What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-07-08 compared with 2020-07-09 · 1972 added, 1685 removed, 525 unchanged (87% of the section changed)

Financial Statements and Supplementary Data

The financial statements required by this

item begin on page F-1 hereof.

The financial statements required by this item

begin on page F-1 hereof.

Index to Financial Statements

2 unchanged sentences

Consolidated Balance Sheets as of March 31, 2021 and 2020

Consolidated Statements of Operations and Comprehensive Loss for the Years Ended March 31, 2020 and 2019

Consolidated Statements of Changes in Stockholders' Equity for the Years Ended March 31, 2020 and 2019

Consolidated Statements of Operations and Comprehensive Loss for the Years Ended

March 31, 2021 and 2020

Consolidated Statements of Changes in Stockholders' Equity for the Years Ended March 31, 2021

Consolidated Statements of Cash Flows for the Years Ended March 31, 2021 and 2020

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Board of Directors and

4 unchanged sentences

and the related consolidated statements of operations and comprehensive loss, changes in stockholders’

cash flows for each of the years in the two-year period ended March 31, 2020, and the related notes (collectively referred to as

the financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the

financial position of the Company as of March 31, 2020 and 2019, and the results of its operations and its cash flows for each

of the years in the two-year period ended March 31, 2020, in conformity with accounting principles generally accepted in the United

States of America.

equity, and cash flows for

each of the years in the two-year period ended March 31, 2021, and the related notes (collectively referred to as the financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company

as of March 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended

March 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements

are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight

Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with

the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether

the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required

to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are

required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

These consolidated financial statements are the

responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial

statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United

States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and

the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated

financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we

engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding

of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s

internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures

to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing

procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and

disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

that our audits provide a reasonable basis for our opinion.

Consideration of the Company’s

Ability to Continue as a Going Concern

The accompanying consolidated financial

statements have been prepared assuming the Company will continue as a going concern.

As discussed in Note 2 to the financial statements,

the Company had incurred significant working capital deficiency, recurring losses from operations and accumulated deficit at March

These factors raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s

plans in regards to these matters are also described in Note 2.

These financial statements do not include any adjustments that

might result from the outcome of these uncertainties.

If the Company is unable to successfully obtain the necessary additional

financial support as specified in Note 2, there could be a material adverse effect on the Company.

Our audits included performing procedures to assess

the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the

consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by

management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide

a reasonable basis for our opinion.

Consideration of the Company’s Ability

to Continue as a Going Concern

The accompanying consolidated financial statements

have been prepared assuming the Company will continue as a going concern.

As discussed in Note 2 to the financial statements, the Company

had incurred significant working capital deficiency, recurring losses from operations and accumulated deficit at March 31, 2021.

factors raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans in regards

to these matters are also described in Note 2.

These financial statements do not include any adjustments that might result from the outcome

of these uncertainties.

If the Company is unable to successfully obtain the necessary additional financial support as specified in Note

2, there could be a material adverse effect on the Company.

/s/ Friedman LLP

1 unchanged sentence

New York, New York

TECHNOLOGY LIMITED

BALANCE SHEETS

of March 31, 2020 and 2019

SENMIAO TECHNOLOGY LIMITED

CONSOLIDATED BALANCE SHEETS

(Expressed in U.S.

dollar, except for the number of shares)

4 unchanged sentences

Prepayments, other receivables and other assets, net

Escrow receivable due within one year

Due from related parties

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Intangible assets, net

Prepayment for intangible assets

Accounts receivable, net, noncurrent

Finance lease receivables, net, noncurrent portion

Other assets - discontinued operations

Total Other Assets

Finance lease receivables, net, noncurrent

LIABILITIES AND EQUITY

1 unchanged sentence

Borrowings from financial institutions

Borrowings from third parties

Accounts payable

Advance from customers

Advances from customers

Income tax payable

9 unchanged sentences

Borrowings from financial institutions, noncurrent

Operating lease liabilities, noncurrent

Operating lease liabilities, noncurrent - related parties

Financing lease liabilities, noncurrent

Operating lease liabilities, non-current

Operating lease liabilities, non-current - related parties

Financing lease liabilities, non-current

Deferred tax liability

Total other liabilities

6 unchanged sentences

Accumulated deficit

(34,064,921 )

(23,704,863 )

Accumulated other comprehensive loss

Total Senmiao Technology Limited stockholders' equity

Noncontrolling interests

Non-controlling interests

Total liabilities and equity

The accompanying notes are an integral part of the consolidated financial statements.

TECHNOLOGY LIMITED

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

The accompanying notes are an integral part of

the consolidated financial statements.

SENMIAO TECHNOLOGY LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Expressed in U.S.

dollar, except for the number of shares)

For the Years Ended March 31,

For the Year Ended March 31,

Cost of revenues

1 unchanged sentence

Selling, general and administrative expenses

Bad debt expense

Recovery of (Provision for) doubtful accounts

Impairments of long-lived assets

Total operating expenses

1 unchanged sentence

Other income (expense)

Other expense, net

Other income (expense), net

Interest expense

3 unchanged sentences

Loss before income taxes

Income tax expenses

Income tax expense

Net loss from continuing operations

Net loss from discontinued operations, net of applicable income taxes

Net loss (income) attributable to noncontrolling interests from continuing operations

Net loss attributable to non-controlling interests from continuing operations

Net loss attributable to stockholders

2 unchanged sentences

Comprehensive loss

Total comprehensive loss (income) attributable to noncontrolling interests

Total comprehensive loss attributable to noncontrolling interests

Total comprehensive loss attributable to stockholders

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Non-controlling

as of March 31, 2018

BALANCE as of March 31, 2019

$ (15,031,538 )

contribution from noncontrolling interests of the subsidiary acquired

from acquisition of variable interest entities

of common stock pursuant to exercise of underwriter's warrants granted in IPO

(loss) income

currency translation adjustment

as of March 31, 2019

Issuance of common stock in registered direct offering net of issuance costs

Exercise of Series B warrants into common stock

Issuance of restricted stock units

Foreign currency translation adjustment

BALANCE as of March 31, 2020

$ (23,704,863 )

of common stock in registered direct offering net of issuance costs

of Series B warrants into common stock

of restricted stock units

currency translation adjustment

as of March 31, 2020

$ (1,331,340 )

(10,360,058 )

(12,662,639 )

Exercise of Series A warrants into common stock

Exercise of Placement warrants into common stock

Fair value of derivative liabilities upon exercises of warrants

Issuance of common stock and warrants in an underwritten direct offering, net of issuance costs

Issuance of common stock pursuant to exercise of underwriters’

over-allotment option, net of issuance costs

Issuance of common stock and warrants in a registered direct offering, net of issuance costs

Fair value of warrants allocated to derivative liabilities

Issuance of common stock for consulting service

Acquisition of business entities

Foreign currency translation adjustment

BALANCE as of March 31, 2021

$ (34,064,921 )

$ (3,284,143 )

The accompanying notes are an integral part of the consolidated financial statements.

TECHNOLOGY LIMITED

STATEMENTS OF CASH FLOWS

SENMIAO TECHNOLOGY LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in U.S.

dollar, except for the number of shares)

For the Years Ended March 31,

For the Year Ended March 31,

Cash Flows from Operating Activities:

$ (12,662,639 )

$ (9,935,803 )

Net loss from discontinued operations

Net loss from continuing operations

(12,600,663 )

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization of property and equipment

Stock compensation expense

Stock based compensation expense

Amortization of right-of-use assets

Amortization of intangible assets

Bad debt expense

Impairment loss of right-of-use assets

Loss on disposal of equipment

Provision (recovery) for doubtful accounts

Impairment loss of long-lived assets

Gain (loss) on disposal of equipment

Change in fair value of derivative liabilities

14 unchanged sentences

Purchases of property and equipment

Purchase of intangible assets

Addition in finance lease receivable

Prepayment of intangible assets

Cash acquired from XXTX, net of cash paid to XXTX

Net cash used in investing activities from continuing operations

2 unchanged sentences

Cash Flows from Financing Activities:

Net proceeds from issuance of common stock in registered direct offering

Net proceeds from issuance of common stock in an underwritten public offering

Net proceeds from exercise of underwriters’

over-allotment option

Net proceeds from issuance of common stock and warrants in a registered direct public offering

Net proceeds from issuance of common stock upon warrants exercised

Borrowings from financial institutions

Repayments to stockholders

Repayments to third parties

Repayments from related parties

Loan to related party

Borrowings from related parties and affiliates

Repayments from related parties

Repayments to related parties and affiliates

Repayments of current borrowings from financial institutions

Repayments of noncurrent borrowings from financial institutions

Release of escrow receivable

Principal payments of finance lease liabilities

Cash acquired from acquisition

Net cash provided by (used in) financing activities from continuing operations

Net cash (used in) provided by financing activities from discontinued operations

Net cash provided by financing activities from continuing operations

Net cash used in financing activities from

discontinued operations

Net Cash Provided by Financing Activities

Effect of exchange rate changes on cash and cash equivalents

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of year

1 unchanged sentence

Cash and cash equivalents from discontinued operations

Cash and cash equivalents from continuing operations, end period

Cash and cash equivalents from continuing operations, end of year

Supplemental Cash Flow Information

Cash paid for interest expense

Cash paid for income tax

Non-cash Transaction in Investing and Financing Activities

IPO expenses paid by the Company’s stockholders

Assume of net liabilities of Ruixi, excluding cash and cash equivalents

Prepayment in exchange of intangible assets

Right-of-use assets obtained in exchange of lease liabilities

Right-of-use assets obtained in exchange of lease liabilities - related parties

Recognition of right-of-use assets and lease liabilities

Recognition of right-of-use assets and lease liabilities, related parties

Acquisition of equipment through prepayment and financing lease

Allocation of fair value of derivative liabilities for issuance of common stock proceeds

Allocation of fair value of derivative liabilities to additional paid in capital upon warrants exercised

$ 1,010,752.00

Issuance of restricted stock units from accrued expenses and other liabilities

Acquisition of XXTX with payables

The accompanying notes are an integral part of the consolidated financial statements.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ORGANIZATION AND

PRINCIPAL ACTITIVIES

Senmiao Technology Limited (the

“Company”) is a U.S.

ORGANIZATION AND PRINCIPAL ACTIVITIES

Senmiao Technology Limited (the “Company”)

holding company incorporated in the State of Nevada on June 8, 2017.

provides automobile transaction and related services focusing on the ride-hailing industry in the People’s Republic of

China (“PRC” or “China”) through its majority owned subsidiary, Hunan Ruixi Financial Leasing

(“Hunan Ruixi”), a PRC limited liability Company, its wholly owned subsidiary, Hunan Ruixi

Automobile Leasing Co., Ltd.

(“Ruixi Leasing”), and its variable interest entity (“VIE”),

Sichuan Jinkailong Automobile Leasing Co., Ltd.

(“Jinkailong”).

The Company operated an online lending

The Company operates its business in two segments:

(1) automobile transaction and related services focusing on the online ride-hailing industry in the People’s Republic of China

(“PRC”

or “China”) through its wholly owned subsidiaries, Yicheng Financial Leasing Co., Ltd., a PRC limited

liability company (“Yicheng”), Chengdu Corenel Technology Co., Ltd., a PRC limited liability company (“Corenel”),

and its majority owned subsidiary, Hunan Ruixi Financial Leasing Co., Ltd., a PRC limited liability company (“Hunan Ruixi”),

its wholly owned subsidiary, Hunan Ruixi Automobile Leasing Co., Ltd., a PRC limited liability company (“Ruixi Leasing”),

and its variable interest entity (“VIE”), Sichuan Jinkailong Automobile Leasing Co., Ltd., a PRC limited liability company

(“Jinkailong”).

(ii) online ride-hailing platform services through its own platform (known as Xixingtianxia)

as described further below, since October 2020, through Hunan Xixingtianxia Technology Co., Ltd., a PRC limited liability

company (“XXTX”), which is a majority owned subsidiary of Sichuan Senmiao Zecheng Business Consulting Co., Ltd., a PRC

limited liability company and wholly-owned subsidiary of the Company (“Senmiao Consulting”).

The Company’s ride hailing

platform enables qualified ride-hailing drivers to provide transportation services in Chengdu, Changsha, Neijiang and Guangzhou, China.

The Company previously operated an online lending

platform in China through its VIE, Sichuan Senmiao Ronglian Technology Co., Ltd.

(“Sichuan Senmiao”), which

facilitated peer-to-peer (“P2P”) loan transactions between Chinese investors and individual and

small-to-medium-sized enterprise borrowers.

The Company ceased its online lending services business in October 2019 and

commenced a process of winding down such business.

On September 25, 2016, Sichuan Senmiao

acquired a P2P platform (including website, internet content provider license, operating systems, servers, and management system)

from Sichuan Chenghexin Investment and Asset Management Co., Ltd.

On July 28, 2017, the Company established a wholly-owned

subsidiary, Sichuan Senmiao Zecheng Business Consulting Co., Ltd.

(“Senmiao Consulting”) in China.

Sichuan Senmiao

was established in China in June 2014.

On September 18, 2017, the Company, through Senmiao Consulting, entered into a

series of agreements (“VIE Agreements”) with Sichuan Senmiao and its equity holders (the “Sichuan Senmiao Shareholders”)

to obtain control and became the primary beneficiary of Sichuan Senmiao (the “Restructuring”).

In connection with the

Restructuring, as partial consideration for the Sichuan Senmiao Shareholders’ commitment to perform their obligations under

the VIE Agreements, the Company issued an aggregate of 45,000,000 shares of its common stock to the Sichuan Senmiao Shareholders

pursuant to certain subscription agreements dated September 18, 2017.

The Company conducted its P2P business transactions

through the Sichuan Senmiao, the VIE.

The P2P business was discontinued on October 17, 2019.

On October 17, 2019, the Board of

Directors of the Company (the “Board”) approved a plan (the “Plan”) prepared by the Company’s executive

officers for the Company to discontinue and wind down its online P2P lending services business.

In connection with the Plan, the

Company ceased facilitation of loan transactions on its online lending platform and assumed all the outstanding loans from investors

on the platform.

The decision and action taken by the Company to discontinue the online P2P lending services business represents

a major shift that will have a material effect on the Company’s operations and financial results, which triggers discontinued

operations accounting in accordance with ASC 205-20-45.

See Note 4 – discontinued operations.

On November 21, 2018, as part of its

entry into the automobile transaction business, the Company entered into an Investment and Equity Transfer Agreement (the “Investment

Agreement”) with Hunan Ruixi and all the shareholders of Hunan Ruixi (“Hunan Ruixi Shareholders”), pursuant to

which the Company acquired from the Hunan Ruixi Shareholders an aggregate of 60% of the equity interest of Hunan Ruixi.

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 (Note 3).

In June 30, 2019, the Company made the

full cash contributions in the aggregate amount of $6,000,000 to Hunan Ruixi.

Hunan Ruixi holds a business license for automobile sales and

financial leasing and has been engaged in automobile financial leasing services and automobile sales since January 2019.

Hunan Ruixi also controls Jinkailong through its 35% equity interest and voting agreements with Jinkailong’s other shareholders.

Jinkailong facilitates automobile sales and financing transactions for its clients, who are primarily ride-hailing drivers and

provides them relevant after-transaction services.

In March 2019, Hunan Ruixi began its financing leasing operation.

In May 2019, the Company formed a wholly

owned subsidiary, Yicheng Financial Leasing Co., Ltd.

(“Yicheng”), with a registered capital of $50 million in

Chengdu City, Sichuan Province.

Yicheng obtained its business licenses for automobiles sale and financial leasing on May 5,

Yicheng has been engaged in automobile sales since June 2019.

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On July 5, 2019, Yicheng entered into

an Investment and Equity Transfer Agreement with Chengdu Mashangchuxing Automobile Leasing Co., Ltd.

(“Mashang Chuxing”),

Chengdu Yunche Chixun Business Consulting Co., Ltd.

(“Yunche Chixun”), Mr.

Zhiqiu Xia and all the shareholders

of Mashang Chuxing (“Mashang Chuxing Shareholders”), pursuant to which, Yicheng, Yunche Chixun, Mr.

acquired from the Mashang Chuxing Shareholders 49%, 5% and 46% of the equity interests of Mashang Chuxing for no consideration,

respectively.

On March 18, 2020, Yicheng, Yunche Chixun, Mr.

Zhiqiu Xia entered into equity transfer agreements with Sichuan

Dinghengxin Automobile Service Co., Ltd (“Dinghengxin”), respectively, pursuant to which, Yicheng, Yunche Chixun, Mr.

Xia transferred all the equity interests of Mashang Chuxing to Dinghengxin with no consideration.

As of the date of the financial

statements, none of the shareholders of Mashang Chuxing made capital contribution.

Mashang Chuxing commenced providing ride-hailing

services in August 2019 and has suffered loss of approximately $4,400 due to limited operations.

The following diagram illustrates the Company’s corporate

structure, including its subsidiaries, and VIEs, as of the date of these financial statements:

(“Sichuan Senmiao”), which facilitated

peer-to-peer (“P2P”) loan transactions between Chinese investors and individual and small-to-medium-sized enterprise borrowers.

The Company ceased its online lending services business in October 2019.

Hunan Ruixi holds a business license for automobile

sales and financial leasing and has been engaged in automobile financial leasing services and automobile sales since March 2019 and

January 2019, respectively.

Hunan Ruixi also controls Jinkailong through its 35% equity interest and voting agreements with Jinkailong’s

other shareholders.

Jinkailong facilitates automobile sales and financing transactions for its clients, who are primarily ride-hailing

drivers and provides them operating lease and relevant after-transaction services.

Yicheng holds a business license for automobiles sale

and financial leasing and has been engaged in automobile sales since June 2019.

The Company also has been engaged in operating leasing

services through Jinkailong and Hunan Ruixi since March 2019.

On July 4, 2020, Hunan Ruixi,

Jinkailong and the other shareholders of Jinkailong entered into an agreement (the “JKL Investment Agreement”) with

Hongyi Industrial Group Co., Ltd.

(“Hongyi”).

Pursuant to the JKL Investment Agreement, Jinkailong agreed to issue

and Hongyi agreed to subscribe for an approximately 27.03% equity interest in Jinkailong in consideration of RMB50 million

(approximately $7.0 million) (the “Investment”).

The Investment will be made in two payments:

(i) the first payment

of RMB10 million (approximately $1.4 million) was due no later than December 31, 2020 and (ii) the remaining RMB40 million

(approximately $5.6 million) is due within 30 days after the record-filing of the Investment has been made with the local PRC

government and the other shareholders of Jinkailong having made their respective capital contributions in full in cash, but no later

than December 31, 2020.

As Hongyi did not make any payment in accordance with the investment, on July 2, 2021, the JKL

Investment Agreement has been terminated upon consent from Hunan Ruixi, Jinkailong, the other shareholders of Jinkailong, and

On September 11, 2020, Senmiao Consulting

entered into an investment agreement relating to XXTX with all the original shareholders of XXTX (the “XXTX Investment Agreement”),

pursuant to which Senmiao Consulting would make an investment of RMB3.16 million (approximately $0.5 million) in XXTX in cash and obtain

a 51% equity interest accordingly.

On October 23, 2020, the registration procedures for the change in shareholders and registered

capital were completed and XXTX became a majority owned subsidiary of Senmiao Consulting.

On February 5, 2021, Senmiao Consulting

and all the shareholders of XXTX entered into a supplementary agreement related to XXTX’s Investment agreement (the “XXTX

Increase Investment Agreement”).

Under the XXTX Increase Investment Agreement, all shareholders of XXTX agreed to increase the total

registered capital of XXTX to RMB50.8 million (approximately $7.8 million).

Senmiao Consulting shall pay another investment amounted to

RMB36.84 million (approximately $5.7 million) in cash in exchange of additional 27.74% of XXTX’s equity interest.

As of the issuance

date of these consolidated financial statements, Senmiao Consulting has made a capital contribution of RMB19.8 million (approximately

$3.0 million) to XXTX and the remaining amount is expected to be paid before December 31, 2025.

As of March 31, 2021, XXTX had

eight wholly owned subsidiaries and only one of them has operations.

In December 2020, Senmiao Consulting formed

Corenel, with a registered capital of RMB10 million (approximately $1.6 million) in Chengdu City, Sichuan Province.

Corenel has engaged

in automobile operating leases since March 2021.

In December 2020, Hunan Ruixi and a third party jointly formed a subsidiary,

Chengdu Xichuang Technology Service Co., Ltd.

(“Xichuang”), with a registered capital of RMB200,000 (approximately $32,000)

in Chengdu City, Sichuan Province.

Hunan Ruixi holds 70% of the equity interests of Xichuang.

In April 2021, the Company formed Senmiao

Technology (Hong Kong)., Ltd.

(“Senmiao HK”), with a registered capital of $10,000 in Hongkong.

The Company holds 99.99%

of the equity interests of Senmiao HK.

The following diagram illustrates the Company’s

corporate structure, including its subsidiaries, and VIEs, as of the issuance date of these consolidated financial statements:

VIE Agreements with Sichuan Senmiao

According to the VIE Agreements, Sichuan

Senmiao is obligated to pay Senmiao Consulting service fees equal to its net income.

Sichuan Senmiao’s entire operations

are controlled by the Company.

Although the Company discontinued Sichuan Senmiao’s online P2P lending services business commencing

in October 2019, the VIE Agreements remain in place, and such agreements are described in detail below:

According to the VIE Agreements, Sichuan Senmiao

is obligated to pay Senmiao Consulting service fees equal to its net income.

Sichuan Senmiao’s entire operations are controlled

by the Company.

Although the Company discontinued Sichuan Senmiao’s online P2P lending services business as of October 2019,

the VIE Agreements remain in place, and such agreements are described in detail below:

Equity Interest Pledge Agreement

Senmiao Consulting, Sichuan Senmiao and

the Sichuan Senmiao Shareholders entered into an Equity Interest Pledge Agreement, pursuant to which the Sichuan Senmiao Shareholders

pledged all of their equity interest in Sichuan Senmiao to Senmiao Consulting in order to guarantee the performance of Sichuan

Senmiao’s obligations under the Exclusive Business Cooperation Agreement as described below.

During the term of the pledge,

Senmiao Consulting is entitled to receive any dividends declared on the pledged equity interest of Sichuan Senmiao.

Interest Pledge Agreement terminates when all contractual obligations under the Exclusive Business Cooperation Agreement have been

fully performed.

Senmiao Consulting, Sichuan Senmiao and the Sichuan

Senmiao Shareholders entered into an Equity Interest Pledge Agreement, pursuant to which the Sichuan Senmiao Shareholders pledged all

of their equity interest in Sichuan Senmiao to Senmiao Consulting in order to guarantee the performance of Sichuan Senmiao’s obligations

under the Exclusive Business Cooperation Agreement as described below.

During the term of the pledge, Senmiao Consulting is entitled to

receive any dividends declared on the pledged equity interest of Sichuan Senmiao.

The Equity Interest Pledge Agreement terminates when

all contractual obligations under the Exclusive Business Cooperation Agreement have been fully performed.

Exclusive Business Cooperation Agreement

Pursuant to an Exclusive Business Cooperation

Agreement entered by and among the Company, Senmiao Consulting, Sichuan Senmiao and each of Sichuan Senmiao Shareholders, Senmiao

Consulting will provide Sichuan Senmiao with complete technical support, business support and related consulting services for 10

years ended September 18, 2027.

The Sichuan Senmiao Shareholders and Sichuan Senmiao will not engage any third party for the

same or similar consultation services without Senmiao Consulting’s prior consent.

Further, the Sichuan Senmiao Shareholders

are entitled to receive an aggregate of 20,250,000 shares of common stock of the Company under the Exclusive Business Cooperation

Senmiao Consulting may terminate the Exclusive Business Cooperation Agreement at any time upon prior written notice

to Sichuan Senmiao and the Sichuan Senmiao Shareholders.

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Agreement entered by and among the Company, Senmiao Consulting, Sichuan Senmiao and each of Sichuan Senmiao Shareholders, Senmiao Consulting

will provide Sichuan Senmiao with complete technical support, business support and related consulting services for 10 years ended September 18,

The Sichuan Senmiao Shareholders and Sichuan Senmiao will not engage any third party for the same or similar consultation services

without Senmiao Consulting’s prior consent.

Further, the Sichuan Senmiao Shareholders are entitled to receive an aggregate of 20,250,000

shares of common stock of the Company under the Exclusive Business Cooperation Agreement.

Senmiao Consulting may terminate the Exclusive

Business Cooperation Agreement at any time upon prior written notice to Sichuan Senmiao and the Sichuan Senmiao Shareholders.

Exclusive Option Agreement

Pursuant to an Exclusive Option Agreement entered by

and among Senmiao Consulting, Sichuan Senmiao and the Sichuan Senmiao Shareholders, the Sichuan Senmiao Shareholders have granted

Senmiao Consulting an exclusive option to purchase at any time their equity interests in Sichuan Senmiao at a purchase price equal

to the capital paid by the Sichuan Senmiao Shareholders in whole or at a pro-rated price for any partial purchase.

The Exclusive

Option Agreement terminates after 10 years ending September 18, 2027 but can be renewed by Senmiao Consulting at its discretion.

Pursuant to an Exclusive Option Agreement entered

by and among Senmiao Consulting, Sichuan Senmiao and the Sichuan Senmiao Shareholders, the Sichuan Senmiao Shareholders have granted Senmiao

Consulting an exclusive option to purchase at any time their equity interests in Sichuan Senmiao at a purchase price equal to the capital

paid by the Sichuan Senmiao Shareholders in whole or at a pro-rated price for any partial purchase.

The Exclusive Option Agreement terminates

after 10 years ending September 18, 2027 but can be renewed by Senmiao Consulting at its discretion.

Powers of Attorney

Each of the Sichuan Senmiao Shareholders

has signed a power of attorney (the “Power of Attorney”), pursuant to which, each of the Sichuan Senmiao Shareholders

has authorized Senmiao Consulting to act as his or her exclusive agent and attorney with respect to all rights of such individual

as a shareholder of Sichuan Senmiao, including but not limited to:

(a) attending shareholders’ meetings;

(b) exercising

all the shareholder’s rights that shareholders are entitled to under PRC laws and the Articles of Association of Sichuan

Senmiao, including but not limited to voting, sale, transfer, pledge and disposition of the equity interests of Sichuan Senmiao;

and (c) designating and appointing the legal representative, chairperson, director, supervisor, chief executive officer and

other senior management members of Sichuan Senmiao.

Each of the Sichuan Senmiao Shareholders has signed

a power of attorney (the “Power of Attorney”), pursuant to which, each of the Sichuan Senmiao Shareholders has authorized

Senmiao Consulting to act as his or her exclusive agent and attorney with respect to all rights of such individual as a shareholder of

Sichuan Senmiao, including but not limited to:

(a) attending shareholders’

(b) exercising all the shareholder’s

rights that shareholders are entitled to under PRC laws and the Articles of Association of Sichuan Senmiao, including but not limited

to voting, sale, transfer, pledge and disposition of the equity interests of Sichuan Senmiao;

and (c) designating and appointing

the legal representative, chairperson, director, supervisor, chief executive officer and other senior management members of Sichuan Senmiao.

The Power of Attorney has the same term as the Exclusive Option Agreement.

Timely Report Agreement

The Company and Sichuan Senmiao entered

into a Timely Report Agreement, pursuant to which, Sichuan Senmiao agrees to make its officers and directors available to the Company

and promptly provide all information required by the Company so that the Company can make necessary filings to the U.S.

and Exchange Commission (“SEC”) and other regulatory reports in a timely fashion.

The Company has concluded that it should consolidate the financial

statements with Sichuan Senmiao because it is Sichuan Senmiao’s primary beneficiary based on the Power of Attorney from the

Sichuan Senmiao Shareholders, who assigned their rights as shareholders of Sichuan Senmiao to Senmiao Consulting, the Company’s

The Company and Sichuan Senmiao entered into a Timely Report Agreement,

pursuant to which, Sichuan Senmiao agrees to make its officers and directors available to the Company and promptly provide all information

required by the Company so that the Company can make necessary filings to the U.S.

Securities and Exchange Commission (“SEC”)

and other regulatory reports in a timely fashion.

The Company has concluded that it should consolidate

the financial statements with Sichuan Senmiao because it is Sichuan Senmiao’s primary beneficiary based on the Power of Attorney

from the Sichuan Senmiao Shareholders, who assigned their rights as shareholders of Sichuan Senmiao to Senmiao Consulting, the Company’s

wholly-owned subsidiary.

These rights include, but are not limited to, attending shareholders’

meetings, voting on matters

submitted for shareholder approval and appointing legal representatives, directors, supervisors and senior management of Sichuan

As a result, the Company, through Senmiao Consulting, is deemed to hold all of the voting equity interests in Sichuan

Pursuant to Exclusive Business Cooperation Agreement, Senmiao Consulting shall provide complete technical support, business

support and related consulting services for 10 years.

Though not explicit in the VIE Agreements, the Company may provide financial

support to Sichuan Senmiao to meet its working capital requirements and capitalization purposes.

The terms of the VIE Agreements

and the Company’s plan to provide financial support to Sichuan Senmiao were considered in determining that the Company is

the primary beneficiary of Sichuan Senmiao.

Accordingly, the financial statements of Sichuan Senmiao are consolidated in the accompanying

consolidated financial statements.

Voting Agreement with Jinkailong’s

Other Shareholders

meetings, voting on matters submitted

for shareholder approval and appointing legal representatives, directors, supervisors and senior management of Sichuan Senmiao.

the Company, through Senmiao Consulting, is deemed to hold all of the voting equity interests in Sichuan Senmiao.

Pursuant to Exclusive

Business Cooperation Agreement, Senmiao Consulting shall provide complete technical support, business support and related consulting services

for 10 years.

Though not explicit in the VIE Agreements, the Company may provide financial support to Sichuan Senmiao to meet its working

capital requirements and capitalization purposes.

The terms of the VIE Agreements and the Company’s plan to provide financial support

to Sichuan Senmiao were considered in determining that the Company is the primary beneficiary of Sichuan Senmiao.

Accordingly, the financial

statements of Sichuan Senmiao are consolidated in the accompanying consolidated financial statements.

Voting Agreements with Jinkailong’s Other

Hunan Ruixi entered into two voting agreements

signed in August 2018 and February 2020, respectively, as amended (the “Voting Agreement”), with Jinkailong and other

Jinkailong’s shareholders holding an aggregate of 65% equity interests and obtained 35% equity interests in Jinkailong.

to the Voting Agreements, all other Jinkailong’s shareholders will vote in concert with Hunan Ruixi on all fundamental corporate

signed in August 2018 and February 2020, respectively, as amended (the “Voting Agreements”), with Jinkailong and

other Jinkailong’s shareholders holding an aggregate of 65% equity interests and obtained 35% equity interests in Jinkailong.

to the Voting Agreements, all other Jinkailong’s shareholders will vote in concert with Hunan Ruixi on all fundamental corporate

transactions in the event of a disagreement for periods of 20 years and 18 years, respectively, ending on August 25, 2038.

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company has concluded that it

should consolidate the financial statements with Jinkailong because it is Jinkailong’s primary beneficiary based on the

Voting Agreement.

Though not explicit in the Voting Agreement by and among Jinkailong, Hunan Ruixi, and other shareholders of

Hunan Ruixi, the Company may provide financial support to Jinkailong to meet its working capital requirements and

capitalization purposes.

The terms of the Voting Agreement and the Company’s plan to provide financial support to

Jinkailong were considered in determining that the Company is the primary beneficiary of Jinkailong.

Accordingly, management

has determined that Jinkailong is a VIE and the financial statements of Jinkailong are consolidated in the Company’s

consolidated financial statements.

Total assets and total liabilities of the Company’s VIEs

included in the Company’s consolidated financial statements as of March 31, 2020 and 2019 are as follows:

Total assets from continuing operations

Total assets from discontinued operations (1)

Total liabilities from continuing operations

Total liabilities from discontinued operations (2)

The Company has concluded that it should consolidate

the financial statements with Jinkailong because it is Jinkailong’s primary beneficiary based on the Voting Agreements.

explicit in the Voting Agreements by and among Jinkailong, Hunan Ruixi, and other shareholders of Hunan Ruixi, the Company may provide

financial support to Jinkailong to meet its working capital requirements and capitalization purposes.

The terms of the Voting Agreements

and the Company’s plan to provide financial support to Jinkailong were considered in determining that the Company is the primary

beneficiary of Jinkailong.

Accordingly, management has determined that Jinkailong is a VIE and the financial statements of Jinkailong

are consolidated in the Company’s consolidated financial statements.

Total assets and total liabilities of the Company’s VIEs included

in the Company’s consolidated financial statements as of March 31, 2021 and 2020 are as follows:

Current assets:

Cash and cash equivalents

Accounts receivable, net, current portion

Prepayments, other receivables and other assets, net

Other receivable- intercompany

Due from related parties

Current assets - discontinued operations (1)

Total current assets

Property and equipment, net:

Property and equipment, net

Property and equipment, net - discontinued operations

Total property and equipment, net

Other assets:

Operating lease right-of-use assets, net

Operating lease right-of-use assets, net, related parties

Financing lease right-of-use assets, net

Accounts receivable, net, non-current

Total other assets

Current liabilities:

Borrowings from financial institutions

Accounts payable

Advances from customers

Income tax payable

Accrued expenses and other liabilities

Other payable - intercompany

Due to related parties and affiliates

Operating lease liabilities

Operating lease liabilities - related parties

Financing lease liabilities

Current liabilities - discontinued operations (2)

Total current liabilities

Other liabilities:

Borrowings from financial institutions, non-current

Operating lease liabilities, non-current

Operating lease liabilities, non-current - related parties

Financing lease liabilities, non-current

Total other liabilities

Total liabilities

1 unchanged sentence

Includes intercompany payables of $35,790 and $402,406 as of March 31, 2021 and 2020, respectively.

Net revenue, loss

from operations and net loss of the VIEs that were included in the Company's consolidated financial statements for the years ended

March 31, 2020 and 2019 are as follows:

For the Years Ended

Net revenue, loss from operations and net loss

of the VIEs that were included in the Company's consolidated financial statements for the years ended March 31, 2021 and 2020 are

Net revenue from continuing operations

1 unchanged sentence

Loss from operations from continuing operations

$ (4,897,744 )

$ (4,514,195 )

Loss from operations from discontinued operations

Net income (loss) from continuing operations attributable to stockholders

Net loss from continuing operations attributable to stockholders

$ (4,048,544 )

$ (3,786,057 )

Net loss from discontinued operations attributable to stockholders

$ (4,692,725 )

Net loss attributable to stockholders

$ (4,281,140 )

$ (8,478,782 )

GOING CONCERN

In assessing the Company’s liquidity,

the Company monitors and analyzes its cash on-hand and its operating and capital expenditure commitments.

The Company’s liquidity

needs are to meet its working capital requirements, operating expenses and capital expenditure obligations.

Debt financing from

financial institutions and equity financings have been utilized to finance the working capital requirements of the Company.

Since January

2020, all provinces across the mainland China have confirmed thousands of infection cases of the novel coronavirus (COVID-19).

The epidemic has resulted in quarantines, travel restrictions, and the temporary closure of stores and business facilities in China,

which has significantly impacted the Chinese economy.

In March 2020, the World Health Organization declared the COVID-19 as a pandemic.

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

rapidly expanding nature of the COVID-19 pandemic, the Company’s business, results of operations, and financial

condition will be adversely affected.

The extent of such impact will depend largely on future developments, which are highly

uncertain, including the severity of the outbreak and future government measures in response to the outbreak, among other

As a result, there can be no assurance that the Company will be able to successfully implement its growth

The Company’s management has considered

whether there is substantial doubt about its ability to continue as a going concern due to the Company’s (1) recurring losses

from operations, including approximately $3.1 million and $5.6 million net loss attributable to the Company’s stockholders

from continuing operations and discontinued operations, respectively, for the year ended March 31, 2020, (2) accumulated deficit

of approximately $23.7 million as of March 31, 2020;

(3) the negative working capital of $4.5 million and (4) negative operating

cash flows of approximately $4.5 million and $2.0 million from continuing operations and discontinued operations, respectively,

for the year ended March 31, 2020.

Management has determined there is substantial

In assessing the Company’s liquidity, the

Company monitors and analyzes its cash on-hand and its operating and capital expenditure commitments.

The Company’s liquidity needs

are to meet its working capital requirements, operating expenses and capital expenditure obligations.

Debt financing from financial institutions

and equity financings have been utilized to finance the working capital requirements of the Company.

Company’s business is capital intensive.

The Company’s management has considered whether there is substantial doubt

about its ability to continue as a going concern due to (1) recurring losses from operations, including net loss of

approximately $12.6 million and $0.1 million from continuing operations and discontinued operations, respectively, for the year

ended March 31, 2021, (2) accumulated deficit of approximately $34.1 million as of March 31, 2021;

working capital deficit of approximately $5.9 million as of March 31, 2021;

(4) net operating cash outflows of

approximately $2.2 million and $1.7 million from continuing operations and discontinued operations, respectively, for the year ended

March 31, 2021 and (5) the purchase commitment of $2.5 million.

As of March 31, 2021, the Company has entered into two purchase

contracts with an automobile dealer to purchase a total of 700 automobiles for the amount of approximately $11.6 million.

to the contracts, the Company is required to purchase 350 automobiles in cash with the amount of approximately $5.8 million.

As the issuance date of these financial statements, 200 automobiles have been purchased in cash and delivered to the Company and the remaining purchase commitment of $2.5

million is to be completed before December 31, 2021.

The remaining 350 automobiles purchase commitment with the amount of

approximately $5.8 million shall be purchased with financing option through the dealer’s designated financial

institutions.

On May 13, 2021, the Company completed a

registered direct offering of 5,531,916 shares of the Company’s common stock at $1.175 per share, pursuant to a securities purchase

agreement with certain institutional investors.

As a result, the Company raised approximately $5.8 million, net of placement agent fees

and offering expenses, to support the Company’s working capital requirements.

After the completion of the registered direct offering on May 13,

2021, the Company’s working capital deficiency was approximately $0.1 million.

However, management has determined there is substantial

doubt about its ability to continue as a going concern.

Management is trying to alleviate the going concern risk through the following

cash and cash equivalents generated from

the Company will continuously seek equity

financing to support its working capital.

If the Company is unable to generate significant

operating cash flows or secure additional debt and equity financing, the Company may be required to cease or curtail its operations.

The Company’s consolidated financial statements do not include adjustments that might result from the outcome of these uncertainties.

If the Company is unable to generate significant revenue, the Company may be required

to curtail or cease its operations.

Management is trying to alleviate the going concern risk through the following sources:

the Company will continue to seek equity financing to support its working capital;

other available sources of financing (including debt) from PRC banks and other financial institutions;

financial support and credit guarantee commitments from the Company’s related parties.

Based on the above considerations, management

is of the opinion that the Company will probably not having sufficient funds to meet its working capital requirements and debt obligations as they

become due one year from the issuance date of these financial statements, if the Company is unable to obtain additional financing.

the maximum contingent liabilities the Company would be exposed to was approximately $12.8 million as of March 31, 2021.

There is no assurance that the Company will be successful in

implementing the foregoing plans or that additional financing will be available to the Company on commercially reasonable terms, or at

There are a number of factors that could potentially arise that could undermine the Company’s plans, such as (i) the impact

of the COVID-19 pandemic on the Company’s business and areas of operations in China, (ii) changes in the demand for the Company’s

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 the Company’s relationships with key

business partners, (vii) the ability of financial institutions in China to provide continued financial support to the Company’s

customers, and (viii) the perception of PRC-based companies in the U.S.

capital markets.

The Company’s inability to secure

needed financing when required could require material changes to the Company’s business plans and could have a material adverse

effect on the Company’s viability and results of operations.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

accompanying consolidated financial statements of the Company has been prepared in accordance with accounting principles generally

accepted in the United States of America (“U.S.

The accompanying

consolidated financial statements of the Company has been prepared in accordance with accounting principles generally accepted in the

United States of America (“U.S.

GAAP”).

Basis of consolidation

consolidated financial statements include the accounts of the Company and include the assets, liabilities, revenues and expenses

of the subsidiaries and VIEs.

The consolidated

financial statements include the accounts of the Company and include the assets, liabilities, revenues and expenses of the subsidiaries

All inter-Company accounts and transactions have been eliminated in consolidation.

Foreign currency translation

Transactions denominated

in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing on

the dates of the transaction.

Monetary assets and liabilities denominated in currencies other than the functional currency are

translated into the functional currency using the applicable exchange rates on the date of the balance sheet.

The resulting exchange

differences are recorded in the statement of operations.

The reporting

currency of the Company and its subsidiaries and VIEs is U.S.

dollars (“US$”) and the accompanying consolidated financial

statements have been expressed in US$.

However, the Company maintains the books and records in its functional currency, Chinese

Renminbi (“RMB”), being the functional currency of the economic environment in which its operations are conducted.

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In general, for

consolidation purposes, assets and liabilities of the Company and its subsidiaries whose functional currency is not the US$, are

translated into US$, using the exchange rate on the balance sheet date.

Revenues and expenses are translated at average rates prevailing

during the period.

The gains and losses resulting from translation of financial statements of the Company and its subsidiaries

and VIEs are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’

Translation of

amounts from RMB into US$ has been made at the following exchange rates for the respective periods:

Foreign currency

Transactions denominated in currencies other than

the functional currency are translated into the functional currency at the exchange rates prevailing on the dates of the transaction.

Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency

using the applicable exchange rates on the date of the balance sheet.

The resulting exchange differences are recorded in the statement

of operations.

The reporting currency of the Company and its

subsidiaries and VIEs is U.S.

dollars (“US$”) and the accompanying consolidated financial statements have been expressed in

However, the Company maintains the books and records in its functional currency, Chinese Renminbi (“RMB”), being the

functional currency of the economic environment in which its operations are conducted.

In general, for consolidation purposes, assets

and liabilities of the Company and its subsidiaries whose functional currency is not the US$, are translated into US$, using the exchange

rate on the balance sheet date.

Revenues and expenses are translated at average rates prevailing during the period.

The gains and losses

resulting from translation of financial statements of the Company and its subsidiaries and VIEs are recorded as a separate component of

accumulated other comprehensive income within the statement of stockholders’

Translation of amounts from RMB into US$ has been

made at the following exchange rates for the respective periods:

Balance sheet items, except for equity accounts

For the Years Ended

Items in the statements of operations and comprehensive loss, and statements of cash flows

For the Year Ended

Items in the statements of operations and comprehensive loss

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

Estimates, by their nature, are based on judgement and available information.

Accordingly, actual results could differ

from those estimates.

On an ongoing basis, management reviews these estimates and assumptions using the currently available information.

Changes in facts and circumstances may cause the Company to revise its estimates.

The Company bases its estimates on past experience

and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about

the carrying values of assets and liabilities.

The inputs into our judgments and estimates consider the economic implications of

COVID-19 on the Company’s critical and significant accounting estimates.

Estimates are used when accounting for items and

matters including, but not limited to, revenue recognition, residual values, lease classification and liabilities, finance lease

receivables, inventory obsolescence, right-of-use assets, determinations of the useful lives and valuation of long-lived assets,

estimates of allowances for doubtful accounts and prepayments, estimates of impairment of intangible assets, valuation of deferred

tax assets, estimated fair value used in business acquisitions, valuation of derivative liabilities, allocation of fair value of

derivative liabilities issuance of common stock and warrants exercised and other provisions and contingencies.

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.

by their nature, are based on judgement and available information.

Accordingly, actual results could differ from those estimates.

ongoing basis, management reviews these estimates and assumptions using the currently available information.

Changes in facts and circumstances

may cause the Company to revise its estimates.

The Company bases its estimates on past experience and on various other assumptions that

are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

The inputs into our judgments and estimates consider the economic implications of COVID-19 on the Company’s critical and significant

accounting estimates.

Estimates are used when accounting for items and matters including, but not limited to, revenue recognition, residual

values, lease classification and liabilities, finance lease receivables, inventory obsolescence, right-of-use assets, determinations of

the useful lives and valuation of long-lived assets and goodwill, estimates of allowances for doubtful accounts and prepayments, estimates

of impairment of intangible assets, valuation of deferred tax assets, estimated fair value used in business acquisitions, valuation of

derivative liabilities, allocation of fair value of derivative liabilities, issuance of common stock and warrants exercised and other

provisions and contingencies.

Fair values of financial instruments

Accounting Standards Codification (“ASC”)

Topic 825, Financial Instruments (“Topic 825”) requires disclosure of fair value information of financial instruments,

whether or not recognized in the balance sheets, for which it is practicable to estimate that value.

In cases where quoted market

prices are not available, fair values are based on estimates using present value or other valuation techniques.

Those techniques

are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows.

Topic 825 excludes

certain financial instruments and all nonfinancial assets and liabilities from its disclosure requirements.

Accordingly, the aggregate

fair value amounts do not represent the underlying value of the Company.

The three levels of valuation hierarchy are defined as

Accounting Standards Codification (“ASC”)

Topic 825, Financial Instruments (“Topic 825”) requires disclosure of fair value information of financial instruments, whether

or not recognized in the balance sheets, for which it is practicable to estimate that value.

In cases where quoted market prices are not

available, fair values are based on estimates using present value or other valuation techniques.

Those techniques are significantly affected

by the assumptions used, including the discount rate and estimates of future cash flows.

Topic 825 excludes certain financial instruments

and all nonfinancial assets and liabilities from its disclosure requirements.

Accordingly, the aggregate fair value amounts do not represent

the underlying value of the Company.

The three levels of valuation hierarchy are defined as follows:

Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

1 unchanged sentence

Inputs to the valuation methodology are unobservable and significant to the fair value.

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table sets forth by level

within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis

as of March 31, 2020:

The following table sets forth by level within

the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31,

2021 and 2020:

Carrying Value at

3 unchanged sentences

Derivative liabilities

The following is a reconciliation of the

beginning and ending balance of the assets and liabilities measured at fair value on a recurring basis for the year ended March

Beginning balance

Derivative liabilities recognized at grant date on June 20, 2019

Carrying Value at

March 31, 2020

Fair Value Measurement at

March 31, 2020

Derivative liabilities

The following is a reconciliation of the beginning

and ending balance of the assets and liabilities measured at fair value on a recurring basis for the years ended March 31, 2021 and

2019 Registered Direct Offering

February 2021

Direct Offering

BALANCE as of March 31, 2019

Derivative liabilities recognized at grant date

Change in fair value of derivative liabilities

Fair value of Series B warrants exercised

Ending balance

On June 21, 2019, the Company closed

a registered direct offering of an aggregate of 1,781,361 shares of common stock, and in connection therewith, issued to the investors

(i) for no additional consideration, Series A warrants to purchase up to an aggregate of 1,336,021 shares of common stock,

(ii) for nominal additional consideration, Series B warrants to purchase up to a maximum aggregate of 1,116,320 shares

of common stock and (iii) placement agent warrants to purchase up to 142,509 shares of common stock.

The strike price of the Company’s

Series A and Series B warrants and the placement agent warrants are denominated in US$ and the Company’s functional currency

is RMB, therefore, those warrant shares are not considered indexed to the Company’s own stock which should be classified

as derivative liability.

The Company’s Series A and Series

B warrants and the placement agent warrants are not traded in an active securities market;

therefore, the Company estimates the

fair value to those warrants using the Black-Scholes valuation model on June 20, 2019 (the grant date) and March 31, 2020.

Fair value of warrants exercised

BALANCE as of March 31, 2020

Derivative liabilities recognized at grant date

Change in fair value of derivative liabilities

Fair value of warrants exercised

Warrant forfeited due to expiration

BALANCE as of March 31, 2021

On June 21, 2019, the Company closed a registered

direct offering of an aggregate of 1,781,361 shares of common stock, and in connection therewith, issued to the investors (i) for

no additional consideration, Series A warrants to purchase up to an aggregate of 1,336,021 shares of common stock, (ii) for

nominal additional consideration, Series B warrants to purchase up to a maximum aggregate of 1,116,320 shares of common stock and

(iii) placement agent warrants to purchase up to 142,509 shares of common stock.

On August 6, 2020, the Company completed

a public offering of 12,000,000 shares of the Company’s common stock at $0.50 per share (the “Offering Price”), pursuant

to an underwriting agreement with The Benchmark Company, LLC and Axiom Capital Management, Inc., as representatives of the several

underwriters (the “Underwriters”).

On August 13, 2020, the Underwriters exercised their rights to purchase an additional

1,800,000 shares of common stock at the Offering Price.

In connection with the offering, the Company issued the Underwriters, on a private

placement basis, warrants to purchase up to 568,000 shares of common stock (the “Underwriters’

Warrants”).

The Underwriters’

Warrants are exercisable for a period of five years commencing six months from August 4, 2020 at a price per share equal to 125%

of the Offering Price and are exercisable on a “cashless”

As the underwriting agreement indicated, The Benchmark

Company, LLC and Axiom Capital Management, Inc.

have the right of first refusal to act as lead or joint investment banker, lead or

join book-runner and /or joint placement agent, for each and every future public and private equity and debt offering, including all equity

linked financings for the Company, or any successor to or any subsidiary of the Company for a period of twelve months following August 4,

2020, (the “ROFR”).

The ROFR was terminated as of February 4, 2021 as disclosed in more details below.

February 10, 2021, the Company completed a registered direct offering of 5,072,465 shares of the Company’s common stock at

$1.38 per share, pursuant to a placement agency agreement with FT Global Capital, Inc., as

exclusive placement agent in connection with this Offering.

In connection with the offering, the Company issued the placement agent

warrants to purchase up to 380,435 shares of its common stock.

These warrants are exercisable for a period of five years commencing 180

days from February 8, 2020 at a price of $1.38 per share and are exercisable on a “cashless”

In addition, the

company issued to The Benchmark Company, LLC and Axiom Capital Management, Inc.

seven percent of the gross proceeds from the

offering and warrants to purchase up to 152,174 shares of its common stock, in consideration for the termination of the ROFR as mentioned

These warrants are exercisable for a period of five years from February 8, 2020 at a price of $1.725 per share.

The strike price of the Company’s Series A

and Series B warrants, the placement agent warrants and the Underwriters’

Warrants are denominated in US$ and the Company’s

functional currency is RMB;

therefore, those warrant shares are not considered indexed to the Company’s own stock which should be

classified as derivative liability.

The Company’s Series A and Series B

warrants, the placement agent warrants, the Underwriters’

Warrants, and the ROFR warrants are not traded in an active securities

therefore, the Company estimates the fair value to those warrants using the Black-Scholes valuation model on June 20, 2019

(the grant date), August 4, 2020 (the grant date), February 10, 2021 (the grant date), March 31, 2020 and March 31,

June 20, 2019

August 4, 2020

February 10, 2021

Underwriters’

# of shares exercisable

1 unchanged sentence

Exercise price

Expected term (year)

Expected term (years)

Risk-free interest rate

1 unchanged sentence

March 31, 2020

Placement Agent

# of shares exercisable

1 unchanged sentence

Exercise price

Expected term (year)

Expected term (years)

Risk-free interest rate

Expected volatility

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2020 and 2019,

financial instruments of the Company comprised primarily current assets and current liabilities including cash and cash

equivalents, accounts receivable, finance lease receivables, prepayments, other receivables and other assets, escrow

receivables, due from related parties, borrowings from financial institutions and third parties, accounts payable, advance

from customers, lease liabilities, accrued expenses and other liabilities, due to stockholders and due to related parties and

affiliates, which approximate their fair values because of the short-term nature of these instruments, and noncurrent

liabilities of borrowings from financial institutions, which approximate their fair values because of the stated loan

interest rate to the rate charged by similar financial institutions.

The noncurrent portion of accounts receivables,

finance lease receivables, and lease liabilities were recorded at gross adjusted for the deferred interest income using the effective

March 31, 2021

Underwriters’

# of shares exercisable

Valuation date

Exercise price

Expected term (years)

Risk-free interest rate

Expected volatility

* The Placement Agent Warrants granted on June

** The Placement Agent Warrants granted on February

As of March 31, 2021 and 2020, financial

instruments of the Company comprised primarily current assets and current liabilities including cash and cash equivalents, restricted

cash, accounts receivable, inventories, finance lease receivables, prepayments, other receivables and other assets, due from related parties,

borrowings from financial institutions, accounts payable, advance from customers, lease liabilities, accrued expenses and other liabilities,

due to related parties and affiliates, and operating and financing lease liabilities, which approximate their fair values because of the

short-term nature of these instruments, and non-current liabilities of borrowings from financial institutions, which approximate their

fair values because of the stated loan interest rate to the rate charged by similar financial institutions.

The non-current portion of accounts receivables,

finance lease receivables, and operating and financing lease liabilities were recorded at gross adjusted for the interest using the effective

interest rate method.

The Company believes that the effective interest rates underlying these instruments approximate their fair

values because of the Company used its incremental borrowing rate to recognize the present value of these instruments as of March

31, 2020 and 2019.

Other than as listed above, the Company

did not identify any assets or liabilities that are required to be presented on the balance sheet at fair value.

Business combinations and noncontrolling interests

The Company believes that the effective interest rates underlying these instruments approximate their fair values

because the Company used its incremental borrowing rate to recognize the present value of these instruments as of March 31, 2021

Other than as listed above, the Company did not

identify any assets or liabilities that are required to be presented on the balance sheet at fair value.

Business combinations and non-controlling interests

The Company accounts for its business combinations

using the acquisition method of accounting in accordance with ASC 805 "Business Combinations."

The cost of an acquisition

is measured as the aggregate of the acquisition date fair value of the assets transferred to the sellers and liabilities incurred

by the Company and equity instruments issued.

The cost of an acquisition is

measured as the aggregate of the acquisition date fair value of the assets transferred to the sellers and liabilities incurred by the

Company and equity instruments issued.

Transaction costs directly attributable to the acquisition are expensed as incurred.

Identifiable assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition date,

irrespective of the extent of any noncontrolling interests.

The excess of (i) the total costs of acquisition, fair value of

the noncontrolling interests and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the

fair value of the identifiable net assets of the acquiree is recorded as goodwill.

If the cost of acquisition is less than the

fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the consolidated income statements.

During the measurement period, which can be up to one year from the acquisition date, the Company may record adjustments to the

assets acquired and liabilities assumed with the corresponding offset to goodwill.

Upon the conclusion of the measurement period

or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments

are recorded to the consolidated income statements.

assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition date, irrespective of the

extent of any non-controlling interests.

The excess of (i) the total costs of acquisition, fair value of the non-controlling interests

and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable

net assets of the acquiree is recorded as goodwill.

If the cost of acquisition is less than the fair value of the net assets of the subsidiary

acquired, the difference is recognized directly in the consolidated income statements.

During the measurement period, which can be up

to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding

offset to goodwill.

Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities

assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated income statements.

For the Company's non-wholly owned subsidiaries,

a noncontrolling interest is recognized to reflect portion of equity that is not attributable, directly or indirectly, to the Company.

The cumulative results of operations attributable to noncontrolling interests are also recorded as noncontrolling interests in

the Company's consolidated balance sheets and consolidated statements of operations and comprehensive loss.

Cash flows related

to transactions with noncontrolling interests are presented under financing activities in the consolidated statements of cash flows.

a non-controlling interest is recognized to reflect portion of equity that is not attributable, directly or indirectly, to the Company.

The cumulative results of operations attributable to non-controlling interests are also recorded as non-controlling interests in the Company's

consolidated balance sheets and consolidated statements of operations and comprehensive loss.

Cash flows related to transactions with

non-controlling interests are presented under financing activities in the consolidated statements of cash flows

Segment reporting

Operating segments are reported in a manner

consistent with the internal reporting provided to the chief operating decision maker (the “CODM”), which is comprised

of certain members of the Company's management team.

Historically, the Company had one single operating and reportable segment,

namely the provision of an online lending services.

During the year ended March 31, 2019, the Company acquired Hunan Ruixi

and Jinkailong and evaluated how the CODM manages the businesses of the Company to maximize efficiency in allocating resources

and assessing performance.

Consequently, the Company presents two operating and reportable segments as set forth in Note 2(p).

The Company has discontinued the online P2P lending services segment and has only one segment in the period after October 17, 2019.

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Operating segments are reported in a manner consistent

with the internal reporting provided to the chief operating decision maker (the “CODM”), which is comprised of certain

members of the Company's management team.

Historically, the Company had one single operating and reportable segment, namely the provision

of an online lending services which was discontinued in the periods after October 17, 2019.

During the year ended March 31,

2019 and 2021, the Company acquired Hunan Ruixi and XXTX, respectively.

The Company evaluated how the CODM manages the businesses of the

Company to maximize efficiency in allocating resources and assessing performance.

Consequently, the Company presents two operating and

reportable segments as set forth in Notes 1 and 19.

Cash and cash equivalents

Cash and cash equivalents primarily consist

of bank deposits with original maturities of three months or less, which are unrestricted as to withdrawal and use.

Cash and cash

equivalents also consist of funds received from automobile purchasers as payment for automobiles, related insurances and taxes

to be paid on behalf of the automobile purchasers, which funds were held at the third party platforms’ fund accounts and

which are unrestricted and immediately available for withdrawal and use.

Cash and cash equivalents primarily consist of

bank deposits with original maturities of three months or less, which are unrestricted as to withdrawal and use.

Cash and cash equivalents

also consist of funds received from automobile purchasers as payment for automobiles, related insurances and taxes to be paid on behalf

of the automobile purchasers, which funds were held at the third party platforms’

fund accounts and which are unrestricted and immediately

available for withdrawal and use.

Accounts receivable, net

Accounts receivable are recorded at the

invoiced amount less an allowance for any uncollectible accounts and do not bear interest, and are due on demand.

Management reviews

the adequacy of the allowance for doubtful accounts on an ongoing basis, using historical collection trends and aging of receivables.

Management also periodically evaluates individual customer’s financial condition, credit history and the current economic

conditions to make adjustments in the allowance when necessary.

Account balances are charged off against the allowance after all

means of collection have been exhausted and the potential for recovery is considered remote.

As of March 31, 2020 and 2019,

allowance for doubtful accounts amounted to $379,689 and $0, respectively.

Inventories consist of automobiles which

are held primarily for sale and for leasing purposes, and are stated at lower of cost or net realizable value, as determined using

the weighted average cost method.

Management compares the cost of inventories with the net realizable value and if applicable,

an allowance is made for writing down the inventory to its net realizable value, if lower than cost.

On an ongoing basis, inventories

are reviewed for potential write-down for estimated obsolescence or unmarketable inventories which equals the difference between

the costs of inventories and the estimated net realizable value based upon forecasts for future demand and market conditions.

inventories are written-down to the lower of cost or net realizable value, it is not marked up subsequently based on changes in

underlying facts and circumstances.

Accounts receivable are recorded at the invoiced

amount less an allowance for any uncollectible accounts and do not bear interest, and are due on demand.

Management reviews the adequacy

of the allowance for doubtful accounts on an ongoing basis, using historical collection trends and aging of receivables.

Management also

periodically evaluates individual customer’s financial condition, credit history and the current economic conditions to make adjustments

in the allowance when necessary.

Account balances are charged off against the allowance after all means of collection have been exhausted

and the potential for recovery is considered remote.

As of March 31, 2021 and 2020, allowance for doubtful accounts amounted to $78,167

and $379,689, respectively.

Inventories consist of automobiles which are held

primarily for sale and for leasing purposes, and are stated at lower of cost or net realizable value, as determined using the weighted

average cost method.

Management compares the cost of inventories with the net realizable value and if applicable, an allowance is made

for writing down the inventory to its net realizable value, if lower than cost.

On an ongoing basis, inventories are reviewed for potential

write-down for estimated obsolescence or unmarketable inventories which equals the difference between the costs of inventories and the

estimated net realizable value based upon forecasts for future demand and market conditions.

When inventories are written-down to the

lower of cost or net realizable value, it is not marked up subsequently based on changes in underlying facts and circumstances.

Finance lease receivables, net

Finance lease receivables, which result

from sales-type leases, are measured at discounted present value of (i) future minimum lease payments, (ii) any residual

value not subject to a bargain purchase option as a finance lease receivables on its balance sheet and (iii) accrued interest

on the balance of the finance lease receivables based on the interest rate inherent in the applicable lease over the term of the

Management also periodically evaluates individual customer’s financial condition, credit history and the current

economic conditions to make adjustments in the allowance when necessary.

Finance lease receivables is charged off against the allowance

after all means of collection have been exhausted and the potential for recovery is considered remote.

As of March 31, 2020 and

2019, the Company determined no allowance for doubtful accounts was necessary for finance lease receivables.

Finance lease receivables, which result from sales-type

leases, are measured at discounted present value of (i) future minimum lease payments, (ii) any residual value not subject to

a bargain purchase option as a finance lease receivables on its balance sheet and (iii) accrued interest on the balance of the finance

lease receivables based on the interest rate inherent in the applicable lease over the term of the lease.

Management also periodically

evaluates individual customer’s financial condition, credit history and the current economic conditions to make adjustments in the

allowance when necessary.

Finance lease receivables is charged off against the allowance after all means of collection have been exhausted

and the potential for recovery is considered remote.

As of March 31, 2021 and 2020, the Company determined no allowance for doubtful

accounts was necessary for finance lease receivables.

As of March 31, 2021 and 2020, finance lease receivables consisted

of the following:

Gross minimum lease payments receivable

Amounts representing estimated executory costs

Minimum lease payments receivable

Less Allowance for uncollectible minimum lease payments receivable

Net minimum lease payments receivable

Unearned interest

1 unchanged sentence

Finance lease receivables, net, current portion

Finance lease receivables, net, noncurrent portion

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Future scheduled minimum lease payments

for investments in sales-type leases as of March 31, 2020 are as follows:

Finance lease receivables, net, non-current portion

Future scheduled minimum lease payments for investments in sales-type

leases as of March 31, 2021 are as follows:

Minimum future

payments receivable

Year ending March 31, 2021

Year ending March 31, 2022

Year ending March 31, 2023

Year ending March 31, 2024

Twelve months ending March 31, 2022

Twelve months ending March 31, 2023

Twelve months ending March 31, 2024

Twelve months ending March 31, 2025

Property and equipment, net

Property and equipment primarily consists

of computer equipment, which is stated at cost less accumulated depreciation less any provision required for impairment in value.

Depreciation is computed using the straight-line method with no residual value based on the estimated useful life.

The useful life

of property and equipment is summarized as follows:

Property and equipment primarily consist of computer

equipment, which is stated at cost less accumulated depreciation less any provision required for impairment in value.

Depreciation is

computed using the straight-line method with no residual value based on the estimated useful life.

The useful life of property and equipment

is summarized as follows:

Leasehold improvements

2 unchanged sentences

Office equipment

The Company reviews property and equipment

for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

An asset is considered impaired if its carrying amount exceeds the future net undiscounted cash flows that the asset is expected

If such asset is considered to be impaired, the impairment recognized is the amount by which the carrying amount of

the asset, if any, exceeds its fair value determined using a discounted cash flow model.

For the years ended March 31, 2020 and

2019, there was no impairment of property and equipment.

The Company reviews property and equipment for

impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

is considered impaired if its carrying amount exceeds the future net undiscounted cash flows that the asset is expected to generate.

such asset is considered to be impaired, the impairment recognized is the amount by which the carrying amount of the asset, if any, exceeds

its fair value determined using a discounted cash flow model.

For the years ended March 31, 2021 and 2020, the impairment for property

and equipment was $10,459 and $0, respectively.

Costs of repairs and maintenance are expensed

as incurred and asset improvements are capitalized.

The cost and related accumulated depreciation of assets disposed of or retired

are removed from the accounts, and any resulting gain or loss is reflected in the consolidated income statements.

The cost and related accumulated depreciation of assets disposed of or retired are

removed from the accounts, and any resulting gain or loss is reflected in the consolidated statements of operations and comprehensive

Intangible assets, net

Purchased intangible assets are recognized

and measured at fair value upon acquisition.

Separately identifiable intangible assets that have determinable lives continue to

be amortized over their estimated useful lives using the straight-line method as follows:

Customer relationship

Separately identifiable intangible assets

to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of

such assets may not be recoverable.

Determination of recoverability is based on an estimate of undiscounted future cash flows resulting

from the use of the asset and its eventual disposition.

Measurement of any impairment loss for identifiable intangible assets is

based on the amount by which the carrying amount of the assets exceeds the fair value of the assets.

For the years ended March

31, 2020 and 2019, there was a $265,525 and $0 impairment, respectively, on customer relationship from Sichuan Senmiao as a result

of the Company’s decision to discontinue the P2P lending business in October 2019.

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Loss per share

Basic loss per share is computed by dividing

net loss attributable to stockholders by the weighted average number of outstanding shares of common stock, adjusted for outstanding

shares of common stock that are subject to repurchase.

For the calculation of diluted loss per

share, net loss attributable to stockholders for basic earnings loss per share is adjusted by the effect of dilutive securities,

including share-based awards, under the treasury stock method.

Potentially dilutive securities, of which the amounts are insignificant,

have been excluded from the computation of diluted net loss per share if their inclusion is anti-dilutive.

Purchased intangible assets are recognized and

measured at fair value upon acquisition.

Separately identifiable intangible assets that have determinable lives continue to be amortized

over their estimated useful lives using the straight-line method as follows:

Online ride-hailing platform operating license

Separately identifiable intangible assets to be

held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets

may not be recoverable.

Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use

of the asset and its eventual disposition.

Measurement of any impairment loss for identifiable intangible assets is based on the amount

by which the carrying amount of the assets exceeds the fair value of the assets.

For the years ended March 31, 2021 and 2020, there

was $0 and $265,525 impairment, respectively, on customer relationship from Sichuan Senmiao as a result of the Company’s decision

to discontinue the P2P lending business in October 2019 of intangible assets.

Goodwill represents the excess of the consideration

paid of an acquisition over the fair value of the net identifiable assets of the acquired subsidiaries at the date of acquisition.

is not amortized and is tested for impairment at least annually, more often when circumstances indicate impairment may have occurred.

Goodwill is carried at cost less accumulated impairment losses.

If impairment exists, goodwill is immediately written off to its fair

value and the loss is recognized in the consolidated statements of operations and comprehensive loss.

Impairment losses on goodwill are

not reversed.

Company reviews the carrying value of intangible assets not subject to amortization, including goodwill, to determine whether impairment

may exist annually or more frequently if events and circumstances indicate that it is more likely than not that an impairment has occurred.

The Company assesses qualitative factors to determine whether it is necessary to perform the two-step in accordance with

If the Company believes, as a result of the qualitative carrying amount, the two-step quantitative impairment test described

below is required.

The first step compares the fair values of each

reporting unit to its carrying amount, including goodwill.

If the fair value of each reporting unit exceeds its carrying amount, goodwill

is not considered to be impaired and the second step will not be required.

If the carrying amount of a reporting unit exceeds

its fair value, the second step compares the implied fair value of goodwill to the carrying value of a reporting unit’s goodwill.

The implied fair value of goodwill is determined in a manner similar to accounting for a business acquisition with the allocation of the

assessed fair value determined in the first step to the assets and liabilities of the reporting unit.

The excess of the fair value of

the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill.

Estimating fair value

is performed by utilizing various valuation techniques, with the primary technique being a discounted cash flow.

For years ended March 31, 2021 and 2020,

no impairment was recorded for goodwill.

Basic loss per share is computed by dividing net

loss attributable to stockholders by the weighted average number of outstanding shares of common stock, adjusted for outstanding shares

of common stock that are subject to repurchase.

For the calculation of diluted loss per share,

net loss attributable to stockholders for basic loss per share is adjusted by the effect of dilutive securities, including share-based

awards, under the treasury stock method.

Potentially dilutive securities, of which the amounts are insignificant, have been excluded from

the computation of diluted net loss per share if their inclusion is anti-dilutive.

Derivative liabilities

A contract is designated as an asset or

a liability and is carried at fair value on the Company’s balance sheet, with any changes in fair value recorded in the Company’s

results of operations.

The Company then determines which options, warrants and embedded features require liability accounting

and records the fair value as a derivative liability.

The changes in the values of these instruments are shown in the accompanying

consolidated statements of operations and comprehensive loss as “change in fair value of derivative liabilities”.

A contract is designated as an asset or a liability

and is carried at fair value on the Company’s balance sheet, with any changes in fair value recorded in the Company’s results

of operations.

The Company then determines which options, warrants and embedded features require liability accounting and records the

fair value as a derivative liability.

The changes in the values of these instruments are shown in the accompanying consolidated statements

of operations and comprehensive loss as “change in fair value of derivative liabilities”.

Revenue recognition

The Company adopted ASC 606, Revenue from

Contracts with Customers (“ASC 606”) on April 1, 2018 using the modified retrospective approach.

ASC 606 establishes

principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the

entity's contracts to provide goods or services to customers.

The core principle requires an entity to recognize revenue to depict

the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive

in exchange for those goods or services recognized as performance obligations are satisfied.

It also requires the Company to identify

contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on

when control of goods and services transfers to a customer.

To achieve that core principle, the Company

applies the five steps defined under ASC 606:

The Company recognized its revenue under Accounting

Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (ASC 606).

ASC 606 establishes principles for reporting

information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide

goods or services to customers.

The core principle requires an entity to recognize revenue to depict the transfer of goods or services

to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services

recognized as performance obligations are satisfied.

It also requires the Company to identify contractual performance obligations and

determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers

to a customer.

To achieve that core principle, the Company applies

the five steps defined under ASC 606:

(i) identify the contract(s) with a customer, (ii) identify the performance obligations

in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the

contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

The Company accounts for a contract with

a customer when the contract is committed in writing, the rights of the parties, including payment terms, are identified, the contract

has commercial substance and consideration to collect is substantially probable.

The Company has assessed the impact of

the guidance by reviewing its existing customer contracts and current accounting policies and practices to identify differences

that will result from applying the new requirements, including the evaluation of its performance obligations, transaction price,

customer payments, transfer of control and principal versus agent considerations.

Based on the assessment, the Company concluded

that there was no change to the timing and pattern of revenue recognition for its current revenue streams in scope of ASC 606 and

therefore there was no material changes to the Company's consolidated financial statements upon adoption of ASC 606.

in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in

the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

The Company accounts for a contract with a customer

when the contract is committed in writing, the rights of the parties, including payment terms, are identified, the contract has commercial

substance and consideration to collect is substantially probable.

As of March 31, 2021, the Company had outstanding

contracts for automobile transaction and related services amounting to $590,509, of which $387,345 is expected to be completed

within twelve months after March 31, 2020, and $203,164 is expected to be completed

after March 31, 2021.

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Disaggregated information of revenues by

business lines are as follows:

For the Years

Ended March 31,

contracts for automobile transaction and related services amounting to $488,328, of which $315,135 is expected to be completed within twelve months

after March 31, 2021, and $173,194 is expected to be completed after March 31, 2022.

Disaggregated information of revenues by business

lines are as follows:

For Years Ended

Automobile Transaction and Related Services (Continuing Operations)

- Revenues from sales of automobiles

- Service fees from automobile purchase services

- Facilitation fees from automobile transactions

- Operating lease revenues from automobile rentals

- Service fees from management and guarantee services

- Financing revenues

- Operating lease revenues from automobile rentals

- Service fees from automobile purchase services

- Facilitation fees from automobile transactions

- Other service fees

Total Revenues from Automobile Transaction and Related Services (Continuing Operations)

Online Ride-hailing Platform Services (Continuing Operations)

Total Revenues from Continuing Operations

Online Lending Services (Discontinued Operations)

2 unchanged sentences

- Website development revenue

Total revenues from Online Lending Services (Discontinued Operations)

Total Revenues from Discontinued Operations

Total Revenues

Automobile transaction and related services

Sales of automobiles – The Company

generates revenue from sales of automobiles to the customers of Jinkailong, Hunan Ruixi and Mashang Chuxing.

The control over the

automobile is transferred to the purchaser along with the delivery of automobile.

The amount of the revenue is based on the sale

price agreed by Hunan Ruixi or Yicheng and the counterparties, including Jinkailong and Mashang Chuxing, who acts on behalf of

its customers.

The Company recognizes revenues when the automobile is delivered and control is transferred to the purchaser at

a point in time.

Sales of automobiles –

The Company generates

revenue from sales of automobiles to the customers of Jinkailong, Hunan Ruixi and Chengdu Mashangchuxing Automobile Leasing Co., Ltd.

(“Mashang Chuxing”).

The control over the automobile is transferred to the purchaser along with the delivery of automobiles.

The amount of the revenue is based on the sale price agreed by Hunan Ruixi or Yicheng and the counterparties, including Jinkailong, who

acts on behalf of its customers.

The Company recognizes revenues when an automobile is delivered and control is transferred to the purchaser

at a point in time.

Accounts receivable related to the revenue are being collected over 36 to 48 months.

The interest component is included in the non-current

portion of the accounts receivable.

Operating lease revenues from automobile rentals

–The Company generates revenue from sub-leasing automobiles from some online ride-hailing drivers or leasing its own automobiles.

The Company recognizes revenue wherein an automobile is transferred to the leasee and the leasee has the ability to control the asset,

is accounted for under ASC Topic 842.

Rental transactions are satisfied over the rental period.

Rental periods are short term in nature,

generally are twelve months or less.

Service fees from management and guarantee services

Over 95% of the Company’s customers are online ride-hailing drivers.

The drivers sign affiliation agreements with the Company,

pursuant to which the Company provides them with management and guarantee services during the affiliation period.

Service fees for management

and guarantee services are paid by such automobile purchasers on a monthly basis for the management and guarantee services provided

during the affiliation period.

The Company recognizes revenue over the affiliation period when performance obligations are completed.

Financing revenues –

Interest income from

the lease arising from the Company’s sales-type leases and bundled lease arrangements are recognized as financing revenues over

the lease term based on the effective rate of interest in the lease.

Service fees from automobile purchase services

– Services fees from automobile purchase services are paid by automobile purchasers for a series of the services provided

to them throughout the purchase process such as credit assessment, preparation of financing application materials, assistance with

closing of financing transactions, license and plate registration, payment of taxes and fees, purchase of insurance, installment

of GPS devices, ride-hailing driver qualification and other administrative procedures.

The amount of these fees is based on the

sales price of the automobiles and relevant services provided.

The Company recognizes revenue when all the services are completed

and the automobile is delivered to the purchaser at a point in time.

Services fees from automobile purchase services are paid by automobile purchasers for a series of the services provided to them

throughout the purchase process such as credit assessment, preparation of financing application materials, assistance with closing of

financing transactions, license and plate registration, payment of taxes and fees, purchase of insurance, installment of GPS devices,

ride-hailing driver qualification and other administrative procedures.

The amount of these fees is based on the sales price of the automobiles

and relevant services provided.

The Company recognizes revenue when all the services are completed and an automobile is delivered to the

purchaser at a point in time.

Accounts receivable related to the revenue are being collected over 36 to 48 months.

The interest component is included in the non-current

portion of the accounts receivable.

Facilitation fees from automobile transactions

– Facilitation fees from automobile purchase transactions are paid by the Company’s customers including third-party

sales teams or the automobile purchasers for the facilitation of the sales and financing of automobiles.

The Company attracts automobile

purchasers through third-party sales teams or its own sales department.

For the sales facilitated between third-party sales teams

and automobile purchasers, the Company charges the fees to the third-party sales teams, which derived from the commission paid

by the automobile purchasers to the third-party sales teams.

Relating to sales facilitated between automobile purchasers and dealers,

the Company charges the fees to the automobile purchasers.

The Company recognizes revenue from facilitation fees when the titles

are transferred to the purchasers at a point in time.

The amount of fees is based on the type of automobile and negotiation with

each sales team or automobile purchaser.

The fees charged to third-party sales teams or automobile purchasers are paid before the

automobile purchase transactions are consummated.

Facilitation fees from automobile purchase transactions are paid by the Company’s customers including third-party sales

teams or the automobile purchasers for the facilitation of the sales and financing of automobiles.

The Company attracts automobile purchasers

through third-party sales teams or its own sales department.

For the sales facilitated between third-party sales teams and automobile

purchasers, the Company charges the fees to the third-party sales teams, which derived from the commission paid by the automobile purchasers

to the third-party sales teams.

Relating to sales facilitated between automobile purchasers and dealers, the Company charges the fees

to the automobile purchasers.

The Company recognizes revenue from facilitation fees when the titles are transferred to the purchasers

at a point in time.

The amount of fees is based on the type of automobile and negotiation with each sales team or automobile purchaser.

The fees charged to third-party sales teams or automobile purchasers are paid before the automobile purchase transactions are consummated.

These fees are non-refundable upon the delivery of automobiles.

Service fees from management and guarantee

services – Over 95% of the Company’s customers are drivers of Didi Chuxing Technology Co., Ltd., the largest ride-hailing

service platform in China.

The drivers sign affiliation agreements with the Company, pursuant to which the Company provides them

with management and guarantee services during the affiliation period.

Service fees for management and guarantee services are paid

by such automobile purchasers on a monthly basis for the management and guarantee services provided during the affiliation

The Company recognizes revenue over the affiliation period when performance obligations are completed.

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Financing revenues – Interest income

from the lease arising from the Company’s sales-type leases and bundled lease arrangements are recognized as financing revenues

over the lease term based on the effective rate of interest in the lease.

Operating lease revenues from

automobile rentals –The Company generates revenue from sub-leasing automobiles from some online ride-hailing drivers or

leasing its own automobiles.

The Company recognizes revenue wherein the automobile is transferred to the leasee and the

leasee has the ability to control the asset, is accounted for under ASC Topic 842.

Rental transactions are satisfied over the

rental period.

Rental periods are short term in nature, generally are twelve months or less.

On April 1, 2019, the Company adopted

ASU 2016-02, Leases (ASC Topic 842).

This update, as well as additional amendments and targeted improvements issued in 2018 and

early 2019, supersedes existing lease accounting guidance found under ASC 840, Leases (“ASC 840”).

accounting for lessors does not fundamentally change with this update except for changes to conform and align guidance to the lessee

guidance, as well as to the revenue recognition guidance in ASU 2014-09, Revenue from Contracts with Customers (ASC Topic 606).

Some of these conforming changes, such as those related to the definition of lease term and minimum lease payments, resulted in

certain lease arrangements, that would have been previously accounted for as operating leases, to be classified and accounted for

as sales-type leases with a corresponding up-front recognition of automobile sales revenue when the lessee obtained control over

the automobile.

The two primary accounting provisions the

Company uses to classify transactions as sales-type or operating leases are:

(i) a review of the lease term to determine if

it is for the major part of the economic life of the underlying equipment (defined as greater than 75%);

and (ii) a review

of the present value of the lease payments to determine if they are equal to or greater than substantially all of the fair market

value of the equipment at the inception of the lease (defined as greater than 90%).

Automobile included in arrangements meeting

these conditions are accounted for as sales-type leases.

Online ride-hailing platform services

The Company generates revenue from providing services

to online ride-hailing drivers (“Drivers”) to assist them in providing transportation services to riders ("Riders")

looking for taxi/ride-hailing services.

The Company earns commissions for each completed ride in an amount equal to the difference between

an upfront quoted fare and the amount earned by a Driver based on actual time and distance for the ride charged to the Rider.

the Company bears a single performance obligation in the transaction of connecting Drivers with Riders to facilitate the completion of

a successful transportation service for Riders.

The Company recognizes revenue upon completion of a ride as the single performance obligation

is satisfied and the Company has the right to receive payment for the services rendered upon the completion of the ride.

The Company evaluates

the presentation of revenue on a gross or net basis based on whether it controls the service provided to the Rider and is the principal

“gross”), or it arranges for other parties to provide the service to the Rider and is an agent (i.e.

"net").

Since the Company is not primarily responsible for ride-hailing services provided to Riders, it does not have inventory risk related to

the services.

Thus, the Company recognizes revenue at a net basis.

The Company accounts for leases in accordance

with ASC 842.

The two primary accounting provisions the Company uses to classify transactions as sales-type or operating leases are:

review of the lease term to determine if it is for the major part of the economic life of the underlying equipment (defined as greater

and (ii) a review of the present value of the lease payments to determine if they are equal to or greater than substantially

all of the fair market value of the equipment at the inception of the lease (defined as greater than 90%).

Automobile included in arrangements

meeting these conditions are accounted for as sales-type leases.

Interest income from the lease is recognized in financing revenues over

the lease term.

Automobile included in arrangements that do not meet these conditions are accounted for as operating leases and

revenue is recognized over the term of the lease.

The Company excludes from the measurement

of its lease revenues any tax assessed by a governmental authority that is both imposed on and concurrent with a specific revenue-producing

transaction and collected from a customer.

The Company considers the economic life

of most of the automobiles to be three to four years, since this represents the most common lease term for its automobiles and

the automobiles will be used for ride-hailing services.

The Company believes three to four years is representative of the period

during which an automobile is expected to be economically usable, with normal service, for the purpose for which it is intended.

A portion of the Company’s direct

sales of automobile to end customers are made through bundled lease arrangements which typically include automobile, services (automobile

purchase services, facilitation services, and management and guarantee services) and financing components where the customer pays

a single negotiated fixed minimum monthly payment for all elements over the contractual lease term.

Revenues under these bundled

lease arrangements are allocated considering the relative standalone selling prices of the lease and non-lease deliverables included

in the bundled arrangement and the financing components.

Lease deliverables include the automobile and financing, while the non-lease

deliverables generally consist of the services and repayment of advanced fees made on behalf of its customers.

The Company considers

the fixed payments for purposes of allocation to the lease elements of the contract.

The fixed minimum monthly payments are multiplied

by the number of months in the contract term to arrive at the total fixed lease payments that the customer is obligated to make

over the lease term.

Amounts allocated to the automobile and financing elements are then subjected to the accounting estimates

under ASC 842 to ensure the values reflect standalone selling prices.

The remainder of any fixed payments are allocated to non-lease

elements (automobile purchase services, facilitation fees, and management and guarantee services), for which these revenues are

recognized in a manner consistent with the guidance for service fees from automobile purchase services, facilitation fees from

automobile transactions, and service fees from management and guarantee services as discussed above.

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s lease pricing interest

rates, which are used in determining customer payments in a bundled lease arrangement, are developed based upon the local prevailing

rates in the marketplace where its customer will be able to obtain an automobile loan under similar terms from the bank.

reassesses its pricing interest rates quarterly based on changes in the local prevailing rates in the marketplace.

31, 2020, the Company's pricing interest rate was 6.0% per annum.

Online P2P Lending Services (Discontinued

Transaction fees – Prior to the

Company’s P2P lending business being discontinued on October 17, 2019, transaction fees were paid by borrowers to the

Company for the work the Company performed through its platform.

The amount of these fees was based upon the loan amount and

the maturity date of the loan.

The fees charged to borrowers were paid upon (i) disbursement of the proceeds for loans

which accrued interest on a monthly basis or (ii) full payment of principal and interest of loans which accrued interest

on a daily basis.

These fees were non-refundable upon the issuance of loan.

The Company recognized revenue when loan proceeds

were disbursed to borrowers or borrowers paid their principal and interest on loans.

Service fees – The Company charged

investors service fees on their actual return of investment (interest income).

The Company generally received the service fees

upon the investors’ receipt of their investment returns.

The Company recognized revenue when loans were repaid and investors

received their investment income.

Website development revenues – Revenue

allocated to website development services is recognized as the service is performed over time using the Company’s efforts

or inputs to the satisfaction of a performance obligation using an input measure method, under which the total value of revenue

is recognized on the basis of the percentage that total cost to date bears to the total expected costs.

The Company considers labor

costs and related outsource labor costs for the input measurement as the best available indicator of the progress, pattern and

timing in which contract obligations are fulfilled.

Provisions for estimated losses, if any,

on uncompleted contracts are recorded in the period in which such losses become probable based on the current contract estimates.

In instances where substantive acceptance provisions are specified in customer contracts, revenues are deferred until all acceptance

criteria have been met.

To date, the Company has not incurred a material loss on any contracts.

However, as a policy, provisions

for estimated losses on such engagements will be made during the period in which a loss becomes probable and can be reasonably

The Company generally does not enter into

arrangements with multiple deliverables for website development services contracts.

If the deliverables have standalone value at

contract inception, the Company accounts for each deliverable separately.

Deferred income tax liabilities and assets

are recognized for the expected future tax consequences of temporary differences between the income tax basis and financial reporting

basis of assets and liabilities.

Provisions or benefits for income taxes consists of tax estimated from taxable income plus or

minus deferred tax expenses (benefits) if applicable.

Deferred tax is calculated using the balance

sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities

in the financial statements and the corresponding tax basis.

Deferred tax assets are recognized to the extent that it is probable

that taxable income will be utilized with prior net operating loss carried forwards using tax rates that are expected to apply

to the period when the asset is realized or the liability is settled.

Deferred tax is charged or credited in the income statement,

except when it is related to items credited or charged directly to equity.

Deferred tax assets are reduced by a valuation allowance

when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be

Current income taxes are provided for in accordance with the laws of the relevant tax authorities.

An uncertain tax position is recognized

as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with

a tax examination being presumed to occur.

The amount recognized is the largest amount of tax benefit that is greater than 50%

likely of being realized on examination.

Penalties and interest incurred related to underpayment of income tax are classified as

income tax expense in the period incurred.

The Company did not have any significant unrecognized uncertain tax positions or any

unrecognized liabilities, interest or penalties associated with unrecognized tax benefit as of March 31, 2020 and 2019.

31, 2020, the calendar years ended December 31, 2015 through 2019 for the Company’s PRC entities remain open for statutory

examination by PRC tax authorities.

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Automobile included in arrangements that do not meet these conditions are accounted for as operating leases and revenue

is recognized over the term of the lease.

The Company excludes from the measurement of its

lease revenues any tax assessed by a governmental authority that is both imposed on and concurrent with a specific revenue-producing transaction

and collected from a customer.

The Company considers the economic life of most

of the automobiles to be three to five years, since this represents the most common lease term for its automobiles and the automobiles

will be used for ride-hailing services.

The Company believes three to five years is representative of the period during which an automobile

is expected to be economically usable, with normal service, for the purpose for which it is intended.

A portion of the Company’s direct sales

of automobile to end customers are made through bundled lease arrangements which typically include automobile, services (automobile purchase

services, facilitation services, and management and guarantee services) and financing components where the customer pays a single negotiated

fixed minimum monthly payment for all elements over the contractual lease term.

Revenues under these bundled lease arrangements are allocated

considering the relative standalone selling prices of the lease and non-lease deliverables included in the bundled arrangement and the

financing components.

Lease deliverables include the automobile and financing, while the non-lease deliverables generally consist of the

services and repayment of advanced fees made on behalf of its customers.

The Company considers the fixed payments for purposes of allocation

to the lease elements of the contract.

The fixed minimum monthly payments are multiplied by the number of months in the contract term

to arrive at the total fixed lease payments that the customer is obligated to make over the lease term.

Amounts allocated to the automobile

and financing elements are then subjected to the accounting estimates under ASC 842 to ensure the values reflect standalone selling prices.

The remainder of any fixed payments are allocated to non-lease elements (automobile purchase services, facilitation fees, and management

and guarantee services), for which these revenues are recognized in a manner consistent with the guidance for service fees from automobile

purchase services, facilitation fees from automobile transactions, and service fees from management and guarantee services as discussed

The Company’s lease pricing interest rates,

which are used in determining customer payments in a bundled lease arrangement, are developed based upon the local prevailing rates in

the marketplace where its customer will be able to obtain an automobile loan under similar terms from the bank.

The Company reassesses

its pricing interest rates quarterly based on changes in the local prevailing rates in the marketplace.

As of March 31, 2021, the

Company's pricing interest rate was 6.0% per annum.

Deferred income tax liabilities and assets are

recognized for the expected future tax consequences of temporary differences between the income tax basis and financial reporting basis

of assets and liabilities.

Provisions or benefits for income taxes consists of tax estimated from taxable income plus or minus deferred

tax expenses (benefits) if applicable.

Deferred tax is calculated using the balance sheet

liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in

the consolidated financial statements and the corresponding tax basis.

In principle, deferred tax liabilities are recognized for all taxable

temporary differences.

Deferred tax assets are recognized to the extent that it is probable that taxable income will be utilized with

prior net operating loss carried forwards using tax rates that are expected to apply to the period when the asset is realized or the liability

Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that

some portion or all of the deferred tax assets will not be utilized.

Current income taxes are provided for in accordance with the laws

of the relevant tax authorities.

An uncertain tax position is recognized as a benefit only if it is “more likely than not”

that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur.

The amount recognized is

the largest amount of tax benefit that is greater than 50% likely of being realized on examination.

Penalties and interest incurred related

to underpayment of income tax are classified as income tax expense in the period incurred.

The Company did not have any significant unrecognized

uncertain tax positions or any unrecognized liabilities, interest or penalties associated with unrecognized tax benefit as of March 31,

2021 and 2020.

As of March 31, 2021, the calendar years ended December 31, 2015 through 2020 for the Company’s PRC entities

remain open for statutory examination by PRC tax authorities.

The Company presents deferred tax assets and liabilities as non-current

in the balance sheet based on an analysis of each taxpaying component within a jurisdiction.

Comprehensive loss

Comprehensive loss includes net loss and

foreign currency adjustments.

Comprehensive loss includes net loss and foreign

currency adjustments.

Comprehensive loss is reported in the consolidated statements of operations and comprehensive loss.

Accumulated other comprehensive loss, as presented on the consolidated balance sheets are the cumulative foreign currency translation

other comprehensive loss, as presented on the consolidated balance sheets are the cumulative foreign currency translation adjustments.

Share-based awards

Share-based awards granted to the Company’s

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 estimated forfeitures,

over the requisite service period.

The fair value of restricted shares is determined with reference to the fair value of the underlying

At each date of measurement, the Company

reviews internal and external sources of information to assist in the estimation of various attributes to determine the fair value

of the share-based awards granted by the Company, including but not limited to the fair value of the underlying shares, expected

life, expected volatility and expected forfeiture rates.

The Company is required to consider many factors and make certain 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.

Prior to March 31, 2019, leases are

classified as either capital or operating leases as lessee.

Leases that transfer substantially all the benefits and risks incidental

to the ownership of assets are accounted for as if there was an acquisition of an asset and incurrence of an obligation at the

inception of the lease.

All other leases are accounted for as operating leases and are included in the consolidated statements

of operations on a straight-line basis over the term of the leases.

Leases are classified as either operating lease, sales-type

lease, or direct finance leases as lessor.

On April 1, 2019, the Company adopted

ASU 2016-02, Leases (ASC Topic 842).

This update supersedes existing lease accounting guidance found under ASC 840, Leases (“ASC

840”) and requires the recognition of right-of-use (“ROU”) assets and lease obligations (“lease liabilities”)

by lessees for those leases currently classified as operating leases under existing lease guidance.

Leases will be classified as

either finance or operating, with classification affecting the pattern of expense recognition.

Short term leases with a term of

twelve months or less are not required to be recognized.

Lessor accounting is generally

the same under ASC 842 as compared to ASC 840 except with an additional requirement to assess collectability to support classification

as a direct financing lease.

Also, in order to derecognize the asset and record revenue, collection of payments due must be probable

for sales-type leases and the lessees of sales-type leases will need to obtain control over the leased asset.

The Company adopted the practical expedient

that allows lessees to treat the lease and non-lease components of a lease a single lease component.

The impact of the adoption

of the ASC 842, as of April 1, 2019, the Company recognized $246,227 ROU assets and $247,325 lease liabilities, primarily

related to operating leases of facilities.

The adoption of this standard resulted in the recording of operating lease assets and

operating lease liabilities as of April 1, 2019, with no related impact on the Company's consolidated statement of changes

in stockholders' equity or consolidated statements of operations and comprehensive loss.

During the year ended March 31, 2020, the

Company entered into certain agreements as a lessor under which it leased automobiles to short-term (usually under 12 months) car

service drivers.

The Company also entered into certain agreements as a lessee to lease automobiles and to conduct its automobiles

rental operations.

If any of the following criteria are met, the Company classifies the lease as a finance lease (as a lessee)

or as a direct financing or sales-type lease (both as a lessor):

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The lease transfers ownership of the underlying

asset to the lessee by the end of the lease term;

The lease grants the lessee an option

to purchase the underlying asset that the Company is reasonably certain to exercise;

The lease term is for 75% or more of the

remaining economic life of the underlying asset, unless the commencement date falls within the last 25% of the economic life of

the underlying asset;

The present value of the sum of the lease

payments equals or exceeds 90% of the fair value of the underlying asset;

The underlying asset is of such a specialized

nature that it is expected to have no alternative use to the lessor at the end of the lease term.

Leases that do not meet

any of the above criteria are accounted for as operating leases.

The Company combines lease

and non-lease components in its contracts under Topic 842, when permissible.

Finance and operating lease ROU assets

and lease liabilities are recognized at the adoption date of April 1, 2019 or the commencement date, whichever is earlier,

based on the present value of lease payments over the lease term.

Since the implicit rate for the Company’s leases is not

readily determinable, the Company use its incremental borrowing rate based on the information available at the commencement date

in determining the present value of lease payments.

The incremental borrowing rate is the rate of interest that the Company would

have to pay to borrow, on a collateralized basis, an amount equal to the lease payments, in a similar economic environment and

over a similar term.

used to calculate the present value of lease payments generally do not include any options to extend, renew, or terminate the lease,

as the Company does not have reasonable certainty at lease inception that these options will be exercised.

The Company generally

consider the economic life of its operating lease ROU assets to be comparable to the useful life of similar owned assets.

has elected the short-term lease exception, therefore operating lease ROU assets and liabilities do not include leases with a lease

term of twelve months or less.

Its leases generally do not provide a residual guarantee.

The finance or operating lease ROU asset

also excludes lease incentives.

Lease expense is recognized on a straight-line basis over the lease term for operating lease.

the Company recognizes the finance leases ROU assets and interest on an amortized cost basis.

The amortization of finance

ROU assets is recognized on an accretion basis as amortization expense, while the lease liability is increased to reflect interest

on the liability and decreased to reflect the lease payments made during the period.

Interest expense on the lease liability is

determined each period during the lease term as the amount that results in a constant periodic interest rate of the automobile

loans on the remaining balance of the liability.

The Company reviews the impairment of its

ROU assets consistent with the approach applied for its other long-lived assets.

The Company reviews the recoverability of its

long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable.

The assessment of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted

future pre-tax cash flows of the related operations.

The Company has elected to include the carrying amount of finance and operating

lease liabilities in any tested asset group and include the associated lease payments in the undiscounted future pre-tax cash flows.

For the years ended March 31, 2020 and 2019, the Company recognized an impairment loss of $70,984 and $0, respectively, on its

finance lease ROU assets.

Share-based awards granted to the Company’s

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 estimated forfeitures, over

the requisite service period.

The fair value of restricted shares is determined with reference to the fair value of the underlying shares.

At each date of measurement, the Company reviews

internal and external sources of information to assist in the estimation of various attributes to determine the fair value of the share-based

awards granted by the Company, including but not limited to the fair value of the underlying shares, expected life, expected volatility

and expected forfeiture rates.

The Company is required to consider many factors and make certain assumptions during this assessment.

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.

The Company accounts for leases in accordance

with ASC 842.

Beginning in the year ended March 31, 2020, the Company entered into certain agreements as a lessor under which it

leased automobiles for a short-term period (usually under 12 months) to ride-hailing car service drivers.

The Company also entered into

certain agreements as a lessee to lease automobiles and to conduct its automobiles rental operations.

If any of the following criteria

are met, the Company classifies the lease as a finance lease (as a lessee) or as a direct financing or sales-type lease (both as a lessor):

The lease transfers ownership of the underlying asset to the lessee by the end of the lease term;

The lease grants the lessee an option to purchase the underlying asset that the Company is reasonably certain to exercise;

The lease term is for 75% or more of the remaining economic life of the underlying asset, unless the commencement date falls within the last 25% of the economic life of the underlying asset;

The present value of the sum of the lease payments equals or exceeds 90% of the fair value of the underlying asset;

The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term.

Leases that do not meet any of

the above criteria are accounted for as operating leases.

The Company combines lease and

non-lease components in its contracts under Topic 842, when permissible.

Finance and operating lease ROU assets and lease

liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.

Since the implicit

rate for the Company’s leases is not readily determinable, the Company use its incremental borrowing rate based on the information

available at the commencement date in determining the present value of lease payments.

The incremental borrowing rate is the rate of interest

that the Company would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments, in a similar economic

environment and over a similar term.

Lease terms used to calculate the present value

of lease payments generally do not include any options to extend, renew, or terminate the lease, as the Company does not have reasonable

certainty at lease inception that these options will be exercised.

The Company generally consider the economic life of its operating lease

ROU assets to be comparable to the useful life of similar owned assets.

The Company has elected the short-term lease exception, therefore

operating lease ROU assets and liabilities do not include leases with a lease term of twelve months or less.

Its leases generally do not

provide a residual guarantee.

The finance or operating lease ROU asset also excludes lease incentives.

Lease expense is recognized on

a straight-line basis over the lease term for operating lease.

Meanwhile, the Company recognizes the finance leases ROU assets and interest

on an amortized cost basis.

The amortization of finance ROU assets is recognized on an accretion basis as amortization expense, while

the lease liability is increased to reflect interest on the liability and decreased to reflect the lease payments made during the period.

Interest expense on the lease liability is determined each period during the lease term as the amount that results in a constant periodic

interest rate of the automobile loans on the remaining balance of the liability.

The Company reviews the impairment of its ROU

assets consistent with the approach applied for its other long-lived assets.

The Company reviews the recoverability of its long-lived

assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable.

The assessment

of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax

cash flows of the related operations.

The Company has elected to include the carrying amount of finance and operating lease liabilities

in any tested asset group and include the associated lease payments in the undiscounted future pre-tax cash flows.

For the year ended

March 31, 2021, the Company recognized impairment loss of $120,380 on its finance lease ROU assets.

Reclassification

Certain items of operating expenses in the consolidated

statements of operations and comprehensive of comparative period have been reclassified to conform to the consolidated financial statements

for the current period.

The reclassification has no impact on net loss.

Significant risks and uncertainties

Assets that potentially subject the Company to significant concentration of credit risk primarily consist of cash and cash equivalents.

The maximum exposure of these assets to credit risk is their carrying amount as of the balance sheet dates.

The maximum exposure of these assets to credit risk is their carrying amounts as of the balance sheet dates.

On March 31, 2021 and 2020, approximately $1,5 60,000 and $2,600, respectively, was deposited with a bank in the United States which is insured by the U.S.

1 unchanged sentence

On March 31, 2021 and 2020, approximately $2,339,000 and $820,000, respectively, were deposited in financial institutions located in mainland China, which were insured by the government authority.

Under the Deposit Insurance System in China, an enterprise’s deposits at one bank is insured for a maximum of approximately $70,000 (RMB500,000).

To limit exposure to credit risk relating to deposits, the Company primarily place cash deposits with large financial institutions in China which management believes are of high credit quality.

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s operations

are carried out in mainland China.

Accordingly, the Company’s business, financial condition and results of operations may

be influenced by the political, economic and legal environments in the PRC as well as by the general state of the PRC’s economy.

In addition, the Company’s business may be influenced by changes in government policies with respect to laws and regulations,

anti-inflationary measures, currency conversion and remittance abroad, rates and methods of taxation and other factors.

In measuring the credit risk of accounts

receivables due from the automobile purchasers (the “customers”), the Company mainly reflects the “probability

of default” by the customer on its contractual obligations and considers the current financial position of the customer and

the risk exposures to the customer and its likely future development.

However, as the Company only commenced the automobile transaction

and related services since November 2018, there was limited historic default data and other information to make an estimate

on the expected credit losses.

Historically, most of the automobile purchasers would pay the Company their previously defaulted

amounts within one to three months.

As a result, the Company would provide full provisions on accounts receivable if the customers

default on repayments for over three months.

As of March 31, 2020, the Company provided an allowance for doubtful accounts of $379,689

and wrote off accounts receivables of $1,410,736, which represents due from automobile purchasers.

In measuring the credit risk of accounts

receivables due from the borrowers and investors (the “P2P customers”), the Company mainly reflects the “probability

of default” by the P2P customer on its contractual obligations and considers the current financial position of the P2P customer

and the risk exposures to the P2P customer and its likely future development.

Historically, most of the borrowers would pay the

transaction fee within one year upon (i) disbursement of the proceeds for loans or (ii) full payment of principal and

interest of loan.

The Company’s operations are carried out entirely in mainland China.

Accordingly, the Company’s business, financial condition and results of operations may be influenced by the social, political, economic and legal environments in the PRC as well as by the general state of the PRC economy.

In addition, the Company’s business may be influenced by changes in PRC government laws, rules and policies with respect to, among other matters, the response to the COVID-19 pandemic, anti-inflationary measures, currency conversion and remittance of currency outside of China, rates and methods of taxation and other factors.

In measuring the credit risk of accounts receivables due from the automobile

purchasers (the “customers”), the Company mainly reflects the “probability of default”

by the customer on its

contractual obligations and considers the current financial position of the customer and the risk exposures to the customer and its likely

future development.

However, as the Company only commenced the automobile transaction and related services since November 2018, there

was limited historic default data and other information to make an estimate on the expected credit losses.

Historically, most of the automobile

purchasers would pay the Company their previously defaulted amounts within one to three months.

As a result, the Company would provide

full provisions on accounts receivable if the customers default on repayments for over three months.

As of March 31, 2021 and 2020,

the Company provided an allowance for doubtful accounts of $78,167 and $379,689, respectively.

For the years ended March 31, 2021

and 2020, the Company wrote off accounts receivable of $485,384 and $1,410,736, respectively, which represents due from automobile purchasers.

In measuring the credit risk of accounts receivables due from the borrowers and investors who formally used the Company’s discontinued P2P lending platform (the “P2P customers”), the Company mainly reflects the “probability of default”

by the P2P customers on its contractual obligations and considers the current financial position of the P2P customers and the risk exposures to the P2P customers and its likely future development.

Historically, most of the borrowers would pay the transaction fee within one year upon (i) disbursement of the proceeds for loans or (ii) full payment of principal and interest of loan.

Most of investors would pay the service fee within one year upon receipt of their investment returns.

On October 17,

2019, the Board approved the Plan for the Company to discontinue and wind down its online lending services business.

the Company re-evaluated its accounts receivables from the P2P customers and wrote off accounts receivable of $143,668 that has

not been received as of March 31, 2020.

On October 17, 2019, the Board approved the plan for the Company to discontinue and wind down its online lending services business.

For the year ended March 31, 2021, no additional accounts receivable were written-off.

Foreign currency risk

As of March 31, 2020 and March 31,

2019, substantially all of the Company’s operating activities and major assets and liabilities, except for the cash deposit

of approximately $818,000 and $3,070,000, respectively, in U.S.

dollars, are denominated in RMB, which are not freely convertible

into foreign currencies.

All foreign exchange transactions take place through either the Peoples’ Bank of China (“PBOC”)

or other authorized financial institutions at exchange rates quoted by PBOC.

Approval of foreign currency payments by the PBOC

or other regulatory institutions requires a payment application together with invoices and signed contracts.

The value of RMB is

subject to change in central government policies and international economic and political developments affecting supply and demand

of March 31, 2021 and 2020, substantially all of the Company’s operating activities and major assets and liabilities, except

for the cash deposit of approximately $2, 073,000 and $818,000, respectively, in U.S.

dollars, are denominated in RMB, which are

not freely convertible into foreign currencies.

All foreign exchange transactions take place through either the People’s Bank of

China (“PBOC”) or other authorized financial institutions at exchange rates quoted by PBOC.

Approval of foreign currency payments

by the PBOC or other regulatory institutions requires a payment application together with invoices and signed contracts.

RMB is subject to change in central government policies and international economic and political developments affecting supply and demand

in the China Foreign Exchange Trading System market.

1 unchanged sentence

from translation of financial statements of a foreign subsidiary will be significant affected.

As of March 31, 2020, RMB were depreciated

from 6.71 RMB into US$1.00 at March 31, 2019 to 7.08 RMB into US$1.00 at March 31, 2020.

The Company believes that the VIE Agreements

and the Voting Agreement are in compliance with PRC law and are legally enforceable.

However, uncertainties in the PRC legal system

could limit the Company’s ability to enforce these contractual arrangements.

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The shareholders of Sichuan Senmiao are

also shareholders of the Company and therefore have no current interest in seeking to act contrary to the contractual arrangements.

However, if the shareholders of Sichuan Senmiao were to reduce their interest in the Company, their interests may diverge from

that of the Company and that may potentially increase the risk that they would seek to act contrary to the contractual terms.

the other shareholders of Jinkailong are not shareholders of the Company and there is a risk they may act in contrary to the interests

of the shareholders of the Company.

RMB were appreciated from 7.08 RMB into

US$1.00 at March 31, 2020 to 6.55 RMB into US$1.00 at March 31, 2021.

The Company believes that the VIE Agreements and

the Voting Agreements are in compliance with PRC law and are legally enforceable.

However, uncertainties in the PRC legal system could

limit the Company’s ability to enforce these contractual arrangements.

The shareholders of Sichuan Senmiao are also shareholders

of the Company and therefore have no current interest in seeking to act contrary to the contractual arrangements.

However, if the shareholders

of Sichuan Senmiao were to reduce their interest in the Company, their interests may diverge from that of the Company and that may potentially

increase the risk that they would seek to act contrary to the contractual terms.

However, the other shareholders of Jinkailong are not

shareholders of the Company and there is a risk they may act in contrary to the interests of the shareholders of the Company.

The Company cannot assure that when conflicts

of interest arise, the shareholders of Sichuan Senmiao or the other shareholders of Jinkailong will act in the best interests of

the Company or that conflicts of interests will be resolved in the Company’s favor.

In addition, the Company’s ability

to control Sichuan Senmiao and Jinkailong via the VIE Agreements and Voting Agreement may not be as effective as direct equity

Further, the VIE Agreements or the Voting

Agreement may not be enforced in China if the PRC government or courts consider those contracts contravene PRC laws and regulations

or otherwise not enforceable for public policy reasons.

If the VIE Agreements or the Voting Agreement were found to be in violation

of any existing PRC laws and regulations, the PRC government could:

revoke the Company’s business and

operating licenses;

require the Company to discontinue or

restrict operations;

restrict the Company’s right to

collect revenues;

block the Company’s websites;

require the Company to restructure the

operations in such a way as to compel the Company to establish a new enterprise, re-apply for the necessary licenses or relocate

our businesses, staff and assets;

impose additional conditions or requirements

with which the Company may not be able to comply;

take other regulatory or enforcement actions

against the Company that could be harmful to the Company’s business.

of interest arise, the shareholders of Sichuan Senmiao or the other shareholders of Jinkailong will act in the best interests of the Company

or that conflicts of interests will be resolved in the Company’s favor.

In addition, the Company’s ability to control Sichuan

Senmiao and Jinkailong via the VIE Agreements and Voting Agreements may not be as effective as direct equity ownership.

Further, the VIE Agreements or the Voting Agreements

may not be enforced in China if the PRC government or courts consider those contracts contravene PRC laws and regulations or otherwise

not enforceable for public policy reasons.

If the VIE Agreements or the Voting Agreements were found to be in violation of any existing

PRC laws and regulations, the PRC government could:

revoke the VIE’s business and operating licenses;

require the VIEs to discontinue or restrict operations;

restrict the Company’s right to collect revenues;

block the Company’s websites;

require the Company to restructure the operations in such a way as to compel the Company to establish a new enterprise, re-apply for the necessary licenses or relocate our businesses, staff and assets;

impose additional conditions or requirements with which the Company may not be able to comply;

take other regulatory or enforcement actions against the Company that could be harmful to the Company’s business.

Recently issued accounting standards

In October 2018,

the FASB issued ASU 2018-17, Consolidation (Topic 810):

Targeted Improvements to Related Party Guidance for Variable Interest Entities.

ASU 2018-17 eliminates the requirement that entities consider indirect interests held through related parties under common control

in their entirety when assessing whether a decision-making fee is a variable interest.

Instead, the reporting entity will consider

such indirect interests on a proportionate basis.

The amendments are effective for fiscal years ending after December 15,

Early adoption is permitted.

The adoption on April 1, 2019 did not have a material effect on the Company’s consolidated

financial statements.

In August 2018,

the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820).

The updated guidance improves the disclosure

requirements on fair value measurements.

The updated guidance if effective for fiscal years, and interim periods within those fiscal

years, beginning after December 15, 2019.

Early adoption is permitted for any removed or modified disclosures.

on April 1, 2019 did not have a material effect on the Company’s consolidated financial statements.

In June 2016,

the FASB issued new accounting guidance ASU 2016-13 for recognition of credit losses on financial instruments, which is effective

January 1, 2020, with early adoption permitted on January 1, 2019.

The guidance introduces a new credit reserving model

known as the Current Expected Credit Loss (“CECL”) model, which is based on expected losses, and differs significantly

from the incurred loss approach used today.

The CECL model requires measurement of expected credit losses not only based on historical

experience and current conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information

and will likely result in earlier recognition of credit reserves.

In June 2016, the FASB issued new accounting

guidance ASU 2016-13 for recognition of credit losses on financial instruments, which is effective January 1, 2020, with early adoption

permitted on January 1, 2019.

The guidance introduces a new credit reserving model known as the Current Expected Credit Loss (“CECL”)

model, which is based on expected losses, and differs significantly from the incurred loss approach used today.

The CECL model requires

measurement of expected credit losses not only based on historical experience and current conditions, but also by including reasonable

and supportable forecasts incorporating forward-looking information and will likely result in earlier recognition of credit reserves.

In November 2019, the FASB issued ASU No.

2019-10, which to update

the effective date of ASU No.

2016-13 for private companies, not-for-profit organizations and certain smaller reporting companies

applying for credit losses standard.

The new effective date for these preparers is for fiscal years beginning after December

15, 2022, including interim periods within those fiscal years.

The Company has not early adopted this update and it

will become effective on January 1, 2023 assuming the Company will remain eligible to be smaller reporting company.

is currently evaluating the impact of this new standard on Company’s consolidated financial statements and related disclosures.

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CECL adoption will have broad impact on the financial

statements of financial services firms, which will affect key profitability and solvency measures.

Some of the more notable expected

changes include:

2019-10, which to update the effective date of ASU No.

2016-13 for private companies,

not-for-profit organizations and certain smaller reporting companies applying for credit losses standard.

The new effective date for these

preparers is for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

has not yet adopted this update and it will become effective on January 1, 2023 assuming the Company will remain eligible to be smaller

reporting company.

The Company is currently evaluating the impact of this new standard on Company’s consolidated financial statements

and related disclosures.

CECL adoption will have broad impact on the financial statements of

financial services firms, which will affect key profitability and solvency measures.

Some of the more notable expected changes include:

Higher allowance on financial guarantee reserve and finance lease receivable levels and related deferred tax assets.

1 unchanged sentence

Increased reserve levels may lead to a reduction in capital levels.

As a result of higher reserving levels, the expectation is that CECL will reduce cyclicality in financial firms’ results, as higher reserving in “good times” will mean that less dramatic reserve increases will be loan related income (which will continue to be recognized on a periodic basis based on the effective interest method) and the related credit losses (which will be recognized up front at origination).

As a result of higher reserving levels, the expectation is that CECL will reduce cyclicality in financial firms’

results, as higher reserving in “good times”

will mean that less dramatic reserve increases will be loan related income (which will continue to be recognized on a periodic basis based on the effective interest method) and the related credit losses (which will be recognized up front at origination).

This will make periods of loan expansion seem less profitable due to the immediate recognition of expected credit losses.

Periods of stable or declining loan levels will look comparatively profitable as the income trickles in for loans, where losses had been previously recognized.

In December 2019, the FASB issued ASU 2019-12,

“Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes”.

The amendments in this Update simplify the

accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The amendments also improve

consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years,

beginning after December 15, 2020.

For all other entities, the amendments are effective for fiscal years beginning after December

15, 2021, and interim periods within fiscal years beginning after December 15, 2022.

Early adoption of the amendments is permitted,

including adoption in any interim period for (1) public business entities for periods for which financial statements have not yet

been issued and (2) all other entities for periods for which financial statements have not yet been made available for issuance.

An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of

the annual period that includes that interim period.

December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes”.

The amendments in this Update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic

The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing

For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those

fiscal years, beginning after December 15, 2020.

For all other entities, the amendments are effective for fiscal years beginning

after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.

Early adoption of the amendments

is permitted, including adoption in any interim period for (1) public business entities for periods for which financial statements

have not yet been issued and (2) all other entities for periods for which financial statements have not yet been made available for

An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning

of the annual period that includes that interim period.

Additionally, an entity that elects early adoption must adopt all the amendments

in the same period.

The Company is currently evaluating the impact of this new standard on Company’s consolidated financial

The adoption of this standard on January 1, 2021 did not have a material impact on its consolidated financial

In August 2020, the FASB issued ASU 2020-06,

“Debt –

Debt Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging –

Contracts in Entity’s

Own Equity (Subtopic 815-40)”.

The amendment in this Update is to address issues identified as a result of the complexity associated

with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and

For convertible instruments, the Board decided to reduce the number of accounting models for convertible debt instruments and

convertible preferred stock.

Limiting the accounting models results in fewer embedded conversion features being separately recognized

from the host contract as compared with current GAAP.

Convertible instruments that continue to be subject to separation models are (1) those

with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative,

and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial

premiums for which the premiums are recorded as paid-in capital.

The amendments in this Update are effective for public business entities

that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies

as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within

those fiscal years.

Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim

periods within those fiscal years.

The Board specified that an entity should adopt the guidance as of the beginning of its annual fiscal

The Company does not believe the adoption of this ASU would have a material effect on the Company’s consolidated financial

statements and related disclosures.

The Company does

not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect

on the consolidated financial position, statements of operations and cash flows of the Company.

ACQUISITION OF HUNAN RUIXI AND ITS VIE

On November 21,

2018, the Company entered into the Investment Agreement with Hunan Ruixi and the Hunan Ruixi Shareholders.

Pursuant to the Investment

Agreement, among other things, the Company acquired from the Hunan Ruixi Shareholders an aggregate of 60% of the outstanding equity

interest in Hunan Ruixi for no consideration.

The Company closed the acquisition on November 22, 2018 and agreed to make a

capital contribution of $6,000,000 to Hunan Ruixi, representing 60% of its registered capital, in accordance with the Investment

As of June 30, 2019, the Company made the full cash contributions totaling $6,000,000 to Hunan Ruixi.

is entitled to vote and receive profits based on its equity interest ownership in Hunan Ruixi and has a right of first refusal

for any issuance of new equity of Hunan Ruixi.

The acquisition

had been accounted for as a business combination and the results of operations of Hunan Ruixi have been included in the Company's

consolidated financial statements from the acquisition date.

The Company made estimates and judgments in determining the fair value

of acquired assets and liabilities, based on an independent valuation report and management's experiences with similar assets and

The following table summarizes the fair values for major classes of assets acquired and liabilities assumed at the

date of acquisition:

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Net assets acquired (i)

Gain from acquisition of Hunan Ruixi and its subsidiary and VIE

Noncontrolling interests (ii)

Total purchase consideration

Net assets acquired primarily include cash and cash equivalents of $213,645, other current assets of $1,813,821, property and equipment of $107,865, other current liabilities of $711,303 and borrowings from related parties and affiliates of $785,231, and borrowings from financial institutions of $554,802.

Fair value of the noncontrolling interests is estimated with reference to the purchase price per share as of the acquisition date.

DISCONTIUED OPERATIONS

On October 17, 2019, the Board approved

the Plan under which the Company has discontinued and is winding down its online P2P lending services business.

The Company determined

that the continued operation of its online P2P lending services business was not viable in light of the recently tightened regulations

on online peer-to-peer lending in China generally and the unofficial request from local regulator to reduce the Company’s

online peer-to-peer lending transaction volume on a monthly basis.

The Company also determined that the discontinuation of its

online P2P lending services business would allow the Company to focus its resources on its automobile financing facilitation and

transaction business.

In connection with the Plan, the Company ceased facilitation of loan transactions on its online lending platform

and assumed all the outstanding loans from investors on the platform.

The decision and action taken by the Company of discontinuing

the online lending services business represented a major shift that will have a major effect on the Company’s operations

and financial results, which triggers discontinued operations accounting in accordance with ASC 205-20-45.

The fair value of discontinued operations,

determined as of October 17, 2019, includes estimated consideration expected to be received, less costs to sell.

After consideration

of the determination of fair value of the discontinued operations including the assumption of all the outstanding loans from investors

on the platform, $143,668 of accounts receivable, $3,760,599 of other receivables, and $143,943 of prepayments for impaired intangible

assets were indicated as of Board approval date of winding down its online P2P lending services business on October 17, 2019 and

the Company recognized $4,048,210 provision for doubtful accounts for the year ended March 31, 2020, in related to the Company’s

online lending services business.

The Company does not believe other recently issued

but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position,

statements of operations and cash flows of the Company.

BUSINESS COMBINATION

On September 11, 2020, Senmiao Consulting

entered into an Investment Agreement relating to XXTX with all the original shareholders of XXTX, pursuant to which Senmiao Consulting

agreed to make an investment of RMB3.16 million (approximately $0.5 million) in XXTX in cash in exchange for a 51% equity interest.

October 23, 2020, the registration procedures for the change in shareholders and registered capital were completed and XXTX became

a majority owned subsidiary of Senmiao Consulting.

On February 5, 2021, Senmiao Consulting and all the shareholders of XXTX entered

into XXTX Increase Investment Agreement, a supplementary agreement related to XXTX Investment Agreement.

Under the XXTX Increase Investment

Agreement, all shareholders of XXTX agreed to increase the total registered capital of XXTX to RMB50.8 million (approximately $7.8 million).

Senmiao Consulting shall pay another investment amounted to RMB36.84 million (approximately $5.7 million) in cash in exchange of additional

27.74% of XXTX’s equity interest.

As of the issuance date of these consolidated financial statements, Senmiao Consulting has made

a capital contribution of RMB19.8 million (approximately $3.0 million) to XXTX and the remaining amount is expected to be paid before

December 31, 2025.

The Company operates a ride-hailing platform through XXTX.

The Company’s acquisition of XXTX was accounted

for as a business combination in accordance with ASC 805.

The Company has allocated the purchase price of XXTX based upon the fair value

of the identifiable assets acquired and liabilities assumed on the acquisition date.

The Company estimated the fair values of the assets

acquired and liabilities assumed at the acquisition date in accordance with the business combination standard issued by the FASB with

the valuation methodologies using level 3 inputs, except for other current assets and current liabilities were valued using the cost approach.

Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed and intangible assets

identified as of the acquisition date and considered a number of factors including valuations from independent appraisers.

Acquisition-related

costs incurred for the acquisitions are not material and have been expensed as incurred in general and administrative expense.

The following table summarizes the fair value

of the identifiable assets acquired and liabilities assumed on the acquisition date, which represents the net purchase price allocation

on the date of the acquisition of XXTX based on valuation performed by an independent valuation firm engaged by the Company and translated

the fair value from RMB to USD using the exchange rate on October 23, 2020 at the rate of USD 1.00 to RMB 6.69.

As of March 31, 2021, the Company acquired

$8,065 in cash, net of cash paid to XXTX in the acquisition of XXTX.

The remaining purchase consideration of approximately $0.3 million

from XXTX Investment Agreement signed on September 11, 2020 and approximately $5.7 million additional capital investment from XXTX

Increase Investment Agreement signed on February 5, 2020 mentioned above are expected to be paid by the Company by December 31,

Under ASC 805-30-30-1, goodwill is calculated

Purchase consideration paid

Fair value of non-controlling interest

fair value of nets assets of XXTX:

Cash and cash equivalents

Other current assets

Plant and equipment

Intangible assets

Total liabilities

Total fair value of net assets of XXTX

Goodwill as of the acquisiton date

Effect of exchange rate changes on goodwill

Goodwill as of March 31, 2021

DISCONTINUED OPERATIONS

On October 17, 2019, the Board approved the

Plan under which the Company has discontinued and is winding down its online P2P lending services business.

The Company determined that

the continued operation of its online P2P lending services business was not viable in light of the tightened regulations on online peer-to-peer

lending in China generally and the unofficial request from local regulator to reduce the Company’s online peer-to-peer lending transaction

volume on a monthly basis.

The Company also determined that the discontinuation of its online P2P lending services business would allow

the Company to focus its resources on its automobile financing facilitation and transaction business.

In connection with the Plan, the

Company ceased facilitation of loan transactions on its online lending platform and assumed all the outstanding loans from investors on

the platform.

The decision and action taken by the Company of discontinuing the online lending services business represented a major shift

that will have a major effect on the Company’s operations and financial results, which triggers discontinued operations accounting

in accordance with ASC 205-20-45.

The fair value of discontinued operations, determined

as of October 17, 2019, includes estimated consideration expected to be received, less costs to sell.

After consideration of the

determination of fair value of the discontinued operations including the assumption of all the outstanding loans from investors on the

platform, $143,668 of accounts receivable, $3,760,599 of other receivables, and $143,943 of prepayments for impaired intangible assets

were indicated as of the date the Company’s Board of Directors approved the winding down of the Company’s online P2P lending

services business on October 17, 2019, and the Company recognized $4,048,210 provision for doubtful accounts as of September 30,

2019 in related to the Company’s online lending services business, while the Company did not recognize any additional provision

for doubtful accounts for the year ended March 31, 2021.

The following table sets forth the reconciliation

of the carrying amounts of major classes of assets and liabilities from discontinued operations in the consolidated balance sheets

as of March 31, 2020.

Carrying amounts of major classes of assets included as part

of discontinued operations:

of the carrying amounts of major classes of assets and liabilities from discontinued operations in consolidated balance sheet as of March 31,

2021 and 2020.

Carrying amounts of major classes of assets included as part of

discontinued operations:

Current assets

Cash and cash equivalents

Accounts receivable, net

Prepayments, other receivables and other assets, net

1 unchanged sentence

Property and equipment, net

Intangible assets, net

Prepayment for intangible assets

Total Other Assets

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Carrying amounts of major classes of liabilities included

as part of discontinued operations:

Carrying amounts of major classes of liabilities included as part

of discontinued operations:

Current liabilities

Advance from customers

Accrued expenses and other liabilities

5 unchanged sentences

The following table sets forth the reconciliation

of the amounts of major classes of income and losses from discontinued operations in the consolidated statements of operations

and comprehensive loss for year ended March 31, 2020.

For the Years Ended

of the amounts of major classes of income and losses from discontinued operations in the consolidated statements of operations and comprehensive

loss for years ended March 31, 2021 and 2020.

Operating expenses

Selling, general and administrative expenses

Bad debt expense

Provision for doubtful accounts

Amortization of intangible assets

1 unchanged sentence

Total operating expenses

Loss from operations

Loss from discontinued operations

Other income, net

1 unchanged sentence

Income tax expenses

Net loss attributable to stockholders

$ (5,587,027 )

Net loss from

discontinued operations attributable to stockholders

$ (5,587,027 )

ACCOUNTS RECEIVABLE, NET

Accounts receivable include a portion of

bundled lease arrangements on fixed minimum monthly payments to be paid by the automobile purchasers arising from automobile sales

and services fees, net of unearned interest income, discounted using the Company’s lease pricing interest rates.

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of March 31,

2020 and 2019, accounts receivable were comprised of the following:

Receivables of transaction fees due from borrowers

Accounts receivable include a portion of bundled

lease arrangements on fixed minimum monthly payments to be paid by the automobile purchasers arising from automobile sales and services

fees, net of unearned interest income, discounted using the Company’s lease pricing interest rates.

As of March 31, 2021 and 2020, accounts receivable

were comprised of the following:

Receivables of automobile sales due from automobile purchasers

Receivables of services fees due from automobile purchasers

Receivables of service fees due from automobile purchasers

Receivables of online ride hailing fees from online ride-hailing drivers

Receivables of operating lease

Unearned interest

1 unchanged sentence

Accounts receivable, net

Accounts receivable, net, - discontinued operations

Accounts receivable, net, - continuing operations

Accounts receivable, net, current portion

Accounts receivable, net, noncurrent portion

Movement of allowance for doubtful accounts

is as follows:

Accounts receivable, net, non-current portion

Movement of allowance for doubtful accounts for

the fiscal years ended March 31, 2021 and 2020 are as follows:

Beginning balance

2 unchanged sentences

Automobiles (i)

As of March 31, 2020, the Company owned 70 automobiles with a total value of $850,533 for sale, and 11 automobiles with a total value of $150,142 for either leasing or sale.

As of March 31, 2020 and 2019, management compared the cost

of automobiles with their net realizable value and determined no inventory write-down was necessary for these automobiles.

As of March 31, 2021, the Company owned three automobiles

with a total value of $47,410 for sale, and six automobiles with a total value of $80,523 for either leasing or sale.

As of March 31, 2021 and 2020, management

compared the cost of automobiles with their net realizable value and determined no inventory write-down was necessary for these automobiles.

PREPAYMENTS, OTHER RECEIVABLES AND OTHER ASSETS

2 unchanged sentences

Receivables from borrowers of online lending platform, net (i)

Due from automobile purchasers, net (ii)

Prepayments for automobiles (iii)

Prepayments for automobiles (ii)

Prepaid expenses (iii)

Receivables from aggregation platforms (iv)

Due from automobile purchasers, net (v)

Deposits (vi)

Value added tax (“VAT”) recoverable

Deferred issuance costs

Prepaid expenses

Employee advances

2 unchanged sentences

Total prepayments, receivables and other assets - continuing operations

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Receivables from borrowers of online lending platform, net

The balance of receivables from

borrowers of online lending platform represented the outstanding loans the Company assumed from investors on the platform, which

will be collected from related borrowers.

As of March 31, 2020, the Company recorded allowance of $3,688,800 against doubtful receivables.

Due from automobile purchasers, net

The balance due from automobile

purchasers represented the payment of automobiles and related insurances and taxes made on behalf of the automobile purchasers.

The balance is expected to be collected from the automobile purchasers in installments.

As of March 31, 2020 and 2019, the Company

recorded allowance of $347,954 and $2,995, respectively, against doubtful receivables.

During the year ended March 31, 2020, the

Company wrote off balance due from automobile purchasers of $1,227,894.

balance of receivables from borrowers of online lending platform represented the outstanding loans the Company assumed from investors

on the Company’s discontinued P2P lending platform, which will be collected from related borrowers.

As of March 31, 2021 and

2020, the Company recorded allowance of $3,8 94,011 and $3,688,800, respectively, against doubtful receivables.

Prepayments for automobiles

The balance represented amounts

advanced to dealers for automobiles and to other third parties for automobiles related taxes and insurances.

EQUIPMENT, NET

The balance represented advanced payments

in purchasing automobiles from auto dealers or other parties.

Prepaid expense

The balance of prepaid expense represented

automobile liability insurance premium for automobiles for operating lease and other miscellaneous expense such as office lease, office

remodel expense and etc.

that will expire within one year.

Receivables from aggregation platforms

The balance of receivables from aggregation

platforms represented the amount due from the collaborated aggregation platforms based on the confirmed billings, which will be disbursed

to the drivers who completed their rides through the Company’s online ride-hailing platform.

Due from automobile purchasers, net

The balance due from automobile purchasers

represented the payment of automobiles and related insurances and taxes made on behalf of the automobile purchasers.

The balance is expected

to be collected from the automobile purchasers in installments.

As of March 31, 2021 and 2020, the Company recorded allowance of

$41,759 and $347,954, respectively, against doubtful receivables.

During the years ended March 31, 2021 and 2020, the Company wrote

off balance due from automobile purchasers of $468,077 and $1,227,894, respectively, and recorded additional allowances of $268,706 and

$0, respectively, while recovered allowance against the balance due from automobile purchasers of $125,940 and $0, respectively.

The balance of deposits mainly represented

the security deposit made by the Company to various financial institutions and Didi Chuxing Technology Co., Ltd., an online ride-hailing

PROPERTY AND EQUIPMENT, NET

Property and equipment consist of the following:

6 unchanged sentences

Total property and equipment, net - continuing operations

Depreciation and amortization expense from

continuing operations for the years ended March 31, 2020 and 2019 amounted to $103,009 and $12,247, respectively.

and amortization expense from discontinued operations for the years ended March 31, 2020 and 2019 amounted to $10,846 and $10,604,

respectively.

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INTANGIBLE ASSETS,

Depreciation expense from continuing operations

for the years ended March 31, 2021 and 2020 amounted to $260,592 and $103,009, respectively.

Depreciation expense from discontinued

operations for years ended March 31, 2021 and 2020 amounted to $8,621 and $10,846, respectively.

INTANGIBLE ASSETS, NET

Intangible assets consisted of the following:

Customer relationship

Online ride-hailing platform operating licenses

Accumulated amortization

Total intangible assets, net

Total intangible assets, net - discontinued operations

Total intangible assets, net - continuing operations

Amortization expense from continuing operations

2 unchanged sentences

totaled $0 and $32,401 for the years ended March 31, 2021 and 2020, respectively.

The following table sets forth the Company’s

amortization expense for the next five years ending:

The following table sets forth the Company’s amortization expense

for the next five years ending:

Twelve months ending March 31, 2022

2 unchanged sentences

Twelve months ending March 31, 2025

PREPAYMENTS FOR

INTANGIBLE ASSETS

As of March 31 2019, the balance of prepayments

for intangible assets of $280,000 represented the advance payments to a third party for the development of software to be used

in the Company’s automobile transaction and related services.

As of March 31, 2020, the prepayments for the software with

amount of $750,000 has been transferred to intangible assets and will be amortized over the estimated useful life of 10 years.

As of March 31, 2019, the balance of prepayments

for intangible assets of $190,706 represented the advance payments for the development of software to be used in the Company’s

online P2P lending services business.

On October 17, 2019, the Board approved the Plan under which the Company discontinued and

is winding down its online P2P lending services business.

As a result, the Company re-evaluated its prepayments for intangible

assets to be used in the Company’s online P2P lending platform and determined that it would no longer be using such software.

As a result, the Company wrote off all those prepayments of $143,943 for intangible assets for the year ended March 31, 2020.

BORROWINGS FROM

FINANCIAL INSTITUTIONS, CURRENT AND NONCURRENT

Borrowings from Financial institutions

Twelve months ending March 31, 2026

BORROWINGS FROM FINANCIAL INSTITUTIONS, CURRENT AND NON-CURRENT

The borrowings from certain financial institutions

represented the difference between the actual proceeds disbursed by the financial institutions to Jinkailong and the total principal

to be responsible for and repaid by the automobile purchasers.

Such borrowings totaled $290,974 and $396,946 bearing interest rates

ranging between 6.2% and 8.1% per annum as of March 31, 2020 and 2019, respectively, of which $64,221 and $177,789, respectively,

is to be repaid over a period of 13 to 24 months.

The interest expense for the years ended

March 31, 2020 and 2019 was $49,422 and $12,799, respectively.

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

BORROWINGS FROM THIRD PARTIES

Borrowings from third parties

The borrowings from third parties were

fully repaid in July 2019.

The interest expense for the years ended March 31, 2020 and 2019 was $17,258 and $7,590, respectively.

in China represented the short-term loans of $140,171 from a bank and the difference between the actual proceeds disbursed by the financial

institution to Jinkailong and the total amount of principal to be responsible for and repaid by the automobile purchasers of $215,453

as of March 31, 2021.

Such borrowings totaled $355,624 and $290,974 bearing interest rates ranging between 6.2% and 8.1% per annum

as of March 31, 2021 and 2020, respectively, of which $44,962 and $64,221, respectively, is to be repaid over a period of 13 to 24

interest expense for the years ended March 31, 2021 and 2020 was $45,764 and $49,422, respectively.

ACCRUED EXPENSES AND OTHER LIABILITIES

Payables to investors of online lending platform (i)

Payables to drivers from aggregation platforms (ii)

Deposits (iii)

Accrued payroll and welfare

Other payable (ii)

Loan repayments received on behalf of financial institutions (iii)

Other payables (iv)

Loan repayments received on behalf of financial institutions (v)

Payables for expenditures on automobile transaction and related services

4 unchanged sentences

Total accrued expenses and other liabilities - continuing operations

The balance of payables to investors of online lending platform represented the outstanding loans from investors on the platform, which was assumed by the Company in connection with the Plan to discontinue its online lending services business.

The balance of other payable represented amount due to suppliers and vendors for operation purposes.

The balance of payables to investors of online lending platform represented the outstanding loans from investors on the Company’s discontinued P2P lending platform, which was assumed by the Company in connection with the Plan to discontinue its online lending services business.

The balance of payables to drivers from aggregation platforms represented the amount the Company collected on behalf of drivers who completed their transaction through the Company’s online ride-hailing platform base on the confirmed billings.

The balance of deposits represented the security deposit from operating and finance lease customers to cover lease payment and related automobile expense in case the customers’

accounts are in default.

The balance is refundable at the end of the lease term, after deducting any missed lease payment and applicable fee.

The balance of other payables represented amount due to suppliers and vendors for operation purposes.

The balance of loan repayments received on behalf of financial institutions represented the loan repayments made by the automobile purchasers to financial institutions through the Company, which has not been paid to the financial institutions.

EMPLOYEE BENEFIT

The Company has made employee benefit plan

in accordance with relevant PRC regulations, including retirement insurance, unemployment insurance, medical insurance, housing

fund, work injury insurance and maternity insurance.

EMPLOYEE BENEFIT PLAN

The Company has made employee benefit plan in

accordance with relevant PRC regulations, including retirement insurance, unemployment insurance, medical insurance, housing fund, work

injury insurance and maternity insurance.

The contributions made by the Company were $320,620

1 unchanged sentence

The contributions

made by the Company were $158,523 and $84,043 for the years ended March 31, 2020 and 2019, respectively, for the Company’s

made by the Company were $92,944 and $158,523 for the years ended March 31, 2021 and 2020, respectively, for the Company’s

discontinued operations.

As of March 31, 2021 and 2020, the Company

did not make adequate employee benefit contributions in the amount of $170,856 and $65,826, respectively, for continuing operations

of the Company.

did not make adequate employee benefit contributions in the amount of $442,485 and $170,856, respectively, for continuing operations of

As of March 31, 2021 and 2020, the Company did not make adequate employee benefit contributions in the amount of $566,140

and $454,151, respectively, for discontinued operations of the Company.

The Company accrued the amount in accrued payroll

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The registration statement relating to

the Company’s IPO also included the underwriters’ common stock purchase warrants to purchase 337,940 shares of common

stock (“Underwriter’s Warrants”).

Each five-year warrant entitles warrant holder to purchase one share of the

Company’s common stock at the price of $4.80 per share and is not exercisable for a period of 180 days from March 16,

On March 15, 2019, the underwriters elected to exercise 300,000 Purchase Warrants on a cashless basis in exchange for

common stock.

On April 5, 2019, the Company issued a total of 65,855 shares of common stock to the underwriters as a result

of the cashless exercise of 300,000 Underwriter’s Warrants.

As the date of March 31, 2020, there were 37,940 Underwriter’s

Warrants outstanding.

The Company accrued the amount in accrued payroll and welfare.

The registration statement relating to the Company’s

initial public offering also included the underwriters’

common stock purchase warrants to purchase 337,940 shares of common stock

(“IPO Underwriter’s Warrants”).

Each five-year warrant entitles warrant holder to purchase one share of the Company’s

common stock at the price of $4.80 per share and is not exercisable for a period of 180 days from March 16, 2018.

As of March 31,

2021, there were 37,940 IPO Underwriter’s Warrants outstanding.

2019 Registered Direct Offering Warrants

The Company adopted the provisions of ASC 815

815 on determining what types of instruments or embedded features in an instrument held by a reporting entity can be considered

indexed to its own stock for the purpose of evaluating the first criteria of the scope exception in ASC 815.

Warrants issued in

connection with the direct equity offering with exercise prices denominated in US dollars are no longer considered indexed to the

Company’s stock, as their exercise price is not in the Company’s functional currency (RMB), and therefore no longer

qualify for the scope exception and must be accounted for as a derivative.

These warrants are classified as liabilities under the

caption “Derivative liabilities” in the consolidated statements of balance sheets and recorded at estimated fair value

at each reporting date, computed using the Black-Scholes valuation model.

Changes in the liability from period to period are recorded

in the consolidated statements of operations and comprehensive loss under the caption “Change in fair value of derivative

liabilities.”

The Company allocated the proceeds received

between the common stock and warrants first to warrants based on the fair value on the date the proceeds were received with the

balance to common stock.

on determining what types of instruments or embedded features in an instrument held by a reporting entity can be considered indexed to

its own stock for the purpose of evaluating the first criteria of the scope exception in ASC 815.

Warrants issued in connection with the

direct equity offering with exercise prices denominated in US dollars are no longer considered indexed to the Company’s stock, as

their exercise price is not in the Company’s functional currency (RMB), and therefore no longer qualify for the scope exception

and must be accounted for as a derivative.

These warrants are classified as liabilities under the caption “Derivative liabilities”

in the consolidated statements of balance sheets and recorded at estimated fair value at each reporting date, computed using the Black-Scholes

valuation model.

Changes in the liability from period to period are recorded in the consolidated statements of operations and comprehensive

loss under the caption “Change in fair value of derivative liabilities.”

The Company allocated the proceeds received between

the common stock and warrants first to warrants based on the fair value on the date the proceeds were received with the balance to common

The value of the warrants was determined using the Black-Scholes valuation model using the following assumptions:

1 unchanged sentence

risk free interest rate 1.77%;

dividend yield of 0% and expected term of 4 years of the Investor Series A

Warrants, 1 year of the Series B Warrants, and 4 years of the Placement Warrants.

The volatility of the Company’s common

stock was estimated by management based on the historical volatility of its common stock, the risk free interest rate was based

on Treasury Constant Maturity Rates published by the U.S.

dividend yield of 0% and expected term of 4 years of the Investor Series A Warrants, 1 year of the

Series B Warrants, and 4 years of the placement agent warrants.

The volatility of the Company’s common stock was estimated

by management based on the historical volatility of its common stock, the risk free interest rate was based on Treasury Constant Maturity

Rates published by the U.S.

Federal Reserve for periods applicable to the expected life of the warrants.

The expected dividend yield was based on the Company’s current and expected dividend policy and the expected term is equal

to the contractual life of the warrants.

The value of the warrants was based on the Company’s common stock closing price

of $2.80 on the date the warrants were issued.

The expected dividend yield was

based on the Company’s current and expected dividend policy and the expected term is equal to the contractual life of the warrants.

The value of the warrants was based on the Company’s common stock closing price of $2.80 on June 20, 2019 which was the date

the warrants were issued.

Net proceeds were allocated as the follows:

Total net proceeds

Subsequent to the initial recording, the

change in the fair value of the warrants, determined under the Black-Scholes valuation model, at each reporting date will result

in either an increase or decrease the amount recorded as liability, based on the fluctuations with the Company’s stock price

with a corresponding adjustment to other income (or expense).

During the year ended March 31, 2020, the change of fair value was

a gain of $1,796,724, recognized in the accompanying consolidated statements of operations and comprehensive loss based on the

decrease in fair value of the liabilities since granted.

The fair value of derivative instrument of $1,010,752 was allocated to

additional paid-in-capital upon exercise of warrants as of the exercise date.

At March 31, 2020, the fair value of the derivative

instrument totaled $342,530.

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company has outstanding warrants as

Subsequent to the initial recording, the change

in the fair value of the warrants, determined under the Black-Scholes valuation model, at each reporting date will result in either an

increase or decrease the amount recorded as liability, based on the fluctuations with the Company’s stock price with a corresponding

adjustment to other income (or expense).

During the year ended March 31, 2021, the change of fair value was a loss of $1,372,966

recognized in the accompanying consolidated statements of operations and comprehensive loss based on the increase in fair value of the

liabilities since March 31, 2020.

During the year ended March 31, 2020, the change of fair value was a gain of $1,796,724 was

recognized in the accompanying consolidated statements of operations and comprehensive loss based on the increase in fair value of the

liabilities since granted.

At March 31, 2021 and 2020, the fair value of the derivative instrument totaled $243,840 and $342,530,

respectively.

The fair value of derivative instrument of $2,481,038 was allocated to additional paid-in-capital upon exercise of warrants

as of the exercise date.

Fair value of derivative instrument was allocated as the following exercise date:

Exercised date

Fair value of

derivative instrument

allocated to additional

paid-in-capital

August 12, 2019

August 13, 2019

October 9, 2019

October 20, 2020

November 24, 2020

November 25, 2020

February 25, 2021

Underwriters’

The Company adopted the provisions of ASC 815

on determining what types of instruments or embedded features in an instrument held by a reporting entity can be considered indexed to

its own stock for the purpose of evaluating the first criteria of the scope exception in ASC 815.

Warrants issued in connection with the

direct equity offering with exercise prices denominated in US dollars are no longer considered indexed to the Company’s stock, as

their exercise price is not in the Company’s functional currency (RMB), and therefore no longer qualify for the scope exception

and must be accounted for as a derivative.

The Underwriters’

Warrants are classified as liabilities under the caption “Derivative

liabilities”

in the consolidated statements of balance sheets and recorded at an estimated fair value at each reporting date, computed

using the Black-Scholes valuation model.

Changes in the liability from period to period are recorded in the consolidated statements of

operations and comprehensive income (loss) under the caption “Change in fair value of derivative liabilities.”

The Company allocated the proceeds received between

the common stock and warrants first to warrants based on the fair value on the date the proceeds were received with the balance to common

The value of the warrants was determined using the Black-Scholes valuation model using the following assumptions:

volatility 129%;

risk free interest rate 0.19%;

dividend yield of 0% and expected term of 5 years of the Underwriters’

The volatility of

the Company’s common stock was estimated by management based on the historical volatility of the Company’s common stock, the

risk free interest rate was based on Treasury Constant Maturity Rates published by the U.S.

Federal Reserve for periods applicable to

the expected life of the warrants (0.51), the expected dividend yield was based on the Company’s current and expected dividend policy

and the expected term is equal to the contractual life of the warrants.

The value of the warrants was based on the closing price of the

Company’s common stock of $0.51 on August 4, 2020, which was the date the warrants were issued.

Net proceeds were allocated

as the follows:

Total net proceeds

Subsequent to the initial recording, the change

in the fair value of the warrants, determined under the Black-Scholes valuation model, at each reporting date will result in either an

increase or decrease the amount recorded as liability, based on the fluctuations with the Company’s stock price with a corresponding

adjustment to other income (or expense).

During the year ended March 31, 2021, the change of fair value was a loss of $455,162, recognized

in the accompanying consolidated statements of operations and comprehensive loss based on the increase in fair value of the liabilities

since issuance.

At March 31, 2021, the fair value of the derivative instrument totaled $397,525.

The fair value of derivative instrument

of $299,556 was allocated to additional paid-in-capital upon exercise of warrants on March 4, 2021.

February 2021 Registered Direct Offering

The Company adopted the provisions of ASC 815

on determining what types of instruments or embedded features in an instrument held by a reporting entity can be considered indexed to

its own stock for the purpose of evaluating the first criteria of the scope exception in ASC 815.

Warrants issued in connection with the

direct equity offering with exercise prices denominated in US dollars are no longer considered indexed to the Company’s stock, as

their exercise price is not in the Company’s functional currency (RMB), and therefore no longer qualify for the scope exception

and must be accounted for as a derivative.

These warrants are classified as liabilities under the caption “Derivative liabilities”

in the consolidated statements of balance sheets and recorded at estimated fair value at each reporting date, computed using the Black-Scholes

valuation model.

Changes in the liability from period to period are recorded in the consolidated statements of operations and comprehensive

loss under the caption “Change in fair value of derivative liabilities.”

The Company allocated the proceeds received between

the common stock and warrants first to warrants based on the fair value on the date the proceeds were received with the balance to common

The value of the warrants was determined using the Black-Scholes valuation model using the following assumptions:

volatility 132%;

risk free interest rate 0.46%;

dividend yield of 0% and expected term of 5 years of the placement agent Warrants and ROFR Warrants.

volatility of the Company’s common stock was estimated by management based on the historical volatility of its common stock, the

risk free interest rate was based on Treasury Constant Maturity Rates published by the U.S.

Federal Reserve for periods applicable to

the expected life of the warrants.

The expected dividend yield was based on the Company’s current and expected dividend policy and

the expected term is equal to the contractual life of the warrants.

The value of the warrants was based on the Company’s common

stock closing price of $1.63 on February 10, 2021 which was the date the warrants were issued.

Net proceeds were allocated as the

Total net proceeds

Subsequent to the initial recording, the change

in the fair value of the warrants, determined under the Black-Scholes valuation model, at each reporting date will result in either an

increase or decrease the amount recorded as liability, based on the fluctuations with the Company’s stock price with a corresponding

adjustment to other income (or expense).

During the year ended March 31, 2021, the change of fair value was a gain of $117,713 recognized

in the accompanying consolidated statements of operations and comprehensive loss based on the increase in fair value of the liabilities

since issuance.

At March 31, 2021, the fair value of the derivative instrument totaled $637,561.

The Company has warrants outstanding as follows:

Balance, March 31, 2019

2 unchanged sentences

Restricted Stock Units

On July 31, 2018, the Board approved

the issuance of 5,000 restricted stock units (“RSUs”) to each of the five directors as stock compensation for their

services for the Company’s fiscal year ending March 31, 2019.

Total RSUs granted to the five directors were 25,000 for

an aggregate fair value of $117,750.

Pursuant to the Restricted Stock Unit Award Agreements (“Award Agreements”) on

August 3, 2018, the RSUs vest in four equal quarterly installments on August 3, 2018, April 1, 2019, July 1,

2019 and October 1, 2019 or in full upon the occurrence of a change in control of the Company, subject to the terms and conditions

set forth in the Award Agreements, provided that the director remains in service as a director through the applicable vesting date.

The RSUs will be settled by the Company’s issuance of shares of common stock in certificated or uncertificated form upon

the earlier of (i) a change in control and (ii) the director’s cessation as a director of the Company due to a

“separation of service” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended, or

the director’s death or disability.

As of March 31, 2019, the first installment

of 6,250 RSUs vested.

The fair value of the vested RSUs is calculated at the grant date market price of the Company’s common

stock multiplying by the number of vested shares.

On December 11, 2019, the Board approved

the issuance of 30,303 RSUs to each of the Company’s five directors as stock compensation for their services for the Company’s

fiscal year ending March 31, 2020.

As of March 31, 2020, the Company

issued a total of 169,015 RSUs and accounted for as expenses and charged to common stock.

A summary of RSU activity for the year

ended March 31, 2020 and 2019 is as follows:

Balance of RSUs outstanding at March 31, 2018

Grants of RSUs

Forfeited RSUs

Balance of unvested RSUs at March 31, 2019

Grants of RSUs

Forfeited RSUs

Balance of unvested RSUs at March 31, 2020

Total compensation expense for the years

ended March 31, 2020 and 2019 was $133,150 and $44,200, respectively.

Two directors ceased to serve on the board

since November 8, 2018, and as a result 7,500 RSUs were forfeited during the year ended March 31, 2019.

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On October 29, 2020, the Board approved the

issuance of an aggregate of 127,273 restricted stock units (“RSUs”) to directors, officers and certain employees as stock

compensation for their services for the year ending March 31, 2021.

Total RSUs granted to these directors, officers and employees

were valued at an aggregate fair value of $140,000.

These RSUs will vest in four equal quarterly installments on January 29, 2021,

April 29, 2021, July 29, 2021 and October 29, 2021 or in full upon the occurrence of a change in control of the Company,

provided that the director, officer or the employee remains in service through the applicable vesting date.

The RSUs will be settled by

the Company’s issuance of shares of common stock in certificated or uncertificated form upon the earlier of (i) vesting date,

(ii) a change in control and (ii) termination of the services of the director, officer or employee due to a "separation

of service"

within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended, or the death or disability

of such director, officer or employee.

As of the issuance date of issuance of these consolidated financial statements, the first and second

installment of RSUs with an aggregate of 63,637 was vested but has not been settled by the Company.

The Company expects to settle the

vested RSUs by issuance of shares of common stock within 2021 and account for the vested RSUs as an addition to both expenses and additional

paid-in capital.

Equity Incentive Plan

At the 2018 Annual Meeting of Stockholders

of the Company held on November 8, 2018, the Company’s stockholders approved the Company’s 2018 Equity Incentive

Plan for employees, officers, directors and consultants of the Company and its affiliates.

A committee consisting of at least

two independent directors appointed by the Board or in the absence of such a committee, the board of directors, will be responsible

for the general administration of the Equity Incentive Plan.

All awards granted under the Equity Incentive Plan will be governed

by separate award agreements between the Company and the participants.

As of March 31, 2020, no awards have been granted under

At the 2018 Annual Meeting of Stockholders of

the Company held on November 8, 2018, the Company’s stockholders approved the Company’s 2018 Equity Incentive Plan for

employees, officers, directors and consultants of the Company and its affiliates.

A committee consisting of at least two independent

directors appointed by the Board or in the absence of such a committee, the board of directors, will be responsible for the general

administration of the Equity Incentive Plan.

All awards granted under the Equity Incentive Plan will be governed by separate award agreements

between the Company and the participants.

As of March 31, 2021, the Company has granted an aggregate of 303,788 RSUs and issued an

aggregate of 169,015 shares upon vest under the Equity Incentive Plan.

And 7,500 RSUs were forfeited due to two directors ceased to serve

on the board of the Company since November 8, 2018.

2019 Registered Direct Offering

On April 15, 2019, the SEC declared

effective the Company’s Registration Statement on Form S-3, pursuant to which, along with the accompanying prospectus,

the Company registered up to $80,000,000 in aggregate principal amount of its common stock, preferred stock, debt securities, warrants,

rights and/or units.

On June 21, 2019, the Company closed a registered direct offering of an aggregate of 1,781,361 shares

of its common stock, and in connection therewith, issued to the investors (i) for no additional consideration, Series A

warrants to purchase up to an aggregate of 1,336,021 shares of common stock and (iii) for nominal additional consideration,

Series B warrants to purchase up to a maximum aggregate of 1,116,320 shares of common stock.

The Company sold the shares of

common stock at a price of $3.38 per share (the “Share Purchase Price”).

The Company received gross proceeds from the

offering, before deducting estimated offering expenses payable by the Company, of approximately $6,000,000.

The Series A warrants are exercisable

immediately upon issuance at an exercise price of $3.72 per share and will expire on the fourth (4th) anniversary of the original

In the event that on December 20, 2019, the exercise price is greater than the Six Month Adjustment Price as defined

below, on the trading day immediately following December 20, 2019 (the “Six Month Measuring Date”), the exercise price

shall automatically adjust to the Six Month Adjustment Price (as adjusted for stock splits, stock dividends, stock combinations,

recapitalizations and similar events).

Six Month Adjustment Price means the greater of (x) $1.50 (as adjusted for any stock

dividend, stock split, stock combination, reclassification or similar transaction) and (y) 100% of the quotient of (I) the

sum of the five lowest VWAPs of the common stock during the ten consecutive trading day period ending and including the Six Month

Measuring Date, divided by (II) five.

On April 15, 2019, the SEC declared effective

the Company’s Registration Statement on Form S-3, pursuant to which, along with the accompanying prospectus, the Company registered

up to $80,000,000 in aggregate principal amount of its common stock, preferred stock, debt securities, warrants, rights and/or units.

On June 21, 2019, the Company closed a registered direct offering of an aggregate of 1,781,360 shares of its common stock, and in

connection therewith, issued to the investors (i) for no additional consideration, Series A warrants to purchase up to an aggregate

of 1,336,021 shares of common stock and (iii) for nominal additional consideration, Series B warrants to purchase up to a maximum

aggregate of 1,116,320 shares of common stock.

The Company sold the shares of common stock at a price of $3.38 per share (the “Share

Purchase Price”).

The Company received gross proceeds from the offering of approximately $6.0 million, and net proceeds from the

offering of approximately $5.1 million after deducting estimated offering expenses payable by the Company.

Series A warrants are exercisable immediately upon issuance at an exercise price of $3.72 per share and will expire on the fourth

(4th) anniversary of the original issue date.

In the event that on December 20, 2019, the exercise price is greater than the Six

Month Adjustment Price as defined below, on the trading day immediately following December 20, 2019 (the “Six Month Measuring

Date”), the exercise price shall automatically adjust to the Six Month Adjustment Price (as adjusted for stock splits, stock dividends,

stock combinations, recapitalizations and similar events).

Six Month Adjustment Price means the greater of (x) $1.50 (as adjusted

for any stock dividend, stock split, stock combination, reclassification or similar transaction) and (y) 100% of the quotient of

(I) the sum of the five lowest VWAPs of the common stock during the ten consecutive trading day period ending and including the Six

Month Measuring Date, divided by (II) five.

All such determinations to be appropriately adjusted for any stock dividend, stock split,

stock combination, reclassification or similar transaction during such period.

The exercise price of the Series A warrant

was adjusted from $3.72 to $1.50 per share on December 20, 2019.

The Company used the adjusted exercise price to value its derivative

liability on its December 31, 2019 financial statements and reporting periods onwards with changes in fair value of warrant liabilities

from period to period are recorded in the consolidated statements of operations and comprehensive loss under the caption “Change

in fair value of derivative liabilities”.

The Series B warrants are pre-funded

warrants and were issued as a true-up with respect to the shares of common stock.

The maximum aggregate number of shares of common

stock issuable upon exercise of the Series B warrants is 1,116,320.

Initially, the Series B warrants shall not be exercisable

for any shares of common stock.

In the event that on the fiftieth (50th) day after the closing date (the “Adjustment Measuring

Time”), the closing price of the common stock is less than the Share Purchase Price, then the number of shares of common

stock issuable upon exercise of the Series B warrants shall be adjusted (upward or downward, as applicable) to the greater

of (i) zero (0) and (ii) such aggregate number of shares of common stock equal to fifty percent (50%) of the difference

of (A) the quotient of (x) the Share Purchase Price divided by (y) the Market Price (as defined in Purchase Agreement)

as of the Adjustment Measuring Time, less (B) the aggregate number of shares of common stock issued to the investors at the

closing (as adjusted for share splits, share dividends, share combinations, recapitalizations and similar events).

price of the Series B warrant was adjusted from $3.72 to $0.0001 per share on August 12, 2019.

The Company used the

adjusted exercise price to value its derivative liability on its September, 2019 financial statements and reporting period onwards

with changes in fair value of warrant liabilities from period to period are recorded in the consolidated statements of operations

and comprehensive loss under the caption “Change in fair value of derivative liabilities.

During the year ended March 31,

2020, the Company issued an aggregate of 1,113,187 shares of common stock to certain investors in the June 2019 offering upon

exercise of the pre-funded Series B warrants for a total consideration of $111.

The fair value of exercised Series B warrants

of $1,010,752 was allocated to additional paid-in-capital upon exercise of warrants as of the exercise date.

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The exercise price of the Series A warrant was adjusted

pursuant to this formula from $3.72 to $1.50 per share on December 20, 2019.

The Company used the adjusted exercise price to value

its derivative liability on its December 31, 2019 financial statements and reporting periods onwards with changes in fair value of

warrant liabilities from period to period are recorded in the consolidated statements of operations and comprehensive loss under the caption

“Change in fair value of derivative liabilities”.

The exercise price of the Series A warrant was further adjusted to

$0.50 per share on August 7, 2020 as a result of the Company’s issuance of shares of common stock in its underwritten public

offering in August 2020, which has been recorded in the financial statements in the year ended March 31, 2021.

the exercise price of the placement agent warrants from the June 2019 registered direct offering was voluntarily adjusted by the

Company from $3.72 to $0.50 per share on August 18, 2020, which was in accordance with the terms of “Adjustment Upon Issuance

of Shares of Common Stock”

in the warrants purchase agreements.

The Series B warrants are pre-funded warrants

and were issued as a true-up with respect to the shares of common stock.

The maximum aggregate number of shares of common stock issuable

upon exercise of the Series B warrants is 1,116,320.

Initially, the Series B warrants shall not be exercisable for any shares

of common stock.

In the event that on the fiftieth (50th) day after the closing date (the “Adjustment Measuring Time”), the

closing price of the common stock is less than the Share Purchase Price, then the number of shares of common stock issuable upon exercise

of the Series B warrants shall be adjusted (upward or downward, as applicable) to the greater of (i) zero (0) and (ii) such

aggregate number of shares of common stock equal to fifty percent (50%) of the difference of (A) the quotient of (x) the Share

Purchase Price divided by (y) the Market Price (as defined in Purchase Agreement) as of the Adjustment Measuring Time, less (B) the

aggregate number of shares of common stock issued to the investors at the closing (as adjusted for share splits, share dividends, share

combinations, recapitalizations and similar events).

The exercise price of the Series B warrant was adjusted from $3.72 to $0.0001

per share on August 12, 2019.

The Company used the adjusted exercise price to value its derivative liability on its September 30,

2019 financial statements and reporting period onwards with changes in fair value of warrant liabilities from period to period are recorded

in the consolidated statements of operations and comprehensive loss under the caption “Change in fair value of derivative liabilities.

As of March 31, 2021, the Company has issued an aggregate of 1,113,188 shares of common stock to certain investors in the June 2019

offering upon exercise of the pre-funded Series B warrants for a total consideration of $111, and forfeited the remaining 3,132 warrants

as it expired on June 20, 2020.

Exercise of Warrants

On July 9, 2020, one of the holders of Series A

warrants exercised the warrants to purchase 50,000 shares of the Company’s common stock at an exercise price of $1.50 per share

generating gross proceeds of $75,000 to the Company.

On October 20, 2020, one of the holders of

Series A warrants exercised the warrants to purchase 337,500 shares of the Company’s common stock at an exercise price of $0.50

per share generating gross proceeds of $168,750 to the Company.

On November 24, 2020, one of the holders

of Series A warrants exercised the warrants to purchase 171,894 shares of the Company’s common stock at an exercise price of

$0.50 per share generating gross proceeds of $85,947 to the Company.

On November 25, 2020, one of the holders

of Series A warrants exercised the warrants to purchase 332,840 shares of the Company’s common stock at an exercise price of

$0.50 per share generating gross proceeds of $166,420 to the Company.

On February 25, 2021, three of the holders

of Series A warrants exercised the warrants to purchase 373,856 shares of the Company’s common stock at an exercise price of

$0.50 per share generating gross proceeds of $186,928 to the Company.

Underwritten Public Offering and Exercise of

the Over-Allotment Option

On August 4, 2020, the Company entered into

an underwriting agreement with The Benchmark Company, LLC and Axiom Capital Management, Inc., as representatives of the Underwriters,

relating to an underwritten public offering of 12,000,000 shares of the Company’s common stock at the Offering Price.

the terms of the Underwriting Agreement, the Company granted the Underwriters a 45-day option to purchase up to an additional 1,800,000

shares of common stock to cover over-allotments, if any, at the Offering Price less the underwriting discounts and commissions.

An underwriting

discount of 7% was applied to the Offering Price, except for shares of common stock purchased by certain existing investors of the Company

(the “Excluded Investors”), an underwriting discount of 6% was applied.

On August 6, 2020, the Company completed the

underwritten offering.

The net proceeds to the Company from this offering, after deducting the underwriting discounts and commissions

and other estimated offering expenses payable by the Company, were approximately $5.3 million.

On August 13, 2020, the Underwriters exercised

their over-allotment option to purchase an additional 1,800,000 shares of common stock at $0.50 per share.

This transaction was completed

on August 13, 2020.

Net proceeds from the exercise of the underwriters’

over-allotment option were approximately $0.8 million

net of underwriting discounts and commissions and offering expenses.

In connection with the underwritten offering,

the Company issued the Underwriters or their permitted designees, on a private placement basis, the Underwriters’

Warrants to purchase

up to 568,000 shares of common stock.

These warrants are valid for a period of five years and exercisable commencing six months from August 4,

2020 at a price per share equal to 125% of the Offering Price and are exercisable on a “cashless”

Exercise of Underwriters’

On March 4, 2021, two of the holders of underwriters’

warrants exercised the warrants on a “cashless”

basis which irrevocably to convert their right to purchase 249,920 shares

of the company under the original Purchase Warrant for 133,352 shares, as determined in accordance with the formula indicated on the notice

February 2021 Registered Direct Offering

February 8, 2021, the Company entered into a placement agency agreement with FT Global Capital, Inc., to act as exclusive placement

agent in connection with the registered direct public offering.

Pursuant to the terms of the placement agency agreement, the Company agreed

to pay the Placement Agent a cash fee equal to 7.5% of the gross proceeds raised in the Offering, and to reimburse the Placement Agent

for certain expenses, including legal fees and expenses, up to $60,000 in the aggregate.

The Placement Agent is also entitled to additional

tail compensation for any financings consummated within the 12-month period following the termination of the Placement Agent Agreement

to the extent that such financing is provided to the Company by investors that the Placement Agent had introduced to the Company.

February 10, 2021, the Company completed the registered direct offering.

The net proceeds to the Company from this offering, after

deducting the underwriting discounts and commissions and other estimated offering expenses payable by the Company, were approximately

$5.7 million.

In connection with the offering, the Company issued

the placement agent warrants to purchase up to 380,435 shares of its common stock.

These warrants are exercisable for a period of five

years commencing 180 days from February 8, 2020 at a price of $1.38 per share and are exercisable on a “cashless”

In addition, the company issued The Benchmark Company, LLC and Axiom Capital Management, Inc.

seven percent of the gross proceeds

from the offering and warrants to purchase up to 152,174 shares of its common stock, in consideration for the termination of the ROFR

(referred to Note 2.e).

These warrants are exercisable for a period of five years from February 8, 2020 at a price of $1.725 per

Common stock issued for consulting services

On July 23, 2020, the Company entered into

a consulting agreement with FirsTrust China Ltd.

(the “Consultant”), pursuant to which the Company engaged the Consultant

to provide certain management, operation and business development advisory services for a period of twelve months.

As compensation for

the services, the Company agreed to issue the Consultant an aggregate of 500,000 shares of its common stock, par value $0.0001.

shares were valued at $445,000, based on the closing price of the Company’s common stock on July 23, 2020 of $0.89 per share.

Pursuant to the agreement, these shares issued to the Consultant are not subject to vesting or forfeiture, and the Company has no recourse

and no substantial disincentives against the Consultant if the services disrupt before the termination or expiration of the service period.

As a result, these shares issued to the Consultant should be expensed on the date of issuance.

For year ended March 31, 2021, these

shares was recorded as stock compensation of $445,000, respectively.

The United States of America

The Company is incorporated in the State

of Nevada in the U.S., and is subject to U.S.

The Company is incorporated in the State of Nevada

in the U.S., and is subject to U.S.

federal corporate income taxes with tax rate of 21%.

The State of Nevada does not

impose any state corporate income tax.

The State of Nevada does not impose any state

corporate income tax.

On December 22, 2017, the U.S.

enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”).

imposes a one-time transition tax on deemed repatriation of historical earnings of foreign subsidiaries, and future foreign earnings

are subject to U.S.

The Tax Act also stablished the Global Intangible Low-Taxed Income (GILTI), a new inclusion rule

affecting non-routine income earned by foreign subsidiaries.

For the year ended March 31, 2020 and March 31, 2019, the Company’s

foreign subsidiaries in China cumulatively were operating at loss which resulted in no GILTI tax.

The Company’s net operating loss

enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”).

The Tax Act imposes

a one-time transition tax on deemed repatriation of historical earnings of foreign subsidiaries, and future foreign earnings are subject

The Tax Act also stablished the Global Intangible Low-Taxed Income (GILTI), a new inclusion rule affecting non-routine

income earned by foreign subsidiaries.

For the years ended March 31, 2021 and 2020, the Company’s foreign subsidiaries in China

were operating at loss on a consolidated basis which resulted in no GILTI tax.

The Company’s net operating loss from U.S

for the year ended March 31, 2021 amounted to approximately $1.5 million.

As of March 31, 2020, the Company’s net operating

As March 31, 2021, the Company’s net operating

loss carryforward for U.S.

income taxes was approximately $3.8 million.

The net operating loss carryforward will not expire and

is available to reduce future years’ taxable income, but limited to 80% of income until utilized.

Management believes that

the utilization of the benefit from this loss appears uncertain due to the Company’s operating history.

Accordingly, the

Company has recorded a 100% valuation allowance on the deferred tax asset to reduce the deferred tax assets to zero on the consolidated

balance sheets.

As of March 31, 2020 and 2019, valuation allowances for deferred tax assets were approximately $0.53 million and

$0.27 million, respectively.

Management reviews the valuation allowance periodically and makes changes accordingly.

Senmiao Consulting, Sichuan Senmiao, Hunan

Ruixi, Ruixi Leasing, Jinkailong, and Yicheng are subject to PRC Enterprise Income Tax (“EIT”) on the taxable income

in accordance with the relevant PRC income tax laws.

The net operating loss carryforward will not expire and is available

to reduce future years’

taxable income, but limited to 80% of income until utilized.

Management believes that the utilization of

the benefit from this loss appears uncertain due to the Company’s operating history.

Accordingly, the Company has recorded a 100%

valuation allowance on the deferred tax asset to reduce the deferred tax assets to zero on the consolidated balance sheets.

As of March 31,

2021 and 2020, valuation allowances for deferred tax assets were approximately $0.80 million and $0.48 million, respectively.

reviews the valuation allowance periodically and makes changes accordingly.

Senmiao Consulting, Sichuan Senmiao, Hunan Ruixi,

Ruixi Leasing, Jinkailong, Yicheng, XXTX and its subsidiaries are subject to PRC Enterprise Income Tax (“EIT”) on the taxable

income in accordance with the relevant PRC income tax laws.

The EIT rate for companies operating in the PRC is 25%.

1 unchanged sentence

For the Years Ended

Current income tax expenses

Deferred income tax benefits

Total income tax expenses

Current income tax expenses (benefit)

Deferred income tax expenses (benefit)

Total income tax expenses (benefit)

Below is a reconciliation of the statutory tax rate to the effective

6 unchanged sentences

Effective tax rate

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2020 and 2019, the Company’s

PRC entities from continuing operations had net operating loss carryforwards of approximately $1.7 million and $153,000, respectively,

As of March 31, 2021 and 2020, the Company’s

PRC entities from continuing operations had net operating loss carryforwards of approximately $8.1 million and $1.7 million, respectively,

which will expire starting from 2023 and ending in 2025.

In addition, allowance for doubtful accounts must be approved by the

Chinese tax authority prior to being deducted as an expense item on the tax return.

Jinkailong’s bad debt allowance are

incurred in Company’s PRC subsidiaries which were operating at losses, the Company believes it is more likely than not that

its PRC operations will be unable to fully utilize its deferred tax assets related to the net operating loss carryforwards in

As a result, the Company provided 100% allowance on all deferred tax assets on allowance for doubtful account of $178,381,

and nil related to its operations in the PRC at March 31, 2020 and 2019, respectively.

At March 31, 2019, full valuation allowance

is provided against the deferred tax assets based upon management’s assessment as to their realization.

During the year ended

March 31, 2020, the Company utilized deferred tax assets of approximately $27,000 related to the Company’s net operating

loss carryforwards.

The tax effects of temporary differences

from continuing operations that give rise to the Company’s deferred tax assets are as follows:

In addition, allowance for doubtful accounts must be approved by the Chinese

tax authority prior to being deducted as an expense item on the tax return.

The bad debt allowances are incurred in Company’s PRC

subsidiaries and VIEs which were operating at losses, the Company believes it is more likely than not that its PRC operations will be

unable to fully utilize its deferred tax assets related to the net operating loss carryforwards in the PRC.

As a result, the Company provided

100% allowance on all deferred tax assets on net operating loss carryforwards in the PRC of $2,036,311 and $414,996 related to its operations

in the PRC at March 31, 2021 and 2020, respectively and provided 100% allowance on all deferred tax assets on allowance for doubtful

account of $21,435 and $178,381 related to its operations in the PRC at March 31, 2021 and 2020, respectively.

The tax effects of temporary differences from

continuing operations that give rise to the Company’s deferred tax assets and liabilities are as follows:

Deferred Tax Assets

Net operating loss carryforwards in the PRC

2 unchanged sentences

valuation allowance

As of March 31, 2020 and March 31,

2019, the Company’s PRC entities associated with the discontinued P2P lending operations had net operating loss carryforwards

of approximately $8.8 million and $3.4 million, respectively, which will expire in 2023 to 2024.

The Company reviews deferred tax

assets for a valuation allowance based upon whether it is more likely than not that the deferred tax asset will be fully realized.

At March 31, 2020 and 2019, full valuation allowance is provided against the deferred tax assets based upon management’s

assessment as to their realization.

The tax effects of temporary differences

from discontinued operations that give rise to the Company’s deferred tax assets are as follows:

Deferred tax assets, net

Deferred tax liabilities:

Capitalized intangible assets cost

Deferred tax liabilities, net

As of March 31, 2021 and 2020, the Company’s

PRC entities associated with the discontinued P2P lending operations had net operating loss carryforwards of approximately $10.4 million

and $8.8 million, respectively, which will expire in 2023 to 2025.

The Company reviews deferred tax assets for a valuation allowance based

upon whether it is more likely than not that the deferred tax asset will be fully realized.

At March 31, 2020 and 2021, full valuation

allowance is provided against the deferred tax assets based upon management’s assessment as to their realization.

The tax effects of temporary differences from

discontinued operations that give rise to the Company’s deferred tax assets are as follows:

Net operating loss carryforwards in the PRC

3 unchanged sentences

Due from related parties

As of March 31, 2020, balances due from

related parties were $12,341 and represented operation costs of four related parties paid by the Company on their behalf, amounts

received by the Company on behalf of a related party for refund of insurance claims, and amounts collected by a related party on

behalf of the Company from the automobile purchasers, including certain installment payments and facilitation fees.

another $14,120 represents advances to the non-controlling shareholders of Hunan Ruixi for operational purposes.

The balances due

from related parties were all non-interest bearing and due on demand.

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2021 and 2020, balances due

from related parties were $24,311 and $12,341, respectively, and represented operation costs of four related parties paid by the Company

on their behalf, amounts received by the Company on behalf of a related party for refund of insurance claims, and amounts collected by

a related party on behalf of the Company from the automobile purchasers, including certain installment payments and facilitation fees.

In addition, another $15,261 and $14,120 represents advances to the non-controlling shareholders of Hunan Ruixi for operational purposes

as of March 31, 2021 and 2020, respectively.

The balances due from related parties were all non-interest bearing and due on demand.

Due to stockholders

This is comprised of amounts payable to

two stockholders and are unsecured, interest free and due on demand.

Due to stockholders comprised of amounts payable

to two stockholders named below and are unsecured, interest free and due on demand.

Total due to stockholders

5 unchanged sentences

Loan payable to related parties (i)

Other payables due to related parties (ii)

Total due to related parties and affiliates

3 unchanged sentences

continuing operations

As of March 31, 2020 and 2019, the balances represented borrowings from three related parties, which is unsecured, interest free and due in the fiscal year of 2021.

The balance as of March 31, 2019 bore an interest rate of 10% per annum and is due in the fiscal year of 2020.

As of March 31, 2019, the balance represented borrowings from two related parties, who obtained borrowings from the online P2P lending platform of Sichuan Senmiao and then loaned the money to Jinkailong.

The balance bore an interest rate of 8.22% per annum and was fully repaid in April 2019.

As of March 31, 2020 and 2019, the balances represented $26,478 of payables to three other related parties for operational purposes.

As of March 31, 2021 and 2020, the balances represented borrowings from three related parties, which are unsecured, interest free and due in the fiscal year of 2021.

As of March 31, 2021 and 2020, the balances represented $170,546 and 26,478, respectively of payables to five other related parties for operational purposes.

These balances are interest free and due on demand.

2 unchanged sentences

Related Party Transactions

In December 2017, the Company entered

into loan agreements with two stockholders, who agreed to grant lines of credit of approximating $955,000 and $159,000, respectively,

to the Company for five years.

In December 2017, the Company entered into

loan agreements with two stockholders, who agreed to grant lines of credit of approximating $955,000 and $159,000, respectively, to the

Company for five years.

The lines of credit are non-interest bearing, effective from January 2017.

As of March 31,

2020, the outstanding balances in the discontinued operations were $108,711 and $73,384, respectively.

Company entered into two office lease agreements which were set to expire on January 1, 2020.

On April 1, 2018, the two

office leases were modified with the leasing term from April 1, 2018 to March 31, 2021.

As of March 31, 2021, the

outstanding balances due to these two stockholders in the discontinued operations were $48,795 and $0, respectively.

As of March 31,

operating lease right-of-use assets of these leases in the continuing operations amounted $105,432.

As of March 31, 2020, current

leases liabilities of these leases in the continuing operations amounted $78,482.

As of March 31, 2020, current leases liabilities

of these leases in the discontinued operations amounted $53,899.

For the years ended March 31, 2020 and 2019, the Company incurred

$109,896 and $113,742, respectively, to this related party in rental expenses.

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

November 2018, Hunan Ruixi entered into an office lease agreement with Hunan Dingchentai Investment Co., Ltd.

("Dingchentai"),

a Company where one of our independent director serves as legal representative and general manager.

The term of the lease agreement

was from November 1, 2018 to October 31, 2023 and the rent was approximately $44,250 per year, payable on a quarterly

The original lease agreement with Dingchentai was terminated on July 1, 2019.

The Company entered into another lease

with Dingchentai on substantially similar terms on September 27, 2019.

As of March 31, 2020, operating lease right-of-use

assets of this lease in the continuing operations amounted $130,873.

As of March 31, 2020, current leases liabilities and non-current

leases liabilities of this lease in the continuing operations amounted $73,173 and $88,349, respectively.

2020, the outstanding balances in the discontinued operations to these two stockholders were $73,384 and $108,711, respectively.

The Company entered into two office lease agreements

with a stockholder of Sichuan Senmiao, which were set to expire on January 1, 2020.

On April 1, 2020, the two office leases

were amended with a leasing term from April 1, 2020 to March 31, 2023.

On March 1, 2021, the Company entered into

an additional office lease which was set to expire on February 1, 2026.

As of March 31, 2021 and 2020, operating lease right-of-use

assets of these leases in the continuing operations amounted to $475,408 and $105,432, respectively.

As of March 31, 2021 and 2020,

current leases liabilities of these leases in the continuing operations amounted to $161,818 and $78,482, respectively.

Non-current lease

liabilities of these leases in the continuing operation amounted to $285,371 and $0 as of March 31, 2021 and 2020, respectively.

As of March 31, 2021 and 2020, current leases liabilities of these leases in the discontinued operations amounted to $0 and $53,899,

respectively.

For the years ended March 31, 2021 and 2020, the Company incurred $121,012 and $109,896, respectively, in rental expenses

to this related party.

In November 2018, Hunan Ruixi entered into

an office lease agreement with Hunan Dingchentai Investment Co., Ltd.

("Dingchentai"), a company where one of our independent

directors serves as legal representative and general manager.

The term of the lease agreement was from November 1, 2018 to October 31,

2023 and the rent was approximately $44,250 per year, payable on a quarterly basis.

The original lease agreement with Dingchentai was

terminated on July 1, 2019.

The Company entered into another lease with Dingchentai on substantially similar terms on September 27,

As of March 31, 2021 and 2020, operating lease right-of-use assets of this lease in the continuing operations amounted

$104,959 and $130,873, respectively.

As of March 31, 2021, current leases liabilities and non-current leases liabilities of this

lease in the continuing operations amounted $81,908 and $56,178, respectively.

As of March 31, 2020, current leases liabilities and

non-current leases liabilities of this lease in the continuing operations amounted $73,173 and $88,349, respectively.

For the years ended

March 31, 2020 and 2019, the Company incurred expense of $41,661 and $13,597 in rent, respectively, to Dingchentai.

March 31, 2021 and 2020, the Company incurred expense of $44,169 and $41,661 in rent to Dingchentai, respectively.

In June 2019 and January 2020, the Company

entered into two automobile maintenance services contracts with Sichuan Qihuaxin Automobile Services Co., Ltd and Sichuan Yousen

Automobile Maintenance Service Co., Ltd, the companies which are controlled by one of the noncontrolling shareholder of Sichuan

During the year ended March 31, 2020, the Company paid automobile maintenance fees of $36,088 and $21,759 to those

companies, respectively.

Before the acquisition of Hunan Ruixi,

five related parties of Jinkailong borrowed funds of $747,647 through the online P2P lending platform of Sichuan Senmiao and then

loaned the money to Jinkailong.

As of March 31, 2019, the outstanding balance was $297,978.

During the year ended March 31,

2020, Jinkailong repaid all of the loans.

Those loans bore interest rates ranging from 7.68% to 8.22% per annum and the interest

expense for the years ended March 31, 2020 and 2019 was $12,184 and $0, respectively.

Effective April 1, 2019, the Company adopted

ASU 2016-02, “Leases” (Topic 842), and elected the package of practical expedients that does not require the Company

(1) whether any expired or existing contracts are, or contain, leases, (2) lease classification for any

expired or existing leases and (3) initial direct costs for any expired or existing leases.

The impact of the adoption of

the ASC 842, as of April 1, 2019, the Company recognized $246,227 ROU assets and $247,325 lease liabilities, primarily related

to leases of facilities.

The ROU and lease liabilities are determined based on the present value of the future minimum rental payments

of the lease as of the adoption date, using an effective interest rate of 6.0%, which is determined using an incremental borrowing

rate with similar term in the PRC.

The average remaining operating and finance lease term of its existing leases is 2.1 and 2.3

years, respectively.

The adoption of this standard resulted in the recording of operating lease assets and operating lease liabilities

as of April 1, 2019, with no related impact on the Company's consolidated statement of changes in stockholders' equity or

consolidated statements of operations and comprehensive loss.

entered into two automobile maintenance services contracts with Sichuan Qihuaxin Automobile Services Co., Ltd and Sichuan Yousen Automobile

Maintenance Service Co., Ltd, which companies are controlled by one of the non-controlling shareholders of Jinkailong.

During the year

ended March 31, 2021, the Company paid automobile maintenance fees of $29,801 and $545,335 to those companies as mentioned above,

respectively.

The Company's operating leases for automobile

1 unchanged sentence

Revenue recognition section of Note 3

(p), the Company discloses that revenue earned from automobile rentals, wherein an identified asset is transferred to the customer

and the customer has the ability to control that asset, is accounted for under Topic 842 upon adoption for the year ended March

The Company did not have any automobile rentals operations prior to April 1, 2019, which the Company would have accounted

for such revenue under Topic 606 for the year ended March 31, 2019.

As of March 31, 2020, the Company has engaged

in offices and showroom leases which were classified as operating leases.

In addition, the Company had automobiles leases which

were classified as finance lease.

Company occupies various offices under operating lease agreements with a term shorter than twelve months which it elected not to

recognize lease assets and lease liabilities under ASC 842.

Instead, the Company recognized the lease payments in profit or loss

on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s lease agreements do

not contain any material residual value guarantees or material restrictive covenants.

The Company recognized lease expense on

a straight-line basis over the lease term for operating lease.

Meanwhile, the Company recognized the finance leases ROU assets

and interest on an amortized cost basis.

The amortization of finance ROU assets is recognized on an accretion basis as amortization

expense, while the lease liability is increased to reflect interest on the liability and decreased to reflect the lease payments

made during the period.

Interest expense on the lease liability is determined each period during the lease term as the amount that

results in a constant periodic interest rate of the automobile loans on the remaining balance of the liability.

Operating and finance lease expenses are

consist of following:

For the Years Ended

(r), the Company discloses that revenue earned from automobile rentals, wherein an identified asset is transferred to the customer and

the customer has the ability to control that asset, is accounted for under Topic 842 upon adoption for the year ended March 31, 2020.

As of March 31, 2021 and 2020, the Company

has engaged in offices and showroom leases which were classified as operating leases.

In addition, the Company had automobiles leases

which were classified as finance lease.

occupies various offices under operating lease agreements with a term shorter than twelve months which it elected not to recognize lease

assets and lease liabilities under ASC 842.

Instead, the Company recognized the lease payments in profit or loss on a straight-line basis

over the lease term and variable lease payments in the period in which the obligation for those payments is incurred.

The Company’s lease agreements do not contain

any material residual value guarantees or material restrictive covenants.

The Company recognized lease expense on a straight-line

basis over the lease term for operating lease.

Meanwhile, the Company recognized the finance leases ROU assets and interest on an amortized

The amortization of finance ROU assets is recognized on an accretion basis as amortization expense, while the lease liability

is increased to reflect interest on the liability and decreased to reflect the lease payments made during the period.

Interest expense

on the lease liability is determined each period during the lease term as the amount that results in a constant periodic interest rate

of the automobile loans on the remaining balance of the liability.

The ROU assets and lease liabilities are

determined based on the present value of the future minimum rental payments of the lease as of the adoption date, using an effective

interest rate of 6.0%, which is determined using an incremental borrowing rate with similar term in the PRC.

As of March 31,

2021, the average remaining operating and finance lease term of its existing leases is 2.1 and 1.5 years, respectively.

Operating and finance lease expenses consist of

the following:

Classification

March 31, 2020

March 31, 2019

Operating lease cost

5 unchanged sentences

Amortization of leased asset

General and administrative

Selling, general and administrative

Interest on lease liabilities

1 unchanged sentence

Total lease expenses

Operating lease expenses from continuing

Operating lease expenses from continuing operations

totaled $396,276 and $294,127 for the years ended March 31, 2021 and 2020, respectively.

Operating lease expenses from discontinued

operations totaled $0 and $84,372 for the years ended March 31, 2021 and 2020, respectively.

Operating lease expenses from

discontinued operations totaled $84,372 and $128,024 for the years ended March 31, 2020 and 2019, respectively.

Interest expenses

on finance leases from continuing operations totaled $373,407 and $0 for the years ended March 31, 2020 and 2019, respectively.

The following table sets forth the Company’s

Interest expenses on finance leases

from continuing operations totaled $733,202 and $373,407 for the years ended March 31, 2021 and 2020, respectively.

The following table sets forth the Company’s

minimum lease payments in future periods:

Operating lease

Finance lease

6 unchanged sentences

Present value of lease liabilities

Present value of lease liabilities –

discontinued operations

Present value of lease liabilities –

continuing operations

COMMITMENTS AND CONTINGENCIES

Purchase Commitments

As of March 31, 2020, the Company has

a purchase commitment of 50 automobiles for a total purchase price of approximately $699,000, which is expected to be completed by

the end of December 2020.

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On January 19 and February 22, 2021,

the Company entered into two purchase contracts with an automobile dealer to purchase a total of 700 automobiles for the amount of approximately

$11.6 million.

Pursuant to the contracts, the Company is required to purchase 350 automobiles in cash with the amount of approximately

$5.8 million.

The remaining 350 automobiles purchase commitment with the amount of approximately $5.8 million shall be purchased with

financing option through the dealer’s designated financial institutions.

As of the issuance date of these consolidated financial

statements, 200 automobiles have been purchased in cash and delivered to the Company.

As the Company is in process of getting approval

from the dealer’s designated financial institutions in financing the 350 automobiles’

purchase, there is no clear timing schedule

for completing the remaining purchase commitment with this automobile dealer.

However, the Company expects the purchase to be completed

by the end of 2021.

Contingencies

In measuring the credit risk of guarantee

services to automobile purchasers, the Company primarily reflects the “probability of default”

by the automobile purchasers

on its contractual obligations and considers the current financial position of the automobile purchasers and its likely future

The Company manages the credit risk of

automobile purchasers by performing preliminary credit checks of each automobile purchaser and ongoing monitoring every month.

By using the current credit loss model, management is of the opinion that the Company is bearing the credit risk to repay the principal

and interests to the financial institutions if automobile purchasers default on their payments for more than three months.

also periodically re-evaluates probability of default of automobile purchasers to make adjustments in the allowance when necessary

as the Company is the guarantor of the loans.

In measuring the credit risk of guarantee services

to automobile purchasers, the Company primarily reflects the “probability of default”

by the automobile purchasers on its

contractual obligations and considers the current financial position of the automobile purchasers and its likely future development.

The Company manages the credit risk of automobile

purchasers by performing preliminary credit checks of each automobile purchaser and ongoing monitoring every month.

By using the current

credit loss model, management is of the opinion that the Company is bearing the credit risk to repay the principal and interests to the

financial institutions if automobile purchasers default on their payments for more than three months.

Management also periodically re-evaluates

probability of default of automobile purchasers to make adjustments in the allowance when necessary, as the Company is the guarantor of

Contingent liabilities for automobile purchasers

Historically, most of the automobile purchasers

1 unchanged sentence

In December 2019, a novel strain of coronavirus,

or COVID-19, surfaced and it has spread rapidly to many parts of China and other parts of

the world, including the United States.

The epidemic has resulted in quarantines, travel restrictions, and the temporary closure

of stores and facilities in China and elsewhere.

Because substantially all of the Company’s operations are conducted

in China, the COVID-19 outbreak had materially adversely affected, and may continue to affect, the Company’s business operations,

financial condition and operating results for 2020, including but not limited to decrease in revenues, slower collection of accounts

receivables and additional allowance for doubtful accounts.

Some of the Company’s customers exited the ride-hailing business

and tendered their automobiles to the Company for sublease or sale to generate income or proceeds to cover payments owed to financial

institutions and the Company.

For the year ended March 31, 2020, the Company recognized estimated provisions loss of approximately

$225,000 for the guarantee services because the drivers who exited the ride-hailing business were not able to make the monthly

As of March 31, 2020, the maximum contingent

liabilities the Company would be exposed to was approximately $18,627,000 (including approximately $497,400 related to the discontinued

P2P business), assuming all the automobile purchasers were in default.

Automobiles are used as collateral to secure the payment

obligations of the automobile purchasers under the financing agreements.

The Company estimated the fair market value of the collateral

to be approximately $13,918,000 as of March 31, 2020, based on the market price and the useful life of such collateral, which represents

about 74.7% of the maximum contingent liabilities.

As of March 31, 2020, approximately $1,431,000, including interests of $84,000,

due to financial institutions, of all the automobile purchases we serviced were past due as a result of the COVID-19 epidemic in

The Company has resumed its operation since

March 23, 2020.

Because of the significant uncertainties surrounding the COVID-19 outbreak, the extent of the business disruption

and the related financial impact cannot be reasonably estimated at this time.

As of the date of this report, the Company’s

operation has been adversely affected which resulted in significant decrease in revenue in the quarter ended March 31, 2020 compared

with prior quarters in the same fiscal year.

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

or COVID-19, surfaced and it has spread rapidly to many parts of China and other parts of the

world, including the United States.

The epidemic has resulted in quarantines, travel restrictions, and the temporary closure of stores

and facilities in China and elsewhere.

Because substantially all of the Company’s operations are conducted in China,

the COVID-19 outbreak has materially and adversely affected, and may continue to affect, the Company’s business operations, financial

condition and operating results for 2020 and 2021, including but not limited to decrease in revenues, slower collection of accounts receivables

and additional allowance for doubtful accounts.

Some of the Company’s customers exited the ride-hailing business and tendered their

automobiles to the Company for sublease or sale to generate income or proceeds to cover payments owed to financial institutions and the

For the years ended March 31, 2021 and 2020, the Company recognized an estimated provision loss of approximately $199,000

and $225,000, respectively for the guarantee services because the drivers who exited the ride-hailing business were not able to make the

monthly payments.

As of March 31, 2021, the maximum contingent liabilities the Company

would be exposed to was approximately $12,763,000 (including approximately $68,000 related to the discontinued P2P business), assuming

all the automobile purchasers were in default.

Automobiles are used as collateral to secure the payment obligations of the automobile

purchasers under the financing agreements.

The Company estimated the fair market value of the collateral to be approximately $8,615,000

as of March 31, 2021, based on the market price and the useful life of such collateral, which represents approximately 67.5% of the

maximum contingent liabilities.

As of March 31, 2021, approximately $3,890,000, including interests of approximately $233,000, due

to financial institutions, of all the automobile purchases we serviced were past due mainly due to the COVID-19 epidemic in China.

Contingent liability of Jinkailong

On May 25, 2018, Chengdu Industrial Impawn

Co., Ltd (“Impawn”) signed a pledge and pawn contract (the “Master Contact”) with Langyue, pursuant to which, Impawn

shall provide loans to Langyue up to RMB20 million (approximately $2.9 million).

In connection with the Master Contract, Jinkailong entered

into a guaranty with Impawn and agreed to provide guarantee on all the payments (including principal, interests, compensations and other

expenses) of Langyue jointly and severally with seven other guarantors, one of which is a shareholder of Jinkailong.

Langyue used RMB7,019,652

(approximately $1,003,000) of the loans from Impawn and re-loaned it to automobile purchasers referred by Jinkailong from June 2018

to September 2018, which were also guaranteed by Jinkailong.

Langyue did not pay Impawn the monthly installment

of June 2020 timely.

In July 2020, Impawn sent the Collection Letter and Notice to Langyue to demand payment of the interest

and penalty of RMB100,300 (approximately $14,330).

On September 18, 2020, Impawn initiated a legal action with the People's

Court of Sichuan Pilot Free Trade Zone (the “Court”) for an order to collect and enforce the repayment of the total outstanding

principal, interest and penalty for an aggregate of RMB9,992,728 (approximately $1,428,000) and other expenses by freezing all bank accounts

of Langyue and all related guarantors.

On October 14, 2020, the cash in the bank accounts of Jinkailong, totaling RMB175,335 (approximately

$25,050) was frozen by the Court and became restricted cash accordingly.

On January 7, 2021, bank account was frozen mentioned above

has been fully released.

On December 24, 2020, Jinkailong, a shareholder

of Jinkailong and Impawn signed a settlement agreement (“Settlement Agreement”).

Impawn agreed to release the pledge of Jinkailong’s

75 automobiles, provided that Jinkailong and such shareholder repay an aggregate of RMB4,026,594 (approximately $614,000) in monthly installments

over 35 months.

In addition, upon the initial payment of RMB600,000 (approximately $92,000) by Jinkailong and such shareholder, Impawn

will request the court to release the frozen bank accounts of Jinkailong.

The Settlement Agreement further provides that it does not release

the guarantee obligations of Jinkailong and in the event Langyue’s loan is not fully repaid at the end of the 35 months, Impawn

reserves the right to pursue further actions against Jinkailong and such shareholder for the outstanding balance of the loan.

As of March 31,

2021, the original maximum contingent liabilities related to the loans from Langyue to automobile purchasers which Jinkailong would be

exposed to was approximately RMB2,163,000 (approximately $330,000), which has been included in the amount of contingent liabilities of

automobile purchasers as mentioned above.

Therefore, Jinkailong recorded the additional $94,000 for the gap between the total amount to

be paid pursuant to the Settle Agreement and the remaining principal of loans from Impawn as guarantee expenses in the consolidated financial

Jinkailong will collect monthly installment payments from online ride-hailing drivers who lease those 75 automobiles to repay

for the remaining balance of Impawns and recognize guarantee expenses if any.

However, as Jinkailong has undertaken the joint and several

liability guarantee for all of Langyue’s loans from Impawn, Jinkailong may be required to pay all the outstanding balance of approximately

$1,346,000 to Impawn in the future.

From time to time, the Company may be subject

to certain legal proceedings, claims and disputes that arise in the ordinary course of business.

Except the contingent liabilities for

Langyue, other amounts accrued, as well as the total amount of reasonable possible losses with the respect to such matters, individually

and in the aggregate, are not deemed to be material to the interim consolidated financial statements.

SEGMENT INFORMATION

The Company presents segment information after

elimination of inter-company transactions.

In general, revenue, cost of revenue and operating expenses are directly attributable, or are

allocated, to each segment.

The Company allocates costs and expenses that are not directly attributable to a specific segment, such as

those that support infrastructure across different segments, to different segments mainly on the basis of usage, revenue or headcount,

depending on the nature of the relevant costs and expenses.

The Company does not allocate assets to its segments as the CODM does not

evaluate the performance of segments using asset information.

The following tables present the summary of each

segment's revenue, loss from operations, loss before income taxes and net loss which is considered as a segment operating performance

measure, for the year ended March 31, 2021:

For the Year Ended March 31, 2021

Transaction and

Related Services

Online ride-hailing platform

Loss from operations

$ (6,126,494 )

$ (1,894,971 )

$ (2,163,078 )

$ (10,184,543 )

Loss before income taxes

$ (7,009,570 )

$ (1,703,551 )

$ (3,872,915 )

$ (12,586,036 )

$ (7,024,200 )

$ (1,703,551 )

$ (3,872,912 )

$ (12,600,663 )

Details of the Company's revenue by segment are

set out in Note 2(g).

As of March 31, 2021, the Company’s

total assets were comprised of, $16,227,836 for automobile transaction and related services, $3,254,822 for online ride-hailing platform

services and $2,421,681 unallocated.

As substantially all of the Company's long-lived

assets are located in the PRC and substantially all of the Company's revenue is derived from within the PRC, no geographical information

is presented.

PARENT-ONLY FINANCIALS

5 unchanged sentences

Prepayments, other receivables and other assets, net

Escrow receivable

Total Current Assets

Intangible assets

Prepayment for intangible asset

Investments in subsidiaries

LIABILITIES AND EQUITY

18 unchanged sentences

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SENMIAO TECHNOLOGY LIMITED

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

6 unchanged sentences

Equity of losses in subsidiaries

(10,360,058 )

Foreign currency translation adjustment

Comprehensive loss attributable

to stockholders

Comprehensive loss attributable to stockholders

$ (10,691,251 )

1 unchanged sentence

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SENMIAO TECHNOLOGY LIMITED

CONDENSED STATEMENTS OF CASH FLOWS

5 unchanged sentences

Equity of loss of subsidiaries

Amortization of intangible asset

Stock compensation expense

6 unchanged sentences

Purchase of intangible assets

Deposits in intangible assets

Working capital contribution for subsidiaries

1 unchanged sentence

Cash Flows from Financing Activities:

Net proceeds from issuance of common stock in registered direct offering

Net proceeds from issuance of common stock in an underwritten public offering

Net proceeds from exercise of underwriters’

over-allotment option

Net proceeds from issuance of common stock and warrants in a registered direct public offering

Net proceeds from issuance of common stock upon warrants exercised

Proceeds borrowed from stockholders

Repayment of borrowing to stockholders

Borrowings to subsidiaries

Release of escrow receivable

Net Cash Provided by (Used in) Financing Activities

Net decrease in cash and cash equivalents

Net Cash Provided by Financing Activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of year

4 unchanged sentences

Non-cash Transaction in Investing and Financing Activities

IPO expenses paid by the Company’s stockholders

Prepayments in exchange of intangible assets

2 unchanged sentences

Issuance of restricted stock units from accrued expenses and other liabilities

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Basis of presentation

The condensed financial information of

Senmiao Technology Limited, has been prepared using the same accounting policies as set out in the consolidated financial statements.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S.

been condensed or omitted by reference to the consolidated financial statements.

Investments in subsidiaries and equity

of loss in subsidiaries

The investments in subsidiaries consist

of investments in Senmiao Consulting, Hunan Ruixi and Yicheng.

The equity losses in subsidiaries consist of equity loss in Senmiao

Consulting, Hunan Ruixi and Yicheng.

Stockholders’ equity

The condensed financial information of Senmiao

Technology Limited, has been prepared using the same accounting policies as set out in the consolidated financial statements.

information and footnote disclosures normally included in financial statements prepared in accordance with U.S.

GAAP have been condensed

or omitted by reference to the consolidated financial statements.

Investments in subsidiaries and equity of loss in subsidiaries

The investments in subsidiaries consist of investments

in Senmiao Consulting, Hunan Ruixi and Yicheng.

The equity losses in subsidiaries consist of equity loss in Senmiao Consulting, Hunan

Ruixi and Yicheng.

Stockholders’

Restricted Stock Units

On July 31, 2018, the Board approved

the issuance of 5,000 restricted stock units (“RSUs”) to each of the five directors as stock compensation for their

services for the Company’s fiscal year ending March 31, 2019.

Total RSUs granted to the five directors were 25,000 for

an aggregate fair value of $117,750.

Pursuant to the Restricted Stock Unit Award Agreements (“Award Agreements”) on

August 3, 2018, the RSUs vest in four equal quarterly installments on August 3, 2018, April 1, 2019, July 1,

2019 and October 1, 2019 or in full upon the occurrence of a change in control of the Company, subject to the terms and conditions

set forth in the Award Agreements, provided that the director remains in service as a director through the applicable vesting date.

The RSUs will be settled by the Company’s issuance of shares of common stock in certificated or uncertificated form upon

the earlier of (i) a change in control and (ii) the director’s cessation as a director of the Company due to a

“separation of service” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended, or

the director’s death or disability.

As of March 31, 2019, the first installment

of 6,250 RSUs vested.

The fair value of the vested RSUs is calculated at the grant date market price of the Company’s common

stock multiplying by the number of vested shares.

On December 11, 2019, the Board approved

the issuance of 30,303 RSUs to each of the Company’s five directors as stock compensation for their services for the Company’s

fiscal year ending March 31, 2020.

As of March 31, 2020, the Company

issued a total of 169,015 RSUs and accounted for as expenses and charged to common stock.

SENMIAO TECHNOLOGY LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On October 29, 2020, the Board approved the

issuance of an aggregate of 127,273 restricted stock units (“RSUs”) to directors, officers and certain employees as stock

compensation for their services for the year ending March 31, 2021.

Total RSUs granted to these directors, officers and employees

were valued at an aggregate fair value of $140,000.

These RSUs will vest in four equal quarterly installments on January 29, 2021,

April 29, 2021, July 29, 2021 and October 29, 2021 or in full upon the occurrence of a change in control of the Company,

provided that the director, officer or the employee remains in service through the applicable vesting date.

The RSUs will be settled by

the Company’s issuance of shares of common stock in certificated or uncertificated form upon the earlier of (i) vesting date,

(ii) a change in control and (ii) termination of the services of the director, officer or employee due to a "separation

of service"

within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended, or the death or disability

of such director, officer or employee.

As of March 31, 2021 no RSUs have been vested.

As of the issuance date of issuance of these

consolidated financial statements, the first installment of RSUs vested but has not been settled by the Company.

The Company expects to

settle the vested RSUs by issuance of shares of common stock within 2021 and account for the vested RSUs as an addition to both expenses

and additional paid-in capital.

2019 Registered Direct Offering

On April 15, 2019, the SEC declared

effective the Company’s Registration Statement on Form S-3, pursuant to which, along with the accompanying prospectus,

the Company registered up to $80,000,000 in aggregate principal amount of its common stock, preferred stock, debt securities, warrants,

rights and/or units.

On June 21, 2019, the Company closed a registered direct offering of an aggregate of 1,781,361 shares

of its common stock, and in connection therewith, issued to the investors (i) for no additional consideration, Series A

warrants to purchase up to an aggregate of 1,336,021 shares of common stock and (iii) for nominal additional consideration,

Series B warrants to purchase up to a maximum aggregate of 1,116,320 shares of common stock.

The Company sold the shares of

common stock at a price of $3.38 per share (the “Share Purchase Price”).

The Company received gross proceeds from the

offering, before deducting estimated offering expenses payable by the Company, of approximately $6,000,000.

The Series A warrants are exercisable

immediately upon issuance at an exercise price of $3.72 per share and will expire on the fourth (4th) anniversary of the original

In the event that on December 20, 2019, the exercise price is greater than the Six Month Adjustment Price as defined

below, on the trading day immediately following December 20, 2019 (the “Six Month Measuring Date”), the exercise price

shall automatically adjust to the Six Month Adjustment Price (as adjusted for stock splits, stock dividends, stock combinations,

recapitalizations and similar events).

Six Month Adjustment Price means the greater of (x) $1.50 (as adjusted for any stock

dividend, stock split, stock combination, reclassification or similar transaction) and (y) 100% of the quotient of (I) the

sum of the five lowest VWAPs of the common stock during the ten consecutive trading day period ending and including the Six Month

Measuring Date, divided by (II) five.

All such determinations to be appropriately adjusted for any stock dividend, stock split,

stock combination, reclassification or similar transaction during such period.

The exercise price of the Series A warrant

was adjusted from $3.72 to $1.50 per share on December 20, 2019.

The Series B warrants are pre-funded

warrants and are being issued as a true-up with respect to the shares of common stock.

The maximum aggregate number of shares of

common stock issuable upon exercise of the Series B warrants is 1,116,320.

Initially, the Series B warrants shall not

be exercisable for any shares of common stock.

In the event that on the fiftieth (50th) day after the closing date (the “Adjustment

Measuring Time”), the closing price of the common stock is less than the Share Purchase Price, then the number of shares

of common stock issuable upon exercise of the Series B warrants shall be adjusted (upward or downward, as applicable) to the

greater of (i) zero (0) and (ii) such aggregate number of shares of common stock equal to fifty percent (50%) of the

difference of (A) the quotient of (x) the Share Purchase Price divided by (y) the Market Price (as defined in Purchase

Agreement) as of the Adjustment Measuring Time, less (B) the aggregate number of shares of common stock issued to the investors

at the closing (as adjusted for share splits, share dividends, share combinations, recapitalizations and similar events).

the year ended March 31, 2020, the Company issued an aggregate of 1,113,187 shares of common stock to certain investors in the

June 2019 offering upon exercise of the pre-funded Series B warrants for a total consideration of $111.

On April 15, 2019, the SEC declared effective

the Company’s Registration Statement on Form S-3, pursuant to which, along with the accompanying prospectus, the Company registered

up to $80,000,000 in aggregate principal amount of its common stock, preferred stock, debt securities, warrants, rights and/or units.

On June 21, 2019, the Company closed a registered direct offering of an aggregate of 1,781,360 shares of its common stock, and in

connection therewith, issued to the investors (i) for no additional consideration, Series A warrants to purchase up to an aggregate

of 1,336,021 shares of common stock and (iii) for nominal additional consideration, Series B warrants to purchase up to a maximum

aggregate of 1,116,320 shares of common stock.

The Company sold the shares of common stock at a price of $3.38 per share (the “Share

Purchase Price”).

The Company received gross proceeds from the offering of approximately $6.0 million, and net proceeds from the

offering of approximately $5.1 million after deducting estimated offering expenses payable by the Company.

The Series A warrants are exercisable immediately

upon issuance at an exercise price of $3.72 per share and will expire on the fourth (4th) anniversary of the original issue date.

event that on December 20, 2019, the exercise price is greater than the Six Month Adjustment Price as defined below, on the trading

day immediately following December 20, 2019 (the “Six Month Measuring Date”), the exercise price shall automatically

adjust to the Six Month Adjustment Price (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations and similar

Six Month Adjustment Price means the greater of (x) $1.50 (as adjusted for any stock dividend, stock split, stock combination,

reclassification or similar transaction) and (y) 100% of the quotient of (I) the sum of the five lowest VWAPs of the common

stock during the ten consecutive trading day period ending and including the Six Month Measuring Date, divided by (II) five.

such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction

during such period.

The exercise price of the Series A warrant was adjusted pursuant to this formula from $3.72 to $1.50 per share

on December 20, 2019.

The Company used the adjusted exercise price to value its derivative liability on its December 31, 2019

financial statements and reporting periods onwards with changes in fair value of warrant liabilities from period to period are recorded

in the consolidated statements of operations and comprehensive loss under the caption “Change in fair value of derivative liabilities”.

The exercise price of the Series A warrant was further adjusted to $0.50 per share on August 7, 2020 as a result of the Company’s

issuance of shares of common stock in its underwritten public offering in August 2020, which has been recorded in the financial statements

in the year ended March 31, 2021.

In addition, the exercise price of the placement agent warrants from the June 2019 registered

direct offering was voluntarily adjusted by the Company from $3.72 to $0.50 per share on August 18, 2020.

The Series B warrants are pre-funded warrants

and were issued as a true-up with respect to the shares of common stock.

The maximum aggregate number of shares of common stock issuable

upon exercise of the Series B warrants is 1,116,320.

Initially, the Series B warrants shall not be exercisable for any shares

of common stock.

In the event that on the fiftieth (50th) day after the closing date (the “Adjustment Measuring Time”), the

closing price of the common stock is less than the Share Purchase Price, then the number of shares of common stock issuable upon exercise

of the Series B warrants shall be adjusted (upward or downward, as applicable) to the greater of (i) zero (0) and (ii) such

aggregate number of shares of common stock equal to fifty percent (50%) of the difference of (A) the quotient of (x) the Share

Purchase Price divided by (y) the Market Price (as defined in Purchase Agreement) as of the Adjustment Measuring Time, less (B) the

aggregate number of shares of common stock issued to the investors at the closing (as adjusted for share splits, share dividends, share

combinations, recapitalizations and similar events).

The exercise price of the Series B warrant was adjusted from $3.72 to $0.0001

per share on August 12, 2019.

The Company used the adjusted exercise price to value its derivative liability on its September 30,

2019 financial statements and reporting period onwards with changes in fair value of warrant liabilities from period to period are recorded

in the consolidated statements of operations and comprehensive loss under the caption “Change in fair value of derivative liabilities.

As of March 31, 2021, the Company has issued an aggregate of 1,113,188 shares of common stock to certain investors in the June 2019

offering upon exercise of the pre-funded Series B warrants for a total consideration of $111.

Underwritten Public Offering and Exercise of

the Over-Allotment Option

On August 4, 2020, the Company entered into

an underwriting agreement with The Benchmark Company, LLC and Axiom Capital Management, Inc., as representatives of the Underwriters,

relating to an underwritten public offering of 12,000,000 shares of the Company’s common stock at the Offering Price.

the terms of the Underwriting Agreement, the Company granted the Underwriters a 45-day option to purchase up to an additional 1,800,000

shares of common stock to cover over-allotments, if any, at the Offering Price less the underwriting discounts and commissions.

An underwriting

discount of 7% was applied to the Offering Price, except for shares of common stock purchased by certain existing investors of the Company

(the “Excluded Investors”), an underwriting discount of 6% was applied.

On August 6, 2020, the Company completed the

underwritten offering.

The net proceeds to the Company from this offering, after deducting the underwriting discounts and commissions

and other estimated offering expenses payable by the Company, were approximately $5.3 million.

On August 13, 2020, the Underwriters exercised

their over-allotment option to purchase an additional 1,800,000 shares of common stock at $0.50 per share.

This transaction was completed

on August 13, 2020.

Net proceeds from the exercise of the underwriters’

over-allotment option were approximately $0.8 million

net of underwriting discounts and commissions and offering expenses.

In connection with the underwritten offering,

the Company issued the Underwriters or their permitted designees, on a private placement basis, the Underwriters’

Warrants to purchase

up to 568,000 shares of common stock.

These warrants are valid for a period of five years and exercisable commencing six months from August 4,

2020 at a price per share equal to 125% of the Offering Price and are exercisable on a “cashless”

February 2021 Registered Direct Offering

February 8, 2021, the Company entered into a placement agency agreement with FT Global Capital, Inc., to act as exclusive placement

agent in connection with the registered direct public offering.

Pursuant to the terms of the placement agency agreement, the Company agreed

to pay the Placement Agent a cash fee equal to 7.5% of the gross proceeds raised in the Offering, and to reimburse the Placement Agent

for certain expenses, including legal fees and expenses, up to $60,000 in the aggregate.

The Placement Agent is also entitled to additional

tail compensation for any financings consummated within the 12-month period following the termination of the Placement Agent Agreement

to the extent that such financing is provided to the Company by investors that the Placement Agent had introduced to the Company.

February 10, 2021, the Company completed the registered direct offering.

The net proceeds to the Company from this offering, after

deducting the underwriting discounts and commissions and other estimated offering expenses payable by the Company, were approximately

$5.7 million.

connection with the offering, the Company issued the placement agent warrants to purchase up to 380,435 shares of its common stock.

warrants are exercisable for a period of five years commencing 180 days from February 8, 2020 at a price of $1.38 per share

and are exercisable on a “cashless”

In addition, the company issued The Benchmark Company, LLC and Axiom Capital Management, Inc.

seven percent of the gross proceeds from the offering and warrants to purchase up to 152,174 shares of its common stock, in consideration

for the termination of the ROFR.

These warrants are exercisable for a period of five years from February 8, 2020 at a price of $1.725

SUBSEQUENT EVENTS

On July 4, 2020, Hunan Ruixi, Jinkailong

and the other shareholders of Jinkailong entered into an agreement (the “JKL Investment Agreement”) with Hongyi Industrial

Group Co., Ltd.

(“Hongyi”).

Pursuant to the JKL Investment Agreement,

Jinkailong agreed to issue and Hongyi agreed to subscribe for a 27.03% equity interest in Jinkailong in consideration of RMB50

million (approximately $7.0 million) (the “Investment”).

The Investment will be made in two payments:

(i) the first

payment of RMB10 million (approximately $1.4 million) is due no later than September 30, 2020 and (ii) the remaining RMB40 million

(approximately $5.6 million) is due within 30 days after the record-filing of the Investment has been made with the local PRC government

and the other shareholders of Jinkailong having made their respective capital contributions in full in cash, but no later than

December 31, 2020.

As a result, Hunan Ruixi will be required to pay RMB3.5 million (approximately $0.5 million) to Jinkailong as

a capital contribution.

Upon the full payment of the consideration, the Investment will be deemed to be closed (the “Closing”).

As a result of the Investment, the original

shareholders’

ownership percentage will be proportionally diluted but Hunan Ruixi will continue to control Jinkailong pursuant

to the Voting Agreements.

The JKL Investment Agreement sets performance

targets for Jinkailong during a three-year performance commitment period following the Closing.

During the performance commitment

period, Jinkailong has agreed, and its original shareholders have agreed to cause Jinkailong, to seek to achieve annual revenue

for Jinkailong of no less than RMB52 million (approximately $7.4 million), RMB90 million (approximately $12.7 million) and RMB110

million (approximately $15.6 million), respectively, and annual net profit of no less than RMB10 million (approximately $1.4 million),

RMB20 million (approximately $2.8 million) and RMB25 million (approximately $3.5 million), respectively, during the first, second

and third year of the performance commitment period.

The JKL Investment Agreement also provides

Hongyi certain shareholder rights, including, but not limited to, the right to receive any undistributed dividends, a right of

first refusal for any equity transfer from the other shareholders of Jinkailong, a tag-along right during the performance commitment

period, anti-dilution rights, redemption rights, subscription rights and priority in liquidation or dissolution of Jinkailong.

Specifically, pursuant to the redemption right provision in the JKL Investment Agreement, in the event that Jinkailong (i) fails

to become public through an IPO for a valuation of no less than RMB350 million (approximately $49.5 million) or merge with a public

company for a valuation of no less than RMB300 million (approximately $42.5 million) within the six months following the performance

commitment period, (ii) fails to achieve an accumulated net profit of RMB24 million (approximately $3.4 million) for the first

two years of the performance commitment period or a net profit of RMB20 million (approximately $2.9 million) for the third year

of the performance commitment period, or (iii) has any material and adverse change to its core business, including but not limited

to being included in the list of dishonest persons and loss of over one third of its online ride-hailing taxi operating licenses,

as well as bankruptcy, liquidation or cessation of operations, Hongyi shall have the right to require certain shareholders of Jinkailong

(including Hunan Ruixi) to repurchase all of its equity interest in Jinkailong.

Based on a repurchase formula provided for in the

JKL Investment Agreement, the maximum repurchase amount that Hunan Ruixi would be subject to is RMB28,320,000 (approximately $4.0

May 2021 Registered Direct Offering

On May 13, 2021, the Company completed a

registered direct offering of 5,531,916 shares of the Company’s common stock at $1.175 per share, pursuant to a securities purchase

agreement with certain purchasers dated May 11, 2021.

As a result, the Company raised approximately $5.8 million, net of placement

agent fees and offering expenses, to support the Company’s working capital requirements.

In connection with the offering, The Company

also issued warrants to the investors to purchase a total of 5,531,916 shares of common stock at an exercise price of $1.05 per share.

The warrants have a term of five years and are exercisable at any time on or after the issuance date.

In connection with the offering,

the Company paid the placement agent cash commission of approximately $487,500 and issued to it warrants to purchase up to 414,894 shares

of common stock at an exercise price of $1.05 per share, which warrants will be exercisable at any time on or after the issuance date

and expire on the fifth year anniversary of their issuance.

The warrants will be fair valued on the transaction date and accounted for

as a derivative liability.

Exercise of Warrants

On April 23, 2021, one of the holders of Series A warrants exercised the warrants to purchase 44,029 shares of the Company’s common

stock at an exercise price of $0.50 per share, generating gross proceeds of approximately $22,015 to the Company.

Termination of JKL Investment

On July 2 2021, Hunan Ruixi, other shareholders of

Jinkailong and Hongyi signed a termination agreement to terminate the investment by Hongyi on Jinkailong.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data