Company: ZCARW
Filing Date: 2025-02-14
Form Type: 10-Q
Source: 0001213900-25-014437
Chunk: 117

Company: Zoomcar Holdings, Inc.
Filing Date: 2025-02-14
Form: 10-Q
Item: Part I, Item 1
Chunk 117
---
 the fair value until the Reverse Recapitalization transaction at which time the warrants were reclassified
to additional paid-in-capital.

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 not
bifurcate the embedded conversion feature.

75

Fair Value Option
(“FVO”) Election

The Company accounted
for Notes and SSCPN under the fair value option election of ASC 825, Financial Instruments (“ASC-825”) as discussed below.

The Notes and SSCPN
accounted under the FVO election which were debt host financial instruments containing conversion features which otherwise would be required
to be assessed for bifurcation from the debt-host and recognized as separate derivative liabilities subject to measurements under ASC
815. Notwithstanding, ASC 825-10-15-4 provides for the “fair value option” (“FVO”) election, to the extent not
otherwise prohibited by ASC 825-10-15- 5, to be afforded to financial instruments, wherein bifurcation of an embedded derivative is not
necessary, and the financial instrument is initially measured at its issue-date estimated fair value and then subsequently remeasured
at estimated fair value on a recurring basis at each reporting period date.

The estimated fair
value adjustment, as required by ASC 825-10-45-5, was recognized as a component of other comprehensive income (“OCI”) with
respect to the portion of the fair value adjustment attributed to a change in the instrument-specific credit risk, with the remaining
amount of the fair value adjustment recognized under Finance costs shown as “Change in fair value of Notes” and “Change
in fair value of SSCPN” in the accompanying Condensed Consolidated Statement of Operations. With respect to the above Notes and
SSCPN, as provided for by ASC