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What changed in Senmiao Technology Ltd's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Senmiao Technology Ltd's 2022 and 2023 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 2023 report.

+679 added−690 removedSource: 10-K (2023-07-13) vs 10-K (2022-07-15)

Top changes in Senmiao Technology Ltd's 2023 10-K

679 paragraphs added · 690 removed · 469 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

149 edited+79 added−74 removed192 unchanged
Biggest changeIf the issuer meets the following conditions, the offering and listing shall be determined as an indirect overseas offering and listing by a domestic company: (i) the total assets, net assets, revenues or profits of the domestic operating entity or entities of the issuer in the most recent accounting year account for more than 50% of the corresponding figure in the issuer’s audited consolidated financial statements for the same period; (ii) most of the senior managers in charge of business operation and management of the issuer are Chinese citizens or domicile in China, and its main places of business are located in China or main business activities are conducted in China.
Biggest changeThe Overseas Listing Trial Measures provide that if an issuer meets both of the following criteria, the overseas securities offering and listing conducted by such issuer will be deemed as an indirect overseas offering and listing by PRC domestic companies: (i) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by domestic companies; and (ii) the main parts of the issuer’s business activities are conducted in mainland China, or its main place(s) of business are located in mainland China, or the majority of senior management staff in charge of its business operations and management are PRC citizens or have their usual place(s) of residence located in mainland China.
Our Corporate Structure The following diagram illustrates the Company’s corporate structure, including its subsidiaries and equity investment as of the date of this Report: ​ Former VIE Agreements with Sichuan Senmiao Senmiao Consulting, Sichuan Senmiao and all the shareholders of Sichuan Senmiao (the “Sichuan Senmiao Shareholders”) entered into an Equity Interest Pledge Agreement, an Exclusive Business Cooperation Agreement, an Exclusive Option Agreement, Power of 10 Table of Contents Attorneys, and Timely Report Agreements in September 2017 (collectively, the “Sichuan Senmiao VIE Agreements”).
Our Corporate Structure The following diagram illustrates the Company’s corporate structure, including its subsidiaries and equity investment as of the date of this Report: ​ 10 Table of Contents Former VIE Agreements with Sichuan Senmiao Senmiao Consulting, Sichuan Senmiao and all the shareholders of Sichuan Senmiao (the “Sichuan Senmiao Shareholders”) entered into an Equity Interest Pledge Agreement, an Exclusive Business Cooperation Agreement, an Exclusive Option Agreement, Power of Attorneys, and Timely Report Agreements in September 2017 (collectively, the “Sichuan Senmiao VIE Agreements”).
For the details of such agreements, please refer to the audited financial statements contained in the annual report on Form 10-K filed with the SEC on July 8, 2021. According to the VIE Agreements, Senmiao Consulting was the primary beneficiary of Sichuan Senmiao, and the financial statements of Sichuan Senmiao are consolidated in the accompanying consolidated financial statements.
For the details of such agreements, please refer to the audited financial statements contained in the annual report on Form 10-K filed with the SEC on July 8, 2021. According to Sichuan Senmiao VIE Agreements, Senmiao Consulting was the primary beneficiary of Sichuan Senmiao, and the financial statements of Sichuan Senmiao are consolidated in the accompanying consolidated financial statements.
The Administrative Measures on Internet Information Service, the Regulations on Technical Measures of Internet Security Protection and the Provisions on Protecting Personal Information of Telecommunication and Internet Users, which were issued on July 16, 2013 by the General Office of the Ministry of Transport (“MIIT”), set forth strict requirements to protect personal information of Internet users and require Internet information service providers to maintain adequate systems to protect the security of such information.
The Administrative Measures on Internet Information Service, the Regulations on Technical Measures of Internet Security Protection and the Provisions on Protecting Personal Information of Telecommunication and Internet Users, which were issued on July 16, 2013 by the General Office of the Ministry of Transport (the “MIIT”), set forth strict requirements to protect personal information of Internet users and require Internet information service providers to maintain adequate systems to protect the security of such information.
Regulations Related to Financial Leasing In September 2013, the Ministry of Commerce of the People’s Republic of China (“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.
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.
On June 22, 2007, the MPS, the State Secrecy Administration and other relevant authorities jointly issued the Administrative Measures for the Hierarchical Protection of Information Security, which divides information systems into five categories and requires the operators of information systems ranking above Grade II to file an application with the local Bureau of Public Security within 30 days of the date of its security protection grade determination or since its operation.
Cybersecurity and Information Security On June 22, 2007, the MPS, the State Secrecy Administration and other relevant authorities jointly issued the Administrative Measures for the Hierarchical Protection of Information Security, which divides information systems into five categories and requires the operators of information systems ranking above Grade II to file an application with the local Bureau of Public Security within 30 days of the date of its security protection grade determination or since its operation.
On November 28, 2019, the Security Bureau of the CAC, the General Office of the MIIT, the General Office of the MPS and the General Office of the State Market Supervision and Administration (the “MSA”) jointly issued the Notice on Measures for Determining the Illegal Collection and Use of Personal Information through Mobile Applications, which aims to provide reference for supervision and administration departments of the PRC government and provide guidance for mobile applications operators’ self-examination and self-correction and social supervision by avid internet users (so called “netizens”), and further elaborates the forms of behavior constituting the illegal collection and use of personal information through mobile applications including: (i) failing to publish the rules on the collection and use of personal information; (ii) failing to explicitly explain the purposes, methods and scope of the collection and use of personal information; (iii) collecting and using personal information without the users’ consent; (iv) collecting personal information unrelated to the services the collector of the information provided and beyond the necessary principle of such services; (v) providing personal information to others without the users’ consent; (vi) failing to provide the function of deleting or correcting personal information according to PRC laws or failing to publish information such as ways for internet users to file complaints and reports.
On November 28, 2019, the Secretary Bureau of the CAC, the General Office of the MIIT, the General Office of the MPS and the General Office of the State Market Supervision and Administration (the “MSA”) jointly issued the Notice on Measures for Determining the Illegal Collection and Use of Personal Information through Mobile Applications, which aims to provide reference for supervision and administration departments of the PRC government and provide guidance for mobile applications operators’ self-examination and self-correction and social supervision by avid internet users (so called “netizens”), and further elaborates the forms of behavior constituting the illegal collection and use of personal information through mobile applications including: (i) failing to publish the rules on the collection and use of personal information; (ii) failing to explicitly explain the purposes, methods and scope of the collection and use of personal information; (iii) collecting and using personal information without the users’ consent; (iv) collecting personal information unrelated to the services the collector of the information provided and beyond the necessary principle of such services; (v) providing personal information to others without the users’ consent; (vi) failing to provide the function of deleting or correcting personal information according to PRC laws or failing to publish information such as ways for internet users to file complaints and reports.
The Circular of Ministry of Industry and Information Technology Concerning Lifting Restrictions on the Proportion of Foreign Equity in Online Data Processing and Transaction Processing Business (E-commerce) (the “Circular 196”), which was promulgated on June 19, 2015, provides that foreign investors are permitted to invest up to 100% of the registered capital in a foreign-invested telecommunication enterprise engaging in the operation of online data processing and transaction processing (E-commerce).
Meanwhile, the Circular of Ministry of Industry and Information Technology Concerning Lifting Restrictions on the Proportion of Foreign Equity in Online Data Processing and Transaction Processing Business (E-commerce) (the “Circular 196”), which was promulgated on June 19, 2015, provides that foreign investors are permitted to invest up to 100% of the registered capital in a foreign-invested telecommunication enterprise engaging in the operation of online data processing and transaction processing (E-commerce).
Our Operating Entities conduct an initial screening when they receive an application from a prospective automobile buyer/lessee based on credit reports from People’s Bank of China (“PBOC”) and third party credit rating companies, and personal information including residence, ethnicity group, driving history and involvement in legal proceeding.
Our Operating Entities conduct an initial screening when they receive an application from a prospective automobile buyer/lessee based on credit reports from People’s Bank of China (the “PBOC”) and third party credit rating companies, and personal information including residence, ethnicity group, driving history and involvement in legal proceeding.
The termination will not impair the past and future legitimate rights and interests of all parties in Jinkailong. As of March 31, 2022, the parties no longer maintained a concerted action relationship with respect to the decision required to take concerted action at its shareholders meetings as stipulated in the Voting Agreements.
The termination will not impair the past and future legitimate rights and interests of all parties in Jinkailong. As of March 31, 2023 and 2022, the parties no longer maintained a concerted action relationship with respect to the decision required to take concerted action at its shareholders meetings as stipulated in the Voting Agreements.
The SCNPC amended the Copyright Law in 2001 and 2010 to widen the scope of works and rights that are eligible for copyright protection. The amended, the Copyright Law extends copyright protection to Internet activities, products disseminated over the Internet and software products. In addition, there is a voluntary registration system administered by the China Copyright Protection Center.
The SCNPC amended the Copyright Law in 2001, 2010 and 2020 to widen the scope of works and rights that are eligible for copyright protection. The amended, the Copyright Law extends copyright protection to Internet activities, products disseminated over the Internet and software products. In addition, there is a voluntary registration system administered by the China Copyright Protection Center.
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.
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.
On February 15, 2022, the MIIT, the MPS and several other governmental authorities jointly promulgated the Notice on Strengthening the Joint Supervision of the Entire Chain of Online Ride Hailing Industry, which provides that the departments of transportation, telecommunications, public security, human resources and social security, the People’s Bank of China, taxation, market regulation and internet information shall accelerate the establishment of a collaborative supervision mechanism led by the transportation department for new forms of transportation at the provincial and municipal levels, or the joint supervision mechanism.
On February 7, 2022, the MIIT, the MPS and several other governmental authorities jointly promulgated the Notice on Strengthening the Joint Supervision of the Entire Chain of Online Ride Hailing Industry, which provides that the departments of transportation, telecommunications, public security, human resources and social security, the People’s Bank of China, taxation, market regulation and internet information shall accelerate the establishment of a collaborative supervision mechanism led by the transportation department for new forms of transportation at the provincial and municipal levels, or the joint supervision mechanism.
Impact on the Ride-Hailing Platform Services XXTX commenced the operation of its online ride-hailing platform since late October 2020 and have witnessed the decrease in online ride-hailing orders in July 2021, November 2021 and February 2022, when Chengdu, Changsha and Guangzhou reported several confirmed COVID-19 cases, the local government usually ensured concrete and effective measures to fight against the resurgence, including suspending some traffic activities in certain medium-risk and high-risk areas.
Impact on the Ride-Hailing Platform Services XXTX commenced the operation of its online ride-hailing platform since late October 2020 and have witnessed the decrease in online ride-hailing orders in July 2021, November 2021, February 2022, September 2022 and December 2022, when Chengdu, Changsha and Guangzhou reported several confirmed COVID-19 cases, the local government usually ensured concrete and effective measures to fight against the resurgence, including suspending some traffic activities in certain medium-risk and high-risk areas.
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.
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.
Regulation Related to Financing Guarantee Companies The State Council of China promulgated the Regulations on the Administration of Financing Guarantee Companies on August 2, 2017, and on April 2, 2018, the CBIRC, together with several other governmental authorities, jointly adopted four supplemental rules over the Administration of Financing Guarantee Companies: (i) the Administrative Measures for the Financing Guarantee Business Permit, (ii) Measures for Measuring the Outstanding Amount of Financing Guarantee Liabilities, (iii) Administrative Measures for the Asset Percentages of Financing Guarantee Companies and (iv) Guidelines on Business Cooperation between Banking Financial Institutions and Financing Guarantee Companies, or the Four Supporting Measures of the Financing Guarantee Rules.
Regulation Related to Financing Guarantee Companies The State Council of China promulgated the Regulations on the Administration of Financing Guarantee Companies on August 2, 2017, and on April 2, 2018, the NFRAC, together with several other governmental authorities, jointly adopted four supplemental rules over the Administration of Financing Guarantee Companies: (i) the Administrative Measures for the Financing Guarantee Business Permit, (ii) Measures for Measuring the Outstanding Amount of Financing Guarantee Liabilities, (iii) Administrative Measures for the Asset Percentages of Financing Guarantee Companies and (iv) Guidelines on Business Cooperation between Banking Financial Institutions and Financing Guarantee Companies, or the Four Supporting Measures of the Financing Guarantee Rules.
Auto Management and Guarantee Services The management and guarantee services of Hunan Ruixi are and the management and guarantee services of Jinkailong were provided to online ride-hailing drivers after the delivery of automobiles, covering (i) management services including, without limitation, ride-hailing driver training, assisting with purchase of insurances, insurance claims and after-sale automobile services, handling traffic violations and other consulting services; and (ii) guarantee services for the obligations of online ride-hailing drivers under their financing arrangement with financial institutions.
Auto Management and Guarantee Services The management and guarantee services of Hunan Ruixi are provided to online ride-hailing drivers after the delivery of automobiles, covering (i) management services including, without limitation, ride-hailing driver training, assisting with purchase of insurances, insurance claims and after-sale automobile services, handling traffic violations and other consulting services; and (ii) guarantee services for the obligations of online ride-hailing drivers under their financing arrangement with financial institutions.
See “ Risk Factors — Risks Related to Doing Business in China — Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties. ” 26 Table of Contents Anti-money Laundering Regulation The PRC Anti-money Laundering Law, which became effective in January 2007, sets forth the principal anti-money laundering requirements applicable to financial institutions, as well as non-financial institutions with anti-money laundering obligations, including the adoption of precautionary and supervisory measures, establishment of various systems for client identification, retention of clients’ identification information and transactions records, and reports on large transactions and suspicious transactions.
See “ Risk Factors — Risks Related to Doing Business in China — Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties. ” Anti-money Laundering Regulation The PRC Anti-money Laundering Law, which became effective in January 2007, sets forth the principal anti-money laundering requirements applicable to financial institutions, as well as non-financial institutions with anti-money laundering obligations, including the adoption of precautionary and supervisory measures, establishment of various systems for client identification, retention of clients’ identification information and transactions records, and reports on large transactions and suspicious transactions.
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 28 Table of Contents audited financial statements; and (ii) domestic entities shall hold income to account for previous years’ losses before remitting the profits.
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.
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 18 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, Guangzhou and other 23 cities in China as of the date of this Report.
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 21 cities 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 26 cities in China, including Chengdu, Changsha, Guangzhou and so on, providing them with a platform to view and take customer orders for rides.
In addition, the PRC Foreign Investment Law provides several protective rules and principles for foreign investors and their investments in the PRC, including, among others, that a foreign investor may freely transfer into or out of China, in Renminbi or a foreign currency, its contributions, profits, capital gains, income from disposition of assets, royalties of intellectual property rights, indemnity or compensation lawfully acquired, and income from liquidation, among others, within China; local governments shall abide by their commitments to the foreign investors; governments at all levels and their departments shall enact local normative documents concerning foreign investment in compliance with laws and regulations and shall not impair legitimate rights and interests, impose additional obligations onto FIEs, set market access restrictions and exit conditions, or intervene with the normal production and operation activities of FIEs; except for special circumstances, in which case statutory procedures shall be followed and fair and reasonable compensation shall be made in a timely manner, expropriation or requisition of the investment of foreign investors is prohibited; and mandatory technology transfer is prohibited.
Furthermore, the PRC Foreign Investment Law provides several protective rules and principles for foreign investors and their investments in the PRC, including, among others, that a foreign investor may freely transfer into or out of China, in Renminbi or a foreign currency, its contributions, profits, capital gains, income from disposition of assets, royalties of intellectual property rights, indemnity or compensation lawfully acquired, and income from liquidation, among others, within China; local governments shall abide by their commitments to the foreign investors; governments at all levels and their departments shall enact local normative documents concerning foreign investment in compliance with laws and regulations and shall not impair legitimate rights and interests, impose additional obligations onto foreign-invested enterprises, set market access restrictions and exit conditions, or intervene with the normal production and operation activities of foreign-invested enterprises; except for special circumstances, in which case statutory procedures shall be followed and fair and reasonable compensation shall be made in a timely manner, expropriation or requisition of the investment of foreign investors is prohibited; and mandatory technology transfer is prohibited.
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.
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.
Yicheng obtained its business licenses for automobiles sale and has engaged in the sales of automobiles since June 2019. Yicheng used to have a license of financial leasing, which was terminated since June 2022. As of the date of this Report, Senmiao has made contributions in an aggregate amount of $5,650,000 to Yicheng.
Yicheng obtained its business licenses for automobiles sale and has engaged in the sales of automobiles since June 2019. Yicheng used to have a license of financial leasing, which was terminated since June 2022. As of the date of this Report, Senmiao has made contributions in an aggregate amount of $5,750,000 to Yicheng.
According to these regulations and guidelines, three licenses or certificates are required for operating the online ride-hailing business: (1) online ride-hailing service platforms such as Didi is required to obtain the online reservation taxi operating license; (2) automobiles used for online ride-hailing are required to obtain the online reservation taxi transport certificate (the “automobile certificate”); (3) online ride-hailing drivers are required obtain the online reservation taxi driver’s license (the “driver’s license”).
According to these regulations and guidelines, three licenses or certificates are required for operating the online ride-hailing business: (1) online ride-hailing service platforms such as XXTX is required to obtain the online reservation taxi operating license; (2) automobiles used for online ride-hailing are required to obtain the online reservation taxi transport certificate (the “automobile certificate”); (3) online ride-hailing drivers are required obtain the online reservation taxi driver’s license (the “driver’s license”).
On May 26, 2020, CBIRC issued the Interim Measures for Supervision and Administration of Financial Leasing Companies (the “Financial Leasing Measures”), which clarified the business scope, the scope of the leased property and the prohibited business or activity of the financial leasing company, as well as other business-related definitions, such as purchase, registration, retrieval and value management of financial leasing products.
On May 26, 2020, NFRAC issued the Interim Measures for Supervision and Administration of Financial Leasing Companies (the “Financial Leasing Measures”), which clarified the business scope, the scope of the leased property and the prohibited business or activity of the financial leasing company, as well as other business-related definitions, such as purchase, registration, retrieval and value management of financial leasing products.
On March 23, 2022, Senmiao Consulting and other shareholders holding 94.5% equity interests of Sichuan Senmiao terminated the Sichuan Senmiao VIE Agreements and purchased Sichuan Senmiao’s 94.5% equity interests with total consideration of zero. Sichuan Senmiao became the majority owned subsidiary of Senmiao Consulting accordingly. The termination and equity transaction has no significant impact on the consolidated financial statements.
On March 23, 2022, Senmiao Consulting and other shareholders holding 94.5% equity interests of Sichuan Senmiao terminated the Sichuan Senmiao VIE Agreements and purchased Sichuan Senmiao’s 94.5% equity interests with total consideration of zero. Sichuan Senmiao became the majority owned subsidiary of Senmiao Consulting accordingly. The termination and equity transaction had no significant impact on the consolidated financial statements.
The CBIRC may make adjustments to the above indicators according to regulatory needs. Financial leasing companies that were established before the implementation of the Interim Measures for the Supervision and Administration of Financial Leasing Companies are required meet the requirements stipulated in the Measures within the transition period prescribed by the provincial local financial supervision department.
The NFRAC may make adjustments to the above indicators according to regulatory needs. Financial leasing companies that were established before the implementation of the Interim Measures for the Supervision and Administration of Financial Leasing Companies are required meet the requirements stipulated in the Measures within the transition period prescribed by the provincial local financial supervision department.
See “ Risk Factors — Risks Related to Doing Business 29 Table of Contents 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 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 .” 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 addition, platform rules and privacy policies formulated by operators of large internet platforms with more than 100 million daily active users, or amendments to such rules or policies by operators of large internet platforms with more than 100 million daily active users that may 18 Table of Contents have significant impacts on users’ rights and interests shall be evaluated by a third-party organization designated by the CAC and reported to local branch of the CAC for approval.
In addition, platform rules and privacy policies formulated by operators of large internet platforms with more than 100 million daily active users, or amendments to such rules or policies by operators of large internet platforms with more than 100 million daily active users that may have significant impacts on users’ rights and interests shall be evaluated by a third-party organization designated by the CAC and reported to local branch of the CAC for approval.
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.
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.
In March 2022, Corenel and another company in Chengdu formed a subsidiary, Jiekai, with a registered capital of RMB500,000 (approximately $80,000) in Chengdu City, Sichuan Province. Corenel holds 51% equity interests of Jiekai. Jiekai is engaged in automobile operating lease business.
In March 2022, Corenel and another company in Chengdu formed a subsidiary, Jiekai, with a registered capital of RMB500,000 (approximately $80,000) in Chengdu City, Sichuan Province. Corenel holds 51% equity interests of Jiekai. Jiekai is engaged in automobile operating lease business since April 2022.
Besides, mobile internet applications and the internet application store are specifically regulated by the Administrative Provisions on Mobile Internet Application Information Services (the “Mobile Application Administrative Provisions”) which were promulgated by the Cyberspace Administration of China (the “CAC”) on June 28, 2016 and effective on August 1, 2016.
Besides, mobile internet applications and the internet application store are specifically regulated by the Administrative Provisions on Mobile Internet Application Information Services (the “Mobile Application Administrative Provisions”) which were promulgated by the Cyberspace Administration of China (the “CAC”) on June 28, 2016 and effective on August 1, 2016 and amended on August 1, 2022.
On the other hand, indirect transfers falling into the scope of the safe harbors under SAT Circular 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. The safe harbors include qualified group restructurings, public market trades and exemptions under tax treaties.
Under SAT Circular 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.
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.
Without requisite automobile certificate or driver’s license, these drivers may be suspended from providing online ride-hailing services, confiscated their illegal income and subject to fines of up to 10 times of their illegal income. 20 Table of Contents Furthermore, according to the Interim Measures, no enterprise or individual is allowed to provide information form online ride-hailing services to unqualified vehicles and drivers.
Without requisite automobile certificate or driver’s license, these drivers may be suspended from providing online ride-hailing services, confiscated their illegal income and subject to fines of up to 10 times of their illegal income. Furthermore, according to the Interim Measures, no enterprise or individual is allowed to provide information form online ride-hailing services to unqualified vehicles and drivers.
The penalty imposed on the purchasers may be reduced or waived if the withholding agents have submitted the relevant materials in connection with the indirect transfer to the PRC tax authorities in accordance with SAT Circular 7.
The penalty imposed on the purchasers may be reduced or waived if the withholding agents have submitted the relevant materials in connection with the indirect transfer to the PRC tax authorities in accordance with SAT Bulletin 7.
The Ministry of Public Security of the People’s Republic of China (“the MPS”) has promulgated measures that prohibit use of the Internet in ways that, among other things, result in leaks of government secrets or the spread of socially destabilizing content. The MPS and its local counterparts have authority to supervise and inspect domestic websites to carry out its measures.
The Ministry of Public Security of the People’s Republic of China (the “MPS”) has promulgated measures that prohibit use of the Internet in ways that, among other things, result in leaks of government secrets or the spread of socially destabilizing content. The MPS and its local counterparts have authority to supervise and inspect domestic websites to carry out its measures.
The appropriate level of protection 17 Table of Contents measures is required to be taken for each respective category of data. For example, a processor of important data shall have designated personnel and management body in responsible for data security, conduct risk assessments for its data processing activities and file risk assessment reports with the competent authorities.
The appropriate level of protection measures is required to be taken for each respective category of data. For example, a processor of important data shall have designated personnel and management body in responsible for data security, conduct risk assessments for its data processing activities and file risk assessment reports with the competent authorities.
Furthermore, the PRC Foreign Investment Law provides that foreign invested enterprises established according to the existing laws regulating foreign investment may maintain their structure and corporate governance within five years after the implementing of the Foreign Investment Law.
Meanwhile, the PRC Foreign Investment Law provides that foreign-invested enterprises established according to the existing laws regulating foreign investment may maintain their structure and corporate governance within five years after the implementing of the Foreign Investment Law.
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.
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.
Financial leasing companies may conduct some or all of the following businesses: (1) financial leasing business; (2) leasing business; (3) purchase, disposal of residual value and repair of leased assets related to financial 21 Table of Contents leasing and leasing business, consulting of the leasing transaction, receipt of leasing deposit; (4) transfer of financial leases or leased assets or acceptance of financial leases or leased assets transferred; (5) fixed income securities investment business.
Financial leasing companies may conduct some or all of the following businesses: (1) financial leasing business; (2) leasing business; (3) purchase, disposal of residual value and repair of leased assets related to financial leasing and leasing business, consulting of the leasing transaction, receipt of leasing deposit; (4) transfer of financial leases or leased assets or acceptance of financial leases or leased assets transferred; (5) fixed income securities investment business.
“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.
“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.
SAT Circular 7 has listed several factors to be taken into consideration by the tax authorities in determining if an indirect transfer has a reasonable commercial purpose.
SAT Bulletin 7 has listed several factors to be taken into consideration by the tax authorities in determining if an indirect transfer has a reasonable commercial purpose.
This interview is typically conducted by our operating entities’ risk management staff who will verify the accuracy of information on the prospective driver by cross-checking information 14 Table of Contents provided by the applicant with other sources. Our Operating Entities will also assess the prospective customer’s potential repayment ability.
This interview is typically conducted by our operating entities’ risk management staff who will verify the accuracy of information on the prospective driver by cross-checking information provided by the applicant with other sources. Our Operating Entities will also assess the prospective customer’s potential repayment ability.
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.
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.
On September 21, 2006, the CSRC published a notice specifying the documents and materials that are required to be submitted for obtaining CSRC approval. 31 Table of Contents The M&A Rules, and other recently adopted regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex.
On September 21, 2006, the CSRC published a notice specifying the documents and materials that are required to be submitted for obtaining CSRC approval. The M&A Rules, and other recently adopted regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex.
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.
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.
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 CBIRC 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 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.
On February 20, 2002, the National Copyright Administration of the PRC introduced the Measures on Computer Software Copyright Registration, which 27 Table of Contents outline the operational procedures for registration of software copyright, as well as registration of software copyright license and transfer contracts. The Copyright Protection Center of China is mandated as the software registration agency.
On February 20, 2002, the National Copyright Administration of the PRC introduced the Measures on Computer Software Copyright Registration, which outline the operational procedures for registration of software copyright, as well as registration of software copyright license and transfer contracts. The Copyright Protection Center of China is mandated as the software registration agency.
Those regulations also stipulates a series of detailed requirements for the online ride-hailing platforms, drivers and automobiles in different cities.
Those regulations also stipulate a series of detailed requirements for the online ride-hailing platforms, drivers and automobiles in different cities.
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.
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.
In addition, the Data Security Law provides a national security review procedure for those data activities which may affect national security and imposes export restrictions on certain data and information. We may be required to make further adjustments to our business practices to comply with this law.
In addition, the Data Security Law provides a national security review procedure for 16 Table of Contents those data activities which may affect national security and imposes export restrictions on certain data and information. We may be required to make further adjustments to our business practices to comply with this law.
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. 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. 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.
From May 1, 2022, the amended Administrative Regulations on Foreign-Invested Telecommunications Enterprises canceled the qualification 23 Table of Contents requirement on the primary foreign investor in a foreign invested value-added telecommunications enterprise for having a good track record and operational experience in the value-added telecommunications industry as stipulated in the previous version.
From May 1, 2022, the amended Administrative Regulations on Foreign-Invested Telecommunications Enterprises canceled the qualification requirement on the primary foreign investor in a foreign invested value-added telecommunications enterprise for having a good track record and operational experience in the value-added telecommunications industry as stipulated in the previous version.
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.
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.
However, approximately 45% of our online ride-hailing drivers had not obtained the driver’s license as of March 31, 2022 while all of the cars used for online ride-hailing services which we provided management services to have the automobile certificate.
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.
As of March 31, 2022, Senmiao has terminated all its VIE Agreements and has no VIEs in its consolidation scope for its financial statements since March 31, 2022.
However, Senmiao has terminated all its VIE Agreements and has no VIEs in its consolidation scope for its financial statements since March 31, 2022.
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.
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.
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 RMB10,000 (approximately US$1,578) to RMB30,000 (approximately US$4,732). 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 (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.
On March 23, 2022, shareholders with 94.5% equity interests of Sichuan Senmiao and Senmiao Consulting terminated the VIE Agreements. On March 28, 2022, these shareholders further sold a total of 94.5% equity interests of Sichuan Senmiao to Senmiao Consulting with a total consideration of zero due to continuous loss. Sichuan Senmiao became the majority owned subsidiary of Senmiao Consulting accordingly.
On March 28, 2022, these shareholders further sold a total of 94.5% equity interests of Sichuan Senmiao to Senmiao Consulting with a total consideration of zero due to continuous loss. Sichuan Senmiao became the majority owned subsidiary of Senmiao Consulting accordingly.
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 to RMB30,000, 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 (approximately US$1,456) to RMB30,000 (approximately US$4,370), or even criminal liabilities if a violation constitutes a crime.
The State Administration of Taxation has promulgated several rules and notices to tighten the scrutiny over acquisition transactions in recent years, including the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises (the “SAT Circular 698”), the Notice on Several Issues Regarding the Income Tax of Non-PRC Resident Enterprises (the “SAT Circular 24”) and the Notice on Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-PRC Resident Enterprises (the “SAT Circular 7”).
The State Administration of Taxation has promulgated several rules and notices to tighten the scrutiny over acquisition transactions in recent years, including the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises (the “SAT Circular 698”), the Notice on Several Issues Regarding the Income Tax of Non-PRC Resident Enterprises (the “SAT Circular 24”) and the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises (the “SAT Bulletin 7”).
If they fail to do so, the seller is required to report and pay the PRC tax to the PRC tax authorities. If neither party complies with the tax payment 30 Table of Contents or withholding obligations under SAT Circular 7, the tax authority may impose penalties such as late payment interest on the seller.
If they fail to do so, the seller is required to report and pay the PRC tax to the PRC tax authorities. If neither party complies with the tax payment or withholding obligations under SAT Bulletin 7, the tax authority may impose penalties such as late payment interest on the seller.
Hunan Ruixi has not complied with all the requirements stipulated under the Financial Leasing Measures and intends to rectify and to comply with all the requirements stipulated under the Financial Leasing Measure during the transition period, failing which, Hunan Ruixi cannot carry out financial leasing business. Yicheng has removed the financial leasing from its business license.
Hunan Ruixi has not complied with all the requirements stipulated under the Financial Leasing Measures and intends to rectify and to comply with all the requirements stipulated under the Financial Leasing Measure during the transition period, failing which, Hunan Ruixi cannot carry out financial leasing business.
We provide 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, Corenel and Jiekai, and our majority owned subsidiary, Hunan Ruixi, and its equity investee company and former VIE, Jinkailong.
As of June 2022, there were approximately 70 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 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.
We are subject to these regulatory requirements. Regulations Related to Labor and Social Security Pursuant to the PRC Labor Law, the PRC Labor Contract Law and the Implementing Regulations of the Employment Contracts Law, labor relationships between employers and employees must be executed in written form. Wages may not be lower than the local minimum wage.
Regulations Related to Labor and Social Security Pursuant to the PRC Labor Law, the PRC Labor Contract Law and the Implementing Regulations of the Employment Contracts Law, labor relationships between employers and employees must be executed in written form. Wages may not be lower than the local minimum wage.
Where Internet advertisements are not identifiable and marked as “advertisements”, a fine of not more than RMB100,000 (approximately US$15,780) may be imposed in accordance with Advertising Law. A fine ranging from RMB5,000 (approximately US$789) to RMB30,000 (approximately US$4,732) 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 (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”.
On November 9, 2021, the issuance of 5,331,667 shares of the Company’s common stock for this transaction has been completed and on December 31, 2021, the registration procedures for the change in shareholders have been completed. As a result, XXTX became a wholly-owned subsidiary of Senmiao Consulting.
On November 9, 2021, the issuance of 533,167 (5,331,667 pre reverse split) shares of the Company’s common stock for this transaction has been completed and on December 31, 2021, the registration procedures for the change in shareholders was completed. As a result, XXTX became a wholly-owned subsidiary of Senmiao Consulting.
Platforms may be subject to an order of correction and a fine of RMB5,000 to RMB10,000, and in severe cases a fine of RMB10,000 to RMB30,000, 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 (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.
During the year ended March 31, 2022, we have been fined by approximately $178,000 by Traffic Management Bureaus in Chengdu and Changsha, of which, approximately $16,000 was further compensated by drivers or cooperated third parties.
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.
In addition, the 22 Table of Contents CBIRC, together with several other governmental authorities, jointly issued the Supplementary Provisions on the Supervision and Administration of Financing Guarantee Companies on October 9, 2019.
In addition, the NFRAC, together with several other governmental authorities, jointly issued the Supplementary Provisions on the Supervision and Administration of Financing Guarantee Companies on October 9, 2019.
Pursuant to the Mobile Application Administrative Provisions, application information service providers shall obtain the relevant qualifications prescribed by laws and regulations, strictly implement their information security management responsibilities and carry out certain duties, including establish and complete user information security protection mechanism and information content inspection and management mechanisms, protect users’ right to know and right to choose in the process of usage, and to record users’ daily information and preserve it for 60 days.
Pursuant to the Mobile Application Administrative Provisions, application information service providers shall obtain the relevant qualifications prescribed by laws and regulations, strictly implement their information security management responsibilities and carry out certain duties, including user real name authentication, establish and complete user information security protection mechanism and information content inspection and management mechanisms, protect users’ right to know and right to choose in the process of usage.
The Internet Advertising Measures also impose several restrictions on the forms of advertisements and activities used in advertising. “Internet advertising” as defined in the Internet Advertising Measures refers to commercial advertisements that directly or indirectly promote goods or services through websites, web pages, Internet applications or other Internet media in various forms, including texts, pictures, audio clips and videos.
“Internet advertising” as defined in the Internet Advertising Measures refers to commercial advertisements that directly or indirectly promote goods or services through websites, web pages, Internet applications or other Internet media in various forms, including texts, pictures, audio clips and videos.
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 13 Operations 13 Marketing 25 Drivers & Automobile Management and Services 15 Technology 9 Human Resources & Administration 13 Finance and Accounting 10 Internal Control and Audit 1 Total 101 ​ 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 18 Drivers & Risk Management and Services 11 Technology 4 Human Resources & Administration 6 Finance and Accounting 5 Total 46 ​ 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 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.
During the year ended March 31, 2022, we earned online ride-hailing platform service fees of approximately $2.7 million, netting off approximately $3.4 million incentives paid to Active Drivers. 8 Table of Contents 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, 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.
Our Operating Entities started the facilitation and supporting services in November 2018, the sale of automobiles in January 2019, and financial and operating leasing in March 2019, respectively. 6 Table of Contents Auto Operating Leasing We, through our subsidiaries, Hunan Ruixi, Corenel, 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: 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.
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, Neijiang, Panzhihua, Nanchong and Guangzhou, and other 24 cities from April 2020 to June 2022, 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, 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.
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.
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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

165 edited+55 added−52 removed463 unchanged
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. ● We are required to obtain licenses and permits related to financing and lending in China for our business operations. ● 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. 35 Table of Contents ● Government policies on automobile purchases and usage in the online ride-hailing industry may materially affect our results of operations. ● We have identified material weaknesses in our internal control over financial reporting. ● Our auditor is headquartered in the United States, and is subject to inspection by the PCAOB on a regular basis.
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.
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; ● 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; 72 Table of Contents ● 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; 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.
As a result, we and non-resident enterprises in such transactions may become at risk of being subject to filing obligations or being taxed, under Circular 59, Circular 7 or SAT Notice 37, and may be required to expend valuable resources to comply with Circular 59, Circular 7 and SAT Notice 37 or to establish that we and our non-resident enterprises should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.
As a result, we and non-resident enterprises in such transactions may become at risk of being subject to filing obligations or being taxed, under Circular 59, SAT Bulletin 7 or SAT Notice 37, and may be required to expend valuable resources to comply with Circular 59, SAT Bulletin 7 and SAT Notice 37 or to establish that we and our non-resident enterprises should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.
If we are considered a non-resident enterprise under the EIT Law and if the PRC tax authorities make adjustments to the taxable income of the transactions under SAT Circular 59, Circular 7 and SAT Notice 37, our income tax costs associated with such potential acquisitions will be increased, which may have an adverse effect on our financial condition and results of operations. 2.
If we are considered a non-resident enterprise under the EIT Law and if the PRC tax authorities make adjustments to the taxable income of the transactions under SAT Circular 59, SAT Bulletin 7 and SAT Notice 37, our income tax costs associated with such potential acquisitions will be increased, which may have an adverse effect on our financial condition and results of operations. 2.
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; 68 Table of Contents ● 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; 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.
The PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of certain taxable assets, including, in particular, equity interests in a PRC resident enterprise, by a non-resident enterprise by promulgating and implementing SAT Circular 59 and Circular 698, which became effective in January 2008, and a Circular 7 in replacement of some of the existing rules in Circular 698, which became effective in February 2015.
The PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of certain taxable assets, including, in particular, equity interests in a PRC resident enterprise, by a non-resident enterprise by promulgating and implementing SAT Circular 59 and Circular 698, which became effective in January 2008, and a SAT Bulletin 7 in replacement of some of the existing rules in Circular 698, which became effective in February 2015.
The strategic relationship between us, our affiliates and Gaode Maps and Meituan, the leading aggregation platforms, and other local online ride-hailing platforms is crucial to our business as most of customers we provide services to are online ride-hailing drivers. Those drivers earn income on our platform from the trip orders distributed from Gaode Maps, or directly from other platforms.
The strategic relationship between us, our affiliates and Gaode Maps, the leading aggregation platform, and other local online ride-hailing platforms is crucial to our business as most of customers we provide services to are online ride-hailing drivers. Those drivers earn income on our platform from the trip orders distributed from Gaode Maps, or directly from other platforms.
If any business of the Company is “restricted” or “prohibited” from foreign investment under the “Negative List” effective at the time, we may be deemed to be in violation of the Foreign Investment Law, and we may be required to unwind or restructure our business operations, any of which may have a material adverse effect on our business operation.
If any of our business is “restricted” or “prohibited” from foreign investment under the “Negative List” effective at the time, we may be deemed to be in violation of the Foreign Investment Law, and we may be required to unwind or restructure our business operations, any of which may have a material adverse effect on our business operation.
Our failure to continuously attract and retain drives and to increase utilization of our online ride-hailing platform in a cost-effective way would impair the network effect of our platform, which would in turn materially and adversely affect our business, results of operations and financial condition.
Our failure to continuously attract and retain Active Drives and to increase utilization of our online ride-hailing platform in a cost-effective way would impair the network effect of our platform, which would in turn materially and adversely affect our business, results of operations and financial condition.
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; 65 Table of Contents ● 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; ● 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.
We do not believe that the Financing Guarantee Rules apply to our car financing facilitation business as we provide guarantees to our financing partners in connection with the financing of the purchase of automobiles and such guarantees are not provided independently as our principal business.
We do not believe that the Financing Guarantee Rules apply to our prior car financing facilitation business as we provide guarantees to our financing partners in connection with the financing of the purchase of automobiles and such guarantees are not provided independently as our principal business.
The PRC tax authorities have the discretion under SAT Circular 59, Circular 7 and SAT Notice 37 to make adjustments to the taxable capital gains based on the difference between the fair value of the taxable assets transferred and the cost of investment.
The PRC tax authorities have the discretion under SAT Circular 59, SAT Bulletin 7 and SAT Notice 37 to make adjustments to the taxable capital gains based on the difference between the fair value of the taxable assets transferred and the cost of investment.
In February 2015, the SAT issued Circular 7 to replace the rules relating to indirect transfers in Circular 698. Circular 7 has introduced a new tax regime that is significantly different from that under Circular 698.
In February 2015, the SAT issued SAT Bulletin 7 to replace the rules relating to indirect transfers in Circular 698. SAT Bulletin 7 has introduced a new tax regime that is significantly different from that under Circular 698.
If we are unable to obtain the telecommunication business certificate in a timely fashion, our business may be materially and adversely affected. 55 Table of Contents 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.
If we are unable to obtain the telecommunication business certificate in a timely fashion, our business may be materially and adversely affected. 56 Table of Contents 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.
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. 74 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. 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 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. 73 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. 74 Table of Contents Increases in labor costs in the PRC may adversely affect our business and results of operations.
China’s regulators may impose penalties for non-compliance ranging from fines or suspension of operations, and this could lead to us delisting from the U.S. stock market. Also, on August 20, 2021, the SCNPC passed the Personal Information Protection Law, started to be implemented on November 1, 2021.
China’s regulators may impose penalties for non-compliance ranging from fines or suspension of operations, and this could lead to us delisting from the U.S. stock market. Also, on August 20, 2021, the SCNPC promulgated the Personal Information Protection Law, started to be implemented on November 1, 2021.
Further, the growth of China’s automobile leasing and financing industry could be affected by many factors, including: ● general economic conditions in China and around the world; ● the impact by public health epidemics, including epidemic prevention policies against Covid-19, especially zero-COVID policy in China on the industries we operate in and our business, results of operations and financial condition ● the growth of disposable household income and the availability and cost of credit available to finance car purchases and lease; ● the growth of China’s automobile industry; ● taxes and other incentives or disincentives related to NEV purchases and ownership; ● environmental concerns and measures taken to address these concerns; ● the cost of energy, including gasoline prices, and the cost of car license plates in various cities with license plate lottery or auction systems in China; ● the improvement of the highway system and availability of parking facilities; ● other government policies relating to automobile leasing and financing in China; ● fluctuations in the sales and price of new and used cars; ● consumer acceptance of financing car purchases; ● changes in demographics and preferences of car purchasers; ● ride sharing, transportation networks, and other fundamental changes in transportation pattern; and ● other industry-wide issues, including supply and demand for cars and supply chain challenges.
Further, the growth of China’s automobile leasing and financing industry could be affected by many factors, including: ● general economic conditions in China and around the world; ● the impact by public health epidemics, including epidemic prevention policies in China on the industries we operate in and our business, results of operations and financial condition ● the growth of disposable household income and the availability and cost of credit available to finance car purchases and lease; ● the growth of China’s automobile industry; ● taxes and other incentives or disincentives related to NEV purchases and ownership; ● environmental concerns and measures taken to address these concerns; ● the cost of energy, including gasoline prices, and the cost of car license plates in various cities with license plate lottery or auction systems in China; ● the improvement of the highway system and availability of parking facilities; ● other government policies relating to automobile leasing and financing in China; ● fluctuations in the sales and price of new and used cars; ● consumer acceptance of financing car purchases; ● changes in demographics and preferences of car purchasers; ● ride sharing, transportation networks, and other fundamental changes in transportation pattern; and ● other industry-wide issues, including supply and demand for cars and supply chain challenges.
In addition, Circular 7 provides clearer criteria than Circular 698 on how to assess reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market.
In addition, SAT Bulletin 7 provides clearer criteria than Circular 698 on how to assess reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market.
Furthermore, on July 16, 2021, the Ministry of Human Resources and Social Security, the National Development and Reform Commission, the Ministry of Transport, together with several other governmental authorities jointly promulgated Guiding Opinions on Safeguarding the Rights and Interests of Labors in New Forms of Employment, which require, among others, platform enterprises adopting labor outsourcing and other cooperative labor methods to undertake corresponding responsibilities in accordance with laws and regulations when labors’ rights and interests are damaged, call for organizing and launching pilot programs for occupational injury protection of flexible employment personnel, focusing on platform enterprises in industries such as mobility, takeout, instant delivery and intra-city freight, and encourage platform enterprises to improve the protection for flexible employment personnel on the platform by purchasing personal accident, employer liability and other commercial insurances.
Furthermore, on July 16, 2021, the Ministry of Human Resources and Social Security, the NDRC, the Ministry of Transport, together with several other governmental authorities jointly promulgated Guiding Opinions on Safeguarding the Rights and Interests of Labors in New Forms of Employment, which require, among others, platform enterprises adopting labor outsourcing and other cooperative labor methods to undertake corresponding responsibilities in accordance with laws and regulations when labors’ rights and interests are damaged, call for organizing and launching pilot programs for occupational injury protection of flexible employment personnel, focusing on platform enterprises in industries such as mobility, takeout, instant delivery and intra-city freight, and encourage platform enterprises to improve the protection for flexible employment personnel on the platform by purchasing personal accident, employer liability and other commercial insurances.
Accordingly, the return on your investment in our common stock will likely depend entirely upon any future price appreciation of our common stock. 67 Table of Contents Other General Risk Factors We may need additional capital to pursue business objectives and respond to business opportunities, challenges or unforeseen circumstances, and financing may not be available on terms acceptable to us, or at all.
Accordingly, the return on your investment in our common stock will likely depend entirely upon any future price appreciation of our common stock. Other General Risk Factors We may need additional capital to pursue business objectives and respond to business opportunities, challenges or unforeseen circumstances, and financing may not be available on terms acceptable to us, or at all.
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.
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.
Circular 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 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.
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.
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.
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. ● 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. 36 Table of Contents ● 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.
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.
As of the date of this Report, to our knowledge, we were not required by the relevant 43 Table of Contents regulatory authorities to obtain the Payment Business Permit for our past settlement practice, nor have we received any penalty in connection with any purported operations of payment and settlement services without a Payment Business Permit or otherwise in violation of the above-described rules and regulations.
As of the date of this Report, to our knowledge, we were not required by the relevant regulatory authorities to obtain the Payment Business Permit for our past settlement practice, nor have we received any penalty in connection with any purported operations of payment and settlement services without a Payment Business Permit or otherwise in violation of the above-described rules and regulations.
At its discretion, a wholly foreign-owned enterprise may allocate a portion of its after-tax profits based on PRC accounting standards to staff welfare and bonus funds. These reserve funds and staff welfare and bonus funds are not distributable as cash dividends. Our PRC subsidiaries are currently unable to pay us any dividend given their financial condition.
At its discretion, a wholly foreign-owned enterprise may allocate a portion of its after-tax profits based on PRC accounting standards to staff welfare and bonus funds. These reserve funds and staff welfare and bonus funds are not distributable as cash dividends. Our PRC subsidiaries currently suffer accumulated loss and are unable to pay us any dividend given their financial condition.
Furthermore, any negative development in any of the automobile financing or ride-hailing industries, such as bankruptcies or failures of other companies in any of this these, and especially a large number of such bankruptcies or failures, or 69 Table of Contents negative perception of any of the industries as a whole, could compromise our image, undermine the trust and credibility we have established and impose a negative impact on our ability to attract new clients.
Furthermore, any negative development in any of the automobile financing or ride-hailing industries, such as bankruptcies or failures of other companies in any of this these, and especially a large number of such bankruptcies or failures, or negative perception of any of the industries as a whole, could compromise our image, undermine the trust and credibility we have established and impose a negative impact on our ability to attract new clients.
As a “startup” business, our online ride-hailing platform may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors that may alter or delay our plans. Before the year ended March 31, 2022, we used to pay a large number of driver incentives to acquire and maintain the large customer base.
As a relatively new business, our online ride-hailing platform may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors that may alter or delay our plans. Before the year ended March 31, 2022, we used to pay a large number of driver incentives to acquire and maintain the large customer base.
When the Cybersecurity Review Measures become effective, and if the Security Administration Draft is enacted as proposed, we believe that the operations of our PRC subsidiaries and our listing will not be affected and that we will not be subject to cybersecurity review by the CAC, given that our PRC subsidiaries possess personal data of fewer than one million individual clients and do not collect data that affects or may affect national security in their business operations as of the date of this Report and do not anticipate that they will be collecting over one million users’ personal information or data that affects or may affect national security in the near future.
If the Security Administration Draft is enacted as proposed, we believe that the operations of our PRC subsidiaries and our listing will not be affected and that we will not be subject to cybersecurity review by the CAC, given that our PRC subsidiaries possess personal data of fewer than one million individual clients and do not collect data that affects or may affect national security in their business operations as of the date of this Report and do not anticipate that they will be collecting over one million users’ personal information or data that affects or may affect national security in the near future.
Pursuant to the Regulations on the Registration of Enterprise Legal Persons, we may be given warnings, fined, confiscated of illegal income, required to suspension and rectification, or our business license might be withheld and revoked by relevant regulatory authorities. 41 Table of Contents Consequently, we may be required to obtain approval or license for financing business to continue our current collection method of payments.
Pursuant to the Regulations on the Registration of Enterprise Legal Persons, we may be given warnings, fined, confiscated of illegal income, required to suspension and rectification, or our business license might be withheld and revoked by relevant regulatory authorities. Consequently, we may be required to obtain approval or license for financing business to continue our current collection method of payments.
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.
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.
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. On December 28, 2021, the CAC and other relevant PRC governmental authorities jointly promulgated the Cybersecurity Review Measures, which will take effect on February 15, 2022.
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. On December 28, 2021, the CAC and other relevant PRC governmental authorities jointly promulgated the Cybersecurity Review Measures, which took effect on February 15, 2022.
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.
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.
In connection with the audit of our consolidated financial statements for the year ended March 31, 2022, 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, 2023, we have identified “material weaknesses” and other control deficiencies including significant deficiencies in our internal control over financial reporting.
Lastly, the draft contains proposals for significant fines for serious violations of up to RMB 50 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. 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.
Therefore, our PRC subsidiaries are able to pay dividends in foreign currencies to us without prior approval from SAFE, subject to the condition that the remittance of such dividends outside of the PRC complies with certain procedures under PRC foreign exchange 62 Table of Contents regulation, such as the overseas investment registrations by the beneficial owners of our company who are PRC residents.
Therefore, our PRC subsidiaries are able to pay dividends in foreign currencies to us without prior approval from SAFE, subject to the condition that the remittance of such dividends outside of the PRC complies with certain procedures under PRC foreign exchange regulation, such as the overseas investment registrations by the beneficial owners of our company who are PRC residents.
This lack of operating history may make it difficult for investors to evaluate our prospects for success for this business. We may not have sufficient experience to address the risks to which our operation in new or rapidly evolving markets may be exposed. There can be no assurances that we will be able to do so.
This short operating history may make it difficult for investors to evaluate our prospects for success for this business. We may not have sufficient experience to address the risks to which our operation in new or rapidly evolving markets may be exposed. There can be no assurances that we will be able to do so.
We may become subject to claims arising primarily from our online ride-hailing platform services for automobile-related incidents, including bodily injury, property damage and uninsured and underinsured liability.
We may become subject to claims arising primarily from our online ride-hailing platform services and automobile operating leasing for automobile-related incidents, including bodily injury, property damage and uninsured and underinsured liability.
The proposed rule would also establish the manner of the PCAOB’s determinations; the factors the PCAOB will evaluate 51 Table of Contents and the documents and information it will consider when assessing whether a determination is warranted; the form, public availability, effective date, and duration of such determinations; and the process by which the board of the PCAOB can modify or vacate its determinations.
The proposed rule would also establish the manner of the PCAOB’s determinations; the factors the PCAOB will evaluate and the documents and information it will consider when assessing whether a determination is warranted; the form, public availability, effective date, and duration of such determinations; and the process by which the board of the PCAOB can modify or vacate its determinations.
Specifically, the Cyber Security Law provides that China adopt a multi-level protection scheme (MLPS), under which network operators are required to perform 57 Table of Contents obligations of security protection to ensure that the network is free from interference, disruption or unauthorized access, and prevent network data from being disclosed, stolen or tampered.
Specifically, the Cyber Security Law provides that China adopt a multi-level protection scheme (MLPS), under which network operators are required to perform obligations of security protection to ensure that the network is free from interference, disruption or unauthorized access, and prevent network data from being disclosed, stolen or tampered.
This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. 75 Table of Contents If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market price for our common stock and trading volume could decline.
This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market price for our common stock and trading volume could decline.
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.
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, 61 Table of Contents a wholly foreign-owned enterprise is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund certain statutory reserve funds, until the aggregate amount of such funds reaches 50% of its registered capital.
In addition, a wholly foreign-owned enterprise is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund certain statutory reserve funds, until the aggregate amount of such funds reaches 50% of its registered capital.
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.
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.
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.
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.
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, 2022.
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.
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. 49 Table of Contents 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. We have incurred net losses and may continue to incur net losses in the future.
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.
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.
Certain provisions of our articles of incorporation (the “Articles of Incorporation”) and by-laws could discourage or make it more difficult to accomplish a proxy contest or other change in our management or the acquisition of control by a holder of a substantial 66 Table of Contents amount of our voting stock.
Certain provisions of our articles of incorporation (the “Articles of Incorporation”) and by-laws could discourage or make it more difficult to accomplish a proxy contest or other change in our management or the acquisition of control by a holder of a substantial amount of our voting stock.
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.
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.
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.
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.
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.
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.
The following information should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” 34 Table of Contents and the consolidated financial statements and related notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Report.
The following information should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Report.
We may have to adjust, modify, or completely change our business operations in response to adverse regulatory changes or 56 Table of Contents policy developments, and we cannot assure you that any remedial action adopted by us can be completed in a timely, cost-efficient, or liability-free manner or at all.
We may have to adjust, modify, or completely change our business operations in response to adverse regulatory changes or policy developments, and we cannot assure you that any remedial action adopted by us can be completed in a timely, cost-efficient, or liability-free manner or at all.
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.
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.
This could have a material adverse effect on our results of operations and business prospects. Second, the notion of “important 59 Table of Contents data” is not clearly defined by the Cyber Security Law or the Data Security Law.
This could have a material adverse effect on our results of operations and business prospects. Second, the notion of “important data” is not clearly defined by the Cyber Security Law or the Data Security Law.
On November 17, 2021, the Ministry of Transport, the National Development and Reform Commission, the CAC and certain other governmental authorities jointly promulgated the Opinions on Strengthening the Protection of the Rights and Interests of Labors in New Forms of Transportation Industry, which provide that the relevant departments shall urge online ride hailing platform enterprises to announce pricing rules and income distribution rules to relevant parties such as drivers and passengers.
On November 17, 2021, the Ministry of Transport, the NDRC, the CAC and certain other governmental authorities jointly promulgated the Opinions on Strengthening the Protection of the Rights and Interests of Labors in New Forms of Transportation Industry, which provide that the relevant departments shall urge online ride hailing platform enterprises to announce pricing rules and income distribution rules to relevant parties such as drivers and passengers.
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.
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.
There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States and China.
There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal 71 Table of Contents policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States and China.
For the year ended March 31, 2022, we recognized estimated provisions loss of approximately $8,000 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, 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.
On August 1, 2021, the China Securities Regulatory Commission (the “CSRC”) stated in a statement that it had taken note of the new disclosure requirements announced by the SEC regarding the listings of Chinese companies and the recent regulatory development in China, and that both countries should strengthen communications on regulating China-related issuers.
On August 1, 2021, the CSRC stated in a statement that it had taken note of the new disclosure requirements announced by the SEC regarding the listings of Chinese companies and the recent regulatory development in China, and that both countries should strengthen communications on regulating China-related issuers.
On August 16, 2021, we received notices from Nasdaq that because the closing bid price for our common stock had fallen below $1.00 per share for 30 consecutive business days, 64 Table of Contents we no longer complied with the $1.00 minimum bid price requirement for continued listing on The Nasdaq Capital Market under Rule 5550(a)(2) of the Nasdaq Listing Rules.
On August 16, 2021, we received a notice from Nasdaq that because the closing bid price for our common stock had fallen below $1.00 per share for 30 consecutive business days, we no longer complied with the $1.00 minimum bid price requirement for continued listing on The Nasdaq Capital Market under Rule 5550(a)(2) of the Nasdaq Listing Rules.
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 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.
The implementation rules define the term “de facto management body” as the body that exercises full and substantial control over 53 Table of Contents and overall management of the business, productions, personnel, accounts and properties of an enterprise.
The implementation rules define the term “de facto management body” as the body that exercises full and substantial control over and overall management of the business, productions, personnel, accounts and properties of an enterprise.
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.
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.
There is no assurance that we will be successful with this business and the likelihood of success of our online ride-hailing platform must be considered in light of our 37 Table of Contents relatively early stage of operations. Any growth in this business will put significant demands on our processes, systems and personnel.
There is no assurance that we will continue to be successful with this business and the likelihood of success of our online ride-hailing platform must be considered in light of our relatively early stage of operations. Any growth in this business will put significant demands on our processes, systems and personnel.
The online ride-hailing market in China, especially in our initial target market of Chengdu, 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, 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.
Circular 7 also brings challenges to both the foreign transferor and transferee (or other person who is obligated to pay for the transfer) of the taxable assets.
SAT Bulletin 7 also brings challenges to both the foreign transferor and transferee (or other person who is obligated to pay for the transfer) of the taxable assets.
The Cybersecurity Review Measures provide that, in addition to critical information infrastructure operators (“CIIOs”) that intend to purchase Internet products and services, net platform operators engaging 58 Table of Contents in data processing activities that affect or may affect national security must be subject to cybersecurity review by the Cybersecurity Review Office of the PRC.
The Cybersecurity Review Measures provide that, in addition to critical information infrastructure operators (“CIIOs”) that intend to purchase Internet products and services, online platform operators engaging in data processing activities that affect or may affect national security must be subject to cybersecurity review by the Cybersecurity Review Office of the PRC.
Under current credit card practices, we may be liable for rides 47 Table of Contents facilitated on our online ride-hailing platform with fraudulent credit card data, even if the associated financial institution approved the credit card transaction.
Under current credit card practices, we may be liable for rides facilitated on our online ride-hailing platform with fraudulent credit card data, even if the associated financial institution approved the credit card transaction.
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 2019, 2020 and 2021 were increases of 4.5%, 0.2% and 1.5%, 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 2020, 2021 and 2022 were increases of 2.5%, 0.9% and 2.0%, respectively.
We have 20 software copyrights, 52 trademarks and one trademark application pending at the PRC Trademark Office. Thus, we cannot assure you that any of our intellectual property rights would not be challenged, invalidated, circumvented or misappropriated, or such intellectual property will be sufficient to provide us with competitive advantages.
We have 19 software copyrights, 52 trademarks and two trademark applications pending at the PRC Trademark Office. Thus, we cannot assure you that any of our intellectual property rights would not be challenged, invalidated, circumvented or misappropriated, or such intellectual property will be sufficient to provide us with competitive advantages.
As Circular 16 is newly issued and SAFE has not provided detailed guidelines with respect to its interpretation or implementation, it is uncertain how these rules will be interpreted and implemented. Violations of these Circulars could result in severe monetary or other penalties.
SAFE has not provided detailed guidelines with respect to its interpretation or implementation, it is uncertain how these rules will be interpreted and implemented. Violations of these Circulars could result in severe monetary or other penalties.
Pursuant to Section 404, we will be required to furnish a report by our management on our internal control over financial reporting, including an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.
Pursuant to Section 404, we were not required to furnish a report by our management on our internal control over financial reporting, including an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.
If we are unable to collect the lease/loan payments we facilitated or repossess the car collateral due to inaccurate or fraudulent information, our results of operations and profitability would be harmed. 42 Table of Contents We may be subject to product liability claims if people or property are harmed by vehicles purchased through us.
If we are unable to collect the lease/loan payments we facilitated or repossess the car collateral due to inaccurate or fraudulent information, our results of operations and profitability would be harmed. We may be subject to product liability claims if people or property are harmed by vehicles purchased through us. Vehicles purchased through us may be defectively designed or manufactured.
In particular, general economic factors and conditions in China or worldwide, including the general interest rate environment and unemployment rates, may affect automobile purchasers’ willingness to seek financing and financing partners’ ability and desire to provide financing. Economic conditions in China are sensitive to global economic conditions.
In particular, general economic factors and conditions in China or worldwide, including the general interest rate environment and unemployment rates, may affect automobile purchasers and lessees’ willingness to seek working opportunities and financing partners’ ability and desire to provide financing. Economic conditions in China are sensitive to global economic conditions.
During the year ended March 31, 2022, we have been fined by approximately $178,000 by Traffic Management Bureaus in Chengdu and Changsha for the non-compliance on taxi driver’s certificates, of which, approximately $16,000 was further compensated by drivers or cooperated third parties.
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.
Vehicles purchased through us may be defectively designed or manufactured. As a result, we may be exposed to product liability claims relating to personal injury or property damage. Third parties subject to such injury or damage may bring claims or legal proceedings against us because we facilitate the financing/purchase of the product.
As a result, we may be exposed to product liability claims relating to personal injury or property damage. Third parties subject to such injury or damage may bring claims or legal proceedings against us because we facilitate the financing/purchase of the product.
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 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.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also lease two parking lots for automobiles in Changsha and Guangzhou and an exhibition hall in Changsha, with total areas of 1,503 square meters. The monthly rent for these parking lots and the exhibition hall is approximately $2,900 in aggregate and approximately $6,700, respectively. Jinkailong leases a parking lot with total area of approximately 6,700 square meters in Chengdu.
Biggest changeWe 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.
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 $7,300 under two lease agreements that expire in August 2024 and December 2023, respectively.
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.
The cost for these offices is approximately $20,000 per month in aggregate. We maintain another four offices for our Automobile Transaction and Related Services and Online Ride-hailing Platform Services in the cities of Chengdu, Changsha and Guangzhou, China. The total area of our offices in Changsha is 680 square meters.
We 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.
We lease those offices for a total monthly rent of approximately $4,300 under two lease agreements that expire in October 2023. The total area of our offices in Guangzhou is 530 square meters. We lease those offices for a total monthly rent of approximately $5,300 under two lease agreements that expire in December 2022 and March 2024, respectively.
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.
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, 461 and 380 square meters under lease agreements that expire in March 2023, March 2024, and February 2026, respectively.
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.
The monthly rent was approximately $2,900. We consider our current facilities adequate for our current operations. ​
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. ​ 76 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 4. Mine Safety Disclosures Not applicable. ​ 77 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table provides information as of March 31, 2022 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 ​ — ​ — ​ 183,099 (1,830,985 pre-reverse stock split) ​ 77 Table of Contents Purchases of Our Equity Securities None.
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.
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 13, 2022, the Company had approximately 28 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 July 10, 2023, the Company had approximately 24 stockholders of record.
Removed
As of the date of this Report, an aggregate of 12,727 (127,273 pre reverse split) RSUs were issued and 9,545 (95,457 pre reverse split) RSUs shall be vested but have not been issued under the plan.
Added
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).
Added
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.
Added
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.

Item 7. Management's Discussion & Analysis

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

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Biggest changeSince November 22, 2018, the acquisition date of Hunan Ruixi, and as of March 31, 2022, we have facilitated financing for an aggregate of 1,687 automobiles with a total value of approximately $26.1 million, sold an aggregate of 1,423 automobiles with a total value of approximately $13.8 million and delivered approximately 2,321 automobiles under operating leases (including 1,826 automobiles delivered by Jinkailong) and 131 automobiles under financing leases to customers, the vast majority of whom are online ride-hailing drivers. 78 Table of Contents The table below provides a breakdown of the number of vehicles sold or delivered under different leasing arrangements or managed/guaranteed by us and corresponding revenue generated for the years ended March 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ ​ March 31 ， ​ ​ 2022 ​ 2021 ​ ​ Number of ​ ​ ​ ​ Number of ​ ​ ​ ​ Vehicles Revenue* Vehicles Revenue* Auto Operating Leasing ​ >2,300 ​ $ 7,175,000 ​ >1,200 ​ $ 3,435,000 Auto Financing ​ 131 ​ $ 102,000 131 ​ $ 228,000 Auto Sales 6 ​ $ 26,000 36 ​ $ 487,000 Auto Financing and Transaction Facilitation — ​ $ — 61 ​ $ 189,000 Other Services >1,800 ​ $ 1,775,000 >2,500 ​ $ 919,000 * The number included operation information of our former VIE and was rounded to the nearest thousand for disclosure purpose.
Biggest changeSince 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.
The attraction of new Active Drivers depends on the comprehensive income they could earn from our own or cooperated platform, which is mainly affected by the number orders distributed to them through our platform and the amount of the incentives paid to them from platforms.
The attraction of new Active Drivers depends on the comprehensive income they could earn from our own or cooperated platform, which is mainly affected by the number of orders distributed to them through our platform and the amount of the incentives paid to them from platforms.
Other income (expenses), net For the year ended March 31, 2022, we had other expenses, net of $107,444, primarily consist of: (1) a donation by Hunan Ruixi of approximately $190,000 (RMB1,200,000) to a public welfare foundation in Changsha, China; (2) penalty fines of $97,000 for our served online ride-hailing drivers who failed to obtain the ride-hailing driver’s licenses approximately; which was offset by (2) income of approximately $198,000 from some leases.
For the year ended March 31, 2022, we had other expenses, net of $107,444, primarily consist of: (1) a donation by Hunan Ruixi of approximately $190,000 (RMB1,200,000) to a public welfare foundation in Changsha, China; (2) penalty fines of $97,000 for our served online ride-hailing drivers who failed to obtain the ride-hailing driver’s licenses approximately; which was offset by (2) income of approximately $198,000 from some leases.
Off-Balance Sheet Arrangements As of the date of this Report, we have the following off-balance sheet arrangements that are likely to have a future effect on our financial condition, revenues or expenses, results of operations and liquidity: ● Purchase Commitments On February 22, 2021, we entered into one purchase contract with an automobile dealer to purchase a total of 200 automobiles for the amount of approximately $3.4 million.
Off-Balance Sheet Arrangements As of the date of this Report, we have the following off-balance sheet arrangements that are likely to have a future effect on our financial condition, revenues or expenses, results of operations and liquidity: ● Purchase Commitments On February 22, 2021, we entered into a purchase contract with an automobile dealer to purchase a total of 200 automobiles for the amount of approximately $3.4 million.
Other income (expenses), net For the year ended March 31, 2022, Jinkailong had other income, net of $118,344, primarily consist of the penalty income amounted to $302,131 from some online ride-hailing drivers for their violence on the contracts, which was offset by expenditures of approximately $159,000 such as penalty fines for served drivers who failed to obtain the ride-hailing driver’s licenses.
Other income, net For the year ended March 31, 2022, Jinkailong had other income, net of $118,344, primarily consist of the penalty income amounted to $302,131 from some online ride-hailing drivers for their violence on the contracts, which was offset by expenditures of approximately $159,000 such as penalty fines for served drivers who failed to obtain the ride-hailing driver’s licenses.
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, netting off approximately $3.4 million incentives paid to Active Drivers.
During the year ended March 31, 2022, approximately 11.5 million rides with gross fare of approximately $37.3 million were 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.
Other service fees Jinkailong generated other revenues such as monthly services commissions from insurance companies, and other miscellaneous service fees charged to our customers, which accounted for approximately 41.1 and 58.9% of revenues from other service fees during the year ended March 31, 2022, respectively.
Jinkailong also generated other revenues such as monthly services commissions from insurance companies, and other miscellaneous service fees charged to our customers, which accounted for approximately 41.1% and 58.9% of revenues from services commissions from insurance companies, and other miscellaneous service fees during the year ended March 31, 2022, respectively.
Recovery of (Provision for) doubtful accounts Jinkailong re-evaluated the possibility of collection of unsettled balances from additional 13 online ride-hailing drivers who rendered their automobiles and provided additional allowance for doubtful accounts of $11,746 for those receivables during the year ended March 31, 2022.
Provision for doubtful accounts Jinkailong re-evaluated the possibility of collection of unsettled balances from additional 13 online ride-hailing drivers who rendered their automobiles and provided additional allowance for doubtful accounts of $11,746 for those receivables during the year ended March 31, 2022.
Cash Flow in Investing Activities For the year ended March 31, 2022, we had net cash used in investing activities of $3,477,125, which consisted of the net cash used in investing activities of $3,365,915 from continuing operations and $111,210 from discontinued operations.
For the year ended March 31, 2022, we had net cash used in investing activities of $3,477,125, which consisted of the net cash used in investing activities of $3,365,915 from continuing operations and $111,210 from discontinued operations.
There are a number of factors that could potentially arise and 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 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) 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.
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 $510,000) of which is equivalent to 35% of liabilities in case Jinkailong is liquidated in accordance with PRC’s company registry compliance.
The platform is presently servicing online ride-hailing drivers in 21 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 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.
Besides, the maximum contingent liabilities our former VIE, Jinkailong, would be exposed to was approximately $6.3 million, assuming all the automobile purchasers were in default, which may cause an increase in guarantee expense and cash outflow in its own financing activities.
Besides, the maximum contingent liabilities our former VIE, Jinkailong, would be exposed to was approximately $3.9 million, assuming all the automobile purchasers were in default, which may cause an increase in guarantee expense and cash outflow in its own financing activities.
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 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 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.
Ability to Manage Defaults and Potential Guarantee Liability Effectively Our subsidiary, Hunan Ruixi, and its equity investee company and former VIE, Jinkailong are exposed to credit risk as they are required by certain financial institutions to provide guarantee on the lease/loan payments (including principal and interests) of the automobile purchasers referred by us.
Ability to Manage Defaults and Potential Guarantee Liability Effectively Our subsidiary, Hunan Ruixi, and its equity investee company and former VIE, Jinkailong are exposed to credit risk as they are required by certain financial institutions to provide guarantee on the lease/loan payments (including principal and interests) of the 82 Table of Contents automobile purchasers referred by us.
Our platform enables qualified ride-hailing drivers to provide application-based transportation services mainly in Chengdu, Changsha, Guangzhou, and other 18 cities in China. Substantially all of our operations are conducted in China.
Our platform enables qualified ride-hailing drivers to provide application-based transportation services mainly in Chengdu, Changsha, Guangzhou, and other 23 cities in China. Substantially all of our operations are conducted in China.
The 79 Table of Contents rider may also simultaneously select multiple online ride-hailing platforms in which case, the aggregation platform will distribute the requests to different online ride-hailing platforms which they cooperate with, based on the number of available drivers using the platform in a certain area and these drivers’ historical performance, among other things.
The rider may also simultaneously select multiple online ride-hailing platforms in which case, the aggregation platform will distribute the requests to different online ride-hailing platforms which they cooperate with, based on the number of available drivers using the platform in a certain area and these drivers’ historical performance, among other things.
We had a gain of $23,556 from the termination of Youlu as it suffered loss during the year ended March 31, 2022. On March 23, 2022, Senmiao Consulting and other shareholders with 94.5% equity interests of Sichuan Senmiao terminated the VIE Agreements and purchased Sichuan Senmiao’s 94.5% equity interests with total consideration of zero.
We had a gain of $23,556 from the termination of Youlu as it suffered loss during the year ended March 31, 2022. On March 23, 2022, Senmiao 93 Table of Contents Consulting and other shareholders with 94.5% equity interests of Sichuan Senmiao terminated the VIE Agreements and purchased Sichuan Senmiao’s 94.5% equity interests with total consideration of zero.
We manage the credit risk arising from the default of automobile purchasers by performing credit checks on each automobile purchaser 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 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.
(“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.
(“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.
Based on the above considerations, we are of the opinion that we will probably not have sufficient funds to meet its working capital requirements and debt obligations as they become due one year from the date of this Report, if we are unable to obtain additional financing.
Based on the above considerations, we are of the opinion that we will probably not have sufficient funds to meet our working capital requirements and debt obligations as they become due one year from the filing date of this Report, if we are unable to obtain additional financing.
Net gain from deconsolidation of VIEs - discontinued operations As fully described above, we terminated series of VIE agreements with other shareholders of our former VIEs. We had a gain of $10,951,545 from the termination of Jinkailong due to its accumulated loss in historical period.
Net gain from deconsolidation of VIEs - discontinued operations As fully described above, we had terminated series of VIE agreements with other shareholders of our former VIEs as of March 31, 2022. We had a gain of $10,951,545 from the termination of Jinkailong due to its accumulated loss in historical period.
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, which legalizes online ride-hailing services such as Didi 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.
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.
We believe three to four years is representative of the period during which the automobile is expected to be economically usable, with normal service, for the purpose for which it is intended.
We believe three to five years is representative of the period during which the automobile is expected to be economically usable, with normal service, for the purpose for which it is intended.
We are trying to alleviate the going concern risk through the following sources: ● will continue to seek equity financing to support our working capital; ● other available sources of financing (including debt) from PRC banks and other financial institutions; and ● financial support and credit guarantee commitments from our related parties.
We are trying to alleviate the going concern risk through the following sources: ● equity financing to support our working capital; ● other available sources of financing (including debt) from PRC banks and other financial institutions; and ● financial support and credit guarantee commitments from our related parties.
Since 2019, in addition to the traditional online ride-hailing platforms, automobile manufacturers, offline operation service companies, financial and map service providers, among others, have built cooperation relationships with each other to make the online ride-hailing industry a more aggregated industry. 83 Table of Contents The online ride-hailing industry may also be affected by, among other factors, the general economic conditions in China.
Since 2019, in addition to the traditional online ride-hailing platforms, automobile manufacturers, offline operation service companies, financial and map service providers, among others, have built cooperation relationships with each other to make the online ride-hailing industry a more aggregated industry. The online ride-hailing industry may also be affected by, among other factors, the general economic conditions in China.
XXTX settles its commissions with the aggregation platforms on a weekly basis. Meanwhile, in order to strengthen our market position in certain cities, our collaboration model with Meituan has been changed from the one same as Gaode, to the one focusing on automobile operating lease and drivers’ management services since August 2021.
XXTX settles its commissions with the aggregation platforms on a weekly basis. 80 Table of Contents Meanwhile, in order to strengthen our market position in certain cities, our collaboration model with Meituan has been changed from the one same as Gaode, to the one focusing on automobile operating lease and drivers’ management services since August 2021.
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 Hunan Ruixi Financial Leasing Co., Ltd.
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.
So Jinkailong re-evaluated and updated the provision amount. Impairments of Long-lived Assets For the year ended March 31, 2022, Jinkailong evaluated the future cash flow of our right-of-use assets and its own vehicles used for operating leases during their remaining useful life and recognized an additional impairment loss of $32,479 for those assets that could not generate sufficient cash.
Impairments of Long-lived Assets For the year ended March 31, 2022, Jinkailong evaluated the future cash flow of our right-of-use assets and its own vehicles used for operating leases during their remaining useful life and recognized an additional impairment loss of $32,479 for those assets that could not generate sufficient cash.
Pursuant to the Interim Measures, XXTX and its subsidiaries may be fined between RMB5,000 to RMB30,000 (approximately $789 to $4,732) 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 (approximately $728 to $4,370) for violations of the Interim Measures, including providing online ride-hailing platform services to unqualified drivers or vehicles.
For the year ended March 31, 2021, net cash used in operating activities from discontinued operation was primarily the payment to investors of the discontinued P2P platform of $1.7 million, offset by the net cash inflow of approximately $1.0 million for the year ended March 31, 2021.
For the year ended March 31, 2022, net cash used in operating activities from discontinued operation was primarily the payment to investors of the discontinued P2P platform of $1.7 million, offset by the net cash inflow of approximately $1.6 million for the year ended March 31, 2022.
However, approximately 45% of our ride-hailing drivers have not obtained the driver’s license as of March 31, 2022 while all of the cars used for online ride-hailing services which we provided management services have the automobile certificate.
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.
The majority net cash used in investing was for the purchase of automobiles for operating lease purpose. 94 Table of Contents Cash Flow in Financing Activities For the year ended March 31, 2022, we had net cash provided by financing activities of $9,755,410, which primarily consisted of: (1) total net proceeds of approximately $5.8 million from our registered public offering in May 2021, approximately $4.4 million from our private placement in November 2021, and $22,015 from exercised warrants from investors, respectively; (2) borrowings from a financial institution of $183,390, partially offset by (3) principal payments made for finance lease liabilities of $433,611, and (4) repayments to related parties and the financial institution of $157,374.
For the year ended March 31, 2022, we had net cash provided by financing activities of $9,755,410, which primarily consisted of: (1) total net proceeds of approximately $5.8 million from our registered public offering in May 2021, approximately $4.4 million from 95 Table of Contents our private placement in November 2021, and $22,015 from exercised warrants from investors, respectively; (2) borrowings from a financial institution of $183,390, partially offset by (3) principal payments made for finance lease liabilities of $433,611, and (4) repayments to related parties and the financial institution of $157,374.
In accordance with the development of the operating lease business, our cooperated platforms, such as Meituan, agree to temporarily “lock-up” the fares of the rides which Active Drivers earn from the platform to ensure the timely collection of our rental receivables from those Active Drivers.
In accordance with the development of the operating lease business, our Partner Platforms, such as Gaode, agree to temporarily “lock-up” the fares of the rides which Active Drivers earn from the platform to ensure the timely collection of its rental receivables from those Active Drivers.
According to these regulations and guidelines, three licenses /certificates are required for operating the online ride-hailing business in Chengdu: (1) the ride-hailing service platform such as Didi 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”).
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”).
We reassess our pricing interest rates quarterly based on changes in the local prevailing rates in the marketplace. As of March 31, 2022, our pricing interest rate was 6.0% per annum.
We reassess our pricing interest rates quarterly based on changes in the local prevailing rates in the marketplace. As of March 31, 2023, our pricing interest rate is 6.0% per annum.
We leased over 480 automobiles with an average monthly rental income of $485 per automobile, resulting in a rental income of $1,722,480, for the year ended March 31, 2022. While we leased over 80 automobiles with an average monthly rental income of $526 per automobile, resulting in a rental income of $224,590, for the year ended March 31, 2021.
While we leased over 480 automobiles with an average monthly rental income of $485 per automobile, resulting in a rental income of $1,722,480, for the year ended March 31, 2022.
Ability to Retain and Key Business Cooperators Historically, we have set up a series of strategy and business relationships with certain affiliates of some famous and leading companies of new energy vehicles (“NEVs”) manufacturers, online ride-hailing platforms and travel service providers to develop our Automobile Transaction and Related Services and Online Ride-hailing Platform Services.
Ability to Retain Key Business Cooperators Historically, we have set up a series of strategy and business relationships with certain affiliates of some famous and leading companies of NEVs manufacturers, online ride-hailing platforms, local NEVs leasing companies, and travel service providers to develop our Automobile Transaction and Related Services and Online Ride-hailing Platform Services.
As of the date of this Report, Senmiao Consulting has made capital contribution of RMB36.86 million (approximately $5.81 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 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.
(“Hunan Ruixi”), a PRC limited liability company, and its equity-investment, also its former variable interest entity (“VIE”), Sichuan Jinkailong Automobile Leasing Co., Ltd. (“Jinkailong”). Since October 2020, we also operate an online ride-hailing platform through Hunan Xixingtianxia Technology Co., Ltd. (“XXTX”), a wholly-owned subsidiary of Sichuan Senmiao Zecheng Business Consulting Co., Ltd., our wholly-owned subsidiary (“Senmiao Consulting”).
(“Hunan Ruixi”), a PRC limited liability company, and equity investee company, Sichuan Jinkailong Automobile Leasing Co., Ltd. (“Jinkailong”). Since October 2020, we also operate an online ride-hailing platform through Hunan Xixingtianxia Technology Co., Ltd. (“XXTX”), a wholly-owned subsidiary of Sichuan Senmiao Zecheng Business Consulting Co., Ltd., our wholly-owned subsidiary (“Senmiao Consulting”).
Interest expense on finance leases for the year ended March 31, 2022 was $55,844, 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 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 and Interest Expense on Finance Leases Interest expense for the year ended March 31, 2022 was $5,893, resulting 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 2022 resulted from the borrowings of Corenel from a financial institution for its automobile commercial insurance by installment.
There is no assurance that we will be successful 93 Table of Contents 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 financial will be available to us on commercially reasonable terms, or at all.
The majority net cash used in investing was for the purchase of automobiles for operating lease purpose and expenditures on the licenses of online ride-hailing platforms in different cities in China.
The majority net cash used in investing was for the purchase of automobiles for operating lease purpose of $3,223,992 and expenditures on the licenses of $141,730 for online ride-hailing platforms in different cities in China.
During the year ended March 31, 2022, our Auto Operating Leasing, Auto Financing, automobile management services, and Auto Sales accounted for approximately 76.6%, 4.5%, 3.3% and 1.2% of our total revenue from our automobile transactions and related services, respectively, for the year ended March 31, 2022, while our Auto Sales, Auto Operating Leasing, Auto Financing and Transaction Facilitation, Auto Financing and automobile management services accounted for approximately 38.0%, 17.5%, 14.7%, 14.3% and 6.2% for the year ended March 31, 2021, respectively, excluding the income which Jinkailong generated.
During the year ended March 31, 2023, our Auto Operating Leasing, Auto Sales, Auto Financing and other services income accounted for approximately 79.0%, 5.6%, 1.0% and 14.4% of our total revenue from our automobile transactions and related services, respectively, while our Auto Operating Leasing, Auto Sales, Auto Financing and other services income accounted for approximately 76.6%, 1.2%, 4.5% and 17.7% for the year ended March 31, 2022, respectively, excluding the income which Jinkailong generated.
As of March 31, 2022, we had one parking lot and 4 employees in Guangzhou, and one parking lot, and an exhibition hall and 6 employees in Changsha, and our equity investee company, Jinkailong, had one parking lot and 10 employees in Chengdu, for parking and management of automobiles for operating lease.
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.
The acquisition of XXTX has brought us a new stream of revenue and enhanced our goal of providing an all-round solution for online ride-hailing drivers. We launched Xixingtianxia in specific markets within Chengdu in late October 2020, focusing on current driver customers.
Jiekai and Jinkailong earned rental income from drivers and earned commissions from Partner Platforms. The acquisition of XXTX has brought us a new stream of revenue and enhanced our goal of providing an all-round solution for online ride-hailing drivers. We launched Xixingtianxia in specific markets within Chengdu in late October 2020, focusing on current driver customers.
As of March 31, 2022, 100 and 1,227 online ride-hailing drivers we serviced rendered their automobiles to Hunan Ruixi and Jinkailong, respectively, for sublease or sale. In general, most of the defaulted automobile purchasers who want to remain in online ride-hailing business would pay the default amounts within one to three months.
As of March 31, 2023, 108 online ride-hailing drivers we serviced rendered their automobiles to Hunan Ruixi for sublease or sale. In general, most of the defaulted automobile purchasers who want to remain in online ride-hailing business would pay the default amounts within one to three months.
The rental costs increased by $341,434, mainly due to Jinkailong leased approximately another 500 automobiles, including 400 from Cornel, to expand leasing scale during the year ended March 31, 2022. Meanwhile, the rental costs of approximately $1.3 million belong to Corenel was eliminated in the loss of discontinued operations of the consolidated financial statements.
Jinkailong leased approximately another 500 automobiles, including approximately 400 from Corenel and Yicheng, to expand leasing scale during the year ended March 31, 2022. Meanwhile, the rental costs of approximately $1.3 million belong to Corenel and Yicheng was eliminated in the loss of discontinued operations of the consolidated financial statements during the year ended March 31, 2022.
Inflation We do not believe our business and operations have been materially affected by inflation. Critical Accounting Policies We prepare our consolidated financial statements in accordance with U.S GAAP.
Inflation We do not believe our business and operations have been materially affected by inflation. Critical Accounting Estimates Our consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP.
We believe the following accounting policies involve the most significant assumptions and estimates used in the preparation of our consolidated financial statements. (a) Use of estimates 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. 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 also keep close communication with our purchasers in particular the online ride-hailing drivers so that we can evaluate their financial conditions and provide them with assistance including the transfer of automobile to a new driver if they are no longer interested in providing ride-hailing services or are unable to earn enough income to make monthly lease/loan payments.
We do this so that we can evaluate their financial conditions and provide them with assistance including the transfer of automobile to a new driver if they are no longer interested in providing ride-hailing services or are unable to earn enough income to make monthly lease/loan payments.
Operating lease revenues from automobile rentals We generate revenues from leasing our own automobiles, sub-leasing automobiles leased from third-parties or rendered by online ride-hailing drivers with their authorization for a lease term of no more than twelve months. The increase of rental income was due to the increased number of leased automobiles.
Operating lease revenues from automobile rentals We generate revenues from leasing our own automobiles, sub-leasing automobiles leased from third-parties or rendered by online ride-hailing drivers with their authorization for a lease term of no more than twelve months.
We exclude from the measurement of our lease revenues any tax assessed by a governmental authority that is both imposed on and concurrent with a specific revenue-producing transaction and collected from a customer.
The basis of the amount of revenue that is recognized since it isn’t straight-line basis We exclude from the measurement of our lease revenues any tax assessed by a governmental authority that is both imposed on and concurrent with a specific revenue-producing transaction and collected from a customer.
During the year ended March 31, 2022, we earned online ride-hailing platform service fees of approximately $2.7 million, netting off approximately $3.4 million incentives paid to Active Drivers.
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.
We are required to consider many factors and make certain assumptions during this assessment. If any of the assumptions used to determine the fair value of the share-based awards changes significantly, share-based compensation expense may differ materially in the future from that recorded in the current reporting period. (h) Leases We account for leases in accordance with ASC 842.
We are required to consider many factors and make certain assumptions 97 Table of Contents during this assessment. If any of the assumptions used to determine the fair value of the share-based awards changes significantly, share-based compensation expense may differ materially in the future from that recorded in the current reporting period.
In addition to the national online reservation taxi operating license, XXTX and its subsidiaries also obtained the online reservation taxi operating license in 25 cities, including Chengdu, Changsha, Guangzhou, Tianjin, Shenyang, Harbin, Nanchang, Haikou, Hezhou, two cities in Zhejiang, Shandong, and Guizhou Province, respectively, five cities in Jiangsu Province and other five cities in Sichuan Province from June 2020 to April 2022, 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 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.
As of March 31, 2022, the maximum contingent liabilities Hunan Ruixi would be exposed to was approximately $0.8 million, assuming all the automobile purchasers were in default, which may cause an increase in guarantee expense and cash outflow in financing activities.
As of March 31, 2023, the maximum contingent liabilities we would be exposed to was approximately $9,691, assuming all the automobile purchasers were in default, which may cause an increase in guarantee expense and cash outflow in financing activities.
During the year ended March 31, 2022, we have been fined by approximately $178,000 by Traffic Management Bureaus in Chengdu and Changsha, of which, approximately $16,000 was further compensated by drivers or cooperated third parties.
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.
See “Business — Actual and Potential Impact of Ongoing Coronavirus (COVID 19) in China on Our Business.” Ability to Manage and Grow New 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.
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.
During the year ended March 31, 2022, we have expanded marketing of our ride-hailing platform to a larger pool of potential drivers and riders in Chengdu, Changsha, Guangzhou and other 16 cities through cooperation with certain local car rental companies and through offering attractive incentives and awards to drivers.
As of the date of this Report, we have expanded marketing of our ride-hailing platform to a larger pool of potential drivers and riders in Chengdu, Changsha, Guangzhou and other 23 cities through cooperation with certain local car rental companies and through offering attractive incentives and awards to drivers.
Liquidity and Capital Resources We have financed our operations primarily through proceeds from our equity offerings, stockholder loans, commercial debt and cash flow from operations. We had cash and cash equivalents of $1,185,221 as of March 31, 2022 as compared to $4,340,529 as of March 31, 2021 for our continuing operations.
Liquidity and Going Concern We have financed our operations primarily through proceeds from our equity offerings, stockholder loans, commercial debt and cash flow from operations. We had cash and cash equivalents of $1,610,090 as of March 31, 2023 as compared to $1,185,221 as of March 31, 2022 for our continuing operations.
We have seen an increasing demand for short-term car rentals since the end of 2019, which remained stable during the three months and year ended March 31, 2022. To meet the demand of business expansion in Chengdu, Changsha and Guangzhou, we also purchased and leased automobiles from third parties for our operating lease.
The demand for short-term car rentals increased accordingly, which remained stable during the year ended March 31, 2023. To meet the demand of business expansion in Chengdu, Changsha, and Guangzhou, we also purchased and leased automobiles from third parties for our operating lease.
Interest expense on finance leases increased by $9,326, or approximately 20%, as compared with the year ended March 31, 2021, mainly due to the weighted average number of rendered automobiles during the year ended March 31, 2022 increased.
Interest expense on finance leases decreased by $30,169, or approximately 54%, as compared with the year ended March 31, 2022, mainly due to the decreased weighted average number of rendered automobiles during the year ended March 31, 2023.
The change in fair value of derivative liabilities the year ended March 31, 2022 was a gain of $6,951,482 in total as our stock price as of March 31, 2022 was lower than the price on March 31, 2021.
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.
Besides, all the new cars used for online ride-hailing should be NEVs.
Besides, all the new cars used for online ride-hailing in Chengdu should be NEVs since July 2021.
As of March 31, 2022, we had accounts receivable, net of allowance of approximately $0.3 million 81 Table of Contents and advanced payments of approximately $0.2 million due from the automobile purchasers, net of allowance, which will be collected through installment payments on a monthly basis during the relevant affiliation periods.
As of March 31, 2023, we had accounts receivable, net of allowance of approximately $76,000 and advanced payments of approximately $45,000 due from the historical automobile purchasers, net of allowance, which will be collected through installment payments on a monthly basis during the relevant affiliation periods.
Meanwhile, sales revenue of automobiles, operating lease revenues from automobile rentals, financing revenues, service fees from automobile purchase services, service fees from automobile management and guarantee services, and other services fees, which accounted for approximately 38.0%, 17.5%, 14.3%, 14.7%, 6.2% and 9.3%, respectively, of the total revenue from Automobile Transaction and Related Services during the year ended March 31, 2021.
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.
As of March 31, 2022, we had 22 and 52 employees in our own sales department and sales department of our equity investee company, Jinkailong, respectively. 80 Table of Contents Management of Automobile Rentals Due to the fierce competition of online ride-hailing industry in Chengdu and the adverse impact from COVID-19 pandemic across mainland China, a significant number of online ride-hailing drivers exited the ride-hailing business and rendered their automobiles to us for sublease or sales in order to generate income/proceeds to cover their payments owed to the financial institutions and us.
Management of Automobile Rentals Due to the fierce competition of online ride-hailing industry in Chengdu and the adverse impact from COVID-19 pandemic across mainland China, a significant number of online ride-hailing drivers exited the ride-hailing business and rendered their automobiles to us for sublease or sales in order to generate income/proceeds to cover their payments owed to the financial institutions and us.
The following table sets forth the breakdown of revenues by revenue source for the years ended March 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ ​ March 31, ​ 2022 2021 Revenue from automobile transactions and related services (discontinued operations) ​ $ 6,830,116 ​ $ 3,971,694 - Operating lease revenues from automobile rentals ​ 5,452,483 ​ 3,207,781 - Commissions from online ride-hailing platforms ​ 399,600 ​ 32,797 - Service fees from NEVs leasing ​ 232,295 ​ — - Service fees from automobile management and guarantee services ​ 217,838 ​ 206,248 - Financing revenues ​ 15,855 ​ 43,744 - Facilitation fees from automobile transactions ​ — ​ 1,665 - Other service fees ​ 512,045 ​ 479,459 ​ ​ ​ ​ ​ ​ ​ Revenue from Online Lending Services (discontinued operations) ​ — ​ 7,153 - Transaction fee ​ — ​ 3,488 - Service and others fees ​ — ​ 3,665 ​ ​ ​ ​ ​ ​ ​ Total revenues from discontinued operations ​ $ 6,830,116 ​ $ 3,978,847 ​ 90 Table of Contents Revenue from Automobile Transactions and Related Services (discontinued operations) Revenue from the automobile transaction and related services (discontinued operations) mainly included operating lease revenues from automobile rentals, commissions from online ride-hailing platforms, service fees from NEVs leasing, service fees from automobile management and guarantee services, and other revenues, which accounted for approximately 79.8%, 5.9%, 3.4%, 3.2% and 7.7%, respectively, of the total revenue from discontinued operations during the year ended March 31, 2022.
Revenues The following table sets forth the breakdown of revenues by revenue source for the year ended March 31, 2022: ​ ​ ​ ​ ​ ​ For the Year Ended ​ March 31, 2022 - Operating lease revenues from automobile rentals ​ $ 5,452,483 - Commission from an online ride-hailing platform ​ 399,600 - Service fees from NEVs leasing ​ 232,295 - Service fees from automobile management and guarantee services ​ 217,838 - Financing revenues ​ 15,855 - Other service fees ​ 512,045 Total revenues from discontinued operations ​ $ 6,830,116 ​ Revenue from the automobile transaction and related services (discontinued operations) mainly included operating lease revenues from automobile rentals, commissions from online ride-hailing platforms, service fees from NEVs leasing, service fees from automobile management and guarantee services, and other revenues, which accounted for approximately 79.8%, 5.9%, 3.4%, 3.2% and 7.7%, respectively, of the total revenue from discontinued operations during the year ended March 31, 2022.
Other service fees We generate other revenues such as monthly services commissions from insurance companies and other companies and other miscellaneous service fees charged to our customers, which accounted for approximately 53.4% and 46.6% of revenues from other service fees during the year ended March 31, 2022, respectively.
Other service fees We generate other revenues such as monthly services commissions from Partner Platforms and other companies, and other miscellaneous service fees charged to our customers, which accounted for approximately 85.3%, and 14.7% of revenues from other service fees during the year ended March 31, 2023, respectively.
The gain consists of a gain of $185,727 for the warrants issued in our June 2019 registered direct offering, a gain of $352,944 for the warrants issued in our August 2020 underwritten public offering, a gain of $572,018 for the warrants issued in our February 2021 registered direct offering, a gain of $2,725,530 for the warrants issued in our May 2021 registered direct offering, and a gain of $3,115,263 for the warrants issued in our November 2021 private placement.
The change in fair value of derivative liabilities for the year ended March 31, 2022 was a gain of $6,951,482 in total, which consists of a gain of $185,727 for the warrants issued in our June 2019 registered direct offering, a gain of $352,944 for the warrants issued in our August 2020 underwritten public offering, a gain of $572,018 for the warrants issued in our February 2021 registered direct offering, a gain of $2,725,530 for the warrants issued in our May 2021 registered direct offering, and a gain of $3,115,263 for the warrants issued in our November 2021 private placement.
(g) Share-based awards Share-based awards granted to our employees are measured at fair value on grant date and share-based compensation expense is recognized (i) immediately at the grant date if no vesting conditions are required, or (ii) using the accelerated attribution method, net of 98 Table of Contents estimated forfeitures, over the requisite service period.
(c) Share-based awards Share-based awards are measured at fair value on grant date and share-based compensation expense is recognized (i) immediately at the grant date if no vesting conditions are required, or (ii) using the straight-line basis, net of estimated forfeitures, over the requisite service period.
Meanwhile, approximately 1.6 million online booking taxi transportation certificates and approximately 4.1 million online booking taxi driver’s licenses were issued nationwide in China.
Meanwhile, approximately 2.36 million online booking taxi transportation certificates and approximately 5.58 million online booking taxi driver’s licenses were issued nationwide in China.
(e) 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 then determine which options, warrants and embedded features require liability accounting and records the fair value as a derivative liability.
(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.
The commissions from insurance companies and other miscellaneous service fees charged to the automobile purchasers, which accounted for approximately 78.3%, and 21.7% of revenues from other service fees during the year ended March 31, 2021, respectively.
The commissions from insurance companies, Ride-hailing platform companies and other companies, and other miscellaneous service fees charged to the automobile purchasers, which accounted for approximately 53.4%, and 46.6% of revenues from other service fees during the year ended March 31, 2022, respectively.
Cost of Revenues Cost of revenues represents the amortization and depreciation, daily maintenance and insurance expense, and rental costs of automobiles leased to online ride-hailing drivers.
Cost of Revenues Cost of revenues represents the amortization and depreciation of $2,590,277, daily maintenance and insurance expense, and rental costs of automobiles leased to online ride-hailing drivers of $2,593,529 during the year ended March 31, 2022.
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 ride-hailing drivers completed rides and earned income through Xixingtianxia (the “Active Drivers”) each month.
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.
We have considered whether there is substantial doubt about our ability to continue as a going concern due to (1) net loss of approximately $5.6 million from continuing operations for the year ended March 31, 2022; (2) accumulated deficit of approximately $34.9 million as of March 31, 2022; (3) the working capital deficit of approximately $0.6 million as of March 31, 2022; (4) net operating cash outflows of approximately $9.0 million and $0.1 million from continuing operations and discontinued operations, respectively, for the year ended March 31, 2022; and (5) the purchase commitment of approximately $1.7 million.
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.
According to the 49 th Statistical report on Internet Development in China published in February 2022 by the China Internet Network Information Center (CNNIC), the number of online ride-hailing service users had reached 452 million by the end of 2021, increased by 24% from 2020, and took approximately 43.9% of the total number of Chinese internet users.
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.

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