Company: ZCARW
Filing Date: 2025-02-14
Form Type: 10-Q
Source: 0001213900-25-014437
Chunk: 918

Company: Zoomcar Holdings, Inc.
Filing Date: 2025-02-14
Form: 10-Q
Item: Part I, Item 2
Chunk 918
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 based on the relative
fair values of warrants and Redeemable Promissory Note in accordance with ASC 820.

(c)Warrants issued along with SSCPN and to placement agent (‘Derivative
financial instrument’):

During the year ended March 31, 2024, the Company
issued warrants along with Senior Subordinated Convertible Promissory Note (“SSCPN)” and as consideration to the placement
agent for the issuance of SSCPN.

These warrants were deemed derivative instruments
in accordance with ASC 815-10-15-83 since they contained an underlying, had cash less payment provisions, that could have been net settled
in shares and had a very minimal initial net investment. Accordingly, the derivatives were measured at fair value and subsequently revalued
at each reporting date until the close of Reverse Recapitalization consummated during year ended March 31, 2024.

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(d)Warrants issued to preferred stockholders:

Before the date of reverse recapitalization, the
Company had warrants issued to preferred stockholders 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