Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our results of operations and financial condition should be read together with our unaudited condensed consolidated financial statements and the notes thereto, which are included elsewhere in this Report and our Annual Report on Form 10-K for the year ended March 31, 2026 (the "Annual Report") filed with the SEC. Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").

Overview

We are a provider of automobile transaction and related services, connecting consumers, who are mostly existing and prospective ride-hailing drivers affiliated with different operators of online ride-hailing platforms in the People's Republic of China ("PRC" or "China"). We provide automobile transaction and related services in Hunan Province of China through our majority owned subsidiary, Hunan Ruixi Business Operation Management Co., Ltd., a PRC limited liability company ("Hunan Ruixi").

Prior to December 31, 2025, we provided automobile transaction and related services in Sichuan Province of China through our former majority owned subsidiary, Chengdu Jiekai Yunli Technology Co., Ltd., a PRC limited liability company and its subsidiary ("Jiekai") and our former wholly owned subsidiary, Chengdu Corenel Technology Co., Ltd. a PRC limited liability company ("Corenel"). As discussed below under "Our Automobile Transactions and Related Services", we ceased our automobile transactions and related services in Sichuan Province of China on December 31 2025.

Starting in 2026, we began evaluating opportunities to expand its business into AI infrastructure. In furtherance of this initiative, we appointed David Nichols as a strategic advisor to assist us in advancing our strategy across AI infrastructure, digital infrastructure and new energy initiatives, with a particular focus on power infrastructure origination, capital formation and institutional partnerships.

In July 2026, we signed an operating agreement with Constant Energy Construction Corp. ("CECC") and jointly established Nebula Matrix AI LLC ("NMA LLC"). Pursuant to the operating agreement, all ownership interests of the NMA LLC, including, without limitation, (i) economic interest and (ii) voting interest, are evidenced by membership units. We hold 90 membership units (constituting 90% of the total 100 membership units), entitling us to 90% economic and voting interests in NMA LLC, while CECC holds the remaining 10 membership units with the corresponding 10% economic and voting interests. NMA LLC will serve as the core platform through which the two companies develop, invest in, construct and operate AI data centers and digital infrastructure projects in the United States. NMA LLC intends to pursue AI data center projects covering site selection, power procurement, engineering-procurement-construction ("EPC"), project financing and long-term operation. As of the filing date of this Report, specific project locations, capital contribution amounts, ownership percentages, project timelines and power capacity metrics have not been finalized. All contemplated projects are subject to completion of due diligence, availability of financing, and satisfaction of applicable regulatory and permitting requirements. There can be no assurance that we will successfully implement or generate operating revenues from such planned data-center initiatives.

Our Automobile Transactions and Related Services

Our automobile transaction and related Services are mainly comprised of (i) automobile operating lease where we provide car rental services to individual customers to meet their personal needs with lease term no more than twelve months (the "Auto Operating Leasing"); (ii) service fees from new energy vehicles ("NEVs") leasing where we charge NEVs lessees for a series of the services provided to them based on the chosen product solutions (the "Service for NEVs Leasing"); (iii)service fees from automobile purchase for a series of the services provided to purchasers throughout the purchase process based on the sales price of the automobiles and relevant services provided (the " Service for Automobile Purchase") ;(iv) monthly services where we provide management and related services to other online ride-hailing platforms we cooperated with ("Partner Platforms") and other companies and earn commission from them (the "Auto Commissions"); (v) automobile financing where we provide our customers with auto finance solutions through finance leases (the "Auto Financing"); (vi) default fees we charges to the lessees for early-termination the contracts or other violation behaviors to the contracts (the "Default Revenue"); and (vii) other supporting services provided to customers, including auto management and other related services (the "Auto Management Services") and automobile sales (the "Auto Sales"). We started our facilitation and supporting services in November 2018, the sale of automobiles in January 2019, and financial and operating leasing in March 2019, respectively.

Considering the fierce competition of the online ride-hailing industry and our operating losses in China, in December 2025 the Company entered into a certain Acquisition Agreement (the "Sichuan Acquisition Agreement") with Hu Mao Sheng Tang Holdings Limited., a non-affiliated Hong Kong company ("HMST"). Pursuant to the Sichuan Acquisition Agreement, the Company sold all of the equity interests in Sichuan Senmiao Yicheng Assets Management Co., Ltd. ("Yicheng"), Sichuan Senmiao Zecheng Business Consulting Co., Ltd. ("Senmiao Consulting") and its subsidiaries, which were our former subsidiaries in Sichuan Province of China ("former subsidiaries in Sichuan"), to HMST for nil consideration, while we undertook certain liabilities of $518,388 which were previously assumed by former subsidiaries in Sichuan (the "Disposition"). On December 31, 2025, the Disposition was completed and we ceased our automobile transactions and related services in Sichuan Province of China.

Since November 22, 2018, the acquisition date of Hunan Ruixi, and as of June 30, 2026, we have facilitated financing for an aggregate of 312 automobiles with a total value of approximately $5.4 million, sold an aggregate of 381 automobiles with a total value of approximately $3.7 million and delivered 470 automobiles under operating leases and 197 automobiles under finance leases to customers, the vast majority of whom are online ride-hailing drivers.

The table below provides a breakdown of the number of vehicles sold or delivered under different leasing arrangements or managed by us and corresponding revenue generated for the three months ended June 30, 2026 and 2025, respectively:

		For the Three Months Ended
		June 30,
		2026								2025
		Number of								Number of
		Vehicles				Revenue*				Vehicles				Revenue*
Auto Operating Leasing			329			$	313,000				339			$	386,000
Auto Financing			33			$	12,000				59			$	22,000
Auto Commissions			-			$	1,000				-			$	8,000
Other Services			>360			$	35,000				>350			$	12,000

*	The number was rounded to the nearest thousand for disclosure purpose.

During the three months ended June 30, 2026, our Auto Operating Leasing, Auto Financing, Auto Commissions and other services income accounted for approximately 86.8%, 3.3%, 0.3% and 9.6% of our total revenue from our automobile transactions and related services, respectively, while our Auto Operating Leasing, Auto Financing, Auto Commissions, and other services income accounted for approximately 90.3%, 5.2%, 1.9%, and 2.6% for the three months ended June 30, 2025, respectively.

Key Factors and Risks Affecting Results of Operations

Ability to Increase Our Automobile Lessee

Our revenue growth has been largely driven by the expansion of our automobile lessee base and the corresponding revenue generated from operating and finance lease. We acquire customers for our Automobile Transaction and Related Services through the network of third-party sales teams, referral from online ride-hailing platforms and our own efforts including online advertising and billboard advertising. We also send out fliers and participate in trade shows to advertise our services. We plan to maintain the number of our customers by marketing our companies to our existing and prospective automobile lessees in the cities we now operate in. We expect to keep promoting the growth of our automobile rental business with automobile rental solutions/incentives specifically targeted at drivers using our Partner Platforms. An effective cross-selling strategies between our automobile leasing business and our Partner Platforms is important to our expansion and revenue growth. We also plan to strengthen our marketing efforts through the collaboration with certain automobile dealers and through our own team by employing more experienced staff, sharing market resources with our equity investee company, and improving the quality and variety of our services. As of June 30, 2026, we had one employee in our own sales department.

Management of Automobile Rentals

Due to the fierce competition of online ride-hailing industry in those cities we operated in, we have witnessed a high turn-over rate on the short-term car rentals during the three months ended June 30, 2026. To meet the demand in Changsha, we have purchased automobiles for our operating lease. The daily management and timely maintenance of leased automobiles will have a significant effect on the stability and potential growth of our income from leasing automobiles in the next twelve months. The effective management, including maintaining the high turn-over rate of our automobiles through our proprietary system and experienced auto-management team could provide in-time delivery and qualified automobiles to potential lessees, either for personal use or providing online ride-hailing services. As of June 30, 2026, for parking and management of automobiles for operating lease, we had one parking lot and three employees in Changsha. During the three months ended June 30, 2026 and 2025, the average utilization of the automobiles for operating lease was approximately 93.1% and 96.0%, respectively.

Our Service Offerings and Pricing

The growth of our revenue depends on our ability to improve existing solutions and services provided, continue identifying evolving business needs, refine our collaborations with business partners and provide value-added services to our customers. The attraction of new automobile leases depends on our leasing solutions with attractive rental price and flexible leasing terms. We have also adopted a series of pricing formulas to adopt the market changes, considering the historical and future expenditure, remaining available leasing months and market price to determine our rental price for varied rental solutions. Furthermore, our product designs affect the type of automobile leases we attract, which in turn affect our financial performance. The attraction of new customers depends on the comprehensive income they could earn from our own or Partner Platforms, which is mainly affected by the number of orders distributed to them through our platform and the amount of the incentives paid to them from platforms. Our revenue growth also depends on our abilities to effectively price our services, which enables us to attract more customers and improve our profit margin.

Ability to Retain Key Business Cooperators

Historically, we have set up a series of strategy and business relationships with certain affiliates of some famous and leading companies of NEVs manufacturers, online ride-hailing platforms, local NEVs leasing companies, and travel service providers to develop our Automobile Transaction and Related Services. We earned commissions or services fees from them, purchased and leased automobiles for our business at a favorable price. The close relationships have provided us with the necessary capacity to support the development of our online ride-hailing platform and leasing business. To retain these valuable cooperators and continuously explore opportunities to collaborate with them in more areas is important to us to have considerable resources to support the exploration and expansion of our business into new cities.

Meanwhile, in order to strengthen our market position, Hunan Ruixi has built up cooperation relationships with Partner Platforms, such as Hunan Didi Chuxing Technology Co., Ltd., whereby the online ride-hailing requests and orders shall be completed on Partner Platforms utilizing the network of cars and drivers of us while Hunan Ruixi earned rental income from drivers and earned commissions from Partner Platforms.

Ability to Collect Receivables on a Timely Basis

For receivables from Auto Operating Leasing, we usually settle the rental income with each online ride-hailing driver monthly based on the product solutions they chose. In accordance with the development of the operating lease business, our Partner Platforms, such as Didi, agree to temporarily "lock-up" the fares of the rides which the driver earned from the platform to ensure the timely collection of our rental receivables from them. As of June 30, 2026, we had no accounts receivable of operating lease. Besides, during the three months ended June 30, 2026, we settled our commissions with the Partner Platforms for our automobile rental income on a monthly basis.

The efficiency of collection of the monthly and weekly payments has a material impact on our daily operation. Our risk and asset management department has set up a series of procedures to monitor the collection from drivers. Our business department has also set up a stable and close relationship with Partner Platforms to ensure the timely collection of commissions. The accounts receivable and advance payments may increase our liquidity risk.

Ability to Manage Defaults Effectively

We manage the credit risk arising from the default of automobile purchasers and lessees by performing credit checks on each automobile purchaser or lessee based on the credit reports from People's Bank of China and third-party credit rating companies, and personal information including residence, ethnicity group, driving history and involvement in legal proceeding. Our risk department continuously monitors the payment by each purchaser and sends them payment reminders. We also keep monitoring the daily gross fare earned by the online ride-hailing drivers, who are our majority customers and run their business through our Partner Platforms during the three months ended June 30, 2026. We do this so that we can evaluate their financial conditions and provide them with assistance including the transfer of automobile to a new driver if they are no longer interested in providing ride-hailing services or are unable to earn enough income to make monthly lease/loan payments. We also charge default fees from customers for their behaviors violated to the contracts.

Further, the automobiles subject to our finance leases are not collateralized by us. As of June 30, 2026, the total value of non-collateralized automobiles was close to the amount of finance lease receivables since it was on a straight-line basis. We believe our risk exposure of financing leasing is immaterial as we have experienced limited default cases and we are able to re-lease those automobiles to drivers under finance leases.

Ability to Compete Effectively

Our business and results of operations depend on our ability to compete effectively. Overall, our competitive position may be affected by, among other things, our service quality and our ability to price our solutions and services competitively. We will set up and continuously optimize our own business system to improve our service quality and user experience. Our competitors may have more resources than we do, including financial, technological, marketing and others and may be able to devote greater resources to the development and promotion of their services. We will need to continue to introduce new or enhance existing solutions and services to continue to attract automobile dealers, financial institutions, car buyers, lessees, ride-hailing drivers and other industry participants. Whether and how quickly we can do so will have a significant impact on the growth of our business.

Market Opportunity and Government Regulations in China

The demand for our services depends on overall market conditions of the online ride-hailing industry in China. The continuous growth of the urban population places increasing pressure on the urban transportation and the improvement of living standards has increased the market demand for quality travel in China. Traditional taxi service is limited, and the emerging online platforms have created good opportunities for the development of the online ride-hailing service market. The market value is expected to increase from RMB354.7 billion in 2024 to RMB751.3 billion in 2028, owing to rising consumer demand for economical mobility options and an amplified penetration of shared mobility services, especially in lower-tier cities. According to the 57th Statistical report on Internet Development in China published in February 2026 by the China Internet Network Information Center (the "CNNIC"), the number of online ride-hailing service users had reached 539 million by the end of December 2025, and took approximately 47.9% of the total number of Chinese internet users. We cooperate with DiDi, the dominant player in China's ride-hailing market. Benefiting from DiDi's leading market share, massive driver and passenger network, advanced AI intelligent dispatching technology, standardized compliance control system and high user loyalty, our business is well-positioned to capture the incremental growth brought by the rapid expansion of aggregation ride-hailing orders in the coming years. In addition, the online ride-hailing industry is also facing increasing competition in China and is attracting more capital investment. For example, Dida Inc. Chenqi Technology Limited and CaoCao Inc. were listed on the Hong Kong Stock Exchange in June 2024 and June 2025, respectively.

However, the participants in the online ride-hailing industry are facing increasingly fierce competition and the platforms for passengers and providing services together with online ride-hailing platform companies ("Aggregation Platforms") have gained rising significance in the shared mobility industry. According to the Ministry of Transportation (the "MOT") of the People's Republic of China, as of June 30, 2026, approximately 401 online ride-hailing platform companies have obtained booking taxi operating licenses, representing an increase of approximately 3% as compared with the one as of June 30, 2025. Total online ride-hailing order volume was approximately 979 million in June 2026 in China, representing an increase of approximately 29% as compared with the one in June 2025. Of this volume, orders completed by Aggregation Platforms amounted to 327 million, accounting for approximately 33.4% of the industry's total orders in June 2026 in China, representing an increase of 17.6% as compared with the one in June 2025. Meanwhile, approximately 3.21 million online booking taxi transportation certificates and approximately 7.48 million online booking taxi driver's licenses were issued nationwide in China as of December 31, 2024, respectively. Since 2023, the municipal transportation bureaus in a series of cities in China have released operational dynamics and risk warnings for the online ride-hailing industry, stating that the online ride-hailing market has become saturated. They remind enterprises and practitioners who intend to engage in online ride-hailing services should have a detailed understanding of relevant regulations, conduct market research, fully consider changes in operating income due to factors such as supply and demand, market conditions, fluctuations or continuous declines, objectively evaluate the actual income level of industry practitioners, and make rational and prudent career choices.

The online ride-hailing industry may also be affected by, among other factors, the general economic conditions in China. The interest rates and unemployment rates may affect the demand of ride-hailing services and automobile purchasers' willingness to seek credit from financial institutions. Adverse economic conditions could also reduce the average income of individual and intensify the competition between platforms. Should any of those negative situations occur, the volume and value of the automobile transactions we service will decline, and our revenue and financial condition will be negatively impacted.

On April 1, 2017, the General Office of Changsha City People's Government issued the "Detailed Rules for the Administration of Online Car-Hailing Business Services of Changsha City", which was abolished and replaced by the updated version issued on July 23, 2018. On August 20, 2025, the Changsha Municipal Bureau of Transportation further issued "Announcement of Changsha Municipal Bureau of Transportation on Further Improving the Issuance of Vocational Qualification Certificates for Taxi Drivers and Other Related Matters". According to these regulations and guidelines, three licenses /certificates are required for operating the online ride-hailing business in Changsha: (1) the ride-hailing service platform should obtain the online booking taxi operating license; (2) the automobiles used for online ride-hailing should obtain the online booking taxi transportation certificate ("automobile certificate"); (3) the drivers should obtain the online booking taxi driver's license ("driver's license"). Besides, all newly added cars used for online ride-hailing in Changsha shall be NEVs starting from 2027.

As of June 30, 2026, all ride-hailing drivers who leased our automobiles or used our services have obtained the driver's license for online ride-hailing services, and all of the cars used for online ride-hailing services which we provided management services have the automobile certificate. Without requisite automobile certificate or driver's license, these drivers may be suspended from providing ride-hailing services, confiscated their illegal income and subject to fines of up to 10 times of their illegal income. We assisted drivers to obtain the required certificate and license for our Automobile Transaction and Related Services. However, there was no guarantee that all of the drivers who run their online ride-hailing business would be able to obtain all the certificates and licenses. These Partner Platforms may not allow unqualified drivers who lease our automobiles to drive through these platforms, or reduce their commission income, so that they may not be able to earn enough income from those Partner Platforms to pay our rental fees. Our business and results of operations shall be materially and adversely affected if we could not serve qualified drivers or our served drivers are suspended from providing ride-hailing services.

The Chinese government has exercised and continued to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. For example, the Chinese cybersecurity regulator announced on July 2, 2021 that it had begun an investigation of Didi and two days later ordered that the company's app be removed from smartphone app stores. We believe that our current operations are in compliance with the laws and regulations of the Chinese cybersecurity regulator. However, the Company's operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating to its business or industry.

Results of Continuing Operations for the three months ended June 30, 2026 Compared to the three months ended June 30, 2025

		For the Three Months Ended
		June 30,
		2026				2025				Change
		(unaudited)				(unaudited)
Revenues		$	360,889			$	427,698			$	(66,809	)
Cost of revenues			(299,197	)			(345,831	)			46,634
Gross profit			61,692				81,867				(20,175	)
Operating expenses
Selling, general and administrative expenses			(692,472	)			(500,829	)			(191,643	)
Total operating expenses			(692,472	)			(500,829	)			(191,643	)
Loss from operations			(630,780	)			(418,962	)			(211,818	)
Other (expense) income, net			(737,700	)			29,087				(766,787	)
Excess of warrant fair value over offering proceeds			(34,149,713	)			-				(34,149,713	)
Change in fair value of derivative liabilities			2,732,106				77,182				2,654,924
Loss before income taxes expense			(32,786,087	)			(312,693	)			(32,473,394	)
Income tax expense			-				-				-
Net loss from continuing operations		$	(32,786,087	)		$	(312,693	)		$	(32,473,394	)

Revenues

We started generating revenue from Automobile Transaction and Related Services from our acquisition of Hunan Ruixi on November 22, 2018. As we focus on our automobile rental business, we expect revenue from our automobile rental to continuously account for a majority of our revenues. We provide a series of product solutions to sustain and further increase the number of our automobiles for operating leases.

The following table sets forth the breakdown of revenues by revenue source for the three months ended June 30, 2026 and 2025, respectively:

		For the Three Months Ended
		June 30,
		2026				2025
		(unaudited)				(unaudited)
Revenue from automobile transactions and related services
- Operating lease revenues from automobile rentals		$	313,335			$	386,266
- Service fees from NEVs leasing			21,291				-
- Financing revenues			11,813				22,331
- Service fees from automobile purchase services			4,670				1,270
- Default revenue			3,439				7,294
- Monthly services commissions			1,163				8,265
- Other service fees			5,178				2,272
Total Revenue		$	360,889			$	427,698

Revenue from our automobile transaction and related services mainly includes operating lease revenues from automobile rentals, service fees from NEVs leasing, financing revenues, service fees from automobile purchase services, default revenue, monthly services commissions, and other services fees, which accounted for approximately 86.8%, 5.9%, 3.3%, 1.3%, 1.0%, 0.3% and 1.4%, respectively, of the total revenue during the three months ended June 30, 2026. Meanwhile, operating lease revenues from automobile rentals, financing revenues, service fees from automobile purchase services, default revenue, monthly services commissions, and other services fees, which accounted for approximately 90.3%, 5.2%, 0.3%, 1.7%, 1.9% and 0.6%, respectively, of the total revenue during the three months ended June 30, 2025.

Operating lease revenues from automobile rentals

We generate revenues from leasing our own automobiles by online ride-hailing drivers with their authorization, with the majority of lease term of no more than 12 months. The decrease in rental income of $72,931, or approximately 18.9% during three months ended June 30, 2026 was mainly due to the decrease in the number and average monthly rental of automobiles leased for operating lease. We leased 329 automobiles with an average monthly rental income of approximately $344 per automobile, resulting in a rental income of $313,335 for the three months ended June 30, 2026. While we leased 339 automobiles with an average monthly rental income of approximately $398 per automobile, resulting in a rental income of $386,266 for the three months ended June 30, 2025.

Service fees from NEVs leasing

We generated revenues of $21,291 and $0 from leasing NEVs by charging leases service fees during the three months ended June 30, 2026 and 2025, respectively. The amount of service fees for NEVs leasing is based on our timely product solutions which are adjusted in accordance with different market conditions. We suspended charging Service fees from NEVs leasing from continuing operations for the period August 2023 through July 2025 and resumed such charges starting August 2025, which resulted in no related service fee revenue recognized from continuing operations for the three months ended June 30, 2025.

Financing revenues

We started our finance lease business in March 2019 and began to generate interest income from providing finance lease services to ride-hailing drivers in April 2019. We also charge the customers of our automobile financing facilitation services interest on their monthly payments which cover purchase price of automobile and our services fees and facilitation fees for terms of 24 or 48 months. We recognized a total interest income of $11,813 from an average monthly number of 26 automobiles and $22,331 from an average monthly number of 52 automobiles during the three months ended June 30, 2026 and 2025, respectively. The decrease was due to the average number of automobiles served for financial leasing decreased during the three months ended June 30, 2026.

Service fees from automobile purchase services

We generated revenues of $4,670 and $1,270 from the automobile purchase services during the three months ended June 30, 2026 and 2025, respectively. The increase was due to the number of automobiles purchase transactions increased to 4 during the three months ended June 30, 2026 from 1 during the three months ended June 30, 2025.

Default revenue

We generated default revenues of $3,439 and $7,294 from the automobile lessee's early-termination of the contracts or other violation behaviors to the contracts during the three months ended June 30, 2026 and 2025, respectively. The decrease was primarily attributable to a lower incidence of early-terminations and contractual breaches by the automobile lessees, driven by improved credit quality of our lessee base, enhanced risk management and contract monitoring practices during three months ended June 30, 2026.

Monthly services commissions

We generated revenues of $1,163 and $8,265 from the monthly management and related services provided to our Partner Platforms and other companies during the three months ended June 30, 2026 and 2025, respectively. The decrease was due to the decrease in the number of automobiles leased to online ride-hailing drivers for operating lease during the three months ended June 30, 2026, which in turn led to lower commission income from the Partner Platforms related to the monthly management and related services.

Other Service fees

We generate other revenues from other miscellaneous service fees charged to our customers during the three months ended June 30, 2026 and 2025. Other services fees mainly include the maintenance fees charged to our customers pursuant to certain new product solutions.

Cost of Revenues

Cost of revenues represents the depreciation and rental cost of automobiles, daily maintenance, insurance and other usage costs of automobiles which related to our Auto Operating Leasing. The decrease of $46,634, or approximately 13.5% was primarily due to decreased in the depreciation of automobiles. Although the total number of our own automobiles used for operating leasing remaining substantially unchanged during the three months ended June 30, 2026 as compared with the three months ended June 30, 2025, these automobiles were fully depreciated in or prior to the three months ended June 30, 2026.

Gross Profit

We had gross profit of $61,692 and $81,867, respectively, during the three months ended June 30, 2026 and 2025. The following table sets forth the breakdown of gross profit by major revenue source for the three months ended June 30, 2026 and 2025:

		For the Three Months Ended
		June 30,
		2026				2025
		(unaudited)				(unaudited)
- Auto Operating Leasing		$	14,138			$	40,435
- Other Automobile transaction and related Services			47,554				41,432
Total Gross Profit		$	61,692			$	81,867

We had a gross profit of $14,138 from our Auto Operating Leasing during the three months ended June 30, 2026, which decreased by $26,297 from a gross profit of $40,435 in the three months ended June 30, 2025. The decrease was attributable to the average monthly rental of automobiles leased for operating lease decreased from $389 in the three months ended June 30, 2025 to $344 in the three months ended June 30, 2026. As the gross margin of the revenues from our operating leasing decreased, our overall gross profit margin decreased to approximately 17.1% for the three months ended June 30, 2026 from approximately 19.1% for the three months ended June 30, 2025.

Selling, General and Administrative Expenses

For the three months ended June 30, 2026, selling, general and administrative expenses primarily consist of salary and employee benefits, rental expense, travel expenses, and other expenses. Selling, general and administrative expenses increased from $500,829 for three months ended June 30, 2025 to $692,472 for the three months ended June 30, 2026, representing an increase of $191,643, or approximately 38.3%. The increase was mainly due to (1) the increase of $160,178 in professional service fees such as financial, market consulting due to our financing arrangements during the three months ended June 30, 2026; (2) an increase of $52,699 in salary and employee benefits mainly due to the higher compensation scales for current executive officers.

Other (expense) income, net

For the three months ended June 30, 2026, we had other expense, net of $737,700, which primarily consist of the (1) $770,000 in offering costs allocable to the derivative liabilities for our June 2026 Units Warrants; partially offset by (2) income of approximately $15,000 from the disposal of our own automobiles used for operating leases; (3) penalty income of approximately $12,000 from the customers; and (4) the miscellaneous other income of approximately $5,000.

For the three months ended June 30, 2025, we had other income, net of $29,087, which primarily consist of (1) penalty income of approximately $15,000 from the customers; and (2) the miscellaneous other income of approximately $14,000.

Excess of warrant fair value over offering proceeds

In June 2026, we issued common shares and warrants in Units Private Placement, generating aggregate gross proceeds of $11.0 million. We concluded that these warrants qualify as liability instruments. At the issuance date in June 2026, the fair value of the warrants was estimated at $45,149,713 using the Black-Scholes valuation model, and the $34,149,713 excess of the warrants' fair value over the total offering proceeds was recognized as a loss in the unaudited condensed consolidated statements of operations and comprehensive loss.

Change in Fair Value of Derivative Liabilities

Warrants issued in our registered direct offerings that took place in February 2021, May 2021 and November 2025, and the August 2020 underwritten public offering, and the November 2021, November 2025 and June 2026 private placement were classified as liabilities under the caption "Derivative Liabilities" in the unaudited condensed consolidated balance sheet and recorded at estimated fair value at each reporting date, computed using the Black-Scholes valuation model. The change in fair value of derivative liabilities for the three months ended June 30, 2026 and 2025 was a gain of $2,732,106 and $77,182, respectively. The following table sets forth the breakdown of the gain (loss) in fair value of derivative liabilities for the three months ended June 30, 2026 and 2025:

		For the Three Months Ended
		June 30,
		2026				2025
		(unaudited)				(unaudited)
- August 2020 underwritten public offering		$	-			$	21
- February 2021 registered direct offering			-				219
- May 2021 registered direct offering			-				13,609
- November 2021 private placement			-				63,333
- November 2025 Private placement			(440,056	)			-
- November 2025 registered direct offering			(81,448	)			-
- June 2026 private placement			3,253,610				-
Total Change in Fair Value of Derivative Liabilities		$	2,732,106			$	77,182

Income Tax Expense

Generally, our subsidiary Hunan Ruixi is subject to enterprise income tax on its taxable income in China at a rate of 25%. And the applicable tax rate of our HK subsidiary, Senmiao HK, for the first HKD$2 million of assessable profits is 8.25% and assessable profits above HKD$2 million will continue to be subject to the rate of 16.5% for corporations in Hong Kong. The enterprise income tax is calculated based on the entity's global income as determined under PRC tax laws and accounting standards. With the exception of Senmiao HK, which generated profits primarily from tax-exempt interest income on bank deposits, all entities suffered losses. Accordingly, no tax expense was recorded for the three months ended June 30, 2026 and 2025.

Net loss from continuing operations

As a result of the foregoing, net loss from continuing operations for the three months ended June 30, 2026 was $32,786,087, representing an increase in loss of $32,473,394 from net loss of $312,693 for the three months ended June 30, 2025.

Results of Discontinued Operations for the three months ended June 30, 2026 Compared to the three months ended June 30, 2025

		For the Three Months Ended
		June 30,
		2026				2025
		(unaudited)				(unaudited)
Revenues		$	-			$	432,401
Cost of revenues			-				(317,313	)
Gross profit			-				115,088
Operating expenses			-
Provision for credit losses			-				(307,416	)
Total operating expenses			-				(307,416	)
Loss from operations			-				(192,328	)
Other income, net			-				229,198
Interest expense on finance leases			-				(615	)
Income before income taxes			-				36,255
Income tax expenses			-				-
Net income from discontinued operations		$	-			$	36,255

The result of discontinued operations was the financial figures of our former subsidiaries in Sichuan. As of December 31, 2025, we deconsolidated former subsidiaries in Sichuan and its business result was included in our automobile transactions and related services before we deconsolidated its financial figures.

Revenues

The following table sets forth the breakdown of revenues by revenue source for the three months ended June 30, 2026 and 2025:

		For the Three Months Ended
		June 30,
		2026				2025
		(unaudited)				(unaudited)
Revenue from automobile transactions and related services (discontinued operations)
- Operating lease revenues from automobile rentals		$	-			$	309,137
- Service fees from NEVs leasing			-				83,444
- Monthly services commissions			-				27,560
- Default revenue			-				2,935
- Other service fees			-				9,325
Total Revenue from discontinued operations		$	-			$	432,401

Revenue from automobile transactions and related services (discontinued operations)

Revenue from automobile transaction and related services (discontinued operations) mainly included operating lease revenues from automobile rentals, service fees from NEVs leasing, monthly services commissions, default revenue and other services fees, which accounted for approximately 71.5%, 19.3%, 6.4%, 0.7% and 2.1%, respectively, of the total revenue from discontinued operations during the three months ended June 30, 2025.

Operating lease revenues from automobile rentals

Our former subsidiaries in Sichuan generated revenues from leasing sub-leasing automobiles leased from third-parties and related parties or rendered by online ride-hailing drivers with their authorization for a lease term of no more than twelve months. Our former subsidiaries in Sichuan leased 327 automobiles with an average monthly rental income of approximately $401 per automobile, resulting in a rental income of $309,137, including rental income of $24,057 from a related party, for the three months ended June 30, 2025.

Service fees from NEVs leasing

Our former subsidiaries in Sichuan generated revenues of $83,444 from leasing NEVs by charging leases service fees during the three months ended June 30, 2025. The amount of services fees for NEVs leasing were based on our timely product solutions in accordance which adjusted with different market conditions.

Monthly services commissions

Our former subsidiaries in Sichuan generated revenues of $27,560 from the monthly management and related services provided to our Partner Platforms during the three months ended June 30, 2025.

Default revenue

Our former subsidiaries in Sichuan generated default revenues of $2,935 from the automobile lessee's early-termination of the contracts or other violation behaviors to the contracts during the three months ended June 30, 2025.

Other Service fees

Our former subsidiaries in Sichuan generated other revenues from other miscellaneous service fees charged to our customers during the three months ended June 30, 2025. Other services fees mainly include the maintenance fees charged to our customers pursuant to certain new production solutions.

Cost of Revenues

During the three months ended June 30, 2025, cost of revenues from discontinued operations of $317,313 represented the amortization of ROUs, rental cost of automobiles, daily maintenance and insurance expense of automobiles which related to Auto Operating Leasing.

Selling, General and Administrative Expenses

For the three months ended June 30, 2025, selling, general and administrative expenses from discontinued operations related to Auto Operating Leasing, which amounted to $307,416, primarily consisted of (1) $217,920 in outsourced operating services related to automobile lease, mainly attributable to the streamlining of the workforce in Chengdu, thereby sharing venue and personnel resources with Jinkailong, which resulted the corresponding service fee obligations; (2) $47,065 in salary and employee benefits; (3) $21,400 in entertainment, advertising and promotion; and (4) other miscellaneous expenses.

Other income, net

For the three months ended June 30, 2025, our former subsidiaries in Sichuan had other income, net of $229,198, which was primarily due to deconsolidation of Corenel.

Income Tax expense

Our former subsidiaries in Sichuan are subject to enterprise income tax on its taxable income in China at a rate of 25%. All of our former subsidiaries in Sichuan suffered losses and no tax expense was recorded for the three months ended June 30, 2025.

Net income from discontinued operations

As a result of the foregoing, the net income from discontinued operations for the three months ended June 30, 2025 was $36,255.

Liquidity and Capital Resources

In assessing liquidity, we monitor and analyze our cash on-hand and our operating and capital expenditure commitments. Our 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 our working capital requirements.

Our business is capital intensive, and certain factors show negative trends in its liquidity position, including (1) the net loss of approximately $32.8 million for the three months ended June 30, 2026; (2) accumulated deficit of approximately $83.1 million as of June 30, 2026; (3) $0.9 million of net cash outflows in operating activities from continuing operations for the three months ended June 30, 2026; and (4) the working capital deficit of approximately $36.3 million as of June 30, 2026.

Recent financing arrangements, however, have materially strengthened our cash position. As of June 30, 2026, we recorded total derivative liabilities of approximately $48.0 million, of which $41.9 million related to warrants issued under the April 2026 Units private placement. Management assessed that these warrants will not be settled in cash upon exercise. Management evaluated and concluded that the factors aforementioned did not raise substantial doubt as to our ability to continue as a going concern. We believe that our cash balance of approximately $12.9 million as of June 30, 2026 will be sufficient to meet our liquidity needs for the twelve months following issuance of these unaudited condensed consolidated financial statements. If we experienced an adverse operating environment or incurred unanticipated capital expenditure requirements, or if we determined to accelerate our growth, then additional financing may be required.

The following table summarizes our cash flows:

		For the Three Months Ended
		June 30,
		2026				2025
		(unaudited)				(unaudited)
Net Cash Used in Operating Activities from Continuing Operations		$	(881,647	)		$	(179,798	)
Net Cash Used in Operating Activities from Discontinued Operations			-				(141,357	)
Net Cash Used in Operating Activities			(881,647	)			(321,155	)
Net Cash Used in Investing Activities from Continuing Operations			(39,538	)			-
Net Cash Used in Investing Activities from Discontinued Operations			-				(385	)
Net Cash Used in Investing Activities			(39,538	)			(385	)
Net Cash Provided by Financing Activities from Continuing Operations			10,230,000				325,347
Net Cash Provided by Financing Activities from Discontinued Operations			-				52,124
Net Cash Provided by Financing Activities			10,230,000				377,471
Effect of Exchange Rate Changes on Cash and Cash Equivalents			831				(21,741	)
Cash and Cash Equivalents, Beginning of the Period			3,562,219				833,577
Cash and Cash Equivalents, End of the Period			12,871,865				867,767
Less: Cash and Cash Equivalents from discontinued operations			-				(77,532	)
Cash from continuing operations, End of Period		$	12,871,865			$	790,235

Cash Flow in Operating Activities

For the three months ended June 30, 2026, net cash used in operating activities was $881,647, which was the net outflows from continuing operations. While for the three months ended June 30, 2025, net cash used in operating activities was $321,155, which consisted of net cash outflows of $179,798 from continuing operations and $141,357 from discontinued operations.

The increase of $701,849 in net cash used in operating activities from continuing operations for the three months ended June 30, 2026 as compared with the three months ended June 30, 2025 was primarily attributable to (1) increase of $32,473,394 in net loss from continuing operations; (2) increase of $2,654,924 in Change in fair value of derivative liabilities from a gain of $77,182 for the three months ended June 30, 2025 to a gain of $2,732,106 for the three months ended June 30, 2026; (3) increase of $256,594 in the change of prepayments, other receivables and other assets; (4) increase of $145,803 in the change of accrued expenses and other liabilities (included third parties and a related party); (5) decrease of $60,793 in depreciation of property and equipment as our owned automobiles used in operating leases were fully depreciated in or prior to the three months ended June 30, 2026; and partially offset by (6) a loss of $34,149,713 arising from excess of the warrants' fair value over the total offering proceeds from Units Private Placement issuance of common shares and warrants; and (7) $770,000 of offering costs for the Units Private Placement issuance of common shares and warrants allocated to derivative liabilities.

Cash Flow in Investing Activities

For the three months ended June 30, 2026, we had net cash used in investing activities of $39,538, which consisted of: (1) purchase of property and equipment for office purpose of $61,875; partially offset by (2) the proceeds from sales of the used-automobiles of $22,337.

For the three months ended June 30, 2025, we had net cash used in investing activities of $385, which was the net outflows from discontinued operations.

Cash Flow in Financing Activities

For the three months ended June 30, 2026, we had net cash provided by financing activities of $10,230,000, generated from gross proceeds of $11,000,000 from issuance of common stock and warrant in Units Private Placement, net of related issuance costs of $770,000.

For the three months ended June 30, 2025, we had net cash provided by financing activities of $377,471, which consisted net inflows of $325,347 from continuing operations and $52,124 from discontinued operations. The net cash provided by financing activities from continuing operations consisted of: (1) net proceeds of $226,000 from the exercise of November 2021 Private Placement Warrants from an investor; and (2) borrowings from a related party of $99,347.

Off-Balance Sheet Arrangements

As of the filing date of this Report, we have the following off-balance sheet arrangements that are likely to have a future effect on our financial condition, revenues or expenses, results of operations and liquidity:

●

Purchase Commitments

As of the filing date of this Report, we have no purchase commitment.

●

Contingent Liabilities

Pursuant to the Regulations of the State Council on Implementing the Management System for Registered Capital Registration in the Company Law of the People's Republic of China issued on July 1, 2024 (the "Registered Capital Registration Implementing Rules"), as Jinkailong was registered and established before June 30, 2024, its shareholders should fully pay their unpaid subscribed capital before June 30, 2032. As of June 30, 2026, Hunan Ruixi holds 35% of equity interest of Jinkailong and has not made any payments towards the investment amounting to RMB3.5 million (approximately $516,000). According to the Registered Capital Registration Implementing Rules, Hunan Ruixi shall pay the subscribed capital of Jinkailong before June 30, 2032.

Inflation

We do not believe our business and operations have been materially affected by inflation.

Critical Accounting Estimates

Our unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these unaudited condensed consolidated financial statements and accompanying notes requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in their application. The management determined there were no critical accounting estimates.

When reading our unaudited condensed consolidated financial statements, you should consider our selection of critical accounting policies, the judgment and other uncertainties affecting the application of such policies and the sensitivity of reported results to changes in conditions and assumptions. Our critical accounting policies and practices include the following: (i) property and equipment, net; and (ii) revenue recognition. See Note 3-Summary of Significant Accounting Policies to our consolidated financial statements in our 2026 Form 10-K for the disclosure of these accounting policies.