Quarterly Report for Quarter Ending June 30, 2025 (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, 2025 (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 through our majority owned subsidiaries, Chengdu Jiekai Yunli Technology Co., Ltd., a PRC limited liability company and its subsidiary ("Jiekai"), and Hunan Ruixi Financial Leasing Co., Ltd., a PRC limited liability company ("Hunan Ruixi"), and our former wholly owned subsidiary, Chengdu Corenel Technology Co., Ltd. a PRC limited liability company ("Corenel"). Substantially all of our operations are conducted in China.

From October 2020 to August 2024, we also operated an online ride-hailing platform through Hunan Xixingtianxia Technology Co., Ltd. ("XXTX"), a former wholly-owned subsidiary of Sichuan Senmiao Zecheng Business Consulting Co., Ltd., our wholly-owned subsidiary ("Senmiao Consulting"). The platform enabled qualified ride-hailing drivers to provide application-based transportation services mainly in Chengdu, Changsha and other 20 cities in China. As more fully discussed below under "- Our Discontinued Ride-Hailing Platform Services," we ceased our online ride-hailing Platform Services on August 20, 2024.

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 financing leases (the "Auto Financing"); (vi) default expenses 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.

Since November 22, 2018, the acquisition date of Hunan Ruixi, and as of June 30, 2025, we have facilitated financing for an aggregate of 312 automobiles with a total value of approximately $5.3 million, sold an aggregate of 1,516 automobiles with a total value of approximately $14.5 million and delivered 2,185 automobiles under operating leases and 192 automobiles under financing 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, 2025 and 2024, respectively:

		For the Three Months Ended
		June 30,
		2025								2024
		Number of								Number of
		Vehicles				Revenue*				Vehicles				Revenue*
Auto Operating Leasing			>660				695,000				>640			$	756,000
Auto Commissions			-				36,000				-			$	26,000
Auto Financing			55				22,000				50			$	22,000
Other Services			>680				107,000				>600			$	75,000

During the three months ended June 30, 2025, our Auto Operating Leasing, Auto Commissions, Auto Financing and other services income accounted for approximately 80.9%, 4.2%, 2.6% and 12.3% of our total revenue from our automobile transactions and related services, respectively, while our Auto Operating Leasing, Auto Commissions, Auto Financing, and other services income accounted for approximately 86.0%, 3.0%, 2.5% and 8.5% for the three months ended June 30, 2024, respectively.

Our Discontinued Online Ride-Hailing Platform Services

From October 2020 to August 2024, we operated our own online ride-hailing platform in China. The platform (called Xixingtianxia) was owned and operated by XXTX, of which Senmiao Consulting acquired the 100% equity interest pursuant to a series of investment and supplementary agreements. XXTX operated Xixingtianxia and held a national online reservation taxi operating license, which served online ride-hailing drivers in 22 cities in China, providing them with a platform to view and take customer orders for rides. XXTX generated revenue from providing services to online ride-hailing drivers to assist them in providing transportation services to the riders looking for taxi/ride-hailing services. XXTX earned commissions for each completed order as 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.

Due to the fierce competition of the online ride-hailing industry, XXTX had suffered loss in the past. Since December 2023, XXTX had engaged Anhui Lianma Technology Co., Ltd. ("Anhui Lianma"), a third-party to co-operate the online ride-hailing platform by outsourcing certain daily operation work to Anhui Lianma in most of cities it operates platform in XXTX and Anhui Lianma will jointly share the operational profits, with the specific calculation method being defined in the cooperation agreement. However, considering the changes in online ride-hailing industry and development plan of the Company, on August 8, 2024, we entered into the Acquisition Agreement with the Purchaser, and certain other parties thereto. Pursuant to the Acquisition Agreement, the Purchaser acquired all of the equity interests the XXTX at a total purchase price of zero, while taking over certain liabilities of XXTX as defined in the Acquisition Agreement. On August 20, 2024, the acquisition was completed and we ceased the online ride-hailing platform services.

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 financial leasing. 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, 2025, we had two employees 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, 2025. To meet the demand in Chengdu and Changsha, we have purchased and leased automobiles from third parties 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, 2025, for parking and management of automobiles for operating lease, we had one parking lot and three employees in Changsha, and we also share the parking lot with our equity investee company, Jinkailong in Chengdu. During the three months ended June 30, 2025 and 2024, the average utilization of the automobiles for operating lease was approximately 88.0% and 90.4%, 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 in certain cities, our subsidiaries, Hunan Ruixi and Jiekai, have built up cooperation relationships with Partner Platforms, such as Hunan Didi Technology Co., Ltd., Chengdu Anma Zhixing Technology Co., Ltd., Sichuan Peitu Kuaixing Technology Co., Ltd. and Nanjing Lingxing Technology Co., Ltd.(i.e.,"T3"), 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 and Jiekai 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 Gaode, 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, 2025, we had accounts receivable of operating lease of approximately $35,000 in total. Besides, during the three months ended June 30, 2025, we settled our commissions with the Partner Platforms for our online ride-hailing platform services and 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. We have used the majority of the proceeds from our equity offerings and plan to seek equity and/or debt financings to pay for the expenditure related to the automobile purchase. To pay for the expenditure in advance will enhance the stability of our daily operation and lower the liquidity risk, and attract more customers.

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, 2025. 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 expenses from customers for their behaviors violated to the contracts.

Further, the automobiles subject to our financing leases are not collateralized by us. As of June 30, 2025, 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 financing 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 56th Statistical report on Internet Development in China published in July 2025 by the China Internet Network Information Center (the "CNNIC"), the number of online ride-hailing service users had reached 511 million by the end of June 2025, and took approximately 45.6% of the total number of Chinese internet users. In addition, in recent years, aggregation platforms have gained rising significance in the shared mobility industry. According to Frost & Sullivan, the portion of ride hailing orders fulfilled through aggregation platforms increased from 3.5% in 2018 to 30.0% in 2023, and is expected to further increase to 49.0% by 2028. 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 competitions. According to the Ministry of Transportation (the "MOT") of the People's Republic of China, as of June 30, 2025, approximately 389 online ride-hailing platforms have obtained booking taxi operating licenses, representing an increase of approximately 10% as compared with the one as of June 30, 2024. And the total volume of online ride-hailing orders was approximately 757 million in June 2025 in China, representing a decrease of approximately 25% as compared with the one as of June 30, 2024. 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 November 5, 2016, the Municipal Communications Commission of Chengdu City and a number of municipal departments jointly issued the "Implementation Rules for the Administration of Online Booking Taxi Management Services for Chengdu", which was abolished and replaced by the updated version issued on July 26, 2021. On August 10, 2017, the Transportation Commission of Chengdu further issued the guidelines on compliance requirements for online ride-hailing businesses, including Working Process for the Online Appointment of Taxi Drivers Qualification Examination and Issuance and Online Appointment Taxi Transportation Certificate Issuance Process. On November 28, 2016, Guangzhou Municipal People's Government promulgated Interim Measures for the Management of Online Ride Hailing Operation and Service in Guangzhou, as amended on November 14, 2019. According to these regulations and guidelines, three licenses /certificates are required for operating the online ride-hailing business in Chengdu and Guangzhou: (1) the ride-hailing service platform 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 the new cars used for online ride-hailing in Chengdu should be NEVs since July 2021.

However, approximately 39% of ride-hailing drivers who leased our automobiles or used our services have not obtained the driver's license for online ride-hailing services as of June 30, 2025 while 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. Meanwhile, during the three months ended June 30, 2025, Gaode conducted several rounds of compliance checks in Chengdu and other cities and reduced the number of orders dispatched platforms that allowed drivers to provide services without appropriate licenses or certificates. 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, 2025 Compared to the three months ended June 30, 2024

		For the Three Months Ended
		June 30,
		2025				2024				Change
		(unaudited)				(unaudited)
Revenues		$	860,099			$	879,009			$	(18,910	)
Cost of revenues			(663,144	)			(626,039	)			(37,105	)
Gross profit			196,955				252,970				(56,015	)
Operating expenses
Selling, general and administrative expenses			(808,245	)			(853,498	)			45,253
Provision for credit losses			-				(173,441	)			173,441
Total operating expenses			(808,245	)			(1,026,939	)			218,694
Loss from operations			(611,290	)			(773,969	)			162,679
Other income, net			258,285				51,459				206,826
Interest expense on finance leases			(615	)			(5,088	)			4,473
Change in fair value of derivative liabilities			77,182				(8,287	)			85,469
Loss before income taxes expense			(276,438	)			(735,885	)			459,447
Income tax expense			-				-				-
Net loss from continuing operations		$	(276,438	)		$	(735,885	)		$	459,447

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 plan to 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, 2025 and 2024, respectively:

		For the Three Months Ended
		June 30,
		2025				2024
		(unaudited)				(unaudited)
Revenue from automobile transactions and related services
- Operating lease revenues from automobile rentals		$	695,403			$	756,315
- Service fees from NEVs leasing			83,444				22,094
- Monthly services commissions			35,825				26,254
- Financing revenues			22,331				22,176
- Default revenue			10,229				22,764
- Service fees from automobile purchase services			1,270				21,738
- Other service fees			11,597				7,668
Total Revenue		$	860,099			$	879,009

Revenue from our automobile transaction and related services mainly includes operating lease revenues from automobile rentals, service fees from NEVs leasing, monthly services commissions, financing revenues, default revenue, service fees from automobile purchase services, and other services fees, which accounted for approximately 80.9%, 9.7%, 4.2%, 2.6%, 1.2%, 0.1% and 1.3%, respectively, of the total revenue during the three months ended June 30, 2025. Meanwhile, operating lease revenues from automobile rentals, service fees from NEVs leasing, monthly services commissions, financing revenues, default revenue, service fees from automobile purchase services and other services fees, which accounted for approximately 86.0%, 2.5%, 3.0%, 2.5%, 2.6%, 2.5% and 0.9%, respectively, of the total revenue during the three months ended June 30, 2024.

Operating lease revenues from automobile rentals

We generate revenues from leasing our own automobiles and 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. The decrease in rental income of $60,912 or approximately 8.1% during the three months ended June 30, 2025 was mainly due to the decrease in average monthly rental income per automobile and partially offset by the increase in number of automobiles leased for operating lease. We leased over 660 automobiles with an average monthly rental income of approximately $400 per automobile, resulting in a rental income of $695,403, including rental income of $24,057 from another related party, for the three months ended June 30, 2025. We leased approximately 640 automobiles with an average monthly rental income of approximately $413 per automobile, resulting in a rental income of $756,315, including rental income of $5,243 from a related party, for the three months ended June 30, 2024.

Service fees from NEVs leasing

We generated revenues of $83,444 and $22,094 from leasing NEVs by charging leases service fees during the three months ended June 30, 2025 and 2024, respectively. The amount of services fees for NEVs leasing were based on our product solutions timely in accordance which adjusted with different market conditions.

Monthly services commissions

We generated revenues of $35,825 and $26,254 from the monthly management and related services provided to our Partner Platforms and other companies during the three months ended June 30, 2025 and 2024, respectively. The increase of $9,571 or approximately 36.5% was due to increase in the number of the automobiles and drivers we served, who ran their business through the Partner Platforms.

Financing revenues

We started our financial leasing business in March 2019 and began to generate interest income from providing financial leasing 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 36 or 48 months. We recognized a total interest income of $22,331 from an average monthly number of 52 automobiles and $22,176 from an average monthly number of 38 automobiles during the three months ended June 30, 2025 and 2024, respectively. The increase was due to the average number of automobiles served for financial leasing increased during the three months ended June 30, 2025.

Default revenue

We generated default revenues of $10,229 and $22,764 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 and 2024, respectively.

Service fees from automobile purchase services and Other Service fees

We generated revenues of $1,270 and $21,738 from the automobile purchase services during the three months ended June 30, 2025 and 2024, respectively. The decrease was due to the number of automobiles purchase transactions decreased to 1 during the three months ended June 30, 2025 from 16 in the same period in 2024.

We generate other revenues from other miscellaneous service fees charged to our customers during the three months ended June 30, 2025 and 2024. Other services fees mainly include the maintenance fees charged to our customers pursuant to certain new production solutions.

Cost of Revenues

Cost of revenues represents the amortization of ROUs, depreciation and rental cost of automobiles, daily maintenance and insurance expense of automobiles which related to our Auto Operating Leasing. Cost of revenues increased by $37,105 or approximately 5.9% during the three months ended June 30, 2025 as compared with the three months ended June 30, 2024, mainly due to an increase in the monthly average number of the automobiles leased from the third parties for operating lease from 263 in the three months ended June 30, 2024 to 322 in the three months ended June 30, 2025. During the three months ended June 30, 2025 and 2024, we paid $59,639 and $1,627, respectively, to related parties for costs of automobiles under operating leases.

Gross Profit

We had gross profit of $196,955 and $252,970, respectively, during the three months ended June 30, 2025 and 2024. The decrease of $56,015 was mainly due to the decrease in gross profit from Auto Operating Leasing. The following table sets forth the breakdown of gross profit by major revenue source for the three months ended June 30, 2025 and 2024:

		For the Three Months Ended
		June 30,
		2025				2024
		(unaudited)				(unaudited)
- Auto Operating Leasing		$	32,259			$	130,276
- Other Automobile transaction and related Services			164,696				122,694
Total Gross Profit		$	196,955			$	252,970

We had a gross profit of $32,259 from our Auto Operating Leasing during the three months ended June 30, 2025, which decreased by $98,017 from a gross profit of $130,276 in the three months ended June 30, 2024. The decrease was attributable to: (1) the decrease in average monthly rental income from approximately $413 for the three months ended June 30, 2024 to approximately $400 for the three months ended June 30, 2025; and (2) the average utilization of the automobiles for operating lease decreased from 90.4% in the three months ended June 30, 2024 to 88.0% in the three months ended June 30, 2025, while the average number of the automobiles leased from the third parties for operating lease increased from 263 to 322. As the gross margin of the revenues from our Auto Business decreased during the three months ended June 30, 2025, our overall gross profit margin decreased to approximately 22.9% from approximately 28.8% during the three months ended June 30, 2024.

Selling, General and Administrative Expenses

Selling, general and administrative expenses primarily consist of salary and employee benefits, office rental expense, travel expenses, and other costs. Selling, general and administrative expenses decreased from $853,498 for the three months ended June 30, 2024 to $808,245 for the three months ended June 30, 2025, representing a decrease of $45,253, or approximately 5.3%. The decrease mainly consisted of (1) a decrease of $104,593 in salary and employee benefits as the average monthly number of our employees decreased from 56 for the three months ended June 30, 2024 to 38 for the three months ended June 30, 2025; and (2) a decrease of $64,668 in offices rental and charges in the three months ended June 30, 2025; partly offset by (3) the increase of $196,325 in professional service fees such as outsourced operating services related to automobile lease, mainly due to the streamline the workforce and improvement on the daily operation in Chengdu.

Provision for credit losses

We re-evaluated the possibility of collection of unsettled balances from customers/suppliers of our automobile transactions and related services, and we provided provision for credit losses of $0 and $173,441 against receivables from Jinkailong for the three months ended June 30, 2025 and 2024, respectively.

Other income, net

For the three months ended June 30, 2025, we had other income, net of $258,285, which primarily consist of the (1) a gain of approximately $245,000 from disposal of Corenel; (2) penalty income of approximately $15,000 from the customers; partially offset by (3) the expense of approximately $14,000 for processing automobile violation fines; and (4) the miscellaneous other income, net of approximately $18,000.

For the three months ended June 30, 2024, we had other income, net of $51,459, which primarily consist of (1) penalty income of approximately $32,000 from the customers; (2) the miscellaneous income of approximately $19,000.

Interest Expense on Finance Leases

Interest expense on finance leases for the three months ended June 30, 2025 and 2024 was $615 and $5,088, respectively, representing the interest expense accrued under financing leases for the leased automobiles Corenel, our former subsidiary, leased from a third-party company.

Change in Fair Value of Derivative Liabilities

Warrants issued in our registered direct offerings that took place in February 2021 and May 2021, and the August 2020 underwritten public offering, and the November 2021 private placement were classified as liabilities under the caption "Derivative Liabilities" in the consolidated balance sheet and recorded at estimated fair value at each reporting date, computed using the Black-Scholes valuation model. The change in fair value of derivative liabilities for the three months ended June 30, 2025 and 2024 was a gain of $77,182 and a loss of $8,287, 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, 2025 and 2024:

		For the Three Months Ended
		June 30,
		2025				2024
		(unaudited)				(unaudited)
- August 2020 underwritten public offering		$	21			$	425
- February 2021 registered direct offering			219				451
- May 2021 registered direct offering			13,609				1,437
- November 2021 private placement			63,333				(10,600	)
Total Change in Fair Value of Derivative Liabilities		$	77,182			$	(8,287	)

Income Tax Expense

Generally, our subsidiaries are subject to enterprise income tax on their taxable income in China at a rate of 25%. The enterprise income tax is calculated based on the entity's global income as determined under PRC tax laws and accounting standards. All the subsidiaries in China suffered losses and no tax expense was recorded for the three months ended June 30, 2025 and 2024.

Net loss from continuing operations

As a result of the foregoing, net loss from continuing operations for the three months ended June 30, 2025 was $276,438, representing a decrease of 459,447 from net loss of $735,885 for the three months ended June 30, 2024.

Results of Discontinued Operations for the three months ended June 30, 2025 Compared to the three months ended June 30, 2024

		For the Three Months Ended
		June 30,
		2025				2024
		(unaudited)				(unaudited)
Revenues		$	-			$	243,391
Cost of revenues			-				(175,826	)
Gross profit			-				67,565
Operating expenses
Selling, general and administrative expenses			-				(86,770	)
Total operating expenses			-				(86,770	)
Loss from operations			-				(19,205	)
Other expenses, net			-				(3,803	)
Interest expense			-				(5,860	)
Loss before income taxes			-				(28,868	)
Income tax benefit			-				1,935
Net loss from discontinued operations		$	-			$	(26,933	)

The results of discontinued operations was the financial figures of our former subsidiary, XXTX. As of August 20, 2024, we deconsolidated XXTX and its business result was included in our online ride-hailing platform services before we deconsolidated its financial figures.

Revenues

XXTX generated revenue from providing services to online ride-hailing drivers to assist them in providing transportation service to the riders though Xixingtianxia platform and earned commissions for each completed order 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.

During the three months ended June 30, 2024, approximately 0.4 million rides with gross fare of approximately $1.3 million were completed through our Xixingtianxia platform and an average of over 2,300 ride-hailing drivers completed rides and earned income through Xixingtianxia (the "Active Drivers") each month. XXTX earned online ride-hailing platform service fees of $243,391, after netting off approximately $24,000 incentives paid to Active Drivers.

Selling, General and Administrative Expenses

Selling, general and administrative expenses from discontinued operations primarily consisted of (1) $35,778 in salary and employee benefits; (2) $22,547 in depreciation of office equipment and amortization of intangible assets; (3) $20,814 in entertainment, advertising and promotion; and (4) other miscellaneous expenses in the three months ended June 30, 2024.

Interest Expense

Interest expense from discontinued operations was resulted from the borrowings of XXTX from a financial institution for its working capital turnover.

Income Tax Benefit

For the three months ended June 30, 2024, XXTX had deferred tax benefit of $1,935, resulted from deferred tax, while all the subsidiaries of XXTX suffered losses for the three months ended June 30, 2024, no income taxes were recorded for the corresponding period accordingly.

Net loss from discontinued operations

As a result of the foregoing, the net loss from discontinued operations for the three months ended June 30, 2024 was $26,933.

Liquidity and Going Concern

We have financed our operations primarily through proceeds from our equity offerings, stockholder loans, commercial debt, borrowings from financial institutions and cash flow from operations.

We had cash and cash equivalents of $867,767 as of June 30, 2025 as compared to $833,577 as of March 31, 2025. We primarily hold our excess unrestricted cash in short-term interest-bearing bank accounts at financial institutions.

Our business is capital intensive. We have considered whether there is substantial doubt about our ability to continue as a going concern due to (1) the net loss of approximately $0.3 million for the three months ended June 30, 2025; (2) accumulated deficit of approximately $45.3 million as of June 30, 2025; (3) the working capital deficit of approximately $2.5 million as of June 30, 2025.

We do not believe that the proceeds from our future public offerings and our anticipated cash flows would be sufficient to meet our anticipated working capital requirements and capital expenditures in the ordinary course of business for the next 12 months from the date of this Quarterly Report. We have determined there is substantial doubt about our ability to continue as a going concern. If we are unable to generate significant revenue, we may be required to cease or curtail our operations. We are trying to alleviate the going concern risk through the following sources:

●

equity financing to support our working capital;

●

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

●

financial support and credit guarantee commitments from our related parties.

Based on the above considerations, we are of the opinion that we will probably not have sufficient funds to meet our working capital requirements and debt obligations as they become due one year from the filing date of this Report, if we are unable to obtain additional financing. In addition, there is no assurance that we will be successful in implementing the foregoing plans or that additional capitals will be available to us on commercially reasonable terms, or at all. There are a number of factors that could potentially arise that could undermine our plans, such as (i) changes in the demand for our 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 our relationships with key business partners, (vi) that financial institutions in China may not able to provide continued financial support to our customers, and (vii) the perception of PRC-based companies in the U.S. capital markets. Our inability to secure needed financing when required could require material changes to our business plans and could have a material adverse effect on our viability and results of operations.

		For the Three Months Ended
		June 30,
		2025				2024
		(unaudited)				(unaudited)
Net Cash (Used in) Provided by Operating Activities		$	(321,155	)		$	16,762
Net Cash (Used in) Provided by Investing Activities			(385	)			7,250
Net Cash Provided by (Used in) Financing Activities			377,471				(53,707	)
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash			(21,741	)			(13,484	)
Cash, Cash Equivalents and Restricted Cash at Beginning of the Period			833,577				794,636
Cash, Cash Equivalents and Restricted Cash at End of the Period			867,767				751,457
Less: Cash and cash equivalents from discontinued operations			-				(34,588	)
Cash, Cash equivalents and Restricted Cash from continuing operations, end of Period		$	867,767			$	716,869

Cash Flow in Operating Activities

For the three months ended June 30, 2025, net cash used in operating activities was $321,155 from continuing operations. While for the three months ended June 30, 2024, net cash provided by operating activities was $16,762, which consisted of net cash inflows of $66,414 from continuing operations and net cash outflows of $49,652 from discontinued operations.

The increase of $387,569 in net cash used in operating activities from continuing operations for the three months ended June 30, 2025 as compared with the three months ended June 30, 2024 was primarily attributable to (1) the one-off gain of $245,310 from disposal of Corenel during the three months ended June 30, 2025; (2) decrease of $209,008 in the change of accrued expenses and other liabilities; (3) decrease of $173,441 in the provision for credit losses; (4) $85,469 in Change in fair value of derivative liabilities from a loss of $8,287 for the three months ended June 30, 2024 to a gain of $77,182 for the three months ended June 30, 2025; (5) decrease of $47,321 in amortization of right-of-use assets; (6) decrease of $38,556 in the change of prepayments, other receivables and other assets (included third parties and a related party); and partially offset by (7) decrease of $459,447 in net loss from continuing operations.

Cash Flow in Investing Activities

For the three months ended June 30, 2025, we had net cash used in investing activities of $385, which was the cash of $385 released upon disposal of Corenel.

For the three months ended June 30, 2024, we had net cash provided by investing activities of $7,250. The net cash provided by in investing activities consisted of the proceeds from sales of the used-automobiles of $8,433, which was partially offset by the purchase of furniture for office purpose of $1,183.

Cash Flow in Financing Activities

For the three months ended June 30, 2025, we had net cash provided by financing activities of $377,471 from continuing 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; (2) borrowings from a related party of $99,347; and (3) repayments from a related party of $52,124.

For the three months ended June 30, 2024, we had net cash used in financing activities of $53,707, which consisted of the net cash outflows of $20,540 from continuing operations and $33,167 from discontinued operations. The net cash used in financing activities from continuing operations primarily consisted of: (1) repayments to related parties and affiliates of $25,365; (2) principal payments made for finance lease liabilities of $8,985; partially offset by (4) repayment from a related party of $13,810.

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, 2025, Hunan Ruixi holds 35% of equity interest of Jinkailong and has not made any payments towards to the investment amounted to RMB3.5 million (approximately $489,000). 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 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. We have identified certain accounting estimates that are significant to the preparation of our financial statements. These estimates are important for an understanding of our financial condition and results of operation. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management's current judgments. We believe the following critical accounting estimates involve the most significant estimates and judgments used in the preparation of our financial statements.

In presenting the unaudited condensed consolidated financial statements in accordance with U.S. GAAP, management make estimates and assumptions that affect the amounts reported and related disclosures. Estimates, by their nature, are based on judgement and available information. Accordingly, actual results could differ from those estimates. On an ongoing basis, management reviews these estimates and assumptions using the currently available information. Changes in facts and circumstances may cause us to revise our estimates. we base our 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 the critical accounting estimates as follows.

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) fair values of financial instruments, including derivative liabilities; (ii) accounts receivable, net; (iii) property and equipment, net; (iv) revenue recognition. See Note 3-Summary of Significant Accounting Policies to our consolidated financial statements in our 2025 Form 10-K for the disclosure of these accounting policies. We believe the following accounting estimates involve the most significant judgments used in the preparation of our financial statements.

(a)	Derivative liabilities

A contract is designated as an asset or a liability and is carried at fair value on a company's balance sheet, with any changes in fair value recorded in a company's results of operations. We then determine which options, warrants and embedded features require liability accounting and records the fair value as a derivative liability by using Black-Scholes model. The changes in the values of these instruments are shown in the accompanying consolidated statements of operations and comprehensive loss as "change in fair value of derivative liabilities".

(b)

Allowance for credit losses

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," which requires us to measure and recognize expected credit losses for financial assets held and not accounted for at fair value through net income. We adopted this guidance effective April 1, 2023. ASC 326 introduces an approach based on expected losses to estimate the allowance for credit losses, which replaces the previous incurred loss impairment model. The adoption of this guidance did not have a material impact on our consolidated financial statements. Accounts receivable are recognized and carried at original invoiced amount less an estimated allowance for credit losses. We estimate the allowance for credit losses based on an analysis of the aging of accounts receivable, assessment of collectability, including any known or anticipated economic conditions, customer-specific circumstances, recent payment history and other relevant factors.

The balance of other receivables is unsecured and is reviewed periodically to determine whether their carrying value has become impaired. We consider the balances to be impaired if the collectability of the balances becomes doubtful. We use the individual specific valuation method to estimate the allowance for uncollectible balances. The allowance is also based on management's best estimate of specific losses on individual exposures, as well as a provision on historical trends of collections and utilizations. Actual amounts received or utilized may differ from management's estimate of credit worthiness and the economic environment.

As of June 30, 2025 and March 31, 2025, there was no allowance for credit losses of gross accounts receivable balances. The provision is recorded against accounts receivable balances, with a corresponding charge recorded in the consolidated statements of operations and comprehensive loss. Delinquent account balances are written-off against the allowance for credit losses after management has determined that the likelihood of collection is not probable. No allowance for credit losses for accounts receivable as of June 30, 2025 and March 31, 2025. Allowance for credit losses balances amounted to $0 and $17,063 as of June 30, 2025 and March 31, 2025, respectively for deposits and other receivables. Allowance for credit losses balances amounted to $5,232,834 and $5,165,699 as of June 30, 2025 and March 31, 2025, respectively, for amount due from a related party.

(c)

Impairment of long-lived assets

Long-lived assets, including property and equipment and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. We assess the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is identified, we would reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. For the three months ended June 30, 2025 and 2024, we did not recognize impairment for property and equipment and intangible assets.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Based on an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended), as of June 30, 2025, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective due to the following material weaknesses in our internal control over financial reporting:

●

We did not have sufficient personnel with appropriate levels of accounting knowledge and experience to address complex U.S. GAAP accounting issues and to prepare and review financial statements and related disclosures under U.S. GAAP. Specifically, our control did not operate effectively to ensure the appropriate and timely analysis of and accounting for unusual and non-routine transactions and certain financial statement accounts;

●

We are lacking adequate policies and procedures in internal audit function to ensure that our policies and procedures have been carried out as planned; and

●

We had deficiencies in our IT general controls regarding to the Logical Access Security, Change Management, IT Operations and Cybersecurity of our financial system, etc.

We are improving our IT environment and daily management to ensure network and information security. In addition, we plan to address the weaknesses identified above by implementing the following measures:

(i)

Continuously hiring additional accounting staffs with comprehensive knowledge of U.S. GAAP and SEC reporting requirements;

(ii)

Ameliorating our internal audit to assist with assessment of Sarbanes-Oxley compliance requirements and improvement of internal controls related to financial reporting; and

(iii)

improving our IT environment and daily management.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the quarter ended June 30, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION