UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from to
Commission File Number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Kodihalli
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The | ||||
| The |
Securities registered pursuant to Section 12(g) of the Act:
None.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☐ | Large accelerated filer | ☐ | Accelerated filer |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant
to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act): Yes ☐ No
As of July 31, 2024,
ZOOMCAR HOLDINGS, INC.
Quarterly Report on Form 10-Q
Table of Contents
i
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” (as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) that reflect our current expectations and views of future events. The forward-looking statements are contained principally in the section of this report entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue” or other similar expressions. These forward-looking statements include, but are not limited to, statements concerning our expected financial performance and our ability to operate our business and execute our anticipated business plans and strategy. We have based these forward-looking statements largely on our current expectations and projections about future events that we believe may affect our financial condition, results of operations, business strategy and financial needs. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. Our actual results of operations or the results of other matters that we anticipate herein could be materially different from our expectations. Accordingly, readers are cautioned that significant known and unknown risks, uncertainties and other important factors may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. Some factors that could cause actual results to differ include:
| ● | our ability to continue as a going concern and to meet our financial obligations as they become due; |
| ● | our ability to obtain additional capital, in particular while we are in default under various of our obligations, including certain of our indebtedness, which will be necessary to continue our business and operations; |
| ● | our limited operating history under our current business model and history of net losses; |
| ● | our ability to sell our platform offerings to new guests and hosts; |
| ● | our ability to retain and expand use of our platform by our existing guests and hosts; |
| ● | our ability to effectively manage our growth; |
| ● | our ability to successfully obtain timely returns on our investments in initiatives relating to sales and marketing, research and development, and other areas; |
| ● | our ability to maintain our competitive advantages; |
| ● | our ability to maintain and expand our partner ecosystem; |
| ● | our ability to maintain the security of our platform and the security and privacy of customer data; |
| ● | our ability to successfully expand in our existing markets and into new markets; |
ii
| ● | the attraction and retention of qualified employees and key personnel; |
| ● | our ability to successfully defend litigation that has been and may in the future be brought against us; |
| ● | the impact of pandemics, inflation, war, other hostilities, and other disruptive events on our business or that of our customers, partners, and supply chain or on the global economy; |
| ● | our ability to successfully remediate and prevent material weaknesses in internal controls over financial reporting; |
| ● | our ability to comply with the continued listing requirements of Nasdaq (including the requirement to maintain a minimum market value of publicly held shares of $15,000,000, a minimum bid price of $1 per share, a minimum market value of listed securities of $50,000,000 for which we have received a deficiency notice) and maintain our listing on Nasdaq; and |
| ● | other risks and uncertainties described under the section titled “Risk Factors” herein and in our Annual Report on Form 10-K/A which was filed with the Securities and Exchange Commission on July 15, 2024 (“Form 10-K/A”). |
You should thoroughly read this report and the documents that we refer to with the understanding that our actual future results may be materially different from, and worse than, what we expect. We qualify all of our forward-looking statements by these cautionary statements.
The forward-looking statements made in this report relate only to events or information as of the date of this report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this report completely and with the understanding that our actual future results may be materially different from what we expect.
iii
FREQUENTLY USED TERMS
Unless otherwise stated in this quarterly report or the context otherwise requires, references to:
“ACM” means ACM Zoomcar Convert LLC.
“Board” means the board of directors of the Company. References herein to the Company will include its subsidiaries to the extent reasonably applicable.
“Business Combination” and “Reverse Recapitalization” means the business combination of the IOAC and Zoomcar pursuant to the terms of the Merger Agreement and the other transactions contemplated by the Merger Agreement.
“Bylaws” means the Amended and Restated Bylaws of the Company as in effect on the date of its prospectus.
“Charter” means the Amended and Restated Certificate of Incorporation of the Company as in effect on the date of its prospectus.
“Closing” means the closing of the Business Combination.
“Closing Date” means December 28, 2023.
“Common Stock” means the shares of Common Stock, par value $0.0001 per share, of the Company.
“Company”, “we”, “us”, “our” and “Zoomcar” means (i) Zoomcar Holdings, Inc., a Delaware corporation, and its consolidated subsidiaries following the Closing and (ii) Zoomcar, Inc., (the predecessor entity in existence prior to the Closing) and its consolidated subsidiaries prior to the Closing.
“Code” means the Internal Revenue Code of 1986, as amended.
“DGCL” means the General Corporation Law of the State of Delaware, as amended.
“Incentive Plan” means the Zoomcar Holdings, Inc. 2023 Equity Incentive Plan.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“GAAP” means generally accepted accounting principles in the United States.
“IOAC” means the Company prior to the Closing.
“Merger” means the merger of Merger Sub with and into Zoomcar, with Zoomcar continuing as the surviving corporation and as a wholly owned subsidiary of the Company, in accordance with the terms of the Merger Agreement.
“Merger Agreement” means the Agreement and Plan of Merger and Reorganization, dated as of October 13, 2022, as amended by the Post-Closing Amendment, by and among IOAC, Zoomcar, Merger Sub and the Seller Representative.
iv
“Merger Sub” means Innovative International Merger Sub, Inc.
“Nasdaq” means The Nasdaq Stock Market LLC.
“Note” means the unsecured convertible promissory note, dated December 28, 2023, issued by the Company and Zoomcar, Inc. to ACM in the original principal amount of $8,434,605, in connection with certain transaction expenses associated with the Business Combination.
“Post-Closing Amendment” means the amendment to the Merger Agreement, dated as of December 29, 2023.
“Public Warrants” means one (1) whole redeemable warrant that was included in as part of each Unit, entitling the holder thereof to purchase one (1) share of Common Stock after the Business Combination at a purchase price of $5.71 per share.
“SEC” means the U.S. Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended.
“Securities Purchase Agreement” means the securities purchase agreement, dated as of December 28, 2023, by and among the Company, Zoomcar, Inc. and ACM.
“Selling Holders” means the selling security holders identified in the Company’s prospectus and their permitted transferees.
“Sponsor” means Innovative International Sponsor I LLC, a Delaware limited liability company.
“Trust Account” means the trust account of IOAC, established at the time of IOAC’s initial public offering, containing the net proceeds of the sale of the securities in the initial public offering and in the private placement that closed following the initial public offering.
“Warrant Agent” means Equiniti Trust Company, LLC (f/k/a American Stock Transfer & Trust Company, LLC).
“Warrant Agreement” means that certain Warrant Agreement, dated October 26, 2021, between IOAC and the Warrant Agent.
“Zoomcar Common Stock” means, collectively, the shares of common stock, par value $0.0001 per share, of Zoomcar, Inc. prior to the Business Combination.
“Zoomcar India” means Zoomcar India Private Limited, an Indian limited liability company and subsidiary of Zoomcar.
v
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
ZOOMCAR HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
| (in
USD, except number of shares) As at | June 30, 2024 | March 31, 2024 | ||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents (Refer Note 31- VIE) | $ | $ | ||||||
| Accounts receivable, net of allowance for doubtful accounts (Refer Note 31- VIE) | ||||||||
| Balances with government authorities | ||||||||
| Short term investments | ||||||||
| Prepaid expenses (Refer Note 31- VIE) | ||||||||
| Other current assets (Refer Note 31- VIE) | ||||||||
| Other current assets with related parties | ||||||||
| Assets held for sale | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Intangible assets, net | ||||||||
| Long term investments (Refer Note 31- VIE) | ||||||||
| Balances with government authorities, (Refer Note 31- VIE) | ||||||||
| Prepaid expenses (Refer Note 31- VIE) | ||||||||
| Other non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable (Refer Note 31- VIE) | $ | $ | ||||||
| Accounts payable towards related parties | ||||||||
| Current portion of long-term debt | ||||||||
| Current portion of operating lease liabilities | ||||||||
| Current portion of finance lease liabilities | ||||||||
| Contract Liabilities (Refer Note 31- VIE) | ||||||||
| Current portion of pension and other employee obligations (Refer Note 31- VIE) | ||||||||
| Redeemable Promissory note | ||||||||
| Unsecured Convertible Note | ||||||||
| Unsecured promissory note to related parties | ||||||||
| Other current liabilities (Refer Note 31- VIE) | ||||||||
| Total current liabilities | ||||||||
| Operating lease liabilities, less current portion | ||||||||
| Pension and other employee obligations, less current portion (Refer Note 31- VIE) | ||||||||
| Unsecured Convertible Note | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 33) | ||||||||
| Stockholders’ deficit: | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of this Condensed Consolidated Balance Sheet.
1
ZOOMCAR HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
| (In USD, except number of
shares) Three months ended | June 30, 2024 | June 30, 2023 | ||||||
| (unaudited) | ||||||||
| Revenue: | ||||||||
| Revenues from services | $ | $ | ||||||
| Other revenues | ||||||||
| Total revenue | ||||||||
| Cost and Expenses | ||||||||
| Cost of revenue | ||||||||
| Technology and development | ||||||||
| Sales and marketing | ||||||||
| General and administrative | ||||||||
| Total costs and expenses | ||||||||
| Loss from operations before income tax | ( | ) | ( | ) | ||||
| Finance costs | ||||||||
| Finance costs to related parties | ||||||||
| Other income, net | ( | ) | ( | ) | ||||
| Other income from related parties | ( | ) | ||||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Provision for income taxes | ||||||||
| Net loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | ||
| Net loss per share | ||||||||
| Basic | $ | ( | ) | ( | ) | |||
| Diluted | $ | ( | ) | ( | ) | |||
| Weighted average shares used in computing loss per share: | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
The accompanying notes are an integral part of these Condensed Consolidated Statements of Operations.
2
ZOOMCAR HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) (UNAUDITED)
| (In USD, except number of
shares) Three months ended | June 30, 2024 | June 30, 2023 | ||||||
| (unaudited) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive income/(loss), net of tax: | ||||||||
| Foreign currency translation adjustment | ( | ) | ||||||
| (Loss)/Gain for defined benefit plan | ( | ) | ( | ) | ||||
| Reclassification adjustments: | ||||||||
| Amortization of gains on defined benefit plan | ( | ) | ( | ) | ||||
| Other comprehensive income/(loss) attributable to common stockholders | ( | ) | ( | ) | ||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | ||
The accompanying notes are an integral part of these Condensed Consolidated Statements of Comprehensive Income/(Loss)
3
ZOOMCAR HOLDINGS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT (UNAUDITED)
FOR THE THREE MONTHS ENDED JUNE 30, 2024 AND 2023
| Redeemable Non- controlling Interest | Mezzanine equity Preferred stock | Zoomcar Holdings, Inc. | ||||||||||||||||||||||||||||||||||
| Additional | Accumulated other | Total | ||||||||||||||||||||||||||||||||||
| paid- in | Accumulated | comprehensive | equity | |||||||||||||||||||||||||||||||||
| (In USD, except number of shares) | Amounts | Shares | Amounts | Shares | Amounts | capital | Deficit | income/(loss) | (deficit) | |||||||||||||||||||||||||||
| Balance as at April 01, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Retroactive application of Reverse Recapitalization (Note 3) * | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance as at April 01, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||||||||||
| - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Balance as at June 30, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance as at April 01, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||||||||||
| Issue of common stock against Atalaya note | ||||||||||||||||||||||||||||||||||||
| Issue of common stock warrants along with redeemable promissory notes | - | - | ||||||||||||||||||||||||||||||||||
| Issue of common stock warrants to placement agents | - | |||||||||||||||||||||||||||||||||||
| - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| - | - | |||||||||||||||||||||||||||||||||||
| Balance as at June 30, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| * |
The accompanying notes are an integral part of these Condensed Consolidated Statements of Stockholders’ Deficit
4
ZOOMCAR HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
| Three months ended | June 30, 2024 | June 30, 2023 | ||||||
| (unaudited) | ||||||||
| A. Cash flows from operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities : | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation | ||||||||
| Change in fair value of preferred stock warrant | ( | ) | ||||||
| Change in fair value of convertible promissory note | ||||||||
| Change in fair value of Senior Subordinated Convertible Promissory Notes | ||||||||
| Change in fair value of derivative financial instrument | ||||||||
| Note issue expenses | ||||||||
| Interest on redeemable promissory note | ||||||||
| Interest on finance leases | ||||||||
| Other borrowing cost | ||||||||
| Change in fair value of Unsecured Convertible Note | ( | ) | ||||||
| (Gain)/ loss on sale and disposal of assets, net | ( | ) | ||||||
| (Gain)/ loss on sale and disposal of assets held for sale, net | ( | ) | ||||||
| Assets written off | ||||||||
| Amortization of operating lease right-of-use assets | ||||||||
| Unrealized foreign currency exchange loss, net | ||||||||
| ( | ) | ( | ) | |||||
| Changes in operating assets and liabilities : | ||||||||
| Decrease in Accounts receivable | ||||||||
| (Increase) in balances with government authorities | ( | ) | ( | ) | ||||
| Decrease in Prepaid expenses | ||||||||
| Decrease in Other current assets | ||||||||
| Increase/(Decrease) in Accounts payables | ( | ) | ||||||
| Increase/(Decrease) in Other current liabilities | ( | ) | ||||||
| (Decrease)/Increase in Pension and other employee obligations | ( | ) | ||||||
| (Decrease)/Increase in Contract liabilities | ( | ) | ||||||
| Net cash used in operating activities (A) | ( | ) | ( | ) | ||||
| B. Cash flows from investing activities | ||||||||
| Payment towards deposits accounts with maturity more than 12 months | ||||||||
| Purchase of property, plant and equipment, including intangible assets and capital advances | ( | ) | ||||||
| Payment towards investments in fixed deposits | ( | ) | ||||||
| Proceeds from sale of property, plant and equipment | ||||||||
| Proceeds from sale of asset held for sale | ||||||||
| Proceeds from maturity of investments in fixed deposits | ||||||||
| Net cash generated/(used) in investing activities (B) | ( | ) | ||||||
| C. Cash flows from financing activities | ||||||||
| Proceeds from issue of Senior Subordinated Convertible Promissory Notes | ||||||||
| Payment of notes issuance cost | ( | ) | ||||||
| Proceeds from issue of redeemable promissory notes | ||||||||
| Payment of redeemable promissory note issue expenses | ( | ) | ||||||
| Repayment of debt | ( | ) | ( | ) | ||||
| Principal payment of finance lease obligation | ( | ) | ||||||
| Net cash generated from financing activities (C) | ||||||||
| Net increase in cash and cash equivalents (A+B+C) | ||||||||
| Effect of foreign exchange on cash and cash equivalents. | ( | ) | ( | ) | ||||
| Cash and cash equivalents | ||||||||
| Beginning of period | ||||||||
| End of period | $ | $ | ||||||
| Reconciliation of cash and cash equivalents to the Condensed Consolidated Balance Sheet | ||||||||
| Cash and cash equivalents | ||||||||
| Total cash and cash equivalents | $ | $ | ||||||
| Supplemental disclosures of cash flow information | ||||||||
| Cash refund/(paid) for income taxes | ( | ) | ||||||
| Interest paid on debt | ( | ) | ( | ) | ||||
| Supplemental disclosures of non-cash investing and financing activities: | ||||||||
| Issue of common stock upon conversion of Unsecured Convertible Note | ||||||||
| Issue of Warrants to redeemable promissory note holders | ||||||||
| Issue of Warrants to placement agents | ||||||||
The accompanying notes are an integral part of these Condensed Consolidated Statement of Cash Flows
5
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED
| 1. | Organization, Business operation and Going concern. |
Zoomcar Holdings, Inc. (formerly “Innovative International Acquisition Corp”) a Delaware corporation provides mobility solutions to consumers and businesses. The accompanying Condensed Consolidated Financial Statements include the accounts and transactions of Zoomcar Holdings, Inc. and its subsidiaries (collectively, the “Company” or “the combined entity” or “Zoomcar”). The Company operates its facilitation services under the Zoomcar brand with its operations in India.
On December 28, 2023 (the “Closing
Date”), pursuant to a Merger Agreement dated October 13, 2022 by and among Innovative International Acquisition Corp (“IOAC”
or “SPAC”), Innovative International Merger Sub, Inc. and Zoomcar, Inc., the parties consummated the merger of Innovative
International Merger Sub, Inc. with and into Zoomcar, Inc., with Zoomcar, Inc., continuing as the surviving corporation (the “Merger”),
as well as the other transactions contemplated by the Merger Agreement (the Merger and such other transactions, the “Reverse Recapitalization”).
In connection with the closing (the “Closing”) of the Reverse Recapitalization, Zoomcar, Inc. became a wholly owned subsidiary
of IOAC and IOAC changed its name to Zoomcar Holdings, Inc., and all of Zoomcar, Inc. common stock, convertible preferred stock and convertible
notes automatically converted into shares of the Company’s common stock having a par value of $
Zoomcar, Inc., determined that it was the accounting acquirer in the Reverse Recapitalization based on an analysis of the criteria outlined in ASC 805, Business Combinations. The determination was primarily based on the following facts:
| ◾ | Zoomcar, Inc’s shareholders, prior to the Reverse Recapitalization, have the largest voting interest in the post-combination Company; |
| ◾ | Zoomcar, Inc., prior to the Closing, appointed the majority
of the Company’s Board of Directors (effective upon the Reverse Recapitalization, the Company’s Board consists of seven directors,
including |
| ◾ | The executive officers of Zoomcar, Inc. became the initial executive officers of the Company after the Reverse Recapitalization; |
| ◾ | Zoomcar, Inc., is the larger entity, in terms of substantive operations and employee base; |
6
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED
| ◾ | Zoomcar, Inc., will comprise the ongoing operations of the combined entity; and |
| ◾ | The combined entity will continue under the name of Zoomcar Holdings, Inc. |
Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the equivalent of Zoomcar, Inc., issuing stock for the net assets of IOAC. The primary asset acquired from IOAC was cash that was assumed. Separately, the Company also assumed warrants that were reclassified to equity upon close of the Reverse Recapitalization. No goodwill or other intangible assets were recorded as a result of the Reverse Recapitalization.
While IOAC was the legal acquirer in the Reverse Recapitalization, because Zoomcar, Inc., was deemed to be the accounting acquirer, the historical financial statements of Zoomcar, Inc., became the historical financial statements of the combined entity upon the consummation of the Reverse Recapitalization. As a result, the financial statements included in this report reflect (i) the historical operating results of Zoomcar, Inc., prior to the Reverse Recapitalization; (ii) the results of the combined entity following the Closing of the Reverse Recapitalization; (iii) sum of the assets and liabilities of both Zoomcar, Inc., and the SPAC at their historical cost; and (iv) the combined entity’s equity structure for all periods presented.
The equity
structure has been recast in all comparative periods up to the Closing date to reflect the number of shares of the Company’s Common
Stock, $
Going concern
The accompanying Condensed
Consolidated Financial Statements have been prepared in accordance with U.S. GAAP and the rules and regulations of the SEC. The
Condensed Consolidated Financial Statements have been prepared using U.S. GAAP applicable to a going concern that contemplates the
realization of assets and settlement of liabilities in the normal course of business. The Company incurred a net loss of $
The Company expects to continue to incur net losses and have significant cash outflows from operating activities for at least the next 12 months. Management has evaluated the significance of the conditions described above in relation to the Company’s ability to meet its obligations and concluded that, without additional funding, the Company will not have sufficient funds to meet its obligations within one year from the date the Condensed Consolidated Financial Statements are issued. Management’s plans with respect to these adverse financial conditions that caused management to express substantial doubt about the Company’s ability to continue as a going concern are as follows:
| a. | In June 2024, Company entered into a letter agreement with
Aegis Capital Corp. (“Aegis”) pursuant to which Aegis will act as a placement agent to the Company in connection with a proposed
private placement of up to $ |
There can be no assurance that the Company will be able to achieve its business plan, raise any additional capital or secure the additional financing necessary to implement its current operating plan. The ability of the Company to continue as a going concern is dependent upon its ability to increase its revenues and eventually achieve profitable operations. The accompanying Condensed Consolidated Financial Statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
7
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED
| 2. | Summary of Significant Accounting Policies |
| (a) | Basis of presentation |
The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (US GAAP) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by US GAAP have been condensed or omitted. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and an Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). The results of operations for the three months ended June 30, 2024, are not necessarily indicative of the results for the fiscal year ending March 31, 2025, or any future interim period.
These Condensed Consolidated Financial Statements follow the same significant accounting policies as those included in the audited Consolidated Financial Statements of the Company for the year ended March 31, 2024. In the opinion of management, these Condensed Consolidated Financial Statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of the Condensed Consolidated Financial position, results of operations, and cash flows for these interim periods.
The Condensed Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries and variable interest entities in which the Company is the primary beneficiary, including an entity in India and in other geographical locations. All intercompany accounts and transactions have been eliminated in the Condensed Consolidated Financial Statements herein.
| (b) | Principles of consolidation |
The Condensed Consolidated Financial Statements include the accounts of Zoomcar Holdings, Inc. and of its wholly owned subsidiaries and Variable Interest Entities (“VIE”) in which the Company is the primary beneficiary, including an entity in India and in other geographical locations (collectively, the “Company”).
The Company determines, at the inception of each arrangement, whether an entity in which it has made an investment or in which it has other variable interest is considered a VIE. The Company consolidates a VIE when it is the primary beneficiary. The primary beneficiary of a VIE is the party that meets both of the following criteria:
| i. | has the power to direct the activities that most significantly affect the economic performance of the VIE; and |
| ii. | has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. |
Periodically, the Company determines whether any changes in its interest or relationship with the entity impact the determination of whether the entity is still a VIE and, if so, whether the Company is the primary beneficiary.
8
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED
| Name of Entity | Place of Incorporation | Investor Entity | Method of consolidation | |||
In determining whether the VIE model was applicable to the subsidiaries the criteria prescribed under ASC 810 were examined as below:
| - | The subsidiaries were incorporated as legal entities under the laws and regulations of the country in which they are incorporated. |
| - | The scope exemptions under ASC 810 were not applicable to the entities. |
| - | Zoomcar Holdings, Inc holds variable interest in all the subsidiaries by way of contribution towards equity and in the form of debt. |
| - | The entities are variable interest entities for Zoomcar Holdings, Inc since the legal entities do not have sufficient equity investment at risk and equity investors at risk. |
For the purpose of equity interests, the interests held by employees are also considered under ASC 810 since employees are considered as de-facto agents. Thus, Zoomcar Egypt Car Rental LLC, Fleet Mobility Philippines Corporation, and Zoomcar Vietnam Mobility LLC are considered as wholly owned subsidiaries of Zoomcar, Inc and step-down subsidiaries of Zoomcar Holdings, Inc
Through the direct and indirect interest that Zoomcar Holdings, Inc. holds in the subsidiaries, Zoomcar Holdings, Inc. has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and has the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. Accordingly, Zoomcar Holdings, Inc. is the primary beneficiary to Zoomcar Egypt Car Rental LLC and Zoomcar Vietnam Mobility LLC under the VIE model. Zoomcar, Inc., Zoomcar India Private Limited, Zoomcar Netherlands Holding B.V, Fleet Holding Pte Ltd and PT Zoomcar Indonesia Mobility Service are consolidated as per the voting interest model.
9
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED
On August 14, 2023, Zoomcar Vietnam Mobility LLC has voluntarily filed application for bankruptcy with the local authorities of Vietnam. In accordance with ASC 205-30, the liquidation of the VIE is imminent and thus the financial statements of VIE are prepared on a liquidation basis, which entails valuing assets at their estimated net realizable values and recording liabilities at their expected settlement amounts. Further, in accordance with ASC 810-10-15-10, the Company consolidate the VIE as the bankruptcy application is pending with the authorities in Vietnam and unless the application is admitted, the Company holds a variable interest and still is the primary beneficiary.
The assets/liabilities consolidated for the VIE are not material.
| (c) | Use of estimates and assumptions |
The use of estimates and assumptions as determined by management is required in the preparation of the Condensed Consolidated Financial Statements in conformity with US GAAP. These estimates are based on management’s evaluation of historical trends and other information available when the Condensed Consolidated Financial Statements are prepared and may affect the amounts reported and related disclosures. Actual results could differ from those estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis.
The significant estimates, judgments and assumptions that affect the Condensed Consolidated Financial Statements include, but are not limited to; are:
| a. | Estimation of defined benefit obligation |
| b. | Estimation of useful lives and residual values of property, plant & equipment, and intangible assets |
| c. | Fair value measurement of financial instruments |
| d. | Fair value measurement of share based payments |
| e. | Leases – assumption to determine the incremental borrowing rate. |
| f. | Valuation allowance on deferred tax assets |
| g. | Estimation of utilization of balances with government authorities |
| (d) | Revenue recognition |
During the three months ended June 30, 2024 and June 30, 2023, the Company derives its revenue principally from the following:
Facilitation revenue (“Host services”)
The Company launched its platform “Zoomcar Host Services” during the year ended March 2022. Zoomcar Host Services is a marketplace feature of the platform that helps owners of vehicles (“Hosts/ Customer/Lessors”) connect with users (“Renters/Lessee”) in temporary need of a vehicle on leasehold basis for their personal use.
10
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED
Facilitation Services revenue consists of facilitation fees charged to Hosts, net of incentives and refunds and trip protection charged to the Renters. The Company charges facilitation fees to its customers as a percentage of the value of the total booking, excluding taxes. The Company collects both the booking value on behalf of the Host and the trip protection charges from the renter. On a daily basis the Company, or its third-party payment processors, disburse the booking value to the host, less the fees due from the host to the Company. The amounts charged for trip fees for the Marketplace service vary based on factors such as the vehicle type, the day of the week, time of the trip, and the duration of the trip. Hence, the Company’s primary performance obligation in the transaction towards the Host is to facilitate the successful completion of the rental transaction and towards the renter is to offer trip protection.
Customer support is rendered to both the Host (customer/lessor) and the renter (lessee). Company being the intermediary between the two provides its platform through which all communication takes place related to any services e.g., extension of trip period. Such services also include the normal customer support related to any vehicle breakdowns, tracking of vehicles, renter background checks, vehicle ownership checks and various other activities which are part of an ongoing set of series required for successful listing, renting and completion of trip. These activities are not distinct from each other and are not separate performance obligations. As a result, these series of services integrate together to form a single performance obligation.
In case of booking value collected from the renter on behalf of the Host, the Company evaluates the presentation of revenue on a gross versus net basis based on whether or not it is the principal(gross) or the agent (net) in the transaction. The Company considers whether it controls the right to use the vehicle before control is transferred to the renter. Indicators of control that the Company considers include whether the Company is primarily responsible for fulfilling the promise associated with the booking of the vehicle, whether it has inventory risk associated with the vehicle, and whether it has discretion in establishing the prices for the vehicles booked. The Company determined that it does not establish pricing for vehicles listed on its platform and does not control the right to use the host’s vehicle at any time before, during, or after completion of a trip booked on the Company’s platform. Accordingly, the Company has concluded that it is acting in an agent capacity, and revenue is presented net reflecting the facilitation fees received from the Marketplace service. The customer simultaneously receives and consumes the benefits provided by the entity’s performance as the entity performs. Revenue is recognized ratably over the trip period. The Company recognizes facilitation revenue from these performance obligations on a straight-line basis over the duration of the rental trip using the output method as its performance obligation is satisfied over time. The Company uses the output method based on rental hours or days, where revenue is calculated based on the percentage of total time elapsed in relation to total estimated rental period. In the event a user books a trip extension, at the time the extension is booked, the service revenue is recognized on a straight-line basis over the duration of the extension period.
The Company offers vehicle listing incentive programs to hosts. The incentives are recorded in accordance with ASC 606- 10-32-25 and ASC 606-10-32-27 as a reduction to revenue and in cases where the amount of incentive paid to the Host are above the facilitation fees earned from that Host on cumulative basis the excess of the revenue amount is recorded as a marketing expense in the Consolidated Statement of Operations. These incentives are offered as part of overall marketing strategy of the company and incentivize the hosts to refer the platform. No incentives were paid during the three months ended June 30, 2024.
11
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED
Loyalty program
The Company offers loyalty program,
Z-Points, wherein customers are eligible to earn loyalty points that are redeemable for payment towards facilitation fees. Under ASC 606,
each transaction that generates loyalty points results in the deferral of revenue equivalent to the retail value at the date the points
are earned. The associated revenue is recognized when the customer redeems the loyalty points at some time in future. The retail value
of points is estimated based on the current retail value measured as of the date the loyalty points are earned, less an estimated amount
representing loyalty points that are not expected to be redeemed (“breakage”). Breakage is reviewed on an annual basis and
includes significant assumptions such as historical breakage trends, internal Company forecasts and extended redemption period, if any.
As at June 30, 2024 and March 31, 2024, the Company’s deferred revenue balance amounted to $
Contract liabilities
Contract liabilities primarily consists of obligations to customers for advance received against bookings, revenue-share payable to customers for vehicles listed by them on Company’s portal for short-term rentals and related to Company’s points-based loyalty program.
| (e) | Accounts receivable, net of allowance |
Accounts receivables are stated net of allowances and primarily represent corporate debtors and dues from payment gateways for amounts paid by customers. In case of corporate debtors, the payment terms generally include a credit of 30-60 days. The amounts receivable from payment gateways are settled within 2 days.
The Company records an allowance for credit losses for amounts owed for completed transactions that may never settle or be collected. The Company estimates its exposure to balances deemed to be uncollectible based on factors including known facts and circumstances, historical experience, and the age of the uncollected balances. Accounts receivable balances are written off against the allowance of credit losses after all means of collection has been exhausted and potential recovery is considered remote.
| (f) | Other receivables |
Other receivables include amounts recoverable from host. The receivable from host is adjusted for an allowance on account of host which are not active on the platform for more than 90 days.
| (g) | Balances with government authorities – Input Tax Credit |
Balances with government authorities represent the tax credit with government agencies which are recognized when the Company has performed the required services and when they meet the eligibility criteria outlined in the applicable government regulations.
The input tax credits are related to Indian Goods and Service Tax (“GST”). These balances are classified based on their expected period of utilization of future GST credit and GST debit that comes from domestic purchases and sales of services, respectively. If the tax credits are expected to be utilized within twelve months from the reporting date, they are classified as current assets. If the tax credits are not expected to be utilized within twelve months from the reporting date, they are classified as non-current assets.
12
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED
| (h) | Assets held for sale |
The Company classifies vehicles to be disposed of as held for sale in the period in which they are available for immediate sale in their present condition and the sale is probable and expected to be completed within one year. The Company initially measures assets held for sale at the lower of their carrying value or fair value less costs to sell and assesses their fair value annually until disposed. The fair value of Assets held for sale not traded in an active market is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an asset are observable, the Valuation is included in Level 2.
The Company has a policy of disposing
vehicles once it has crossed
In case of certain vehicles which are not sold within one year from date of classification, the Company reassess the carrying value of the assets to adjust it for the realizable value.
| (i) | Stock-based compensation |
The Company accounts for stock-based compensation expense in accordance with the fair value recognition and measurement provisions of US GAAP, which requires compensation cost for grant-date fair value of stock-based awards to be recognized over the requisite service period. The Company includes a forfeiture estimate in the amount of compensation expense being recognized based on the Company’s estimate of equity instruments that will eventually vest. The fair value of stock-based awards, granted or modified, is determined on the grant date at fair value, using appropriate valuation techniques.
For stock options with service-based
vesting conditions only, the valuation model, typically the Black-Scholes option-pricing model, incorporates various assumptions including
expected stock price volatility, expected term, and risk-free rates. Stock options with graded vesting the fair- value-based measure is
estimated of the entire award by using a single weighted-average expected term. The Company estimated the volatility of common stock on
the date of the grant based on weighted-average historical stock price volatility of comparable publicly traded companies in its industry
group. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant with a term equal to the expected term.
The Company estimates the term based on the simplified method for employee stock options considered to be “plain vanilla”
options as the Company’s historical share option exercise experience does not provide a reasonable basis upon which to estimate
the expected term. The expected dividend yield is
The Company estimates a forfeiture rate on an annual basis for the purpose of computation of stock-based compensation expense.
In case of cancellation of stock-based awards with no concurrent grant of a replacement award or other valuable consideration, any unrecognized compensation cost is recognized immediately on the cancellation date.
| (j) | Debt |
The debt instruments of the Company consist of debentures and term loans from financial institutions. The Company based on available proceeds makes periodic prepayments of scheduled instalments and the same has been accounted under ASC 470-50.
Redeemable Promissory Notes
During the period ended June 30, 2024, the Company has issued Redeemable Promissory Notes which are repayable at the principal value on maturity date and has been accounted for under ASC 470-10. The Company issued these Redeemable Promissory notes on discount and incurred expenses on issue of the Redeemable Promissory Notes. As per ASC 835, the discount and the expenses incurred on issue of the Redeemable Promissory Notes have been amortized over the period of the Redeemable Promissory note on a straight-line basis. The Redeemable Promissory Notes liabilities have been presented net off the discount and issue expenses.
13
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED
Debt Issuance costs
Debt issuance costs consist primarily of arrangement fees paid to Placement agent, professional fees and legal fees. These costs are netted off with the related debt and are being amortized to interest expense over the term of the related.
The debt has been classified into current or non-current based on the payment terms of the debt instruments. Non-current obligations are those scheduled to mature beyond twelve months from the date of the Company’s Condensed Consolidated Balance Sheet.
| (k) | Warrants |
When the Company issues warrants, it evaluates the proper balance sheet classification of the warrant to determine whether the warrant should be classified as equity or as a derivative liability on the Condensed Consolidated Balance Sheets. In accordance with ASC 815- 40, Derivatives and Hedging- Contracts in the Entity’s Own Equity (ASC 815-40), the Company classifies a warrant as equity so long as it is “indexed to the Company’s equity” and several specific conditions for equity classification are met. A warrant is not considered indexed to the Company’s equity, in general, when it contains certain types of exercise contingencies or adjustments to exercise price. If a warrant is not indexed to the Company’s equity or it has net cash settlement that results in the warrants to be accounted for under ASC 480, Distinguishing Liabilities from Equity, or ASC 815-40, it is classified as a derivative liability which is carried on the Condensed Consolidated Balance Sheet at fair value with any changes in its fair value recognized currently in the Condensed Consolidated Statement of Operations.
(a) Warrants issued along with Redeemable Promissory Note:
During the three months ended June 30, 2024, the Company issued warrants along with Redeemable Promissory Note and as consideration to placement agents for the issuance of the Redeemable Promissory Note.
These warrants were classified equity in accordance with ASC 815-40 since all the conditions required for equity classification are met. Upon issuance of the warrant, the Company had allocated a portion of the proceeds from the issuance of its Redeemable Promissory Note to the warrant based on the relative fair values of warrants and Redeemable Promissory Note in accordance with ASC 820.
(b) 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 placement agents for the issuance of SSCPN.
14
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED
These warrants were derivative 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.
(c) Warrants issued to preferred stockholders:
The Company also had preferred stocks and common stocks warrants issued during the year ended March 31, 2022, and were classified as liabilities and equity respectively, in the Condensed Consolidated Balance Sheet as of March 31, 2024 and June 30, 2024.
Each unit of Series E preferred stock issued by the Company consisted of one 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 placement agencies 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.
15
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED
| (l) | 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 into debt 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.
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 825-10-50- 30(b), the estimated fair value adjustments were presented as a separate line item in the accompanying Condensed Consolidated Statement of Operations, since the change in fair value of the Notes and SSCPN payable were not attributable to instrument specific credit risk.
During the year ended March 31,
2024, as a result of consummation of the Business Combination by way of Reverse Recapitalization, the Notes and SSCPN outstanding were
converted into
16
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED
The SSCPN and Notes were adjusted for their carrying value through Condensed Consolidated Statement of Operations as on date of Reverse Recapitalization and credited at carrying value to the capital accounts upon conversion to reflect the stock issued.
During the year ended March 31, 2024, the Company issued an unsecured convertible note (“Atalaya Note) which had features similar to that of SSCPN and were accounted accordingly as enumerated above.
| (m) | Net profit/(loss) per share attributable to common stockholders |
The Company computes net profit/(loss) per share using the two-class method required for participating securities. The two-class method requires income available to common stockholders for the period to be allocated between common stock and participating securities based upon their respective rights to receive dividends as if all the income for the period had been distributed. The Company’s convertible preferred stock is participating security. The holders of the convertible preferred stock would be entitled in preference to common shareholders, at specified rate, if declared.
Then any remaining earnings would be distributed to the holders of common stock and convertible preferred stock on a pro-rata basis assuming conversion of all convertible preferred stock into common stock. This participating security do not contractually require the holders of such shares to participate in the Company’s losses. As such, net losses for the periods presented were not allocated to the Company’s participating securities.
The Company’s basic profit/(loss) per share is computed using the weighted-average number of ordinary shares outstanding during the period. The diluted profit/(loss) per share is computed by considering the impact of potential issuance of common stock on the weighted average number of shares outstanding during the period, except where the results would be anti- dilutive.
| (n) | Provisions and accrued expenses. |
A provision is recognized in the Condensed Consolidated Balance Sheet when the Company has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are recognized at present value by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money.
Provisions for onerous contracts are recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Company recognizes any impairment loss on the assets associated with that contract. The Company does not have any onerous contracts.
17
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED
| (o) | Fair value measurements and financial instruments |
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In accordance with ASC 820, Fair Value Measurement (“ASC 820”), the Company uses the fair value hierarchy, which prioritizes the inputs used to measure fair value. The hierarchy, as defined below, gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of the fair value hierarchy are set forth below:
| Level 1 |
Observable inputs such as quoted prices in active markets for identical assets or liabilities. | |
| Level 2 | Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not active or inputs other than the quoted prices that are observable either directly or indirectly for the full term of assets or liabilities. | |
| Level 3 | Unobservable inputs in which there is little or no market data and that are significant to the fair value of the assets or liabilities. |
During the three months ended June 30, 2024, the Company’s primary financial instruments included cash and cash equivalents, investments, accounts receivables, other financial assets, accounts payable, debt, unsecured convertible note, redeemable promissory note and other financial liabilities. The estimated fair value of cash equivalents, accounts receivable, accounts payable, redeemable promissory note and accrued liabilities approximate their carrying value due to short-term maturities of these instruments.
| (p) | Segment information |
Operating segments are defined as components of an entity for which discrete financial information is available and is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in making decisions regarding resource allocation and performance assessment. The Company’s CODM is its Board of Directors. The Company has determined it has one operating and reportable segment as the CODM reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance.
| (q) | Recent Accounting Pronouncements |
Accounting Pronouncement Adopted
In July 2023, the FASB issued ASU 2023-03 - Presentation of Financial Statements (Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation— Stock Compensation (Topic 718). The ASU amends or supersedes various SEC paragraphs within the Codification to conform to past SEC announcements and guidance issued by the SEC. The ASU is effective immediately upon issuance and did not have a material impact on the Company’s Condensed Consolidated Financial Statements.
Accounting Pronouncement Pending Adoption
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2023-07, “Segment Reporting (ASC 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. This update does not have any impact on the Company’s Condensed Consolidated Financial Statements.
In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for our annual periods beginning January 1, 2025, with early adoption permitted. We are currently evaluating the potential effect that the updated standard will have on our Condensed Consolidated Financial Statement disclosures.
18
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In March 2024, the FASB issued ASU 2024-02 Codification Improvements – Amendments to Remove References to the Concept Statements to provide amendments to the Codification that remove references to various FASB Concepts Statements. ASU 2024-02 is effective for our annual periods beginning December 15, 2024, with early adoption permitted. This update does not have any impact on the Company’s Condensed Consolidated Financial Statements.
There are other new accounting pronouncements issued by the FASB that the Company has adopted or will adopt, as applicable, and the Company does not believe any of these accounting pronouncements have had, or will have, a material impact on its Condensed Consolidated Financial Statements or disclosures.
| 3 | Reverse Recapitalization |
As discussed in Note 1, “Organization and Business Operation”, on the Closing Date, Zoomcar, Inc. completed the acquisition of IOAC and Zoomcar, Inc. received cash of $
On the Closing Date, each then-outstanding IOAC ordinary share was cancelled and converted into
All equity awards of Zoomcar, Inc. were assumed by the Company and converted into comparable equity awards that are settled or exercisable for shares of the Company’s common stock. As a result, each outstanding stock option of Zoomcar, Inc. was converted into an option to purchase shares of the Company’s common stock based on the Exchange Ratio and each outstanding warrant of Zoomcar, Inc. was converted into a warrant to purchase shares of the Company’s common stock based on the Exchange Ratio.
As additional consideration for
the acquisition of Zoomcar, Inc. securities, at the Closing, IOAC issued and deposited into an escrow account established for this purpose
(the “Earnout Escrow Account”)
The equity structure has been recast
in all comparative periods up to the Closing date to reflect the number of shares of the Company’s Common Stock, $
In connection with Reverse Recapitalization,
then-outstanding
19
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Ananda Trust Closing Subscription Agreement
On December 19, 2023, IOAC and Ananda Trust, an affiliate of the Sponsor, entered into a subscription agreement (the “Ananda Trust Closing Subscription Agreement”), pursuant to which, upon the Closing, Ananda Trust purchased
| Particulars | March 31, 2024 | |||
| Conversion of Zoomcar, Inc. Common Stock and Preferred Stock outstanding prior to Reverse Recapitalization | ||||
| Common stock – issuance to IOAC shareholders | ||||
| Shares issued to Mohan Ananda | ||||
| Other vendors | ||||
| Total | ||||
| Particulars | Zoomcar, Inc. Shares | Common shares issued to shareholders of Zoomcar, Inc. | ||||||
| Common shares | ||||||||
| Preferred stock | ||||||||
| Redeemable NCI - Shares of Zoomcar India Private Limited | ||||||||
| Issue of common shares on conversion of SSCPN | ||||||||
| Total | ||||||||
| 4 | Cash and cash equivalents |
| (In USD) As at | June 30, 2024 | March 31, 2024 | ||||||
| Balances in bank accounts | $ | $ | ||||||
| Cash | ||||||||
| Cash and cash equivalents | ||||||||
20
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 5 | Accounts receivable, net of allowance for doubtful accounts |
| (In USD) As at | June 30, 2024 | March 31, 2024 | ||||||
| Accounts receivable | $ | $ | ||||||
| Allowance for credit losses | ( | ) | ( | ) | ||||
| Net accounts receivable | ||||||||
The Company records an allowance for credit losses for amounts
owed for completed transactions that may never settle or be collected. As at June 30, 2024 and March 31, 2024, allowance amounting to
$ and $
| 6 | Balances with government authorities |
| (In USD) As at | June 30, 2024 | March 31, 2024 | ||||||
| Current | ||||||||
| Goods and service tax receivable | $ | $ | ||||||
| Less: Impairment* | ( | ) | ( | ) | ||||
| Non current | ||||||||
| Other tax receivables | $ | $ | ||||||
During the year ended March 31, 2024, the Company
recorded an allowance for impairment of tax credits for an amount of $
| 7 | Short term investments |
| (In USD) As at | June 30, 2024 | March 31, 2024 | ||||||
| Certificate of deposits* | $ | $ | ||||||
| Short term investments | ||||||||
| * |
During the period ended June 30, 2024, the Company has adjusted the certificate of deposits with Mahindra & Mahindra Financial Services Limited against the debt. (Refer note 14).
21
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 8(a) | Other current assets |
| (In USD) As at | June 30, 2024 | March 31, 2024 | ||||||
| Security deposits | $ | $ | ||||||
| Franchise tax refund receivable | ||||||||
| Advance to employees | ||||||||
| Receivables from car sale | ||||||||
| Advance income taxes, net | ||||||||
| Advance to suppliers | ||||||||
| Other receivables | ||||||||
| Other current assets | ||||||||
| 8(b) | Other current assets with related parties |
| (In USD) As at | June 30, 2024 | March 31, 2024 | ||||||
| Advance to director | $ | $ | ||||||
| Other current assets with related parties | ||||||||
| 9 | Assets held for sale |
| (In USD) As at | June 30, 2024 | March 31, 2024 | ||||||
| Vehicles | $ | $ | ||||||
| Total assets held for sale | ||||||||
Vehicles represent the vehicles held for sale in the Indian subsidiary, Zoomcar India Private Limited. The gain or loss on sale of these assets is included in Loss/ (gain) on sale of assets held for sale under Other (income)/expense of Condensed Consolidated Statement of Operations. During the three months ended June 30, 2024, total profit of $
The Company is actively taking steps to liquidate these “Assets held for sale”, pending the capacity to foreclose loans and issue NOCs to buyers. The Company anticipates full asset sale completion by the third quarter of the calendar year 2024.
22
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 10 | Property and equipment, net |
| (In USD) As at | Estimated useful life | June 30, 2024 | March 31, 2024 | |||||||
| Devices | $ | $ | ||||||||
| Computer equipments | ||||||||||
| Office equipments | ||||||||||
| Furniture and fixtures | ||||||||||
| Total, at cost | ||||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||||
Right-of-use assets under finance leases:
| Vehicles, at cost | $ | $ | ||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| - | - | |||||||
| Total property and equipment, net |
Depreciation expense for the three
months ended June 30, 2024 and June 30, 2023 was $
As of June 30, 2024 and June 30, 2023 , the Company believes no impairment exists because the long-lived asset’s future undiscounted net cash flows expected to be generated exceeds its carrying value; however, there can be no assurances that long-lived assets will not be impaired in future periods.
| 11 | Leases |
The Company’s lease primarily
includes vehicles and corporate offices which has been classified as finance leases and operating leases, respectively . The lease term
of operating and finance leases varies between
| (In USD) Period ended | June 30, 2024 | March 31, 2024 | ||||||
| Finance lease cost: | ||||||||
| Amortization of right-of-use assets | $ | $ | ||||||
| Interest on lease liabilities | ||||||||
| Operating lease cost | ||||||||
| Short term lease cost | ||||||||
| Total lease cost | ||||||||
23
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| (In
USD) Period ended | June
30, 2024 | March
31, 2024 | ||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash outflows for operating leases | $ | ( | ) | $ | ( | ) | ||
| Financing cash outflows for finance leases | ( | ) | ||||||
| Right-of-use assets obtained in exchange for lease obligations: | ||||||||
| Operating leases | ||||||||
| Finance leases | ||||||||
| (In USD) Period ended | June 30, 2024 | March 31, 2024 | ||||||
| Operating Leases | ||||||||
| Operating lease right-of-use assets | $ | $ | ||||||
| Current operating lease liabilities | $ | $ | ||||||
| Non current operating lease liabilities | ||||||||
| Total operating lease liabilities | ||||||||
| Finance Leases | ||||||||
| Property and equipment, at cost | $ | $ | ||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Accumulated impairment | ( | ) | ( | ) | ||||
| Property and equipment, net | ||||||||
| Current finance lease liabilities | $ | $ | ||||||
| Non current finance lease liabilities | ||||||||
| Total finance lease liabilities | ||||||||
| Weighted Average Remaining Lease Term | ||||||||
| Operating leases | ||||||||
| Finance leases | ||||||||
| Weighted Average Discount Rate | ||||||||
| Operating leases | % | % | ||||||
| Finance leases | % | % | ||||||
24
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company determines the incremental borrowing rate by adjusting the benchmark reference rates, with appropriate financing spreads applicable to the respective geographies where the leases were entered and lease specific adjustments for the effects of collateral.
| Three months ended | Year ended | |||||||||||||||
| June 30, 2024 | March 31, 2024 | |||||||||||||||
| Operating Leases | Finance Leases | Operating Leases | Finance Leases | |||||||||||||
| 2025 | $ | $ | $ | $ | ||||||||||||
| 2026 | ||||||||||||||||
| 2027 | ||||||||||||||||
| 2028 | ||||||||||||||||
| 2029 | ||||||||||||||||
| Total Lease Payments | ||||||||||||||||
| Less : Imputed Interest | ||||||||||||||||
| Total Lease Liabilities | $ | $ | $ | $ | ||||||||||||
An amount of $
As of June 30, 2024, the Company continues to default on equated monthly instalments (EMI) payments for November 2023 to June 2024 owed to Leaseplan India Private Limited (Lender). The total lease commitment balance as of June 30, 2024 is $
As per the terms of the agreement, an additional simple interest of
| a) | withdrawal of conditional waiver of USD |
| b) | entire outstanding debt becoming due and payable, inclusive of all accrued interests; |
| c) | enforcement of the consent award for the entire amount of default (along with applicable interest thereon); |
| d) | seek and cause compulsory re-possession of all vehicles from Zoomcar which were financed from the Lender; |
| e) | enforcement of the security created in pursuance of this Resolution Agreement for the amount of default (along with applicable interest thereon); |
| f) | invoke the personal guarantee issued by the promoter for satisfaction of the amount of default (along with applicable interest thereon). |
In April 2024, Lease Plan India Private Limited has invoked the bank guarantee created against fixed deposit amounting to $
The Company has defaulted on EMI from December 2023 to June 2024 owed to Orix Leasing and Financial Services India Limited. As per the restructuring agreement, in case of default on payment, interest charge of
On June 4, 2024, the Company had sent a notice of termination to Economic Transport Organisation Private Limited (lessor) notifying their intention to terminate the deed for their property lease. Accordingly, the right-of-use of asset has been fully impaired as on June 30, 2024 since the Company does not have an intention to use the leased asset. However, in case of vacating the property earlier than the lock-in period, the Company is liable to pay the balance rent amount for the unexpired period of the lock-in period. The Company has an outstanding liability of $
25
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 12 | Investments |
| (In USD) As at | June 30, 2024 | March 31, 2024 | ||||||
| Long term investments | ||||||||
| Investments in certificate of deposits* | $ | $ | ||||||
| * |
| 13 | Other non-current assets |
| (In USD) As at | June 30, 2024 | March 31, 2024 | ||||||
| Security deposits* | $ | $ | ||||||
| Receivables from car sale ** | ||||||||
| Other non current assets | ||||||||
| * | (i) | |
| (ii) |
| (iii) |
| (iv) |
| ** |
26
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 14 | Debt |
| (In USD) As at | Effective interest rates | Maturities* | June 30, 2024 | March 31, 2024 | ||||||||||
| Current | ||||||||||||||
| Non-convertible debentures | ||||||||||||||
| - 7.7% Debentures | $ | $ | ||||||||||||
| Term loans | ||||||||||||||
| - from non-banking financial companies (NBFCs) | ||||||||||||||
| - Mahindra & Mahindra Financial Services Limited | ||||||||||||||
| - Cholamandalam Investment and Finance | ||||||||||||||
| - TATA Motors Finance Limited | % | |||||||||||||
| - Kotak Mahindra Financial Services Limited | % | |||||||||||||
| - Nissan Renault Financial Services India Private Limited | ||||||||||||||
| - Jain and Sons Services Limited | ||||||||||||||
| - Mercury Car Rentals Private Limited | ||||||||||||||
| - Orix Leasing and Financial Services India LTD | % | |||||||||||||
| - Clix Finance India Private Limited | % | |||||||||||||
| Financing arrangement with- | ||||||||||||||
| - AON Premium Finance LLC | % | |||||||||||||
| Total maturity for the year ending on March 31, | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | $ |
| * |
| (A) | Non-convertible debentures |
| (i) |
The Company has defaulted on the lumpsum payment that was due in January 2024 owed to Blacksoil Capital Private Limited for an amount of $
The Company has recorded an interest expense amounting to $ and $
| (B) | Term loans from NBFCs |
Includes loans outstanding as at June
30, 2024 and March 31, 2024 of $
27
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company has recorded an interest expense amounting to $
As of March 31, 2024, the Company continues to default on Equated Monthly Installment (“EMI”) for November 2023 to June 2024 owed to Kotak Mahindra Finance (Lender). The outstanding balance as of June 30, 2024 is $
The Company has defaulted on EMI for the months of January 2024 to June 2024 owed to Tata Motors Finance Limited for an amount of $
The Company has defaulted on EMI for
the months of February to June 2024 owed to Clix Finance India Private Limited for an amount of $
The outstanding amounts for the above loans are classified under current liabilities in the Condensed Consolidated Balance Sheet.
The Company has defaulted on EMI from December 2023 to June 2024 owed to Orix Leasing and Financial Services India Limited for an amount of $
The Company has defaulted on EMI for the months of December 2023, March 2024 and June 2024 due to Jain and Sons Services Limited amounting to $
The Company has defaulted on the lumpsum payment due in the month of January 2024 owed to Mahindra & Mahindra Financial Services Limited for an amount of $
The Company has defaulted on the lumpsum payment due in the month of January 2024 owed Mercury Car Rentals Private Limited for an amount $
In June 2024, the Company fully paid the liability due to AON Premium Finance LLC along with interest of $
28
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 14A | Redeemable Promissory Note |
| Outstanding | ||||||||
| (In USD) As at | June 30, 2024 | March 31, 2024 | ||||||
| Redeemable promissory note | $ | $ | ||||||
| Less: Discount ($ | ( | ) | ||||||
| Total | ||||||||
On June 18, 2024 , the Company entered into a Securities Purchase Agreement with certain institutional accredited investors pursuant to which the Company issued and sold an aggregate of $
Out of the total proceeds of $
Terms of Redeemable Promissory Note
The Notes are due nine months from the date of issuance, provided that the Company is required to use the proceeds at the Closing Date of one or more subsequent equity, debt or other capital raises or any sale of tangible or intangible assets with net proceeds sufficient to repay all or any portion of the amounts due under the Note (the “Maturity Date”). The Redeemable Promissory Note bear interest at a rate of
The interest on the Redeemable Promissory Note was $
As of June 30, 2024 and March 31, 2024, the balance outstanding of the Redeemable Promissory Note was $
Terms of Warrants issued along with Redeemable Promissory Note
The Warrants are each exercisable for one share of Common Stock at an initial exercise price of $
If at the time of exercise, there is no effective registration statement registering, or the prospectus contained therein is not available for the resale of the Warrant Shares by the Holder, then the Warrant may also be exercised, in whole or in part, at such time by means of a ‘cashless exercise’. The Holder may also effect an ‘Alternative cashless exercise’. In such event, the aggregate number of Warrant Shares issuable in such alternative cashless exercise pursuant to any given Notice of Exercise electing to effect an alternative cashless exercise shall equal the aggregate number of Warrant Shares that would be issuable upon exercise of the Warrant if such exercise were by means of a cash exercise rather than a cashless exercise. On the Termination Date, the Warrant shall be automatically exercised via cashless exercise. These Warrants are classified as equity on the Condensed Consolidated Balance Sheet.
Terms of Warrants issued to placement agent
The
placement agent was compensated with a cash fee amounting to $
29
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 15 | Convertible promissory note (‘Notes’) |
In October
2022, the Company entered into a Convertible Promissory Note agreement with Ananda Small Business Trust for $
The
Convertible Promissory Note were converted into the Company’s Common Stock on the consummation of the Business Combination by way of
a Reverse Recapitalization. The outstanding principal along with interest at a simple rate of
Pursuant to the Amendment to Note Purchase Agreement dated September 11, 2023, the maturity date of the Notes had been amended to December 31, 2023. All other terms of the Note remained unchanged.
The
(gain)/loss on fair value change of the Notes recorded was $ and $
As of June 31, 2024 and March 31, 2024, the principal balance and fair value of the Notes was $. Unsecured promissory note
| 15A | Unsecured promissory note |
Outstanding | ||||||||
| (In USD) As at | June
30, 2024 | March
31, 2024 | ||||||
| Unsecured promissory note | $ | $ | ||||||
| Total | ||||||||
Prior
to Merger in August 2022, the SPAC had issued an interest free Convertible Promissory Note to Ananda Small Business Trust with a principal
amount for $
| 16 | Senior Subordinated Convertible Promissory Note (’SSCPN’) |
The
Company has raised $
During
the year ended March 31, 2024, as a result of consummation of the Business Combination by way of a Reverse Recapitalization, the SSCPN
outstanding were converted into
The Company had measured the SSCPN under the fair value option election of ASC 825 and were adjusted for their carrying value through Statement Of Operations up to the date of conversion on Reverse Recapitalization. On the date of Reverse Recapitalization, the carrying amounts of the SSCPN and Notes were credited to the capital accounts upon conversion.
The
loss on change in fair value of the SSCPN recorded was $ and $
30
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2024 and March 31, 2024, the principal balances and fair values of the SSCPN were $.
The
warrants issued with the SSCPN were classified as derivative financial liabilities. The Company remeasured the Warrants at each balance
sheet date to fair value. On the Closing Date of Reverse Recapitalization, the Warrants were reclassified to equity-classified common
stock warrants. As a result, the Warrants were adjusted to fair value through Condensed Consolidated Statement Of Operations on reclassification
which resulted in a gain of $
The term and conditions of the SSCPN, warrants issued with SSCPNs, and placement agent warrants issued during the year ended March 31, 2024 was as follows:
Terms of SSCPN:
The
Notes carried a simple interest rate of
The Notes were convertible either automatically or voluntarily into Common Stock of the Company. Since the SPAC merger was consummated prior to the maturity date, it was converted via automatic conversion route. As per the terms of automatic conversion immediately prior to the closing of the SPAC Merger, the outstanding principal amount of this Note and all accrued and unpaid interest on this Note that has accrued as of the date have been automatically converted into a number of fully paid common stock at the conversion price as defined in the agreement.
Terms of Warrants issued with SSCPN :
The
warrants were exercisable from the completion of any event that results in the Company (or the surviving corporation) being subject to
the reporting requirements of the Exchange Act, and its (or the surviving corporation’s capital stock) capital stock trading on
a national securities exchange, OTC Markets or Pink Sheets (any of the foregoing, a “Public Event”). The warrants had an
expiry of
If the warrants were exercised prior to the automatic conversion of the SSCPN, the exercise price would have been a fixed amount, as defined in the agreement, divided by the number of shares of Common Stock outstanding on the date of Public Event. In case warrants were exercised concurrently with or following the automatic conversion of the SSCPN, exercise price is the amount equal to the conversion price.
In case of recapitalization of the Company, any consolidation or merger of the Company with another corporation, shall be effected in a way that holders of Common Stock shall be entitled to receive stock, securities, or other assets or property (an “Organic Change”), then, as a condition of such Organic Change, that the Company would made adequate provisions whereby the Holder hereof shall have the right to adjust number of shares receivable on such event according to the conversion price determined for issuance of shares to other common stockholders.
The Company's Warrants to purchase common stock were initially classified as a derivative liability ("Derivative financial instrument") which was then reclassified to equity on the Condensed Consolidated Balance Sheet for the year ended March 31, 2024.
Warrants to SSCPN placement agent:
The
placement agent was compensated with a cash fee and was also issued agent warrants to purchase
The terms of the warrants issued to the placement agents are similar to the warrants issued to the investors as mentioned above.
In accordance with ASC 815-40, the warrants issuable to Placement agent on satisfaction of above contingencies are considered as issued and are accounted accordingly. These were accounted as per ASC 480 as liability since the Company intended to settle them by issuing variable number of shares with a fixed and known monetary value at the time of inception. These warrants were classified as a derivative liability (“derivative financial instrument”) on the Condensed Consolidated Balance Sheet and were held at fair value till the date of Reverse Recapitalization. On date of Reverse Recapitalization, these warrants were reclassified to equity.
31
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 17 | Warrants issued to preferred stockholders |
As a result of the Reverse Recapitalization (see Note 3), the Company has retroactively adjusted the Zoomcar, Inc. warrants outstanding to give effect to the Exchange Ratio to determine the number of Company warrants that they were exchanged for.
Warrants to be converted into common stock:
The
total outstanding warrants to be converted into common stock was
The Company’s warrants to purchase common stock were classified as equity. Upon issuance of the warrant, the Company 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:
The
total outstanding warrants to be converted into preferred stock was
The Company’s warrants to purchase convertible preferred stock were classified as a liability and held at fair value because the warrants were exercisable for contingently redeemable preferred stock, which was classified outside of stockholders’ deficits. The convertible preferred stock warrant liability was subject to remeasurement at the end of each reporting period, and changes in the fair value of the warrant liability are reflected in the Company’s Condensed Consolidated Statement of Operations. See Note 32, Fair value measurements.
Refer Note 16 for details on warrants issued along with SSCPN.
| 17(a) | Warrants related to the Reverse Recapitalization |
Public warrants
Prior
to the Reverse Recapitalization, the SPAC issued Public Warrants. The Company’s Public Warrants were classified as equity instruments,
in accordance with ASC 815-40. On the Closing Date, there were
Private warrants
The
common stock, preferred stock and SSCPN warrants described above have been converted into private warrants of the Company at the
Exchange Ratio. Accordingly, the warrants holders received
| 17(b) | Warrants issued along with Redeemable Promissory Note |
The
Warrants issued along with the Redeemable Promissory Note are classified as equity instruments in accordance with ASC 815-40. As on June
30, 2024 and March 31, 2024,
Refer Note 14A for details on warrants issued along with Redeemable Promissory Note.
32
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 18 | Unsecured Convertible Note (‘Atalaya Note’) |
| Fair Value Outstanding | ||||||||
| (In USD) As at | June
30, 2024 | March
31, 2024 | ||||||
| Non current liability | ||||||||
| Atalaya Note | $ | $ | ||||||
| Total | ||||||||
| Fair Value Outstanding | ||||||||
| (In USD) As at | June
30, 2024 | March
31, 2024 | ||||||
| Current liability | ||||||||
| Atalaya Note | $ | $ | ||||||
| Total | ||||||||
The
unsecured convertible notes were issued to ACM Zoomcar Convert LLC (“Atalaya”) for making payment of $
The
Atalaya Note were initially recorded at the fair value of $
During
the three months ended June 30, 2024, a part liability was settled by issue of
As
of June 30, 2024 and March 31, 2024, the principal balance of the Atalaya Note was $
The Company is liable to pay liquidated damages to the note holders, owing to breach of certain conditions as prescribed by the agreement. However, there is no visibility on the amount of such damages, henceforth, no provision has been booked for the same.
33
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Terms of notes
In December
2023, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with ACM Zoomcar Convert
LLC (the “Purchaser” or “Atalaya”) relating to an unsecured convertible note (the ‘Atalaya Note’), obligations
under which after the Closing, a Convertible Note for $
The
Atalaya Note is subject to an original issue discount equal to
Commencing
at the end of the month in which Company’s Registration Statement, for registering the shares issued under Reverse Recapitalization,
is declared effective, the Purchaser may, in its sole discretion, require the Company to pay the Purchaser, in monthly installments of
amounts equal to one twelfth (1/12) of the Original Note Principal Amount, until the total principal amount of the Note has been paid
in full, prior to or on the maturity date or, if earlier, upon acceleration, conversion or prepayment of the Note in accordance with
its terms. Such monthly payments shall be made in cash or in shares of Common Stock, subject to certain further conditions set forth
in the Atalaya Note. In connection with any monthly payments made in Common Stock, the number of shares required to be delivered by the
Company shall be determined by dividing the monthly payment amount by the lower of (i) the Conversion Price or (ii) the Amortization
Conversion Price (each as defined below). The Note Purchaser shall also have the right, to convert all or any portion of the Atalaya
Note, at the Conversion Price, at the Amortization Conversion Price, up to an amount equal to
“Amortization
Conversion Price” means the lower of (i) the Conversion Price, and (ii) a
On May 22, 2024, the Company received a notice from Atalaya stating that the Company is in default of the terms of the Atalaya Note, since the Company has entered into an equity line arrangement with White Lion Capital LLC, a variable rate transaction, without the prior consent of Atalaya.
Further,
on June 25, 2024, the Company has received another notice of default from Atalaya as the Company has incurred indebtedness in the
form of $
As per the terms of the Atalaya Note, in the event of any default, all accrued but unpaid Interest plus liquidated damages and other amounts thereof, shall become immediately due and payable in cash. The Company is in discussion with Atalaya on this matter to settle the same and therefore has classified all the payment due to Atalaya as current liability.
Additionally,
during the year ended March 31, 2024,
34
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 19 | Other current liabilities |
| (In
USD) As at | June
30, 2024 | March
31, 2024 | ||||||
| Payable to renters | $ | $ | ||||||
| Statutory dues payable | ||||||||
| Capital creditors | ||||||||
| Employee benefit expenses payable | ||||||||
| Other liabilities* | ||||||||
| Other current liabilities | ||||||||
| * |
| 20 | Accumulated other comprehensive income/ (loss) |
| (In USD) As at |
June
30, 2024 |
March
31, 2024 |
||||||
| (Loss)/ Gain on employee benefit | ||||||||
| Balance, beginning of period | $ | $ | ||||||
| (Loss)/gain on employee benefit | ||||||||
| - Gratuity | ||||||||
| Recognized during the period, net of taxes amounts to $NIL | ( |
) | ( |
) | ||||
| Reclassification to net income: Amortization losses/(gains) | ( |
) | ( |
) | ||||
| Balance, end of period | ( |
) | ||||||
| Foreign currency translation adjustment | ||||||||
| Balance, beginning of period | $ | $ | ||||||
| Translation adjustments gain recognized during the period, net of taxes amounts to $NIL | ||||||||
| Balance, end of period | ||||||||
| Accumulated other comprehensive income | ||||||||
35
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 21 | Capital Stock |
Common stock capital
On December
28, 2023, the Company consummated a Business Combination which was accounted for as a Reverse Recapitalization (refer Note 3 for additional
information). The Company had
As a
result of the Reverse Recapitalization,
As on
the transaction Closing date, a)
The
Original Earnout Terms were modified pursuant to the terms and provisions set forth in the Post-Closing Amendment, effective immediately
upon the adoption of the Post- Closing Amendment on December 29, 2023 resulting in distribution of
The holders of the Common Stock are entitled to receive dividends out of funds legally available therefore at such times and in such amounts as the Board of Directors may determine in its sole discretion. In the event of liquidation, dissolution, distribution of assets or winding up of the Company, whether voluntary or involuntary, after the payment or provision for payment of all debts and liabilities of the Company and any and all preferential amounts to which the holders of the Preferred Stock are entitled with respect to the distribution of the net assets of the Company in liquidation, the holders of Common Stock shall be entitled to share ratably in the remaining net assets of the Company available for distribution.
36
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 22(a) | Preferred Stock |
| As at December 28, 2023 | ||||||||||||||||||||
| Authorized shares | Shares issued |
Conversion Ratio | Net carrying value | Liquidation preference | ||||||||||||||||
| Preferred Stock | ||||||||||||||||||||
| Series Seed | ||||||||||||||||||||
| Series A | ||||||||||||||||||||
| Series A2 | ||||||||||||||||||||
| Series B | ||||||||||||||||||||
| Series C | ||||||||||||||||||||
| Series D | ||||||||||||||||||||
| Series E | ||||||||||||||||||||
| Series E1 | ||||||||||||||||||||
| Total preferred stock | ||||||||||||||||||||
Upon the closing of the Reverse Recapitalization,
Upon
the consummation of the Business Combination by way of a Reverse Recapitalization, the Company is authorized to issue
| 22(b) | Redeemable non-controlling interests |
Series P1 and P2 Preferred stock represents the minority preferred stockholders ownership in the Indian subsidiary of the Company, which was classified as a redeemable non- controlling interest, because it was redeemable on a deemed liquidation event that was outside of its control. The redeemable non-controlling interest was not accreted to redemption value because then it was not probable that the non-controlling interest will become redeemable.
The Company did not attribute the pro rata share of the Indian subsidiary’s loss to the redeemable non-controlling interests because these shares were entitled to a liquidation preference and therefore did not participate in losses that would cause their interest to be below the liquidation preference. Upon liquidation, these preferred stocks were entitled to the greater of either (i) the Original issue price for such series plus any dividend declared but unpaid thereon, or (ii) such amount per share as would have been payable had all shares of such series been converted into common stock immediately prior to such liquidation, dissolution, winding up or deemed liquidation event.
There
was no further issue of preferred stock in the Indian subsidiary after initial issuance and on the close of the Reverse Recapitalization,
these Redeemable non-controlling interests have been converted into Common Stock of the Company at the Exchange Ratio of
37
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 23 | Revenue |
| (In USD) | June
30, 2024 | June
30, 2023 | ||||||
| Revenues from services | ||||||||
| Facilitation revenue (net) | $ | $ | ||||||
| Other operating revenues | ||||||||
| Total | ||||||||
| June 30, 2024 | June 30, 2023 | |||||||
| Revenue by geographical location | ||||||||
| India | $ | $ | ||||||
| Egypt | ||||||||
| Vietnam | ||||||||
| Indonesia | ||||||||
Contract balances
The
Company’s contract liabilities for consideration collected prior to satisfying the performance obligations is $
The
Company offers loyalty program, Z-Points, that results in the deferral of revenue equivalent to the retail value at the date the points
are earned. The Company had accumulated deferred revenue amounting to $
Revenue
recognized during the three months ended June 30, 2024 and June 30, 2023 respectively which was included in contract liabilities balance
at the beginning of the respective period is $
38
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 24 | Finance costs |
| (In USD) | June
30, 2024 | June
30, 2023 | ||||||
| Finance costs -other than related parties | ||||||||
| Interest on vehicle loans | $ | $ | ||||||
| Interest on finance leases | ||||||||
| Interest on subcontractor liability | ||||||||
| Change in fair value of convertible promissory note | ||||||||
| Interest on redeemable promissory notes | ||||||||
| Change in fair value of SSCPN | ||||||||
| Note issue expenses | ||||||||
| Change in fair value of derivative financial instrument | ||||||||
| Bank charges | ||||||||
| Other borrowings cost | ||||||||
| Total | ||||||||
| Finance costs -to related parties | ||||||||
| Interest on vehicle loans | $ | $ | ||||||
| Total | ||||||||
| 25 | Other (income) /expense, net |
| (In USD) | June
30, 2024 | June
30, 2023 | ||||||
| Other (income) /expense, net - other than related parties | ||||||||
| Interest income | $ | ( | ) | $ | ( | ) | ||
| Change in fair value of preferred stock warrant liability | ( | ) | ||||||
| Change in fair value of Atalaya Note | ( | ) | ||||||
| (Gain)/loss on sale of property, plant & equipment | ( | ) | ||||||
| (Gain)/loss on sale of assets held for sale | ( | ) | ||||||
| Loss on foreign currency remeasurements | ||||||||
| Loss on assets written off | ||||||||
| Other, net | ( | ) | ( | ) | ||||
| Total | ( | ) | ( | ) | ||||
| Other (income) - from related parties | ||||||||
| Interest income | $ | $ | ( | ) | ||||
| Total | ( | ) | ||||||
39
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 26 | Income taxes |
| (In USD) | June
30, 2024 | June
30, 2023 | ||||||
| Domestic | $ | ( | ) | |||||
| Foreign | ( | ) | ( | ) | ||||
| Income/(Loss) before income taxes | $ | ( | ) | ( | ) | |||
The
Company has computed income tax expense/(benefit) for the three months ended June 30, 2024 and June 30, 2023 by using a forecasted
annual effective tax rate and adjust for any discrete items arising during the period. The Company has recorded $ tax expense for
all of the periods. Our effective tax rate was
The Company files tax returns in the U.S. federal, various state, and foreign jurisdictions. In the normal course of business, the Company is subject to examination by tax authorities. Our major tax jurisdiction is in India. The Indian tax authority is currently examining our 2016 through 2022 tax returns.
As at June 30, 2024, tax returns for years ended March 31, 2020 and onward remain subject to examination by tax authorities in India. There are other ongoing audits in various other jurisdictions that are not material to our financial statements.
The Company has received various orders from Indian tax authorities, for details refer note 33.
40
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 27 | Net loss per share |
| (In USD, except loss per share) | June
30, 2024 | June
30, 2023 | ||||||
| Net loss available for common shareholders (A) | $ | ( | ) | $ | ( | ) | ||
| Weighted average outstanding shares of common stock (B) | ||||||||
| Common stock and common stock equivalents (C) | ||||||||
| Loss per share | ||||||||
| Basic (A/B) | $ | ( | ) | $ | ( | ) | ||
| Diluted (A/C) | $ | ( | ) | $ | ( | ) | ||
Since
the Company was in a loss position for the three months ended June 30, 2024 and June 30, 2023 basic loss per share was same as diluted
net loss per share for the periods presented.
| As at | June
30, 2024 | June
30, 2023 | ||||||
| Convertible preferred stock | ||||||||
| Preferred stock warrants | ||||||||
| Stock options | ||||||||
| SSCPN | ||||||||
| Public warrants | ||||||||
| Private warrants | ||||||||
| Derivative financial instruments | ||||||||
| Total | ||||||||
| 28 | Employee benefit plans (unfunded) |
Employee benefit plans includes gratuity and compensated absences payable to employees. These benefit plans consist a defined benefit plan for gratuity payable by the Indian subsidiary of the Company under Indian regulations. These are determined under the projected unit credit method, with actuarial valuations being carried out at each reporting date. The retirement benefit obligations recognized in the Condensed Consolidated Balance Sheet represents the present value of the defined obligations. Under an employee benefit plan, it is the Company’s obligation to provide agreed benefits to the employees. The related actuarial and investment risks fall on the Company. The summary of current and non-current employee benefit plans obligations along with its components are as below:
Pension and other employee obligations
| As at | June
30, 2024 | March
31, 2024 | ||||||
| Current | ||||||||
| Gratuity | $ | $ | ||||||
| Compensated absences | ||||||||
| Non current | ||||||||
| Gratuity | ||||||||
| Compensated absences | ||||||||
| Other statutory dues | ||||||||
41
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| I. | Gratuity |
| June 30, 2024 | June 30, 2023 | |||||||
| Changes in projected benefit obligation (PBO) | ||||||||
| PBO at the beginning of the year | $ | $ | ||||||
| Service cost | ||||||||
| Interest cost | ||||||||
| Actuarial loss/ (gain) | ||||||||
| Benefits paid | ( | ) | ( | ) | ||||
| Effect of exchange rate changes | ( | ) | ||||||
| PBO at the end of the period | ||||||||
| Accrued pension liability | ||||||||
| Current liability | $ | $ | ||||||
| Non-current liability | ||||||||
| Accumulated benefit obligation | ||||||||
Net gratuity cost recognized in income statement
| June
30, 2024 | June
30, 2023 | |||||||
| Service cost | $ | $ | ||||||
| Interest cost | ||||||||
| Amortization of net actuarial (gains)/loss | ( | ) | ( | ) | ||||
| Net periodic benefit cost | ||||||||
Re-measurement (gains) / losses in other comprehensive income
| June
30, 2024 | June
30, 2023 | |||||||
| Actuarial (gain)/loss | $ | $ | ||||||
| Amortization loss | ( | ) | ( | ) | ||||
| Total | ||||||||
42
ZOOMCAR HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Components of actuarial gain:
| June
30, 2024 | June
30, 2023 | |||||||
| Actuarial (gain)/loss due to demographic assumption changes in defined benefit obligation | $ | ( | ) | $ | ||||
| Actuarial (gain)/ loss due to financial assumption changes in defined benefit obligation | ( | ) | ||||||
| Actuarial (gain)/loss due to experience on defined benefit obligation | ||||||||
| Total | ||||||||
| June
30, 2024 | June
30, 2023 | |||||||
| Discount rate - staff | % | % | ||||||
| Discount rate - independent service provider* | % | % | ||||||
| Attrition rate - staff | % | % | ||||||
| Attrition rate - independent service provider* | % | % | ||||||
| Rate of increase in compensation levels - staff | % | % | ||||||
| Rate of increase in compensation levels - independent service provider* | % | % | ||||||
| * |
During the period ended June 30, 2024 and June 30, 2023, actuarial gain was driven by changes in actuarial assumptions, offset by experience adjustments on present value of benefit obligations.
The Company evaluates these assumptions annually based on its long-term plans of growth and industry standards. The discount rates are based on current market yields on government securities adjusted for a suitable risk premium.
| Three months ending June 30, | ||||
| 2025 (July 1, 2024 till March 31, 2025) | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total | ||||
43