Company: ZCARW
Filing Date: 2025-05-05
Form Type: S-1
Source: 0001213900-25-039778
Chunk: 272

Company: Zoomcar Holdings, Inc.
Filing Date: 2025-05-05
Form: S-1
Chunk 272
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holders convertible into shares of preferred stock and common stock which were issued
during the year ended March 31, 2022, and were classified as liabilities and equity respectively.

Each unit issued by the Company
consisted of one share of Series E preferred stock and a warrant which entitled the holder to purchase one share of common stock of the
Company on the satisfaction of certain conditions. Warrants were also issued to the placement agent of the Series E and Series E1 which
included the following two categories: a) warrants to purchase common stock of the company; and b) warrants to purchase Series E and Series
E1 shares.

Warrants to be converted into common stock:

The Company’s warrants to
purchase common stock were classified as equity. Upon issuance of the warrant, the Company had allocated a portion of the proceeds from
the issuance of its preferred stock to the warrant based on the relative fair values of warrants and preferred stock.

Warrants to be converted into preferred stock (“Preferred stock warrant liability”):

The Company’s warrants to
purchase convertible preferred stock were classified as a liability and were held at fair value as the warrants were exercisable for contingently
redeemable preferred stock, which was classified outside of stockholders’ deficit.

The warrant instruments classified
as liabilities were subject to re-measurement at each balance sheet date, and any change in fair value was recognized as a component of
finance costs.

The Company continued to adjust
the liability classified warrant for changes in the fair value until the Reverse Recapitalization transaction at which time the warrants
were reclassified to additional paid-in-capital.

F- 16 ZOOMCAR HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

| (k) | Financial liabilities measured at fair value |

Convertible Promissory notes (“Notes”), Senior Subordinated Convertible Promissory Note (“SSCPN”) and Unsecured Convertible Note (“Atalaya Note”)

During the year ended March 31, 2024 the Company issued
Notes and SSCPN. The Company evaluated the balance sheet classification for these instruments either as liabilities or equity, and accounting
for conversion feature. As per ASC 480-10-25-14, the Notes and SSCPN were classified as liabilities because the Company intended to settle
them by issuing variable number of shares with a fixed and known monetary value at the time of inception. However, the Company had elected
fair value option for these Notes and SSCPN, as discussed below and thus did