Valor Energy Inc: Form 10-Q for the period ended Dec 31, 2025

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 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 “– Automobile Transactions and Related Services”, we ceased our automobile transactions and related services in Sichuan Province of China on December 31 2025.

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.

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 zero consideration (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 December 31, 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 2,300 automobiles under operating leases and 197 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 and nine months ended December 31, 2025 and 2024, respectively:

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

During the three months ended December 31, 2025, our Auto Operating Leasing, Auto Commissions, Auto Financing and other services income accounted for approximately 88.4%, 1.0%, 4.2% and 6.4% 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 90.8%, 0.8%, 5.2%, and 3.2% for the three months ended December 31, 2024, respectively. During the nine months ended December 31, 2025, our Auto Operating Leasing, Auto Commissions, Auto Financing and other services income accounted for approximately 88.2%, 1.2%, 4.6% and 6.0% 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 88.9%, 1.1%, 4.9%, and 5.1% for the nine months ended December 31, 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 XXTX Acquisition Agreement with the Purchaser, and certain other parties thereto. Pursuant to the XXTX Acquisition Agreement, the Purchaser acquired all of the equity interests in XXTX at a total purchase price of zero, while taking over certain liabilities of XXTX as defined in the XXTX 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 December 31, 2025, 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 and nine months ended December 31, 2025. 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 December 31, 2025, for parking and management of automobiles for operating lease, we had one parking lot and three employees in Changsha. During the three months ended December 31, 2025 and 2024, the average utilization of the automobiles for operating lease was approximately 85.7% and 91.4%, respectively. During the nine months ended December 31, 2025 and 2024, the average utilization of the automobiles for operating lease was approximately 92.2% and 92.3%, 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 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 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 December 31, 2025, we had accounts receivable of operating lease of approximately $1,000 in total. Besides, during the three and nine months ended December 31, 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 and nine months ended December 31, 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 December 31, 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 December 31, 2025, approximately 395 online ride-hailing platforms have obtained booking taxi operating licenses, representing an increase of approximately 5% as compared with the one as of March 31, 2025. And the total volume of online ride-hailing orders was approximately 963 million in December 2025 in China, representing a decrease of approximately 28% as compared with the one as of October 31, 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.

As of December 31, 2025, 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 December 31, 2025 Compared to the three months ended December 31, 2024

(unaudited)

(unaudited)

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 December 31, 2025 and 2024, respectively:

(unaudited)

(unaudited)

Revenue from our automobile transaction and related services mainly includes operating lease revenues from automobile rentals, financing revenues, service fees from NEVs leasing, default revenue, monthly services commissions, and other services fees, which accounted for approximately 88.4%, 4.2%, 4.1%, 1.6%, 1.0% and 0.7%, respectively, of the total revenue during the three months ended December 31, 2025. Meanwhile, operating lease revenues from automobile rentals, financing revenues, default revenue, monthly services commissions, service fees from automobile purchase services and other services fees, which accounted for approximately 90.8%, 5.2%, 1.7%, 0.8%, 0.7% and 0.8%, respectively, of the total revenue during the three months ended December 31, 2024.

Operating lease revenues from automobile rentals

We generate revenues from leasing our own automobiles by online ride-hailing drivers with their authorization for a lease term of no more than twelve months. The decrease in rental income of $92,578 or approximately 22.6% during the three months ended December 31, 2025 was mainly due to the decrease in the number and average monthly rental of automobiles leased for operating lease. We leased over 322 automobiles with an average monthly rental income of approximately $319 per automobile, resulting in a rental income of $317,153 for the three months ended December 31, 2025. We leased approximately 346 automobiles with an average monthly rental income of approximately $394 per automobile, resulting in a rental income of $409,731 for the three months ended December 31, 2024.

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 $15,117 from an average monthly number of 44 automobiles and $23,668 from an average monthly number of 49 automobiles during the three months ended December 31, 2025 and 2024, respectively. The decrease was due to the number and monthly payment we charged to customers decreased during the three months ended December 31, 2025.

Service fees from NEVs leasing

We generated revenues of $14,799 and $0 from leasing NEVs by charging leases service fees during the three months ended December 31, 2025 and 2024, respectively. The amount of services fees for NEVs leasing were based on our timely product solutions in accordance which adjusted with different market conditions.

Default revenue

We generated default revenues of $5,831 and $7,711 from the automobile lessee’s early-termination of the contracts or other violation behaviors to the contracts during the three months ended December 31, 2025 and 2024, 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 the three months ended December 31, 2025.

Monthly services commissions

We generated revenues of $3,427 and $3,828 from the monthly management and related services provided to our Partner Platforms and other companies during the three months ended December 31, 2025 and 2024, 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 December 31, 2025, which in turn led to lower commission income from the Partner Platforms related to the monthly management and related services.

Service fees from automobile purchase services and Other Service fees

We generated revenues of $0 from the automobile purchase services during the three months ended December 31, 2025, and of $2,959 for two automobiles purchase transactions from the automobile purchase services during the three months ended December 31, 2024.

We generate other revenues from other miscellaneous service fees charged to our customers during the three months ended December 31, 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 depreciation and rental cost of automobiles, daily maintenance and insurance expense of automobiles which related to our Auto Operating Leasing. Cost of revenues decreased by $36,314 or approximately 10.5% during the three months ended December 31, 2025 as compared with the three months ended December 31, 2024, mainly due to the decrease in the number of the automobiles leased for operating lease from 346 in the three months ended December 31, 2024 to 322 in the three months ended December 31, 2025.

Gross Profit

We had gross profit of $49,480 and $105,929, respectively, during the three months ended December 31, 2025 and 2024. The decrease of $56,449 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 December 31, 2025 and 2024:

(unaudited)

(unaudited)

We had a gross profit of $7,949 from our Auto Operating Leasing during the three months ended December 31, 2025, which decreased by $56,264 from a gross loss of $64,213 in the three months ended December 31, 2024. The decrease was attributable to the average monthly rental of automobiles leased for operating lease decreased from 394 in the three months ended December 31, 2024 to 319 in the three months ended December 31, 2025. As the gross margin of the revenues from our operating leasing decreased during the three months ended December 31, 2025, our overall gross profit margin decreased to approximately 13.8% from approximately 23.5% during the three months ended December 31, 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 expenses. Selling, general and administrative expenses increased from $412,270 for the three months ended December 31, 2024 to $651,157 for the three months ended December 31, 2025, representing an increase of $238,887, or approximately 57.9%. The increase was mainly due to the increase of $227,060 in professional service fees such as financial, market consulting for our financing transactions during the three months ended December 31, 2025.

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 $244,908 and $104,700 against receivables from Jinkailong for the three months ended December 31, 2025 and 2024, respectively.

Stock-based compensation

In November 2025, we entered into a consulting services agreement (the “Consulting Agreement”) with a consultant (“the Consultant”), pursuant to which we engaged the Consultant to provide consulting services. We issued an aggregate of 200,000 shares of our common stock in November 2025 at $1.25 per share to settle the compensation for the services. We did not have similar transaction during the three months ended December 31, 2024.

Other income, net

For the three months ended December 31, 2025, we had other income, net of $243,272, which primarily consist of the (1) a gain of $213,000 from historical debt forgiveness by service providers and the company’s former directors; (2) penalty income of approximately $17,000 from the customers; and (3) the miscellaneous other income, net of approximately $13,000.

For the three months ended December 31, 2024, we had other income, net of $32,232, which primarily consist of (1) penalty income of approximately $20,000 from the customers; and (2) the miscellaneous income, net of approximately $12,000.

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 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 December 31, 2025 and 2024 was a gain of $180 and $121,314, respectively. The following table sets forth the breakdown of the gain in fair value of derivative liabilities for the three months ended December 31, 2025 and 2024:

(unaudited)

(unaudited)

Income Tax Expense

Generally, our subsidiary Hunan Ruixi and Senmiao HK are subject to enterprise income tax on its taxable income in China at a rate of 25% and in Hong Kong, China at a rate of 8.25%, respectively. 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 suffered losses and no tax expense was recorded for the three months ended December 31, 2025 and 2024.

Net loss from continuing operations

As a result of the foregoing, net loss from continuing operations for the three months ended December 31, 2025 was $853,133, representing an increase of $595,638 from net loss of $257,495 for the three months ended December 31, 2024.

Results of Continuing Operations for the nine months ended December 31, 2025 Compared to the nine months ended December 31, 2024

(unaudited)

(unaudited)

39

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 nine months ended December 31, 2025 and 2024, respectively:

(unaudited)

(unaudited)

Revenue from our automobile transaction and related services mainly includes operating lease revenues from automobile rentals, financing revenues, service fees from NEVs leasing, default revenue, monthly services commissions, service fees from automobile purchase services, and other services fees, which accounted for approximately 88.2%, 4.6%, 2.7%, 1.9%, 1.2%, 0.7% and 0.7%, respectively, of the total revenue during the nine months ended December 31, 2025. Meanwhile, operating lease revenues from automobile rentals, financing revenues, default revenue, monthly services commissions, service fees from automobile purchase services, and other services fees, which accounted for approximately 88.9%, 4.9%, 1.8%, 1.1%, 2.0% and 1.3%, respectively, of the total revenue during the nine months ended December 31, 2024.

Operating lease revenues from automobile rentals

We generate revenues from leasing our own automobiles by online ride-hailing drivers with their authorization for a lease term of no more than twelve months. The decrease in rental income of $236,407 or approximately 18.0% during the nine months ended December 31, 2025 was mainly due to the decrease in the number and average monthly rental of automobiles leased for operating lease. We leased approximately 340 automobiles with an average monthly rental income of approximately $359 per automobile, resulting in a rental income of $1,076,175 for the nine months ended December 31, 2025. While we approximately 367 automobiles with an average monthly rental income of approximately $414 per automobile, resulting in a rental income of $1,312,582 for the nine months ended December 31, 2024.

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 $56,297 from an average monthly number of 48 automobiles and $72,697 from an average monthly number of 45 automobiles during the nine months ended December 31, 2025 and 2024, respectively. The decrease was due to the monthly payment we charged to customers decreased during the nine months ended December 31, 2025.

Service fees from NEVs leasing

We generated revenues of $33,341 and $0 from leasing NEVs by charging leases service fees during the nine months ended December 31, 2025 and 2024, respectively. The amount of services fees for NEVs leasing were based on our timely product solutions in accordance which adjusted with different market conditions.

Default revenue

We generated default revenues of $23,320 and $27,294 from the automobile lessee’s early-termination of the contracts or other violation behaviors to the contracts during the nine months ended December 31, 2025 and 2024, 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 the nine months ended December 31, 2025.

Monthly services commissions

We generated revenues of $14,422 and $16,353 from the monthly management and related services provided to our Partner Platforms and other companies during the nine months ended December 31, 2025 and 2024, respectively. The decrease was due to the decrease in the number of automobiles leased to online ride-hailing drivers for operating lease during the nine months ended December 31, 2025, which in turn led to lower commission income from the Partner Platforms related to the monthly management and related services.

Service fees from automobile purchase services and Other Service fees

We generated revenues of $8,936 and $29,862 from the automobile purchase services during the nine months ended December 31, 2025 and 2024, respectively. The decrease was due to the number of automobiles purchase transactions decreased to 7 during the nine months ended December 31, 2025 from 21 in the same period in 2024.

We generate other revenues from other miscellaneous service fees charged to our customers during the nine months ended December 31, 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 depreciation and rental cost of automobiles, daily maintenance and insurance expense of automobiles which related to our Auto Operating Leasing. Cost of revenues decreased by $25,339 or approximately 2.5% during the nine months ended December 31, 2025 as compared with the nine months ended December 31, 2024, mainly due to the decrease in the number of the automobiles leased for operating lease from 367 in the nine months ended December 31, 2024 to 340 in the nine months ended December 31, 2025.

Gross Profit

We had gross profit of $224,641 and $455,912, respectively, during the nine months ended December 31, 2025 and 2024. The following table sets forth the breakdown of gross profit by major revenue source for the nine months ended December 31, 2025 and 2024:

(unaudited)

(unaudited)

We had a gross profit of $81,188 from our Auto Operating Leasing during the nine months ended December 31, 2025, which decreased by $211,068 from a gross loss of $292,256 in the nine months ended December 31, 2024. The decrease was attributable to the average monthly rental of automobiles leased for operating lease decreased from 414 in the three months ended December 31, 2024 to 359 in the three months ended December 31, 2025. As the gross margin of the revenues from our operating leasing decreased during the three months ended December 31, 2025, our overall gross profit margin decreased to approximately 18.4% from approximately 30.9% during the three months ended December 31, 2024.

Selling, General and Administrative Expenses

For the nine months ended December 31, 2025, selling, general and administrative expenses primarily consist of salary and employee benefits, office rental expense, travel expenses, and other expenses. Selling, general and administrative expenses increased from $1,420,370 for the nine months ended December 31, 2024 to $1,703,676 for the nine months ended December 31, 2025, representing an increase of $283,306, or approximately 19.9%. The increase was mainly due to (1) the increase of $347,273 in professional service fees such as financial, market consulting during the nine months ended December 31, 2025; and partly offset by (2) a decrease of $28,088 in salary and employee benefits as the average monthly number of our employees decreased from 26 for the nine months ended December 31, 2024 to 23 for the nine months ended December 31, 2025; and (3) a decrease of $30,907 in entertainment and travel expenses.

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 $427,764 and $199,365 against receivables from Jinkailong for the nine months ended December 31, 2025 and 2024, respectively.

Stock-based compensation

In November 2025, we entered into the Consulting Agreement with the Consultant, pursuant to which we engaged the Consultant to provide consulting services. We issued an aggregate of 200,000 shares of our common stock in November 2025 at $1.25 per share to settle the compensation for the services. We did not have similar transaction during the nine months ended December 31, 2024.

Other income, net

For the nine months ended December 31, 2025, we had other income, net of $305,068, which primarily consist of the (1) a gain of $213,000 from historical debt forgiveness by service providers and the company’s former directors; (2) penalty income of approximately $52,000 from the customers; and (3) the miscellaneous other income, net of approximately $40,000.

For the nine months ended December 31, 2024, we had other income, net of $65,737, which primarily consist of (1) the penalty income of approximately $80,000 from the customers; partially offset by (2) the expense of approximately $20,000 from the termination of our right-of-use assets for an exhibition hall we leased in Changsha, and (5) the miscellaneous income, net of approximately $6,000.

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 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 nine months ended December 31, 2025 and 2024 was a gain of $80,489 and $105,900, respectively. The following table sets forth the breakdown of the gain in fair value of derivative liabilities for the nine months ended December 31, 2025 and 2024:

(unaudited)

(unaudited)

Income Tax Expense

Generally, our subsidiary Hunan Ruixi and Senmiao HK are subject to enterprise income tax on its taxable income in China at a rate of 25% and in Hong Kong, China at a rate of 8.25%, respectively. 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 suffered losses and no tax expense was recorded for the nine months ended December 31, 2025 and 2024.

Net loss from continuing operations

As a result of the foregoing, net loss from continuing operations for the nine months ended December 31, 2025 was $1,771,242, representing an increase of $779,056 from net loss of $992,186 for the nine months ended December 31, 2024.

Results of Discontinued Operations for the three months ended December 31, 2025 Compared to the three months ended December 31, 2024

(unaudited)

(unaudited)

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 December 31, 2025 and 2024:

(unaudited)

(unaudited)

43

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 79.5%, 11.6%, 4.0%, 3.9% and 1.0%, respectively, of the total revenue from discontinued operations during the three months ended December 31, 2025. Meanwhile, operating lease revenues from automobile rentals, service fees from NEVs leasing, monthly services commissions, default revenue, and other services fees, which accounted for approximately 72.1%, 14.6%, 8.5%, 4.0% and 0.8%, respectively, of the total revenue from discontinued operations during the three months ended December 31, 2024.

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 over 370 automobiles with an average monthly rental income of approximately $356 per automobile, resulting in a rental income of $327,223, including rental income of $25,304 from two related parties, for the three months ended December 31, 2025. Our former subsidiaries in Sichuan leased approximately 316 automobiles with an average monthly rental income of approximately $325 per automobile, resulting in a rental income of $337,523, including rental income of $2,882 from a related party, for the three months ended December 31, 2024.

Service fees from NEVs leasing

Our former subsidiaries in Sichuan generated revenues of $47,758 and $68,606 from leasing NEVs by charging leases service fees during the three months ended December 31, 2025 and 2024, respectively. 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 $16,300 and $39,927 from the monthly management and related services provided to our Partner Platforms during the three months ended December 31, 2025 and 2024, respectively.

Default revenue

Our former subsidiaries in Sichuan generated default revenues of $16,159 and $18,675 from the automobile lessee’s early-termination of the contracts or other violation behaviors to the contracts during the three months ended December 31, 2025 and 2024, respectively.

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 December 31, 2025 and 2024. 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 December 31, 2025 and 2024, cost of revenues from discontinued operations of $280,098 and $397,931, respectively, represented the amortization of ROUs, rental cost of automobiles, daily maintenance and insurance expense of automobiles which related to Auto Operating Leasing. The decrease was mainly due to a decrease in the monthly rental costs of the automobiles leased for operating lease from $409 in the three months ended December 31, 2024 to $288 in the three months ended December 31, 2025. During the three months ended December 31, 2025 and 2024, our former subsidiaries in Sichuan paid $20,056 and $44,479, respectively, to related parties for costs of automobiles under operating leases.

Selling, General and Administrative Expenses

For the three months ended December 31, 2025, selling, general and administrative expenses from discontinued operations related to Auto Operating Leasing, which amounted to $265,090, primarily consisted of (1) $165,284 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) $61,753 in salary and employee benefits; (3) $21,749 in entertainment, advertising and promotion; and (4) other miscellaneous expenses.

For the three months ended December 31, 2024, selling, general and administrative expenses from discontinued operations related to Auto Operating Leasing, which amounted to $103,096, primarily consisted of (1) $76,949 in salary and employee benefits; (2) $15,846 in entertainment, advertising and promotion; and (3) other miscellaneous expenses.

Provision for credit losses

Our former subsidiaries in Sichuan provided provision for credit losses of $311,752 and $262,545 against receivables from Jinkailong for the three months ended December 31, 2025 and 2024, respectively.

Other expenses, net

For the three months ended December 31, 2025 and 2024, our former subsidiaries in Sichuan had other expenses, net of $1,744 and $27,335, respectively, which primarily due to the miscellaneous expenses in its daily operations.

Interest Expense on Finance Leases

Interest expense on finance leases from discontinued operations for the three months ended December 31, 2025 and 2024 was $0 and $3,365, respectively, representing the interest expense accrued under financing leases for the leased automobiles Corenel leased from a third-party company, and the leased automobiles rendered to us for sublease or sale by the online ride-hailing drivers who exited the ride-hailing business.

Gain on disposal of discontinued operations

As fully described above, we had a gain of $426,766 from disposal of our former subsidiaries in Sichuan during the three months ended December 31, 2025.

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 December 31, 2025 and 2024.

Net loss from discontinued operations

As a result of the foregoing, the net loss from discontinued operations for the three months ended December 31, 2025 and 2024 was $20,544 and $325,883, respectively.

Results of Discontinued Operations for the nine months ended December 31, 2025 Compared to the nine months ended December 31, 2024

(unaudited)

(unaudited)

The result of discontinued operations was the financial figures of our former subsidiary, XXTX and 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. 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

The following table sets forth the breakdown of revenues by revenue source for nine months ended December 31, 2025 and 2024:

(unaudited)

(unaudited)

Revenue from automobile transactions and related services (discontinued operations)

Revenue from our automobile transaction and related services (discontinued operations) mainly includes operating lease revenues from automobile rentals, service fees from NEVs leasing, monthly services commissions, default revenue and other services fees, which accounted for approximately 75.1%, 16.6%, 4.8%, 2.2% and 1.3%, respectively, of the total revenue from discontinued operations during the nine months ended December 31, 2025. Meanwhile, operating lease revenues from automobile rentals, service fees from NEVs leasing, monthly services commissions, default revenue and other services fees, which accounted for approximately 72.6%,13.4%, 7.9%, 4.4% and 1.7%, respectively, of the total revenue from discontinued operations during the nine months ended December 31, 2024.

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 over 410 automobiles with an average monthly rental income of approximately $418 per automobile, resulting in a rental income of $1,011,119, including rental income of $79,203 from two related parties, for the nine months ended December 31, 2025. Our former subsidiaries in Sichuan leased approximately 337 automobiles with an average monthly rental income of approximately $361 per automobile, resulting in a rental income of $775,405, including rental income of $11,747 from a related party, for the nine months ended December 31, 2024.

Service fees from NEVs leasing

Our former subsidiaries in Sichuan generated revenues of $223,775 and $142,751 from leasing NEVs by charging leases service fees during the nine months ended December 31, 2025 and 2024, respectively. 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 $65,188 and $84,337 from the monthly management and related services provided to Partner Platforms during the nine months ended December 31, 2025 and 2024, respectively.

Default revenue

Our former subsidiaries in Sichuan generated default revenues of $30,190 and $46,786 from the automobile lessee’s early-termination of the contracts or other violation behaviors to the contracts during the nine months ended December 31, 2025 and 2024, respectively.

Other Service fees

Our former subsidiaries in Sichuan generate other revenues from other miscellaneous service fees charged to our customers during the nine months ended December 31, 2025 and 2024. Other services fees mainly include the maintenance fees charged to our customers pursuant to certain new production solutions.

Revenue from online ride-hailing platform services (discontinued operations)

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 nine months ended December 31, 2024, approximately 0.6 million rides with gross fare of approximately $1.8 million were completed through our Xixingtianxia platform and an average of over 2,100 Active Drivers each month. XXTX earned online ride-hailing platform service fees of $344,241, after netting off approximately $32,000 incentives paid to Active Drivers.

Cost of Revenues

During the nine months ended December 31, 2025 and 2024, cost of revenues from discontinued operations of $919,715 and $998,143, respectively, represented the amortization of ROUs, rental cost of automobiles, daily maintenance and insurance expense of automobiles which related to Auto Operating Leasing. The decrease was mainly due to a decrease in the monthly rental costs of the automobiles leased for operating lease from $372 in the nine months ended December 31, 2024 to $310 in the nine months ended December 31, 2025. During the nine months ended December 31, 2025 and 2024, our former subsidiaries in Sichuan paid $110,328 and $63,440 to related parties for costs of automobiles under operating leases, respectively.

During the nine months ended December 31, 2024, cost of revenues from discontinued operations of $247,025 represented the technical service charges, insurance and other expenses which related to Online Ride-Hailing Platform Services.

Selling, General and Administrative Expenses

For the nine months ended December 31, 2025, selling, general and administrative expenses from discontinued operations related to Auto Operating Leasing, which amounted to $928,071, primarily consisted of (1) $616,586 in outsourced operating services related to automobile lease; (2) $183,298 in salary and employee benefits; (3) $86,660 in entertainment, advertising and promotion; and (4) other miscellaneous expenses.

For the nine months ended December 31, 2024, selling, general and administrative expenses from discontinued operations related to Auto Operating Leasing, which amounted to $479,145, primarily consisted of (1) $365,320 in salary and employee benefits; (2) $70,070 in entertainment, advertising and promotion; and (3) other miscellaneous expenses.

For the nine months ended December 31, 2024, selling, general and administrative expenses from discontinued operations related to Online Ride-Hailing Platform Services, which amounted to $166,937 primarily consisted of (1) $64,859 in salary and employee benefits; (2) $37,746 in depreciation of office equipment and amortization of intangible assets; (3) $32,187 in entertainment, advertising and promotion; and (4) other miscellaneous expenses.

Provision for credit losses

For the three months ended December 31, 2025 and 2024, our former subsidiaries in Sichuan provided provision for credit losses of $253,942 and $523,316 against receivables from Jinkailong, respectively.

For the nine months ended December 31, 2024, XXTX provided provision for credit losses of $173,278 against receivables from a prepaid software development fee and a deposit due to the termination on the development which resulting from the discontinuing of the business.

Other income, net

For the nine months ended December 31, 2025, our former subsidiaries in Sichuan had other income, net of $226,101 which primarily due to deconsolidation of Corenel.

For the nine months ended December 31, 2024, our former subsidiaries in Sichuan and XXTX had other expense, net of $18,751 and other income, net of $33,214, respectively, which primarily due to the miscellaneous income and expense in the daily operations.

Interest Expense and Interest expense on finance leases

Interest expense from discontinued operations for the nine months ended December 31, 2024 was resulted from the borrowings of XXTX from a financial institution for its working capital turnover.

Interest expense on finance leases from discontinued operations for the nine months ended December 31, 2024 represented the interest expense accrued under financing leases for the leased automobiles Corenel leased from a third-party company, and the leased automobiles rendered to us for sublease or sale by the online ride-hailing drivers who exited the ride-hailing business.

Gain on disposal of discontinued operations

We had a gain of $426,766 from disposal of our former subsidiaries in Sichuan during the three months ended December 31, 2025, and $397,775 from disposal of XXTX during the three months ended December 31, 2024.

Income Tax Benefit

For the nine months ended December 31, 2024, XXTX had deferred tax benefit of $4,510, which resulted from recognition of deferred tax assets.

Net loss from discontinued operations

As a result of the foregoing, the net loss from discontinued operations for the nine months ended December 31, 2025 and 2024 was $102,603 and $779,463, respectively.

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 $3,508,226 as of December 31, 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, and certain factors show negative trends in its liquidity position, including (1) the net loss of approximately $1.9 million for the nine months ended December 31, 2025; (2) accumulated deficit of approximately $47.0 million as of December 31, 2025; and (3) $1.3 million of net cash outflows in operating activities.

However, our liquidity position has been substantially improved by two financing transactions completed in November 2025. Specifically, we received cash proceeds of approximately $0.66 million from issuance of common stock in PIPE Offering and $2.8 million from issuance of common stock and pre-funded warrants in registered direct offering. As a result, our cash and cash equivalents as of December 31, 2025 increased by approximately $2.8 million as compared with that of September 30, 2025, and maintained a net working capital of approximately $2.4 million as of December 31, 2025.

Management evaluated our current liquidity and operating forecasts for the twelve months following the issuance of these unaudited condensed consolidated financial statements and has concluded that, as a result of the recent financing and improved cash flows, there was no substantial doubt about our ability to continue as a going concern for a period of twelve months from the issuance of unaudited condensed consolidated financial statements for the quarterly period ended December 31, 2025.

The following table summarizes our cash flows:

(unaudited)

(unaudited)

Cash Flow in Operating Activities

For the nine months ended December 31, 2025, net cash used in operating activities was $1,258,193, which consisted of the net outflows of $793,096 from continuing operations and $465,097 from discontinued operations. While for the nine months ended December 31, 2024, net cash provided by operating activities was $548,442, which consisted of net cash inflows of $318,996 from continuing operations and $229,446 from discontinued operations.

The increase of $1,112,092 in net cash used in operating activities from continuing operations for the nine months ended December 31, 2025 as compared with the nine months ended December 31, 2024 was primarily attributable to (1) increase of $779,056 in net loss; (2) decrease of $529,591 in the change of accrued expenses and other liabilities; (3) the gain of $212,581 from debt forgiveness by service providers and the company’s directors in the nine months ended December 31, 2025; (4) decrease of $105,043 in the change of accounts payable; and partially offset by (5) $250,000 in stock-based compensation in the nine months ended December 31, 2025; (6) increase of $228,399 in the provision for credit losses.

Cash Flow in Investing Activities

For the nine months ended December 31, 2025, we had net cash used in investing activities of $223,759, which consisted of: (1) the loan to a related party of $229,469; partially offset by (2) the proceeds from sales of the used-automobiles of $5,710.

For the nine months ended December 31, 2024, we had net cash used in investing activities of $448,208, which consisted of the net inflows of $16,386 from continuing operations and net outflows of $464,594 from discontinued operations. The majority of net cash provided by investing activities from continuing operations was (1) the proceeds from sales of the used-automobiles of $16,804; partially offset by (2) the purchase furniture for office purpose of $418.

Cash Flow in Financing Activities

For the nine months ended December 31, 2025, we had net cash provided by financing activities of $4,059,719, which consisted of the net inflows of $3,979,619 from continuing operations and net inflows of $80,100 from discontinued operations. The majority of net cash provided by financing activities from continuing operations consisted of: (1) net proceeds of $659,992 from the exercise of November 2021 Private Placement Warrants from an investor; (2) net proceeds of $341,251from issuance of common stock in PIPE Offering in November 2025; (3) net proceeds of $2,828,725 from issuance of common stock and pre-funded warrants in registered direct offering in November 2025; (4) borrowings from related parties of $277,165; partially offset by (5) repayments to a related party of $127,514.

For the nine months ended December 31, 2024, we had net cash used in financing activities of $17,528, which consisted net inflows of $79,872 from continuing operations and net outflows of $97,400 from discontinued operations. The majority of net cash provided by financing activities financing activities from continuing operations was borrowings from a related party.

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 December 31, 2025, Hunan Ruixi holds 35% of equity interest of Jinkailong and has not made any payments towards the investment amounting to RMB3.5 million (approximately $500,000). 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; (ii) 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.

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 December 31, 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 December 31, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.