Senmiao Technology Ltd 10-K

Item 8. Financial Statements and Supplementary Data The financial statements required by this item begin on page F-1 hereof. Index to Financial Statements Report of Independent Registered Public Accounting Firm F-1 Financial Statements: Consolidated Balance Sheets as of March 31, 2021 and 2020 F-2 Consolidated Statements of Operations and Comprehensive Loss for the Years Ended March 31, 2021 and 2020 F-3 Consolidated Statements of Changes in Stockholders' Equity for the Years Ended March 31, 2021 and 2020 F-4 Consolidated Statements of Cash Flows for the Years Ended March 31, 2021 and 2020 F-5 Notes to Consolidated Financial Statements F-6 94 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Senmiao Technology Limited Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Senmiao Technology Limited and Subsidiaries (collectively, the “Company”) as of March 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ 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. 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. 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. 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. /s/ Friedman LLP We have served as the Company’s auditor since 2018. New York, New York July 8, 2021 F- 1 SENMIAO TECHNOLOGY LIMITED CONSOLIDATED BALANCE SHEETS (Expressed in U.S. dollar, except for the number of shares) March 31, March 31, 2021 2020 ASSETS Current assets Cash, and cash equivalents $ 4,448,075 $ 833,888 Accounts receivable, net, current portion 1,437,195 660,645 Inventories 127,933 1,000,675 Finance lease receivables, net, current portion 541,605 459,110 Prepayments, other receivables and other assets, net 3,905,278 2,798,780 Due from related parties 39,572 26,461 Current assets - discontinued operations 393,348 826,580 Total current assets 10,893,006 6,606,139 Property and equipment, net Property and equipment, net 3,700,147 469,201 Property and equipment, net - discontinued operations 5,592 11,206 Total property and equipment, net 3,705,739 480,407 Other assets Operating lease right-of-use assets, net 499,221 473,661 Operating lease right-of-use assets, net, related parties 580,367 236,305 Financing lease right-of-use assets, net 4,778,772 5,440,362 Intangible assets, net 968,131 777,621 Goodwill 135,388 - Accounts receivable, net, noncurrent 269,183 882,078 Finance lease receivables, net, noncurrent 473,472 734,145 Total other assets 7,704,534 8,544,172 Total assets $ 22,303,279 $ 15,630,718 LIABILITIES AND EQUITY Current liabilities Borrowings from financial institutions $ 310,662 $ 226,753 Accounts payable 44,769 4,065 Advances from customers 155,586 90,349 Income tax payable 17,408 16,267 Accrued expenses and other liabilities 6,655,592 2,008,391 Due to related parties and affiliates 352,827 152,679 Operating lease liabilities 209,644 149,582 Operating lease liabilities - related parties 243,726 151,655 Financing lease liabilities 5,172,943 3,473,967 Derivative liabilities 1,278,926 342,530 Current liabilities - discontinued operations 2,336,861 4,516,292 Total current liabilities 16,778,944 11,132,530 Other liabilities Borrowings from financial institutions, noncurrent 44,962 64,221 Operating lease liabilities, non-current 263,708 297,167 Operating lease liabilities, non-current - related parties 341,549 88,349 Financing lease liabilities, non-current 2,256,553 2,576,094 Deferred tax liability 44,993 - Total other liabilities 2,951,765 3,025,831 Total liabilities 19,730,709 14,158,361 Commitments and contingencies Stockholders' equity Common stock (par value $0.0001 per share, 100,000,000 shares authorized;49,780,725 and 29,008,818 shares issued and outstanding at March 31, 2021 and 2020, respectively) 4,978 2,901 Additional paid-in capital 40,755,327 27,013,137 Accumulated deficit (34,064,921 ) (23,704,863 ) Accumulated other comprehensive loss (838,671 ) (507,478 ) Total Senmiao Technology Limited stockholders' equity 5,856,713 2,803,697 Non-controlling interests (3,284,143 ) (1,331,340 ) Total equity 2,572,570 1,472,357 Total liabilities and equity $ 22,303,279 $ 15,630,718 The accompanying notes are an integral part of the consolidated financial statements. F- 2 SENMIAO TECHNOLOGY LIMITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Expressed in U.S. dollar, except for the number of shares) For the Year Ended March 31, 2021 2020 Revenues $ 6,160,534 $ 15,655,575 Cost of revenues (5,969,492 ) (12,280,238 ) Gross profit 191,042 3,375,337 Operating expenses Selling, general and administrative expenses (10,273,104 ) (5,496,955 ) Recovery of (Provision for) doubtful accounts 28,358 (3,404,336 ) Impairments of long-lived assets (130,839 ) (70,984 ) Total operating expenses (10,375,585 ) (8,972,275 ) Loss from operations (10,184,543 ) (5,596,938 ) Other income (expense) Other income (expense), net 87,888 (45,347 ) Interest expense (45,764 ) (96,624 ) Interest expense on finance leases (733,202 ) (373,407 ) Change in fair value of derivative liabilities (1,710,415 ) 1,796,724 Total other income (expense), net (2,401,493 ) 1,281,346 Loss before income taxes (12,586,036 ) (4,315,592 ) Income tax expense (14,627 ) (33,184 ) Net loss from continuing operations (12,600,663 ) (4,348,776 ) Net loss from discontinued operations, net of applicable income taxes (61,976 ) (5,587,027 ) Net loss (12,662,639 ) (9,935,803 ) Net loss attributable to non-controlling interests from continuing operations 2,302,581 1,262,478 Net loss attributable to stockholders $ (10,360,058 ) $ (8,673,325 ) Net loss $ (12,662,639 ) $ (9,935,803 ) Other comprehensive loss Foreign currency translation adjustment (314,669 ) (154,913 ) Comprehensive loss (12,977,308 ) (10,090,716 ) less: Total comprehensive loss attributable to noncontrolling interests (2,286,057 ) (1,338,684 ) Total comprehensive loss attributable to stockholders $ (10,691,251 ) $ (8,752,032 ) Weighted average number of common stock Basic and diluted 39,430,889 28,023,498 Loss per share - basic and diluted Continuing operations $ (0.26 ) $ (0.11 ) Discontinued operations $ (0.00 ) $ (0.13 ) The accompanying notes are an integral part of the consolidated financial statements. F- 3 SENMIAO TECHNOLOGY LIMITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY For the Years Ended March 31, 2021 and 2020 (Expressed in U.S. dollar, except for the number of shares) Common stock Additional paid-in Accumulated Accumulated other comprehensive Non-controlling Shares Par value capital deficit loss interest Total equity BALANCE as of March 31, 2019 25,945,255 $ 2,595 $ 23,833,112 $ (15,031,538 ) $ (428,771 ) $ 7,344 $ 8,382,742 Net loss - - - (8,673,325 ) - (1,262,478 ) (9,935,803 ) Issuance of common stock in registered direct offering net of issuance costs 1,781,360 178 1,991,940 - - - 1,992,118 Exercise of Series B warrants into common stock 1,113,188 111 1,010,752 - - - 1,010,863 Issuance of restricted stock units 169,015 17 177,333 - - - 177,350 Foreign currency translation adjustment - - - - (78,707 ) (76,206 ) (154,913 ) BALANCE as of March 31, 2020 29,008,818 $ 2,901 $ 27,013,137 $ (23,704,863 ) $ (507,478 ) $ (1,331,340 ) $ 1,472,357 Net loss - - - (10,360,058 ) (2,302,581 ) (12,662,639 ) Exercise of Series A warrants into common stock 1,266,090 127 682,919 - - - 683,046 Exercise of Placement warrants into common stock 133,352 13 (13 ) - - - - Fair value of derivative liabilities upon exercises of warrants - - 1,769,841 - - - 1,769,841 Issuance of common stock and warrants in an underwritten direct offering, net of issuance costs 12,000,000 1,200 5,260,097 - - - 5,261,297 Issuance of common stock pursuant to exercise of underwriters’ over-allotment option, net of issuance costs 1,800,000 180 836,820 - - - 837,000 Issuance of common stock and warrants in a registered direct offering, net of issuance costs 5,072,465 507 5,743,398 - - - 5,743,905 Fair value of warrants allocated to derivative liabilities - - (995,822 ) - - - (995,822 ) Issuance of common stock for consulting service 500,000 50 444,950 - - - 445,000 Acquisition of business entities - - - - - 333,254 333,254 Foreign currency translation adjustment - - - - (331,193 ) 16,524 (314,669 ) BALANCE as of March 31, 2021 49,780,725 $ 4,978 $ 40,755,327 $ (34,064,921 ) $ (838,671 ) $ (3,284,143 ) $ 2,572,570 The accompanying notes are an integral part of the consolidated financial statements. F- 4 SENMIAO TECHNOLOGY LIMITED CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in U.S. dollar, except for the number of shares) For the Year Ended March 31, 2021 2020 Cash Flows from Operating Activities: Net loss $ (12,662,639 ) $ (9,935,803 ) Net loss from discontinued operations (61,976 ) (5,587,027 ) Net loss from continuing operations (12,600,663 ) (4,348,776 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization of property and equipment 260,592 103,009 Stock based compensation expense 445,000 133,150 Amortization of right-of-use assets 4,316,162 1,553,523 Amortization of intangible assets 107,765 283 Provision (recovery) for doubtful accounts (28,358 ) 3,404,336 Impairment loss of long-lived assets 130,839 70,984 Gain (loss) on disposal of equipment (425 ) 3,608 Change in fair value of derivative liabilities 1,710,415 (1,796,724 ) Change in operating assets and liabilities Accounts receivable 49,624 (3,047,955 ) Inventories 172,626 437,012 Prepayments, other receivables and other assets (864,420 ) (964,889 ) Finance lease receivables 278,406 (1,185,031 ) Accounts payable (10,251 ) 4,144 Advances from customers 55,859 61,409 Income tax payable (168 ) (4,582 ) Accrued expenses and other liabilities 4,083,378 1,138,316 Operating lease liabilities (130,534 ) (94,235 ) Operating lease liabilities - related parties (195,519 ) 2,125 Net cash used in operating activities from continuing operations (2,219,672 ) (4,530,293 ) Net cash used in operating activities from discontinued operations (1,716,395 ) (1,917,371 ) Net Cash used in Operating Activities (3,936,067 ) (6,447,664 ) Cash Flows from Investing Activities: Purchases of property and equipment (2,491,296 ) (495,241 ) Prepayment of intangible assets (25,347 ) (470,000 ) Cash acquired from XXTX, net of cash paid to XXTX 8,065 - Net cash used in investing activities from continuing operations (2,508,578 ) (965,241 ) Net cash provided by (used in) investing activities from discontinued operations (2,284 ) 1,825 Net Cash Used in Investing Activities (2,510,862 ) (963,416 ) Cash Flows from Financing Activities: Net proceeds from issuance of common stock in an underwritten public offering 5,261,297 - Net proceeds from exercise of underwriters’ over-allotment option 837,000 - Net proceeds from issuance of common stock and warrants in a registered direct public offering 5,743,905 5,142,124 Net proceeds from issuance of common stock upon warrants exercised 683,046 111 Borrowings from financial institutions 572,035 55,159 Repayments to third parties - (604,562 ) Loan to related party (10,579 ) - Borrowings from related parties and affiliates - 1,305,166 Repayments from related parties - 108,566 Repayments to related parties and affiliates (37,445 ) (1,405,356 ) Repayments of current borrowings from financial institutions (529,288 ) (145,048 ) Release of escrow receivable - 600,000 Principal payments of finance lease liabilities (2,230,765 ) (975,958 ) Net cash provided by financing activities from continuing operations 10,289,206 4,080,202 Net cash used in financing activities from discontinued operations (29,429 ) (648,405 ) Net Cash Provided by Financing Activities 10,259,777 3,431,797 Effect of exchange rate changes on cash and cash equivalents (208,800 ) (197,200 ) Net increase (decrease) in cash and cash equivalents 3,604,048 (4,176,483 ) Cash and cash equivalents, beginning of year 844,027 5,020,510 Cash and cash equivalents, end of year 4,448,075 844,027 Less: Cash and cash equivalents from discontinued operations - (10,139 ) Cash and cash equivalents from continuing operations, end of year $ 4,448,075 $ 833,888 Supplemental Cash Flow Information Cash paid for interest expense $ 45,764 $ 96,624 Non-cash Transaction in Investing and Financing Activities Prepayment in exchange of intangible assets $ - $ 280,000 Recognition of right-of-use assets and lease liabilities $ 3,785,526 $ 549,679 Recognition of right-of-use assets and lease liabilities, related parties $ - $ 343,819 Acquisition of equipment through prepayment and financing lease $ 941,263 $ - Allocation of fair value of derivative liabilities for issuance of common stock proceeds $ 997,193 $ 3,150,006 Allocation of fair value of derivative liabilities to additional paid in capital upon warrants exercised $ 1,771,213 $ 1,010,752.00 Issuance of restricted stock units from accrued expenses and other liabilities $ - $ 44,200.00 Acquisition of XXTX with payables $ 317,835 $ - The accompanying notes are an integral part of the consolidated financial statements. F- 5 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND PRINCIPAL ACTIVITIES Senmiao Technology Limited (the “Company”) is a U.S. holding company incorporated in the State of Nevada on June 8, 2017. 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. 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 Hongyi. 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. F- 6 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 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. 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 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. F- 7 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. 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. 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. 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 Senmiao. As a result, 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 Shareholders Hunan Ruixi entered into two voting agreements signed in August 2018 and February 2020, respectively, as amended (the “Voting Agreements”), with Jinkailong and other Jinkailong’s shareholders holding an aggregate of 65% equity interests and obtained 35% equity interests in Jinkailong. Pursuant to the Voting Agreements, all other Jinkailong’s shareholders will vote in concert with Hunan Ruixi on all fundamental corporate transactions in the event of a disagreement for periods of 20 years and 18 years, respectively, ending on August 25, 2038. 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. Though not 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. F- 8 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: March 31, 2021 March 31, 2020 Current assets: Cash and cash equivalents $ 134,776 $ 247,671 Accounts receivable, net, current portion 935,165 66,768 Prepayments, other receivables and other assets, net 1,245,330 1,500,784 Other receivable- intercompany 1,815,250 2,211 Due from related parties 39,572 26,461 Current assets - discontinued operations (1) 571,172 1,363,972 Total current assets 4,741,265 3,207,867 Property and equipment, net: Property and equipment, net 451,522 317,427 Property and equipment, net - discontinued operations 2,706 3,895 Total property and equipment, net 454,228 321,322 Other assets: Operating lease right-of-use assets, net 265,470 317,258 Operating lease right-of-use assets, net, related parties 9,896 50,213 Financing lease right-of-use assets, net 4,201,693 5,440,362 Accounts receivable, net, non-current 207,240 720,916 Total other assets 4,684,299 6,528,749 Total assets $ 9,879,792 $ 10,057,938 Current liabilities: Borrowings from financial institutions $ 310,662 $ 226,753 Accounts payable - 4,018 Advances from customers 45,413 34,374 Income tax payable 17,408 16,106 Accrued expenses and other liabilities 3,750,393 1,632,617 Other payable - intercompany 6,895,543 5,143,463 Due to related parties and affiliates 352,827 152,679 Operating lease liabilities 99,831 78,981 Operating lease liabilities - related parties 4,989 37,378 Financing lease liabilities 4,814,808 3,473,967 Current liabilities - discontinued operations (2) 2,372,652 7,561,603 Total current liabilities 18,664,526 18,361,939 Other liabilities: Borrowings from financial institutions, non-current 38,857 58,572 Operating lease liabilities, non-current 167,822 231,825 Operating lease liabilities, non-current - related parties 3,850 - Financing lease liabilities, non-current 2,037,609 2,576,094 Total other liabilities 2,248,138 2,866,491 Total liabilities $ 20,912,664 $ 21,228,430 (1) Includes intercompany receivables of $177,825 and $543,446 as of March 31, 2021 and 2020, respectively. (2) Includes intercompany payables of $35,790 and $402,406 as of March 31, 2021 and 2020, respectively. F- 9 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 as follows: For the Years Ended December 31, 2021 2020 Net revenue from continuing operations $ 4,406,947 $ 3,483,078 Net revenue from discontinued operations $ 7,153 $ 308,102 Loss from operations from continuing operations $ (4,897,744 ) $ (4,514,195 ) Loss from operations from discontinued operations $ (81,285 ) $ (822,470 ) Net loss from continuing operations attributable to stockholders $ (4,048,544 ) $ (3,786,057 ) Net loss from discontinued operations attributable to stockholders $ (232,596 ) $ (4,692,725 ) Net loss attributable to stockholders $ (4,281,140 ) $ (8,478,782 ) 2. 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. The 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; (3) the 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. Pursuant 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. 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; and ● financial support and credit guarantee commitments from the Company’s related parties. F- 10 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. In addition, 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 all. 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. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of presentation 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”). (b) Basis of consolidation The consolidated financial statements include the accounts of the Company and include the assets, liabilities, revenues and expenses of the subsidiaries and VIEs. All inter-Company accounts and transactions have been eliminated in consolidation. (c) 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$. However, the Company maintains the books and records in its functional currency, Chinese Renminbi (“RMB”), being the functional currency of the economic environment in which its operations are conducted. In general, for consolidation purposes, assets and liabilities of the Company and its subsidiaries whose functional currency is not the US$, are translated into US$, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of the Company and its subsidiaries and VIEs are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’ equity. Translation of amounts from RMB into US$ has been made at the following exchange rates for the respective periods: March 31, 2021 March 31, 2020 Balance sheet items, except for equity accounts 6.5527 7.0824 F- 11 For the Year Ended March 31, 2021 2020 Items in the statements of operations and comprehensive loss 6.7960 6.9472 (d) Use of estimates In presenting the consolidated financial statements in accordance with U.S. GAAP, management make estimates and assumptions that affect the amounts reported and related disclosures. 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 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. (e) 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 follows: Level 1 Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments. Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value. The following table sets forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2021 and 2020: Carrying Value at March 31, 2021 Fair Value Measurement at March 31, 2021 Level 1 Level 2 Level 3 Derivative liabilities $ 1,278,926 $ - $ - $ 1,278,926 Carrying Value at March 31, 2020 Fair Value Measurement at March 31, 2020 Level 1 Level 2 Level 3 Derivative liabilities $ 342,530 $ - $ - $ 342,530 F- 12 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 2020: 2019 Registered Direct Offering August 2020 Underwritten Public February 2021 Registered Series A Warrants Series B Warrants Placement Warrants Offering Warrants Direct Offering Warrants Total BALANCE as of March 31, 2019 $ - $ - $ - $ - $ - $ - Derivative liabilities recognized at grant date 2,134,229 780,522 235,255 - - 3,150,006 Change in fair value of derivative liabilities (1,818,306 ) 231,601 (210,019 ) - - (1,796,724 ) Fair value of warrants exercised - (1,010,752 ) - - - (1,010,752 ) BALANCE as of March 31, 2020 315,923 1,371 25,236 - - 342,530 Derivative liabilities recognized at grant date - - - 241,919 755,274 997,193 Change in fair value of derivative liabilities 1,234,630 - 138,336 455,162 (117,713 ) 1,710,415 Fair value of warrants exercised (1,470,285 ) - - (299,556 ) (1,769,841 ) Warrant forfeited due to expiration - (1,371 ) - - - (1,371 ) BALANCE as of March 31, 2021 $ 80,268 $ - $ 163,572 $ 397,525 $ 637,561 $ 1,278,926 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” basis. 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. On 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” basis. 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 above. 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 market; 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, 2021. F- 13 June 20, 2019 August 4, 2020 February 10, 2021 Placement Placement Series A Series B Agent Underwriters’ Agent ROFR Warrants Warrants Warrants Warrants Warrants Warrants # of shares exercisable 1,336,021 1,116,320 142,509 568,000 380,435 152,174 Valuation date 6/20/2019 6/20/2019 6/20/2019 8/4/2020 2/10/2021 2/10/2021 Exercise price $ 3.72 $ 3.72 $ 3.38 $ 0.63 $ 1.38 $ 1.73 Stock price $ 2.80 $ 2.80 $ 2.80 $ 0.51 $ 1.63 $ 1.63 Expected term (years) 4.00 1.00 4.00 5.00 5.00 5.00 Risk-free interest rate 1.77 % 1.91 % 1.77 % 0.19 % 0.46 % 0.46 % Expected volatility 86 % 91 % 86 % 129 % 132 % 132 % March 31, 2020 Series A Warrants Series B Warrants Placement Agent Warrants # of shares exercisable 1,336,021 3,132 142,509 Valuation date 3/31/2020 3/31/2020 3/31/2020 Exercise price $ 1.50 $ 0.0001 $ 3.38 Stock price $ 0.44 $ 0.44 $ 0.44 Expected term (years) 3.22 0.22 3.22 Risk-free interest rate 0.30 % 0.11 % 0.30 % Expected volatility 122 % 127 % 122 % March 31, 2021 Placement Placement Series A Agent Underwriters’ Agent ROFR Warrants Warrants* Warrants Warrants** Warrants # of shares exercisable 69,931 142,509 318,080 380,435 152,174 Valuation date 3/31/2021 3/31/2021 3/31/2021 3/31/2021 3/31/2021 Exercise price $ 0.5 $ 0.5 $ 0.63 $ 1.38 $ 1.73 Stock price $ 1.40 $ 1.40 $ 1.40 $ 1.40 $ 1.40 Expected term (years) 2.22 2.22 4.35 4.87 4.87 Risk-free interest rate 0.20 % 0.20 % 0.73 % 0.88 % 0.88 % Expected volatility 132 % 132 % 132 % 132 % 132 % * The Placement Agent Warrants granted on June 20, 2019. ** The Placement Agent Warrants granted on February 10, 2021. 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 the Company used its incremental borrowing rate to recognize the present value of these instruments as of March 31, 2021 and 2020. F- 14 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. (f) 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. 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 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 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 (g) 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 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. (h) 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. (i) 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, 2021 and 2020, allowance for doubtful accounts amounted to $78,167 and $379,689, respectively. F- 15 (j) Inventories 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. (k) 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 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: March 31, 2021 March 31, 2020 Minimum lease payments receivable $ 1,343,662 $ 1,606,230 Less: Unearned interest (328,585 ) (412,975 ) Financing lease receivables, net $ 1,015,077 $ 1,193,255 Finance lease receivables, net, current portion $ 541,605 $ 459,110 Finance lease receivables, net, non-current portion $ 473,472 $ 734,145 Future scheduled minimum lease payments for investments in sales-type leases as of March 31, 2021 are as follows: Minimum future payments receivable Twelve months ending March 31, 2022 $ 639,877 Twelve months ending March 31, 2023 490,516 Twelve months ending March 31, 2024 196,503 Twelve months ending March 31, 2025 16,766 Total $ 1,343,662 (l) Property and equipment, net 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: Categories Useful life Leasehold improvements Shorter of the remaining lease terms or estimated useful lives Computer equipment 2 - 5 years Office equipment 3 - 5 years Automobiles 3 - 5 years F- 16 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 to generate. 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, 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 statements of operations and comprehensive loss. (m) 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: Categories Useful life Software 5-10 years Online ride-hailing platform operating license 5 years 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. (n) Goodwill 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. Goodwill 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. The 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 ASC 350-20. If the Company believes, as a result of the qualitative carrying amount, the two-step quantitative impairment test described below is required. 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. F- 17 (o) 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 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. (p) 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”. (q) Revenue recognition 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. As of March 31, 2021, the Company had outstanding 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 March 31, 2021 2020 Automobile Transaction and Related Services (Continuing Operations) - Revenues from sales of automobiles $ 487,426 $ 11,536,691 - Operating lease revenues from automobile rentals 3,434,615 1,303,639 - Service fees from management and guarantee services 285,427 141,527 - Financing revenues 227,599 164,391 - Service fees from automobile purchase services 187,295 1,726,717 - Facilitation fees from automobile transactions 1,663 197,815 - Other service fees 633,255 584,795 Total Revenues from Automobile Transaction and Related Services (Continuing Operations) 5,257,280 15,655,575 Online Ride-hailing Platform Services (Continuing Operations) 903,254 - Total Revenues from Continuing Operations 6,160,534 15,655,575 Online Lending Services (Discontinued Operations) - Transaction fees 3,488 73,341 - Service fees - 23,833 - Website development revenue 3,665 15,266 Total Revenues from Discontinued Operations 7,153 112,440 Total Revenues $ 6,167,687 $ 15,768,015 F- 18 Automobile transaction and related services 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 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. These fees are non-refundable upon the delivery of automobiles. F- 19 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. As a result, 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 (i.e. “gross”), or it arranges for other parties to provide the service to the Rider and is an agent (i.e. "net"). Since the Company is 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. Leases 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: (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. 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 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 above. F- 20 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. (r) Income taxes 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 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 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. (s) Comprehensive loss 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 adjustments. (t) 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 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. 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. F- 21 (u) Leases 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; or · The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. Leases that do not meet any of the above criteria are accounted for as operating leases. The Company combines lease and non-lease components in its contracts under Topic 842, when permissible. Finance and operating lease ROU assets and lease liabilities are recognized at the commencement date based on the present value of 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. F- 22 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. (v) 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. (w) Significant risks and uncertainties 1) Credit risk a. 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 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. government up to $250,000. 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. 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. b. In measuring the credit risk of accounts receivables due from the automobile purchasers (the “customers”), the Company mainly reflects the “probability of default” by the customer on its contractual obligations and considers the current financial position of the customer and the 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. For the year ended March 31, 2021, no additional accounts receivable were written-off. F- 23 2) Foreign currency risk As 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. The value of 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. When there is a significant change in value of RMB, the gains and losses resulting from translation of financial statements of a foreign subsidiary will be significant affected. 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. 3) VIE risk 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 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; or · take other regulatory or enforcement actions against the Company that could be harmful to the Company’s business. F- 24 (x) Recently issued accounting standards 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 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. While different asset types will be impacted differently, the expectation is that reserve levels will generally increase across the board for all financial firms. - Increased reserve levels may lead to a reduction in capital levels. - As a result of higher reserving levels, the expectation is that CECL will reduce cyclicality in financial firms’ results, as higher reserving in “good times” will mean that less dramatic reserve increases will be loan related income (which will continue to be recognized on a 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. 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 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. Additionally, an entity that elects early adoption must adopt all the amendments in the same period. The adoption of this standard on January 1, 2021 did not have a material impact on its consolidated financial statements. 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 equity. 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. For 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 year. 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. F- 25 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. 4. 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. 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 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. F- 26 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, 2025. Under ASC 805-30-30-1, goodwill is calculated as follows: Fair value Purchase consideration paid $ 472,573 Fair value of non-controlling interest 326,570 Less: fair value of nets assets of XXTX: Cash and cash equivalents 105,386 Other current assets 525,005 Plant and equipment 790 Intangible assets 265,536 Total assets 896,717 Total liabilities (230,247 ) Total fair value of net assets of XXTX 666,470 Goodwill as of the acquisiton date 132,673 Effect of exchange rate changes on goodwill 2,715 Goodwill as of March 31, 2021 $ 135,388 5. 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 consolidated balance sheet as of March 31, 2021 and 2020. F- 27 Carrying amounts of major classes of assets included as part of discontinued operations: March 31 March 31, 2021 2020 Current assets Cash and cash equivalents $ - $ 10,139 Prepayments, other receivables and other assets, net 393,348 816,441 Total current assets 393,348 826,580 Property and equipment, net 5,592 11,206 Total assets $ 398,940 $ 837,786 Carrying amounts of major classes of liabilities included as part of discontinued operations: March 31 March 31, 2021 2020 Current liabilities Accrued expenses and other liabilities $ 2,288,066 $ 4,204,012 Due to stockholders 48,795 182,095 Due to related parties and affiliates - 76,286 Lease liabilities - 53,899 Total current liabilities 2,336,861 4,516,292 Total liabilities $ 2,336,861 $ 4,516,292 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 years ended March 31, 2021 and 2020. For the Years Ended March 31, 2021 2020 Revenues $ 7,153 $ 112,440 Operating expenses Selling, general and administrative expenses (88,438 ) (1,365,733 ) Provision for doubtful accounts - (4,048,210 ) Amortization of intangible assets - (32,401 ) Impairments of intangible assets and goodwill - (265,525 ) Total operating expenses (88,438 ) (5,711,869 ) Loss from discontinued operations (81,285 ) (5,599,429 ) Other income, net 19,309 12,402 Loss before income taxes (61,976 ) (5,587,027 ) Income tax expenses - - Net loss from discontinued operations attributable to stockholders $ (61,976 ) $ (5,587,027 ) F- 28 6. 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. As of March 31, 2021 and 2020, accounts receivable were comprised of the following: March 31, March 31, 2021 2020 Receivables of automobile sales due from automobile purchasers $ 760,126 $ 1,172,765 Receivables of service fees due from automobile purchasers 731,962 854,730 Receivables of online ride hailing fees from online ride-hailing drivers 162,197 - Receivables of operating lease 170,707 - Less: Unearned interest (40,447 ) (105,083 ) Less: Allowance for doubtful accounts (78,167 ) (379,689 ) Accounts receivable, net $ 1,706,378 $ 1,542,723 Accounts receivable, net, current portion $ 1,437,195 $ 660,645 Accounts receivable, net, non-current portion $ 269,183 $ 882,078 Movement of allowance for doubtful accounts for the fiscal years ended March 31, 2021 and 2020 are as follows: March 31, 2021 March 31, 2020 Beginning balance $ 379,689 $ - Addition 374,785 1,797,816 Recovery (209,723 ) - Write off (485,384 ) (1,410,736 ) Translation adjustment 18,800 (7,391 ) Ending balance $ 78,167 $ 379,689 7. INVENTORIES March 31, 2021 March 31, 2020 Automobiles (i) $ 127,933 $ 1,000,675 (i) 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. 8. PREPAYMENTS, OTHER RECEIVABLES AND OTHER ASSETS As of March 31, 2021 and 2020, the prepayments, receivables and other assets were comprised of the following: March 31, 2021 March 31, 2020 Receivables from borrowers of online lending platform, net (i) $ 393,348 $ 811,504 Prepayments for automobiles (ii) 1,026,802 365,932 Prepaid expenses (iii) 829,032 331,319 Receivables from aggregation platforms (iv) 867,614 - Due from automobile purchasers, net (v) 504,792 1,385,352 Deposits (vi) 537,619 489,638 Value added tax (“VAT”) recoverable 99,445 146,964 Employee advances 9,739 11,937 Others 30,235 72,575 Total prepayments, receivables and other assets 4,298,626 3,615,221 Total prepayments, receivables and other assets - discontinued operations (393,348 ) (816,441 ) Total prepayments, receivables and other assets - continuing operations $ 3,905,278 $ 2,798,780 F- 29 (i) 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 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. (ii) Prepayments for automobiles The balance represented advanced payments in purchasing automobiles from auto dealers or other parties. (iii) 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. (iv) 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. (v) 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. (vi) Deposits 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 platform. F- 30 9. PROPERTY AND EQUIPMENT, NET Property and equipment consist of the following: March 31, 2021 March 31, 2020 Leasehold improvements $ 192,020 $ 177,659 Electronic devices 53,200 40,720 Office equipment, fixtures and furniture 104,735 79,271 Vehicles 3,778,811 320,949 Subtotal 4,128,766 618,599 Less: accumulated depreciation and amortization (423,027 ) (138,192 ) Total property and equipment, net 3,705,739 480,407 Total property and equipment, net - discontinued operations (5,592 ) (11,206 ) Total property and equipment, net - continuing operations $ 3,700,147 $ 469,201 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. 10. INTANGIBLE ASSETS, NET Intangible assets consisted of the following: March 31, 2021 March 31, 2020 Software $ 794,548 $ 791,216 Online ride-hailing platform operating licenses 297,258 - Less: Accumulated amortization (123,675 ) (13,595 ) Total intangible assets, net $ 968,131 $ 777,621 Amortization expense from continuing operations totaled $107,765 and $283 for the years ended March 31, 2021 and 2020, respectively. Amortization expense from discontinued operations 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: Amortization expenses Twelve months ending March 31, 2022 $ 148,288 Twelve months ending March 31, 2023 148,288 Twelve months ending March 31, 2024 142,473 Twelve months ending March 31, 2025 139,409 Twelve months ending March 31, 2026 89,673 Thereafter 300,000 Total $ 968,131 11. BORROWINGS FROM FINANCIAL INSTITUTIONS, CURRENT AND NON-CURRENT The borrowings from certain financial institutions 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 months. F- 31 The interest expense for the years ended March 31, 2021 and 2020 was $45,764 and $49,422, respectively. 12. ACCRUED EXPENSES AND OTHER LIABILITIES March 31, 2021 March 31, 2020 Payables to investors of online lending platform (i) $ 1,795,066 $ 3,668,957 Payables to drivers from aggregation platforms (ii) 2,352,264 - Deposits (iii) 1,639,681 543,843 Accrued payroll and welfare 1,306,509 890,912 Other payables (iv) 446,670 83,810 Loan repayments received on behalf of financial institutions (v) 839,770 374,535 Payables for expenditures on automobile transaction and related services 159,388 373,026 Accrued expenses 6,090 104,264 Other taxes payable 398,220 173,056 Total accrued expenses and other liabilities 8,943,658 6,212,403 Total accrued expenses and other liabilities - discontinued operations (2,288,066 ) (4,204,012 ) Total accrued expenses and other liabilities - continuing operations $ 6,655,592 $ 2,008,391 (i) 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. (ii) 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. (iii) 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. (iv) The balance of other payables represented amount due to suppliers and vendors for operation purposes. (v) 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. 13. 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 and $204,245 for the years ended March 31, 2021 and 2020, respectively, for continuing operations of the Company. The contributions 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 $442,485 and $170,856, respectively, for continuing operations of the Company. 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 and welfare. F- 32 14. EQUITY Warrants IPO Warrants 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 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. The value of the warrants was determined using the Black-Scholes valuation model using the following assumptions: volatility 86%; 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 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 June 20, 2019 which was the date the warrants were issued. Net proceeds were allocated as the follows: Warrants $ 3,150,006 Common stock 1,992,118 Total net proceeds $ 5,142,124 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 $ 699,523 August 13, 2019 262,108 October 9, 2019 49,122 July 9, 2020 56,662 October 20, 2020 315,790 November 24, 2020 197,926 November 25, 2020 414,425 February 25, 2021 486,854 Total $ 2,482,410 F- 33 Underwriters’ Warrants 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 stock. 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’ Warrants. 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: Warrants $ 241,919 Common stock 5,856,378 Total net proceeds $ 6,098,297 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 Warrants 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.” F- 34 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. 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. 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 $1.63 on February 10, 2021 which was the date the warrants were issued. Net proceeds were allocated as the follows: Warrants $ 755,273 Common stock 4,988,632 Total net proceeds $ 5,743,905 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: Weighted Average Warrants Warrants Average Exercise Remaining Contractual Outstanding Exercisable Price Life Balance, March 31, 2019 37,940 37,940 $ 4.80 3.96 Granted 2,594,850 2,594,850 $ 3.70 4.00 Forfeited - - - - Exercised (1,113,188 ) (1,113,188 ) - - Balance, March 31, 2020 1,519,602 1,519,602 $ 1.76 3.21 Granted 1,100,609 1,100,609 $ 1.48 5.00 Forfeited (3,132 ) (3,132 ) - - Exercised (1,516,010 ) (1,516,010 ) - - Balance, March 31, 2021 1,101,069 1,101,069 $ 1.16 4.09 Restricted Stock Units 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. F- 35 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, 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 1,781,360 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. 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 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, 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. F- 36 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. Pursuant to 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” basis. F- 37 Exercise of Underwriters’ Warrants 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 of exercise. February 2021 Registered Direct Offering On 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. On 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” basis. 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 share. 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. These 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. 15. INCOME TAXES The United States of America 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. On December 22, 2017, the U.S. government 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 to U.S. taxation. 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 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, 2021 and 2020, valuation allowances for deferred tax assets were approximately $0.80 million and $0.48 million, respectively. Management reviews the valuation allowance periodically and makes changes accordingly. F- 38 PRC 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%. Income taxes in the PRC are consist of: For the Years Ended March 31 2021 2020 Current income tax expenses (benefit) $ 14,627 $ 59,451 Deferred income tax expenses (benefit) - (26,267 ) Total income tax expenses (benefit) $ 14,627 $ 33,184 Below is a reconciliation of the statutory tax rate to the effective tax rate: For the Years Ended March 31, 2021 2020 U.S. Statutory tax rate 21.0 % 21.0 % Differential of PRC statutory tax rate 4.0 % 4.0 % Permanent difference of write-off of receivables from guarantee of loans (2.4 )% (15.5 )% Permanent difference of US (income) expenses not (taxable) deductible in PRC (3.7 )% 9.3 % Valuation allowance on deferred income tax asset (17.2 )% (19.0 )% Others (1.8 )% (0.6 )% Effective tax rate (0.1 )% (0.8 )% 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. 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: March 31, 2021 March 31, 2020 Deferred Tax Assets Net operating loss carryforwards in the PRC $ 2,036,311 $ 414,996 Net operating loss carryforwards in the U.S. 798,489 477,247 Allowance for doubtful account 21,435 178,381 Less: valuation allowance (2,856,235 ) (1,070,624 ) Deferred tax assets, net $ - $ - Deferred tax liabilities: Capitalized intangible assets cost $ 45,146 $ - Deferred tax liabilities, net $ 45,146 $ F- 39 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: March 31, 2021 March 31, 2020 Net operating loss carryforwards in the PRC $ 2,595,919 $ 2,206,673 Less: valuation allowance (2,595,919 ) (2,206,673 ) $ - $ - 16. RELATED PARTY TRANSACTIONS AND BALANCES 1. Related Party Balances 1) Due from related parties 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. 2) Due to stockholders Due to stockholders comprised of amounts payable to two stockholders named below and are unsecured, interest free and due on demand. March 31, 2021 March 31, 2020 Jun Wang $ 48,795 $ 73,384 Xiang Hu - 108,711 Total due to stockholders $ 48,795 $ 182,095 Total due to stockholders – discontinued operations (48,795 ) (182,095 ) Total due to stockholders – continuing operations $ - $ - F- 40 3) Due to related parties and affiliates March 31, 2021 March 31, 2020 Loan payable to related parties (i) $ 182,281 $ 202,487 Others (ii) 170,546 26,478 Total due to related parties and affiliates 352,827 228,965 Total due to related parties and affiliates – discontinued operations - (76,286 ) Total due to related parties and affiliates – continuing operations $ 352,827 $ 152,679 (i) 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. (ii) 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. Interest expense for the years ended March 31, 2021 and 2020 were $0 and $29,944, respectively. 2. 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. The lines of credit are non-interest bearing, effective from January 2017. 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, 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, 2019. 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, 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, 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. F- 41 17. LEASES Lessor The Company's operating leases for automobile rentals have rental periods that are typically short term, generally is twelve months or less. Revenue recognition section of Note 3 (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. Lessee 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. The 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 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 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 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: For the Years Ended Classification March 31, 2021 March 31, 2020 Operating lease cost Lease expenses Selling, general and administrative $ 396,276 $ 378,499 Finance lease cost Amortization of leased asset Cost of revenue 2,441,873 941,796 Amortization of leased asset Selling, general and administrative 1,656,336 791,670 Interest on lease liabilities Interest expenses on finance leases 733,202 373,407 Total lease expenses $ 5,227,687 $ 2,485,372 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. Interest expenses on finance leases from continuing operations totaled $733,202 and $373,407 for the years ended March 31, 2021 and 2020, respectively. F- 42 The following table sets forth the Company’s minimum lease payments in future periods: Operating lease payments Finance lease payments Total Twelve months ending March 31, 2022 $ 443,183 $ 6,580,777 $ 7,023,960 Twelve months ending March 31, 2023 351,165 1,275,765 1,626,930 Twelve months ending March 31, 2024 206,320 8,561 214,881 Twelve months ending March 31, 2025 85,893 - 85,893 Twelve months ending March 31, 2026 43,633 - 43,633 Total lease payments 1,130,194 7,865,103 8,995,297 Less: discount (71,567 ) (435,607 ) (507,174 ) Present value of lease liabilities $ 1,058,627 $ 7,429,496 $ 8,488,123 18. COMMITMENTS AND CONTINGENCIES Purchase Commitments 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 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 the loans. Contingent liabilities for automobile purchasers Historically, most of the automobile purchasers would pay the Company their previous defaulted amounts within one to three months. 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 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 Company. 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. F- 43 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 statements. 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. F- 44 19. 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 Automobile Transaction and Related Services Online ride-hailing platform Services Unallocated Consolidated Revenues $ 5,257,280 $ 903,254 $ - $ 6,160,534 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 ) Net loss $ (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. F- 45 20. PARENT-ONLY FINANCIALS SENMIAO TECHNOLOGY LIMITED CONDENSED BALANCE SHEETS March 31, March 31, 2021 2020 ASSETS Current Assets Cash and cash equivalents $ 1,609,778 $ 2,590 Due from subsidiaries 8,170,057 2,575,039 Prepayments, other receivables and other assets, net 136,901 92,375 Total Current Assets 9,916,736 2,670,004 Other Assets Intangible assets 675,000 750,000 Total Assets $ 10,591,736 $ 3,420,004 LIABILITIES AND EQUITY Current Liabilities Accrued expenses and other liabilities $ - $ 128,796 Derivative liabilities 1,278,926 342,530 Total Current Liabilities 1,278,926 471,326 Other Liabilities Excess of investments in subsidiaries 3,456,097 144,980 Total Liabilities 4,735,023 616,306 Commitments and Contingencies Stockholders' Equity Common stock (par value $0.0001 per share, 100,000,000 shares authorized; 49,780,725 and 29,008,818 shares issued and outstanding at March 31, 2021 and 2020, respectively) 4,978 2,901 Additional paid-in capital 40,755,327 27,013,137 Accumulated deficit (34,064,921 ) (23,704,863 ) Accumulated other comprehensive loss (838,671 ) (507,478 ) Total Senmiao Technology Limited Stockholders' Equity 5,856,713 2,803,697 Total Liabilities and Equity $ 10,591,736 3,420,004 SENMIAO TECHNOLOGY LIMITED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS For the Years Ended March 31, 2021 2020 General and administrative expenses $ (2,070,303 ) $ (1,215,156 ) Other Income, net 582 359 Change in fair value of derivative liabilities (1,710,415 ) 1,796,724 Equity of losses in subsidiaries (6,579,922 ) (9,255,252 ) Net loss (10,360,058 ) (8,673,325 ) Foreign currency translation adjustment (331,193 ) (78,707 ) Comprehensive loss attributable to stockholders $ (10,691,251 ) $ (8,752,032 ) F- 46 SENMIAO TECHNOLOGY LIMITED CONDENSED STATEMENTS OF CASH FLOWS For the Years Ended March 31, 2021 2020 Cash Flows from Operating Activities: Net loss $ (10,360,058 ) $ (8,673,325 ) Adjustments to reconcile net loss to net cash used in operating activities: Equity of loss of subsidiaries 6,579,922 9,255,252 Amortization of intangible asset 75,000 - Stock compensation expense 445,000 133,150 Change in fair value of derivative liabilities 1,710,415 (1,796,724 ) Change in operating assets and liabilities Prepayments, receivables and other assets (44,526 ) 115,952 Accrued expenses and other liabilities (65,495 ) (109,176 ) Net Cash Used in Operating Activities (1,659,742 ) (1,074,871 ) Cash Flows from Investing Activities: Purchase of intangible assets - (470,000 ) Working capital contribution for subsidiaries (3,600,000 ) (5,470,082 ) Net Cash Used in Investing Activities (3,600,000 ) (5,940,082 ) Cash Flows from Financing Activities: Net proceeds from issuance of common stock in an underwritten public offering 5,261,297 - Net proceeds from exercise of underwriters’ over-allotment option 837,000 - Net proceeds from issuance of common stock and warrants in a registered direct public offering 5,743,905 5,142,124 Net proceeds from issuance of common stock upon warrants exercised 683,046 111 Borrowings to subsidiaries (5,658,318 ) (675,039 ) Release of escrow receivable - 600,000 Net Cash Provided by Financing Activities 6,866,930 5,067,196 Net increase (decrease) in cash and cash equivalents 1,607,188 (1,947,757 ) Cash and cash equivalents, beginning of year 2,590 1,950,347 Cash and cash equivalents, end of year $ 1,609,778 $ 2,590 Supplemental Cash Flow Information Cash paid for interest expense $ - $ - Cash paid for income tax $ - $ - Non-cash Transaction in Investing and Financing Activities Prepayments in exchange of intangible assets $ - $ 280,000 Allocation of fair value of derivative liabilities for issuance of common stock proceeds $ 997,193 $ 3,150,006 Allocation of fair value of derivative liabilities to additional paid in capital upon warrants exercised $ 1,771,213 $ 1,010,752 Issuance of restricted stock units from accrued expenses and other liabilities $ - $ 44,200 a) 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. GAAP have been condensed or omitted by reference to the consolidated financial statements. F- 47 b) 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. c) Stockholders’ equity Restricted Stock Units 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 1,781,360 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. 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 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. F- 48 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. Pursuant to 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” basis. February 2021 Registered Direct Offering On 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. On 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” basis. 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 per share. 21. SUBSEQUENT EVENTS 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. F- 49 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.