Results
Valor Energy Inc.
Valor Energy Inc.
11/13/2026 | Press release | Distributed by Public on 11/13/2026 16:11
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our results of operations and financial condition should be read together with our unaudited condensed consolidated financial statements and the notes thereto, which are included elsewhere in this Report and our Annual Report on Form 10-K for the year ended March 31, 2026 (the "Annual Report") filed with the SEC. Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").
Overview
We are a provider of automobile transaction and related services, connecting consumers, who are mostly existing and prospective ride-hailing drivers affiliated with different operators of online ride-hailing platforms in the People's Republic of China ("PRC" or "China"). We provide automobile transaction and related services in Hunan Province of China through our majority owned subsidiary, Hunan Ruixi Business Operation Management Co., Ltd., a PRC limited liability company ("Hunan Ruixi").
Prior to December 31, 2025, we provided automobile transaction and related services in Sichuan Province of China through our former majority owned subsidiary, Chengdu Jiekai Yunli Technology Co., Ltd., a PRC limited liability company and its subsidiary ("Jiekai") and our former wholly owned subsidiary, Chengdu Corenel Technology Co., Ltd. a PRC limited liability company ("Corenel"). As discussed below under "Our Automobile Transactions and Related Services", we ceased our automobile transactions and related services in Sichuan Province of China on December 31 2025.
Starting in 2026, we began evaluating opportunities to expand its business into AI infrastructure. In furtherance of this initiative, we appointed David Nichols as a strategic advisor to assist us in advancing our strategy across AI infrastructure, digital infrastructure and new energy initiatives, with a particular focus on power infrastructure origination, capital formation and institutional partnerships.
In July 2026, we signed an operating agreement with Constant Energy Construction Corp. ("CECC") and jointly established Nebula Matrix AI LLC ("Nebula"). Pursuant to the operating agreement, all ownership interests of the Nebula, including, without limitation, (i) economic interest and (ii) voting interest, are evidenced by membership units. We hold 90 membership units (constituting 90% of the total 100 membership units), entitling us to 90% economic and voting interests in Nebula, while CECC holds the remaining 10 membership units with the corresponding 10% economic and voting interests. Nebula will serve as the core platform through which the two companies develop, invest in, construct and operate AI data centers and digital infrastructure projects in the United States. Nebula intends to pursue AI data center projects covering site selection, power procurement, engineering-procurement-construction ("EPC"), project financing and long-term operation.
On October 18, 2026, we entered into the Youngstown Computing Center Equity Transfer Agreement dated October 17, 2026 with Glorious Star LLC, pursuant to which we agreed to acquire 100% of the outstanding equity interests of Glorious Star LLC, an Ohio limited liability company holding interests in a computing center project located at 1911 Logan Avenue, Youngstown, Mahoning County, Ohio, consisting of approximately 30,888 square feet of warehouse space, agreed outdoor areas, site rights, a 23kV electricity connection with 18 MVA site-level apparent power capacity, related equipment, facilities, permits and contract rights. The aggregate purchase price is $3,600,000. On November 3, 2026, we entered into Amendment No. 1 to the agreement, which eliminated the escrow arrangement and revised the payment, closing and termination provisions. On the same date, we paid $360,000 directly to the seller as a down payment, which will be credited against the purchase price at closing. The down payment is generally non-refundable, subject to the limited refund provisions specified in the amended agreement. The remaining $3,240,000 is payable at closing concurrently with the transfer of all equity interests and control, subject to satisfaction or applicable written waiver of the closing conditions, including those relating to due diligence and valuation. The due diligence period remains 30 business days from the agreement's original effective date of October 18, 2026, and the closing and balance-payment deadline is the 30th business day after that date, unless extended by written agreement. We retain termination rights under specified circumstances, but termination alone does not entitle us to repayment of the down payment. Payment of the down payment does not constitute completion of the acquisition or waive the remaining closing conditions. As of the date of this report, the acquisition has not closed, and there can be no assurance that it will be completed. Following closing, we intend to convert the project into a data center for artificial intelligence and high-performance computing workloads; the acquisition and planned conversion are subject to significant uncertainties.
Our Automobile Transactions and Related Services
Our automobile transaction and related Services are mainly comprised of (i) automobile operating lease where we provide car rental services to individual customers to meet their personal needs with lease term no more than twelve months (the "Auto Operating Leasing"); (ii) service fees from new energy vehicles ("NEVs") leasing where we charge NEVs lessees for a series of the services provided to them based on the chosen product solutions (the "Service for NEVs Leasing"); (iii)service fees from automobile purchase for a series of the services provided to purchasers throughout the purchase process based on the sales price of the automobiles and relevant services provided (the " Service for Automobile Purchase") ;(iv) monthly services where we provide management and related services to other online ride-hailing platforms we cooperated with ("Partner Platforms") and other companies and earn commission from them (the "Auto Commissions"); (v) automobile financing where we provide our customers with auto finance solutions through finance leases (the "Auto Financing"); (vi) default fees we charges to the lessees for early-termination the contracts or other violation behaviors to the contracts (the "Default Revenue"); and (vii) other supporting services provided to customers, including auto management and other related services (the "Auto Management Services") and automobile sales (the "Auto Sales"). We started our facilitation and supporting services in November 2018, the sale of automobiles in January 2019, and financial and operating leasing in March 2019, respectively.
Considering the fierce competition of the online ride-hailing industry and our operating losses in China, in December 2025 the Company entered into a certain Acquisition Agreement (the "Sichuan Acquisition Agreement") with Hu Mao Sheng Tang Holdings Limited., a non-affiliated Hong Kong company ("HMST"). Pursuant to the Sichuan Acquisition Agreement, the Company sold all of the equity interests in Sichuan Senmiao Yicheng Assets Management Co., Ltd. ("Yicheng"), Sichuan Senmiao Zecheng Business Consulting Co., Ltd. ("Senmiao Consulting") and its subsidiaries, which were our former subsidiaries in Sichuan Province of China ("former subsidiaries in Sichuan"), to HMST for nil consideration, while we undertook certain liabilities of $518,388 which were previously assumed by former subsidiaries in Sichuan (the "Disposition"). On December 31, 2025, the Disposition was completed and we ceased our automobile transactions and related services in Sichuan Province of China.
Since November 22, 2018, the acquisition date of Hunan Ruixi, and as of September 30, 2026, we have facilitated financing for an aggregate of 312 automobiles with a total value of approximately $5.4 million, sold an aggregate of 381 automobiles with a total value of approximately $3.7 million and delivered 470 automobiles under operating leases and 197 automobiles under finance leases to customers, the vast majority of whom are online ride-hailing drivers.
The table below provides a breakdown of the number of vehicles sold or delivered under different leasing arrangements or managed by us and corresponding revenue generated for the three and six months ended September 30, 2026 and 2025, respectively:
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||||
| Number of | Number of | Number of | Number of | |||||||||||||||||||||||||||||
| Vehicles | Revenue* | Vehicles | Revenue* | Vehicles | Revenue* | Vehicles | Revenue* | |||||||||||||||||||||||||
| Auto Operating Leasing | 325 | $ | 321,000 | 339 | $ | 373,000 | 329 | 635,000 | 340 | $ | 759,000 | |||||||||||||||||||||
| Auto Commissions | - | $ | 14,000 | - | $ | 3,000 | - | 15,000 | - | $ | 11,000 | |||||||||||||||||||||
| Auto Financing | 16 | $ | 6,000 | 53 | $ | 19,000 | 33 | 18,000 | 59 | $ | 41,000 | |||||||||||||||||||||
| Other Services | >360 | $ | 23,000 | >350 | $ | 38,000 | >360 | 57,000 | >350 | $ | 50,000 | |||||||||||||||||||||
| * | The number was rounded to the nearest thousand for disclosure purpose. |
During the three months ended September 30, 2026, our Auto Operating Leasing, Auto Commissions, Auto Financing, and other services income accounted for approximately 88.3%, 3.7%, 1.6% 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 86.0%, 0.6%, 4.4%, and 9.0% for the three months ended September 30, 2025, respectively. During the six months ended September 30, 2026, our Auto Operating Leasing, Auto Commissions, Auto Financing, and other services income accounted for approximately 87.6%, 2.0%, 2.4% and 8.0% 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 88.2%, 1.3%, 4.8%, and 5.7% for the six months ended September 30, 2025, respectively.
Key Factors and Risks Affecting Results of Operations
Ability to Increase Our Automobile Lessee
Our revenue growth has been largely driven by the expansion of our automobile lessee base and the corresponding revenue generated from operating and finance lease. We acquire customers for our Automobile Transaction and Related Services through the network of third-party sales teams, referral from online ride-hailing platforms and our own efforts including online advertising and billboard advertising. We also send out fliers and participate in trade shows to advertise our services. We plan to maintain the number of our customers by marketing our companies to our existing and prospective automobile lessees in the cities we now operate in. We expect to keep promoting the growth of our automobile rental business with automobile rental solutions/incentives specifically targeted at drivers using our Partner Platforms. An effective cross-selling strategies between our automobile leasing business and our Partner Platforms is important to our expansion and revenue growth. We also plan to strengthen our marketing efforts through the collaboration with certain automobile dealers and through our own team by employing more experienced staff, sharing market resources with our equity investee company, and improving the quality and variety of our services. As of September 30, 2026, we had 7 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 six months ended September 30, 2026. To meet the demand in Changsha, we have purchased automobiles for our operating lease. The daily management and timely maintenance of leased automobiles will have a significant effect on the stability and potential growth of our income from leasing automobiles in the next twelve months. The effective management, including maintaining the high turn-over rate of our automobiles through our proprietary system and experienced auto-management team could provide in-time delivery and qualified automobiles to potential lessees, either for personal use or providing online ride-hailing services. As of September 30, 2026, for parking and management of automobiles for operating lease, we had one parking lot and four employees in Changsha. During the three months ended September 30, 2026 and 2025, the average utilization of the automobiles for operating lease was approximately 94.2% and 94.9%, respectively. During the six months ended September 30, 2026 and 2025, the average utilization of the automobiles for operating lease was approximately 93.2% and 95.5%, respectively.
Our Service Offerings and Pricing
The growth of our revenue depends on our ability to improve existing solutions and services provided, continue identifying evolving business needs, refine our collaborations with business partners and provide value-added services to our customers. The attraction of new automobile leases depends on our leasing solutions with attractive rental price and flexible leasing terms. We have also adopted a series of pricing formulas to adopt the market changes, considering the historical and future expenditure, remaining available leasing months and market price to determine our rental price for varied rental solutions. Furthermore, our product designs affect the type of automobile leases we attract, which in turn affect our financial performance. The attraction of new customers depends on the comprehensive income they could earn from our own or Partner Platforms, which is mainly affected by the number of orders distributed to them through our platform and the amount of the incentives paid to them from platforms. Our revenue growth also depends on our abilities to effectively price our services, which enables us to attract more customers and improve our profit margin.
Ability to Retain Key Business Cooperators
Historically, we have set up a series of strategy and business relationships with certain affiliates of some famous and leading companies of NEVs manufacturers, online ride-hailing platforms, local NEVs leasing companies, and travel service providers to develop our Automobile Transaction and Related Services. We earned commissions or services fees from them, purchased and leased automobiles for our business at a favorable price. The close relationships have provided us with the necessary capacity to support the development of our online ride-hailing platform and leasing business. To retain these valuable cooperators and continuously explore opportunities to collaborate with them in more areas is important to us to have considerable resources to support the exploration and expansion of our business into new cities.
Meanwhile, in order to strengthen our market position, Hunan Ruixi has built up cooperation relationships with Partner Platforms, such as Hunan Didi Chuxing Technology Co., Ltd., whereby the online ride-hailing requests and orders shall be completed on Partner Platforms utilizing the network of cars and drivers of us while Hunan Ruixi earned rental income from drivers and earned commissions from Partner Platforms.
Ability to Collect Receivables on a Timely Basis
For receivables from Auto Operating Leasing, we usually settle the rental income with each online ride-hailing driver monthly based on the product solutions they chose. In accordance with the development of the operating lease business, our Partner Platforms, such as Didi, agree to temporarily "lock-up" the fares of the rides which the driver earned from the platform to ensure the timely collection of our rental receivables from them. As of September 30, 2026, we had no accounts receivable of operating lease. Besides, during the three and six months ended September 30, 2026, we settled our commissions with the Partner Platforms for our automobile rental income on a monthly basis.
The efficiency of collection of the monthly and weekly payments has a material impact on our daily operation. Our risk and asset management department has set up a series of procedures to monitor the collection from drivers. Our business department has also set up a stable and close relationship with Partner Platforms to ensure the timely collection of commissions. The accounts receivable and advance payments may increase our liquidity risk.
Ability to Manage Defaults Effectively
We manage the credit risk arising from the default of automobile purchasers and lessees by performing credit checks on each automobile purchaser or lessee based on the credit reports from People's Bank of China and third-party credit rating companies, and personal information including residence, ethnicity group, driving history and involvement in legal proceeding. Our risk department continuously monitors the payment by each purchaser and sends them payment reminders. We also keep monitoring the daily gross fare earned by the online ride-hailing drivers, who are our majority customers and run their business through our Partner Platforms during the three and six months ended September 30, 2026. We do this so that we can evaluate their financial conditions and provide them with assistance including the transfer of automobile to a new driver if they are no longer interested in providing ride-hailing services or are unable to earn enough income to make monthly lease/loan payments. We also charge default fees from customers for their behaviors violated to the contracts.
Further, the automobiles subject to our finance leases are not collateralized by us. As of September 30, 2026, the total value of non-collateralized automobiles was close to the amount of finance lease receivables since it was on a straight-line basis. We believe our risk exposure of financing leasing is immaterial as we have experienced limited default cases and we are able to re-lease those automobiles to drivers under finance leases.
Ability to Compete Effectively
Our business and results of operations depend on our ability to compete effectively. Overall, our competitive position may be affected by, among other things, our service quality and our ability to price our solutions and services competitively. We will set up and continuously optimize our own business system to improve our service quality and user experience. Our competitors may have more resources than we do, including financial, technological, marketing and others and may be able to devote greater resources to the development and promotion of their services. We will need to continue to introduce new or enhance existing solutions and services to continue to attract automobile dealers, financial institutions, car buyers, lessees, ride-hailing drivers and other industry participants. Whether and how quickly we can do so will have a significant impact on the growth of our business.
Market Opportunity and Government Regulations in China
The demand for our services depends on overall market conditions of the online ride-hailing industry in China. The continuous growth of the urban population places increasing pressure on the urban transportation and the improvement of living standards has increased the market demand for quality travel in China. Traditional taxi service is limited, and the emerging online platforms have created good opportunities for the development of the online ride-hailing service market. The market value is expected to increase from RMB354.7 billion in 2024 to RMB751.3 billion in 2028, owing to rising consumer demand for economical mobility options and an amplified penetration of shared mobility services, especially in lower-tier cities. According to the 57th Statistical report on Internet Development in China published in February 2026 by the China Internet Network Information Center (the "CNNIC"), the number of online ride-hailing service users had reached 539 million by the end of December 2025, and took approximately 47.9% of the total number of Chinese internet users. We cooperate with DiDi, the dominant player in China's ride-hailing market. Benefiting from DiDi's leading market share, massive driver and passenger network, advanced AI intelligent dispatching technology, standardized compliance control system and high user loyalty, our business is well-positioned to capture the incremental growth brought by the rapid expansion of aggregation ride-hailing orders in the coming years. In addition, the online ride-hailing industry is also facing increasing competition in China and is attracting more capital investment. For example, Dida Inc. Chenqi Technology Limited and CaoCao Inc. were listed on the Hong Kong Stock Exchange in June 2024 and June 2025, respectively.
However, the participants in the online ride-hailing industry are facing increasingly fierce competition and the platforms for passengers and providing services together with online ride-hailing platform companies ("Aggregation Platforms") have gained rising significance in the shared mobility industry. According to the Ministry of Transportation (the "MOT") of the People's Republic of China, as of August 31, 2026, approximately 402 online ride-hailing platform companies have obtained booking taxi operating licenses, representing an increase of approximately 2% as compared with the one as of August 31, 2025. Total online ride-hailing order volume was approximately 1,069 million in August 2026 in China, representing an increase of approximately 35% as compared with the one in August 2025. Of this volume, orders completed by Aggregation Platforms amounted to 347 million, accounting for approximately 32.5% of the industry's total orders in August 2026 in China, representing an increase of 20.9% as compared with the one in August 2025. Meanwhile, approximately 3.21 million online booking taxi transportation certificates and approximately 7.48 million online booking taxi driver's licenses were issued nationwide in China as of December 31, 2024, respectively. Since 2023, the municipal transportation bureaus in a series of cities in China have released operational dynamics and risk warnings for the online ride-hailing industry, stating that the online ride-hailing market has become saturated. They remind enterprises and practitioners who intend to engage in online ride-hailing services should have a detailed understanding of relevant regulations, conduct market research, fully consider changes in operating income due to factors such as supply and demand, market conditions, fluctuations or continuous declines, objectively evaluate the actual income level of industry practitioners, and make rational and prudent career choices.
The online ride-hailing industry may also be affected by, among other factors, the general economic conditions in China. The interest rates and unemployment rates may affect the demand of ride-hailing services and automobile purchasers' willingness to seek credit from financial institutions. Adverse economic conditions could also reduce the average income of individual and intensify the competition between platforms. Should any of those negative situations occur, the volume and value of the automobile transactions we service will decline, and our revenue and financial condition will be negatively impacted.
On April 1, 2017, the General Office of Changsha City People's Government issued the "Detailed Rules for the Administration of Online Car-Hailing Business Services of Changsha City", which was abolished and replaced by the updated version issued on July 23, 2018. On August 20, 2025, the Changsha Municipal Bureau of Transportation further issued "Announcement of Changsha Municipal Bureau of Transportation on Further Improving the Issuance of Vocational Qualification Certificates for Taxi Drivers and Other Related Matters". According to these regulations and guidelines, three licenses /certificates are required for operating the online ride-hailing business in Changsha: (1) the ride-hailing service platform should obtain the online booking taxi operating license; (2) the automobiles used for online ride-hailing should obtain the online booking taxi transportation certificate ("automobile certificate"); (3) the drivers should obtain the online booking taxi driver's license ("driver's license"). Besides, all newly added cars used for online ride-hailing in Changsha shall be NEVs starting from 2027.
As of September 30, 2026, all ride-hailing drivers who leased our automobiles or used our services have obtained the driver's license for online ride-hailing services, and all of the cars used for online ride-hailing services which we provided management services have the automobile certificate. Without requisite automobile certificate or driver's license, these drivers may be suspended from providing ride-hailing services, confiscated their illegal income and subject to fines of up to 10 times of their illegal income. We assisted drivers to obtain the required certificate and license for our Automobile Transaction and Related Services. However, there was no guarantee that all of the drivers who run their online ride-hailing business would be able to obtain all the certificates and licenses. These Partner Platforms may not allow unqualified drivers who lease our automobiles to drive through these platforms, or reduce their commission income, so that they may not be able to earn enough income from those Partner Platforms to pay our rental fees. Our business and results of operations shall be materially and adversely affected if we could not serve qualified drivers or our served drivers are suspended from providing ride-hailing services.
The Chinese government has exercised and continued to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. For example, the Chinese cybersecurity regulator announced on July 2, 2021 that it had begun an investigation of Didi and two days later ordered that the company's app be removed from smartphone app stores. We believe that our current operations are in compliance with the laws and regulations of the Chinese cybersecurity regulator. However, the Company's operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating to its business or industry.
Results of Continuing Operations for the three months ended September 30, 2026 Compared to the three months ended September 30, 2025
| For the Three Months Ended | ||||||||||||
| September 30, | ||||||||||||
| 2026 | 2025 | Change | ||||||||||
| (unaudited) | (unaudited) | |||||||||||
| Revenues | $ | 364,171 | $ | 433,246 | $ | (69,075 | ) | |||||
| Cost of revenues | (238,057 | ) | (339,952 | ) | 101,895 | |||||||
| Gross profit | 126,114 | 93,294 | 32,820 | |||||||||
| Operating expenses | ||||||||||||
| Selling, general and administrative expenses | (681,493 | ) | (551,690 | ) | (129,803 | ) | ||||||
| Provision for credit losses | - | (182,856 | ) | 182,856 | ||||||||
| Total operating expenses | (681,493 | ) | (734,546 | ) | 53,053 | |||||||
| Loss from operations | (555,379 | ) | (641,252 | ) | 85,873 | |||||||
| Other income, net | 18,625 | 32,709 | (14,084 | ) | ||||||||
| Change in fair value of derivative liabilities | (7,524,024 | ) | 3,127 | (7,527,151 | ) | |||||||
| Loss before income taxes expense | (8,060,778 | ) | (605,416 | ) | (7,455,362 | ) | ||||||
| Income tax expense | - | - | - | |||||||||
| Net loss from continuing operations | $ | (8,060,778 | ) | $ | (605,416 | ) | $ | (7,455,362 | ) | |||
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 September 30, 2026 and 2025, respectively:
| For the Three Months Ended | ||||||||
| September 30, | ||||||||
| 2026 | 2025 | |||||||
| (unaudited) | (unaudited) | |||||||
| Revenue from automobile transactions and related services | ||||||||
| - Operating lease revenues from automobile rentals | $ | 321,482 | $ | 372,756 | ||||
| - Service fees from NEVs leasing | 14,496 | 19,011 | ||||||
| - Monthly services commissions | 13,648 | 2,730 | ||||||
| - Financing revenues | 5,738 | 18,849 | ||||||
| - Default revenue | 3,243 | 10,195 | ||||||
| - Service fees from automobile purchase services | - | 7,666 | ||||||
| - Other service fees | 5,564 | 2,039 | ||||||
| Total Revenue | $ | 364,171 | $ | 433,246 | ||||
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, and other services fees, which accounted for approximately 88.3%, 4.0%, 3.7%, 1.6%, 0.9% and 1.5%, respectively, of the total revenue during the three months ended September 30, 2026. 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%, 4.4%, 0.6%, 4.4%, 2.4%, 1.8% and 0.4%, respectively, of the total revenue during the three months ended September 30, 2025.
Operating lease revenues from automobile rentals
We generate revenues from leasing our own automobiles by online ride-hailing drivers with their authorization, with the majority of lease term of no more than 12 months. The decrease in rental income of $51,274, or approximately 13.8% during three months ended September 30, 2026 was mainly due to the decrease in the number and average monthly rental of automobiles leased for operating lease. We leased 325 automobiles with an average monthly rental income of approximately $350 per automobile, resulting in a rental income of $321,482 for the three months ended September 30, 2026. While we leased 339 automobiles with an average monthly rental income of approximately $395 per automobile, resulting in a rental income of $372,756 for the three months ended September 30, 2025.
Service fees from NEVs leasing
We generated revenues of $14,496 and $19,011 from leasing NEVs by charging leases service fees during the three months ended September 30, 2026 and 2025, respectively. The amount of service fees for NEVs leasing is based on our timely product solutions which are adjusted in accordance with different market conditions.
Monthly services commissions
We generated revenues of $13,648 and $2,730 from the monthly management and related services provided to our Partner Platforms and other companies during the three months ended September 30, 2026 and 2025, respectively. The increase was primarily attributable to higher automobile maintenance as our own automobiles aged during the three months ended September 30, 2026, resulting in greater rebate income from auto repair vendors.
Financing revenues
We started our finance lease business in March 2019 and began to generate interest income from providing finance lease services to ride-hailing drivers in April 2019. We also charge the customers of our automobile financing facilitation services interest on their monthly payments which cover purchase price of automobile and our services fees and facilitation fees for terms of 24 or 48 months. We recognized a total interest income of $5,738 from an average monthly number of 16 automobiles and $18,849 from an average monthly number of 50 automobiles during the three months ended September 30, 2026 and 2025, respectively. The decrease was due to the average number of automobiles served for financial leasing decreased during the three months ended September 30, 2026.
Default revenue
We generated default revenues of $3,243 and $10,195 from the automobile lessee's early-termination of the contracts or other violation behaviors to the contracts during the three months ended September 30, 2026 and 2025, respectively. The decrease was primarily attributable to a lower incidence of early-terminations and contractual breaches by the automobile lessees, driven by improved credit quality of our lessee base, enhanced risk management and contract monitoring practices during three months ended September 30, 2026.
Service fees from automobile purchase services
We generated revenues of $0 and $7,666 from the automobile purchase services during the three months ended September 30, 2026 and 2025, respectively. The decrease was due to the number of automobiles purchase transactions decreased to 0 during the three months ended September 30, 2026 from 6 during the three months ended September 30, 2025.
Other Service fees
We generate other revenues from other miscellaneous service fees charged to our customers during the three months ended September 30, 2026 and 2025. Other services fees mainly include the maintenance fees charged to our customers pursuant to certain new product solutions.
Cost of Revenues
Cost of revenues represents the depreciation and rental cost of automobiles, daily maintenance, insurance and other usage costs of automobiles which related to our Auto Operating Leasing. The decrease of $101,895, or approximately 30.0% was primarily due to decrease in the depreciation of automobiles. Although the total number of our own automobiles used for operating leasing remaining substantially unchanged during the three months ended September 30, 2026 as compared with the three months ended September 30, 2025, these automobiles were fully depreciated in or prior to the three months ended September 30, 2026.
Gross Profit
We had gross profit of $126,114 and $93,294, respectively, during the three months ended September 30, 2026 and 2025. The following table sets forth the breakdown of gross profit by major revenue source for the three months ended September 30, 2026 and 2025:
| For the Three Months Ended | ||||||||
| September 30, | ||||||||
| 2026 | 2025 | |||||||
| (unaudited) | (unaudited) | |||||||
| - Auto Operating Leasing | $ | 83,425 | $ | 32,804 | ||||
| - Other Automobile transaction and related Services | 42,689 | 60,490 | ||||||
| Total Gross Profit | $ | 126,114 | $ | 93,294 | ||||
We had a gross profit of $83,425 from our Auto Operating Leasing during the three months ended September 30, 2026, which increased by $50,621 from a gross profit of $32,804 in the three months ended September 30, 2025. The increase was attributable to decrease in the depreciation of automobiles, which were fully depreciated in or prior to the three months ended September 30, 2026. As the gross margin of the revenues from our operating leasing increased, our overall gross profit margin increased to approximately 34.6% for the three months ended September 30, 2026 from approximately 21.5% for the three months ended September 30, 2025.
Selling, General and Administrative Expenses
For the three months ended September 30, 2026, selling, general and administrative expenses primarily consist of salary and employee benefits, rental expense, travel expenses, and other expenses. Selling, general and administrative expenses increased from $551,690 for three months ended September 30, 2025 to $681,493 for the three months ended September 30, 2026, representing an increase of $129,803, or approximately 23.5%. The increase was mainly due to (1) the increase of $77,915 in professional service fees such as financial, market consulting due to our financing arrangements during the three months ended September 30, 2026; (2) an increase of $72,829 in salary and employee benefits mainly due to the higher compensation scales for current executive officers.
Other income, net
For the three months ended September 30, 2026, we had other income, net of $18,625, which primarily consist of the (1) penalty income of approximately $13,000 from the customers; and (2) the miscellaneous other income of approximately $6,000.
For the three months ended September 30, 2025, we had other income, net of $32,709, which primarily consist of (1) penalty income of approximately $20,000 from the customers; and (2) the miscellaneous other income of approximately $13,000.
Change in Fair Value of Derivative Liabilities
Warrants issued in our registered direct offerings that took place in February 2021, May 2021 and November 2025, and the August 2020 underwritten public offering, and the November 2021, November 2025 and June 2026 private placement were classified as liabilities under the caption "Derivative Liabilities" in the unaudited condensed consolidated balance sheet and recorded at estimated fair value at each reporting date, computed using the Black-Scholes valuation model. The change in fair value of derivative liabilities for the three months ended September 30, 2026 and 2025 was a loss of $7,524,024 and a gain of $3,127, respectively. The following table sets forth the breakdown of the gain (loss) in fair value of derivative liabilities for the three months ended September 30, 2026 and 2025:
| For the Three Months Ended | ||||||||
| September 30, | ||||||||
| 2026 | 2025 | |||||||
| (unaudited) | (unaudited) | |||||||
| - May 2021 registered direct offering | $ | - | $ | 166 | ||||
| - November 2021 private placement | - | 2,961 | ||||||
| - November 2025 Private placement | (3,315,443 | ) | - | |||||
| - November 2025 registered direct offering | (724,000 | ) | - | |||||
| - June 2026 private placement | (3,484,581 | ) | - | |||||
| Total Change in Fair Value of Derivative Liabilities | $ | (7,524,024 | ) | $ | 3,127 | |||
Income Tax Expense
Generally, our subsidiary Hunan Ruixi is subject to enterprise income tax on its taxable income in China at a rate of 25%. And the applicable tax rate of our HK subsidiary, Senmiao HK, for the first HKD$2 million of assessable profits is 8.25% and assessable profits above HKD$2 million will continue to be subject to the rate of 16.5% for corporations in Hong Kong. The enterprise income tax is calculated based on the entity's global income as determined under PRC tax laws and accounting standards. With the exception of Senmiao HK, which generated profits primarily from tax-exempt interest income on bank deposits, all entities suffered losses. Accordingly, no tax expense was recorded for the three months ended September 30, 2026 and 2025.
Net loss from continuing operations
As a result of the foregoing, net loss from continuing operations for the three months ended September 30, 2026 was $8,060,778, representing an increase in loss of $7,455,362 from net loss of $605,416 for the three months ended September 30, 2025.
Results of Continuing Operations for the six months ended September 30, 2026 Compared to the six months ended September 30, 2025
| For the Six Months Ended | ||||||||||||
| September 30, | ||||||||||||
| 2026 | 2025 | Change | ||||||||||
| (unaudited) | (unaudited) | |||||||||||
| Revenues | $ | 725,060 | $ | 860,944 | $ | (135,884 | ) | |||||
| Cost of revenues | (537,254 | ) | (685,783 | ) | 148,529 | |||||||
| Gross profit | 187,806 | 175,161 | 12,645 | |||||||||
| Operating expenses | ||||||||||||
| Selling, general and administrative expenses | (1,373,965 | ) | (1,052,519 | ) | (321,446 | ) | ||||||
| Provision for credit losses | - | (182,856 | ) | 182,856 | ||||||||
| Total operating expenses | (1,373,965 | ) | (1,235,375 | ) | (138,590 | ) | ||||||
| Loss from operations | (1,186,159 | ) | (1,060,214 | ) | (125,945 | ) | ||||||
| Other (expense) income, net | (719,075 | ) | 61,796 | (780,871 | ) | |||||||
| Excess of warrant fair value over offering proceeds | (34,149,713 | ) | - | (34,149,713 | ) | |||||||
| Change in fair value of derivative liabilities | (4,791,918 | ) | 80,309 | (4,872,227 | ) | |||||||
| Loss before income taxes expense | (40,846,865 | ) | (918,109 | ) | (39,928,756 | ) | ||||||
| Income tax expense | - | - | - | |||||||||
| Net loss from continuing operations | $ | (40,846,865 | ) | $ | (918,109 | ) | $ | (39,928,756 | ) | |||
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 six months ended September 30, 2026 and 2025, respectively:
| For the Six Months Ended | ||||||||
| September 30, | ||||||||
| 2026 | 2025 | |||||||
| (unaudited) | (unaudited) | |||||||
| Revenue from automobile transactions and related services | ||||||||
| - Operating lease revenues from automobile rentals | $ | 634,817 | $ | 759,022 | ||||
| - Service fees from NEVs leasing | 35,787 | 19,011 | ||||||
| - Financing revenues | 17,551 | 41,180 | ||||||
| - Monthly services commissions | 14,811 | 10,995 | ||||||
| - Default revenue | 6,682 | 17,489 | ||||||
| - Service fees from automobile purchase services | 4,670 | 8,936 | ||||||
| - Other service fees | 10,742 | 4,311 | ||||||
| Total Revenue | $ | 725,060 | $ | 860,944 | ||||
Revenue from our automobile transaction and related services mainly includes operating lease revenues from automobile rentals, service fees from NEVs leasing, financing revenues, monthly services commissions, default revenue, service fees from automobile purchase services, and other services fees, which accounted for approximately 87.6%, 4.9%, 2.4%, 2.0%, 0.9%, 0.6% and 1.6%, respectively, of the total revenue during the six months ended September 30, 2026. Meanwhile, operating lease revenues from automobile rentals, service fees from NEVs leasing, financing revenues, monthly services commissions, default revenue, service fees from automobile purchase services, and other services fees, which accounted for approximately 88.2%, 2.2%, 4.8%, 1.3%, 2.0%, 1.0% and 0.5%, respectively, of the total revenue during the six months ended September 30, 2025.
Operating lease revenues from automobile rentals
We generate revenues from leasing our own automobiles by online ride-hailing drivers with their authorization, with the majority of lease term of no more than 12 months. The decrease in rental income of $124,205, or approximately 16.4% during six months ended September 30, 2026 was mainly due to the decrease in the number and average monthly rental of automobiles leased for operating lease. We leased 329 automobiles with an average monthly rental income of approximately $349 per automobile, resulting in a rental income of $634,817 for the six months ended September 30, 2026. While we leased 340 automobiles with an average monthly rental income of approximately $397 per automobile, resulting in a rental income of $759,022 for the six months ended September 30, 2025.
Service fees from NEVs leasing
We generated revenues of $35,787 and $19,011 from leasing NEVs by charging leases service fees during the six months ended September 30, 2026 and 2025, respectively. The amount of service fees for NEVs leasing is based on our timely product solutions which are adjusted in accordance with different market conditions. We suspended charging Service fees from NEVs leasing from continuing operations for the period August 2023 through July 2025 and resumed such charges starting August 2025, which resulted in the increase of related service fee revenue recognized from continuing operations for the six months ended September 30, 2025.
Financing revenues
We started our finance lease business in March 2019 and began to generate interest income from providing finance lease services to ride-hailing drivers in April 2019. We also charge the customers of our automobile financing facilitation services interest on their monthly payments which cover purchase price of automobile and our services fees and facilitation fees for terms of 24 or 48 months. We recognized a total interest income of $17,551 from an average monthly number of 20 automobiles and $41,180 from an average monthly number of 51 automobiles during the six months ended September 30, 2026 and 2025, respectively. The decrease was due to the average number of automobiles served for financial leasing decreased during the six months ended September 30, 2026.
Monthly services commissions
We generated revenues of $14,811 and $10,995 from the monthly management and related services provided to our Partner Platforms and other companies during the six months ended September 30, 2026 and 2025, respectively. The increase was primarily attributable to higher automobile maintenance as our own automobiles aged during the six months ended September 30, 2026, resulting in greater rebate income from auto repair vendors.
Default revenue
We generated default revenues of $6,682 and $17,489 from the automobile lessee's early-termination of the contracts or other violation behaviors to the contracts during the six months ended September 30, 2026 and 2025, respectively. The decrease was primarily attributable to a lower incidence of early-terminations and contractual breaches by the automobile lessees, driven by improved credit quality of our lessee base, enhanced risk management and contract monitoring practices during six months ended September 30, 2026.
Service fees from automobile purchase services
We generated revenues of $4,670 and $8,936 from the automobile purchase services during the six months ended September 30, 2026 and 2025, respectively. The decrease was due to the number of automobiles purchase transactions decreased to 4 during the six months ended September 30, 2026 from 7 during the six months ended September 30, 2025.
Other Service fees
We generate other revenues from other miscellaneous service fees charged to our customers during the six months ended September 30, 2026 and 2025. Other services fees mainly include the maintenance fees charged to our customers pursuant to certain new product solutions.
Cost of Revenues
Cost of revenues represents the depreciation and rental cost of automobiles, daily maintenance, insurance and other usage costs of automobiles which related to our Auto Operating Leasing. The decrease of $148,529, or approximately 21.7% was primarily due to decrease in the depreciation of automobiles. Although the total number of our own automobiles used for operating leasing remaining substantially unchanged during the six months ended September 30, 2026 as compared with the six months ended September 30, 2025, these automobiles were fully depreciated in or prior to the six months ended September 30, 2026.
Gross Profit
We had gross profit of $187,806 and $175,161, respectively, during the six months ended September 30, 2026 and 2025. The following table sets forth the breakdown of gross profit by major revenue source for the six months ended September 30, 2026 and 2025:
| For the Six Months Ended | ||||||||
| September 30, | ||||||||
| 2026 | 2025 | |||||||
| (unaudited) | (unaudited) | |||||||
| - Auto Operating Leasing | $ | 97,563 | $ | 73,239 | ||||
| - Other Automobile transaction and related Services | 90,243 | 101,922 | ||||||
| Total Gross Profit | $ | 187,806 | $ | 175,161 | ||||
We had a gross profit of $97,563 from our Auto Operating Leasing during the six months ended September 30, 2026, which increased by $24,234 from a gross profit of $73,239 in the six months ended September 30, 2025. The increase was attributable to decrease in the depreciation of automobiles, which were fully depreciated in or prior to the six months ended September 30, 2026. As the gross margin of the revenues from our operating leasing decreased, our overall gross profit margin increased to approximately 25.9% for the six months ended September 30, 2026 from approximately 20.3% for the six months ended September 30, 2025.
Selling, General and Administrative Expenses
For the six months ended September 30, 2026, selling, general and administrative expenses primarily consist of salary and employee benefits, rental expense, travel expenses, and other expenses. Selling, general and administrative expenses increased from $1,052,519 for six months ended September 30, 2025 to $1,373,965 for the six months ended September 30, 2026, representing an increase of $321,446, or approximately 30.5%. The increase was mainly due to (1) the increase of $238,093 in professional service fees such as financial, market consulting due to our financing arrangements during the six months ended September 30, 2026; (2) an increase of $125,527 in salary and employee benefits mainly due to the higher compensation scales for current executive officers; (3) an increase of $62,119 in business travel and promotion expenses mainly attributable to efforts to attract drivers and source new development projects during six months ended September 30, 2026.
Other (expense) income, net
For the six months ended September 30, 2026, we had other expense, net of $719,075, which primarily consist of the (1) $770,000 in offering costs allocable to the derivative liabilities for our June 2026 Units Warrants; partially offset by (2) income of approximately $15,000 from the disposal of our own automobiles used for operating leases; (3) penalty income of approximately $25,000 from the customers; and (4) the miscellaneous other income of approximately $11,000.
For the six months ended September 30, 2025, we had other income, net of $61,796, which primarily consist of (1) penalty income of approximately $25,000 from the customers; and (2) the miscellaneous other income of approximately $27,000.
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 $182,856 against receivables from Jinkailong for the six months ended September 30, 2026 and 2025, respectively.
Excess of warrant fair value over offering proceeds
In June 2026, we issued common shares and warrants in Units Private Placement, generating aggregate gross proceeds of $11.0 million. We concluded that these warrants qualify as liability instruments. At the issuance date in June 2026, the fair value of the warrants was estimated at $45,149,713 using the Black-Scholes valuation model, and the $34,149,713 excess of the warrants' fair value over the total offering proceeds was recognized as a loss in the unaudited condensed consolidated statements of operations and comprehensive loss.
Change in Fair Value of Derivative Liabilities
Warrants issued in our registered direct offerings that took place in February 2021, May 2021 and November 2025, and the August 2020 underwritten public offering, and the November 2021, November 2025 and June 2026 private placement were classified as liabilities under the caption "Derivative Liabilities" in the unaudited condensed consolidated balance sheet and recorded at estimated fair value at each reporting date, computed using the Black-Scholes valuation model. The change in fair value of derivative liabilities for the six months ended September 30, 2026 and 2025 was a loss of $4,791,918 and a gain of $80,309, respectively. The following table sets forth the breakdown of the gain (loss) in fair value of derivative liabilities for the six months ended September 30, 2026 and 2025:
| For the Six Months Ended | ||||||||
| September 30, | ||||||||
| 2026 | 2025 | |||||||
| (unaudited) | (unaudited) | |||||||
| - August 2020 underwritten public offering | $ | - | $ | 21 | ||||
| - February 2021 registered direct offering | - | 219 | ||||||
| - May 2021 registered direct offering | - | 13,775 | ||||||
| - November 2021 private placement | - | 66,294 | ||||||
| - November 2025 Private placement | (3,755,499 | ) | - | |||||
| - November 2025 registered direct offering | (805,448 | ) | - | |||||
| - June 2026 private placement | (230,971 | ) | - | |||||
| Total Change in Fair Value of Derivative Liabilities | $ | (4,791,918 | ) | $ | 80,309 | |||
Income Tax Expense
Generally, our subsidiary Hunan Ruixi is subject to enterprise income tax on its taxable income in China at a rate of 25%. And the applicable tax rate of our HK subsidiary, Senmiao HK, for the first HKD$2 million of assessable profits is 8.25% and assessable profits above HKD$2 million will continue to be subject to the rate of 16.5% for corporations in Hong Kong. The enterprise income tax is calculated based on the entity's global income as determined under PRC tax laws and accounting standards. With the exception of Senmiao HK, which generated profits primarily from tax-exempt interest income on bank deposits, all entities suffered losses. Accordingly, no tax expense was recorded for the six months ended September 30, 2026 and 2025.
Net loss from continuing operations
As a result of the foregoing, net loss from continuing operations for the six months ended September 30, 2026 was $40,846,865, representing an increase in loss of $39,928,756 from net loss of $918,109 for the six months ended September 30, 2025.
Results of Discontinued Operations for the three and six months ended September 30, 2026 Compared to the three and six months ended September 30, 2025
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
| Revenues | $ | - | $ | 503,098 | $ | - | $ | 935,499 | ||||||||
| Cost of revenues | - | (322,304 | ) | - | (639,617 | ) | ||||||||||
| Gross profit | - | 180,794 | - | 295,882 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Selling, general and administrative expenses | - | (355,565 | ) | - | (662,981 | ) | ||||||||||
| Reversal of credit losses | 57,810 | 57,810 | ||||||||||||||
| Total operating expenses | - | (297,755 | ) | - | (605,171 | ) | ||||||||||
| Loss from operations | - | (116,961 | ) | - | (309,289 | ) | ||||||||||
| Other (expenses) income, net | - | (1,353 | ) | - | 227,845 | |||||||||||
| Interest expense on finance leases | - | - | - | (615 | ) | |||||||||||
| Loss before income taxes | - | (118,314 | ) | - | (82,059 | ) | ||||||||||
| Income tax expenses | - | - | - | - | ||||||||||||
| Net loss from discontinued operations | $ | - | $ | (118,314 | ) | $ | - | $ | (82,059 | ) | ||||||
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 and six months ended September 30, 2026 and 2025:
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Revenue from automobile transactions and related services (discontinued operations) | ||||||||||||||||
| - Operating lease revenues from automobile rentals | $ | - | $ | 374,759 | $ | - | $ | 683,896 | ||||||||
| - Service fees from NEVs leasing | - | 92,104 | - | 175,548 | ||||||||||||
| - Monthly services commissions | - | 21,328 | - | 48,888 | ||||||||||||
| - Default revenue | - | 11,096 | - | 14,031 | ||||||||||||
| - Other service fees | - | 3,811 | - | 13,136 | ||||||||||||
| Total Revenue from discontinued operations | $ | - | $ | 503,098 | $ | - | $ | 935,499 | ||||||||
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 74.5%, 18.3%, 4.2%, 2.2% and 0.8%, respectively, of the total revenue from discontinued operations during the three months ended September 30, 2025.
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 73.1%, 18.8%, 5.2%, 1.5% and 1.4%, respectively, of the total revenue from discontinued operations during the six months ended September 30, 2025.
Operating lease revenues from automobile rentals
Our former subsidiaries in Sichuan generated revenues from leasing sub-leasing automobiles leased from third-parties and related parties or rendered by online ride-hailing drivers with their authorization for a lease term of no more than twelve months. Our former subsidiaries in Sichuan leased 377 automobiles with an average monthly rental income of approximately $409 per automobile, resulting in a rental income of $374,759, including rental income of $29,842 from a related party, for the three months ended September 30, 2025. Our former subsidiaries in Sichuan leased 411 automobiles with an average monthly rental income of approximately $405 per automobile, resulting in a rental income of $683,896, including rental income of $53,899 from a related party, for the six months ended September 30, 2025.
Service fees from NEVs leasing
Our former subsidiaries in Sichuan generated revenues of $92,104 and $175,548 from leasing NEVs by charging leases service fees during the three and six months ended September 30, 2025, 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 $21,328 and $48,888 from the monthly management and related services provided to our Partner Platforms during the three and six months ended September 30, 2025, respectively.
Default revenue
Our former subsidiaries in Sichuan generated default revenues of $11,096 and $14,031 from the automobile lessee's early-termination of the contracts or other violation behaviors to the contracts during the three and six months ended September 30, 2025, respectively.
Other Service fees
Our former subsidiaries in Sichuan generated other revenues from other miscellaneous service fees charged to our customers during the three and six months ended September 30, 2025. Other services fees mainly include the maintenance fees charged to our customers pursuant to certain new production solutions.
Cost of Revenues
During the three and six months ended September 30, 2025, cost of revenues from discontinued operations of $322,304 and $639,617, respectively, represented the amortization of ROUs, rental cost of automobiles, daily maintenance and insurance expense of automobiles which related to Auto Operating Leasing.
Selling, General and Administrative Expenses
For the three months ended September 30, 2025, selling, general and administrative expenses from discontinued operations related to Auto Operating Leasing, which amounted to $355,565, primarily consisted of (1) $233,382 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) $74,480 in salary and employee benefits; (3) $43,512 in entertainment, advertising and promotion; and (4) other miscellaneous expenses.
For the six months ended September 30, 2025, selling, general and administrative expenses from discontinued operations related to Auto Operating Leasing, which amounted to $662,981, primarily consisted of (1) $451,302 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) $121,545 in salary and employee benefits; (3) $64,911in entertainment, advertising and promotion; and (4) other miscellaneous expenses.
Other (expenses) income, net
For the three months ended September 30, 2025, our former subsidiaries in Sichuan had other expenses net of $1,353, while our former subsidiaries in Sichuan had other income, net of $227,845, which were both primarily due to deconsolidation of Corenel.
Income Tax expense
Our former subsidiaries in Sichuan are subject to enterprise income tax on its taxable income in China at a rate of 25%. All of our former subsidiaries in Sichuan suffered losses and no tax expense was recorded for the three and six months ended September 30, 2025.
Net loss from discontinued operations
As a result of the foregoing, the net loss from discontinued operations for the three and six months ended September 30, 2025 was $118,314 and $82,059, respectively.
Liquidity and Capital Resources
In assessing liquidity, we monitor and analyze our cash on-hand and our operating and capital expenditure commitments. Our liquidity needs are to meet its working capital requirements, operating expenses and capital expenditure obligations. Debt financing from financial institutions and equity financings have been utilized to finance our working capital requirements.
Our business is capital intensive, and certain factors show negative trends in its liquidity position, including (1) the net loss of approximately $40.8 million for the six months ended September 30; (2) accumulated deficit of approximately $91.2 million as of September 30; and (3) $1.3 million of net cash outflows in operating activities from continuing operations the six months ended September 30, 2026.
Recent financing arrangements, however, have materially strengthened our cash position. Management evaluated and concluded that the factors aforementioned did not raise substantial doubt as to our ability to continue as a going concern. We believe that our cash balance of approximately $12.5 million as of September 30, 2026, together with the gross proceeds of $5.0 million from the private placement of common stock in November 2026, will be sufficient to meet our liquidity needs for the twelve months following issuance of these unaudited condensed consolidated financial statements, after taking into account the $3.6 million purchase price for the Glorious Star LLC acquisition if such transaction closes. If we experienced an adverse operating environment or incurred unanticipated capital expenditure requirements, or if we determined to accelerate our growth, then additional financing may be required.
The following table summarizes our cash flows:
| For the Six Months Ended | ||||||||
| September 30, | ||||||||
| 2026 | 2025 | |||||||
| (unaudited) | (unaudited) | |||||||
| Net Cash Used in Operating Activities from Continuing Operations | $ | (1,268,332 | ) | $ | (159,665 | ) | ||
| Net Cash Used in Operating Activities from Discontinued Operations | - | (232,882 | ) | |||||
| Net Cash Used in Operating Activities | (1,268,332 | ) | (392,547 | ) | ||||
| Net Cash Used in Investing Activities from Continuing Operations | (40,187 | ) | (223,786 | ) | ||||
| Net Cash Used in Investing Activities from Discontinued Operations | - | (388 | ) | |||||
| Net Cash Used in Investing Activities | (40,187 | ) | (224,174 | ) | ||||
| Net Cash Provided by Financing Activities from Continuing Operations | 10,230,000 | 314,352 | ||||||
| Net Cash Provided by Financing Activities from Discontinued Operations | - | 101,656 | ||||||
| Net Cash Provided by Financing Activities | 10,230,000 | 416,008 | ||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 42,464 | 44,173 | ||||||
| Cash and Cash Equivalents, Beginning of the Period | 3,562,219 | 833,577 | ||||||
| Cash, cash equivalents and restricted cash, End of the Period | 12,526,164 | 677,037 | ||||||
| Less: Cash, cash equivalents and restricted cash from discontinued operations | - | (92,496 | ) | |||||
| Cash and cash equivalents from continuing operations, End of Period | $ | 12,526,164 | $ | 584,541 | ||||
Cash Flow in Operating Activities
For the six months ended September 30, 2026, net cash used in operating activities was $1,268,332, which was the net outflows from continuing operations. While for the six months ended September 30, 2025, net cash used in operating activities was $392,547, which consisted of net cash outflows of $159,665 from continuing operations and $232,882 from discontinued operations.
The increase of $1,108,667 in net cash used in operating activities from continuing operations for the six months ended September 30, 2026 as compared with the six months ended September 30, 2025 was primarily attributable to (1) increase of $39,928,756 in net loss from continuing operations; (2) increase of $297,720 in the change of prepayments, other receivables and other assets; (3) increase of $235,798 in the change of accrued expenses and other liabilities (included third parties and a related party); (4) decrease of $182,856 in the provision for credit losses; (5) decrease of $166,838 in depreciation of property and equipment as our owned automobiles used in operating leases were fully depreciated in or prior to the six months ended September 30, 2026; and partially offset by (6) a loss of $34,149,713 arising from excess of the warrants' fair value over the total offering proceeds from Units Private Placement issuance of common shares and warrants; (7) decrease of $4,872,227 in change in fair value of derivative liabilities from a gain of $80,309 for the six months ended September 30, 2025 to a loss of $4,791,918 for the six months ended September 30, 2026; and (8) $770,000 of offering costs for the Units Private Placement issuance of common shares and warrants allocated to derivative liabilities.
Cash Flow in Investing Activities
For the six months ended September 30, 2026, we had net cash used in investing activities of $40,187, which consisted of: (1) purchase of property and equipment for office purpose of $62,631; partially offset by (2) the proceeds from sales of the used-automobiles of $22,444.
For the six months ended September 30, 2025, we had net cash used in investing activities of $224,174, which consisted of net cash outflows of $223,786 from continuing operations and $388 from discontinued operation. The net cash used in investing activities from continuing operations consisted of: (1) loan to a related party of $229,469 and partially offset by (2) $5,683 of cash received from disposal of property and equipment.
Cash Flow in Financing Activities
For the six months ended September 30, 2026, we had net cash provided by financing activities of $10,230,000, generated from gross proceeds of $11,000,000 from issuance of common stock and warrant in Units Private Placement, net of related issuance costs of $770,000.
For the six months ended September 30, 2025, we had net cash provided by financing activities of $416,008, which consisted net inflows of $314,352 from continuing operations and $101,656 from discontinued operations. The net cash provided by financing activities from continuing operations consisted of: (1) net proceeds of $341,251 from the exercise of November 2021 Private Placement Warrants from an investor; and (2) borrowings from a related party of $100,000, and partially offset by (3) repayments to a related party of $126,899.
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 September 30, 2026, Hunan Ruixi holds 35% of equity interest of Jinkailong and has not made any payments towards the investment amounting to RMB3.5 million (approximately $522,000). According to the Registered Capital Registration Implementing Rules, Hunan Ruixi shall pay the subscribed capital of Jinkailong before June 30, 2032.
Inflation
We do not believe our business and operations have been materially affected by inflation.
Critical Accounting Estimates
Our unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these unaudited condensed consolidated financial statements and accompanying notes requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in their application. The management determined there were no critical accounting estimates.
When reading our unaudited condensed consolidated financial statements, you should consider our selection of critical accounting policies, the judgment and other uncertainties affecting the application of such policies and the sensitivity of reported results to changes in conditions and assumptions. Our critical accounting policies and practices include the following: (i) property and equipment, net; and (ii) revenue recognition. See Note 3-Summary of Significant Accounting Policies to our consolidated financial statements in our 2026 Form 10-K for the disclosure of these accounting policies.
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