOM and the MSA, which took effect on January 1, 2020, a foreign investment information reporting system was established and foreign investors or foreign-invested enterprises must report investment information to competent commerce departments of the PRC government through the enterprise registration system, the enterprise credit information publicity system and the foreign investment information reporting system, and the relevant government authorities shall share such investment information to the competent commerce departments in a timely manner.
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 have more competitive advantage in the industry.
We face significant competition primarily from platforms that have operation in Chengdu and Changsha City, such as Caocao, Robotaxi and T3 Chuxing. We expect to have more cooperation with other aggregation platforms in the online ride-hailing industries to have more competitive advantage in the industry.
Regulations Relating to Offshore Special Purpose Companies Held by PRC Residents SAFE promulgated the Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles (the “SAFE Circular 37”) in July 2014 that requires PRC residents or entities to register with SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of 28 Table of Contents overseas investment or financing.
Regulations Relating to Offshore Special Purpose Companies Held by PRC Residents SAFE promulgated the Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles (the “SAFE Circular 37”) in July 2014 that requires PRC residents or entities to register with SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.
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-hailing drivers to provide transportation services mainly in Chengdu, Changsha, Guangzhou and other 23 cities in China as of the date of this Report.
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-hailing drivers to provide transportation services mainly in Chengdu, Changsha and other 20 cities in China as of the date of this Report.
After a car is repossessed, our Auto Business Entities store it in a warehouse and later re-lease it to new customers or dispose of the automobile in accordance with law and relevant financing documents. If our Auto Business Entities are unable to repossess collateral from a delinquent automobile purchaser/lessee, they may commence a lawsuit against such purchaser/lessee.
After a car is repossessed, our Auto Business Entities store it in a warehouse and later re-lease it to new customers or dispose of the automobile in accordance with law and relevant contracts. If our Auto Business Entities are unable to repossess collateral from a delinquent automobile purchaser/lessee, they may commence a lawsuit against such purchaser/lessee.
Since November 2018, we have been providing automobile transaction and related services focusing on the online ride-hailing industry in the People’s Republic of China (“PRC” or “China”) through our wholly owned subsidiaries, Yicheng, Corenel and Jiekai, and our majority owned subsidiary, Hunan Ruixi, and its equity investee company and former VIE, Jinkailong.
Since November 2018, we have been providing automobile transaction and related services focusing on the online ride-hailing industry in the People’s Republic of China (“PRC” or “China”) through our wholly owned subsidiaries, Yicheng and Corenel, and our majority owned subsidiaries, Jiekai, and Hunan Ruixi, and its equity investee company, Jinkailong.
“Financing guarantees companies” refer to companies legally 22 Table of Contents established and engaged in financing guarantee business. According to those rules, the establishment of a financing guarantee company is subject to the approval by the competent government authority, and unless otherwise stipulated, no entity may operate financing guarantee business without such approval.
“Financing guarantees companies” refer to companies legally established and engaged in financing guarantee business. According to those rules, the establishment of a financing guarantee company is subject to the approval by the competent government authority, and unless otherwise stipulated, no entity may operate financing guarantee business without such approval.
Payments of current account items, such as profit distributions and trade and service- 27 Table of Contents related foreign exchange transactions, can usually be made in foreign currencies without prior approval from the State Administration of Foreign Exchange (“SAFE”) by complying with certain procedural requirements.
Payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, can usually be made in foreign currencies without prior approval from the State Administration of Foreign Exchange (“SAFE”) by complying with certain procedural requirements.
Before carrying out online ride hailing services, an online ride 19 Table of Contents hailing service platform must obtain a permit for the online ride hailing business and complete the record filing of internet information services with the provincial communications administration in the place of its enterprise registration.
Before carrying out online ride hailing services, an online ride hailing service platform must obtain a permit for the online ride hailing business and complete the record filing of internet information services with the provincial communications administration in the place of its enterprise registration.
Regulations Relating to Vehicle Rental Services Pursuant to the Administration Measures for Operations and Services of Small and Micro Passenger Vehicles issued by the Ministry of Transport on December 20, 2020 and last amended on August 11, 2021, rental business operators of small and micro passenger vehicles shall carry out 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.
We are subject to these regulatory requirements. 18 Regulations Relating to Vehicle Rental Services Pursuant to the Administration Measures for Operations and Services of Small and Micro Passenger Vehicles issued by the Ministry of Transport on December 20, 2020 and last amended on August 11, 2021, rental business operators of small and micro passenger vehicles shall carry out 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.
The contractual arrangements had been in place since the establishment of Senmiao Consulting (the “Restructuring”). On March 23, 2022, shareholders with 94.5% equity interests of Sichuan Senmiao and Senmiao Consulting terminated the VIE Agreements.
Senmiao Consulting became the primary beneficiary of Sichuan Senmiao. The contractual arrangements had been in place since the establishment of Senmiao Consulting (the “Restructuring”). On March 23, 2022, shareholders with 94.5% equity interests of Sichuan Senmiao and Senmiao Consulting terminated the VIE Agreements.
However, there is no 20 Table of Contents guarantee that all of the drivers who run their online ride-hailing business through our platform would be able to obtain all the certificates and licenses.
However, there is no guarantee that all of the drivers who run their online ride-hailing business through our platform would be able to obtain all the certificates and licenses.
Under the MOFCOM Security Review Regulations, MOFCOM will focus on the substance and actual impact of the transaction when deciding 31 Table of Contents whether a specific merger or acquisition is subject to security review.
Under the MOFCOM Security Review Regulations, MOFCOM will focus on the substance and actual impact of the transaction when deciding whether a specific merger or acquisition is subject to security review.
As of March 31, 2023, all the Company’s subsidiaries incorporated in the PRC have suffered accumulated loss and the Company concluded those 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.
As of March 31, 2024, most of the Company’s subsidiaries incorporated in the PRC have suffered accumulated loss and the Company concluded all the 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.
Failure to complete the record-filing procedures may subject the rental business operators of small and micro passenger vehicles to orders to rectify and fines ranging from RMB3,000 (approximately US$437) to RMB10,000 (approximately US$1,456). All vehicles used for our Auto Operating Leasing have obtained the required licenses and completed the registration.
Failure to complete the record-filing procedures may subject the rental business operators of small and micro passenger vehicles to orders to rectify and fines ranging from RMB3,000 (US$416) to RMB10,000 (US$1,384). All vehicles used for our Auto Operating Leasing have obtained the required licenses and completed the registration.
Platforms that conduct the online ride hailing business without obtaining the necessary permit may be subject to an order of correction, a warning by the local authority, a fine of RMB10,000 (approximately US$1,456) to RMB30,000 (approximately US$4,370), or even criminal liabilities if a violation constitutes a crime.
Platforms that conduct the online ride hailing business without obtaining the necessary permit may be subject to an order of correction, a warning by the local authority, a fine of RMB10,000 (US$1,384) to RMB30,000 (US$4,155), or even criminal liabilities if a violation constitutes a crime.
The following chart illustrates the constitution of our automobile transactions and related services: 6 Table of Contents Auto Operating Leasing We, through our subsidiaries, Hunan Ruixi, Corenel, Jiekai and former VIE, Jinkailong (the “Auto Business Entities”) in China, have generated revenue since March 2019 from operating lease services, where the Auto Business Entities lease their own automobiles, sublease automobiles leased from third-parties or rendered from certain online ride-hailing drivers they served before with their authorization, to other individuals, including new online ride-hailing drivers, for a lease term of no more than twelve months.
The following chart illustrates the constitution of our automobile transactions and related services: 1 Auto Operating Leasing We, through our subsidiaries, Hunan Ruixi, Corenel, Jiekai and equity investee company, Jinkailong (the “Auto Business Entities”) in China, have generated revenue since March 2019 from operating lease services, where the Auto Business Entities lease their own automobiles, sublease automobiles leased from third-parties or rendered from certain online ride-hailing drivers they served before with their authorization, to other individuals, including new online ride-hailing drivers, for a lease term of no more than twelve months.
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 cars used for online ride-hailing services which we provided management services to have the automobile certificate.
However, approximately 25% of our online ride-hailing drivers had not obtained the driver’s license as of March 31, 2024 while all of the cars used for online ride-hailing services which we provided management services to have the automobile certificate.
Our business includes Automobile Transaction and Related Services (as defined hereinbelow) and Online Ride-hailing Platform Services, which constituted a series of services as follows: Automobile Transactions and Related Services Our automobile transaction and related services (the “Automobile Transaction and Related Services”) are mainly comprised of (i) automobile operating lease where we provide car rental services 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 or automobile purchasers for a series of the services provided to them throughout the leasing or purchase process based on the chosen product solutions, such as ride-hailing driver training, assisting with a series of administrative procedures and other consulting 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 “Auto Financing”); (v) auto management and guarantee services provided to online ride-hailing drivers after the delivery of automobiles (the “Auto Management and Guarantee Services”); and (vi) other supporting services provided to online ride-hailing drivers.
Our business includes Automobile Transaction and Related Services (as defined herein below) and Online Ride-hailing Platform Services, which constituted a series of services as follows: Automobile Transactions and Related Services Our automobile transaction and related services (the “Automobile Transaction and Related Services”) are mainly comprised of (i) automobile operating lease where we provide car rental services to individual customers to meet their personal needs with lease term no more than twelve months (the “Auto Operating Leasing”); (ii) monthly services where we provide management and related services to Partner Platforms and other companies and earn commission from them (the “ Auto Commissions” ); (iii) automobile financing where we provide our customers with auto finance solutions through financing leases (the “Auto Financing”); (iv) service fees from new energy vehicles (“NEVs”) leasing, automobile purchase and management services where we charge NEVs lessees or automobile purchasers for a series of the services provided to them throughout the leasing or purchase process based on the chosen product solutions, such as ride-hailing driver training, assisting with a series of administrative procedures and other consulting services (the “NEVs and Purchase Services”); (v) auto management and guarantee services provided to online ride-hailing drivers after the delivery of automobiles (the “Auto Management and Guarantee Services”); (vi) automobile sales where we sell new purchased or used cars to our customers (the “Auto Sales”); and (vii) other supporting services provided to online ride-hailing drivers.
Without a requisite automobile certificate or driver’s license, ride-hailing drivers may be suspended from providing online ride-hailing services, their illegal income may be confiscated and they may be subject to fines amounting to RMB200 (approximately US$29) to RMB2,000 (approximately US$291) for each offense.
Without a requisite automobile certificate or driver’s license, ride-hailing drivers may be suspended from providing online ride-hailing services, their illegal income may be confiscated and they may be subject to fines amounting to RMB200 (US$28) to RMB2,000 (US$277) for each offense.
The establishment procedures, approval procedures, registered capital requirements, foreign exchange matters, accounting practices, taxation and labor matters of a wholly foreign-owned enterprise are regulated by the Foreign Investment Law and the Implementing Rules to Further Clarify and Elaborate the Relevant Provisions of the PRC Foreign Investment Law (the “Implementing Rules”), which was approved by the National People’s Congress of China in March 2019 and December 2019, respectively.
The establishment procedures, approval procedures, registered capital requirements, foreign exchange matters, accounting practices, taxation and labor matters of a wholly foreign-owned enterprise are regulated by the Foreign Investment Law and the Implementing Rules of the PRC Foreign Investment Law (the “Implementing Rules”), which was approved by the National People’s Congress of China in March 2019 and December 2019, respectively.
As of March 31, 2023, the total respective registered capital of all the Company’s direct subsidiaries was approximately RMB492 million (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 and bonus funds at their discretion.
As of March 31, 2024, the total respective registered capital of all the Company’s direct subsidiaries was approximately RMB513 million (approximately $71.1 million). In addition, PRC companies may allocate a portion of their after-tax profits based on PRC accounting standards to employee welfare and bonus funds at their discretion.
Due to the complexity and difficulty of obtaining registration of various licenses required for driving an online ride-hailing car, our customers choose to lease automobile from us or become affiliated with us who offer them a simplified and smooth process to obtain qualified cars for online ride-hailing.
Customers The significant majority of our Operating Entities’ customers are online ride-hailing drivers. Due to the complexity and difficulty of obtaining registration of various licenses required for driving an online ride-hailing car, our customers choose to lease automobile from us or become affiliated with us who offer them a simplified and smooth process to obtain qualified cars for online ride-hailing.
We own 19 software copyrights and 52 trademarks. We have two trademark applications pending at the PRC 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, this Report.
We have two trademark applications pending at the PRC 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, this Report.
Accordingly, during the year ended March 31, 2022, our revenues generated from our Online Ride-hailing Platform Services was exempted from duty since January 1, 2022 to March 31, 2022. And during the year ended March 31, 2023, our revenues generated from our Online Ride-hailing Platform Services was exempted from duty since April 1, 2022 to December 31, 2022.
During the fiscal year ended March 31, 2023, our revenues generated from our Online Ride-hailing Platform Services was exempted from duty since April 1, 2022 to December 31, 2022.
The following table sets forth the breakdown of our employees by function in our Automobile Transaction and Related Services segment: ​ ​ ​ Function Number of Employees Management 2 Legal & Risk Management 11 Operations 7 Marketing 9 Drivers & Automobile Management and Services 13 Technology 2 Human Resources & Administration 9 Finance and Accounting 9 Internal Control and Audit 1 Total 63 ​ 33 Table of Contents The following table sets forth the breakdown of our employees by function in our Online Ride-hailing Platform Services segment: ​ ​ ​ Function Number of Employees Management 2 Operations 16 Drivers & Risk Management and Services 6 Technology 2 Human Resources & Administration 1 Finance and Accounting 4 Total 31 ​ All of our employees are based in the cities of Chengdu, Changsha and Guangzhou, where our main operations are located.
The following table sets forth the breakdown of our employees by function in our Automobile Transaction and Related Services segment: Function Number of Employees Management 2 Legal & Risk Management 9 Operations 7 Marketing 4 Drivers & Automobile Management and Services 7 Technology 2 Human Resources & Administration 7 Finance and Accounting 6 Internal Control and Audit 1 Total 45 The following table sets forth the breakdown of our employees by function in our Online Ride-hailing Platform Services segment: Function Number of Employees Management 2 Operations 3 Finance and Accounting 2 Total 7 All of our employees are based in the cities of Chengdu, Changsha and Guangzhou, where our main operations are located.
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.
During the year ended March 31, 2024, we earned online ride-hailing platform service fees of approximately $2.5 million, after netting off approximately $0.3 million incentives paid to Active Drivers. Our executive office is located in Chengdu City, Sichuan Province, China. Substantially all of our operations are conducted in China.
The Foreign Investment Law and the Implementing Rules provide that a system of pre-entry national treatment and negative list shall be applied for the administration of foreign investment, where “pre-entry national treatment” means that the treatment given to foreign investors and their investments at market entry stage is no less favorable than that given to domestic investors and their investments, and “negative list” means the special administrative measures for foreign investment’s entry to specific fields or industries, which will be proposed by the competent investment department of the State Council in conjunction with the competent commerce department of the State Council and other relevant departments, and be reported to the State Council for promulgation, or be promulgated by the competent investment department or competent commerce department of the State Council after being reported to the State Council for approval.
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. 17 The Foreign Investment Law and the Implementing Rules provide that a system of pre-entry national treatment and negative list shall be applied for the administration of foreign investment, where “pre-entry national treatment” means that the treatment given to foreign investors and their investments at market entry stage is no less favorable than that given to domestic investors and their investments, and “negative list” means the special administrative measures for foreign investment’s entry to specific fields or industries, which will be proposed by the competent investment department of the State Council in conjunction with the competent commerce department of the State Council and other relevant departments, and be reported to the State Council for promulgation, or be promulgated by the competent investment department or competent commerce department of the State Council after being reported to the State Council for approval.
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 driver providing the online ride hailing services has not obtained the applicable permit.
Platforms may be subject to an order of correction and a fine of RMB5,000 (US$692) to RMB10,000 (US$1,384), and in severe cases a fine of RMB10,000 (US$1,384) to RMB30,000 (US$4,155), if the relevant vehicle or driver providing the online ride hailing services has not obtained the applicable permit.
XXTX’s online ride-hailing platform also sets criteria for the automobiles used for online ride-hailing business, which need to be completed before 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 local registered 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 of motor 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.
XXTX’s online ride-hailing platform also sets criteria for the automobiles used for online ride-hailing business, which need to be completed before 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 local registered 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 of motor 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. 8 As for the Cybersecurity risk assessment as well as the mitigation measure taken by the Company, please refer to the discussion under Item 1C – Cybersecurity for more details.
In addition to the national online reservation taxi operating license, XXTX and its subsidiaries also obtained the local online reservation taxi operating license in Chengdu, Changsha, and Guangzhou, the three major cities, and other 25 cities from April 2020 to June 2023, issued by local authorities, to operate the online ride-hailing platform services.
In addition to the national online reservation taxi operating license, XXTX and its subsidiaries also obtained the local online reservation taxi operating license in Chengdu and Changsha, the two major cities, and other 27 cities from April 2020 to June 2024, issued by local authorities, to operate the online ride-hailing platform services.
As most of the leasing term of the automobiles we delivered in Changsha in prior periods has come to the end, during the year ended March 31, 2023, the number of newly rendered automobiles decreased to 8 as compared with 25 during the year ended March 31, 2022.
As most of the leasing term of the automobiles we delivered in Changsha in prior periods has come to the end, during the year ended March 31, 2024, the number of newly rendered automobiles decreased to 0 as compared with 7 during the year ended March 31, 2023.
According to this notice, the joint supervision mechanism shall apply to certain violations of laws and regulations by online ride hailing platforms, which include (i) engaging in online ride hailing business or in a disguised form without obtaining the permit for online ride hailing business; (ii) failing to secure that the vehicles and drivers providing services have relevant licenses and professional qualifications, dispatching orders to drivers and vehicles that have not obtained the corresponding licenses, failing to transmit relevant data information to online ride hailing supervision information exchange platform as required or other serious violations of laws and regulations occurring in the process of operating online ride hailing business; (iii) low-price dumping, fraud, and unreasonably differential treatment of individuals in terms of transaction conditions; (iv) endangering network security, data security, or infringing on the rights and interests of users’ personal information; (v) illegal operation of payment and settlement business; (vi) serious infringement of the labor security rights and interests 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.
According to this notice, the joint supervision mechanism shall apply to certain violations of laws and regulations by online ride hailing platforms, which include (i) engaging in online ride hailing business or in a disguised form without obtaining the permit for online ride hailing business; (ii) failing to secure that the vehicles and drivers providing services have relevant licenses and professional qualifications, dispatching orders to drivers and vehicles that have not obtained the corresponding licenses, failing to transmit relevant data information to online ride hailing supervision information exchange platform as required or other serious violations of laws and regulations occurring in the process of operating online ride hailing business; (iii) low-price dumping, fraud, and unreasonably differential treatment of individuals in terms of transaction conditions; (iv) endangering network security, data security, or infringing on the rights and interests of users’ personal information; (v) illegal operation of payment and settlement business; (vi) serious infringement of the labor security rights and interests 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. 13 Regulations Related to Financial Leasing In September 2013, the Ministry of Commerce of the People’s Republic of China (the “MOFCOM”) issued the Administration Measures of Supervision on Financing Lease Enterprises (the “Leasing Measures”), to regulate and administer the business operations of financial leasing enterprises.
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) to RMB30,000 (approximately US$4,370) may be imposed for any failure to provide a prominently marked “CLOSE” button to ensure “one-click closure”.
Where Internet advertisements are not identifiable and marked as “advertisements”, a fine of not more than RMB100,000 (US$13,840) may be imposed in accordance with Advertising Law. A fine ranging from RMB5,000 (US$692) to RMB30,000 (US$4,155) may be imposed for any failure to provide a prominently marked “CLOSE” button to ensure “one-click closure”.
As of the date of this Report, Senmiao Consulting has made a cumulative capital contribution of RMB39.76 million (approximately $5.79 million) to XXTX and the remaining amount is expected to be paid before December 31, 2025. As of the date of this Report, XXTX had seven wholly owned subsidiaries and two of them have operations.
As of the date of this Report, Senmiao Consulting has made a cumulative capital contribution of RMB40.41 million (approximately $5.60 million) to XXTX and the remaining amount is expected to be paid before December 31, 2025. As of the date of this Report, XXTX had eight wholly owned subsidiaries and two of them have operations.
As of June 2023, there were over 110 companies who operate their own online ride-hailing platforms and have established business relationships with Gaode in Chengdu, Changsha and Guangzhou, our major operation cities and are engaged in the same business as ours.
As of June 2024, there were approximately 100 companies who operate their own online ride-hailing platforms and have established business relationships with Gaode in Chengdu and Changsha, our major operation cities and are engaged in the same business as ours.
If there is any indicator such as the driver’s daily income is far behind the average level or the trajectory is unusual, our Drivers & Automobile Management and Services department shall contact the driver immediately and repose the car if necessary.
If there is any indicator such as the driver’s daily income is far behind the average level or the trajectory is unusual, our Drivers Management department shall contact the driver immediately and deliver the case to the Post Financing Management department to repose the car if necessary.
Regulation Related to the Payment Services of Non-financial Institutions According to Measures for the Administration of Payment Services of Non-Financial Institutions which were promulgated by PBOC on June 14, 2010, effective on September 1, 2010 and amended on April 29, 2020, and Implementing Rules for the Measures for the Administration of Payment Services of Non-Financial Institution which were promulgated by the PBOC, effective on December 1, 2010 26 Table of Contents and amended on June 2, 2020, the payment services provided by non-financial institutions refer to some or all of the following monetary capital transfer 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.
However, the State Council has not promulgated the list of the non-financial institutions with anti-money laundering obligations. 19 Regulation Related to the Payment Services of Non-financial Institutions According to Measures for the Administration of Payment Services of Non-Financial Institutions which were promulgated by PBOC on June 14, 2010, effective on September 1, 2010 and amended on April 29, 2020, and Implementing Rules for the Measures for the Administration of Payment Services of Non-Financial Institution which were promulgated by the PBOC, effective on December 1, 2010 and amended on June 2, 2020, the payment services provided by non-financial institutions refer to some or all of the following monetary capital transfer 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.
On January 26, 2017, SAFE issued the Notice of State Administration of Foreign Exchange on Improving the Check of Authenticity and Compliance to Further Promote Foreign Exchange Control (the “SAFE Circular 3”), which stipulates several capital control measures with respect to the outbound remittance of profit from domestic entities to offshore entities, including (i) under the principle of genuine transaction, banks shall check board resolutions regarding profit distribution, the original version of tax filing records and audited financial statements; and (ii) domestic entities shall hold income to account for previous years’ losses before remitting the profits.
SAFE Circular 13 delegates the power to enforce the foreign exchange registration in connection with inbound and outbound direct investments under relevant SAFE rules from local branches of SAFE to banks, thereby further simplifying the foreign exchange registration procedures for inbound and outbound direct investments. 21 On January 26, 2017, SAFE issued the Notice of State Administration of Foreign Exchange on Improving the Check of Authenticity and Compliance to Further Promote Foreign Exchange Control (the “SAFE Circular 3”), which stipulates several capital control measures with respect to the outbound remittance of profit from domestic entities to offshore entities, including (i) under the principle of genuine transaction, banks shall check board resolutions regarding profit distribution, the original version of tax filing records and audited financial statements; and (ii) domestic entities shall hold income to account for previous years’ losses before remitting the profits.
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 the original shareholders held in XXTX at a total purchase price of $3.5 million, payable in the Company’s shares of common stock, par value $0.0001 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.
As of the date of this Report, the Company had remitted approximately RMB36.60 million ($5.33 million) to XXTX pertained to above mentioned XXTX Increase Investment Agreement. 4 On October 22, 2021, the Company, Senmiao Consulting, XXTX and its other shareholders further entered into a Share Swap Agreement (the “XXTX Share Swap Agreement”), pursuant to which the Company, through Senmiao Consulting, purchased all of the remaining equity interests the original shareholders held in XXTX at a total purchase price of $3.5 million, payable in the Company’s shares of common stock, par value $0.0001 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 XXTX Share Swap Agreement.
During the year ended March 31, 2023, we have been fined by approximately $19,000 by Traffic Management Bureaus in Chengdu and Changsha, of which, approximately $4,000 was further compensated by drivers or cooperated third parties.
During the year ended March 31, 2024, we have been fined by approximately $76,000 by Traffic Management Bureaus in Chengdu, Changsha, Guangzhou and Tianjin, of which, approximately $30,000 was further compensated by drivers or cooperated third parties.
Any of these factors related to COVID-19 and other similar or currently unforeseen factors beyond our control could have an adverse effect on our overall business environment, causing uncertainties in the regions in China where we conduct business, and causing our business to suffer in ways that we cannot predict and materially and adversely impact our business, financial condition and results of operations. 12 Table of Contents Customers The significant majority of our Operating Entities’ customers are online ride-hailing drivers.
Any of these factors related to COVID-19 and other similar or currently unforeseen factors beyond our control could have an adverse effect on our overall business environment, causing uncertainties in the regions in China where we conduct business, and causing our business to suffer in ways that we cannot predict and materially and adversely impact our business, financial condition and results of operations.
The Trial Measures, together with the Guidance Rules and Notice reiterate the basic principles of the Draft Administrative Provisions and Draft Filing Measures and impose substantially the same requirements for the overseas securities offering and listing by domestic enterprises, and clarified and emphasized several aspects, which include but are not limited to: (1) criteria to determine whether an issuer will be required to go through the filing procedures under the Trial Measures; (2) exemptions from immediate filing requirements for issuers including those that have already been listed in foreign securities markets, including U.S. markets, prior to the effective date of the Trial Measures, but these issuers shall still be subject to filing procedures if they conduct refinancing or are involved in other circumstances that require filing with the CSRC; (3) a negative list of types of issuers banned from listing or offering overseas, such as issuers whose affiliates have been recently convicted of bribery and corruption; (4) issuers’ compliance with web security, data security, and other national security laws and regulations; (5) issuers’ filing and reporting obligations, such as obligation to file with the CSRC after it submits an application for initial public offering to overseas regulators, and obligation after offering or listing overseas to file with the CSRC after it completes subsequent offerings and to report to the CSRC material events including change of control or voluntary or forced delisting of the issuer; and (6) the CSRC’s authority to fine both issuers and their relevant shareholders for failure to comply with the Trial Measures, including failure to comply with filing obligations or committing fraud and misrepresentation.
For violations of these provisions 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. 25 The Trial Measures, together with the Guidance Rules and Notice prescribe that, amongst others: (1) criteria to determine whether an issuer will be required to go through the filing procedures under the Trial Measures; (2) exemptions from immediate filing requirements for issuers including those that have already been listed in foreign securities markets, including U.S. markets, prior to the effective date of the Trial Measures, but these issuers shall still be subject to filing procedures if they conduct refinancing or are involved in other circumstances that require filing with the CSRC; (3) a negative list of types of issuers banned from listing or offering overseas, such as issuers whose affiliates have been recently convicted of bribery and corruption; (4) issuers’ compliance with web security, data security, and other national security laws and regulations; (5) issuers’ filing and reporting obligations, such as obligation to file with the CSRC after it submits an application for initial public offering to overseas regulators, and obligation after offering or listing overseas to file with the CSRC after it completes subsequent offerings and to report to the CSRC material events including change of control or voluntary or forced delisting of the issuer; and (6) the CSRC’s authority to fine both issuers and their relevant shareholders for failure to comply with the Trial Measures, including failure to comply with filing obligations or committing fraud and misrepresentation.
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 of approximately $19.9 million were completed through our platform orders.
During the year ended March 31, 2024, we serviced over 2,000 customers for our Automobile Transaction and Related Services. During the year ended March 31, 2024, approximately 4.9 million rides with gross fare of approximately $15.1 million were completed through our platform orders.
The PBOC and other governmental authorities issued a series of administrative rules and regulations to specify the anti-money laundering obligations of financial institutions 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.
The PBOC and other governmental authorities issued a series of administrative rules and regulations to specify the anti-money laundering obligations of financial institutions and certain non-financial institutions, such as payment institutions.
Senmiao closed the acquisition on November 22, 2018 and agreed to make a cash contribution of $6,000,000 to Hunan Ruixi, representing 60% of its registered capital, in accordance with the Investment Agreement. As of the date of this Report, Senmiao has made the full cash contributions (in the aggregate amount of $6,000,000) to Hunan Ruixi.
Senmiao closed the acquisition on November 22, 2018 and agreed to make a cash contribution of $6,000,000 to Hunan Ruixi, representing 60% of its registered capital, in accordance with the Investment Agreement.
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.
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 April 2021, Senmiao formed Senmiao Technology (Hong Kong), Ltd.
Former Voting Agreements with Jinkailong’s Other Shareholders Hunan 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 aggregate of 65% equity interest.
Our Corporate Structure The following diagram illustrates the Company’s corporate structure as of the date of this Report: 5 Former Voting Agreements with Jinkailong’s Other Shareholders Hunan 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 aggregate of 65% equity interest.
The automobile purchasers typically become affiliated with Hunan Ruixi and Jinkailong through affiliation agreements pursuant to which Hunan Ruixi and Jinkailong, as a qualified management company, provide them post-transaction management services during the affiliation period, which is usually the same as the term of the Financing Agreements.
The automobile purchasers typically become affiliated with Hunan Ruixi through affiliation agreements pursuant to which Hunan Ruixi, as a qualified management company, provide them post-transaction management services during the affiliation period, which is usually the same as the term of the Financing Agreements. The users of Xixingtianxia platform typically use it to view and take customer orders for rides.
Meanwhile, over 1,200 online ride-hailing drivers rendered their automobiles to Jinkailong as of March 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 our potential guarantee expenditure pursuant to the financing agreements we guaranteed.
However, our daily cash flow will be adversely impacted as a result of the unsatisfied collection from the online ride-hailing drivers and our potential guarantee expenditure pursuant to the financing agreements we guaranteed.
In connection with our historical automotive financing facilitation business, Hunan Ruixi provides and Jinkailong provided guarantees to our financing 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.
In connection with our historical automotive financing facilitation business, Hunan Ruixi provided guarantees to our financing 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 guarantee business.
Under SAT Bulletin 7 and other PRC tax regulations, in the case of an indirect transfer, entities or individuals obligated to pay the transfer price to the transferor must act as withholding agents and are required to withhold the PRC tax from the transfer price.
The safe harbors include qualified group restructurings, public market trades and exemptions under tax treaties. 23 Under SAT Bulletin 7 and other PRC tax regulations, in the case of an indirect transfer, entities or individuals obligated to pay the transfer price to the transferor must act as withholding agents and are required to withhold the PRC tax from the transfer price.
Sichuan Senmiao, our former VIE, now a majority owned subsidiary of Senmiao Consulting, was established in China in June 2014. Senmiao Consulting provided services to Sichuan Senmiao, pursuant to a series of contractual arrangements (the “VIE Agreements”) with Sichuan Senmiao and each of its equity holders. Senmiao Consulting became the primary beneficiary of Sichuan Senmiao.
It established a wholly owned subsidiary, Senmiao Consulting in China in July 2017. Sichuan Senmiao, a majority owned subsidiary of Senmiao Consulting, was established in China in June 2014. Senmiao Consulting provided services to Sichuan Senmiao, pursuant to a series of contractual arrangements (the “VIE Agreements”) with Sichuan Senmiao and each of its equity holders.
(2) Advisors in listing or offering securities that failed to dutifully advise the PRC domestic companies and their controlling shareholders in complying with the Trial Measures and caused such failures to comply can face warnings and fines between RMB0.5 million and 5 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).
(2) Advisors in listing or offering securities that failed to dutifully advise the PRC domestic companies and their controlling shareholders in complying with the Trial Measures and caused such failures to comply can face warnings and fines between RMB0.5 million and 5 million ($69,204 and $692,040); the Subject Individuals in these advisor entities may, severally, face warnings and fines between RMB0.2 million and RMB2 million ($27,682 and $276,820).
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 efforts including online advertising and billboard advertising. Our operating entities also send out fliers and participate in trade shows to advertise our services.
Our Auto Business Entities acquire customers through the network of sales teams from third-party and our related party, cooperated lease companies and our own efforts including online advertising and billboard advertising. Our operating entities also send out fliers and participate in trade shows to advertise our services.
Excluding Jinkailong, our other Auto Business Entities had revenue of services of $350,510 from NEVs leasing and $33,585 from automobile purchase, for the year ended March 31, 2023, respectively.
Excluding Jinkailong, our other Auto Business Entities had revenue of services of $45,231 from NEVs leasing and $36,637 from automobile purchase, for the year ended March 31, 2024, respectively.
For failure to comply with the Trial Measures Negative List 32 Table of Contents or 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 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 RMB5 million (approximately $72,824 and $728,237).
For failure to comply with the Trial Measures Negative List or 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 to comply, severally, may face warnings, injunctions to comply, and fines between RMB1 million and RMB10 million ($138,408 and $1,384,083); the Subject Individuals in these entities may severally, face warnings and fines between RMB0.5 million and RMB5 million ($69,204 and $692,040).
On the other hand, indirect transfers falling into 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.
On the other hand, indirect transfers falling into the scope of the safe harbors under SAT Bulletin 7 may not be subject to PRC tax.
With respect to the security of information collected and used by mobile apps, pursuant to the Announcement of Conducting Special Supervision against the Illegal Collection and Use of Personal Information by Apps, which was issued by the CAC, the MIIT, the Ministry of Public Security, and the State Administration for Market Regulation on January 23, 2019, app operators shall collect and use personal information in compliance with the Cybersecurity Law and shall be responsible for the security of personal information obtained from users and take effective measures to strengthen personal information protection.
Any violation of the above decision or order may subject the internet information service provider to warnings, fines, confiscation of illegal gains, revocation of licenses, cancelation of filings, closedown of websites or even criminal liabilities. 10 With respect to the security of information collected and used by mobile apps, pursuant to the Announcement of Conducting Special Supervision against the Illegal Collection and Use of Personal Information by Apps, which was issued by the CAC, the MIIT, the Ministry of Public Security, and the State Administration for Market Regulation on January 23, 2019, app operators shall collect and use personal information in compliance with the Cybersecurity Law and shall be responsible for the security of personal information obtained from users and take effective measures to strengthen personal information protection.
We plan to expand our driver base for the platform and automobile rental business while strengthening the royalty of the drivers who both lease our cars and use our platform while expanding, but our platform is available to others.
We plan to expand our driver base for the platform and automobile rental business while strengthening the royalty of the drivers who both lease our cars and use our platform while expanding, but our platform is available to others. 3 Our Corporate History Senmiao was incorporated in the State of Nevada on June 8, 2017.
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.
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. 7 Additionally, our Operating Entities arrange a simple in-person interview with the applicant where we gather information on marital/family status, income, assets, borrowing history and default history, if any.
Regulations Related to Mergers and Acquisitions On August 8, 2006, six PRC regulatory agencies, including China Securities Regulatory Commission (the “CSRC”), promulgated the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the “M&A Rules”), which became effective on September 8, 2006 and were amended on June 22, 2009.
A taxpayer is allowed to offset the qualified input VAT paid on taxable purchases against the output VAT chargeable on the revenue from services provided. 24 Regulations Related to Mergers and Acquisitions On August 8, 2006, six PRC regulatory agencies, including China Securities Regulatory Commission (the “CSRC”), promulgated the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the “M&A Rules”), which became effective on September 8, 2006 and were amended on June 22, 2009.
Advertisers who induce users to click on the content of advertisements by fraudulent means or without permission, attach advertisements or advertising links in the emails shall be imposed a fine ranging from RMB5,000 (approximately US$728) to RMB30,000 (approximately US$4,370). Our marketplace is in the process of complying with the new Internet Advertising Measures during our advertising activities.
Advertisers who induce users to click on the content of advertisements by fraudulent means or without permission, attach advertisements or advertising links in the emails shall be imposed a fine ranging from RMB5,000 (US$692) to RMB30,000 (US$4,155).
During the year ended March 31, 2023, approximately 6.1 million rides with gross fare of approximately $19.9 million were 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.
The following chart illustrates our typical process of our ride-hailing platform services: During the year ended March 31, 2024, approximately 4.9 million rides with gross fare of approximately $15.1 million were completed through Xixingtianxia and an average of over 5,000 ride-hailing drivers completed rides and earned income through Xixingtianxia (the “Active Drivers”) each month.
Following the promulgation of the Interim Measures, various local governmental authorities have promulgated implementing rules to further stipulate the detailed requirements for online ride hailing service platforms, vehicles and drivers, including the major cities of our operations.
Furthermore, the Interim Measures also provide that competent local governmental authorities may formulate detailed implementing rules for their respective regions in accordance with the Interim Measures and in light of local conditions. 12 Following the promulgation of the Interim Measures, various local governmental authorities have promulgated implementing rules to further stipulate the detailed requirements for online ride hailing service platforms, vehicles and drivers, including the major cities of our operations.
The Administrative Measures on Telecommunications Business Operating Licenses, promulgated by the MIIT in 2009 and most recently amended in July 2017, which set forth more specific provisions regarding the types of licenses required to operate VATS, the qualifications and procedures for obtaining such licenses and the administration and supervision of such licenses.
The Telecom Catalogue was most recently updated in June 2019, categorizing online data and transaction processing, information services, among others, as Class II VATS. 15 The Administrative Measures on Telecommunications Business Operating Licenses, promulgated by the MIIT in 2009 and most recently amended in July 2017, which set forth more specific provisions regarding the types of licenses required to operate VATS, the qualifications and procedures for obtaining such licenses and the administration and supervision of such licenses.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe may also be subject to risks relating to third-party debt collection service providers whom we engage for the 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 have a 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 financial condition 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, our business, 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 be materially 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 interpretation and implementation of newly established policies may remain uncertain, which could have an adverse impact on our business and future prospects. ● 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 HFCA Act, in the future if the PCAOB is unable to inspect or investigate completely our auditors.
Biggest changeRisk Factors Summary Risks Related to Our Business and Industry ● We face intense competition, which could lead to our inability to secure market share or cause us to lose market share to our competitors, any of which could materially and adversely affect our business, results of operations and financial condition. ● If we fail to cost-effectively attract and retain online ride-hailing drivers, or to increase the profitability of our platform by existing users, our business, results of operations and financial condition could be materially and adversely affected. ● Relationship between us, our affiliates and Gaode Maps and other cooperated partners is crucial to our ability to grow our business, results of 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 our operations. ● 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 have a 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 financial condition could be materially and adversely affected. ● Changes to pricing for our online ride-hailing services could materially and adversely affect our ability to attract or retain riders and qualified drivers. ● 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 be materially 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 interpretation and implementation of newly established policies may remain uncertain, which could have an adverse impact on our business and future prospects. ● 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 HFCA Act, in the future if the PCAOB is unable to inspect or investigate completely our auditors.
The credit risk may be exacerbated in automobile financing due to the relatively limited credit history and other available information of many consumers in China. If we experience a widespread default by our automobile purchasers/lessees, our cash flow and results of operations will be materially and adversely affected.
The credit risk may be exacerbated in automobile financing due to the relatively limited credit history and other available information of many consumers in China. If we experience a widespread default by our automobile lessees/purchasers, our cash flow and results of operations will be materially and adversely affected.
In addition to the above factors, the price and trading volume of our common stock may be highly volatile due to multiple factors, including the 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 capital commitments; ● 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.
In addition to the above factors, the price and trading volume of our common stock may be highly volatile due to multiple factors, including the 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; 58 ● announcements by us or our competitors of new product and service offerings, acquisitions, strategic relationships, joint ventures or capital commitments; ● 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.
Our financial position could be materially and adversely affected if Sichuan Senmiao’s tax liabilities increase or if it is required to pay late payment fees and other penalties. If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC stockholders.
Our financial position could be materially and adversely affected if Sichuan Senmiao’s tax liabilities increase or if it is required to pay late payment fees and other penalties. 45 If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC stockholders.
Lastly, the draft contains proposals for significant fines 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 continually change, through new legislation, amendments to existing legislation and changes in enforcement.
Lastly, the draft contains proposals for significant fines for serious violations of up to RMB50 million or 5% of annual revenues from the prior year. 50 Interpretation, application and enforcement of these laws, rules and regulations evolve from time to time and their scope may continually change, through new legislation, amendments to existing legislation and changes in enforcement.
If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could 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 Comments Not Applicable. ​
If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for our common stock to decline. 68 Item 1B. Unresolved Staff Comments Not Applicable.
We are in the process of taking measures to detect and prevent fraudulent transactions by our users, such as cross-checking a driver’s travel path against the proposed itinerary to verify the authenticity of an order. Despite our efforts, our measures may not eliminate order skipping, disintermediation, and other user misconducts and fraud.
We are in the process of taking measures to detect and prevent fraudulent transactions by our users, such as cross-checking a driver’s travel path against the proposed itinerary to verify the authenticity of an order. 33 Despite our efforts, our measures may not eliminate order skipping, disintermediation, and other user misconducts and fraud.
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 against our 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.
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 against our assets or the assets of our directors and officers. 59 Our articles of incorporation and by-laws could deter a change of our management, which could discourage or delay offers to acquire us.
If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able 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.
If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our stockholders. 55 Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.
If any of the foregoing takes place, our business and results of operations could 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.
If any of the foregoing takes place, our business and results of operations could be materially and adversely affected. 62 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.
Any such penalties may disrupt our business operations and materially and 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.
Any such penalties may disrupt our business operations and materially and adversely affect our business, results of operations and financial condition. 38 We rely primarily on a third-party insurance policy to insure our auto-related risks relating to our online ride-hailing platform services.
Any adverse change to these factors could reduce demand for used cars and hence demand for our services, and our results of operations and financial condition could be materially and adversely affected. We have incurred net losses and may continue to incur net losses in the future.
Any adverse change to these factors could reduce demand for used cars and hence demand for our services, and our results of operations and financial condition could be materially and adversely affected. 41 We have incurred net losses and may continue to incur net losses in the future.
In addition, we cannot guarantee 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 in China.
In addition, we cannot guarantee that we will not be subject to tightened regulatory review and we could be exposed to government interference in China. 49 Since 1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China.
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 acquired business; ● inability of the acquired technologies, products or businesses to achieve expected levels of revenue, profitability, productivity or other benefits; ● difficulties in retaining, training, motivating and integrating key personnel; ● diversion of management’s time and resources from our normal daily operations; 73 Table of Contents ● 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-closing approvals, 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 rights or 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.
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 acquired business; ● inability of the acquired technologies, products or businesses to achieve expected levels of revenue, profitability, productivity or other benefits; ● difficulties in retaining, training, motivating and integrating key personnel; ● diversion of management’s time and resources from our normal daily operations; 65 ● 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-closing approvals, 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 rights or 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.
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 online reservation taxi driver’s license are required for a driver to operate the online ride-hailing business.
According to the guidelines issued by the different local authorities in China, including our major operations, Chengdu and Changsha, online reservation taxi operating license, automobile certificate and online reservation taxi driver’s license are required for a driver to operate the online ride-hailing business.
As a result, in certain circumstances it may be difficult to determine what actions or 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.
As a result, in certain circumstances it may be difficult to determine what actions or omissions may be deemed to be in violation of applicable laws and regulations. 52 The evolving PRC regulatory system for the internet industry may lead to the establishment of new regulatory agencies.
As of the date of this Report, none of our subsidiaries have been authorized VATS licenses as we are do not operate the value-added telecommunications services as defined by the regulations.
As of the date of this Report, none of our subsidiaries have been authorized VATS licenses as we do not operate the value-added telecommunications services as defined by the regulations.
Factors that may cause fluctuations in our 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 our Automobile Transaction and Related Services and Online Ride-hailing Platform Services; ● the revenue generated from automobile leasing and online ride-hailing platform services; 69 Table of Contents ● 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, operations and 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.
Factors that may cause fluctuations in our 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 our Automobile Transaction and Related Services and Online Ride-hailing Platform Services; ● the revenue generated from automobile leasing and online ride-hailing platform services; ● 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, operations and 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; 61 ● 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.
Pursuant to the Purchase Agreements with investors in our offerings in June 2019 and May 2021, we issued to the investors a series of warrants.
Pursuant to the Purchase Agreements with investors in our offerings in June 2019, May 2021 and November 2021, we issued to the investors a series of warrants.
As Hunan Ruixi holds 35% of equity interest of Jinkailong and has 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.
As Hunan Ruixi holds 35% of equity interest of Jinkailong and has not made any consideration towards to the investment, Hunan Ruixi will subject to the maximum amount of RMB3.5 million (approximately $485,000) of which is equivalent to 35% of liabilities in case Jinkailong is liquidated in accordance with PRC’s company registry compliance.
Considering the number of online ride-hailing drivers are keep increasing while the consumer demand has no significant increase in current months in China, the MOT of certain cities, such as Changsha, Sanya has suspended issuing new online booking taxi transportation certificates and transport certificates since April and May 2023 accordingly.
Considering the number of online ride-hailing drivers keep increasing while the consumer demand has no significant increase in current months in China, the MOT of certain cities, such as Changsha, Sanya has suspended issuing new online booking taxi transportation certificates and transport certificates since April 2023 accordingly.
The proposed rule was adopted by the PCAOB on September 22, 2021 and approved by the SEC on November 5, 2021. On June 22, 2021, the U.S.
The proposed rule was adopted by the PCAOB on September 22, 2021 and approved by the SEC on November 5, 2021. 43 On June 22, 2021, the U.S.
Although this circular 54 Table of Contents only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners like us, the criteria set forth in the circular may reflect the State Administration of Taxation’s general position on how the “de facto management body” test should be applied in determining the tax resident status of all offshore enterprises.
Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners like us, the criteria set forth in the circular may reflect the State Administration of Taxation’s general position on how the “de facto management body” test should be applied in determining the tax resident status of all offshore enterprises.
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 the requirements imposed on us by the Cyber Security Law, the Data Security 59 Table of Contents Law and/or related implementing regulations.
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 the requirements imposed on us by the Cyber Security Law, the Data Security Law and/or related implementing regulations.
If we cannot repossess some of these cars or the 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.
If we cannot repossess some of these cars or the residual values of the repossessed cars are lower than we expected and not sufficient to cover the automobile purchaser/lessee’ 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.
In addition, we may be subject to industry-wide regulations that may be adopted by the relevant PRC authorities, which may have the 57 Table of Contents effect of limiting our service offerings, restricting the scope of our operations in China, or causing the suspension or termination of our business operations in China entirely, all of which will materially and adversely affect our business, financial condition and results of operations.
In addition, we may be subject to industry-wide regulations that may be adopted by the relevant PRC authorities, which may have the effect of limiting our service offerings, restricting the scope of our operations in China, or causing the suspension or termination of our business operations in China entirely, all of which will materially and adversely affect our business, financial condition and results of operations.
Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if 68 Table of Contents any, received by us from our subsidiary, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors.
Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiary, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors.
In connection with the audit of our consolidated financial statements for the year ended March 31, 2023, we have identified “material weaknesses” and other control deficiencies including significant deficiencies in our internal control over financial reporting.
In connection with the audit of our consolidated financial statements for the year ended March 31, 2024, we have identified “material weaknesses” and other control deficiencies including significant deficiencies in our internal control over financial reporting.
We expect competition to continue, both from current competitors and new entrants in the market that may be well-established and enjoy greater resources or other strategic advantages.
However, we expect the fierce competition to continue, both from current competitors and new entrants in the market that may be well-established and enjoy greater resources or other strategic advantages.
In addition, the security review 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 domestic enterprises that raise “national security” concerns are subject to strict review by the MOC, and the rules prohibit any activities attempting to bypass a security review, 64 Table of Contents including by structuring the transaction through a proxy or contractual control arrangement.
In addition, the security review 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 domestic enterprises that raise “national security” concerns are subject to strict review by the MOC, and the rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement.
We rely on third-party payment processors, such as Alipay and Qiandaibao, and rarely, commercial banks, to process payments made by our business partners and payments made to online ride-hailing drivers on our platform.
We rely on third-party payment processors, such as Alipay and commercial banks, to process payments made by our business partners and payments made to online ride-hailing drivers on our platform.
Among other things, reclassification could subject us to vicarious liability for any misconduct of drivers, require us to pay them wages, make 47 Table of Contents social insurance contributions or provide other benefits, or reduce our attractiveness to drivers given the loss of flexibility under an employee model.
Among other things, reclassification could subject us to vicarious liability for any misconduct of drivers, require us to pay them wages, make social insurance contributions or provide other benefits, or reduce our attractiveness to drivers given the loss of flexibility under an employee model.
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. 70 Table of Contents In addition, certain factors that may adversely affect our reputation are beyond our control.
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. In addition, certain factors that may adversely affect our reputation are beyond our control.
To date, inflation in China has not materially impacted our results of operations. According to the National Bureau of Statistics of China, the year-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.
To date, inflation in China has not materially impacted our results of operations. According to the National Bureau of Statistics of China, the year-over-year percent changes in the consumer price index for December 2021, 2022 and 2023 were increases of 0.9%, 2.0% and 0.2%, respectively.
This may happen because of broad market and industry factors, like the performance and fluctuation in the market prices or the underperformance or deteriorating financial results of internet or other companies based in China that have listed their securities in the United States in 66 Table of Contents recent years.
This may happen because of broad market and industry factors, like the performance and fluctuation in the market prices or the underperformance or deteriorating financial results of internet or other companies based in China that have listed their securities in the United States in recent years.
For example, we monitor the order completion 40 Table of Contents rate for our online ride-hailing drivers, and those with low credit scores based on riders’ feedback or behavior scores will be less likely to receive orders on our platform. If we detect a persistent skipping pattern, we will permanently close their user accounts on our platform.
For example, we monitor the order completion rate for our online ride-hailing drivers, and those with low credit scores based on riders’ feedback or behavior scores will be less likely to receive orders on our platform. If we detect a persistent skipping pattern, we will permanently close their user accounts on our platform.
We also take measures to help increase safety, prevent privacy and security breaches, and protect against fraud which may make our platform less convenient 44 Table of Contents or accessible for some drivers and discourage or diminish their use of our platform.
We also take measures to help increase safety, prevent privacy and security breaches, and protect against fraud which may make our platform less convenient or accessible for some drivers and discourage or diminish their use of our platform.
If research analysts do not establish and maintain adequate research coverage or if one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, the market price for our 76 Table of Contents common stock would likely decline.
If research analysts do not establish and maintain adequate research coverage or if one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, the market price for our common stock would likely decline.
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 may determine that we or Sichuan Senmiao owe additional taxes, which could negatively affect our financial condition and the value of your investment. ● If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences 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 may pursue 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 and regulations could have a significant impact upon the business that we may be able to conduct in the PRC and accordingly on the results of our operations and financial condition. ● Adverse regulatory developments in China may subject us to additional regulatory review, and additional disclosure requirements and regulatory scrutiny to be adopted by the SEC in response to risks related to recent regulatory developments in China may impose additional compliance 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 and guidelines relating to the multi-level protection scheme and any other future laws and regulations may entail significant expenses and could materially affect our business. ● Recent greater oversight by the CAC over data security, particularly for companies seeking to list on a foreign exchange, could adversely impact 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 and results of operations. ● PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of from our public offerings to make loans to or make additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability 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 may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct 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 your investment. ● Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties. 37 Table of Contents ● The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of PRC companies by foreign investors, 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 registered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC law.
Additionally, the inability of the PCAOB to conduct inspections of our auditors would deprive our investors of the benefits of such inspections. ● We face risks related to natural disasters, health epidemics and other outbreaks, such as COVID-19, which could significantly disrupt our operations. 29 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 may determine that we or Sichuan Senmiao owe additional taxes, which could negatively affect our financial condition and the value of your investment. ● If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences 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 may pursue 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 and regulations could have a significant impact upon the business that we may be able to conduct in the PRC and accordingly on the results of our operations and financial condition. ● Adverse regulatory developments in China may subject us to additional regulatory review, and additional disclosure requirements and regulatory scrutiny to be adopted by the SEC in response to risks related to recent regulatory developments in China may impose additional compliance 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 and guidelines relating to the multi-level protection scheme and any other future laws and regulations may entail significant expenses and could materially affect our business. ● Recent greater oversight by the CAC over data security, particularly for companies seeking to list on a foreign exchange, could adversely impact 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 and results of operations. ● PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of from our public offerings to make loans to or make additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability 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 may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct 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 your investment. ● Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties. ● The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of PRC companies by foreign investors, 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 registered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC law.
If we are deemed to 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. 75 Table of Contents If we cannot maintain our corporate culture as we grow, we could lose the innovation, collaboration and focus that contribute to our business.
If we are deemed to 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. 67 If we cannot maintain our corporate culture as we grow, we could lose the innovation, collaboration and focus that contribute to our business.
Our reporting currency is the U.S. dollar while the functional currency for our PRC subsidiaries is RMB. Gains and losses from the remeasurement of assets and liabilities that are receivable or payable in RMB are included in our consolidated statements of operations.
Our reporting currency is the U.S. dollar while the functional currency for our PRC subsidiaries is RMB. Gains and losses from the re-measurement of assets and liabilities that are receivable or payable in RMB are included in our consolidated statements of operations.
If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements, and the quality of our services and our ability to serve borrowers and investors could diminish, resulting in a material adverse effect to our business. 74 Table of Contents Increases in labor costs in the PRC may adversely affect our business and results of operations.
If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements, and the quality of our services and our ability to serve borrowers and investors could diminish, resulting in a material adverse effect to our business. 66 Increases in labor costs in the PRC may adversely affect our business and results of operations.
We also cannot assure you that there will not be regulatory changes that prohibit the installation of GPS trackers, or the 41 Table of Contents realized value of the repossessed cars will be sufficient to cover our customers’ payment obligations.
We also cannot assure you that there will not be regulatory changes that prohibit the installation of GPS trackers, or the realized value of the repossessed cars will be sufficient to cover our customers’ payment obligations.
If our stockholders who are PRC residents or entities do not complete their registration as required, our PRC subsidiaries may be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be 65 Table of Contents restricted in our ability to contribute additional capital to our PRC subsidiaries.
If our stockholders who are PRC residents or entities do not complete their registration as required, our PRC subsidiaries may be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in our ability to contribute additional capital to our PRC subsidiaries.
In 2015, the PBOC announced that it would open the credit reporting market to 43 Table of Contents private sectors with a view to spurring competition and innovation, but it may be a long-term process to establish a widely-applicable, reliable and sophisticated credit infrastructure in the market we operate.
In 2015, the PBOC announced that it would open the credit reporting market to private sectors with a view to spurring competition and innovation, but it may be a long-term process to establish a widely-applicable, reliable and sophisticated credit infrastructure in the market we operate.
In addition, our results of operations could be adversely affected to the extent that any of these epidemics harms the Chinese economy in general. ​ 53 Table of Contents Risks Related to Doing Business in China 1. Corporate Structure Our current corporate structure and business operations may be affected by the Foreign Investment Law.
In addition, our results of operations could be adversely affected to the extent that any of these epidemics harms the Chinese economy in general. 44 Risks Related to Doing Business in China 1. Corporate Structure Our current corporate structure and business operations may be affected by the Foreign Investment Law.
Any significant appreciation or depreciation of the RMB may materially and adversely affect our revenues, earnings and financial position, and the 63 Table of Contents value of, and any dividends payable on, our securities in U.S. dollars.
Any significant appreciation or depreciation of the RMB may materially and adversely affect our revenues, earnings and financial position, and the value of, and any dividends payable on, our securities in U.S. dollars.
We are exposed to credit risk in our auto financing and prior auto financing facilitation businesses. Our current risk management system may not be able to accurately assess and mitigate all risks to which we are exposed, including credit risk.
We are exposed to credit risk in our Auto Businesses. Our current risk management system may not be able to accurately assess and mitigate all risks to which we are exposed, including credit risk.
In April 2015, several PRC governmental authorities also jointly announced that from 2016 to 2020, NEV purchasers designated on certain catalogs will enjoy 48 Table of Contents subsidies. In December 2016, relevant PRC governmental authorities further adjusted the subsidy policy for NEVs.
In April 2015, several PRC governmental authorities also jointly announced that from 2016 to 2020, NEV purchasers designated on certain catalogs will enjoy subsidies. In December 2016, relevant PRC governmental authorities further adjusted the subsidy policy for NEVs.
In connection with our online ride-hailing business, we have integrations with Gaode Maps, Meituan, Alipay, Qiandaibao and other third-party service providers. As our online ride-hailing services expand and evolve, we may have an increasing number of integrations with third-party applications, products and services.
In connection with our online ride-hailing business, we have integrations with Gaode Maps, Alipay, Partner Platforms and other third-party service providers. As our online ride-hailing services expand and evolve, we may have an increasing number of integrations with third-party applications, products and services.
We 39 Table of Contents are not able to fully control or predict the actions of our customers and third parties, either during the process of providing services or otherwise.
We are not able to fully control or predict the actions of our customers and third parties, either during the process of providing services or otherwise.
In particular, because these laws and regulations are relatively new, and because of the limited volume of published decisions and their nonbinding nature, the interpretation and enforcement of these laws 58 Table of Contents and regulations involve uncertainties.
In particular, because these laws and regulations are relatively new, and because of the limited volume of published decisions and their nonbinding nature, the interpretation and enforcement of these laws and regulations involve uncertainties.
As of the date of this Report, there were 6,062,504 shares of common stock issuable upon exercise of outstanding warrants at a weighted average 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.
As of the date of this Report, there were 6,045,663 shares of common stock issuable upon exercise of outstanding warrants at a weighted average exercise price of $2.25 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.
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.
The re-measurement 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.
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 the contributions for these plans as well as to pay late fees and fines.
As of March 31, 2024 and 2023, we did not make adequate employee benefit contributions in the amount of $1,137,887 and $1,086,526, respectively, for our continuing operations. We accrued the amount in accrued payroll and welfare. We may be required to make up the contributions for these plans as well as to pay late fees and fines.
In addition, changes in driver qualification 45 Table of Contents and background check requirements may increase our costs and reduce our ability to onboard additional drivers to our platform. Our driver qualification and background check procedure varies by jurisdiction.
In addition, changes in driver qualification and background check requirements may increase our costs and reduce our ability to onboard additional drivers to our platform. Our driver qualification and background check procedure varies by jurisdiction.
During the year ended March 31, 2022, the CAC has taken action against several Chinese internet companies in connection with their initial public offerings on U.S. securities exchanges, for alleged national security risks and improper collection and use of the personal information of Chinese data subjects.
The CAC has taken action against several Chinese internet companies in connection with their initial public offerings on U.S. securities exchanges, for alleged national security risks and improper collection and use of the personal information of Chinese data subjects.
As described in the section titled “ Business ” above, as of March 31, 2023, approximately 108 online ride-hailing drivers in Changsha and over 1,200 online ride-hailing drivers in Chengdu exited the online ride-hailing business and rendered their purchased automobile to Hunan Ruixi and Jinkailong for sublease or sales in order to offset monthly payment owed to Hunan Ruixi and Jinkailong and the financial institutions.
As described in the section titled “ Business ” above, as of March 31, 2024, approximately 108 online ride-hailing drivers in Changsha exited the online ride-hailing business and rendered their purchased automobile to Hunan Ruixi for sublease or sales in order to offset monthly payment owed to Hunan Ruixi and the financial institutions.
As we shifted our business focus to automobile rental since March 2020, we purchase and lease automobiles mainly for operating lease during the year ended March 31, 2023.
As we shifted our business focus to automobile rental since March 2020, we lease automobiles mainly for operating lease during the year ended March 31, 2024.
We have identified material weaknesses in our internal control over financial reporting. If we fail to develop and maintain an effective system of internal control over financial reporting, we may be unable to accurately report our financial results or prevent fraud.
If we fail to develop and maintain an effective system of internal control over financial reporting, we may be unable to accurately report our financial results or prevent fraud.
We cannot assure you that we will be able to successfully locate and recover the car collateral. We have in the past failed to repossess one car as the GPS trackers failed to function properly or had been disabled, and we cannot assure you that this incident will not happen again the future.
We have in the past failed to repossess one car as the GPS trackers failed to function properly or had been disabled, and we cannot assure you that this incident will not happen again the future.
For the year ended March 31, 2023, we recognized estimated provisions loss of approximately $7,000 for the guarantee services as a result of default by the automobile purchasers. Customers may default on their lease/loan payments for a number of reasons including those outside of their or our control.
For the year ended March 31, 2024, we recognized estimated provisions loss of approximately $500 for the guarantee services as a result of default by the automobile purchasers. Customers may default on their lease/purchase payments for a number of reasons including those outside of their or our control.
If the relevant regulatory authorities determine that we are operating financing guarantee business, we may be required to obtain approval or license for financing guarantee business to continue our collaboration arrangement with certain financial institutions.
If the relevant regulatory authorities determine that we are operating financing guarantee business, we may be required to obtain approval or license for financing guarantee business to continue our collaboration arrangement with certain financial institutions. Consequently, we may be required to obtain approval or license for financing business to continue our current collection method of payments.
Repayment of the debts may divert a substantial portion of cash flow to repay principal and service interest on such debt, which would reduce the funds available for expenses, capital expenditures, acquisitions and other general corporate purposes; and we may suffer default and foreclosure on our assets if our operating cash flow is insufficient to service debt obligations, which could in turn result in acceleration of obligations to repay the indebtedness and limit our sources of financing.
Repayment of the debts may divert a substantial portion of cash flow to repay principal and service interest on such debt, which would reduce the funds available for expenses, capital expenditures, acquisitions and other general corporate purposes; and we may suffer default and foreclosure on our assets if our operating cash flow is insufficient to service debt obligations, which could in turn result in acceleration of obligations to repay the indebtedness and limit our sources of financing. 60 Volatility in the credit markets may also have an adverse effect on our ability to obtain debt financing.
Meituan and other online ride-hailing platforms settles payments to accounts of Auto Business Entities in Alipay or Qiandaibao once a week or a month. In general, after deducting service fees of these platforms, the remaining amounts, including the earnings of the drivers and our service fees, are transferred to those accounts in Alipay, Qiandaibao or other banks.
Other Partner Platforms settles payments to accounts of Auto Business Entities in Alipay or banks once a week. In general, after deducting service fees of these platforms, the remaining amounts, including the earnings of the drivers and our service fees, are transferred to those accounts in Alipay or other banks.
Approximately 57% of our served online ride-hailing drivers have not obtained the online reservation taxi driver’s certificates as of March 31, 2023.
Approximately 25% of our served online ride-hailing drivers have not obtained the online reservation taxi driver’s certificates as of March 31, 2024.
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 significant management 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 or electronic break-ins or similar disruptions.
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. ● Our ability to protect the confidential information of our customers may be adversely affected by cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions. ● From time to time, we may evaluate and potentially consummate strategic investments or acquisitions, which could require significant management attention, disrupt our business and adversely affect our financial results. 30 Risks Related to Our Business and Industry We face intense competition, which could lead to our inability to secure market share or cause us to lose market share to our competitors, any of which could materially and adversely affect our business, results of operations and financial condition.
During the year ended March 31, 2023, we have been fined by approximately $19,000 by Traffic Management Bureaus in Chengdu and Changsha for the non-compliance on taxi driver’s certificates, of which, approximately $4,000 was further compensated by drivers or cooperated third parties.
During the year ended March 31, 2024, we have been fined by approximately $76,000 by Traffic Management Bureaus in Chengdu, Changsha, Guangzhou and Tianjin, for the non-compliance on taxi driver’s certificates, of which, approximately $30,000 was further compensated by drivers or cooperated third parties.
We have made our determinations based on Yuantai Law Offices, our PRC counsel, to the extent that the discussion relates to matters of CSRC, CAC and other government authorities on our PRC subsidiaries’ operations and concluded that: as of the date of this Report, we, our PRC subsidiaries and equity investee company, (i) are not required to obtain permissions from the CSRC, CAC or any other government authorities on our PRC subsidiaries’ operations, and (ii) have not received or were denied such permissions by any PRC government authorities.
As such, substantial uncertainties exist with respect to the enactment timetable, final content, interpretation and implementation of such regulations. 51 We have made our determinations based on Yuantai Law Offices, our PRC counsel, to the extent that the discussion relates to matters of CSRC, CAC and other government authorities on our PRC subsidiaries’ operations and concluded that: as of the date of this Report, we, our PRC subsidiaries and equity investee company, (i) are not required to obtain permissions from the CSRC, CAC or any other government authorities on our PRC subsidiaries’ operations, and (ii) have not received or were denied such permissions by any PRC government authorities.
SAT Bulletin 7 extends its tax jurisdiction to not only indirect transfers set forth under Circular 698 but also transactions involving transfer of other taxable assets, through the offshore transfer of a foreign intermediate holding company.
SAT Bulletin 7 has introduced a new tax regime that is significantly different from that under Circular 698. SAT Bulletin 7 extends its tax jurisdiction to not only indirect transfers set forth under Circular 698 but also transactions involving transfer of other taxable assets, through the offshore transfer of a foreign intermediate holding company.
Circular 698 also provides that, where a non-PRC resident enterprise transfers its equity interests in a PRC resident enterprise to its related parties at a price lower than the fair market value, the relevant tax authority has the power to make a reasonable adjustment to the taxable income of the transaction.
Circular 698 also provides that, where a non-PRC resident enterprise transfers its equity interests in a PRC resident enterprise to its related parties at a price lower than the fair market value, the relevant tax authority has the power to make a reasonable adjustment to the taxable income of the transaction. 46 In February 2015, the SAT issued SAT Bulletin 7 to replace the rules relating to indirect transfers in Circular 698.
The Credit Reference Center established by the PBOC in 2002 has been the only credit reporting system in China. This centrally managed nationwide credit database operated by the Credit Reference Center only records limited credit information, such as tax payments, civil lawsuits, foreclosures and bankruptcies.
China’s credit infrastructure is still at an early stage of development. The Credit Reference Center established by the PBOC in 2002 has been the only credit reporting system in China. This centrally managed nationwide credit database operated by the Credit Reference Center only records limited credit information, such as tax payments, civil lawsuits, foreclosures and bankruptcies.
It is possible that automobile retail transactions may decline significantly upon expiration of the existing government subsidies if consumers have become used to such incentives and delay purchase decisions in the absence of new incentives. If automobile retail transactions indeed decline, our revenues may fluctuate and our results of operations may be materially and adversely affected.
It is possible that automobile retail transactions may decline significantly upon expiration of the existing government subsidies if consumers have become used to such incentives and delay purchase decisions in the absence of new incentives.
The growth of our online ride-hailing platform depends in part on our ability to cost-effectively attract and retain online ride-hailing drivers who 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.
The growth of our online ride-hailing platform depends in part on our ability to cost-effectively attract and retain online ride-hailing drivers who satisfy our screening criteria and procedures, and to increase their utilization of our platform.
In addition, SAFE issued a circular in September 2008, SAFE Circular 142, regulating the conversion by a foreign-invested enterprise of foreign currency registered capital into RMB by restricting how the converted RMB may be used.
These capital contributions must be approved by the MOFCOM or its local counterpart. In addition, SAFE issued a circular in September 2008, SAFE Circular 142, regulating the conversion by a foreign-invested enterprise of foreign currency registered capital into RMB by restricting how the converted RMB may be used.
We are exposed to credit risk as Hunan Ruixi and Jinkailong provide automobile financing to automobile purchasers and are required to provide guarantees to most of their financing partners on the financing for automobile purchases facilitated by them in prior years.
We are exposed to credit risk as our equity investee company, Jinkailong is required to provide guarantees to most of their financing partners on the financing for automobile purchases facilitated by them in prior years.
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 our online ride-hailing platform.
We also reduced the incentives paid to the drivers and had witnessed both the number of Active Drivers on our platform and the total number of the completed orders decreased accordingly. 31 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 our online ride-hailing platform.
The online ride-hailing market in China, especially in our key target markets of Chengdu, Changsha and Guangzhou, is intensely competitive and characterized by rapid changes in technology, shifting user preferences, and frequent introductions of new services and offerings. We face intense competition in the Automobile Transaction and Financing Services, as well as the Online Ride-hailing Platform Services.
The online ride-hailing market in China, especially in our key target markets of Chengdu and Changsha, is intensely competitive and characterized by rapid changes in technology, shifting user preferences, and frequent introductions of new services and offerings.
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, our business, results of operations and financial condition could be materially and adversely affected.
If we fail to cost-effectively attract and retain online ride-hailing drivers, or to increase the profitability of our platform by existing users, our business, results of operations and financial condition could be materially and adversely affected.
For failure to comply with the Trial Measures Negative List or 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 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 RMB5 million (approximately $72,824 and $728,237).
For failure to comply with the Trial Measures Negative List or 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 to comply, severally, may face warnings, injunctions to comply, and fines between RMB1 million and RMB10 million ($138,408 and $1,384,083); the Subject Individuals in these entities may severally, face warnings and fines between RMB0.5 million and RMB5 million ($69,204 and $692,040).

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe maintain another three offices for our Automobile Transaction and Related Services and Online Ride-hailing Platform Services in the cities of Changsha and Guangzhou, China. The total area of our offices in Changsha is 680 square meters.
Biggest changeWe maintain another office for our Automobile Transaction and Related Services and Online Ride-hailing Platform Services in the city of Changsha, China, comprising an aggregate of 650 square meters. We lease the office for a monthly rent of approximately $3,700 under a lease agreement that expires in May 2025.
Item 2. Properties We 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 cost for these offices is approximately $10,700 per month in aggregate.
Item 2. Properties We currently maintain our principal executive office at 16F, Shihao Square, Middle Jiannan Blvd., High-Tech Zone, Chengdu, Sichuan, People’s Republic of China 610000, comprising an aggregate of 143 square meters under a lease agreement that expires on June 30, 2024. The cost for the office is approximately $1,520 per month in aggregate.
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 for the parking lot and the exhibition hall is approximately $1,100 and approximately $3,500, respectively. Jinkailong leases a parking lot with total area of approximately 7,300 square meters in Chengdu. The monthly rent was approximately $2,900.
We also lease a parking lot for automobiles and an exhibition hall in Changsha, with total areas of 2,500 square meters. The monthly rent for the parking lot and the exhibition hall is approximately $1,400 and approximately $1,800, respectively. We consider our current facilities adequate for our current operations.
Removed
We lease those offices for a total monthly rent of approximately $4,200 under two lease agreements that expire in October 2023 and May 2025, respectively. The total area of our office in Guangzhou is 101 square meters. We lease the office for a total monthly rent of approximately $960 under a lease agreement that expire in December 2023.
Added
The Company previously entered into two office lease agreements in the same building, comprising an aggregate of 965 square meters with a monthly rental cost of approximately $10,700. The leasing term was from April 1, 2023 to March 31, 2026 while such lease was terminated in December 2023.
Removed
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 and December 2023, respectively.
Removed
We consider our current facilities adequate for our current operations. ​

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeLitigation 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 Disclosures Not applicable. ​ 77 Table of Contents PART II
Biggest changeLitigation 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 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs of the date of this Report, an aggregate of 29,630 RSUs were issued and 3,182 RSUs were vested but have not been issued under the plan. 78 Table of Contents The following table provides information as of March 31, 2023 with respect to the shares of our common stock that may be issued under our existing equity incentive plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of securities remaining ​ ​ Number of securities to be ​ Weighted-average exercise ​ available for future issuance ​ ​ issued upon exercise of ​ price of outstanding ​ under equity compensation ​ ​ outstanding options, warrants ​ options, warrants and ​ plans (excluding securities Plan category and rights rights reflected in column (a)) 2018 Equity Incentive Plan ​ — ​ — ​ 1,470,371 ​ Purchases of Our Equity Securities None.
Biggest changeAs of the date of this Report, the Company has granted an aggregate of 30,379 RSUs (after reverse split) , among which, 26,447 RSUs were issued, 3,182 RSUs were vested but have not been issued while 750 RSUs were forfeited due to two directors ceased to serve on the board of the Company since November 8, 2018 . 71 The following table provides information as of March 31, 2024 with respect to the shares of our common stock that may be issued under our existing equity incentive plan: Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) 2018 Equity Incentive Plan — — 1,770,371 Purchases of Our Equity Securities None.
We do not have any present plan to pay any cash dividends on our common stock 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 our business.
Nor do we have any present plan to pay any cash dividends on our common stock 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 our business.
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 on dividends and other distributions on equity paid by our PRC subsidiaries for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our stockholders and service any debt we may incur.
Our board of directors has the discretion to declare and pay dividends in the future as we are a holding company and we rely on dividends and other distributions on equity paid by our PRC subsidiaries for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our stockholders and service any debt we may incur.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information Our common stock trades on the Nasdaq Capital Market under the symbol “AIHS.” Holders Based upon information furnished by our transfer agent, as of July 10, 2023, the Company had approximately 24 stockholders of record.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information Our common stock trades on the Nasdaq Capital Market under the symbol “AIHS.” Holders Based upon information furnished by our transfer agent, as of June 24, 2024, the Company had approximately 32 stockholders of record.
As of March 31, 2023, the total respective registered capital of all the Company’s direct subsidiaries was approximately RMB492 million (approximately $71.6 million).
As of March 31, 2024, the total respective registered capital of all the Company’s direct subsidiaries was approximately RMB513 million (approximately $71.1 million).
And as of March 31, 2023, all the Company’s subsidiaries incorporated in the PRC have suffered accumulated loss and the Company concluded those 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.
And as of March 31, 2024, most of the Company’s subsidiaries incorporated in the PRC have suffered accumulated loss and the Company concluded none of subsidiaries has ability to transfer a portion of their net assets to the Company either in the form of dividends, loans or advances.
In March 2023, our annual meeting of stockholders for the year ended March 31, 2022 further approved the amendment to the 2018 Equity Incentive Plan, to increase the number of shares of common stock reserved under the Plan to 1,500,000 shares.
In March 2023 and April 2024, our annual meetings of stockholders for the years ended March 31, 2022 and 2023 further approved the amendments to the 2018 Equity Incentive Plan, to increase the number of shares of common stock reserved under the Plan to 1,500,000 shares and 1,800,000 shares, respectively.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeHowever, the Company’s operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating to its business or industry. 86 Table of Contents Results of Continuing Operations for the year ended March 31, 2023 Compared to the year ended March 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ ​ ​ ​ ​ March 31, ​ ​ ​ ​ 2023 2022 Change Revenues ​ $ 8,082,514 ​ $ 4,913,102 ​ $ 3,169,412 Cost of revenues ​ (6,590,001) ​ (7,001,297) ​ 411,296 Gross profit (loss) ​ 1,492,513 ​ (2,088,195) ​ 3,580,708 Operating expenses ​ ​ ​ ​ ​ ​ Selling, general and administrative expenses ​ (6,142,447) ​ (9,035,142) ​ 2,892,695 Provision for doubtful accounts, net of recovery ​ (1,487,889) ​ (235,279) ​ (1,252,610) Impairments of inventories ​ ​ (3,085) ​ ​ (60,398) ​ ​ 57,313 Impairments of long-lived assets and goodwill ​ — ​ (142,974) ​ 142,974 Total operating expenses ​ (7,633,421) ​ (9,473,793) ​ 1,840,372 Loss from operations ​ (6,140,908) ​ (11,561,988) ​ 5,421,080 Other income (expenses), net ​ 664,001 ​ (107,444) ​ 771,445 Interest expense ​ — ​ (5,893) ​ 5,893 Interest expense on finance leases ​ (25,675) ​ (55,844) ​ 30,169 Change 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) ​ 821,892 Loss before income taxes ​ (3,790,693) ​ (5,601,579) ​ 1,810,886 Income tax expenses ​ — ​ (4,566) ​ 4,566 Net loss from continuing operations ​ $ (3,790,693) ​ $ (5,606,145) ​ $ 1,815,452 ​ Revenues We 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.
Biggest changeResults of Operations for the year ended March 31, 2024 Compared to the year ended March 31, 2023 For the Years Ended March 31, 2024 2023 Change Revenues $ 6,814,428 $ 8,082,514 $ (1,268,086 ) Cost of revenues (5,253,857 ) (6,590,001 ) 1,336,144 Gross profit 1,560,571 1,492,513 68,058 Operating expenses Selling, general and administrative expenses (4,115,436 ) (6,142,447 ) 2,027,011 Provision for credit losses (1,725,746 ) (1,487,889 ) (237,857 ) Impairments of inventories — (3,085 ) 3,085 Stock-based compensations (444,300 ) — (444,300 ) Total operating expenses (6,285,482 ) (7,633,421 ) 1,347,939 Loss from operations (4,724,911 ) (6,140,908 ) 1,415,997 Other income, net 315,450 664,001 (348,551 ) Interest expense (17,630 ) — (17,630 ) Interest expense on finance leases (29,088 ) (25,675 ) (3,413 ) Change in fair value of derivative liabilities 212,949 1,711,889 (1,498,940 ) Loss before income taxes (4,243,230 ) (3,790,693 ) (452,537 ) Income tax benefit 9,016 — 9,016 Net loss $ (4,234,214 ) $ (3,790,693 ) $ (443,521 ) Revenues We 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.
Cash Flow in Financing Activities For the year ended March 31, 2023, we had net cash used in financing activities of $373,834, which primarily consisted of: (1) principal payments made for finance lease liabilities of $392,145, (2) repayments of current borrowings from a financial institution of $125,840, partially offset by (3) repayment from related parties and affiliates of $144,151.
For the year ended March 31, 2023, we had net cash used in financing activities of $373,834, which primarily consisted of: (1) principal payments made for finance lease liabilities of $392,145, (2) repayments of current borrowings from a financial institution of $125,840, partially offset by (3) repayment from related parties and affiliates of $144,151.
If we are deemed in serious violation of the Interim Measures, our Online Ride-hailing Platform Services may be suspended 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 Related Services and our Online Ride-hailing Platform Services.
If we are deemed in serious violation of the Interim Measures, our Online Ride-hailing Platform Services may be suspended and the relevant licenses may be revoked by certain government authorities. 78 We are in the process of assisting the drivers to obtain the required certificate and license both for our Automobile Transaction and Related Services and our Online Ride-hailing Platform Services.
We then determine which options, warrants and embedded features require liability accounting and records the fair value as a derivative liability by using Black-Scholes model. The changes in the values of these instruments are shown in the accompanying consolidated statements of operations and comprehensive income (loss) as “change in fair value of derivative liabilities”.
We then determine which options, warrants and embedded features require liability accounting and records the fair value as a derivative liability by using Black-Scholes model. The changes in the values of these instruments are shown in the accompanying consolidated statements of operations and comprehensive loss as “change in fair value of derivative liabilities”.
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.
Besides, we are dealing with other trip platforms to attract more riders choosing their trip through our platform. 76 Pursuant to the cooperation agreement signed with Didi Chuxing Technology Co., Ltd.
Change in Fair Value of Derivative Liabilities Warrants issued in our registered direct offerings that took place in June 2019, February 2021 and May 2021, and the August 2020 underwritten public offering, and November 2021 private placement were classified as liabilities under the caption “Derivative Liabilities” in the consolidated balance sheet and recorded at estimated fair value at each reporting date, computed using the Black-Scholes valuation model.
Change in Fair Value of Derivative Liabilities Warrants issued in our registered direct offerings that took place in September 2019, February 2021 and May 2021, and the August 2020 underwritten public offering, and the November 2021 private placement were classified as liabilities under the caption “Derivative Liabilities” in the consolidated balance sheet and recorded at estimated fair value at each reporting date, computed using the Black-Scholes valuation model.
Our business and results of operations will be materially and adversely affected if our affiliated drivers are suspended from providing 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.
Our business and results of operations shall be materially and adversely affected if our affiliated drivers are suspended from providing 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.
The majority net cash provided by investing was for the proceeds from sales of the used-automobiles and rendered automobiles of $1,498,024, which was offset by the expenditures on the licenses 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.
The majority of net cash provided by investing activities was for the proceeds from sales of the used-automobiles and rendered automobiles of $1,498,024, which was partially offset by the expenditures on the licenses 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.
As Hunan Ruixi holds 35% of equity interest of Jinkailong and has not made any consideration towards to the investment, Hunan Ruixi will subject 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 Hunan Ruixi holds 35% of equity interest of Jinkailong and has not made any consideration towards to the investment, Hunan Ruixi will subject to the maximum amount of RMB3.5 million (approximately $485,000) of which is equivalent to 35% of liabilities in case Jinkailong is liquidated in accordance with PRC’s company registry compliance.
We expect the expansion of our Active Driver base to promote the growth of our automobile rental business because we offer automobile rental solutions/incentives specifically targeted at drivers using our platform. An effective cross-selling strategies between our automobile leasing business and Online Ride-hailing Platform Services business is important to our expansion and revenue growth.
We expect the expansion of our Active Driver base to promote the growth of our automobile rental business because we offer automobile rental solutions/incentives specifically targeted at drivers using our platform and the Partner Platforms. An effective cross-selling strategies between our automobile leasing business and Online Ride-hailing Platform Services business is important to our expansion and revenue growth.
Our risk department continuously monitors the payment by each purchaser and sends them payment reminders. We also keep monitoring the daily gross fare earned by the online ride-hailing drivers, who are our majority customers and run their business through our online ride-hailing platform During the year ended March 31, 2023.
Our risk department continuously monitors the payment by each purchaser and sends them payment reminders. We also keep monitoring the daily gross fare earned by the online ride-hailing drivers, who are our majority customers and run their business through our online ride-hailing platform during the year ended March 31, 2024.
(i) Valuation of deferred tax assets Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities. ​
(e) Valuation of deferred tax assets Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.
Overview We are a provider of automobile transaction and related services, connecting auto dealers, financial institutions, and consumers, who are mostly existing and prospective ride-hailing drivers affiliated with different operators of online ride-hailing platforms in the People’s Republic of China (“PRC” or “China”).
Overview We are a provider of automobile transaction and related services, connecting auto dealers and consumers, who are mostly existing and prospective ride-hailing drivers affiliated with different operators of online ride-hailing platforms in the People’s Republic of China (“PRC” or “China”).
(f) Impairment of long-lived assets and goodwill Long-lived assets Long-lived assets, including property and equipment and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable.
(d) Impairment of long-lived assets Long-lived assets, including property and equipment and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable.
Our cash flow has been adversely impacted by local resurgences of COVID-19 in Chengdu, Changsha and Guangzhou while the COVID-19 measures in China keep applying the current control and prevention measures especially from September to November 2022, which had negative impact on the online ride-hailing market accordingly due to travel restriction.
Our cash flow had been adversely impacted by local resurgences of COVID-19 in Chengdu, Changsha and Guangzhou while the COVID-19 measures in China kept applying the current control and prevention measures especially from September to November 2022, which had negative impact on the online ride-hailing market accordingly due to travel restriction.
Actual and Potential Impact of Coronavirus (COVID-19) in China on Our Business Impact on the Automobile Transactions and Related Services Our Automobile Transactions and Related Services have been gradually recovering from the adverse impact of COVID-19 pandemic. As of March 31, 2023, 108 online ride-hailing drivers we serviced rendered their automobiles to Hunan Ruixi.
Actual Impact of Coronavirus (COVID-19) in China on Our Business Our Automobile Transactions and Related Services have been gradually recovering from the adverse impact of COVID-19 pandemic. As of March 31, 2024, 108 online ride-hailing drivers we serviced rendered their automobiles to Hunan Ruixi.
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 take customer orders for rides. We currently collaborate with Gaode Map, a well-known aggregation platform in China on our ride-hailing platform services.
The platform is presently servicing online ride-hailing drivers in 22 cities in China, including Chengdu, Changsha and so on, providing them with a platform to view and take customer orders for rides. We currently collaborate with Gaode Map, a well-known aggregation platform in China on our ride-hailing platform services.
(“Didi”) for our Automobile Transaction and Related Services, we may be penalized by Didi, or our partnership with Didi may be terminated as we now operate a business 84 Table of Contents competitive with Didi. However, the service fees we earned from Didi for automobile transaction and related services currently represent less than 0.1% of our total revenue.
(“Didi”) for our Automobile Transaction and Related Services, we may be penalized by Didi, or our partnership with Didi may be terminated as we now operate a business competitive with Didi. However, the service fees we earned from Didi for automobile transaction and related services currently represent less than 0.1% of our total revenue.
However, there is no assurance that we will be successful in implementing the foregoing plans or that additional financial will be available to us on commercially reasonable terms, or at all.
However, there is no assurance that we will be successful in implementing the foregoing plans or that additional capitals will be available to us on commercially reasonable terms, or at all.
Our Ride-Hailing Platform S ervices As part of our goal to provide an all-round solution for online ride-hailing drivers as well as to increase our competitive power in an increasingly competitive online ride-hailing industry and to take advantage of the market potential, in October 2020, we began operating our own online ride-hailing platform in Chengdu.
Our Ride-Hailing Platform Services As part of our goal to provide an all-round solution for online ride-hailing drivers as well as to increase our competitive power in an increasingly competitive online ride-hailing industry and to take advantage of the market potential, in October 2020, we began operating our own online ride-hailing platform in Chengdu.
Other income, net For the year ended March 31, 2023, we had other income, net of $664,001, which primarily consist of the income of approximately $453,000 from 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, 2023, we had other income, net of $664,001, which primarily consist of the income of approximately $453,000 from the disposal of our right-of-use assets and our own vehicles used for operating leases; and the penalty income of approximately $211,000 from the customers.
According to these regulations and guidelines, three licenses /certificates are required for operating the online ride-hailing business in Chengdu and Guangzhou: (1) the ride-hailing service platform such as XXTX should obtain the online booking taxi operating license; (2) the automobiles used for online ride-hailing should obtain the online booking taxi transportation certificate (“automobile certificate”); (3) 85 Table of Contents the drivers should obtain the online booking taxi driver’s license (“driver’s license”).
According to these regulations and guidelines, three licenses /certificates are required for operating the online ride-hailing business in Chengdu and Guangzhou: (1) the ride-hailing service platform such as XXTX should obtain the online booking taxi operating license; (2) the automobiles used for online ride-hailing should obtain the online booking taxi transportation certificate (“automobile certificate”); (3) the drivers should obtain the online booking taxi driver’s license (“driver’s license”).
The effective management of our automobiles through our proprietary system and experienced auto-management team could provide qualified automobiles to potential lessees, either for personal use or providing online ride-hailing services.
The effective management of our automobiles through our proprietary system and experienced auto-management team could provide in-time delivery and qualified automobiles to potential lessees, either for personal use or providing online ride-hailing services.
As of March 31, 2023, the total value of non-collateralized automobiles was approximately $356,000. We believe our risk exposure of financing leasing is immaterial as we have experienced limited default cases and we are able to re-lease those automobiles to drivers under financing leases.
As of March 31, 2024, the total value of non-collateralized automobiles was approximately $255,000. We believe our risk exposure of financing leasing is immaterial as we have experienced limited default cases and we are able to re-lease those automobiles to drivers under financing leases.
Ability to Manage and Grow New Ride-Hailing Business Due to the fierce competition of online ride-hailing industry in Chengdu, Changsha and Guangzhou, our ability to increase our revenue over time may be limited if we focus only on our current Automobile Transaction and Related Services business model.
Ability to Manage and Maintain Ride-Hailing Business Due to the fierce competition of online ride-hailing industry in Chengdu and Changsha, our ability to increase our revenue over time may be limited if we focus only on our current Automobile Transaction and Related Services business model.
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 used for online ride-hailing services which we provided management services have the automobile certificate.
However, approximately 25% of our ride-hailing drivers have not obtained the driver’s license for online ride-hailing services as of March 31, 2024 while all of the cars used for online ride-hailing services which we provided management services have the automobile certificate.
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, 2024, we earned online ride-hailing platform service fees of approximately $2.5 million, after netting off approximately $0.3 million incentives paid to Active Drivers.
We have also adopted a stable pricing formula, considering the 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.
We have also adopted a series of pricing formulas to adopt the market changes, considering the 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.
Pursuant to the Interim Measures, XXTX and its subsidiaries may be fined between RMB5,000 to RMB30,000 (approximately $728 to $4,370) for violations of the Interim Measures, including providing online ride-hailing platform services to unqualified drivers or vehicles.
Pursuant to the Interim Measures, XXTX and its subsidiaries may be fined between RMB5,000 to RMB30,000 ($692 to $4,155) for violations of the Interim Measures, including providing online ride-hailing platform services to unqualified drivers or vehicles.
There are a number of factors that could potentially arise that could undermine our plans, such as (i) the impact of the COVID-19 pandemic on our business and areas of operations in China, (ii) changes in the demand for our services, (iii) PRC government policies, (iv) economic conditions in China and worldwide, (v) competitive pricing in the automobile transaction and related service and ride-hailing industries, (vi) changes in our relationships with key business partners, (vii) that financial institutions in China may not able to provide continued financial support to our customers, and (viii) the perception 94 Table of Contents of PRC-based companies in the U.S. capital markets.
There are a number of factors that could potentially arise that could undermine our plans, such as (i) changes in the demand for our services, (ii) PRC government policies, (iii) economic conditions in China and worldwide, (iv) competitive pricing in the automobile transaction and related service and ride-hailing industries, (v) changes in our relationships with key business partners, (vi) that financial institutions in China may not able to provide continued financial support to our customers, and (vii) the perception of PRC-based companies in the U.S. capital markets.
We provide automobile transaction and related services through our wholly owned subsidiaries, Yicheng Financial Leasing 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.
We provide automobile transaction and related services through our wholly owned subsidiary, 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.
The decrease was attributable to that our continuous control on costs and streamline expenses during the year ended March 31, 2023.
The decrease was attributable to our continuous control on costs and streamline expenses during the year ended March 31, 2024.
Therefore, we believe that the risk of termination of cooperation with Didi on automobile transaction and related services will not have a material influence on our business or results of operations. Ability to Compete Effectively Our business and results of operations depend on our ability to compete effectively.
Therefore, we believe that the risk of termination of cooperation with Didi on automobile transaction and related services will not have a material influence on our business or results of operations.
In addition to the national online reservation taxi operating license, XXTX and its subsidiaries also obtained the online reservation taxi operating license in 31 cities, including Chengdu, Changsha, Guangzhou, Tianjin, Shenyang, Harbin, Nanchang, Haikou, Xining, two cities in Zhejiang, Shandong, and Guangxi Province, respectively, three cities in Guizhou Province, five cities in Jiangsu Province, other two cities in Hunan 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.
In addition to the national online reservation taxi operating license, XXTX and its subsidiaries also obtained the online reservation taxi operating license 29 cities, including Chengdu, Changsha, Guangzhou, Tianjin, Shenyang, Harbin, Changchun, Nanchang, Xining, Daoxian, two cities in Shandong, Guangxi Province and Zhejiang, respectively, three cities in Guizhou Province, seven cities in Jiangsu Province, other two cities in Hunan and Guangdong Province, respectively, and other five cities in Sichuan Province from June 2020 to October 2023, to operate the online ride-hailing platform services.
As of the date of this Report, Senmiao Consulting has made accumulated capital contribution of RMB39.76 million (approximately $5.79 million) to XXTX and the remaining amount is expected to be paid before December 31, 2025. XXTX operates Xixingtianxia and holds a national online reservation taxi operating license.
As of the filing date of this Report, Senmiao Consulting has made accumulated capital contribution of RMB40.41 million (approximately $5.60 million) to XXTX and the remaining amount is expected to be paid before December 31, 2025. 73 XXTX operates Xixingtianxia and holds a national online reservation taxi operating license.
As most of the leasing term of the automobiles we delivered in Changsha in prior periods has come to the end, during the year ended March 31, 2023, the number of newly rendered automobiles decreased to 8 as compared with 25 during the year ended March 31, 2022.
As most of the leasing term of the automobiles we delivered in Changsha in prior periods has come to the end, during the year ended March 31, 2024, the number of newly rendered automobiles decreased to 0 as compared with 7 during the year ended March 31, 2023.
Our Automobile Transactions and Related Services Our Automobile Transaction And Related Services are mainly comprised of (i) automobile operating lease where we provide car rental services 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 or automobile purchasers for a series of the services provided to them throughout the leasing or purchase process based on the chosen product solutions, such as ride-hailing driver training, assisting with a series of administrative procedures and other consulting 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 “Auto Financing”); (v) auto management and guarantee services provided to online ride-hailing drivers after the delivery of automobiles (the “Auto Management and Guarantee Services”); and (vi) other supporting services provided to online ride-hailing 79 Table of Contents drivers.
Substantially all of our operations are conducted in China. 72 Our Automobile Transactions and Related Services Our Automobile Transaction and Related Services are mainly comprised of (i) automobile operating lease where we provide car rental services to individual customers to meet their personal needs with lease term no more than twelve months (the “Auto Operating Leasing”); (ii) monthly services where we provide management and related services to Partner Platforms and other companies and earn commission from them (the “ Auto Commissions” ); (iii) automobile financing where we provide our customers with auto finance solutions through financing leases (the “Auto Financing”); (iv) service fees from new energy vehicles (“NEVs”) leasing, automobile purchase services where we charge NEVs lessees or automobile purchasers for a series of the services provided to them throughout the leasing or purchase process based on the chosen product solutions, such as ride-hailing driver training, assisting with a series of administrative procedures and other consulting services (the “NEVs and Purchase Services”); (v) auto management and guarantee services provided to online ride-hailing drivers after the delivery of automobiles (the “Auto Management and Guarantee Services”); (vi) automobile sales where we sell new purchased or used cars to our customers (the “Auto Sales”); and (vii) other supporting services provided to online ride-hailing drivers.
Service fees from automobile management and guarantee services and Service fees from automobile purchase services The majority of our customers are online ride-hailing drivers. Some of them also entered into affiliation service agreements in prior periods with us pursuant to which we provide them post-transaction management services and guarantee services.
T he majority of our customers are online ride-hailing drivers. Some of them also entered into affiliation service agreements in prior periods with us pursuant to which we provide them post-transaction management services and guarantee services.
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 optimize our own business system to improve our service quality and user experience.
Ability to Compete Effectively Our 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 optimize our own business system to improve our service quality and user experience.
For receivables from Auto Operating Leasing, we usually settle the rental income with each online ride-hailing driver monthly based on the product solutions they chose.
Ability to Collect Receivables on a Timely Basis For receivables from Auto Operating Leasing, we usually settle the rental income with each online ride-hailing driver monthly based on the product solutions they chose.
The decrease of $33,396 was due to the decrease in the accumulated number of rendered automobiles which were subsequently rented to ride-hailing drivers whom we charge rent rather than charging management and guarantee services fee. We had management and guarantee services for over 110 and 200 automobiles during the years ended March 31, 2023 and 2022, respectively.
The decrease of $23,912 or approximately 60% was due to the decrease in the accumulated number of rendered automobiles which were subsequently rented to ride-hailing drivers whom we charge rent rather than charging management and guarantee services fee. We had management and guarantee services for over 30 and 110 automobiles during the years ended March 31, 2024 and 2023, respectively.
Interest Expense and Interest Expense on Finance Leases Interest expense for the year ended March 31 2022 resulted from the borrowings of Corenel from a financial institution for its automobile commercial insurance by installment.
Interest Expense and Interest Expense on Finance Leases Interest expense for the year ended March 31, 2024 was resulted from the borrowings of XXTX from a financial institution for its working capital turnover and Corenel from a financial institution for its automobile commercial insurance by installment.
Estimates, by their nature, are based on judgement and available information. Accordingly, actual results could differ from those estimates. On an ongoing basis, management reviews these estimates and assumptions using the currently available information.
Accordingly, actual results could differ from those estimates. On an ongoing basis, management reviews these estimates and assumptions using the currently available information.
Meanwhile, operating lease revenues from automobile rentals, service fees from NEVs leasing, financing revenues, service fees from automobile management and 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.
Meanwhile, operating lease revenues from automobile rentals, service fees from NEVs leasing, monthly services commissions, financing revenues, service fees from automobile purchase services, service fees from automobile management and guarantee services, sales revenue of automobiles and other services fees, which accounted for approximately 79.0%, 8.0%, 4.1%, 1.0%, 0.8%, 0.9%, 5.6% and 0.6%, respectively, of the total revenue from automobile transaction and related services during the year ended March 31, 2023.
Besides, during the year ended March 31, 2023, we settle our commissions with 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.
As of March 31, 2024, we had accounts receivable of operating lease of approximately $19,000 in total. Besides, during the year ended March 31, 2024, we settled our commissions with the Partner Platforms for our online ride-hailing platform services and automobile rental income on a monthly basis.
According to the 51th Statistical report on Internet Development in China published in March 2023 by the China Internet Network Information Center (the “CNNIC”), the number of online ride-hailing service users had reached 473 million by the end of December 2022, and took approximately 40.9% of the total number of Chinese internet users.
According to the 53th Statistical report on Internet Development in China published in March 2024 by the China Internet Network Information Center (the “CNNIC”), the number of online ride-hailing service users had reached 528 million by the end of December 2023, and took approximately 48.3% of the total number of Chinese internet users.
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 of March 31, 2023; (3) the working capital deficit of approximately $0.4 million as of March 31, 2023; and (4) two purchase commitments of approximately $1.36 million for 120 automobiles.
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 $4.2 million for the year ended March 31, 2024; (2) accumulated deficit of approximately $41.4 million as of March 31, 2024; (3) the working capital deficit of approximately $2.7 million as of March 31, 2024; and (4) a purchase commitment of approximately $0.9 million for 100 automobiles.
During the years ended March 31, 2023 and 2022, the average utilization of the automobiles for operating lease was approximately 64.9% and 56.3%, respectively.
During the years ended March 31, 2024 and 2023, the average utilization of the automobiles for operating lease was approximately 79.7% and 64.9%, respectively.
The decrease was mainly due to the increase in the average utilization and the decrease in the average daily maintenance and insurance expense of the automobiles for operating lease as we used more NEVs in the year ended March 31, 2023.
The increase was mainly due to the increase in the average utilization of the automobiles for operating lease from approximately 64.9% to 79.7% and the decrease in the average daily maintenance and insurance expense of the automobiles for operating lease as we used more NEVs in the year ended March 31, 2024 as compared with the year ended March 31, 2023.
As part of our strategy to provide an all-encompassing solution for online ride-hailing drivers, we have expanded our services to drivers through the operation of Xixingtianxia, our own online ride-hailing platform, which has brought us a new stream of revenue.
As part of our strategy to provide an all-encompassing solution for online ride-hailing drivers, we have expanded our services to drivers through the operation of Xixingtianxia, our own online ride-hailing platform.
During the year ended March 31, 2022, approximately 11.5 million rides with gross fare of approximately $37.3 million were completed through 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.
During the year ended March 31, 2023, approximately 6.1 million rides with gross fare of approximately $19.9 million were completed through 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, netting off approximately $0.5 million incentives paid to Active Drivers.
In order to manage the rapidly growing ride-hailing service market and control relevant risks, on July 27, 2016, seven ministries and commissions in China, including the MOT, jointly promulgated the “Interim Measures for the Administration of Online Taxi Booking Business Operations and Services” (“Interim Measures”) and amended it 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 measures and obtain taxi-booking service licenses and take full responsibility of the ride services to ensure the safety of riders.
Should any of those negative situations occur, the volume and value of the automobile transactions we service will decline, and our revenue and financial condition will be negatively impacted. 77 In order to manage the rapidly growing ride-hailing service market and control relevant risks, on July 27, 2016, seven ministries and commissions in China, including the MOT, jointly promulgated the “Interim Measures for the Administration of Online Taxi Booking Business Operations and Services” (“Interim Measures”) and amended it 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 measures and obtain taxi-booking service licenses and take full responsibility of the ride services to ensure the safety of riders.
The increase of rental income of $1,730,912 during the year ended March 31, 2023 was due to the increased number of leased automobiles. We leased over 1,800 automobiles with an average monthly rental income of $478 per automobile, resulting in a rental income of $3,453,392, including rental income of $344,120 from Jinkailong, for the year ended March 31, 2023.
While we leased over 1,800 automobiles with an average monthly rental income of approximately $478 per automobile, resulting in a rental income of $3,453,392, including rental income of $344,120 from Jinkailong, for the year ended March 31, 2023.
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.
As of March 31, 2024, for parking and management of automobiles for operating lease, we had one parking lot, an exhibition hall and 4 employees in Changsha, and we also share the parking lot with our equity investee company, Jinkailong in Chengdu.
The accounts receivable and advance payments may increase our 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 the expenditure related to the automobile purchase.
We have used the majority of the proceeds from our equity offerings and plan to seek equity and/or debt financings to pay for the expenditure related to the automobile purchase.
The change 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 change in fair value of derivative liabilities for the year ended March 31, 2024 was a gain of $212,949 in total as our stock price as of March 31, 2024 was lower than the price as of March 31, 2023.
During the year ended March 31, 2022, approximately 11.5 million rides with gross fare of approximately $37.3 million were completed through our Xixingtianxia platform and we earned online ride-hailing platform service fees of $2,665,457, after netting off approximately $3.4 million incentives paid to Active Drivers.
During the year ended March 31, 2024, approximately 4.9 million rides with gross fare of approximately $15.1 million were completed through our Xixingtianxia platform and we earned online ride-hailing platform service fees of $2,494,397, after netting off approximately $0.3 million incentives paid to Active Drivers.
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 taxi operating licenses and the total volume of online ride-hailing orders was approximately 735 million in May 2023 in China.
According to the Ministry of Transportation (the “MOT”) of the People’s Republic of China, as of April 30, 2024, approximately 349 online ride-hailing platforms have obtained booking taxi operating licenses and the total volume of online ride-hailing orders was approximately 897 million in April 2024 in China.
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 a majority of our revenues.
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 continuously account for a majority of our revenues.
Selling, General and Administrative Expenses Selling, general and administrative expenses primarily consist of salary and employee benefits, office rental expense, travel expenses, and other costs. Selling, general and administrative expenses decreased from $9,035,142 for the year ended March 31, 2022 to $6,142,447 for the year ended March 31, 2023, representing a decrease of $2,892,695, or approximately 32.0%.
Selling, General and Administrative Expenses Selling, general and administrative expenses primarily consist of salary and employee benefits, office rental expense, travel expenses, and other costs. Selling, general and administrative expenses decreased from $6,142,447 for the year ended March 31, 2023 to $4,115,436 for the year ended March 31, 2024, representing a decrease of $2,027,011, or approximately 33.0%.
We believe the following critical accounting estimates involve the most significant estimates and judgments used in the preparation of our financial statements. 96 Table of Contents In presenting the consolidated financial statements in accordance with U.S. GAAP, management make estimates and assumptions that affect the amounts reported and related disclosures.
We believe the following critical accounting estimates involve the most significant estimates and judgments used in the preparation of our financial statements. 85 In presenting the consolidated financial statements in accordance with U.S. GAAP, management make estimates and assumptions that affect the amounts reported and related disclosures. Estimates, by their nature, are based on judgement and available information.
During the year ended December 31, 2023, we have been fined by approximately $19,000 by Traffic Management Bureaus in Chengdu and Changsha, of which, approximately $4,000, respectively, was further compensated by drivers or cooperated third parties, respectively.
During the year ended March 31, 2024, we have been fined by approximately $76,000 by Traffic Management Bureaus in Chengdu, Changsha, Guangzhou and Tianjin, of which, approximately $30,000 was further compensated by drivers or cooperated third parties.
Interest expense on finance leases for the year ended March 31, 2023 was $25,675, representing the interest expense accrued under financing leases for the leased automobiles rendered to us for sublease or sale by the online ride-hailing drivers who exited the ride-hailing business.
Interest expense on finance leases for the years ended March 31, 2024 and 2023 was $29,088 and $25,675, respectively, representing the interest expense accrued under financing leases for the leased automobiles Corenel leased from a third-party company, and the leased automobiles rendered to us for sublease or sale by the online ride-hailing drivers who exited the ride-hailing business.
If an impairment is identified, we would reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values.
If an impairment is identified, we would reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. For the years ended March 31, 2024 and 2023, we did not recognize impairment for property and equipment and intangible assets.
We plan to expand our driver base for the platform and automobile rental business while strengthening the royalty of the drivers who both lease our cars and use our platform while expanding, but our platform is available to others. We plan to launch Xixingtianxia in more cities across China the next 12 months.
We plan to maintain our driver base for the platform and automobile rental business while strengthening the royalty of the drivers who both lease our cars and use our platform while expanding, but our platform is available to others.
Our critical accounting policies and practices include the following: (i) fair values of financial instruments, including derivative liabilities; (ii) accounts receivable, net; (iii) inventories; (iv) property and equipment, net; (v) intangible assets, net; (vi) goodwill; (vii) revenue recognition; and (viii) leases - lessee.
Our critical accounting policies and practices include the following: (i) fair values of financial instruments, including derivative liabilities; (ii) accounts receivable, net; (iii) property and equipment, net; (iv) intangible assets, net; (v) revenue recognition; and (vi) leases - lessee. See Note 3—Summary of Significant Accounting Policies to our consolidated financial statements for the disclosure of these accounting policies.
The efficiency of collection of the monthly and weekly payments has a material impact on our daily operation. Our risk and asset management department has set up a series of procedures to monitor the collection from drivers. Our business department has also set up a stable and close relationship with cooperated platform to ensure the timely collection of commissions.
Our risk and asset management department has set up a series of procedures to monitor the collection from drivers. Our business department has also set up a stable and close relationship with cooperated platform to ensure the timely collection of commissions. The accounts receivable and advance payments may increase our liquidity risk.
During the year ended March 31, 2023, we sub-leased approximately 49 rendered automobiles in total to 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.
During the years ended March 31, 2024 and 2023, 19 and 86 rendered automobiles have been sold, 7 and 49 rendered automobiles have been sub-leased to other customers, respectively. By selling and subleasing automobiles, 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.
Key Factors and Risks Affecting Results of Operations Ability to Increase Our Automobile Lessee and Active Driver Base Our revenue growth has been largely driven by the expansion of our automobile lessee base and the corresponding revenue generated from operating and financial leasing.
Key Factors and Risks Affecting Results of Operations Ability to Increase Our Automobile Lessee and Active Driver Base Our revenue growth has been largely driven by the expansion of our automobile lessee base and the corresponding revenue generated from operating and financial leasing, as well as the number of completed online ride-hailing orders on our platform, which largely depends on the number of Active Drivers who complete ride-hailing transactions on our platform.
Our risk management department typically starts to interact with overdue purchasers if they have missed one monthly installment payment. However, if the balances are overdue for more than two months or the purchasers decide to exit the online ride-hailing business and sublease or sell their automobiles, we would fully record an allowance against receivables from those purchasers.
However, if the balances are overdue for more than two months or the purchasers decide to exit the online ride-hailing business and sublease or sell their automobiles, we would fully record allowance for credit losses against receivables from those purchasers.
Cost of Revenues Cost 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 Cost of revenues represents (1) the amortization of ROUs, depreciation and rental cost of automobiles, daily maintenance and insurance expense of automobiles which related to our Auto Operating Leasing of $3,384,761; (2) technical service charges, insurance and other expenses related to our Online Ride-Hailing Platform Services of $1,858,557; and (3) costs of our Auto Sales of $10,539.
The increase was mainly due to the increase of operating lease revenues from automobile rentals and revenues from online ride-hailing platform services, as a result of the expansion and our continuous “efficiency - improving” strategy of those two businesses.
The decrease was mainly due to the decrease of revenues from online ride-hailing platform services resulted from the decrease in orders caused by the market competition, and partly offset by the increase of operating lease revenues from automobile rentals as a result of the expansion and our continuous “efficiency - improving” strategy of this business.
(a) Derivative liabilities A 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 value recorded in a company’s results of operations.
We believe the following accounting estimates involve the most significant judgments used in the preparation of our financial statements. (a) Derivative liabilities A 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 value recorded in a company’s results of operations.
We manage the credit risk arising from the default of automobile purchasers and lessees by performing credit checks on each automobile purchaser or lessee based on the credit reports from People’s Bank of China and third-party credit rating companies, and personal information including residence, ethnicity group, driving history and involvement in legal proceeding.
To pay for the expenditure in advance will enhance the stability of our daily operation and lower the liquidity risk, and attract more customers. 75 Ability to Manage Defaults and Potential Guarantee Liability Effectively We manage the credit risk arising from the default of automobile purchasers and lessees by performing credit checks on each automobile purchaser or lessee based on the credit reports from People’s Bank of China and third-party credit rating companies, and personal information including residence, ethnicity group, driving history and involvement in legal proceeding.
We plan to provide a series of product solutions to sustain and further increase the number of our automobiles for operating leases. 87 Table of Contents The following table sets forth the breakdown of revenues by revenue source for the years ended March 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ ​ March 31, ​ 2023 2022 Revenue 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 ​ 196,069 ​ ​ ​ ​ ​ ​ ​ Revenue from online ride-hailing platform services ​ 3,709,945 ​ 2,665,457 ​ ​ ​ ​ ​ ​ ​ Total Revenue ​ $ 8,082,514 ​ $ 4,913,102 ​ Revenue from Automobile Transactions and Related Services Revenue from our automobile transaction and related services mainly includes operating lease revenues from automobile rentals, service fees from NEVs leasing, sales revenue of automobiles, financing revenues, service fees from automobile management and guarantee services, service fees from automobile purchase services, and other services fees, which accounted for approximately 79.0%, 8.0%, 5.6%, 1.0%, 0.9%, 0.8% and 4.7%, respectively, of the total revenue from automobile transaction and related services during the year ended March 31, 2023.
We plan to provide a series of product solutions to sustain and further increase the number of our automobiles for operating leases. 79 The following table sets forth the breakdown of revenues by revenue source for the years ended March 31, 2024 and 2023: For the Years Ended March 31, 2024 2023 Revenue from automobile transactions and related services $ 4,320,031 $ 4,372,569 - Operating lease revenues from automobile rentals 3,831,037 3,453,392 - Monthly services commissions 196,099 179,241 - Financing revenues 57,677 41,738 - Service fees from NEVs leasing 45,231 350,510 - Service fees from automobile purchase services 36,637 33,585 - Service fees from management and guarantee services 16,246 40,158 - Revenues from sales of automobiles 8,822 243,065 - Other service fees 128,282 30,880 Revenue from online ride-hailing platform services 2,494,397 3,709,945 Total Revenue $ 6,814,428 $ 8,082,514 Revenue from Automobile Transactions and Related Services Revenue from our automobile transaction and related services mainly includes operating lease revenues from automobile rentals, monthly services commissions, financing revenues, service fees from NEVs leasing, service fees from automobile purchase services, service fees from automobile management and guarantee services, sales revenue of automobiles, and other services fees, which accounted for approximately 88.7%, 4.5%, 1.3%, 1.0%, 0.8%, 0.4%, 0.2% and 3.1%, respectively, of the total revenue from automobile transaction and related services during the year ended March 31, 2024.
The change of $3,580,708 was mainly due to the increase in profit in our online ride-hailing platform services and operating lease, partially offset by the gross loss of $75,846 from sales of automobiles.
The increase of $68,058 was mainly due to the increase in gross profit in our operating lease, partially offset by the decrease in profit from online ride-hailing platform services and other services.
Since November 22, 2018, the acquisition date of Hunan Ruixi, and as of March 31, 2023, we and our former VIEs have facilitated financing for 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 value of approximately $14.1 million and delivered approximately 2,936 automobiles under operating leases (including 1,826 automobiles used to be delivered by Jinkailong before March 31, 2022) and 144 automobiles under financing leases to customers, the vast majority of whom are online ride-hailing drivers.
Since November 22, 2018, the acquisition date of Hunan Ruixi, and as of March 31, 2024, we have facilitated financing for an aggregate of 312 automobiles with a total value of approximately $5.3 million, sold an aggregate of 1,516 automobiles with a total value of approximately $14.5 million and delivered 1,892 automobiles under operating leases and 164 automobiles under financing leases to customers, the vast majority of whom are online ride-hailing drivers.
The following table sets forth the breakdown of gross profit (loss) by major revenue source for the years ended March 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ ​ March 31, ​ ​ 2023 ​ 2022 - 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.
The following table sets forth the breakdown of gross profit (loss) by major revenue source for the years ended March 31, 2024 and 2023: For the Years Ended March 31, 2024 2023 - Auto Operating Leasing $ 446,276 $ (522,465 ) - Other Automobile transaction and related Services 480,172 676,112 - Auto Sales (1,717 ) (75,846 ) - Online Ride-Hailing Platform Services 635,840 1,414,712 Total Gross Profit $ 1,560,571 $ 1,492,513 We had a gross profit of $446,276 in our automobile operating leasing during the year ended March 31, 2024, which increased by $968,741 from a gross loss of $522,465 in the year ended March 31, 2023.
We also plan to strengthen our marketing efforts through the collaboration with certain automobile dealers and through our own team by employing more experienced staffs and improving the quality and variety of our services. As of March 31, 2023, we had 10 and 59 employees in our own sales department and sales department of our equity investee company, Jinkailong, respectively.
We also plan to strengthen our marketing efforts through the collaboration with certain automobile dealers and through our own team by employing more experienced staff, sharing market resources with our equity investee company, and improving the quality and variety of our services.
During the year ended March 31, 2023, approximately 6.1 million rides with gross fare of approximately $19.9 million were completed through Xixingtianxia and an average of over 5,100 Active Drivers each month.
During the year ended March 31, 2024, approximately 4.9 million rides with gross fare of approximately $15.1 million were completed through Xixingtianxia and an average of approximately 5,000 ride-hailing drivers completed rides and earned income through Xixingtianxia (the “Active Drivers”) each month.

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