Company: GCL
Filing Date: 2025-08-27
Form Type: DRS
Source: 0001213900-25-080905
Chunk: 275

Company: GCL Global Holdings Ltd
Filing Date: 2025-08-27
Form: DRS
Chunk 275
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 the fair value option.

Upon
completion of the Business Combination on February 13, 2025, the aggregate principal amount
of the Notes, net of unamortized discount, amounted to $33,025,000 which was converted into 7,338,887
ordinary shares of the Company. In addition, 2,201,665 shares of the Company’s ordinary
shares were issued and held in an escrow account for three years as the Bonus Shares.

The Company evaluated the
convertible notes agreement under ASC 470 Debt (“ASC 470”), and ASC 815 Derivatives and Hedging (“ASC 815”).
ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation
and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks
of the host contract.

The Company elected to measure
the entire convertible note, including all embedded features, at fair value option under ASC 825 on the issuance date, with changes in
fair value recognized through earnings until conversion. The fair value of the convertible notes was determined the same as its carrying
value at issuance than reevaluated upon conversion by using a scenario-based probability-weighted approach for the conversion and bonus
share components and a Monte Carlo simulation model for the top-up share feature. Subsequently, the component of fair value changes relating
to the instrument specific credit risk of the convertible note is minimal. Key assumptions included stock price volatility, share price
at measurement dates, risk-free rate, and the expected holding period.

Upon the closing of the
Business Combination, the convertible notes automatically converted into equity, and the related embedded features were detached and
re-evaluated. The bonus share provision was determined to be clearly and closely related to equity and was not bifurcated. However, the
Top-Up Shares feature was determined to be derivative liabilities under ASC 815-40, as it is not considered indexed to the Company’s
own stock due to variable settlement provisions.

The Top-Up Shares liabilities
were measured at fair value on the conversion date and at each subsequent reporting date until settlement, with changes in fair value
recognized in the consolidated statements of operations and comprehensive income (loss). The fair value of the Top-Up Shares liability
is determined using unobservable inputs and a Monte Carlo simulation model. Key assumptions include the Company’s stock price volatility,
the price floor, the expected holding period, and the risk-free discount rate.

As of