0001104659-21-154272 | 6-K | XBRL Viewer

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Document and Entity Information	6 Months Ended
Document and Entity Information	Sep. 30, 2021
Entity Registrant Name	Uxin Limited
Entity Central Index Key	0001729173
Document Type	6-K
Document Period End Date	Sep. 30, 2021
Current Fiscal Year End Date	--03-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q2
Amendment Flag	false

UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS ¥ in Thousands, $ in Thousands	Sep. 30, 2021 CNY (¥)	Sep. 30, 2021 USD ($)	Mar. 31, 2021 CNY (¥)
Current assets:
Cash and cash equivalents	¥ 216,782	$ 33,644	¥ 192,605
Restricted cash	13,847	2,149	41,114
Accounts receivable, net	3,317	515	2,446
Amounts due from related parties, net of provision for credit losses of RMB 6,456 as of March 31, 2021			129,383
Loan recognized as a result of payment under the guarantee, net of provision for credit losses of RMB 1,182,609 and RMB 733,169 as of March 31, 2021 and September 30, 2021, respectively	130,347	20,230	179,947
Other receivables, net of provision for credit losses of RMB 20,980 and RMB 25,037 as of March 31, 2021 and September 30, 2021, respectively	189,735	29,446	110,025
Inventory, net	291,800	45,282	69,587
Prepaid expenses and other current assets	95,665	14,847	107,836
Total current assets	941,466	146,113	832,943
Noncurrent assets:
Property, equipment and software, net	27,186	4,219	29,306
Intangible assets, net	7	1	27
Long-term investments	288,702	44,806	288,428
Other non-current assets	30,000	4,656	36,000
Right-of-use assets, net	39,388	6,113	46,829
Total noncurrent assets	385,283	59,795	400,590
Total assets	1,326,749	205,908	1,233,533
Current liabilities (including amounts of the consolidated VIEs and VIEs' subsidiaries without recourse to the primary beneficiary of RMB 65,476 and RMB 63,331 as of March 31, 2021 and September 30, 2021, respectively)
Current portion of long-term borrowings	27,063	4,200	79,560
Accounts payable	95,047	14,751	101,205
Guarantee liabilities	566	88	2,441
Other payables and other current liabilities	552,230	85,705	788,303
Deferred revenue	19,989	3,102	23,296
Amounts due to related parties			69,434
Operating lease liabilities, current	17,894	2,777	11,657
Consideration payment to WeBank, current	53,357	8,281	71,309
Warrant liabilities	1,815,265	281,725
Forward contract liabilities	547,985	85,046
Total current liabilities	3,129,396	485,675	1,147,205
Noncurrent liabilities
Long-term borrowings	233,000	36,161	233,000
Convertible notes, non-current			1,614,040
Operating lease liabilities, non-current	12,362	1,919	34,365
Consideration payment to WeBank, non-current	141,195	21,913	200,778
Other non-current liabilities	1,043,508	161,949
Total noncurrent liabilities	1,430,065	221,942	2,082,183
Total liabilities	4,559,461	707,617	3,229,388
Mezzanine equity
Senior convertible preferred shares (US$0.0001 par value, nil and 1,000,000,000 shares authorized as of March 31, 2021 and September 30, 2021, respectively; nil and 291,290,416 shares issued and outstanding as of March 31, 2021 and September 30, 2021, respectively)
Total Mezzanine equity
Shareholders' deficit
Ordinary shares (US$0.0001 par value, 10,000,000,000 and 9,000,000,000 shares authorized as of March 31, 2021 and September 30, 2021, respectively; 1,071,621,698 Class A ordinary shares and 40,809,861 Class B ordinary shares issued and outstanding as of March 31, 2021; 1,145,427,125 Class A ordinary shares and 40,809,861 Class B ordinary shares issued and outstanding as of September 30, 2021)	781	121	733
Additional paid-in capital	14,228,359	2,208,207	13,695,877
Accumulated other comprehensive income	232,146	36,028	217,747
Accumulated deficit	(17,693,800)	(2,746,040)	(15,910,049)
Total UXIN LIMITED shareholders' deficit	(3,232,549)	(501,684)	(1,995,692)
Non-controlling interests	(163)	(25)	(163)
Total shareholders' deficit	(3,232,712)	(501,709)	(1,995,855)
Total liabilities, mezzanine equity and shareholders' deficit	¥ 1,326,749	$ 205,908	¥ 1,233,533

UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) ¥ in Thousands, $ in Thousands	Sep. 30, 2021 CNY (¥) shares	Sep. 30, 2021 USD ($) $ / shares shares	Mar. 31, 2021 CNY (¥) shares	Mar. 31, 2021 $ / shares
Provision for credit losses, related party receivables \| ¥			¥ 6,456
Provision for credit losses, Loan recognized \| ¥	¥ 733,169		1,182,609
Provision for credit losses, Other receivables \| ¥	25,037		20,980
Current liabilities	¥ 3,129,396	$ 485,675	¥ 1,147,205
Temporary Equity, par value (in dollars pe share) \| $ / shares		$ 0.0001		$ 0.0001
Temporary Equity, Shares Authorized (in shares)	1,000,000,000	1,000,000,000	0
Temporary Equity, Shares Issued (in shares)	291,290,416	291,290,416	0
Temporary Equity, Shares Outstanding (in shares)	291,290,416	291,290,416	0
Ordinary shares, par value (in dollars per share) \| $ / shares		$ 0.0001		$ 0.0001
Ordinary shares, shares authorized (in shares)	9,000,000,000	9,000,000,000	10,000,000,000
Ordinary shares, shares issued (in shares)	1,186,236,986	1,186,236,986	1,112,431,559
VIEs
Current liabilities \| ¥	¥ 63,331		¥ 65,476
Class A ordinary shares
Ordinary shares, shares issued (in shares)	1,145,427,125	1,145,427,125	1,071,621,698
Ordinary shares, shares outstanding (in shares)	1,145,427,125	1,145,427,125	1,071,621,698
Class B ordinary shares
Ordinary shares, shares issued (in shares)	40,809,861	40,809,861	40,809,861
Ordinary shares, shares outstanding (in shares)	40,809,861	40,809,861	40,809,861

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS ¥ in Thousands, $ in Thousands	6 Months Ended
	Sep. 30, 2021 CNY (¥) ¥ / shares shares	Sep. 30, 2021 USD ($) $ / shares shares	Sep. 30, 2020 CNY (¥) ¥ / shares shares
Revenues:
Total Revenues	¥ 623,731	$ 96,802	¥ 138,593
Cost of revenues	(597,968)	(92,803)	(173,396)
Gross (loss)/ profit	25,763	3,999	(34,803)
Operating expenses:
Sales and marketing	(86,304)	(13,394)	(191,276)
Research and development	(16,493)	(2,560)	(41,873)
General and administrative	(73,230)	(11,365)	(142,749)
Provision for)/reversal of credit losses, net	6,782	1,053	(94,056)
Total operating expenses	(169,245)	(26,266)	(469,954)
Other operating income, net	46,872	7,274	213,796
Loss from continuing operations	(96,610)	(14,993)	(290,961)
Interest income	3,212	498	43,840
Interest expenses	(28,110)	(4,363)	(52,885)
Other income	3,509	545	4,999
Other expenses	(5,890)	(914)	(5,765)
Foreign exchange gains/(losses)	(5,222)	(810)	74
Inducement charge			(121,056)
Fair value impact of the issuance of senior convertible preferred shares	(1,654,949)	(256,844)
Loss from continuing operations before income tax expense	(1,784,060)	(276,881)	(421,754)
Income tax (expense)/ benefit			(32)
Equity in income of affiliates, net of tax	274	43	10,482
Net loss from continuing operations, attributable to UXIN LIMITED's ordinary shareholders	(1,783,786)	(276,838)	(411,304)
Less: net loss attributable to non-controlling interests shareholders			(7)
Net loss from continuing operations, attributable to UXIN LIMITED's ordinary shareholders	(1,783,786)	(276,838)	(411,297)
Discontinued operations
Net income from discontinued operations before income tax			295,744
Net income from discontinued operations			295,744
Net income from discontinued operations attributable to UXIN LIMITED's ordinary shareholders			295,744
Net loss	(1,783,786)	(276,838)	(115,560)
Less: net loss attributable to non controlling interests shareholders			(7)
Net loss attributable to UXIN LIMITED's ordinary shareholders	(1,783,786)	(276,838)	(115,553)
Comprehensive Income (Loss)
Net loss	(1,783,786)	(276,838)	(115,560)
Foreign currency translation	14,399	2,235	64,782
Total comprehensive loss	(1,769,387)	(274,603)	(50,778)
Less: total comprehensive loss attributable to non controlling interests shareholders			(7)
Total comprehensive loss attributable to UNIX LIMITED's ordinary shareholders	(1,769,387)	(274,603)	(50,771)
Net loss from continuing operations, attributable to ordinary shareholders	(1,783,786)	(276,838)	(411,297)
Net income attributable to ordinary shareholders from discontinued operations			295,744
Net loss attributable to UNIX LIMITED's ordinary shareholders	¥ (1,783,786)	$ (276,838)	¥ (115,553)
Weighted average shares outstanding - basic \| shares	1,177,159,051	1,177,159,051	997,541,095
Weighted average shares outstanding - diluted \| shares	1,367,056,109	1,367,056,109	1,225,268,425
Weighted average number of ordinary shares outstanding from continuing operations - diluted \| shares	1,367,056,109,000	1,367,056,109,000	997,541,095,000
Net (loss)/ income per share for ordinary shareholders, basic
Continuing operations \| (per share)	¥ (1.52)	$ (0.24)	¥ (0.41)
Discontinued operations \| ¥ / shares			0.30
Net (loss)/ income per share for ordinary shareholders, diluted
Continuing operations \| (per share)	¥ (1.91)	$ (0.30)	(0.41)
Discontinued operations \| ¥ / shares			¥ 0.27
Retail vehicle sales
Revenues:
Total Revenues	¥ 228,043	$ 35,392	¥ 36,108
Wholesale vehicle sales
Revenues:
Total Revenues	377,881	58,646
Consumers ("2C") - Commission revenue
Revenues:
Total Revenues			41,803
Consumers ("2C") - Value-added service revenue
Revenues:
Total Revenues			35,102
Other services
Revenues:
Total Revenues	¥ 17,807	$ 2,764	¥ 25,580

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Parenthetical) - CNY (¥) ¥ in Thousands	6 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Related party transaction	¥ 6,707	¥ 176

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY/(DEFICIT) $ in Thousands	Total UXIN LIMITED shareholders' equity/(deficit) CNY (¥)	Ordinary share CNY (¥) shares	Additional paid-in capital CNY (¥)	Accumulated other comprehensive income CNY (¥)	Accumulated deficit CNY (¥)	Non-controlling interest CNY (¥)	Class A ordinary shares shares	CNY (¥)	USD ($)
Balance at Mar. 31, 2020	¥ (2,344,493,000)	¥ 581,000	¥ 13,036,989,000	¥ 106,764,000	¥ (15,488,827,000)	¥ (154,000)		¥ (2,344,647,000)
Balance (in shares) at Mar. 31, 2020 \| shares		887,667,457
Changes in equity
Foreign currency translation adjustments	64,782,000	¥ 0	0	64,782,000	0	0		64,782,000
Net loss	(115,553,000)	0	0	0	(115,553,000)	(7,000)		(115,560,000)
Issuance of ordinary shares due to exercise of the share option	995,000	¥ 1,000	994,000	0	0	0		995,000
Issuance of ordinary shares due to exercise of the share option (in shares) \| shares		2,028,907
Share-based compensation	(20,330,000)		(20,330,000)					(20,330,000)
Conversion of convertible notes (Note 12)	506,752,000	¥ 93,000	506,659,000	0	0	0		506,752,000
Conversion of convertible notes (in shares) \| shares		136,279,973
Balance at Sep. 30, 2020	(1,907,847,000)	¥ 675,000	13,524,312,000	171,546,000	(15,604,380,000)	(161,000)		(1,908,008,000)
Balance (in shares) at Sep. 30, 2020 \| shares		1,025,976,337
Balance at Mar. 31, 2020	(2,344,493,000)	¥ 581,000	13,036,989,000	106,764,000	(15,488,827,000)	(154,000)		(2,344,647,000)
Balance (in shares) at Mar. 31, 2020 \| shares		887,667,457
Balance at Mar. 31, 2021	(1,995,692,000)	¥ 733,000	13,695,877,000	217,747,000	(15,910,049,000)	(163,000)		(1,995,855,000)
Balance (in shares) at Mar. 31, 2021 \| shares		1,112,431,559					1,071,621,698
Changes in equity
Foreign currency translation adjustments	14,399,000			14,399,000				14,399,000	$ 2,235
Net loss	(1,783,786,000)				(1,783,786,000)			(1,783,786,000)	(276,838)
Issuance of ordinary shares due to exercise of the share option	15,612,000	¥ 5,000	15,607,000					15,612,000
Issuance of ordinary shares due to exercise of the share option (in shares) \| shares		6,815,136
Share-based compensation	8,884,000		8,884,000					8,884,000
Debt restructuring gain from equity holders of the Company (Note 12)	61,018,000		61,018,000					61,018,000
Conversion of convertible notes (Note 12)	447,016,000	¥ 43,000	446,973,000					447,016,000	69,376
Conversion of convertible notes (in shares) \| shares		66,990,291
Balance at Sep. 30, 2021	¥ (3,232,549,000)	¥ 781,000	¥ 14,228,359,000	¥ 232,146,000	¥ (17,693,835,000)	¥ (163,000)		¥ (3,232,712,000)	$ (501,709)
Balance (in shares) at Sep. 30, 2021 \| shares		1,186,236,986					1,145,427,125

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ¥ in Thousands, $ in Thousands	6 Months Ended
	Sep. 30, 2021 CNY (¥)	Sep. 30, 2021 USD ($)	Sep. 30, 2020 CNY (¥)
Cash flows from operating activities:
Net loss (continuing and discontinued operations)	¥ (1,783,786)	$ (276,838)	¥ (115,560)
Adjustments to reconcile net loss to net cash generated from operating activities:
Shared-based compensation	8,884	1,379	(20,330)
Depreciation and amortization of property, equipment and software	8,096	1,256	28,787
Amortization of intangible assets	20	3	77
Amortization of right-of-use assets	5,569	864	5,798
Loss/ (gain) from disposal of property, equipment and software	(1,390)	(216)	4,805
Equity in income of affiliates	(274)	(43)	(10,482)
Provision for/ (reversal of) inventory	(258)	(40)	11,623
Goodwill impairment			9,541
Provision for (reversal of) credit losses	(6,782)	(1,053)	94,056
Impairment of net assets transferred			420,000
Guarantee income	(72)	(11)	(207,445)
Transaction gain from divestiture transactions, net			(721,211)
Discounting impact of consideration payment to WeBank	6,268	973	(39,335)
Inducement charge of convertible notes			121,056
Fair value impact of the issuance of senior convertible preferred shares (Note 12, 17)	1,654,949	256,844
Gains from waiver of operating payables	(49,141)	(7,627)
Changes in operating assets and liabilities:
Receivables, prepaid expenses and other current assets	20,300	3,151	28,278
Amounts due from related parties	3,817	592	21,108
Amounts due to related parties			37,736
Loan recognized as a result of payment under the guarantee	65,068	10,098	(13,550)
Advance to sellers			33,127
Financial lease receivables	10	2	8,333
Inventory	(223,155)	(34,633)	(33,485)
Payables, accruals and other liabilities	(208,635)	(32,380)	(204,286)
Deposit of interests from consumers and payable to financing partners			(17,904)
Deferred revenue	(3,307)	(513)	(7,336)
Consideration payment to WeBank	(46,547)	(7,224)	(274,631)
Net cash used in operating activities	(550,366)	(85,416)	(841,230)
Cash flows from investing activities:
Proceeds from disposal of property, equipment and software	1,636	254	5,092
Purchase of property, equipment and software	(4,995)	(775)	(358)
Proceeds from disposal of subsidiaries, net of cash disposed			100,000
Proceeds from disposal of 2B business			300,072
Net cash generated from/ (used in) investing activities	(3,359)	(521)	404,806
Cash flows from financing activities:
Repayment of borrowings	(52,497)	(8,147)	(94,999)
Repayment of convertible notes	(58,956)	(9,150)
Proceeds from exercise of options	15,612	2,423	995
Proceeds from the issuance of senior convertible preferred shares in conjunction with warrants	647,771	100,532
Net cash (used in)/ generated from financing activities	551,930	85,658	(94,004)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1,295)	(201)	(7,570)
Net decrease in cash, cash equivalents and restricted cash	(3,090)	(480)	(537,998)
Cash. cash equivalents and restricted cash at beginning of the period	233,719	36,273	797,435
Cash, cash equivalents and restricted cash at end of the period	230,629	35,793	259,437
Supplemental disclosure of cash flow information
Cash paid for income tax	7	1	33
Cash paid for interest	4,810	747	11,152
Supplemental schedule of noncash investing and financing activities
Unreceived disposal consideration	87,432	13,569	174,433
Unpaid repurchase consideration to monitory interest			8,319
Issuance of forward contract	736,129	114,245
Conversion of convertible notes into Class A ordinary shares	¥ 447,016	$ 69,376	¥ 506,752

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) ¥ in Thousands, $ in Thousands	Sep. 30, 2021 CNY (¥)	Sep. 30, 2021 USD ($)	Sep. 30, 2020 CNY (¥)
Cash and cash equivalents	¥ 216,782	$ 33,644	¥ 219,318
Restricted cash	13,847	2,149	40,119
Total cash, cash equivalents and restricted cash	¥ 230,629	$ 35,793	¥ 259,437

PRINCIPAL ACTIVITIES AND ORGANIZATION

6 Months Ended

Sep. 30, 2021

PRINCIPAL ACTIVITIES AND ORGANIZATION

PRINCIPAL ACTIVITIES AND ORGANIZATION

1. PRINCIPAL ACTIVITIES AND ORGANIZATION

The accompanying unaudited interim condensed consolidated financial statements include the financial statements of Uxin Limited (the “Company” or “Uxin”), its subsidiaries and variable interest entities (“VIEs”). The Company, its subsidiaries and the consolidated VIEs are collectively referred to as the “Group”.

The Company was incorporated under the law of the Cayman Islands as the exempted limited liability company on December 8, 2011. The Company serves as an investment holding company and currently has no operations of its own.

In 2016, the Group spun off its 2B business through a transfer of the equity interest of Youxinpai (Beijing) Information Technology Co., Ltd.(“Youxinpai”), a subsidiary of the Company, to a series of shareholders, which represented the same offshore shareholders of the Company, i.e. same shareholders with their respective onshore and offshore entities. In 2017, the Company made its strategic decision for the existing shareholders of Youxinpai to transfer 100% equity interest in Youxinpai to the Company (referred to as “the Reorganization”).

On June 27, 2018, the Company completed its IPO on NASDAQ Global Select Market under the symbol “UXIN”. The Company offered 25,000,000 American Depositary Shares (“ADS”). Each ADS represents three ordinary share and was sold to the public at US$9.00 per ADS. Also, the Company entered into Convertible Note Purchase Agreements with CNCB (Hong Kong) Investment Limited (the “CNCB (Hong Kong)”) and Golden Fortune Company Limited (the “Golden Fortune”) concurrently with the closing of IPO. Net proceeds raised by the Company from the IPO and private placement in total amounted to approximately US$382.1 million (equivalent to RMB 2.6 billion) after deducting underwriting discounts commissions and other offering expenses.

The Group’s principal operation and geographic market is in the People’s Republic of China (“PRC”). In order to devote all resources towards developing and scaling up its online used car business and to relieve its future growth from additional guarantee obligations or credit risks, the Group made a series of strategic divestiture transactions (the “Divestiture Transactions”) that occurred during 2019 and subsequent period in 2020. Since September 2020, the Group has shifted to “inventory-owing” model where the Group builds-up and sells its own inventory of used vehicles. Prior to these Divestiture Transactions disclosed in below paragraphs, the Group was primarily engaged in operating used car e-commerce platforms through its mobile applications (Uxin Used Car / Uxin Auction) and websites (www.xin.com / www.youxinpai.com), facilitating used car transaction services (2B / 2C) and facilitating financing solutions offered by third-party financing partners to buyers for their used car purchases (2C).

Divestiture Transactions

On January 16, 2020, the Company entered into definitive agreements with Beijing Hengtai Boche Auction Co. Ltd. (“Boche”) to divest its salvage car related business in exchange for a total cash consideration of RMB330 million. The cash consideration was further modified and revised to RMB295 million due to working capital adjustment. The transaction contemplated under the definitive agreements was closed in January 2020. Starting from January 31, 2020, the Company no longer retained power of control over salvage cars related business and accordingly deconsolidated related subsidiaries, mainly including Beijing Youxin Fengshun Lubao Vehicle Auction Co., Ltd., Beijing Fengshun Lubao Automotive Auction Co., Ltd., Zhejiang Dongwang Internet Technology Co., Ltd. and their wholly-owned subsidiaries (“Salvage Car Related Subsidiaries”), from the Company’s unaudited interim condensed consolidated financial statements.

On March 24, 2020, the Company entered into definitive agreements with 58.com to sell its 2B online used car auction business in exchange for a total gross consideration of US$105 million. The transaction contemplated under the definitive agreements was closed in April 2020.

1. PRINCIPAL ACTIVITIES AND ORGANIZATION (CONTINUED)

Divestiture Transactions (continued)

On July 12, 2019 and September 30, 2019, the Company entered into a binding term sheet and definitive agreements, respectively, with Golden Pacer relating to the divestiture of its entire 2C intra-regional business and loan facilitation related service. On April 23, 2020, the Company entered into supplemental agreements with Golden Pacer to modify and supplement certain terms and conditions in connection with the divestiture. Pursuant to the series of agreements, the Company has divested its entire 2C intra-regional business to Golden Pacer and ceased to provide loan facilitation related guarantee starting from the three months ended December 31, 2019. The transaction contemplated under the definitive and supplemental agreements was closed on April 23, 2020.

After the Divestiture Transactions, the Group will primarily operate its cross-regional online used car transaction business (2C).

As of September 30, 2021, the Company’s principal subsidiaries and consolidated VIEs are as follows:


		Date of	Percentage of
	Place of	incorporation or	direct or		Principal
Subsidiaries	incorporation	acquisition	indirect		activities
Youxinpai (Beijing) Information Technology Co., Ltd.	Beijing	June 15, 2012	100	%	Used car auction
Youhan (Shanghai) Information Technology Co., Ltd.	Shanghai	December 25, 2015	100	%	Used car auction
Kai Feng Finance Lease (Hangzhou) Co., Ltd.	Hangzhou	March 25, 2013	100	%	Loan facilitation
Yougu (Shanghai) Information Technology Co., Ltd.	Shanghai	March 13, 2015	100	%	Online used car transaction service
Youxin (Shaanxi) Technology Information Co., Ltd.	Xi’an	April 27, 2018	100	%	Online used car transaction service
Youxin (Ningbo) Information Technology Co., Ltd.	Ningbo	July 15, 2020	100	%	Vehicle sales


		Date of	Percentage
	Place of	incorporation or	of direct		Principal
VIEs	incorporation	acquisition	or indirect		activities
Youxin Internet (Beijing) Information Technology Co., Ltd.	Beijing	August 11, 2011	99.99	%	Auction platform
Youxin Yishouche (Beijing) Information Technology Co., Ltd.	Beijing	March 12, 2015	99.99	%	Transaction service

1. PRINCIPAL ACTIVITIES AND ORGANIZATION (CONTINUED)

Liquidity

The Company incurred net losses from continuing operations of RMB411.3 million and RMB1,783.8 million for the six months ended September 30, 2020 and 2021. Accumulated deficit amounted to RMB15,910.0 million and RMB17,693.8 million as of March 31, 2021 and September 30, 2021, respectively. The COVID-19 pandemic continues to be uncertain, however, in response to the current economic situation in China, the Company has taken actions to improve its liquidity and cash position.

On June 14, 2021, the Company entered into shares subscription agreements with NIO Capital and Joy Capital, pursuant to which both investors have agreed to invest a total of up to US$315 million. The first tranche of this financing transaction was completed on July 12, 2021 and the Company issued a total of 291,290,416 senior convertible preferred shares for an aggregate amount of US$100 million. The Company also received a total of US$27.5 million as part of the second closing in November 2021. On June 14, 2021, the Company has also agreed with its convertible notes holders, including 58.com, TPG and Warburg Pincus, to convert their convertible notes in an aggregate principal amount of US$69 million into 66,990,291 Class A ordinary shares of the Company. On July 12, 2021, the conversion was completed and the related Class A ordinary shares were issued.

In addition, the Company entered into operating payables waiver agreements with several suppliers, pursuant to which the Company would be exempted from the repayment of other operating payables of approximately RMB120.4 million, under the conditions that the Company shall make the instalment payments based on the agreed-upon schedule set forth in the supplemental agreement. Looking forward, the Company continues to control its cash outflows by decreasing overall costs and expenses through the upgrade of its used car transaction process as well as streamlining its business operations with stringent cost control measures.

Considering all the actions mentioned above, the Company believes that its current cash and cash equivalents, cash considerations received from recent financing transactions and the anticipated cash flows from operations will be sufficient to meet its anticipated working capital requirements for at least the next twelve months of operations since the issuance of the unaudited interim condensed consolidated financial statements.

PRINCIPAL ACCOUNTING POLICIES

6 Months Ended

Sep. 30, 2021

PRINCIPAL ACCOUNTING POLICIES

PRINCIPAL ACCOUNTING POLICIES

2. PRINCIPAL ACCOUNTING POLICIES

2.1 Basis of presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Certain information and note disclosures normally included in our annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted consistent with Article 10 of Regulation S-X. In the opinion of management, the unaudited interim condensed consolidated financial statements and accompanying notes included all adjustments (consisting of normal recurring adjustments) considered necessary by management to a fair statement of the results of operations, financial position and cash flows for the interim periods presented. Interim results of operations are not necessarily indicative of the results for the full year or for any future periods. These financial statements should be read in conjunction with the annual financial statements and notes thereto also included herein.

The unaudited interim condensed consolidated financial statements have been prepared using accounting policies that are consistent with the policies used in preparing the Group’s consolidated financial statements for the year ended December 31, 2019 and 2020, the three months ended March 31, 2020 and the fiscal year ended March 31, 2021. Principal accounting policies followed by the Group in the preparation of the accompanying unaudited interim condensed consolidated financial statements are summarized below.

2.2 Discontinued operations

A component of a reporting entity or a group of components of a reporting entity that are disposed or meet all of the criteria to be classified as held for sale in accordance with ASC 205-20-45-1E Initial Criteria for Classification of Held for Sale, such as the management, having the authority to approve the action, commits to a plan to sell the disposal group, should be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. Discontinued operations are reported when a component of an entity comprising operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity is classified as held for disposal or has been disposed of, if the component either (1) represents a strategic shift or (2) have a major impact on an entity’s financial results and operations. Examples include a disposal of a major geographical location, line of business, or other significant part of the entity, or disposal of a major equity method investment.

Non-current assets or disposal groups are classified as assets held for sale when the carrying amount is to be recovered principally through a sale transaction rather than through continuing use. For this to be the case, the asset or disposal group must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset.

Once a disposed business meets the criteria of held for sales and be reported as a discontinued operation, According to ASC 205-20-45-10, in the period(s) that a discontinued operation is classified as held for sale and for all prior periods presented, the assets and liabilities of the discontinued operation shall be presented separately in the asset and liability sections, respectively, of the Unaudited Interim Condensed Consolidated Balance Sheets.

In the Unaudited Interim Condensed Consolidated statements of comprehensive loss, result from discontinued operations is reported separately from the income and expenses from continuing operations and prior periods are presented on a comparative basis. Cash flows for discontinuing operations are presented separately (Note 3).

The following accounting policies support the basis of presentation of the Divestiture Transactions disclosed in Note 1.

2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

2.2 Discontinued operations (continued)

Divestiture of 2C intra-regional business and loan-facilitation related service

On July 12, 2019 and September 30, 2019, the Company entered into a binding term sheet and definitive agreements with Golden Pacer relating to the divestiture of its entire 2C intra-regional business and loan facilitation related service, respectively. On April 23, 2020, the Company entered into supplemental agreements with Golden Pacer to modify and supplement certain terms and conditions in connection with the divestiture. Pursuant to the series of agreements, the Company has divested its entire 2C intra-regional business to Golden Pacer and ceased to provide loan facilitation related guarantee starting from the three months ended December 31, 2019. Results of operations related to the discontinued operations were recorded in loss from discontinued operations in the Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss.

Divestiture of 2B business

On March 24, 2020, the Company entered into definitive agreements with 58.com to sell its 2B online used car auction business. The transaction contemplated under the definitive agreements was closed in April 2020. Results of operations related to discontinued operations were recorded in loss from discontinued operations in the Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss.

2.3 Basis of consolidation

The unaudited interim condensed consolidated financial statements include the financial statements of the Company, its subsidiaries, VIEs and VIEs’ subsidiaries.

A subsidiary is an entity in which the Company, directly or indirectly, controls more than one half of the voting power; has the power to appoint or remove the majority of the members of the board of directors; to cast a majority of votes at the meeting of the board of directors or to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders.

The Company applies the guidance codified in Accounting Standard Codification 810, Consolidations (“ASC 810”) on accounting for VIEs and their respective subsidiaries, which requires certain variable interest entities to be consolidated by the primary beneficiary of the entity in which it has a controlling financial interest. A VIE is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional financial support; (b) as a group, the holders of the equity investment at risk lack the ability to make certain decisions, the obligation to absorb expected losses or the right to receive expected residual returns, or (c) an equity investor has voting rights that are disproportionate to its economic interest and substantially all of the entity’s activities are on behalf of the investor.

All transactions and balances between the Company, its subsidiaries, VIEs and VIEs’ subsidiaries have been eliminated upon consolidation.

2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

2.3 Basis of consolidation (continued)

Variable interest entities

In order to comply with PRC regulatory requirements restricting foreign ownership of internet information services under value-added telecommunications services and certain other businesses in China, the Company operates online platforms that provide internet information services and engages in other foreign-ownership-restricted businesses through certain PRC domestic companies, whose equity interests are held by certain management members of the Company (“Nominee Shareholders”). The Company obtained control over these PRC domestic companies by entering into a series of Contractual Arrangements with these PRC domestic companies and their respective Nominee Shareholders. These contractual agreements cannot be terminated by the Nominee Shareholders or the PRC domestic companies. As a result, the Company which maintains the ability to control these PRC domestic companies is entitled to substantially all of the economic benefits from these PRC domestic companies and is obligated to absorb expected losses of these PRC domestic companies. Management concluded that these PRC domestic companies are VIEs of the Company, of which the Company is the ultimate primary beneficiary. As such, the Group consolidated financial results of these PRC domestic companies and their subsidiaries. The principal terms of the agreements entered into amongst the VIEs, their respective shareholders and the Group’s subsidiaries (“Primary Beneficiaries”) are further described below.

Prior to the Divestiture Transactions, the Company primarily operated 2B and 2C online platforms through one of the VIEs, Youxin Hulian via the contractual agreements. In January 2015, the MIIT eliminates the restrictions on foreign ownership in the SHFTZ Notice for enterprises in Shanghai Pilot Free Trade Zone that provide online data processing and transaction processing services (operating E-commerce) under value-added telecommunications services. Certain of our eligible WFOE and subsidiary of WFOE, Yougu and Youhan applied for and obtained the VATS Licenses to conduct E-commerce in 2015 and 2016, and they have been operating our 2B and 2C online platforms since then. After the Divestiture Transactions, the continued operations will still be primarily operated by the Company’s subsidiaries.

Currently, Youxin Hulian and Yishouche hold the VATS Licenses for internet information services to operate other online platforms of the Company and they may hold equity interests of subsidiaries conducting business that are restricted with foreign ownership.

Loan Agreements

Pursuant to the relevant loan agreements, the Group’s relevant PRC subsidiary has granted interest-free loans to the relevant Nominee Shareholders of the relevant VIE with the sole purpose of providing funds necessary for the capital injection to the relevant VIEs. Only the Group’s relevant PRC subsidiary can require the Nominee Shareholder to settle the loan amount with the equity interests of relevant VIEs, subject to any applicable PRC laws, rules and regulations. And both parties have agreed that any proceeds from sale of the Nominee Shareholder’s equity interest in relevant VIE should be repaid to the Group’s relevant PRC subsidiary. The terms of the loan agreements are ten years and can be extended with the written consent of both parties before its expiration.

2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

2.3 Basis of consolidation (continued)

Exclusive option agreements

The Nominee Shareholders of the VIEs have granted the Group’s relevant PRC subsidiaries the exclusive and irrevocable right to purchase or to designate one or more person(s) at their discretion to purchase part or all of the equity interests in the VIEs from the Nominee Shareholders for a purchase price at any time, subject to the lowest price permitted by PRC laws and regulations. The VIEs and their Nominee Shareholders have agreed that without prior written consent of the Group’s relevant PRC subsidiaries, their respective Nominee Shareholders cannot sell, transfer, pledge or dispose their equity interests, and the VIEs cannot sell, transfer, pledge or dispose, but not limit to the equity interest, significant assets, significant revenue and significant business. Also as agreed, the VIEs cannot declare any dividend or change capitalization structure of the VIEs and cannot enter into any loan or investment agreements. Furthermore, the Nominee Shareholders have agreed that any proceeds but not limited to the sales of the Nominee Shareholders’ equity interest in relevant VIEs should be gratuitously paid to the Group’s relevant PRC subsidiaries or one or more person(s) at their discretion.

Power of attorney

Pursuant to the irrevocable power of attorney, each of the Nominee Shareholders appointed the Group’s relevant PRC subsidiaries as their attorney-in-fact to exercise all shareholder rights under PRC law and the relevant articles of association, including but not limited to, attending shareholders meetings, voting on their behalf on all matters requiring shareholder approval, including but not limited to sale, transfer, pledge, or disposition of all or part of the Nominee Shareholders’ equity interests, and designation and appointing the legal representative, directors, supervisors, chief executive officer and other senior management members of the VIEs. Each power of attorney will remain in force during the period when the Nominee Shareholders continue to be shareholders of the VIEs. Each Nominee Shareholder has waived all the rights which have been authorized to the person designated by the Group’s relevant PRC subsidiaries under each power of attorney.

Exclusive business cooperation agreement

Pursuant to the exclusive business cooperation agreement, the Group’s relevant PRC subsidiaries have agreed to provide to the VIEs services, including, but not limited to, development, maintenance and update software, design, installation, daily management, maintenance and updating of the network system, hardware and database design, marketing. The VIEs shall pay to the Group’s relevant PRC subsidiaries service fees determined based on the complexity and difficulty of the services, title of and time consumed by employees, contents and value of the services, operation conditions and market price of the service provided. The agreement shall remain in full force and effect unless terminated in accordance with the provisions of this Agreement or terminated in writing by the Group’s relevant PRC subsidiaries.

2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

2.3 Basis of consolidation (continued)

Equity pledge agreements

Pursuant to the relevant equity pledge agreements, the Nominee Shareholders of the VIEs have pledged all of their equity interests in relevant VIEs to the Group’s relevant PRC subsidiaries as collateral for all of them to direct, indirect and derivate losses and anticipated profits of the PRC subsidiaries incurred in the event of default and to secure their obligations under the above agreements. The relevant PRC subsidiaries are entitled to have any dividends based on the pledged equity interest in relevant VIEs. The Nominee Shareholders may not transfer or assign the equity interests, the rights and obligations in the equity pledge agreements and may not create or permit to create any pledges which may have an adverse effect on the rights or benefits of the Group’s relevant PRC subsidiaries without the Group’s relevant PRC subsidiaries’ pre-approval. In addition, the Group’s relevant PRC subsidiaries are entitled to purchase at a discount, auction or sell the equity interests pledged and have priority to obtain the proceeds from above auctions or sales, if an event of default happens. The equity pledge agreements will expire only when the Nominee Shareholders have completed all their obligations under the above agreements.

Risks in relation to the VIE structure

In the opinion of the Company’s legal counsel, (i) the ownership structure relating to the VIEs of the Company is in compliance with existing PRC laws and regulations; and (ii) the contractual arrangements with the VIEs and their Nominee Shareholders are valid, binding and enforceable, and will not result in any violation of PRC laws or regulations currently in effect.

However, uncertainties in the interpretation and application of current and future PRC laws, regulations and rules could cause the Company’s current ownership structure to be found in violation of any existing or future PRC laws or regulations and could limit the Company’s ability, through the Primary Beneficiaries, to enforce its rights under these contractual arrangements. Furthermore, Nominee Shareholders of the VIEs may have interests that are different with those of the Company, which could potentially increase the risk that they would seek to act in contrary to the terms of the aforementioned agreements.

In addition, if the current structure or any of the contractual arrangements were found to be in violation of any existing or future PRC law, the Company may be subject to penalties, which may include but not be limited to, the cancellation or revocation of the Company’s business and operating licenses, being required to restructure the Company’s operations or discontinue the Company’s operating activities. The imposition of any of these or other penalties may result in a material and adverse effect on the Company’s ability to conduct its operations. In such case, the Company may not be able to operate or control the VIEs, which may result in deconsolidation of the VIEs.

2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

2.3 Basis of consolidation (continued)

Risks in relation to the VIE structure (continued)

There are, however, substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations. Accordingly, the Company cannot be assured that the PRC government authorities will not ultimately take a view that is contrary to the Company’s belief and the opinion of its PRC legal counsel. In March 2019, the draft Foreign Investment Law was submitted to the National People’s Congress for review and was approved on March 15, 2019, which will come into effect from January 1, 2020. The approved Foreign Investment Law does not touch upon the relevant concepts and regulatory regimes that were historically suggested for the regulation of VIE structures, and thus this regulatory topic remains unclear under the Foreign Investment Law. Since the Foreign Investment Law is new, there are substantial uncertainties exist with respect to its implementation and interpretation and the possibility that such entities will be deemed as foreign-invested enterprise and subject to relevant restrictions in the future shall not be excluded. If the contractual arrangements establishing the Company’s VIE structure are found to be in violation of any existing law and regulations or future PRC laws and regulations, the relevant PRC government authorities will have broad discretion in dealing with such violation, including, without limitation, levying fines, confiscating income or the income of affiliated Chinese entities, revoking business licenses or the business licenses of affiliated Chinese entities, requiring affiliated Chinese entities to restructure ownership structure or operations and requiring affiliated Chinese entities to discontinue any portion or all of value-added telecommunications, E-commerce and internet information services. Any of these actions could cause significant disruption to the Company’s business operations, and have a severe adverse impact on the Company’s cash flows, financial position and operating performance. If the imposing of these penalties cause the Company to lose its rights to direct the activities of and receive economic benefits from its VIEs, which in turn may restrict the Company’s ability to consolidate and reflect in its financial statements the financial position and results of operations of its VIEs.

Pursuant to the contractual arrangements with the VIEs, the Company has the power to direct activities of the VIEs, and can have assets transferred freely out of the VIEs without any restrictions. Therefore, the Company considers there to be no assets of a consolidated VIE that can be used only to settle obligations of the VIE, except for registered capital of the VIEs amounting to a total of RMB104.0 million as of March 31, 2021 and September 30, 2021, respectively. As all the consolidated VIEs are incorporated as limited liability companies under the PRC Company Law, creditors of the VIEs do not have recourse to the general credit of the Company for any of the liabilities of the consolidated VIEs.

2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

2.3 Basis of consolidation (continued)

The following table sets forth the assets, liabilities and results of operations and cash flows of the VIEs and their subsidiaries taken as a whole, which are included in the Group’s unaudited interim condensed consolidated financial statements. Transactions between the VIEs and their subsidiaries are eliminated in the balances presented below:


	March 31, 2021	September 30, 2021
	RMB	RMB

Cash and cash equivalents	299	112
Amounts due from Group companies	207,313	177,703
Accounts receivable, net	2,202	2,220
Other receivables, net	43,493	43,477
Prepaid expense and other current assets	2,514	4,480
Long-term investments	5,666	5,941
Property, equipment and software, net	3,531	3,240
Intangible assets, net	313	287
Total assets	265,331	237,460

Accounts payable	4	4
Amounts due to Group companies	815,459	792,812
Other payables and other current liabilities	65,472	63,327
Total liabilities	880,935	856,143


	Six months ended September 30,
	2020	2021
	RMB	RMB

Total revenues	1,539	1,153
Cost of revenues	(32)	(115)
Net loss	(2,160)	(3,079)

Net cash used in operating activities	(1,768)	(471)
Net cash generated from investing activities	134	284
Net cash generated from financing activities	249	—
Net decrease in cash and cash equivalents	(1,385)	(187)
Cash and cash equivalents at beginning of the period	1,852	299
Cash and cash equivalents at end of the period	467	112

2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

2.4 Use of estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets, long-lived assets and liabilities at the dates of the financial statements and the reported amount of revenues and expenses during the reporting periods. Actual results could differ from those estimates. On an ongoing basis, the Company’s management reviews these estimates based on information that is currently available. Changes in facts and circumstances may cause the Company to revise its estimates. Significant accounting estimates reflected in the Group’s unaudited interim condensed consolidated financial statements include, but are not limited to, provision for credit losses for loan recognized as a result of payment under the guarantee and warrant liabilities.

2.5 Fair value measurements

Accounting guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Accounting guidance establishes three levels of inputs that may be used to measure fair value:

Level 1 — Quoted prices (unadjusted) for identical assets or liabilities in active markets

Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data

Level 3 — Unobservable inputs which are supported by little or no market activity

Financial instruments of the Company primarily comprise of cash equivalents, accounts receivable, loan recognized as a result of payment under the guarantee, current portion of long-term borrowings, accounts payable, guarantee liabilities, warrant liabilities and forward contract liabilities. As of March 31, 2021 and September 30, 2021, except for warrant liabilities and forward contract liabilities which are measured at fair value, the carrying values approximated their fair values because of their generally short maturities. The warrant liabilities and forward contract liabilities were recorded at the fair value at the inception date and classified within Level 3 measurement.

2.6 Foreign currencies

The Group uses Renminbi (“RMB”) as its reporting currency. The USD (“US$”) is the functional currency of the Group’s entities incorporated in Cayman Islands, British Virgin Islands and Hong Kong, and the RMB is the functional currency of the Group’s PRC subsidiaries.

Transactions denominated in other than the functional currencies are translated into the functional currency of the entity at the exchange rates quoted by authoritative banks prevailing on the transaction dates. Exchange gains and losses resulting from those foreign currency transactions denominated in a currency other than the functional currency are recorded in the Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss.

2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

2.6 Foreign currencies (continued)

The financial statements of the Group are translated from the functional currency into RMB. Assets and liabilities denominated in foreign currencies are translated into RMB using the applicable exchange rates at the balance sheet date. Equity accounts other than earnings generated in current period are translated into RMB at the appropriate historical rates. Revenues, expenses, gain and loss are translated into RMB using the periodic average exchange rates. The resulting foreign currency translation adjustments are recorded in other comprehensive income as a component of shareholders’ deficit.

2.7 Convenience translation

Translations of Unaudited Interim Condensed Consolidated Balance Sheets, the Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss and the Unaudited Interim Condensed Consolidated Statements of Cash Flows from RMB into US$ as of and for the six months ended September 30, 2021 are solely for the convenience of the readers and were calculated at the rate of US$1.00=RMB6.4434 on September 30, 2021 as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on September 30, 2021, or at any other rate.

2.8 Cash and cash equivalents

Cash includes currency on hand and deposits held by financial institutions that can be added to or withdrawn without limitation. Cash equivalents represent short-term, highly liquid investments that are readily convertible to known amount of cash and with original maturities from the date of purchase of generally three months or less.

2.9 Restricted cash

Cash restricted as to withdrawal or for use or pledged as security is reported separately on the face of the Unaudited Interim Condensed Consolidated Balance Sheets. In the ordinary course of business, the third-party financing partners offer financing solutions to buyers (the “Borrowers”) and the Company is required to provide a guarantee (Note 2.12 guarantee liabilities). As a result, the Company, as the guarantor, is required to maintain a separate guarantee fund, held as an escrow account with the third-party financing partners. This guarantee fund is required to be maintained at a fixed percentage of the balance of all loans outstanding. Beginning in the three months ended December 31, 2019, the Group no longer provided loan facilitation related services through its online platform.

2.10 Inventory

Inventory consists primarily of used vehicles and is stated at the lower of cost or net realizable value. Inventory cost is determined by specific identification and includes acquisition cost, direct and indirect reconditioning costs and inbound transportation expenses. Net realizable value represents the estimated selling price less costs to complete, dispose and transport the vehicles. Each reporting period the Company recognizes any necessary adjustments to reflect vehicle inventory at the lower of cost or net realizable value in the cost of revenues in the accompanying Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss. Total amount of used vehicles was RMB69.6 million and RMB291.8 million as of March 31, 2021 and September 30, 2021. The inventory provision was RMB4.7 million and RMB4.4 million as of March 31, 2021 and September 30, 2021, respectively.

2.11 Accounts receivable

Accounts receivable are recorded at the invoiced amount and do not bear interest. The Group makes credit assessments of customers to assess the collectability of contract amounts prior to entering into contracts. The Group makes specific allowance for doubtful accounts when facts and circumstances indicate that the receivable is unlikely to be collected. The allowance of accounts receivable was RMB14.1 million and RMB13.8 million as of March 31, 2021 and September 30, 2021, respectively.

2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

2.12 Guarantee liabilities

Effective on January 1, 2020, the Company adopted ASU 2016-13 using the modified retrospective transition approach (Note 2.31). The initial adoption resulted in a recognition of a separate contingent liability in the full amount, in addition to financial guarantee liabilities measured under ASC 460. Subsequent to the initial adoption, the Company’s guarantee obligations are measured in separated two components (i) ASC 460 component and (ii) ASC 326 component. In accordance with ASC 460-10-30-5, both guarantee obligations and an allowance for credit losses (calculating using the current expected credit losses - CECL - impairment model) are recorded for financial guarantees in the scope of ASC 326. The liability recorded based on ASC 460 is determined on a contract-by-contract basis and is reduced as the Company is released from the underlying risk, meaning as the loan is repaid by the Borrower or when the financing partners are compensated in the event of a default. The liability is reduced only as the Company is released from the underlying risk. This component is a stand ready obligation which is not subject to the probable threshold used to record a contingent obligation. The other component is a contingent liability determined using the CECL model per ASC 326 Financial Instruments - Credit Losses. Subsequent to the initial recognition, ASC 460 component is recorded in Other operating income in the Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss as the guarantor is released from the guaranteed risk by a systematic and rational amortization method, e.g. over the term of the loan. ASC 326 component is re-measured at each period end and recognized in (provision for)/reversal of credit losses in Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss.

As of March 31, 2021, and September 30, 2021, the amount of maximum potential future payment that the Group could be required to make under the guarantee were RMB146.4 million and RMB6.4 million, respectively. Based on management assessment, the estimated value of collateral approximated amounts of maximum potential future payments.

2.13 Property, equipment and software, net

Property, equipment and software are stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the following estimated useful lives, taking into account any estimated residual value:


Electronic equipment		3 years
Furniture		5 years
Vehicles and motors		4 years
Software		5 years
Leasehold improvement		lesser of the term of the lease or the estimated useful lives of the assets

The Company recognized the gain or loss on the disposal of property, equipment and software in the Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss.

2.14 Intangible assets, net

Intangible assets represent software copyright and supplier relationship acquired. These intangible assets are carried at acquisition cost less accumulated amortization and amortized on a straight-line basis over their estimated useful lives of the respective assets, which is usually 5 years.

Separately identifiable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

2.15 Goodwill

Goodwill represents the excess of the purchase price over the fair value of the identifiable assets and liabilities acquired in a business combination.

Goodwill is not depreciated or amortized but is tested for impairment on an annual basis in the fourth quarter, and in between annual tests when an event occurs or circumstances change that could indicate that the asset might be impaired. In accordance with the FASB guidance on “Testing of Goodwill for Impairment” a company first has the option to assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the company decides, as a result of its qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is mandatory. Otherwise, no further testing is required. The quantitative impairment test consists of a comparison of the fair value of each reporting unit with its carrying amount, including goodwill. The Company adopted ASU No. 2017-04 starting January 1, 2020, following the new guidance, an impairment charge shall be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. Application of a goodwill impairment test requires significant management judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value of each reporting unit.

As of March 31, 2021 and September 30, 2021, impairment of goodwill was RMB13.2 million, respectively, and impairment was fully provided.

2.16 Long-term investments

In accordance with ASC 323 Investment—Equity Method and Joint Ventures, the Company accounts for an equity investment over which it has significant influence but does not own a majority of the equity interest or otherwise controls and the investments are either common stock or in substance common stock using the equity method. The Company’s share of the investee’s profit and loss is recognized in the earnings of the period.

The Company holds investments in privately held companies in the form of equity securities without readily determinable fair values and in which the Company does not have a controlling interest or significant influence. In accordance with ASC 321 Investment- Equity Securities, investments in equity securities without readily determinable fair values are initially recorded at cost and are subsequently adjusted to fair value for impairments and price changes from observable transactions in the same or a similar security from the same issuer. No impairment of long-term investments was recognized for the six months ended September 30, 2020 and 2021.

2.17 Impairment of long-lived assets and intangible assets with definite lives

Long-lived assets including intangible assets with definite lives are assessed for impairment, whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable in accordance with ASC 360, Property, Plant and Equipment. The Company measures the carrying amount of long-lived assets against the estimated undiscounted future cash flows associated with it. The impairment exists when the estimated undiscounted future cash flows are less than the carrying value of the asset being evaluated. Impairment loss is calculated as the amount by which the carrying value of the asset exceeds its fair value. No impairment of long-lived assets was recognized for the six months ended September 30, 2020 and 2021.

2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

2.18 Deferred revenue

Deferred revenue mainly represents warranty service program provided by the Company and the share of fee revenue earned by the appointed depositary of the Company. As of March 31, 2021 and September 30, 2021, the deferred revenue was RMB23.3 million and RMB20.0 million, respectively.

2.19 Warranty liabilities

Starting from March 2020, the Company provides one-year return policy for all vehicles sold through the Company’s platform, covering certain major damages caused by severe accidents that occurred prior to the sale but were not originally identified through the inspection program the Company provided. The Company accrues a warranty reserve for all vehicles sold through the Company’s platform, which includes the Company’s best estimate of the projected costs for returns under warranties. These estimates are based on actual claims incurred to date and an estimate of the nature, frequency and costs of future claims. These estimates are inherently uncertain given the Company’s relatively short history of operations, and changes to the historical or projected warranty experience may cause material changes to the warranty reserve when the Company accumulates more actual data and experience in the future. As of March 31, 2021 and September 30, 2021, the warranty liabilities was RMB2.3 million recorded in the other payables and other current liabilities, respectively. Warranty expense is recorded as a component of sales and marketing expense in the Unaudited Interim Consolidated Statements of Comprehensive Loss.

2.20 Revenue recognition

Prior to the Divestiture Transactions occurred during 2019 and 2020 disclosed in Note 1, the Group used to primarily engage in operating used car e-commerce platforms through its mobile applications (Uxin Used Car / Uxin Auction) and websites (www.xin.com / www.youxinpai.com), facilitating used car transaction services (2B / 2C) and facilitating financing solutions offered by third-party financing partners to buyers for their used car purchases (2C). Revenues generated from these businesses were presented as three revenue streams as Transaction facilitation revenue and Loan facilitation revenue to consumers (2C), and Transaction facilitation revenue to business (2B). Meanwhile, the Group has been focusing more on the 2C cross-regional service business since second half of 2018. The cross-regional transactions mean transactions completed on the Company’s platform where the buyer completes the purchase of a car without having physically inspected the car on-site, which primarily comprise transactions where the buyer is located in a different city from which the car purchased. Whereas the 2C intra-regional transactions mainly include similar transactions when the consumers are located in the same city as where the cars are located.

Starting from the three months ended September 30, 2019, given the divestiture of 2C intra-regional business and loan facilitation service to Golden Pacer (Note 1), the Group modified its existing/surviving cross-regional service contract and no longer provides loan guarantee service. Therefore, cross-regional business is renamed as Online used car transaction to consumers. Accordingly, the revenues generated from the Online used car transaction are renamed as Commission revenue, and Value-added service revenue starting in the three months ended September 30, 2019 and beyond. Since September 2020, the Group started to shift to “inventory-owing” model where the Group build and sell its own inventory of used vehicles, and this model was further updated since March, 2021 as the Group started to acquire used vehicles directly from individuals. Since then, used vehicles sold directly to customers have been presented as Retail vehicle sales revenue, while used vehicles sold to wholesalers have been presented as Wholesale vehicle sales revenue.

2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

2.20 Revenue recognition (continued)

For the divestiture of 2C business, the Group presented the results as discontinued operations for the year of 2019 and all the prior comparable periods. For the divestiture of 2B business, the Group presented the results as discontinued operations for all the periods presented (Note 3).

Besides these four main revenue streams, the Group has other revenue generated from the other services and businesses throughout all periods.

The Group adopted ASC Topic 606, “Revenue from Contracts with Customers” for all periods presented. Consistent with the criteria of Topic 606, the Group recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to receive in exchange for those goods or services. To achieve that core principle, an entity should apply five steps defined under Topic 606. The Group assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. Revenue arrangements with multiple performance obligations are divided into separate units of accounting. The Company considered appropriate method to allocate the transaction price to each performance obligations, based on the relative standalone selling prices of the services provided. In estimating the standalone selling price for the services that are not directly observable, the Company considered the suitable methods included in ASC 606-10-21-34, and determined the adjusted market assessment approach is the most appropriate method. When estimating the relative standalone selling prices, the Group considers selling prices of similar services. Revenue is recognized upon transfer of control of these promised services to a customer.

The Group, from time to time, provides incentives to consumers. These incentives are given in the form of discount coupon to consumers. As these incentives were provided without any distinct good or service in return, these incentives have been recorded as reduction of revenue, pursuant to the guidance under ASC 606.

Revenue is recorded net off cash incentives and value-added-tax collected from customers.

Online used car transaction services (formerly known as “2C cross-regional business”) after the divestiture of intra-regional business and loan facilitation business

The Company uses www.xin.com as its 2C online platform, which assists in publishing the used cars of car dealers (the “Dealer”) for consumers (the “Consumer”). The online used car business mainly includes three services as follows:

Broker transaction (or commission-related service): The Company provides used car purchase assistance, used car inspection services, title transfer and title registration service, as well as logistics service during the purchase process. The Company charges the Consumer the commission fees based on agreed percentage of final car sales price;

Value-added service: For the Consumers that have financing needs, the Company provides additional services to Consumers based on agreed amount or agreed percentages, including but not limited to the following:

Channel service:

Uxin provides advice on financial solutions and refer Consumers to financing platforms

Uxin helps check the documents in relation to application of financial products prepared by Consumers

Safety-guaranteed service:

Uxin provides GPS purchase and installation service

Uxin provides other assistances to Consumers if necessary, such as sharing the GPS trajectory when there is a car theft, etc.

Mortgage service:

Uxin assists in mortgage registration process if needed

Uxin assists on the purchase of insurance policy offered by insurance company

2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

2.20 Revenue recognition (continued)

Warranty service: is provided for selected cars sold with Uxin’s authentication, e.g. for cars sold with “Uxin golden authentication”, the Group provides the Buyer with 30-day return due to significant issues that existed prior to deal close & 1-year or 20,000-kilemeter warranty service for qualified issues up to the car price; For cars sold with “Uxin silver authentication”, the Group provides the Buyer with 30-day return due to issues that existed prior to deal close & 6-month or 10,000-kilemeter warranty service for qualified issues up to RMB 20,000. Starting from March 2020, the Group provides Buyer with upgraded service with 1-year or 20,000-kilemeter warranty program and 1-year return policy (Note 2.18) for selected cars.

The Company determined the Consumer as customer of the online used car business in accordance with ASC 606, the Company collects the fees for both of the Broker transaction service and Value-added service from the Consumer, only. The Company may sell the Broker transaction service alone, but does not sell the Value-added service or warranty service individually or separately. These two services are sold together with the Commission-related service either separately or collectively. Each of these services is identified as a separate performance obligation. The Company allocates the transaction price to each of these performance obligations on a relative standalone selling price basis or market price, based on different type of the contract or combined contracts.

The Company recognizes both the Commission revenue from the Broker transaction service and the Value-added services upon the closing of car sale; For warranty service (6-month and 1-year types only), since the Consumer receives, consumes and benefits the warranty service simultaneously when the Company performs the service, therefore the Company recognizes the warranty revenue over the warranty period, i.e. 6-month or 1-year period. Revenue derives from value-added service and warranty service were collectively reported as Value-added service revenue on the Unaudited Interim Condensed Company’s the Unaudited Interim Consolidated Statements of Comprehensive Loss.

Vehicle sales business since September 2020

Retail vehicle sales business

The Company sells used vehicles directly to its customers through its ecommerce platform (www.xin.com). The Company procures used cars by analyzing the extensive user behavioral, used car and transactional data aggregated on its platform over the years. This enables the Company to selectively build its inventory of used cars with value-for-money performance and have greater flexibility in offering more competitive pricing to individual consumer (the “Consumer”).

The prices of used vehicles are set forth in the customer contracts at stand-alone selling prices which are agreed upon prior to delivery. The Company satisfies its performance obligation for used vehicles sales upon the Consumer’s physical acceptance of the used vehicles. The Company receives payment for used vehicle sales directly from the customer at the time of sale. Payments received prior to delivery or pick-up of used vehicles are recorded as Other payables and other current liabilities within the Unaudited Interim Consolidated Balance Sheets.

Wholesale vehicle sales business

The Company sells vehicles to wholesalers through offline dealership. These vehicles sold to wholesalers are primarily acquired from individuals that do not meet the Company’s retail standards to list and sell through its ecommerce platform, and therefore, sold through offline dealership. The Company satisfies its performance obligation and recognizes revenue for wholesale vehicle sales at a point in time when vehicle is sold. The payments are received when the vehicles are sold.

Others

Other revenue is mainly comprised of commissions earned from the Group’s financing and insurance partners as well as revenue from advertising and vehicle transportation revenue earned from the Group’s vehicle logistics business. Since September 2020, warranty service revenue is recorded in the Others.

2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

2.20 Revenue recognition (continued)

Remaining performance obligations

Revenue allocated to remaining performance obligations represents that portion of the overall transaction price that has been received (or for which the Group has an unconditional right to payment) allocated to performance obligations that the Group has not yet fulfilled, which is presented as deferred revenue that has not yet been recognized. As of March 31, 2021 and September 30, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was RMB5.4 million and RMB 4.0 million, respectively, reflecting the Group’s remaining obligations. The Group expects to recognize approximately 100% of the revenue over the next 12 months.

2.21 Value-added-tax (“VAT”) and surcharges

The Company’s subsidiaries and VIEs are subject to value-added tax and related surcharges on the revenues earned for services provided in the PRC. The applicable value-added-tax rate for general VAT payers is set out in the following table.


Type of service	Applicable VAT rate (%)
Vehicle sales	0.5 - 6	%
Commission	6	%
Value-added service	6	%
Other services	6	%

The surcharges (i.e. urban construction and maintenance tax, educational surtax, local educational surtax), vary from 5% to 12% of the value-added-tax depending on the tax payer’s location. The surcharges are recorded in the cost of revenue in the Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss.

2.22 Cost of revenues

Prior to September 2020, cost of revenues consists of salaries and benefits expenses, cost of title transfer and registration, delivery and logistics cost, rental for transaction centers, platform maintenance cost, GPS tracking device costs, cost of warranty services provided, etc. Cost of revenues in relation to 2B related business was reclassified as discontinued operations.

Starting from September 2020, the Company started to build its own used vehicles inventory. After then, cost of sales includes the cost to acquire used vehicles and direct and indirect vehicle reconditioning costs associated with preparing the vehicles for resale. Cost of sales also includes any necessary adjustments to reflect vehicle inventory at the lower of cost or net realizable value.

2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

2.23 Sales and marketing expenses

Sales and marketing expenses primarily consist of salaries and benefits expenses for sales and marketing personnel, advertising and promotion expenses and warranty expenses. Advertising and promotion expenses primarily include branding advertisements, online traffic acquisition costs and costs incurred in other marketing activities. Due to the adoption of the inventory-owing model since September 2020, most salaries and benefits for employees engaged in aftersales services and costs relating to outbound logistics were classified as sales and marketing expense whereas before such costs were classified as cost of revenues.

Advertising costs are expensed as incurred and the total amounts charged to the Unaudited Interim Consolidated Condensed Statements of Comprehensive Loss amounted to approximately RMB81.7 million and RMB19.9 million for the six months ended September 30, 2020 and 2021, respectively.

2.24 Research and development expenses

Research and development expenses primarily consist of salaries and benefits expenses and depreciation of servers and computers relating to research and development.

All research and development costs are expensed as incurred. Software development costs required to be capitalized under ASC 350-40, Internal-Use Software, were not material to our unaudited interim condensed consolidated financial statements.

2.25 General and administrative expenses

General and administrative expenses primarily consist of salaries and benefits and share-based compensation for employees engaged in management and administration positions or involved in general corporate functions, office rental, professional service fees and depreciation.

2.26 Share-based compensation

The Company follows ASC 718 to determine whether a share option or a restricted share unit should be classified and accounted for as a liability award or equity award. All grants of share-based awards to employees and directors classified as equity awards are recognized in the financial statements based on their grant date fair values which are calculated using an option pricing model. The Company classifies the share-based awards granted to employees as equity award, and has elected to recognize compensation expense on share-based awards with service condition on a graded vesting basis over the requisite service period, which is generally the vesting period.

The binomial option-pricing model is used to measure the value of share options. The determination of the fair value is affected by the fair value of the ordinary shares as well as assumptions regarding a number of complex and subjective variables, including the expected share price volatility, actual and projected employee and nonemployee share option exercise behavior, risk-free interest rates and expected dividend yield. Binomial option-pricing model incorporates the assumptions about grantees’ future exercise patterns. The fair value of these awards was determined by management with the assistance from an independent appraisers using management’s estimates and assumptions.

The assumptions used in share-based compensation expense recognition represent management’s best estimates, but these estimates involve inherent uncertainties and application of management judgment. If factors change or different assumptions are used, the share-based compensation expenses could be materially different for any period. Moreover, the estimates of fair value of the awards are not intended to predict actual future events or the value that ultimately will be realized by grantees who receive share-based awards. In accordance with ASU 2016-09, the Group made an entity-wide accounting policy election to account for forfeitures when they occur.

2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

2.27 Taxation

Current income taxes are provided on the basis of net income for financial reporting purposes, adjusted for income and expense items which are not assessable or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions.

Deferred income taxes are recognized for temporary differences between the tax bases of assets and liabilities and their reported amounts in the unaudited interim condensed consolidated financial statements, net operating loss carries forwards and credits. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided in accordance with the laws of the relevant taxing authorities. Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income in which temporary differences are expected to be received or settled. The effect on deferred tax assets and liabilities of changes in tax rates is recognized in the statements of comprehensive loss in the period of the enactment of the change.

The Group considers positive and negative evidence when determining whether a portion or all of its deferred tax assets will more likely than not be realized. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carry-forward periods, its experience with tax attributes expiring unused, and its tax planning strategies. The ultimate realization of deferred tax assets is dependent upon its ability to generate sufficient future taxable income within the carry-forward periods provided for in the tax law and during the periods in which the temporary differences become deductible. When assessing the realization of deferred tax assets, the Group has considered possible sources of taxable income including (i) future reversals of existing taxable temporary differences, (ii) future taxable income exclusive of reversing temporary differences and carry-forwards, (iii) future taxable income arising from implementing tax planning strategies, and (iv) specific known trend of profits expected to be reflected within the industry.

The Group recognizes a tax benefit associated with an uncertain tax position when, in its judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority. For a tax position that meets the-more-likely-than-not recognition threshold, the Group initially and subsequently measures the tax benefit as the largest amount that the Group judges to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. The Group’s liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of tax audits, case law developments and new or emerging legislation. Such adjustments are recognized entirely in the period in which they are identified. The Group’s effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequent adjustments as considered appropriate by management. The Group classifies interest and penalties recognized on the liability for unrecognized tax benefits as income tax expense.

2.28 Business combinations and non-controlling interests

The Company accounts for its business combinations using the acquisition method of accounting in accordance with ASC 805 “Business Combinations.” The cost of an acquisition is measured as the aggregate of the acquisition date fair values of the assets transferred and liabilities incurred by the Company to the sellers and equity instruments issued. Transaction costs directly attributable to the acquisition are expensed as incurred. Identifiable assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition date, irrespective of the extent of any non-controlling interests. The excess of (i) the total costs of acquisition, fair value of the non-controlling interests and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss. During the measurement period, which can be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss.

2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

2.28 Business combinations and non-controlling interests (continued)

In a business combination achieved in stages, the Company remeasures the previously held equity interest in the acquire immediately before obtaining control at its acquisition date fair value and the remeasurement gain or loss, if any, is recognized in the Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss.

For the Company’s majority owned subsidiaries and consolidated VIEs, a non-controlling interest is recognized to reflect the portion of their equity which is not attributable, directly or indirectly, to the Company. When the non-controlling interest is contingently redeemable upon the occurrence of a conditional event, which is not solely within the control of the Company, the non-controlling interest is classified as mezzanine equity. Consolidated net loss on the Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss includes net loss attributable to non-controlling interests when applicable.

2.29 Loss per share

Basic loss per share is computed by dividing net loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period using the two-class method. Under the two-class method, the net loss is allocated between ordinary shares and other participating securities based on their participating rights. Net loss is not allocated to other participating securities, including senior convertible preferred shares, if based on their contractual terms they are not obligated to share in the loss. Diluted loss per share is calculated by dividing net loss attributable to ordinary shareholders by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the period. The dilutive effect of outstanding senior convertible preferred shares, options, warrants and forward contracts is reflected in the diluted net loss per share by application of the if-converted method and treasury stock method, respectively, if applicable. Ordinary equivalent shares are not included in the denominator of the diluted loss per share calculation when inclusion of such shares would be anti-dilutive.

2.30 Operating leases

The Company applied ASC 842, Leases, on January 1, 2019 on modified retrospective basis and has elected not to recast comparative periods. The Company has elected the package of practical expedients on the adoption date, which allows the Company not to reassess (1) whether any expired or existing contracts as of the adoption date are or contain a lease, (2) lease classification for any expired or existing leases as of the adoption date and (3) initial direct costs for any expired or existing leases. The Company determines if an arrangement is or contains a lease at inception. Operating leases are primarily for offices and stores and are included in Right-of-use assets, net, Operating lease liabilities, current and Operating lease liabilities, non-current on its Unaudited Interim Condensed Consolidated Balance Sheets. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and Operating lease liabilities represent obligation to make lease payment arising from the lease. The operating lease right of use assets and liabilities are recognized at lease commencement date based on the present value of lease payment over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments. The right of use assets also includes any lease payments made. The Company’s lease term may include options to extend or terminate the lease. Renewal options are considered within the operating lease right of use assets and liabilities when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

For operating lease with a term of one year or less, the Company has elected to not recognize a lease liability or lease right of use asset on its Unaudited Interim Condensed Consolidated Balance Sheets. Instead, it recognizes the lease payment as expense on a straight-line basis over the lease term. Short-term lease costs are immaterial to its Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss. The Company has operating lease agreements with insignificant non-lease components and has elected the practical expedient to combine and account for lease and non-lease components as a single lease component.

2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

2.31 Provision for credit losses

The Company has several types of financial assets and liabilities that are subject to ASC 326’s new CECL model. The CECL reserves for credit loss represents the Company’s best estimate of the expected lifetime credit losses for accounts receivable, loans recognized as a result of payment under the guarantee, advance to sellers, other receivables, financial lease receivables and guarantee liabilities as of the balance sheet date. The adequacy of the reserves for credit losses is assessed quarterly; and the assumptions and models used in establishing the allowance are evaluated regularly. Because credit losses can vary substantially over time, estimating credit loss reserves requires us to estimate lifetime expected credit losses by incorporating historical loss experience, as well as current and future economic conditions over a reasonable and supportable period beyond the balance sheet date. The Company has lowered its forecasts on selected economic factors, such as GDP, to reflect the adverse impact of the COVID -19 pandemic.

Measurement of CECL reserve

The Company estimates its CECL reserve for different financial instruments using various methods including the probability-of-default method, the loss rate method, the roll rate method and the discounted cash flow method.

●

For guarantee liability, the probability-of-default method is used, where the lifetime CECL reserve is measured as the product of the ending balance and two key parameters, the lifetime Probability of Default (PD) and Loss Given Default (LGD). The calibration of PD and LGD starts with the Company’s historical information. Both are further adjusted to incorporate the impacts of macroeconomic conditions, recent portfolio performance, as well as the observed industry experience.

●

For loan recognized as a result of payment under the guarantee and financial lease receivables, the loss rate method is applied as the comprehensive product impact of PD and LGD.

●

The roll rate model is adopted for accounts receivable; while for some other receivables which cannot be pooled with financial assets with similar risk characteristics, the reserve for credit losses are evaluated on an individual basis using the discounted cash flow method.

Note that to incorporate the forward-looking impacts based on the Company’s best macroeconomic forecasts, quantitative adjustments are applied to key parameters such as PD, LGD, loss rates, and roll rates on a collective basis. The Company groups its financial instruments into pools by credit status, product types, accounts receivable aging schedule, collateral types and other risk characteristics as appropriate in the calibration and adjustments of these parameters.

Loan recognized as a result of payment under the guarantee

Assumptions Used: The credit loss allowance of Loan recognized as a result of payment under the guarantee based on the Company’s assumptions regarding:

●

Loss rate: The loss percentage of the outstanding balance. It considers the historical loss information, the recent performance of this portfolio, categories of credit status (normal, attention and secondary), the collateral, and the Company’s forecasts of selected macroeconomic factors.

2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

2.31 Provision for credit losses (continued)

Sensitivity Analysis:

Change in the assumptions would affect the allowance for credit loss of Loan recognized as a result of payment under the guarantee. The effect of the indicated increase/decrease in the assumptions for the Company is as follows (in thousands):


Assumption	Basis Point Change	Increase/(Decrease)
Loss rate	+/- 100	7,332/ (7,332)

2.32 Recent accounting pronouncements

In January 2020, the FASB issued ASU 2020-01 Investments—Equity securities (Topic 321), Investments—Equity method and joint ventures (Topic 323), and Derivatives and hedging (Topic 815)—Clarifying the interactions between Topic 321, Topic 323, and Topic 815. The amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. The amendments also clarify that for the purpose of applying paragraph 815-10-15-141(a) an entity should not consider whether, upon the settlement of the forward contract or exercise of the purchased option, individually or with existing investments, the underlying securities would be accounted for under the equity method in Topic 323 or the fair value option in accordance with the financial instruments guidance in Topic 825. The standard is effective for the Company for fiscal years beginning after December 15, 2021, with early adoption permitted. The Company is currently evaluating the impact.

In August 2020, the FASB issued a new accounting update relating to convertible instruments and contracts in an entity’s own equity. For convertible instruments, the accounting update reduces the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current U.S. GAAP. The accounting update amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. The accounting update also simplifies the diluted earnings per share calculation in certain areas. For public business entities, the update is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. The Company is currently evaluating the impact.

DISCONTINUED OPERATIONS

6 Months Ended

Sep. 30, 2021

DISCONTINUED OPERATIONS

DISCONTINUED OPERATIONS

3. DISCONTINUED OPERATIONS

Divestiture of 2C intra-regional business and loan-facilitation related service

On July 12, 2019 and September 30, 2019, the Company entered into a binding term sheet and definitive agreements with Golden Pacer relating to the divestiture of its entire 2C intra-regional business and loan facilitation related service, respectively. On April 23, 2020, the Company entered into supplemental agreements with Golden Pacer to modify and supplement certain terms and conditions in connection with the divestiture. Pursuant to the series of agreements, the Company divested its entire 2C intra-regional business to Golden Pacer and ceased to provide loan facilitation related guarantee starting from the three months ended December 31, 2019.

Results of the discontinued operations of 2C intra-regional business and loan facilitation related service were as follows:


		Six months ended
		September 30,
		2020
		RMB
Operating expenses
Impairment for net assets transferred		(420,000)
Total operating expenses		(420,000)

Loss from operations		(420,000)
Loss from the divestiture of 2C intra-regional and loan facilitation business		(14,745)
Loss from discontinued operations before income tax expense		(434,745)
Income tax expense		—
Net loss from discontinued operations		(434,745)

In the three months ended December 31, 2019, the Company transferred the legal titles of assets and liabilities in relation to the historically-facilitated loans for XW bank to Golden Pacer as one of the pre-closing conditions with no consideration exchanged. The transaction contemplated under the definitive and supplemental agreements was closed upon the signing of the supplemental agreements on April 23, 2020. Due to the legal titles of the assets and liabilities being transferred prior to year-end of 2019 while the transaction was not closed until April 23, 2020, these pre-transferred assets and liabilities were reclassified on a net basis under the name of “Net assets transferred” as of March 31, 2020. During the three months ended June 30, 2021, the “Net assets transferred” was further impaired in the value due to the ongoing negative impacts from the COVID-19 pandemic and the continuously deteriorated quality of the underlying pre-transferred net assets.

3. DISCONTINUED OPERATIONS (CONTINUED)

Divestiture of 2B business

On March 24, 2020, the Company entered into definitive agreements with 58.com to sell its 2B online used car auction business. The transaction was completed on April 14, 2020 for a total consideration of US$105.0 million, and a total of RMB736.0 million disposal gain was recognized from the divestiture of 2B business and was recorded in the discontinued operations.

Results of the discontinued operations of 2B business were as follows:


		Six months ended
		September 30,
		2020
		RMB

Transaction facilitation revenue		5,198
Cost of revenues		(1,384)
Gross profit		3,814

Operating expenses
Sales and marketing		(8,063)
General and administrative		(1,218)
Total operating expenses		(9,281)

Gain from the divestiture of 2B business		735,956
Net income from discontinued operations		730,489

The condensed cash flows of the discontinued operations of 2B business were as follows:


		Six months ended
		September 30, 2020
		RMB

Net cash used in operating activities		(9,491)

LOAN RECOGNIZED AS A RESULT OF PAYMENT UNDER THE GUARANTEE

6 Months Ended

Sep. 30, 2021

LOAN RECOGNIZED AS A RESULT OF PAYMENT UNDER THE GUARANTEE

LOAN RECOGNIZED AS A RESULT OF PAYMENT UNDER THE GUARANTEE

4. LOAN RECOGNIZED AS A RESULT OF PAYMENT UNDER THE GUARANTEE

The third-party financing partners offer financing solutions to the Borrowers and the Group is required to provide a guarantee. In the event of a payment default from the Borrower, the Group is required to repay the monthly installment or full amount of outstanding loan to the financing partner as the guarantor. As such, the Group recognized loan receivables as a result of payment under the guarantee deducted by an allowance to its expected recoverable amounts in the unaudited interim condensed consolidated balance sheets.


	March 31,	September 30,
	2021	2021
	RMB	RMB
Loan recognized as a result of payment under the guarantee	1,362,556	863,516
Less: provision for credit losses	(1,182,609)	(733,169)
	179,947	130,347

An aging analysis of loan recognized as a result of payment under the guarantee is as follows:


	March 31,	September 30,
	2021	2021
	RMB	RMB
Up to 6 months	145,639	103,329
6 months to 12 months	307,224	6,871
Over 12 months	909,693	753,316
	1,362,556	863,516

The Company relies on the consumers’ credit history, loan-to-value ratio and other certain application information to evaluate and rank their risk on an ongoing basis. The credit grades represent the relative likelihood of repayment. Customers assigned a grade of “Normal” are determined to have the highest probability of repayment, customers assigned a grade of “Attention” are determined to have a lower probability of repayment, and customers assigned a grade of “Secondary” are determined to have a lowest probability of repayment. Loan performance is reviewed on a recurring basis to identify whether the assigned grades adequately reflect the customers’ likelihood of repayment.

The balance of loan recognized as a result of payment under the guarantee by grade of monitored credit risk quality indicator as of March 31, 2021 and September 30, 2021 were listed as below:


	March 31,	September 30,
	2021	2021
	RMB	RMB

Normal	66,924	26,170
Attention	252,572	231,275
Secondary	1,043,060	606,071
	1,362,556	863,516

Loan recognized as a result of payment under the guarantee of RMB12.6 million was pledged as collateral for current portion of long-term borrowings of RMB27.1 million as of September 30, 2021 (Note 9).

4. LOAN RECOGNIZED AS A RESULT OF PAYMENT UNDER THE GUARANTEE (CONTINUED)

The movement of allowance for the six months ended September 30, 2020 and 2021 was as follows:


	Six months ended September 30,
	2020	2021
	RMB	RMB
Beginning balance of the period	(2,190,575)	(1,182,609)
Addition	(68,578)	—
(Provision for)/reversal of credit losses	(32,863)	1,174
Write-off	245,299	5,025
Bought out by certain non-bank financing institutions without recourse	—	428,947
Payments from the borrowers or other recoveries	819	14,294
Ending balance of the period	(2,045,898)	(733,169)

OTHER RECEIVABLES, NET

6 Months Ended

Sep. 30, 2021

OTHER RECEIVABLES, NET

OTHER RECEIVABLES, NET

5. OTHER RECEIVABLES, NET


	March 31,	September 30,
	2021	2021
	RMB	RMB

Unreceived 2B disposal consideration (i)	—	87,432
Rental and other deposits	44,892	43,648
Deposits in non-bank financing partners (ii)	19,919	19,295
Staff advance	16,268	15,989
Others	49,926	48,408
	131,005	214,772
Less: provision for credit losses	(20,980)	(25,037)
	110,025	189,735

(i) As of March 31, 2021, unreceived 2B disposal consideration was recorded as “amounts due from related parties”. Since July 12, 2021, 58.com was no longer the Company’s related party, unreceived 2B disposal consideration was recorded as “other receivables, net” since then (Note 15).

(ii) In relation with the Company’s historically-facilitated loans for non-banking financial institutions, which were not transferred to Golden Pacer during the divestiture of loan facilitation related business (Note 3), the Company, as the guarantor, was required to deposit a separate guarantee fund with those financial institutions.

PREPAID EXPENSES AND OTHER CURRENT ASSETS

6 Months Ended

Sep. 30, 2021

PREPAID EXPENSES AND OTHER CURRENT ASSETS

PREPAID EXPENSES AND OTHER CURRENT ASSETS

6. PREPAID EXPENSES AND OTHER CURRENT ASSETS


	March 31,	September 30,
	2021	2021
	RMB	RMB
VAT-input deductible	71,989	51,234
Prepaid financial advisory service fee (i)	12,000	12,000
Prepaid consulting and professional service fees	6,495	9,374
Prepayment for used vehicles	4,689	7,769
Prepaid marketing expense	3,955	6,507
Prepaid rental expense	2,207	4,997
Others	6,501	3,784
	107,836	95,665

(i) The Company entered into a long-term strategic cooperation agreement with Golden Pacer in April 2020, and an aggregate amount of RMB60.0 million as prepayment was made in exchange for a 5-year financial solution advisory services from Golden Pacer. As of September 30, 2021, RMB12.0 million was recorded in prepaid expenses and other current assets, and RMB30.0 million was recorded in other non-current assets.

PROPERTY, EQUIPMENT AND SOFTWARE, NET

6 Months Ended

Sep. 30, 2021

PROPERTY, EQUIPMENT AND SOFTWARE, NET

PROPERTY, EQUIPMENT AND SOFTWARE, NET

7. PROPERTY, EQUIPMENT AND SOFTWARE, NET

Property, equipment and software, net, consist of the following:


	March 31,	September 30,
	2021	2021
	RMB	RMB

Cost
Leasehold improvement	167,073	173,267
Computer equipment	61,758	56,686
Software	26,018	26,018
Furniture	3,650	3,650
Vehicle and motor	2,254	2,254
Total property, equipment and software	260,753	261,875

Less: accumulated depreciation and amortization
Leasehold improvement	(159,103)	(162,215)
Computer equipment	(56,961)	(55,531)
Software	(11,561)	(12,752)
Furniture	(2,738)	(2,839)
Vehicle and motor	(1,084)	(1,352)
Total accumulated depreciation and amortization	(231,447)	(234,689)

Net book value	29,306	27,186

The total amounts charged to the Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss for depreciation and amortization expenses amounted to approximately RMB 28.8 million and RMB8.1 million for the six months ended September 30, 2020 and 2021, respectively.

LONG-TERM INVESTMENTS

6 Months Ended

Sep. 30, 2021

LONG-TERM INVESTMENTS

LONG-TERM INVESTMENTS

8. LONG-TERM INVESTMENTS

The Group’s long-term investments consist of the following:



	March 31,	September 30,
	2021	2021
	RMB	RMB

Equity investments accounted for using the equity method
Beijing Gangjian Shoubao Cultural Media Center LLP (“Gangjian Shoubao”)	4,500	4,500
Weiche Information Technology Co., Ltd. (“Weiche”)	1,167	1,441
	5,667	5,941

Equity investments accounted for using the measurement alternative
Jincheng	282,761	282,761

Total long-term investments	288,428	288,702

Major investments of the Company during the six months ended September 30, 2020 and 2021 are summarized as follows:

Equity investments accounted for using the equity method

Investment in Gangjian Shoubao

In April 2019, the Company invested in Gangjian Shoubao, focusing on advertising and media business. The Company is one of the limited partners and does not have control of the partnership. The investee has not started to operate yet.

Investment in Weiche

In May 2018, the Company invested in Weiche, a professional information technology company focusing on technology development and technology consulting service. The Company acquired 40% ordinary equity interest with a total consideration of RMB 3 million. The Company exercises significant influence in Weiche and therefore accounts for this as a long-term investment using equity method.

Equity investments accounted for using the measurement alternative

Investment in Jincheng

In September 2017, the Company invested in Jincheng, a professional consumer financial service company. The Company acquired 19% ordinary equity interest with a total consideration of RMB 233.0 million. The Company exercises significant influence in Jincheng and therefore accounted for this as a long-term investment using equity method. In early 2021, as the Group completed the divesture of its historical loan-facilitation business and, the Group proposed to Jincheng its desire to give up its board seat in Jincheng. The administration process was completed in March 2021. After that, the Group could no longer execute significant influence over Jincheng. The Group accounted for the investment using an alternative method measurement, and no remeasurement events were identified during the six months ended September 30, 2021.

LONG-TERM BORROWINGS

6 Months Ended

Sep. 30, 2021

LONG-TERM BORROWINGS

LONG-TERM BORROWINGS

9. LONG-TERM BORROWINGS

The following table presents short-term and long-term borrowings from commercial banks or other institutions as of March 31, 2021 and September 30, 2021. Short-term borrowings include borrowings with maturity terms shorter than one year and the current portion of the long-term borrowings.


	Fixed annual		March 31,	September 30,
Funding Partners	interest rate	Term	2021	2021
			RMB	RMB
Current portion of long-term borrowings