Company: ZCARW
Filing Date: 2025-02-14
Form Type: 10-Q
Source: 0001213900-25-014437
Chunk: 27

Company: Zoomcar Holdings, Inc.
Filing Date: 2025-02-14
Form: 10-Q
Item: Part I, Item 1
Chunk 27
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Each unit of 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 E1preferred
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.

(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 not bifurcate the embedded
conversion feature.

17

ZOOMCAR HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Option (“FVO”)
Election

The Company accounted for Notes and
SSCPN under the fair