Senmiao Technology Ltd 10-K

Item 8. Financial Statements and Supplementary Data The financial statements required by this item begin on page F-1 to F-40 hereof. Index to Financial Statements Report of Independent Registered Public Accounting Firm (PCOAB ID: 5395 ) F-2 Financial Statements: Consolidated Balance Sheets as of March 31, 2024 and 2023 F-3 Consolidated Statements of Operations and Comprehensive Loss for the Years Ended March 31, 2024 and 2023 F-4 Consolidated Statements of Changes in Equity for the Years Ended March 31, 2024 and 2023 F-5 Consolidated Statements of Cash Flows for the Years Ended March 31, 2024 and 2023 F-6 Notes to Consolidated Financial Statements F-7 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of Senmiao Technology Limited Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Senmiao Technology Limited (the “Company”) as of March 31, 2024 and 2023, the related consolidated statements of operations and comprehensive loss , changes in equity and cash flows for each of the two years in the period ended March 31, 2024, and the related notes (collectively referred to as the “consolidated 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, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended March 31, 2024, in conformity with accounting principles generally accepted in the United States of America. Explanatory Paragraph – Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 2, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These 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 audits 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. Critical Audit Matters Critical audit matters are matters arising from the current period audits of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ Marcum Asia CPAs LLP Marcum Asia CPAs LLP We have served as the Company’s auditor since 2018. (such date takes into account the acquisition of certain assets of Friedman LLP by Marcum Asia CPAs LLP effective September 1, 2022) New York, New York June 27, 2024 F- 2 SENMIAO TECHNOLOGY LIMITED CONSOLIDATED BALANCE SHEETS (Expressed in U.S. dollar, except for the number of shares) March 31, March 31, 2024 2023 ASSETS Current assets Cash and cash equivalents $ 792,299 $ 1,610,090 Restricted cash 2,337 — Accounts receivable, net 34,013 158,435 Accounts receivable, a related party — 6,312 Inventories — 6,678 Finance lease receivables, current 144,166 146,114 Prepayments, other receivables and other current assets, net 1,022,813 1,438,243 Due from related parties, net, current 655,532 1,488,914 Total current assets 2,651,160 4,854,786 Property and equipment, net 2,676,524 3,343,457 Other assets Operating lease right-of-use assets, net 60,862 121,672 Operating lease right-of-use assets, net, related parties 47,128 92,916 Financing lease right-of-use assets, net 355,383 623,714 Intangible assets, net 590,727 774,324 Finance lease receivable, non-current 92,524 71,133 Due from a related party, net, non-current 2,747,313 3,640,206 Other non-current assets 639,863 716,407 Total other assets 4,533,800 6,040,372 Total assets $ 9,861,484 $ 14,238,615 LIABILITIES, MEZZANNIE EQUITY AND EQUITY Current liabilities Borrowings from a financial institution, current $ 142,456 $ 8,813 Accounts payable 140,532 183,645 Advances from customers 122,461 148,188 Income tax payable 20,019 — Accrued expenses and other liabilities 3,648,407 3,377,507 Due to related parties 170,986 8,667 Operating lease liabilities, current 14,007 60,878 Operating lease liabilities - related parties 51,741 143,462 Financing lease liabilities, current 279,768 264,052 Derivative liabilities 288,833 501,782 Current liabilities - discontinued operations 464,000 487,829 Total current liabilities 5,343,210 5,184,823 Other liabilities Borrowings from a financial institution, non-current 71,228 — Operating lease liabilities, non-current 20,430 83,485 Operating lease liabilities, non-current - related parties — 42,247 Financing lease liabilities, non-current 126,637 388,064 Deferred tax liability 11,611 42,930 Total other liabilities 229,906 556,726 Total liabilities 5,573,116 5,741,549 Commitments and contingencies (note 19) Mezzanine Equity Series A convertible preferred stock (par value $ 1,000 per share, 5,000 shares authorized; 991 and 1,641 shares issued and outstanding at March 31, 2024 and March 31, 2023, respectively) 234,364 269,386 Stockholders’ equity Common stock (par value $ 0.0001 per share, 500,000,000 shares authorized; 10,518,040 and 7,743,040 shares issued and outstanding at March 31, 2024 and March 31, 2023, respectively)* 1,051 773 Additional paid-in capital 43,950,123 43,355,834 Accumulated deficit ( 41,384,268 ) ( 37,715,294 ) Accumulated other comprehensive loss ( 1,672,005 ) ( 1,247,099 ) Total Senmiao Technology Limited stockholders’ equity 894,901 4,394,214 Non-controlling interests 3,159,103 3,833,466 Total equity 4,054,004 8,227,680 Total liabilities, mezzanine equity and equity $ 9,861,484 $ 14,238,615 * Giving retroactive effect to the 1-for-10 reverse stock split effected on April 6, 2022 The accompanying notes are an integral part of the consolidated financial statements F- 3 SENMIAO TECHNOLOGY LIMITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Expressed in U.S. dollar, except for the number of shares) For the Years Ended March 31, 2024 2023 Revenues Revenues $ 6,779,686 $ 7,738,394 Revenues, a related party 34,742 344,120 Total revenues 6,814,428 8,082,514 Cost of revenues Cost of revenues ( 4,781,009 ) ( 6,080,097 ) Cost of revenues, a related party ( 472,848 ) ( 509,904 ) Total cost of revenues ( 5,253,857 ) ( 6,590,001 ) Gross profit 1,560,571 1,492,513 Operating expenses Selling, general and administrative expenses ( 4,115,436 ) ( 6,142,447 ) Allowance for credit losses ( 1,725,746 ) ( 1,487,889 ) Impairments of inventories — ( 3,085 ) Stock-based compensation ( 444,300 ) — Total operating expenses ( 6,285,482 ) ( 7,633,421 ) Loss from operations ( 4,724,911 ) ( 6,140,908 ) Other income (expense) Other income, net 315,450 664,001 Interest expense ( 17,630 ) — Interest expense on finance leases ( 29,088 ) ( 25,675 ) Change in fair value of derivative liabilities 212,949 1,711,889 Total other income, net 481,681 2,350,215 Loss before income taxes ( 4,243,230 ) ( 3,790,693 ) Income tax benefit 9,016 — Net Loss ( 4,234,214 ) ( 3,790,693 ) Net loss attributable to non-controlling interests from operations 565,240 676,944 Net loss attributable to the Company’s stockholders $ ( 3,668,974 ) $ ( 3,113,749 ) Net loss $ ( 4,234,214 ) $ ( 3,790,693 ) Other comprehensive loss Foreign currency translation adjustment ( 418,784 ) ( 1,103,510 ) Comprehensive loss ( 4,652,998 ) ( 4,894,203 ) less: Total comprehensive loss attributable to non-controlling interests ( 527,591 ) ( 642,809 ) Total comprehensive loss attributable to stockholders $ ( 4,125,407 ) $ ( 4,251,394 ) Weighted average number of common stock Basic and diluted 8,863,190 7,195,781 Net loss per share - basic and diluted* $ ( 0.41 ) $ ( 0.43 ) * Giving retroactive effect to the 1-for-10 reverse stock split effected on April 6, 2022 The accompanying notes are an integral part of the consolidated financial statements F- 4 SENMIAO TECHNOLOGY LIMITED UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY For the Years Ended March 31, 2024 and 2023 (Expressed in U.S. dollar, except for the number of shares) Accumulated Additional other Non- Common stock paid-in Accumulated comprehensive controlling Total Shares Par value capital* deficit loss interest equity BALANCE, March 31, 2022 6,186,783 $ 618 $ 42,803,045 $ ( 34,601,545 ) $ ( 109,454 ) $ 4,476,275 $ 12,568,939 Net loss — — — ( 3,113,749 ) — ( 676,944 ) ( 3,790,693 ) Conversion of preferred stock into common stock 1,546,125 155 551,256 — — — 551,411 Cashless exercise of November 2021 Investor warrants into common stock 10,132 — — — — — — Fair value of derivative liabilities upon exercise of warrants — — 1,533 — — — 1,533 Foreign currency translation adjustment — — — — ( 1,137,645 ) 34,135 ( 1,103,510 ) BALANCE, March 31, 2023 7,743,040 773 43,355,834 ( 37,715,294 ) ( 1,247,099 ) 3,833,466 8,227,680 Net loss — — — ( 3,668,974 ) — ( 565,240 ) ( 4,234,214 ) Conversion of preferred stock into common stock 325,000 33 34,989 — — — 35,022 Issuance of common stock for consulting service 1,500,000 150 444,150 — — — 444,300 Issuance of common stock in purchase of Hunan Ruixi’s NCI 950,000 95 115,150 — 31,527 ( 146,772 ) — Foreign currency translation adjustment — — — — ( 456,433 ) 37,649 ( 418,784 ) BALANCE, March 31, 2024 10,518,040 $ 1,051 $ 43,950,123 ( 41,384,268 ) $ ( 1,672,005 ) $ 3,159,103 $ 4,054,004 * Giving retroactive effect to the 1-for-10 reverse stock split effected on April 6, 2022 The accompanying notes are an integral part of the consolidated financial statements F- 5 SENMIAO TECHNOLOGY LIMITED CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in U.S. dollar, except for the number of shares) For the Years Ended March 31, 2024 2023 Cash Flows from Operating Activities: Net loss $ ( 4,234,214 ) $ ( 3,790,693 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation of property and equipment 933,395 1,095,518 Stock-based compensation 444,300 — Amortization of right-of-use assets 398,027 711,630 Amortization of intangible assets 172,135 184,215 Allowance for credit losses 1,725,746 1,487,889 Impairments of inventories — 3,085 Gain on disposal of equipment ( 34,801 ) ( 452,522 ) Gain from lease modification ( 18,272 ) — Change in fair value of derivative liabilities ( 212,949 ) ( 1,711,889 ) Deferred tax benefit ( 29,222 ) — Change in operating assets and liabilities Accounts receivable 115,567 224,673 Accounts receivable, a related party 6,048 ( 6,327 ) Inventories 6,825 316,139 Finance lease receivables 162,687 258,932 Prepayments, other receivables and other current assets 213,994 1,046,465 Due from a related party ( 150,000 ) — Accounts payable 169,376 170,703 Advances from customers ( 18,626 ) 36,911 Income tax payable 20,167 — Accrued expenses and other liabilities 450,005 1,170,510 Due to a related party 159,810 — Operating lease liabilities ( 62,565 ) ( 53,620 ) Operating lease liabilities - related parties ( 210,192 ) ( 133,782 ) Net Cash Provided by Operating Activities 7,241 557,837 Cash Flows from Investing Activities: Purchases of property and equipment ( 671,679 ) ( 1,151,076 ) Cash received from disposal of property and equipment 102,071 1,498,024 Purchases of intangible assets — ( 26,420 ) Net Cash Provided by (Used in) Investing Activities ( 569,608 ) 320,528 Cash Flows from Financing Activities: Borrowings from a financial institution 249,297 — Repayments from related parties and affiliates 339,049 144,151 Loans to related parties and affiliates ( 505,630 ) — Repayments of current borrowings from financial institutions ( 35,613 ) ( 125,840 ) Principal payments of finance lease liabilities ( 215,443 ) ( 392,145 ) Net Cash Used in Financing Activities ( 168,340 ) ( 373,834 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 84,747 ) ( 79,662 ) Net increase (decrease) in cash, cash equivalents and restricted cash ( 815,454 ) 424,869 Cash, cash equivalents and restricted cash, beginning of the year 1,610,090 1,185,221 Cash, cash equivalents and restricted cash, end of the year 794,636 1,610,090 Supplemental Cash Flow Information Cash paid for interest expense $ 17,630 $ — Cash paid for income tax $ 379 $ — Non-cash Transaction in Investing and Financing Activities Settlement of accounts payable by a related party $ 86,572 $ — Recognition of right-of-use assets and lease liabilities $ — $ 917,786 Recognition of right-of-use assets and lease liabilities, related parties $ 349,186 $ 121,742 Modification of right-of use assets and lease liabilities $ 22,799 $ 47,438 Termination of right-of use assets and lease liabilities, related parties $ 264,818 $ 302,010 Cashless exercise of November 2021 Investor warrants into common stock $ — $ 1,533 The following tables provides a reconciliation of cash, cash equivalent and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statements of cash flows: March 31, March 31, 2024 2023 Cash, cash equivalent, end of the year $ 792,299 $ 1,610,090 Restricted cash, end of the year 2,337 — Total cash, cash equivalent and restricted cash shown in the consolidated statements of cash flows, end of the year $ 794,636 $ 1,610,090 March 31, March 31, 2024 2023 Cash, cash equivalent, beginning of the year $ 1,610,090 $ 1,185,221 Restricted cash, beginning of the year — — Total cash, cash equivalent and restricted cash shown in the consolidated statements of cash flows, beginning of the year $ 1,610,090 $ 1,185,221 The accompanying notes are an integral part of the consolidated financial statements F- 6 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: (i) automobile transaction and related services focusing on the online ride-hailing industry in the People’s Republic of China (“PRC” or “China”) through the Company’s wholly owned subsidiary, Chengdu Corenel Technology Co., Ltd., a PRC limited liability company (“Corenel”), and its majority owned subsidiaries, Chengdu Jiekai Yunli Technology Co., Ltd. (“Jiekai”), and Hunan Ruixi Financial Leasing Co., Ltd., a PRC limited liability company (“Hunan Ruixi”), and its equity investee company (an entity 35% owned by Hunan Ruixi), Sichuan Jinkailong Automobile Leasing Co., Ltd., a PRC limited liability company (“Jinkailong”). (ii) online ride-hailing platform services through its own platform (known as Xixingtianxia) as described further below, since October 2020, through Hunan Xixingtianxia Technology Co., Ltd., a PRC limited liability company (“XXTX”), which is a wholly owned subsidiary of Sichuan Senmiao Zecheng Business Consulting Co., Ltd. (“Senmiao Consulting”), a PRC limited liability company and wholly-owned subsidiary of the Company. The Company’s ride hailing platform enables qualified ride-hailing drivers to provide transportation services in Chengdu, Changsha and other 20 cities in China as of the filing date of these consolidated financial statements. Hunan Ruixi holds a business license for automobile sales and financial leasing and has been engaged in automobile financial leasing services and automobile sales since March 2019 and January 2019, respectively. The Company also has been engaged in operating leasing services through Hunan Ruixi, Jiekai and its equity investee company, Jinkailong since March 2019. Jinkailong used to facilitate automobile sales and financing transactions for its clients, who are primarily ride-hailing drivers and provides them operating lease and relevant after-transaction services. As of the filing date of these consolidated financial statements, Senmiao Consulting has made a cumulative capital contribution of RMB 40.41 million (approximately $ 5.60 million) to XXTX and the remaining amount is expected to be paid before December 31, 2025. As of March 31, 2024, XXTX had eight wholly owned subsidiaries and two of them have operations. The following diagram illustrates the Company’s corporate structure as of the filing date of these consolidated financial statements: F- 7 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Former Voting Agreements with Jinkailong’s Other Shareholders Hunan Ruixi entered into two voting agreements signed in August 2018 and February 2020, respectively, as amended (the “Voting Agreements”), with Jinkailong and other Jinkailong’s shareholders holding an aggregate of 65 % equity interests. 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. On March 31, 2022, Hunan Ruixi entered into an Agreement for the Termination of the Agreement for Concerted Action by Shareholders of Jinkailong (the “Termination Agreement”), pursuant to which the Voting Agreements mentioned above was terminated as of the date of the Termination Agreement. The termination will not impair the past and future legitimate rights and interests of all parties in Jinkailong. As of March 31, 2024 and 2023, the parties no longer maintain a concerted action relationship with respect to the decision required to take concerted action at its shareholders meetings as stipulated in the Voting Agreements. Each party shall independently express opinions and exercise various rights such as voting rights and perform relevant obligations in accordance with the provisions of laws, regulations, normative documents and the Jinkailong’s articles of association. As a result of the Termination Agreement, the Company no longer has a controlling financial interest in Jinkailong and has determined that Jinkailong was deconsolidated from the Company’s Consolidated Financial Statements effective as of March 31, 2022. However, as Hunan Ruixi still holds 35 % equity interests in Jinkailong, Jinkailong is the equity investee company of the Company since then. As of March 31, 2024 and 2023, the paid-in capital of Jinkailong is zero. As of March 31, 2024, the Company has outstanding balance due from Jinkailong amounted to $ 3,245,907 , net of allowance for credit losses, of which, $ 2,747,313 is to be repaid over a period from April 2025 to December 2026, classified as due from a related party, net, non-current portion. As of March 31, 2023, the Company has outstanding balance due from Jinkailong amounted to $ 5,106,100 , net of allowance for credit losses, of which, $ 3,640,206 is to be repaid over a period from April 2024 to December 2026, classified as due from a related party, net, non-current portion (refer to Note 17). As of March 31, 2024 and 2023, allowance for credit losses due from Jinkailong amounted to $3,099,701 and $ 1,481,036 , respectively. During the years ended March 31, 2024 and 2023, the Company recorded provision for credit losses against the balance due from Jinkailong of $ 1,703,563 and $ 1,484,495 , respectively. 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) the net loss of approximately $ 4.2 million for the year ended March 31, 2024; (2) accumulated deficit of approximately $ 41.4 million as of March 31, 2024; (3) the working capital deficit of approximately $ 2.7 million as of March 31, 2024; and (4) one purchase commitment of approximately $ 0.9 million for 100 automobiles. As of the filing date of these consolidated financial statements, the Company has entered into one purchase contract with an automobile dealer to purchase a total of 100 automobiles in the amount of approximately $ 1.5 million, of which, and approximately $ 0.6 million has been remitted as purchase prepayments. The remaining purchase commitment of approximately $ 0.9 million shall be remitted in installment to be completed before March 31, 2025. 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: ● 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- 8 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Based on the above considerations, management is of the opinion that the Company will probably not have sufficient funds to meet its working capital requirements and debt obligations as they become due one year from the filing date of these consolidated financial statements if the Company is unable to obtain additional financing. 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) changes in the demand for the Company’s services, (ii) PRC government policies, (iii) economic conditions in China and worldwide, (iv) competitive pricing in the automobile transaction and related service and ride-hailing industries, (v) changes in the Company’s relationships with key business partners, (vi) the ability of financial institutions in China to provide continued financial support to the Company’s customers, and (vii) 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 ability to continue as a going concern and results of operations. The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments that might result from the outcome of such uncertainties. 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”). The consolidated financial statements include the accounts of the Company and include the assets, liabilities, revenues, and expenses of the subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation. A subsidiary is an entity in which the Company, directly or indirectly, controls more than one half of the voting power; or has the power to govern the financial and operating policies, to appoint or remove the majority of the members of the board of directors, or to cast a majority of votes at the meeting of directors. All adjustments (including normal recurring adjustments) necessary to present a fair statement of the Company’s financial position as of March 31, 2024, its results of operations for the year ended March 31, 2024 and its cash flows for the year ended March 31, 2024, as applicable, have been made. (b) 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 is U.S. dollars (“US$”) and the consolidated financial statements have been expressed in US$. 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 are recorded as a separate component of accumulated other comprehensive loss within the consolidated statements of changes in stockholders’ equity. Translation of amounts from RMB into US$ has been made at the following exchange rates for the respective periods: March 31, March 31, 2024 2023 Balance sheet items, except for equity accounts – RMB: US$ 1 : 7.2203 6.8676 For the years ended March 31, 2024 2023 Items in the statements of operations and comprehensive loss, and cash flows – RMB: US$ 1 : 7.1671 6.8516 F- 9 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (c) Use of estimates In presenting the consolidated financial statements in accordance with U.S. GAAP, management makes estimates and assumptions that affect the amounts reported and related disclosures. Estimates, by their nature, are based on judgment 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. Estimates are used when accounting for items and matters including, but not limited to, revenue recognition, residual values of property and equipment, lease classification and liabilities, right-of-use assets, determinations of the useful lives and valuation of long-lived assets, estimates of allowances for credit losses for receivables, due from related parties, estimates of impairment of long-lived assets, valuation of deferred tax assets and valuation of derivative liabilities. (d) 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, 2024 and 2023: Carrying Value as of Fair Value Measurement as of March 31, March 31, 2024 2024 Level 1 Level 2 Level 3 Derivative liabilities $ 288,833 $ — $ — $ 288,833 Carrying Value as of Fair Value Measurement as of March 31, March 31, 2023 2023 Level 1 Level 2 Level 3 Derivative liabilities $ 501,782 $ — $ — $ 501,782 F- 10 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 years ended March 31, 2024 and 2023: 2019 Registered Direct Offering August 2020 Underwritten Public February 2021 Registered Direct May 2021 Registered Direct Offering November 2021 Private Placement Series A Warrants Placement Warrants Offering Warrants Offering Warrants Investors Warrants Placement Warrants Investors Warrants Placement Warrants Total BALANCE as of March 31, 2022 $ 1,913 $ 10,525 $ 44,581 $ 65,543 $ 778,488 $ 58,387 $ 1,165,465 $ 90,302 $ 2,215,204 Change in fair value of derivative liabilities ( 1,912 ) ( 10,520 ) ( 36,131 ) ( 54,052 ) ( 616,527 ) ( 46,240 ) ( 879,170 ) ( 67,337 ) ( 1,711,889 ) Cashless exercise on November 2021 investor warrants — — — — — — ( 1,533 ) — ( 1,533 ) BALANCE as of March 31, 2023 1 5 8,450 11,491 161,961 12,147 284,762 $ 22,965 $ 501,782 Change in fair value of derivative liabilities ( 5,231 ) ( 7,158 ) ( 81,325 ) ( 6,099 ) ( 105,242 ) ( 7,888 ) ( 212,943 ) Warrant forfeited due to expiration ( 1 ) ( 5 ) — — — — — — ( 6 ) BALANCE as of March 31, 2024 $ — $ — $ 3,219 4,333 80,636 6,048 179,520 15,077 288,833 The Company’s Series A and Series B warrants, the June 2019 Placement Agent Warrants, the Underwriters’ Warrants, the ROFR Warrants, the May 2021 Investors Warrants, the May 2021 Placement Agent Warrants, and the November 2021 Investors Warrants and November 2021 Placement Agent Warrants are not traded in an active securities market; therefore, the Company estimates the fair value to those warrants using the Black-Scholes valuation model on June 20, 2019 (the grant date), August 4, 2020 (the grant date), February 10, 2021 (the grant date), May 13, 2021 (the grant date), November 10, 2021 (the grant date), as of March 31, 2024 and 2023. June 20, 2019 August 4, 2020 February 10, 2021 May 13, 2021 November 10, 2021 Series A Series B Placement Agent Underwriters’ Placement Agent ROFR Investor Placement Agent Investor Placement Agent Warrants Warrants Warrants Warrants Warrants Warrants Warrants Warrants Warrants Warrants # of shares exercisable* 133,602 111,632 14,251 56,800 38,044 15,218 553,192 41,490 5,310,763 55,148 Valuation date 6/20/2019 6/20/2019 6/20/2019 8/4/2020 2/10/2021 2/10/2021 5/13/2021 5/13/2021 11/10/2021 11/10/2021 Exercise price* $ 37.20 $ 37.20 $ 33.80 $ 6.30 $ 13.80 $ 17.30 $ 10.50 $ 10.50 $ 1.13 $ 6.80 Stock price* $ 28.00 $ 28.00 $ 28.00 $ 5.10 $ 16.30 $ 16.30 $ 7.20 $ 7.20 $ 6.70 $ 6.70 Expected term (years) 4 1 4 5 5 5 5 5 5 5 Risk-free interest rate 1.77 % 1.91 % 1.77 % 0.19 % 0.46 % 0.46 % 0.84 % 0.84 % 1.23 % 1.23 % Expected volatility 86 % 91 % 86 % 129 % 132 % 132 % 131 % 131 % 126 % 126 % F- 11 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2024 August 4, 2020 February 10, 2021 May 13, 2021 November 10, 2021 Placement Placement Placement Underwriters’ Agent ROFR Investor Agent Investor Agent Granted Date Warrants Warrants Warrants Warrants Warrants Warrants Warrants # of shares exercisable 31,808 38,044 15,218 553,192 41,490 5,310,763 55,148 Valuation date 3/31/2024 3/31/2024 3/31/2024 3/31/2024 3/31/2024 3/31/2024 3/31/2024 Exercise price $ 6.30 $ 13.8 $ 17.30 $ 10.50 $ 10.50 $ 1.13 $ 1.13 Stock price $ 0.9 $ 0.9 $ 0.9 $ 0.9 $ 0.9 $ 0.9 $ 0.9 Expected term (years) 1.35 1.87 1.87 2.12 2.12 2.61 2.61 Risk-free interest rate 4.88 % 4.65 % 4.65 % 4.57 % 4.57 % 4.47 % 4.47 % Expected volatility 117 % 117 % 117 % 117 % 117 % 117 % 117 % As of March 31, 2023 June 20, 2019 August 4, 2020 February 10, 2021 May 13, 2021 November 10, 2021 Placement Placement Placement Placement Series A Agent Underwriters’ Agent ROFR Investor Agent Investor Agent Granted Date Warrants Warrants Warrants Warrants Warrants Warrants Warrants Warrants Warrants # of shares exercisable 2,590 14,251 31,808 38,044 15,218 553,192 41,490 5,310,763 55,148 Valuation date 3/31/2023 3/31/2023 3/31/2023 3/31/2023 3/31/2023 3/31/2023 3/31/2023 3/31/2023 3/31/2023 Exercise price $ 5.00 $ 5.00 $ 6.30 $ 13.80 $ 17.30 $ 10.50 $ 10.50 $ 1.13 $ 6.80 Stock price $ 0.90 $ 0.90 $ 0.90 $ 0.90 $ 0.90 $ 0.90 $ 0.90 $ 0.90 $ 0.90 Expected term (years) 0.22 0.22 2.35 2.87 2.87 3.12 3.12 3.62 3.62 Risk-free interest rate 1.02 % 1.02 % 4.02 % 3.95 % 4.43 % 3.80 % 3.80 % 3.74 % 3.74 % Expected volatility 120 % 120 % 120 % 120 % 120 % 120 % 120 % 120 % 120 % * Giving retroactive effect to the 1-for-10 reverse stock split effected on April 6, 2022. F- 12 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2024 and 2023, 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, accounts payable, advance from customers, lease liabilities, accrued expenses and other liabilities, due to related parties, and operating and financing lease liabilities, which approximate their fair values because of the short-term nature of these instruments, and current liabilities of borrowings from a financial institution, 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 finance lease receivables, operating and financing lease liabilities and borrowings from a financial institution were recorded at the gross amount 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, 2024 and 2023. 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. (e) Equity method investments The Company accounts for investments in private company by using equity method as the Company determined that it does not have control over Jinkailong under either voting or VIE models in accordance with ASC 323 “Investments- Equity Method and Joint Ventures”. As of March 31, 2024 and 2023, the Company had equity investment in Jinkailong of 35 % that the Company has significant influence over Jinkailong. The Company records equity method investments initially at cost and subsequently records its share of the earnings or losses of the investee in the periods for which they are reported by the investee in its financial statements rather than in the period in which an investee declares a dividend. The Company adjusts the carrying amount of an investment for its share of the earnings or losses of the investee after the date of investment and share report the recognized earnings or loses in income. If an investment balance is reduced to zero as a result of cumulative losses, the Company will need to pause the recognition of losses until its share of earnings exceeds the accumulated losses resulting in the investment balance returning to zero. As of March 31, 2024 and 2023, the carrying value of the investment is $ 0 for both periods presented. (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 at 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. During the years 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 of automobile transaction and related services and online ride-hailing platform services as set forth in Notes 1 and 20. F- 13 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (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 payments for automobiles, funds received from automobile lessees as payments for rentals, which were held at the third-party platforms’ fund accounts and which are unrestricted and immediately available for withdrawal and use. (i) Restricted cash Restricted cash consists of fund held in the bank accounts of Corenel was frozen by a court order with a prior business partner whom Corenel had cooperation with. The restricted cash of Corenel was approximately $ 2,337 as of March 31, 2024. (j) 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. The carrying value of accounts receivable is reduced by an allowance that reflects the Company’s best estimate of the amounts that will not be collected. An allowance for credit losses is recorded in the period when a loss is probable based on an assessment of specific evidence indicating collection is unlikely, historical bad debt rates, accounts aging, financial conditions of the customer and industry trends. Starting from April 1, 2023, the Company adopted ASU No.2016-13 “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASC Topic 326”). The Company used a modified retrospective approach, and the adoption does not have an impact on our consolidated financial statements. Management also periodically evaluates individual customer’s financial condition, credit history, and the current economic conditions to make adjustments in the allowance when it is considered 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. The Company’s management continues to evaluate the reasonableness of the valuation allowance policy and update it if necessary. As of March 31, 2024 and 2023, the Company record allowance for credit losses of $ 1,545 and $ 0 against accounts receivable, respectively. (k) Finance lease receivables Finance lease receivables, which result from sales-type leases, are measured at discounted present value of (i) future minimum lease payments, (ii) any residual value not subject to a bargain purchase option as 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 for credit losses when necessary. Finance lease receivables is charged off against the allowance for credit losses after all means of collection have been exhausted and the potential for recovery is considered remote. As of March 31, 2024 and 2023, the Company determined no allowance for credit losses was necessary for finance lease receivables. As of March 31, 2024 and 2023, finance lease receivables consisted of the following: March 31, March 31, 2024 2023 Minimum lease payments receivable $ 354,617 $ 297,960 Less: Unearned interest ( 117,927 ) ( 80,713 ) Financing lease receivables $ 236,690 $ 217,247 Finance lease receivables, current $ 144,166 $ 146,114 Finance lease receivables, non-current $ 92,524 $ 71,133 Future scheduled minimum lease payments for investments in sales-type leases as of March 31, 2024 are as follows: Minimum future payments receivable Twelve months ending March 31, 2025 $ 206,894 Twelve months ending March 31, 2026 132,805 Twelve months ending March 31, 2027 14,918 Total $ 354,617 F- 14 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (l) Property and equipment, net Property and equipment primarily consist of automobiles, leasehold improvements, computers and other equipment, which are 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, fixture and furniture 3 - 5 years Automobiles 3 - 5 years 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, 2024 and 2023, the Company did not recognize impairment for property and equipment. 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 2 - 10 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, 2024 and 2023, there was no impairment of intangible assets. (n) 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 and convertible securities under the if-converted 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. As of March 31, 2024, the Company’s dilutive securities from the outstanding series A convertible preferred stock are convertible into 495,706 shares of common stock. This amount is not included in the computation of dilutive loss per share because their impact is anti-dilutive. F- 15 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (o) Mezzanine Equity (redeemable) The Company evaluates its convertible preferred stock in accordance with ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, to determine if its convertible preferred stock should be treated as a liability or an equity. As a result, the Company determined that the convertible preferred stock should be treated as an equity as it did not meet the definition of liability instrument. In accordance with ASC 480-10-S99, the convertible preferred stock should be classified as a mezzanine equity, since it contained a change of control redemption right feature which is not solely within the control of the Company. The Company believes the future event of change of control is not probable as of March 31, 2024; therefore, the convertible preferred stock has not been re-measured to its redemption value. Subsequently, the Company adjust the initial carrying amount of the convertible preferred stock by the at redemption value method. As of March 31, 2024, there was no change to the initial carrying amount of the convertible preferred stock. ( 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 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 entered into by the parties, the rights of the parties, including payment terms, are identified, the contract has commercial substance and consideration to collect is substantially probable. Disaggregated information of revenues by business lines are as follows: For the Years Ended March 31, 2024 2023 Automobile Transaction and Related Services - Operating lease revenues from automobile rentals $ 3,831,037 $ 3,453,392 - Monthly services commissions 196,099 179,241 - Financing revenues 57,677 41,738 - Service fees from NEVs leasing 45,231 350,510 - Service fees from automobile purchase services 36,637 33,585 - Service fees from management and guarantee services 16,246 40,158 - Revenues from sales of automobiles 8,822 243,065 - Other service fees 128,282 30,880 Total revenues from Automobile Transaction and Related Services 4,320,031 4,372,569 Online Ride-hailing Platform Services 2,494,397 3,709,945 Total Revenues from Operations $ 6,814,428 $ 8,082,514 Automobile transaction and related services Operating lease revenues from automobile rentals –The Company generates revenue from sub-leasing automobiles to some online ride-hailing drivers or third-parties and leasing its own automobiles. The Company recognizes revenue wherein an automobile is transferred to the lessees and the lessees has the ability to control the asset, is accounted for under ASC Topic 842. Rental transactions are satisfied over the rental period and is recognized over time. As the operating lease revenue are variable in nature which is based on online ride-hailing drivers or third-parties’ performance for a certain period, the Company recognized the revenue from operating lease by using the output method based on periodic settlement between the Company and the online ride-hailing drivers or third-parties when such revenue is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Rental periods are short term in nature, generally are twelve months or less. F- 16 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Monthly services commissions – Commissions from the services generated from the management and related services provided to Partner Platforms and other companies, which are settled on a monthly basis. The Company recognizes revenues at a point in time when performance obligations are completed and the commission amount is confirmed by the Partner Platforms and other companies, based on their evaluations on the services provided by the Company. 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 NEVs leasing and automobile purchase services - Services fees from NEVs leasing and automobile purchase services are paid by some lessees who rent new energy electric vehicles from the Company or automobile purchasers for a series of the services provided to them throughout the purchase process such as credit assessment, installment of GPS devices, ride-hailing driver qualification and other administrative procedures. The amount of services fees for NEVs leasing is based on the product solutions while the fees for purchase is based on the sales price of the automobiles and relevant services provided. The Company recognizes revenue at a point in time when above mentioned services are completed, and corresponding an automobile is delivered to the lessee or purchaser. Accounts receivable related to the revenue from NEVs leasing and automobile purchase services is collected upon the automobiles are delivered to lessees or purchaser. Service fees from automobile management and guarantee services – Over 95 % of the Company’s customers are online ride-hailing drivers. Some of 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. Sales of automobiles – The Company generated revenue from sales of automobiles to the customers of Hunan Ruixi. 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 and the 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 within 12 months. Other service fees – The Company generated other revenues such as miscellaneous service fees charged to its customers for some supporting services provided to online ride-hailing drivers. The Company recognizes revenues at a point in time when performance obligations are completed and the collectability is probable from the customers. Leases - Lessor The Company recognized revenue as lessor 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 %). Automobiles 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 long-term lease term for its automobiles and the automobiles will be used for online 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. 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, 2024, the Company’s pricing interest rate was 6.0 % per annum. F- 17 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 discretion in establishing the price of the online ride-hailing service and inventory risk related to the services as the Company earns commissions for each completed order as the difference between an upfront quote fare and the amount earned by a driver based on actual time and distance for ride charged to the rider. Thus, the Company recognizes revenue at a net basis. Incentives paid to Drivers are similar to retrospective volume-based rebates and represent variable consideration that is typically settled weekly or monthly. The Company recorded it as a reduction to revenue by the amount of the incentives to be paid upon completion of the performance criteria. (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, 2024 and 2023. As of March 31, 2024, the calendar years ended December 31, 2018 through 2023 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. Meanwhile, the Internal Revenue Service (“IRS”) in the U.S. can include returns filed within the last three years in an audit unless a substantial error is found in which case, IRS may extend the period to six years. The Company is not currently under examination by any income tax authority, nor has it been notified of an impending examination. Since these net operating losses may be utilized in future periods, they remain subject to examination. As of March 31, 2024, the Company was not aware of any pending income tax examinations by U.S. (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. F- 18 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (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 straight-line basis, net of estimated forfeitures, over the requisite service period. The fair value of restricted shares is determined with reference to the fair value of the underlying shares. At each date of measurement, the Company reviews internal and external sources of information to assist in the estimation of various attributes 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. (u) Leases – lessee The Company accounts for leases in accordance with ASC 842. The Company enters 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 direct financing or sales-type lease (as a lessee): ● The lease transfers ownership of the underlying asset to the lessee by the end of the lease term; ● The lease grants the lessee an option to purchase the underlying asset that the Company is reasonably certain to exercise; ● The lease term is for 75 % or more of the remaining economic life of the underlying asset, unless the commencement date falls within the 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 uses 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- 19 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 considers 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 a straight-line basis as amortization expense, while the lease liability is increased to reflect interest on the liability and decreased to reflect the lease payments made during the period. Interest expense on the lease liability is determined each period during the lease term as the amount that results in a constant periodic interest rate of the automobile loans on the remaining balance of the liability. The Company reviews the impairment of its ROU assets consistent with the approach applied for its other long-lived assets. The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations. The Company has elected to include the carrying amount of finance and operating lease liabilities in any tested asset group and include the associated lease payments in the undiscounted future pre-tax cash flows. For the years ended March 31, 2024 and 2023, the Company did not recognize impairment loss on its finance lease ROU assets. ( v ) 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. As of March 31, 2024 and 2023, approximately $ 21,000 and $ 79,000 , respectively, were deposited with a bank in the United States which is insured by the U.S. government up to $ 250,000 . As of March 31, 2024 and 2023, approximately $ 719,000 and $ 1,190,000 , 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 are insured for a maximum of approximately $ 69,000 (RMB 500,000 ). To limit exposure to credit risk relating to deposits, the Company primarily places cash deposits with large financial institutions in China which management believes are of high credit quality. The Company’s operations are carried out entirely in mainland China. Accordingly, the Company’s business, financial condition and results 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, 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 receivable 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. 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, 2024 and 2023, the Company record allowance for credit losses of $ 1,545 and $ 0 against accounts receivable, respectively. 2) Foreign currency risk As of March 31, 2024 and 2023, substantially all of the Company’s operating activities and major assets and liabilities, except for the cash deposit of approximately $ 21,000 and $ 79,000 , 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 (the “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 significantly affected. RMB depreciated from 6.87 RMB into US$ 1.00 on March 31, 2023 to 7.22 RMB into US$ 1.00 on March 31, 2024. F- 20 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ( w ) Recent accounting pronouncements not yet adopted In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements — codification amendments in response to SEC’s disclosure Update and Simplification initiative which amend the disclosure or presentation requirements of codification subtopic 230-10 Statement of Cash Flows—Overall, 250-10 Accounting Changes and Error Corrections— Overall, 260-10 Earnings Per Share— Overall, 270-10 Interim Reporting— Overall, 440-10 Commitments—Overall, 470-10 Debt—Overall, 505-10 Equity—Overall, 815-10 Derivatives and Hedging—Overall, 860-30 Transfers and Servicing—Secured Borrowing and Collateral, 932-235 Extractive Activities— Oil and Gas—Notes to Financial Statements, 946-20 Financial Services— Investment Companies— Investment Company Activities, and 974-10 Real Estate—Real Estate Investment Trusts—Overall. The amendments represent changes to clarify or improve disclosure and presentation requirements of above subtopics. Many of the amendments allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the SEC’s requirements. Also, the amendments align the requirements in the Codification with the SEC’s regulations. For entities subject to existing SEC disclosure requirements or those that must provide financial statements to the SEC for securities purposes without contractual transfer restrictions, the effective date aligns with the date when the SEC removes the related disclosure from Regulation S-X or Regulation S-K. Early adoption is not allowed. For all other entities, the amendments will be effective two years later from the date of the SEC’s removal. The Company is currently evaluating the impact of the update on the Company’s consolidated financial statements and related disclosures. In November 2023, the FASB issued ASU 2023-07, which is an update to Topic 280, Segment Reporting. The amendments in this Update improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. The amendments in this update: (1) require that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit or loss (collectively referred to as the “significant expense principle”), (2) Require that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition. The other segment items category is the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss, (3) Require that a public entity provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by Topic 280 in interim periods, and (4) Clarify that if the CODM uses more than one measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit. However, at least one of the reported segment profit or loss measures (or the single reported measure, if only one is disclosed) should be the measure that is most consistent with the measurement principles used in measuring the corresponding amounts in the public entity’s consolidated financial statements. In other words, in addition to the measure that is most consistent with the measurement principles under generally accepted accounting principles (GAAP), a public entity is not precluded from reporting additional measures of a segment’s profit or loss that are used by the CODM in assessing segment performance and deciding how to allocate resources, (5) Require that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources, and (6) Require that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this Update and all existing segment disclosures in Topic 280. The amendments in this Update also do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. The amendments in this Update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. A public entity should apply the amendments in this Update retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The Company is currently evaluating the impact of the update on the Company’s consolidated financial statements and related disclosures. In December 2023, the FASB issued ASU 2023-09, which is an update to Topic 740, Income Taxes. The amendments in this update related to the rate reconciliation and income taxes paid disclosures improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. The amendments allow investors to better assess, in their capital allocation decisions, how an entity’s worldwide operations and related tax risks and tax planning and operational opportunities affect its income tax rate and prospects for future cash flows. The other amendments in this Update improve the effectiveness and comparability of disclosures by (1) adding disclosures of pretax income (or loss) and income tax expense (or benefit) to be consistent with U.S. Securities and Exchange Commission (SEC) Regulation S-X 210.4-08(h), Rules of General Application—General Notes to Financial Statements: Income Tax Expense, and (2) removing disclosures that no longer are considered cost beneficial or relevant. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2024. For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2025. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this Update should be applied on a prospective basis. Retrospective application is permitted. The Company is currently evaluating the impact of the update on Company’s consolidated financial statements and related disclosures. F- 21 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ( x ) Recently adopted accounting pronouncements The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued. Under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging growth company and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies. 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 is to update the effective date of ASU No. 2016-13 for private companies, not-for-profit organizations and certain smaller reporting companies applying for credit losses standard. The new effective date for these preparers is for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company has adopted this update on April 1, 2023, and the adoption does not have material impact on Company’s consolidated financial statements and related disclosures. CECL adoption will have broad impact on the financial statements of financial services firms, which will affect key profitability and 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. Although the Company has automobile financing business, the Company reserves the allowance for doubtful account such as accounts receivable balance based on historical collection rate, current economic environment, and credit worthy of specific customers, along with individual assessment on specific accounts. As these approvals are aligned with the CECL model, the adoption of CECL model does not have material impact on Company’s consolidated financial statements and related disclosures. Further, 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. In March 2023, the FASB issued new accounting guidance, ASU 2023-01, for leasehold improvements associated with common control leases, which is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been made available for issuance. The new guidance introduced two issues: terms and conditions to be considered with leases between related parties under common control and accounting for leasehold improvements. The goals for the new issues are to reduce the cost associated with implementing and applying Topic 842 and to promote diversity in practice by entities within the scope when applying lease accounting requirements. ASU 2023-01 is effective for the Company for annual and interim reporting periods beginning April 1, 2024. The Company has adopted this update on April 1, 2024, and does not anticipate such adoption to have material impact on Company’s consolidated financial statements and related disclosures for the fiscal year ending March 31, 2025. F- 22 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. DISCONTINUED OPERATIONS Discontinued operations- Online P2P lending services 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 “Plan”). The Company determined that the 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 had 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 Plan on October 17, 2019, and the Company recognized $ 4,048,210 provision for doubtful accounts as of December 31, 2019 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, 2024. Carrying amounts of major classes of liabilities was included as part of discontinued operations of Online P2P lending services, whose change was due to the effect of exchange rate changes as of March 31, 2024 and 2023: March 31, March 31, 2024 2023 Current liabilities Accrued expenses and other liabilities $ 464,000 $ 487,829 5. ACCOUNTS RECEIVABLE, NET Accounts receivable include online ride-hailing services fees due from online ride-hailing drivers and rental receivables due from operating lessees. It also includes 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, 2024 and 2023, accounts receivable were comprised of the following: March 31, March 31, 2024 2023 Receivables of online ride hailing fees from online ride-hailing drivers $ 14,130 $ 51,290 Receivables of operating lease 18,531 31,039 Receivables of automobile sales due from automobile purchasers 2,897 76,106 Less: Allowance for credit losses ( 1,545 ) — Accounts receivable, net $ 34,013 $ 158,435 Movement of allowance for credit losses for the years ended March 31, 2024 and 2023 are as follows: March 31, March 31, 2024 2023 Beginning balance $ — $ 112,905 Addition 1,557 3,394 Write off — ( 107,868 ) Translation adjustment ( 12 ) ( 8,431 ) Ending balance $ 1,545 $ — F- 23 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. INVENTORIES March 31, March 31, 2024 2023 Automobiles (i) $ — $ 6,678 (i) As of March 31, 2023, the Company owned an automobile with a total value of $ 6,678 , net of impairment, for sale or sales-type leases. For the years ended March 31, 2024 and 2023, the Company recognized impairments of $ 0 and $ 3,085 , respectively for certain automobiles for sale. 7. PREPAYMENTS, OTHER RECEIVABLES AND OTHER CURRENT ASSETS, NET As of March 31, 2024 and 2023, the prepayments, other receivables and other current assets, net were comprised of the following: March 31, March 31, 2024 2023 Prepaid expenses (i) $ 457,302 $ 334,297 Deposits (ii) 381,651 679,794 Receivables from aggregation platforms (iii) 145,751 271,791 Value added tax (“VAT”) recoverable (iv) 27,443 86,051 Due from automobile purchasers, net (v) 2,633 45,489 Employee advances 142 11,482 Others 28,365 9,339 Less: Allowance for credit losses ( 20,474 ) — Total prepayments, other receivables and other current assets, net $ 1,022,813 $ 1,438,243 Movement of allowance for credit losses for the years ended March 31, 2024 and 2023 are as follows: March 31, March 31, 2024 2023 Beginning balance $ — $ — Addition 20,626 — Translation adjustment ( 152 ) — Ending balance $ 20,474 $ — (i) Prepaid expense The balance of prepaid expense represented automobile purchase prepayments, automobile liability insurance premium for automobiles for operating lease and other miscellaneous expense such as office lease, office remodel expense, etc. that will expire within one year. (ii) Deposits The balance of deposits mainly represented the security deposit made by the Company to various automobile leasing companies, financial institutions and Didi Chuxing Technology Co., Ltd., who runs an online ride-hailing platform. As of March 31, 2024, the allowance for credit losses of $ 17,841 was recorded against the security deposits not returned for more than one year after the end of the cooperation. (iii) 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. F- 24 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (iv) Value added tax (“VAT”) recoverable The balance represented the amount of VAT, which resulted from historical purchasing activities and could be further used for deducting future VAT in PRC. (v) Due from automobile purchasers, net The balance due from automobile purchasers represented the payments 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, 2024, the allowance for credit losses recorded against receivables due from automobile purchasers was $ 2,633 . During the year ended March 31, 2024, the Company recorded provision for credit losses of $ 2,652 against the balance from an automobile purchaser. 8. PROPERTY AND EQUIPMENT, NET Property and equipment consist of the following: March 31, March 31, 2024 2023 Leasehold improvements $ 174,266 $ 183,216 Computer equipment 32,494 37,932 Office equipment, fixtures and furniture 77,898 78,372 Automobiles 4,707,663 4,679,927 Subtotal 4,992,321 4,979,447 Less: accumulated depreciation and amortization ( 2,315,797 ) ( 1,635,990 ) Total property and equipment, net $ 2,676,524 $ 3,343,457 Depreciation expense for the years ended March 31, 2024 and 2023 were amounted to $ 933,395 and $ 1,095,518 , respectively. 9. INTANGIBLE ASSETS, NET Intangible assets consisted of the following: March 31, March 31, 2024 2023 Software $ 791,262 $ 793,381 Online ride-hailing platform operating licenses 419,988 441,557 Subtotal 1,211,250 1,234,938 Less: accumulated amortization ( 620,523 ) ( 460,614 ) Total intangible assets, net $ 590,727 $ 774,324 Amortization expense for the years ended March 31, 2024 and 2023 were amounted to $ 172,135 and $ 184,215 , respectively. The following table sets forth the Company’s amortization expense for the next five years ending: Amortization expenses Twelve months ending March 31, 2025 $ 165,089 Twelve months ending March 31, 2026 112,161 Twelve months ending March 31, 2027 81,587 Twelve months ending March 31, 2028 77,908 Twelve months ending March 31, 2029 77,389 Thereafter 76,593 Total $ 590,727 F- 25 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. OTHER NON-CURRENT ASSETS March 31, March 31, 2024 2023 Prepayments of automobiles purchased (i) $ 639,863 $ 716,407 (i) In September 2022 and March 2023, the Company entered into two automobile purchase agreements (“Purchase Agreements”) with two third parties to purchase a total of 150 automobiles which amounted to $ 2,301,261 . As of March 31, 2024, 50 automobiles have been delivered to the Company and the Company has made prepayments of $639 ,863 towards the remaining purchase pertaining to the Purchase Agreements. The Company expects to complete the remaining purchase by March 31, 2025. 11. BORROWINGS FROM A FINANCIAL INSTITUTION Interest March 31, March 31, Bank name Maturity date rate 2024 2023 WeBank* 09/11/2025 12.24 % $ 213,684 $ — SDIC Taikang Trust Co. Ltd Fully Repaid on August 31, 2023 13.04 % — 8,813 Total $ 213,684 $ 8,813 Borrowing from a financial institution, current $ 142,456 $ 8,813 Borrowing from a financial institution, non-current $ 71,228 $ — * On September 11, 2023, the Company entered into a loan agreement (the “Loan Agreement”) with WeBank for a total amount of $ 249,297 . Pursuant to the Loan Agreement, the borrowing bears an interest rate of 12.24 % per annum with monthly repayments consist of principal and interest for two years. As of March 31, 2024, the current portion of the loan principal balance to be repaid within the next twelve months was amounted to $ 142,456 , while the noncurrent portion of the loan principal to be repaid after March 31, 2025, was amounted to $ 71,228 . The total interest expense for the years ended March 31, 2024 and 2023 was $ 17,630 and $0 , respectively. 12. ACCRUED EXPENSES AND OTHER LIABILITIES March 31, March 31, 2024 2023 Accrued payroll and welfare $ 1,940,549 $ 1,636,092 Payables to drivers from aggregation platforms (i) 800,207 1,103,892 Deposits (ii) 686,897 730,002 Accrued expenses 516,210 226,721 Payables for expenditures on automobile transaction and related services (iii) 9,768 31,719 Other taxes payable 98,003 83,432 Loan repayments received on behalf of financial institutions(iv) 449 16,130 Other payables 60,324 37,348 Total accrued expenses and other liabilities 4,112,407 3,865,336 Total accrued expenses and other liabilities – discontinued operations ( 464,000 ) ( 487,829 ) Total accrued expenses and other liabilities – continuing operations $ 3,648,407 $ 3,377,507 (i) Payables to drivers from aggregation platforms 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. F- 26 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (ii) Deposits 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. (iii) Payables for expenditures on automobile transaction and related services The balance of payables for expenditures on automobile transaction and related services represented the payables balance to the miscellaneous expenses related to the daily operations of automobiles. (iv) Loan repayments received on behalf of financial institutions 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 $ 267,962 and $ 452,796 for the years ended March 31, 2024 and 2023, respectively, from operations of the Company. As of March 31, 2024 and 2023, the Company did not make adequate employee benefit contributions in the amount of $ 1,137,887 and $ 1,086,526 , respectively. 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 33,794 ( 337,940 pre reverse split) 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 $ 48.0 ($ 4.80 before reverse split) per share and is not exercisable for a period of 180 days from March 16, 2018 . As of March 31, 2024, the remaining 3,794 warrants of the Company’s initial public offering has been forfeited due to expiration. Warrants in Offerings 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 prices are 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.” 2019 Registered Direct Offering Warrants As of March 31, 2024 and 2023, there were 0 and 16,841 2019 registered direct offering warrants outstanding, respectively. During the year ended March 31, 2024, the Company has forfeited the remaining 16,841 2019 registered direct offering warrants as they expired. During the years ended March 31, 2024 and 2023, the change of fair value was a gain of $ 6 and $ 12,432 recognized in the consolidated statements of operations and comprehensive loss based on the decrease in fair value of the liabilities since March 31, 2022, respectively. As of March 31, 2024 and 2023, the fair value of the derivative instrument totaled $ 0 and $ 6 , respectively. F- 27 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS August 2020 Underwriters’ Warrants As of March 31, 2024 and 2023, there were 31,808 underwriters’ warrants outstanding. During years ended March 31, 2024 and 2023, the change of fair value was a gain of $ 5,231 and $ 36,131 recognized in the consolidated statements of operations and comprehensive loss based on the decrease in fair value of the liabilities since March 31, 2022, respectively. As of March 31, 2024 and 2023, the fair value of the derivative instrument totaled $ 3,219 and $ 8,450 , respectively. As the 1-for-10 reverse stock split on the Company’s common stock became effective on April 6, 2022, the exercise price of the August 2020 Underwriters’ Warrants was adjusted to $ 6.25 . February 2021 Registered Direct Offering Warrants As of March 31, 2024 and 2023, there were 53,262 February 2021 registered direct offering warrants outstanding. During the years ended March 31, 2024 and 2023, the change of fair value was a gain of $ 7,158 and $ 54,052 recognized in the consolidated statements of operations and comprehensive loss based on the decrease in fair value of the liabilities since March 31, 2022, respectively. As of March 31, 2024 and 2023, the fair value of the derivative instrument totaled $ 4,333 and $ 11,491 , respectively. As the 1-for-10 reverse stock split on the Company’s common stock became effective on April 6, 2022, the exercise prices of the Placement Agent Warrants and the ROFR Warrants of the February 2021 Registered Direct Offering were adjusted to $ 13.80 and $ 17.25 , respectively. May 2021 Registered Direct Offering Warrants As of March 31, 2024 and 2023, there were 594,682 May 2021 registered direct offering warrants outstanding. During the years ended March 31, 2024 and 2023, the change of fair value was a gain of $ 87,424 and $ 662,767 recognized in the consolidated statements of operations and comprehensive loss based on the decrease in fair value of the liabilities since March 31, 2022. As of March 31, 2024 and 2023, the fair value of the derivative instrument totaled $ 86,684 and $ 174,108 , respectively. As the 1-for-10 reverse stock split on the Company’s common stock became effective on April 6, 2022, the exercise price of the May 2021 Registered Direct Offering warrants was adjusted to $ 10.50 . November 2021 Private Placement Warrants Pursuant to November 2021 Investors Warrants, if at any time and from time to time on or after the issuance date there occurs any stock split, stock dividend, stock combination recapitalization or other similar transaction involving the Common Stock (“Stock Combination Event”) and the Event Market Price (which is defined as with respect to any Stock Combination Event date, the quotient determined by dividing (x) the sum of the VWAP of the Common Stock for each of the five ( 5 ) lowest trading days during the twenty ( 20 ) consecutive trading day period ending and including the trading day immediately preceding the sixteenth (16th) trading day after such Stock Combination Event date, divided by (y) five (5)) is less than the original exercise price of $ 0.82 then in effect, then on the sixteenth (16th) trading day immediately following such Stock Combination Event, the exercise price then in effect on such sixteenth (16th) trading day shall be reduced (but in no event increased) to the event market price. As the 1-for-10 reverse stock split on the Company’s common stock became effective on April 6, 2022, the exercise price of the November 2021 Investors Warrants was adjusted to $ 1.13 , the Event Market Price and the total number of shares of the November 2021 Investors Warrants was adjusted to 5,335,763 . As of March 31, 2024 and 2023, there were 5,365,911 November 2021 Private Placement Warrants outstanding. During the years ended March 31, 2024 and 2023, the change of fair value was a gain of $ 113,130 and $ 946,507 recognized in the consolidated statements of operations and comprehensive loss based on the decrease in fair value of the liabilities since insurance. On November 18, 2022, a holder of November 2021 private placement warrants exercised the warrants on a “cashless” basis. Upon exercise of above-mentioned warrants, the Company reduced the fair value of the warrants and increased the additional paid in capital by $ 1,533 . As of March 31, 2024 and 2023, the fair value of the derivative instrument totaled $ 194,597 and $ 307,727 , respectively. Weighted Average Average Remaining Warrants Warrants Exercise Contractual Outstanding Exercisable Price Life Balance, March 31, 2022 6,091,298 6,091,298 $ 2.28 4.32 Exercised ( 25,000 ) ( 25,000 ) — — Balance, March 31, 2023 6,066,298 6,066,298 $ 2.29 3.56 Forfeited ( 20,635 ) ( 20,635 ) Balance, March 31, 2024 6,045,663 6,045,663 $ 2.25 2.55 F- 28 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 years ended March 31, 2022. 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 filing date of these consolidated financial statements, all installment of RSUs with an aggregate of 12,727 was vested and 9,545 was settled by the Company. The Company expects to settle the remaining vested RSUs by issuance of shares of common stock before December 31, 2024 and account for the vested RSUs as an addition to both expenses and additional paid-in capital. Equity Incentive Plan At the 2018 Annual Meeting of Stockholders of the Company held on November 8, 2018, the Company’s stockholders approved the Company’s 2018 Equity Incentive Plan for employees, officers, directors and consultants of the Company and its affiliates. At the 2022 Annual Meeting of Stockholders of Company held on March 30, 2023, the Company’s stockholders approved the amendment to the 2018 Equity Incentive Plan, to increase the number of shares of common stock reserved under the Plan to 1,500,000 shares. A committee consisting of at least two independent directors would be 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, 2024, the Company has granted an aggregate of 30,379 RSUs (after reverse split) , among which, 26,447 RSUs were issued under the Equity Incentive Plan, 3,182 RSUs were vested but have not been issued while 750 RSUs were forfeited due to two directors ceased to serve on the board of the Company since November 8, 2018. During the year ended March 31, 2024, no new RSUs were granted. 1-for-10 shares reverse split on common stock The Company considered the above transactions after giving a retroactive effect to a 1-for-10 reverse stock split of its common stock which became effective on April 6, 2022. The Company believed it is appropriate to reflect the above transactions on a retroactive basis similar to those after a stock split or dividend pursuant to ASC 260. All shares and per share amounts used herein and in the accompanying consolidated financial statements have been retroactively stated to reflect the effect of the reverse stock split. Upon execution of the 1-for-10 reverse stock split, the Company recognized additional 8,402 shares of common stock due to round up issue. Conversion Price Adjustment for November 2021 Preferred Shares Pursuant to the Certificate of Designation for the series A convertible preferred stock signed by the Company and certain institutional investors in November 2021 Private Placement, the initial conversion price of the series A Convertible Preferred Shares was $ 0.68 . If as of the applicable date the conversion price then in effect is greater than the greater of (1) $ 0.41 (the “floor Price”) (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations and similar events) and (2) 85 % of the closing bid price on the applicable date (the “Adjustment Price”), the conversion price shall automatically lower to the Adjustment Price accordingly. As the 1-for-10 reverse stock split on the Company’s Common Stock became effective on April 6, 2022, the conversion price of the Preferred Shares was adjusted to $ 4.1 . As of March 31, 2024 and 2023, there were 991 and 1,641 shares of Series A convertible preferred stock outstanding, respectively, valued at $ 234,364 and $ 269,386 , recorded as mezzanine equity. As of March 31, 2024, 4,009 shares of Series A convertible preferred stock were converted into 1,871,125 shares of the Company’s common stock. Further, on August 9, 2022, the Company and the investors agreed to reduce the conversion price of the series A Convertible Preferred Shares from $ 4.10 to $ 2.00 and to increase the number of the shares of common stock that are available to be issued upon conversion of the Preferred Shares from 1,092,683 to 2,240,000 . Common stock issued for consulting services In October 2023, the Company entered into three different consulting and services agreements (the “Consulting Agreements”) with three consultants (the “Consultants”), pursuant to which the Company engaged the Consultant to provide certain merger and acquisition consulting service, market research and business development advisory services, and financial consulting services, respectively. As compensation for the services, the Company agreed to issue the Consultants an aggregate of 1,500,000 shares of its common stock, par value $ 0.0001 . The Company recognized the non-employee share-based payment equity awards by using the grant-date fair values at the time of signing agreement. On November 7, 2023, the issuance of 1,500,000 shares of the Company’s common stock has been completed and the Company recorded $ 444,300 service expense during the years ended March 31, 2024. F- 29 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Change of ownership interest in a subsidiary On February 11, 2024, The Company and Hunan Ruixi’s two minority shareholders (“Shareholders”) has entered into a share swap agreement (“Share Swap Agreement”). Pursuant to the Share Swap Agreement, the Company would issue a total of 950,000 shares of its common stock to the above mentioned two Shareholders. In return, each shareholder will transfer a 2.5 % equity interest in Hunan Ruixi to the Company, which increasing the Company’s ownership in Hunan Ruixi by 5 %. As no cash consideration was received, $ 155,461 which is the difference between the fair value of the consideration received and the amount by which the noncontrolling interest is adjusted was recognized as an addition in additional paid-in capital in accordance with ASC 810-10-45-23 “Change in a parent’s ownership interest in a subsidiary”. 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 established 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, 2024 and 2023, the Company’s foreign subsidiaries in China were operating at loss and as such, did not record a liability for GILTI tax. The Company’s net operating loss for U.S. income taxes from U.S for the years ended March 31, 2024 and 2023 amounted to approximately $ 1.1 million and $ 1.3 million respectively. As of March 31, 2024 and 2023, the Company’s net operating loss carryforward for U.S. income taxes was approximately $ 7.6 million and $ 7.1 million, respectively. 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. Management reviews the valuation allowance periodically and makes changes accordingly. PRC Senmiao Consulting, Sichuan Senmiao Ronglian Technology Co., Ltd. (“Sichuan Senmiao”), Hunan Ruixi, Sichuan Senmiao Yicheng Assets Management Co., Ltd. (“Yicheng”), Corenel, Jiekai and 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 %. Net income (loss) before income tax by jurisdiction as follows: For the Years Ended March 31, 2024 2023 U.S. $ ( 1,436,097 ) $ 260,851 PRC ( 2,807,133 ) ( 4,051,544 ) Total net loss before income tax $ ( 4,243,230 ) $ ( 3,790,693 ) Significant components of the provision for income taxes are as follows: For the Years Ended March 31, 2024 2023 Current income tax $ 20,206 $ — Deferred tax benefit ( 29,222 ) — Income tax benefit $ ( 9,016 ) $ — F- 30 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Below is a reconciliation of the statutory tax rate to the effective tax rate: For the Years Ended March 31, 2024 2023 PRC Statutory tax rate* 25.0 % 25.0 % Differential of local statutory tax rate ( 1.4 )% 0.3 % Permanent difference of gain from change in fair value of derivative liabilities not taxable in PRC 1.1 % 9.5 % Non-deductible expenses ( 2.7 )% ( 1.1 )% Valuation allowance on deferred income tax asset ( 22.2 )% ( 30.7 )% Others 0.4 % ( 3.0 )% Effective tax rate 0.2 % — % * As the Company business operation mainly concentrated PRC, the Company determined to apply PRC statutory tax rate in reconciliation of the statutory tax rate to the effective tax rate As of March 31, 2024 and 2023, the Company’s PRC entities from continuing operations had net operating loss carryforwards of approximately $ 9.7 million and $ 9.6 million, respectively, which will be available to offset future taxable income. As of March 31, 2024, these carryforwards will expire from 2025 through 2034, if not used. As of March 31, 2024 and 2023, valuation allowances for deferred tax assets related to net operating loss carry forward for U.S. income taxes were approximately $ 1.6 million and $ 1.5 million, respectively. With the consideration of the duration of statutory carry forward periods and forecasts of future profitability, it has concluded that it is more likely than not that all its deferred tax assets generated from the Company would not be utilized in the future. The Company has provided full allowance of its deferred tax assets. 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, March 31, 2024 2023 Deferred Tax Assets Net operating loss carryforwards in the PRC $ 2,423,561 $ 2,403,785 Net operating loss carryforwards in the U.S. 1,588,529 1,499,607 Allowance for credit losses 807,974 402,599 Others 6,431 — Less: valuation allowance ( 4,826,495 ) ( 4,305,991 ) Deferred tax assets, net $ — $ — Deferred tax liabilities: Capitalized intangible assets cost $ 11,611 $ 42,930 Deferred tax liabilities, net $ 11,611 $ 42,930 As of March 31, 2024 and 2023, the Company’s PRC entities associated with discontinued operations had net operating loss carryforwards of approximately $ 0.9 million and $ 1.9 million, respectively . Despite the fact that the net operating loss carryforwards arose from the Company discontinued operation, the Company may still benefit from them as potential deduction against future taxable income. As of March 31, 2024, such net operating loss from discontinued operations will expire from 2025 through 2026, if not used. 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 not be fully realized. As of March 31, 2024 and 2023, full valuation allowance is provided against the deferred tax assets related to the Company’s discontinued operations based upon management’s assessment as to their realization. The tax effects of temporary differences from discontinued operations that give rise to the Company’s deferred tax assets are as follows: March 31, 2024 March 31, 2023 Net operating loss carry forwards in the PRC $ 228,268 $ 479,377 Less: valuation allowance ( 228,268 ) ( 479,377 ) Total $ — $ — Uncertain tax positions The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measure the unrecognized benefits associated with the tax positions. As of March 31, 2024 and 2023, the Company did not have any unrecognized uncertain tax positions and the Company does not believe that its unrecognized tax benefits will change over the next twelve months. For the years ended March 31, 2024 and 2023, the Company did not incur any interest and penalties related to potential underpaid income tax expenses. According to PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or withholding agent. The statute of limitations will be extended five years under special circumstances, which are not clearly defined (but an underpayment of tax liability exceeding RMB 0.1 million is specifically listed as a special circumstance). In the case of a related party transaction, the statute of limitations is ten years. There is no statute of limitations in the case of tax evasion. F- 31 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 16. CONCENTRATION Major Suppliers For the year ended March 31, 2024, three suppliers accounted for approximately 20.1 %, 13.5 %, and 12.1 % of the total costs of revenue from operations of the Company. For the year ended March 31, 2023, two suppliers accounted for approximately 21.2 % and 12.4 % of the total costs of revenue from continuing operations of the Company. 17. RELATED PARTY TRANSACTIONS AND BALANCES 1. Related Party Balances 1) Accounts receivable, a related party As of March 31, 2024 and 2023, accounts receivable from a related party amounted to $ 0 and $ 6,312 , respectively, represented balance due from operating lease revenue recognized from Jinkailong, the Company’s equity investee company. 2) Due from related parties As of March 31, 2024 and 2023, balances due from related parties from the Company’s operations were comprised of the following: March 31, March 31, 2024 2023 Total due from related parties $ 6,502,546 $ 6,610,156 Less: Allowance for credit losses ( 3,099,701 ) ( 1,481,036 ) Due from related parties, net $ 3,402,845 $ 5,129,120 Due from related parties, net, current $ 655,532 $ 1,488,914 Due from a related party, net, non-current $ 2,747,313 $ 3,640,206 As of March 31, 2024, balances due from Jinkailong, the Company’s equity investee company was $ 3,245,907 , net of allowance for credit losses, of which, $ 2,747,313 is to be repaid over a period from April 2025 to March 2026, which was classified as due from a related party, net, non-current. The balances due from Jinkailong consist of outstanding balance of $ 2,651,078 as a result of Jinkailong’s deconsolidation on March 31, 2022 and $ 594,829 represents revenue collected by Jinkailong on behalf of the Company’s subsidiary, Jiekai. As of March 31, 2023, balances due from Jinkailong was $ 5,106,100 , representing balance due from Jinkailong as result of Jinkailong’s deconsolidation on March 31, 2022, of which, $ 3,640,206 is to be repaid over a period from April 2024 to December 2026, which was classified as due from a related party, non-current. Movement of allowance for credit losses due from Jinkailong for March 31, 2024 and 2023 are as follows: March 31, March 31, 2024 2023 Beginning balance $ 1,481,036 $ — Addition 1,703,563 1,484,495 Translation adjustment ( 84,898 ) ( 3,459 ) Ending balance $ 3,099,701 $ 1,481,036 On January 3, 2024, Xiang Hu, the Legal Representative of Sichuan Senmiao and a shareholder of the Company, entered into a loan agreement wherein the Company agreed to provide an interest-free special reserve loan of $ 150,000 for a period of 12 months. This loan is strictly designated for the Company’s business development, potential capital market investments, and prospective mergers and business combinations. As of March 31, 2024, total of $ 150,000 has been disbursed to Xiang Hu, but no actual spending has been incurred yet. The Company will monitor the actual spending to determine the utilized amount. Any unused portion must be returned to the Company upon expiration of the loan. F- 32 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2024 and 2023, balance due from Chengdu Youlu Technology Ltd. (“ Youlu”), a related party of the Company were amounted to $ 6,938 and $ 23,020 , respectively. 3) Due to related parties March 31, March 31, 2024 2023 Loan payable to a related party (i) $ 12,354 $ 8,667 Other payable due to related party (ii) 158,632 — Total due to related parties $ 170,986 $ 8,667 (i) As of March 31, 2024 and 2023, the balances represented borrowings from Xi Wen, the CEO of the Company, of which, $ 12,354 and $ 8,667 are unsecured, interest free and due on demand, respectively. (ii) As of March 31, 2024 and 2023, the balances represented outstanding lease payments due to Hong Li, the Supervisor of Sichuan Senmiao, upon termination of existing lease. 4) Operating lease right-of-use assets, net, related parties and Operating lease liabilities - related parties March 31, March 31, 2024 2023 Lease II (ii) 47,128 92,916 March 31, March 31, 2024 2023 Lease I (i) $ — $ 82,069 Lease II (ii) 51,741 61,393 Total Operating lease liabilities, current - related parties $ 51,741 $ 143,462 March 31, March 31, 2024 2023 Lease II (ii) — 42,247 (i) On March 31, 2023, the Company entered into two office lease agreements with Hong Li, supervisor of Sichuan Senmiao, with a leasing term from April 1, 2023 to March 31, 2026, such lease was terminated in December 2023. On March 1, 2021, the Company entered into an office lease which was set to expire on February 1, 2026. On April 1, 2021, the Company entered into another office lease which was set to expire on April 1, 2024. In October 2022, the Company terminated the leases signed on March 1, 2021 and April 1, 2021. (ii) In November 2018, Hunan Ruixi entered into an office lease agreement with Hunan Dingchentai Investment Co., Ltd. (“Dingchentai”), a company where one of the Company’s 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, and a renewal lease contract was signed on June 2022 which extended the original lease to May 2025. 2. Related Party Transactions For the years ended March 31, 2024 and 2023, the Company incurred $ 96,614 and $ 177,414 , respectively, in rental expenses to Hong Li, supervisor of Sichuan Senmiao, pursuant to three office lease agreements. For the years ended March 31, 2024 and 2023, the Company incurred $ 41,668 and $ 47,043 , respectively, in rental expenses to Dingchentai, a company where one of the Company’s independent directors serves as legal representative and general manager. The Company had reached cooperation with Jinkailong, the Company’s equity investee company, that the drivers who leased automobile from Jinkailong completed their online ride-hailing requests and orders through the company’s ride-hailing platform, and the company will pay Jinkailong a certain promotion service fee. During the years ended March 31, 2024 and 2023, the company incurred promotion fee of $ 11,115 and $ 95,804 payable to Jinkailong. During the years ended March 31, 2024 and 2023, Corenel leased automobiles to Jinkailong and generated revenue of $ 34,742 and $ 344,120 , while Jiekai leased automobiles from Jinkailong and had a rental cost of $ 472,848 and $ 509,904 respectively. F- 33 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 18. 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, 2024. Lessee As of March 31, 2024 and 2023, the Company has engaged in offices and showroom leases which were classified as operating leases. The Company leased automobiles under operating lease agreements with a term shorter than twelve months which it elected not to recognize 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. In addition, the Company had automobiles leases which were classified as finance lease. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company recognized lease expense on a straight-line basis over the lease term for operating lease. Meanwhile, the Company recognized the finance leases ROU assets and interest on an amortized cost basis. The amortization of finance ROU assets is recognized on a straight-line 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 effective interest rate of 6.0 %, which is determined using an incremental borrowing rate with similar term in the PRC. As of March 31, 2024, the weighted-average remaining operating and finance lease term of its existing leases is approximately 1.63 and 1.53 years, respectively. Operating and finance lease expenses consist of the following: For the Years Ended Classification March 31, 2024 March 31, 2023 Operating lease cost Automobile lease costs Cost of revenues $ 1,737,869 $ 2,020,276 Lease expenses Selling, general and administrative 207,793 355,814 Finance lease cost Amortization of leased asset Cost of revenue 239,353 230,022 Amortization of leased asset General and administrative 276 100,814 Interest on lease liabilities Interest expenses on finance leases 29,088 25,675 Total lease expenses $ 2,214,379 $ 2,732,601 Operating lease costs for automobiles totaled $ 1,737,869 and $ 2,020,276 for the years ended March 31, 2024 and 2023, respectively. Operating lease expenses for offices and showroom leases totaled $ 206,432 and $ 355,814 for the years ended March 31, 2024 and 2023, respectively, of which $ 199,445 and $ 380,794 were amortization of leased asset for operating leases for the years ended March 31, 2024 and 2023, respectively. Interest expenses on finance leases totaled $ 29,088 and $ 25,675 for years ended March 31, 2024 and 2023, respectively. F- 34 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table sets forth the Company’s minimum lease payments in future periods: Operating lease Finance lease payments* payments Total Twelve months ending March 31, 2025 $ 69,001 $ 294,906 $ 363,907 Twelve months ending March 31, 2026 21,082 128,802 149,884 Total lease payments 90,083 423,708 513,791 Less: discount ( 3,905 ) ( 17,303 ) ( 21,208 ) Present value of lease liabilities $ 86,178 $ 406,405 $ 492,583 * As of March 31, 2024 and 2023, the outstanding balance of operating lease payments due to related parties was $ 51,741 and $ 185,709 , respectively. 19. COMMITMENTS AND CONTINGENCIES 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. Purchase commitments On September 23, 2022, the Company entered into a purchase contract with an automobile dealer to purchase a total of 100 automobiles for the amount of approximately $ 1.5 million. As of the filing date of these consolidated financial statements, the Company has remitted approximately $ 0.6 million as purchase prepayments, and expects to fulfill the purchase commitment before March 31, 2025. 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 the Company’s business operations, financial condition and operating results for 2021 and 2022, including but not limited to decrease in revenues, slower collection of accounts receivable and additional allowance for credit losses. Some of the Company’s customers exited the ride-hailing business and rendered 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, 2024 and 2023, the Company recognized an estimated provision loss of approximately $ 499 and $ 7,287 respectively, for drivers who exited the ride-hailing business were not able to make the monthly payments from operations. As of March 31, 2024, there was no contingent liabilities Hunan Ruixi had for the automobile purchasers. Contingent liability of Jinkailong Despite that the Company holds 35 % of equity interest of Jinkailong through Hunan Ruixi, and has not make any consideration towards to the investment, the Company will be subjected to the maximum amount of RMB 3.5 million (approximately $ 485,000 ) of which is equivalent to 35 % of liabilities in case Jinkailong is liquidated in accordance with PRC’s company registry compliance. F- 35 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 20. 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. By assessing the qualitative and quantitative criteria established by Accounting Standards Codification (“ASC”) 280, “Segment Reporting”, the Company considers itself to be operating in two reportable segments which comprise of automobile transaction and related services and online ride-hailing platform. The segments are organized based on type of service offered. The following tables present the summary of each segment’s revenue, loss from operations, loss before income taxes and net loss which is considered as a segment operating performance measure, for the years ended March 31, 2024 and 2023: For the Year ended March 31, 2024 Automobile Transaction and Online ride-hailing Related platform Services Services Unallocated Consolidated Revenues $ 4,320,031 $ 2,494,397 $ — $ 6,814,428 Interest income $ 491 $ 98 $ 12 $ 601 Depreciation and amortization $ 1,360,598 $ 64,442 $ 78,517 $ 1,503,557 Loss from operations $ ( 2,727,162 ) $ ( 381,845 ) $ ( 1,615,904 ) $ ( 4,724,911 ) Loss before income taxes $ ( 2,398,572 ) $ ( 441,704 ) $ ( 1,402,954 ) $ ( 4,243,230 ) Net loss $ ( 2,389,556 ) $ ( 441,704 ) $ ( 1,402,954 ) $ ( 4,234,214 ) Capital expenditure $ 671,679 $ — $ — $ 671,679 For the Year ended March 31, 2024 Automobile Transaction and Online ride-hailing Related platform Services Services Unallocated Consolidated Revenues $ 4,372,569 $ 3,709,945 $ — $ 8,082,514 Interest income $ 1,533 $ 197 $ 52 $ 1,782 Depreciation and amortization $ 1,842,745 $ 64,217 $ 84,401 $ 1,991,363 Loss from operations $ ( 4,319,384 ) $ ( 357,916 ) $ ( 1,463,608 ) $ ( 6,140,908 ) Loss before income taxes $ ( 3,682,810 ) $ ( 356,164 ) $ 248,281 $ ( 3,790,693 ) Net loss $ ( 3,682,810 ) $ ( 356,164 ) $ 248,281 $ ( 3,790,693 ) Capital expenditure $ 1,151,076 $ 26,420 $ — $ 1,177,496 F- 36 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The accounting principles for the Company’s revenue by segment are set out in Note 3(h). As of March 31, 2024, the Company’s total assets were comprised of $ 8,637,552 for automobile transaction and related services, $ 575,887 for online ride-hailing platform services and $ 648,045 for unallocated. As of March 31, 2023, the Company’s total assets were comprised of $ 12,579,764 for automobile transaction and related services, $ 937,400 for online ride-hailing platform services and $ 721,451 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. 21. PARENT-ONLY FINANCIALS SENMIAO TECHNOLOGY LIMITED CONDENSED BALANCE SHEETS March 31, March 31, 2024 2023 (Unaudited) (Unaudited) ASSETS Current Assets Cash and cash equivalents $ 21,124 $ 78,693 Due from subsidiaries 11,301,053 11,889,775 Prepayments, other receivables and other current assets, net 37,125 35,251 Total Current Assets 11,359,302 12,003,719 Other Assets Intangible assets 450,000 525,000 Total Assets $ 11,809,302 $ 12,528,719 LIABILITIES AND EQUITY Current Liabilities Accrued expenses and other liabilities $ 495,481 $ 340,151 Derivative liabilities 288,833 501,782 Total Current Liabilities 784,314 841,933 Other Liabilities Excess of investments in subsidiaries 9,895,723 7,023,186 Total Liabilities 10,680,037 7,865,119 Commitments and Contingencies Mezzanine Equity (redeemable) Series A convertible preferred stock (par value $ 1,000 per share, 5,000 shares authorized; 991 and 1,641 shares issued and outstanding at March 31, 2024 and March 31, 2023, respectively) 234,364 269,386 Stockholders’ Equity Common stock (par value $ 0.0001 per share, 500,000,000 shares authorized; 10,518,040 and 7,743,040 shares issued and outstanding at March 31, 2024 and March 31, 2023, respectively) 1,051 773 Additional paid-in capital 43,950,123 43,355,834 Accumulated deficit ( 41,384,268 ) ( 37,715,294 ) Accumulated other comprehensive loss ( 1,672,005 ) ( 1,247,099 ) Total Senmiao Technology Limited Stockholders’ Equity 894,901 4,394,214 Total Liabilities, Mezzanine Equity and Equity $ 11,809,302 12,528,719 F- 37 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SENMIAO TECHNOLOGY LIMITED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS For the Years Ended March 31, 2024 2023 General and administrative expenses $ ( 1,649,046 ) $ ( 1,451,038 ) Change in fair value of derivative liabilities 212,949 1,711,889 Equity of losses in subsidiaries ( 2,232,877 ) ( 3,374,600 ) Net loss ( 3,668,974 ) ( 3,113,749 ) Foreign currency translation adjustment ( 456,433 ) ( 1,137,645 ) Comprehensive loss attributable to stockholders $ ( 4,125,407 ) $ ( 4,251,394 ) SENMIAO TECHNOLOGY LIMITED CONDENSED STATEMENTS OF CASH FLOWS For the Years Ended March 31, 2024 2023 Cash Flows from Operating Activities: Net loss $ ( 3,668,974 ) $ ( 3,113,749 ) Adjustments to reconcile net loss to net cash used in operating activities: Equity of loss of subsidiaries 2,232,877 3,374,600 Amortization of intangible asset 75,000 75,000 Stock compensation expense 444,300 — Change in fair value of derivative liabilities ( 212,949 ) ( 1,711,889 ) Change in operating assets and liabilities Prepayments, receivables and other current assets ( 1,872 ) 100,002 Other receivable – a related party ( 150,000 ) — Accrued expenses and other liabilities 386,682 421,815 Net Cash Used in Operating Activities ( 894,936 ) ( 854,221 ) Cash Flows from Financing Activities: Repayment from subsidiaries 855,522 750,000 Borrowings from subsidiaries — 66,301 Repayments to a related party ( 18,155 ) — Net Cash Provided by Financing Activities 837,367 816,301 Net decrease in cash and cash equivalents ( 57,569 ) ( 37,920 ) Cash and cash equivalents, beginning of year 78,693 116,613 Cash and cash equivalents, end of year $ 21,124 $ 78,693 Supplemental Cash Flow Information Cash paid for interest expense $ — $ — Cash paid for income tax $ — $ — 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. 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 total equity loss in Senmiao Consulting, Hunan Ruixi, Yicheng, XXTX, Sichuan Senmiao, Corenel and Jiekai. F- 38 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 years ended March 31, 2022. 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 filing date of these consolidated financial statements, all installment of RSUs with an aggregate of 12,727 was vested and 9,545 was settled by the Company. The Company expects to settle the remaining vested RSUs by issuance of shares of common stock before March 31, 2024 and account for the vested RSUs as an addition to both expenses and additional paid-in capital. Equity Incentive Plan At the 2018 Annual Meeting of Stockholders of the Company held on November 8, 2018, the Company’s stockholders approved the Company’s 2018 Equity Incentive Plan for employees, officers, directors and consultants of the Company and its affiliates. At the 2022 Annual Meeting of Stockholders of Company held on March 30, 2023, the Company’s stockholders approved the amendment to the 2018 Equity Incentive Plan, to increase the number of shares of common stock reserved under the Plan to 1,500,000 shares. A committee consisting of at least two independent directors would be 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, 2024, the Company has granted an aggregate of 30,379 RSUs (after reverse split) , among which, 26,447 RSUs were issued under the Equity Incentive Plan, 3,182 RSUs were vested but have not been issued while 750 RSUs were forfeited due to two directors ceased to serve on the board of the Company since November 8, 2018. 1-for-10 shares reverse split on common stock The Company considered the above transactions after giving a retroactive effect to a 1-for-10 reverse stock split of its common stock which became effective on April 6, 2022. The Company believed it is appropriate to reflect the above transactions on a retroactive basis similar to those after a stock split or dividend pursuant to ASC 260. All shares and per share amounts used herein and in the accompanying consolidated financial statements have been retroactively stated to reflect the effect of the reverse stock split. Upon execution of the 1-for-10 reverse stock split, the Company recognized additional 8,402 shares of common stock due to round up issue. Conversion Price Adjustment for November 2021 Preferred Shares Pursuant to the Certificate of Designation for the series A convertible preferred stock signed by the Company and certain institutional investors in November 2021 Private Placement, the initial conversion price of the series A Convertible Preferred Shares was $ 0.68 . If as of the applicable date the conversion price then in effect is greater than the greater of (1) $ 0.41 (the “floor Price”) (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations and similar events) and (2) 85 % of the closing bid price on the applicable date (the “Adjustment Price”), the conversion price shall automatically lower to the Adjustment Price accordingly. As the 1-for-10 reverse stock split on the Company’s Common Stock became effective on April 6, 2022, the conversion price of the Preferred Shares was adjusted to $ 4.1 . As of March 31, 2024 and 2023, there were 991 and 1,641 shares of Series A convertible preferred stock outstanding, respectively, valued at $ 234,364 and $ 269,386 , recorded as mezzanine equity. As of March 31, 2024, 4,009 shares of Series A convertible preferred stock were converted into 1,871,125 shares of the Company’s common stock. Further, on August 9, 2022, the Company and the investors agreed to reduce the conversion price of the series A Convertible Preferred Shares from $ 4.10 to $ 2.00 and to increase the number of the shares of common stock that are available to be issued upon conversion of the Preferred Shares from 1,092,683 to 2,240,000 . F- 39 SENMIAO TECHNOLOGY LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Common stock issued for consulting services In October 2023, the Company entered into three different consulting and services agreements (the “Consulting Agreements”) with three consultants (the “Consultants”), pursuant to which the Company engaged the Consultant to provide certain merger and acquisition consulting service, market research and business development advisory services, and financial consulting services, respectively. As compensation for the services, the Company agreed to issue the Consultants an aggregate of 1,500,000 shares of its common stock, par value $ 0.0001 . The Company recognized the non-employee share-based payment equity awards by using the grant-date fair values at the time of signing agreement. On November 7, 2023, the issuance of 1,500,000 shares of the Company’s common stock has been completed and the Company recorded $ 444,300 service expense during the years ended March 31, 2024. Change of ownership interest in a subsidiary On February 11, 2024, The Company and Hunan Ruixi’s two minority shareholders (“Shareholders”) has entered into a share swap agreement (“Share Swap Agreement”). Pursuant to the Share Swap Agreement, the Company would issue a total of 950,000 shares of its common stock to the above mentioned two Shareholders. In return, each shareholder will transfer a 2.5 % equity interest in Hunan Ruixi to the Company, which increasing the Company’s ownership in Hunan Ruixi by 5 %. As no cash consideration was received, $ 155,461 which is the difference between the fair value of the consideration received and the amount by which the non-controlling interest is adjusted was recognized as an addition in additional paid-in capital in accordance with ASC 810-10-45-23 “Change in a parent’s ownership interest in a subsidiary”. 22. SUBSEQUENT EVENTS The Company evaluated all events and transactions that occurred after March 31, 2024 up through the date the Company filed these consolidated financial statements. No events require adjustment to or disclosure in the consolidated financial statements. F- 40 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.