Company: ZCARW
Filing Date: 2025-02-14
Form Type: 10-Q
Source: 0001213900-25-014437
Chunk: 340

Company: Zoomcar Holdings, Inc.
Filing Date: 2025-02-14
Form: 10-Q
Item: Part I, Item 8
Chunk 340
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 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.

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