{"url_path":"/sec/zcar/10-k/2026/item-8","section_key":"item-8","section_title":"Item 8 Financial Statements and Supplementary Data**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-07-14","source_url":"https://www.sec.gov/Archives/edgar/data/1854275/0001213900-26-078029-index.html","accession_number":"0001213900-26-078029","cik":"0001854275","ticker":"ZCAR","issuer_name":"Zoomcar Holdings, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1854275/0001213900-26-078029-index.html","primary_entity_key":"0001854275","primary_entity_name":"Zoomcar Holdings, Inc."},"word_count":25532,"has_tables":true,"body_markdown":"**Item\n8. Financial Statements and Supplementary Data**\n\n** **\n\n**ZOOMCAR HOLDINGS, INC.**\n\n**INDEX TO CONSOLIDATED FINANCIAL\nSTATEMENTS**\n\n** **\n\n**Report\nof Independent Registered Public Accounting Firm (Bansal & Co. LLP, PCAOB ID: 2807)**\n \nF-2\n\n**Consolidated Balance Sheets as of March 31, 2026 and 2025**\n \nF-4\n\n**Consolidated Statements of Operations for the years ended March 31, 2026 and 2025**\n \nF-5\n\n**Consolidated\nStatements of Comprehensive Income/(Loss) for the years ended March 31, 2026 and 2025**\n \nF-6\n\n**Consolidated Statements of Redeemable Non-Controlling Interests, Mezzanine Equity and Stockholders Equity for the years ended March 31, 2026 and 2025**\n \nF-7\n\n**Consolidated Statements of Cash Flows for the years ended March 31, 2026 and 2025**\n \nF-8\n\n**Notes to Consolidated Financial Statements**\n \nF-9\n\n \n\nF-1\n\n  \n\n**REPORT\nOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**\n\n \n\nTo the Board of Directors and Stockholders\n\nZoomcar Holdings, Inc.\n\n \n\nOpinion on the Consolidated Financial Statements\n\n \n\nWe have audited the accompanying consolidated\nbalance sheet of Zoomcar Holdings, Inc. and subsidiaries (the “Company”) as of March 31, 2026, the related consolidated statements\nof operations, comprehensive loss, stockholders’ deficit, and cash flows for the year ended March 31, 2026, and the related notes\n(collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements\npresent fairly, in all material respects, the financial position of the Company as of March 31, 2026 and the results of its operations\nand its cash flows for the year ended March 31, 2026, in conformity with accounting principles generally accepted in the United States\nof America.\n\n \n\nThe consolidated financial statements of the Company\nas of and for the year ended March 31, 2025 were audited by another auditor, whose report dated June 30, 2025 expressed an unqualified\nopinion on those statements.\n\n \n\nGoing Concern\n\n \n\nThe accompanying consolidated financial statements\nhave been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements,\nthe Company incurred a net loss of $14,621,113 during the year ended March 31, 2026 (a net loss of $25,622,303 for the year ended March\n31, 2025), had net cash used in operating activities of $1,359,300 for the year ended March 31, 2026 ($8,525,164 for the year ended March\n31, 2025), and as of March 31, 2026 had an accumulated deficit of $347,794,918 ($333,173,805 as of March 31, 2025) and negative working\ncapital of $36,275,897 ($26,496,105 as of March 31, 2025). In addition, as disclosed in Note 1, the Company’s cash position is critically\ndeficient and certain payments to operational and financial creditors are not being made in the ordinary course of business. These conditions,\nalong with other matters as set forth in Note 1, raise substantial doubt about the Company’s ability to continue as a going concern.\nManagement’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include\nany adjustments that might result from the outcome of this uncertainty.\n\n \n\nBasis for Opinion\n\n \n\nThese consolidated financial statements are the\nresponsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial\nstatements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)\n(“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws\nand the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.\n\n \n\nWe conducted our audit in accordance with the\nstandards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated\nfinancial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we\nengaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding\nof internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s\ninternal control over financial reporting. Accordingly, we express no such opinion.\n\n \n\nF-2\n\n \n\nOur audit included performing procedures to assess\nthe risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures\nthat respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the\nconsolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by\nmanagement, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides\na reasonable basis for our opinion.\n\n \n\nCritical Audit Matters\n\n \n\nThe critical audit matter communicated below is\na matter arising from the current-period audit of the consolidated financial statements that was communicated or required to be communicated\nto the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and\n(2) involved our especially challenging, subjective, or complex judgment. The communication of a critical audit matter does not alter\nin any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit\nmatter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.\n\n \n\n**Description\nof the critical audit matter**\n \n**Principal\nconsiderations for the determination**\n \n**How\nthe matter was addressed in the audit**\n\n**Share-settled\nlitigation settlement (Series E / Reimer settlement)**\n\n** **\n\nAs\ndescribed in Notes 22, the Company was subject to litigation by holders of Series E warrants (Reimer Family Partnership, L.P. and\nothers) concerning the non-delivery of shares on exercise. Following a temporary restraining order, on May 1, 2026 the Company entered\ninto a settlement under which it is obligated to issue 39,000,000 shares of common stock in January 2027 and a proceeds true-up that\nmay require the Company to deliver additional shares or cash if the plaintiffs’ sale proceeds fall below a guaranteed amount.\nThe Company concluded the settlement is a recognized (Type I) subsequent event under ASC 855 and recognized a charge of $5,288,395\nwithin loss on litigation settlement, representing the fair value of the settlement obligation, which reflects both the value of\nthe shares to be issued and the value of the downside price protection, with a corresponding share-settled obligation.\n\n \nAuditing\nthe measurement of this obligation involved especially subjective and complex judgment. The measurement is sensitive to the Company’s\nshare price, to the measurement date used, and to the valuation of the downside true-up payment; where measured at fair value it\nis a Level 3 measurement. Because the settlement was reached after the balance-sheet date, significant judgment was required over\nthe date and the inputs at which a recognized subsequent event is measured for the March 31, 2026 financial statements, and over\nthe classification of the obligation as a liability or within equity.\n \n\nOur\nprocedures included, among others:\n\n \n\n–   examining the settlement agreement, the related court orders and management’s accounting treatment, and evaluating whether\nthe settlement was a recognized subsequent event under ASC 855;\n\n–   evaluating the measurement date and the inputs used for the March 31, 2026 balance sheet, including the share price and the treatment\nof the true-up, and the classification of the obligation;\n\n– evaluating the methodology and the significant assumptions used in the valuation of the share-settled obligation; and\n\n–  evaluating the adequacy of the related disclosures.\n\n \n\n*For* Bansal & Co LLP\n\nPCAOB Firm ID : 2807\n\nWe have served as the Company’s auditor since 2025.\n\n \n\nSurinder K Bansal\n\nPartner\n\nICAI Membership No: 014301\n\n \n\nNew Delhi, India\n\n14 July 2026\n\n \n\nF-3\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**CONSOLIDATED BALANCE SHEETS**\n\n \n\n(in USD, except number of shares) \nMarch 31,  \nMarch 31, \n\nAs at \n2026  \n2025 \n\nAssets \n   \n  \n\nCurrent assets : \n   \n  \n\nCash and cash equivalents \n$328,586  \n$1,077,275 \n\nAccounts receivable, net of allowance for credit losses \n 100,167  \n 200,650 \n\nAssets held for sale \n \n-\n  \n 267,293 \n\nPrepaid expenses \n 727,763  \n 1,020,170 \n\nBalances with government authorities \n \n-\n  \n 187,458 \n\nOther current assets \n 103,573  \n 261,200 \n\nTotal current assets \n$1,260,089  \n$3,014,046 \n\nProperty and equipment, net of accumulated depreciation $720,261 and $2,855,236 respectively \n 153,495  \n 327,124 \n\nOperating lease right-of-use assets \n 739,652  \n 1,021,898 \n\nIntangible assets, net of accumulated amortisation of $12,859 and $10,941 respectively \n 1,987  \n 5,451 \n\nLong term investments \n 21,066  \n 25,653 \n\nPrepaid expenses \n 189,694  \n 257,385 \n\nOther non-current assets, net of allowance for credit losses \n 838,124  \n 705,767 \n\nTotal assets \n$3,204,107  \n$5,357,324 \n\n  \n    \n   \n\nLiabilities and stockholders’ deficit \n    \n   \n\nCurrent liabilities : \n    \n   \n\nAccounts payable \n$22,484,767  \n$12,396,147 \n\nAccounts payable towards related parties \n 152,435  \n 152,435 \n\nCurrent maturities of long-term debt \n 2,511,444  \n 2,851,341 \n\nCurrent portion of long-term debt from related parties \n    \n \n-\n \n\nCurrent portion of operating lease liabilities \n 225,655  \n 316,756 \n\nFinance lease liabilities \n 2,058,281  \n 3,966,962 \n\nContract liabilities \n 515,854  \n 471,720 \n\nCurrent portion of pension and other employee obligations \n 177,539  \n 152,872 \n\nUnsecured notes \n 811,178  \n \n-\n \n\nConvertible Redeemable note \n 451,348  \n \n-\n \n\nUnsecured convertible note \n 6,554,074  \n 6,002,269 \n\nOther current liabilities (Refer Note 28- VIE) \n 1,593,411  \n 3,199,649 \n\nTotal current liabilities \n$37,535,986  \n$29,510,151 \n\nOperating lease liabilities, less current portion \n 601,759  \n 801,981 \n\nPension and other employee obligations, less current portion \n 370,429  \n 394,030 \n\nTotal liabilities \n$38,508,174  \n$30,706,162 \n\nCommitments and contingencies (Note 30) \n \n \n  \n \n \n \n\nStockholders’ deficit: \n    \n   \n\nCommon stock, $0.0001 par value per share, 250,000,000 shares authorized as of March 31, 2026 and March 31, 2025; 7,433,991 shares and 2,462,418 shares issued and outstanding as of March 31, 2026 and March 31, 2025 respectively \n 743  \n 246 \n\nShares pending issuance \n 166,538  \n \n-\n \n\nAdditional paid-in capital \n 309,926,705  \n 305,693,199 \n\nAccumulated deficit \n (347,794,918) \n (333,173,805)\n\nAccumulated other comprehensive income \n 2,396,865  \n 2,131,522 \n\n  \n    \n   \n\nTotal stockholders’ deficit \n$(35,304,067) \n$(25,348,838)\n\n  \n    \n   \n\nTotal liabilities and stockholders’ deficit \n$3,204,107  \n$5,357,324 \n\n \n\nThe accompanying notes are an integral part of these Consolidated Balance\nSheets.\n\n \n\nF-4\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**CONSOLIDATED STATEMENTS OF OPERATIONS**\n\n \n\n(In\nUSD, except number of shares) \nYear ended March 31, \n\n  \n2026  \n2025 \n\nRevenue : \n   \n  \n\nRevenues from services \n**$**9,072,184  \n**$**9,024,576 \n\nOther revenues \n** **83,841  \n** **81,315 \n\nTotal revenue \n**$**9,156,025  \n**$**9,105,891 \n\nCost and Expenses \n** **   \n** **  \n\nCost of revenue \n** **4,428,965  \n** **5,296,841 \n\nTechnology and development \n** **2,655,570  \n** **2,965,631 \n\nSales and marketing \n** **657,032  \n** **1,466,047 \n\nGeneral and administrative \n** **8,182,041  \n** **9,778,371 \n\nTotal costs and expenses \n**$**15,923,608  \n**$**19,506,890 \n\nLoss from operations before income tax \n** **(6,767,583) \n** **(10,400,999)\n\nFinance costs \n** **3,183,148  \n** **8,607,173 \n\nGain on troubled debt restructuring \n** **(72,912) \n** **(1,171,161)\n\nOther (income)/expense, net \n** **4,743,294  \n** **7,785,292 \n\nLoss before income taxes \n**$**(14,621,113) \n**$**(25,622,303)\n\nProvision for income taxes \n** **\n-\n  \n** **\n-\n \n\n  \n** **   \n** **  \n\nNet loss attributable to common stockholders \n**$**(14,621,113) \n**$**(25,622,303)\n\n  \n** **   \n** **  \n\nNet loss per share * \n** **   \n** **  \n\nBasic \n**$**(1.28) \n**$**(52.28)\n\nDiluted \n**$**(1.28) \n**$**(52.28)\n\nWeighted average shares used in computing loss per share: * \n** **   \n** **  \n\nBasic \n** **11,451,192  \n** **490,140 \n\nDiluted \n** **11,451,192  \n** **490,140 \n\n \n\n*Prior period numbers have been adjusted to reflect the First\nReverse Stock Split and the Second Reverse Stock Split of the Common Stock at a ratio of 1-for-100 and 1-for-20 respectively. (Refer\nNote 3A)\n\n \n\nThe accompanying notes are an integral part of these Consolidated Statements of Operations.\n\n \n\n*(This space has been left intentionally blank)*\n\n \n\nF-5\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**CONSOLIDATED STATEMENTS OF COMPREHENSIVE\nLOSS**\n\n \n\n(In USD, except number of shares) \nYear ended March, 31 \n\n  \n2026  \n2025 \n\nNet loss \n$(14,621,113) \n$(25,622,303)\n\n  \n    \n   \n\nOther comprehensive income/(loss), net of tax: \n    \n   \n\nForeign currency translation adjustment \n 1,605,278  \n 399,817 \n\nGain/ (Loss) for defined benefit plan \n (51,788) \n (57,663)\n\n  \n    \n   \n\nReclassification adjustments: \n    \n   \n\nAmortization of gains/(loss) on defined benefit plan \n 5,570  \n (6,624)\n\n  \n    \n   \n\nOther comprehensive loss attributable to common stockholders \n$1,559,060  \n$335,530 \n\nComprehensive loss \n$(13,062,053) \n$(25,286,773)\n\n \n\nThe accompanying notes are an integral part of these Consolidated Statements of Comprehensive Loss\n\n \n\n*(This space has been left intentionally blank)*\n\n \n\nF-6\n\n \n\n**ZOOMCAR HOLDINGS, INC.\nCONSOLIDATED\nSTATEMENTS OF STOCKHOLDERS’ DEFICIT**\n\n**FOR THE YEAR ENDED MARCH\n31, 2026 AND 2025**\n\n \n\n(In USD, except number of shares) \n   \n  \n\n  \nShares pending issuance  \nZoomcar Holdings, Inc. \n\n  \nAmounts  \nShares  \nAmounts  \nAdditional paid-in capital  \nAccumulated deficit  \nAccumulated other comprehensive income/(loss)  \nTotal equity (deficit) \n\nBalance as at April 01, 2024 \n$\n-\n  \n 63,185,881  \n$6,319  \n$272,057,003  \n$(307,551,502) \n$1,795,992  \n$(33,692,188)\n\nRetroactive application of First Reverse Stock Split ** \n \n-\n  \n (62,553,508) \n (6,256) \n 6,256  \n \n-\n  \n \n-\n  \n \n-\n \n\nRetroactive application of Second Reverse Stock Split ** \n \n-\n  \n (600,213) \n (60) \n 60  \n \n-\n  \n \n-\n  \n \n-\n \n\nBalance as at April 01, 2024 \n \n-\n  \n 32,160  \n 3  \n 272,063,319  \n (307,551,502) \n 1,795,992  \n (33,692,188)\n\nStock based compensation \n -  \n -  \n \n-\n  \n 52,461  \n \n-\n  \n \n-\n  \n 52,461 \n\nIssue of common stock against Atalaya note \n -  \n 6,257  \n 1  \n 2,324,695  \n \n-\n  \n \n-\n  \n 2,324,696 \n\nIssue of common stock warrants along with redeemable promissory notes \n -  \n -  \n \n-\n  \n 2,047,925  \n \n-\n  \n \n-\n  \n 2,047,925 \n\nIssue of common stock warrants to placement agents against Redeemable Promissory Note \n -  \n -  \n \n-\n  \n 418,157  \n \n-\n  \n \n-\n  \n 418,157 \n\nIssuance of common stock upon conversion of unsecured promissory note to related party \n -  \n 338  \n \n-\n  \n 2,027,840  \n \n-\n  \n \n-\n  \n 2,027,840 \n\nIssue of common stock upon exercise of warrants along with redeemable promissory notes \n -  \n 46,527  \n 5  \n (5) \n \n-\n  \n \n-\n  \n \n-\n \n\nIssue of common stock and warrants on fund raise*** \n \n-\n  \n 250,429  \n 25  \n 2,568,530  \n \n-\n  \n \n-\n  \n 2,568,555 \n\nIssue of common stock and warrants on settlement*** \n \n-\n  \n 523,317  \n 52  \n 16,158,761  \n \n-\n  \n \n-\n  \n 16,158,813 \n\nIssue of common stock warrants to placement agents \n -  \n -  \n \n-\n  \n 48,405  \n \n-\n  \n \n-\n  \n 48,405 \n\nIssuance costs towards common stock and warrants \n -  \n -  \n \n-\n  \n (616,440) \n \n-\n  \n \n-\n  \n (616,440)\n\nIssue of common stock upon exercise of warrants*** \n \n-\n  \n 1,521,097  \n 152  \n 232,909  \n \n-\n  \n \n-\n  \n 233,061 \n\nReclassification of debt to equity \n -  \n -  \n \n-\n  \n 8,366,650  \n \n-\n  \n \n-\n  \n 8,366,650 \n\nReverse stock split rounding adjustment \n -  \n 82,293  \n 8  \n (8) \n \n-\n  \n \n-\n  \n \n-\n \n\nGain on employee benefit, (net of taxes amounts to $NIL) \n -  \n -  \n \n-\n  \n \n-\n  \n \n-\n  \n (64,287) \n (64,287)\n\nNet loss \n -  \n -  \n \n-\n  \n \n-\n  \n (25,622,303) \n \n-\n  \n (25,622,303)\n\nForeign currency translation adjustment, (net of taxes amounts to $NIL) \n -  \n -  \n \n-\n  \n \n-\n  \n \n-\n  \n 399,817  \n 399,817 \n\nBalance as at March 31, 2025 \n \n-\n  \n 2,462,418  \n 246  \n 305,693,199  \n (333,173,805) \n 2,131,522  \n (25,348,838)\n\n  \n    \n    \n    \n    \n    \n    \n   \n\nBalance as at April 01, 2025 \n \n-\n  \n 2,462,418  \n 246  \n 305,693,199  \n (333,173,805) \n 2,131,522  \n (25,348,838)\n\nIssue of common stock* \n \n-\n  \n 6,340,619  \n 634  \n (596) \n \n-\n  \n \n-\n  \n 38 \n\nIssue of prefunded warrants in exchange of common stock* \n \n-\n  \n (2,400,310) \n (240) \n 240  \n \n-\n  \n \n-\n  \n \n-\n \n\nIssue of prefunded warrants * \n \n-\n  \n -  \n \n-\n  \n 2,931,457  \n \n-\n  \n \n-\n  \n 2,931,457 \n\nIssue of common stock warrants \n -  \n -  \n \n-\n  \n 939  \n \n-\n  \n \n-\n  \n 939 \n\nWarrants pending issuance in lieu of placement agent fees \n -  \n -  \n \n-\n  \n 14,139  \n \n-\n  \n \n-\n  \n 14,139 \n\nGain on employee benefit, (net of taxes amounts to $NIL) \n -  \n -  \n \n-\n  \n \n-\n  \n \n-\n  \n (46,218) \n (46,218)\n\nNet loss \n -  \n -  \n \n-\n  \n \n-\n  \n (14,621,113) \n \n-\n  \n (14,621,113)\n\nShares issued under employee stock plans*** \n \n-\n  \n 1,032,648  \n 103  \n 427,397  \n \n-\n  \n \n-\n  \n 427,500 \n\nStock based compensation*** \n 142,500  \n \n-\n  \n \n-\n  \n 883,968  \n \n-\n  \n \n-\n  \n 1,026,468 \n\nTransfer of vested RSU to shares pending issuance \n 24,038  \n -  \n \n-\n  \n (24,038) \n \n-\n  \n \n-\n  \n \n-\n \n\nTranslation adjustment on derecognition of subsidiary \n -  \n -  \n \n-\n  \n \n-\n  \n \n-\n  \n (1,293,717) \n (1,293,717)\n\nShares cancelled^ \n -  \n (1,384) \n (0) \n 0  \n \n-\n  \n \n-\n  \n \n-\n \n\nForeign currency translation adjustment, (net of taxes amounts to $NIL) \n -  \n -  \n \n-\n  \n \n-\n  \n \n-\n  \n 1,605,278  \n 1,605,278 \n\nBalance as at March 31, 2026 \n$166,538  \n 7,433,991  \n$743  \n$309,926,705  \n$(347,794,918) \n$2,396,865  \n$(35,304,067)\n\n \n\n*Refer Note 19 for the details of the common stock and warrants\nissued and exercised during the year.\n\n**Prior period numbers have been adjusted to reflect the First\nReverse Stock Split and the Second Reverse Stock Split of the Common Stock at a ratio of 1-for-100 and 1-for-20 respectively. (Refer\nNote 3A)\n\n***Includes cost recorded towards restricted shares granted\nto CEO and RSU granted to directors/employees of the Company\n\n^The amount of Common stock presented as zero represents decimal\nvalue less than $1.\n\n \n\nThe accompanying notes are an integral part of these Consolidated\nStatements of Stockholders’ Deficit\n\n \n\nF-7\n\n \n\n**ZOOMCAR HOLDINGS, INC.\nCONSOLIDATED STATEMENTS OF CASH FLOWS**\n\n \n\nYear ended\n \nMarch 31, 2026\n \n \nMarch 31, 2025\n \n\nA. Cash flows from operating activities\n \n \n \n \n \n \n \n \n\nNet loss\n \n$\n(14,621,113\n)\n \n$\n(25,622,303\n)\n\nAdjustments to reconcile net loss to net cash used in operating activities :\n \n \n \n \n \n \n \n \n\nDepreciation and amortization\n \n \n91,766\n \n \n \n433,906\n \n\nInterest on redeemable promissory note\n \n \n\n-\n\n \n \n \n1,995,967\n \n\nAmortisation of discount and debt issuance cost on redeemable promissory notes\n \n \n\n-\n\n \n \n \n1,765,615\n \n\nInterest on unsecured loans\n \n \n229,582\n \n \n \n\n-\n\n \n\nInterest on Convertible notes\n \n \n56,849\n \n \n \n\n-\n\n \n\nInterest on finance leases\n \n \n279,710\n \n \n \n550,903\n \n\nLoss on modification of finance leases\n \n \n\n-\n\n \n \n \n456,714\n \n\nChange in fair value of Unsecured Convertible Note\n \n \n539,805\n \n \n \n(1,740,636\n)\n\nChange in fair value of derivative financial instruments\n \n \n\n-\n\n \n \n \n(9,035,085\n)\n\nIssuance cost towards issue of warrants\n \n \n\n-\n\n \n \n \n3,294,526\n \n\nGain on sale and disposal of assets, net\n \n \n2,188\n \n \n \n(114\n)\n\nGain on sale and disposal of assets held for sale, net\n \n \n(10,755\n)\n \n \n(1,054\n)\n\nGain on derecognition of subsidiary, net\n \n \n(1,748,507\n)\n \n \n\n-\n\n \n\nStock based compensation\n \n \n1,453,968\n \n \n \n52,461\n \n\nAssets written off\n \n \n110,720\n \n \n \n853,194\n \n\nLiabilities written off\n \n \n(1,272,825\n)\n \n \n(219,284\n)\n\nPayable to customers and provision written back\n \n \n(102,815\n)\n \n \n(227,643\n)\n\nGain on recovery of goods and service tax receivable\n \n \n(439,204\n)\n \n \n\n-\n\n \n\nInterest on subcontractor liability\n \n \n-\n \n \n \n91,891\n \n\nLiquidated damages\n \n \n2,568,936\n \n \n \n570,893\n \n\nBad debts against receivables from car sale\n \n \n\n-\n\n \n \n \n452,014\n \n\nLoss on extinguishment of liability\n \n \n\n-\n\n \n \n \n3,458,248\n \n\nGain on troubled debt restructuring\n \n \n(72,912\n)\n \n \n(1,171,161\n)\n\nImpairment on assets held for sale\n \n \n23,789\n \n \n \n448,484\n \n\nHost receivable written off\n \n \n54,955\n \n \n \n202,944\n \n\nLoss on litigation settlement\n \n \n5,300,395\n \n \n \n12,738,865\n \n\nLoss on settlement\n \n \n42,558\n \n \n \n\n-\n\n \n\nUnrealized foreign currency exchange loss, net\n \n \n15,169\n \n \n \n2,137\n \n\nLoss on withdrawal of lease waiver\n \n \n1,131,835\n \n \n \n\n-\n\n \n\n \n \n$\n(6,365,906\n)\n \n$\n(10,648,518\n)\n\nChanges in operating assets and liabilities :\n \n \n \n \n \n \n \n \n\nDecrease/(Increase) in accounts receivable\n \n \n87,101\n \n \n \n(13,668\n)\n\nDecrease in balances with government authorities\n \n \n620,522\n \n \n \n200,769\n \n\nDecrease in prepaid expenses\n \n \n350,283\n \n \n \n481,521\n \n\n(Increase) in other assets\n \n \n(65,058\n)\n \n \n(230,295\n)\n\nIncrease in accounts payables\n \n \n3,498,750\n \n \n \n1,551,898\n \n\nIncrease in other liabilities\n \n \n410,724\n \n \n \n615,550\n \n\nIncrease/(Decrease) in pension and other employee obligations\n \n \n9,567\n \n \n \n(267,854\n)\n\nDecrease in operating lease right of use asset\n \n \n198,490\n \n \n \n239,335\n \n\n(Decrease) in operating lease liabilities\n \n \n(198,429\n)\n \n \n(224,868\n)\n\nIncrease/(Decrease) in contract liabilities\n \n \n94,656\n \n \n \n(229,034\n)\n\nNet cash used in operating activities (A)\n \n$\n(1,359,300\n)\n \n$\n(8,525,164\n)\n\n \n \n \n \n \n \n \n \n \n\nB. Cash flows from investing activities\n \n \n \n \n \n \n \n \n\nPayment for purchase of property and equipment, including intangible assets\n \n \n(4,748\n)\n \n \n(12,012\n)\n\nProceeds from sale of asset held for sale\n \n \n17,333\n \n \n \n144,538\n \n\n(Investments in) / proceeds from fixed deposits\n \n \n(1,545\n)\n \n \n359,614\n \n\nNet cash generated from investing activities (B)\n \n$\n11,040\n \n \n$\n492,140\n \n\n \n \n \n \n \n \n \n \n \n\nC. Cash flows from financing activities\n \n \n \n \n \n \n \n \n\nProceeds from issue of equity and warrants (including prepayment of exercise price on pre funded warrants)\n \n \n\n-\n\n \n \n \n16,073,284\n \n\nPayment of issuance cost towards issue of common stock and warrants\n \n \n\n-\n\n \n \n \n(2,370,799\n)\n\nProceeds from issue of redeemable promissory notes\n \n \n\n-\n\n \n \n \n3,000,000\n \n\nPayment of redeemable promissory note issue expenses\n \n \n\n-\n\n \n \n \n(491,500\n)\n\nRepayment of redeemable promissory note\n \n \n\n-\n\n \n \n \n(3,804,000\n)\n\nProceeds from Unsecured notes\n \n \n1,275,000\n \n \n \n\n-\n\n \n\nPayment of Unsecured notes issuance cost\n \n \n(97,000\n)\n \n \n\n-\n\n \n\nRepayment of Unsecured notes\n \n \n(596,401\n)\n \n \n\n-\n\n \n\nProceeds from Convertible notes\n \n \n409,500\n \n \n \n\n-\n\n \n\nPayment of Convertible notes issuance cost\n \n \n(15,000\n)\n \n \n\n-\n\n \n\nProceeds from issue of debt\n \n \n595,520\n \n \n \n1,069,500\n \n\nPrincipal repayment of debt\n \n \n(674,038\n)\n \n \n(3,104,032\n)\n\nPrincipal payment of finance lease obligation\n \n \n(289,228\n)\n \n \n(2,654,122\n)\n\nNet cash generated from financing activities (C)\n \n$\n608,353\n \n \n$\n7,718,331\n \n\n \n \n \n \n \n \n \n \n \n\nNet decrease in cash and cash\nequivalents and restricted cash (A+B+C)\n \n \n(739,907\n)\n \n \n(314,693\n)\n\nEffect of foreign exchange on cash and cash equivalents.\n \n \n(103,008\n)\n \n \n(9,414\n)\n\nCash and cash equivalents and restricted cash\n \n \n \n \n \n \n \n \n\nCash and cash equivalents at the beginning of period\n \n \n1,077,275\n \n \n \n1,496,144\n \n\nRestricted cash included under other non-current assets at the beginning of period\n \n \n94,762\n \n \n \n\n-\n\n \n\nCash and cash equivalents derecognized due to derecognition of subsidiary\n \n \n(536\n)\n \n \n\n-\n\n \n\nEnd of period\n \n$\n328,586\n \n \n$\n1,172,037\n \n\n \n \n \n \n \n \n \n \n \n\n**Reconciliation of cash, cash equivalents and restricted cash to the Consolidated Balance Sheets**\n \n \n \n \n \n \n \n \n\nCash and cash equivalents\n \n \n328,586\n \n \n \n1,077,275\n \n\nRestricted cash and cash equivalents included under other non-current assets\n \n \n\n-\n\n \n \n \n94,762\n \n\nTotal cash and cash equivalents and restricted cash shown in Consolidated Statement of Cash Flows\n \n$\n328,586\n \n \n$\n1,172,037\n \n\n \n \n \n \n \n \n \n \n \n\nSupplemental disclosures of cash flow information \n   \n  \n\nCash paid for income taxes \n \n-\n  \n (4,052)\n\nInterest paid on debt \n (190,802) \n (307,354)\n\n  \n    \n   \n\nSupplemental disclosures of non-cash investing and financing activities: \n    \n   \n\nIssue of Common stock upon conversion of unsecured convertible Note \n \n-\n  \n 2,324,696 \n\nIssue of Common Stock and warrants \n \n-\n  \n 16,158,811 \n\nReclassification of warrants from liability to equity \n \n-\n  \n 8,366,650 \n\nIssue of Common Stock upon cashless exercise of warrants \n \n-\n  \n 92,791 \n\nIssue of warrants to redeemable promissory note holders \n \n-\n  \n 2,047,925 \n\nIssue of common stock upon exercise of warrants issued with redeemable promissory notes \n \n-\n  \n 5 \n\nConversion of unsecured promissory note into equity (shares pending issuance) \n \n-\n  \n 2,027,840 \n\nWarrants issued to placement agents towards issue of redeemable promissory notes \n \n-\n  \n 418,157 \n\nWarrants issued to placement agents \n \n-\n  \n 1,540,167 \n\nAcquisition of assets held for sale by incurring a liability \n \n-\n  \n 238,689 \n\nIssue of common stock upon exercise of warrants \n 634  \n \n-\n \n\nIssue of prefunded warrants in exchange of common stock \n 240  \n \n-\n \n\nIssue of prefunded warrants in lieu of liquidated damages payable \n 2,931,457  \n \n-\n \n\nWarrants pending issuance in lieu of placement agent fees \n 14,139  \n \n-\n \n\n \n\nThe accompanying notes are an integral part of these Consolidated Statements of Cash Flows\n\n \n\n(This space has been left intentionally blank)\n\n \n\nF-8\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\n1.Organization, Business operation and Going concern\n\n** **\n\nZoomcar Holdings, Inc. *(formerly\n“Innovative International Acquisition Corp”)*a Delaware corporation provides mobility solutions to consumers and\nbusinesses. The accompanying Consolidated Financial Statements include the accounts and transactions of Zoomcar Holdings, Inc. and its\nsubsidiaries (collectively, the “Company” or “the combined entity” or “Zoomcar”). The Company operates\nits facilitation services under the Zoomcar brand with its operations in India.\n\n \n\nGoing concern\n\n \n\nThe accompanying Consolidated Financial Statements have been prepared\nin accordance with U.S. GAAP and the rules and regulations of the SEC. The Consolidated Financial Statements have been prepared using\nU.S. GAAP applicable to a going concern that contemplates the realization of assets and settlement of liabilities in the normal course\nof business. The Company incurred a net loss of $14,621,113 and $25,622,303 during the year ended March 31, 2026 and March 31, 2025 and\ncash used in operations was $1,359,300 for the year ended March 31, 2026. The Company’s accumulated deficit amounts to $347,794,918\n(March 2025: $333,173,805). The Company has negative working capital of $36,275,897 as on March 31, 2026. In addition, the Company’s\ncash position is critically deficient and critical payments to the operational and financial creditors of the Company are not being made\nin the ordinary course of business, all of which raises substantial doubt about the Company’s ability to continue as a going concern.** **\n\n \n\nThe Company expects to continue to incur\nnet losses and have significant cash outflows from operating activities for at least the next 12 months. Management has evaluated the\nsignificance of the conditions described above in relation to the Company’s ability to meet its obligations and concluded that,\nwithout additional funding, the Company will not have sufficient funds to meet its obligations within one year from the date of the Consolidated\nFinancial Statements are issued.\n\n \n\nManagement is evaluating plans with respect to these adverse financial\nconditions that caused to express substantial doubt about the Company’s ability to continue as a going concern. Management’s\nplan is to seek funding through additional debt or equity financing arrangements, implement business initiatives to improve customer experience,\nprovide new offerings to customers through new business and partnership launches and incremental expense reduction measures or a combination\nthereof to continue financing its operations. Further the Company continues to raise money by way of promissory note, convertible promissory\nnote, share and warrant issuance to manage the working capital requirements. Additionally, the company entered into the financing arrangements\nbelow:\n\n \n\n  ●\nDuring the year ended March 31, 2026, the Company\nentered into Securities Purchase Agreements with certain institutional accredited investors and issued Bridge Notes with a total principal\namount of $1,427,825. These notes were issued with an initial issue discount of $152,825. After deducting legal and due diligence fees\nof $97,000, the net proceeds received by the Company amounted to $1,178,000. The Bridge Notes bear interest at an annual rate ranging\nfrom 10% to 12% and require scheduled monthly installment repayments beginning November 30, 2025, through August 30, 2026. The Company\nhas the option to prepay the notes, in full or in part, at a discounted rate applied to the outstanding balance. Additionally, the notes\ncarry a default interest rate ranging from 8% to 22% per annum and include customary events of default. \n\n \n\nF-9\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n1.Organization, Business operation and Going concern (Continued)\n\n \n\n  ● During the year ended March 31, 2026, the Company entered into Securities Purchase Agreement with certain institutional accredited investor pursuant to which the Company issued convertible notes for a total principal amount of $447,614 with an initial issue discount of $38,114. The net proceeds disbursed to the Company were $394,500 after deduction of legal and due diligence fees of $15,000. The convertible redeemable notes issued have a maturity date ranging from July 8, 2026 to August 24, 2026 and bear interest at an annual rate ranging from 6 - 12%. These convertible redeemable notes may be prepaid in part or full, by the Company at a discount to the outstanding balance. Certain convertible notes are subject to a default interest rate of 22% per annum and includes customary events of default.\n\n \n\n  ● On January 23, 2026, the Company launched a private placement bridge financing under Rule 506(c) of the Securities Act of 1933 to raise capital in the interim before its planned uplisting. The Company engaged ThinkEquity LLC as its exclusive placement agent on a reasonable best efforts basis to support both this bridge financing and a subsequent uplist raise of approximately $15 million. The interim bridge offering seeks to raise up to $5,000,000—plus an additional $5,000,000 through an Overallotment Option—and requires a $1,000,000 minimum. Investors can buy units for $1,000 each, consisting of one share of Series A Convertible Preferred Stock (convertible at $0.05 per share) and one warrant to buy common stock at $0.0625. Because these securities are unregistered, they are subject to resale registration requirements. Between June 2 and June 30, 2026, the Company issued a total of 1,875 units, raising approximately $1.88 million before fees and expenses.\n\n     \n\n  ● Subsequently, the Company entered into Securities Purchase Agreements with certain institutional accredited investors and issued Bridge Notes with a total principal amount of $300,800. These notes were issued with an initial issue discount of $32,800. After deducting legal and due diligence fees of $18,000, the net proceeds received by the Company amounted to $250,000. The Bridge Notes bear interest at an annual rate ranging from 10% to 12% and require scheduled monthly installment repayments beginning November 30, 2026, through July 2, 2027. The Company has the option to prepay the notes, in full or in part, at a discounted rate applied to the outstanding balance. Additionally, the notes carry a default interest rate ranging from 8% to 22% per annum and include customary events of default.\n\n \n\nF-10\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n1.Organization, Business operation and Going concern (Continued)\n\n \n\nWhile these financing arrangements shall\nresult in the payment of certain outstanding indebtedness, the Company will still need to raise additional capital imminently in order\nto have sufficient capital. There can be no assurance that the Company will be able to achieve its business plan, raise any additional\ncapital or secure the additional financing necessary to implement its current operating plan.\n\n \n\nThe ability of the Company to continue\nas a going concern is dependent upon its ability to increase its revenues and eventually achieve profitable operations. The accompanying\nConsolidated Financial Statements do not include any adjustments that might be necessary if the Company is unable to continue as a going\nconcern.\n\n \n\n2.Summary of Significant Accounting Policies\n\n** **\n\n**i.****Basis of presentation**\n\n** **\n\nThe accompanying Consolidated Financial\nStatements have been prepared in accordance with generally accepted accounting principles in the United States of America (US GAAP) and\npursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).. Any reference in these notes to\napplicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”)\nand an Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).\n\n \n\nThe Consolidated Financial Statements\ninclude the accounts of the Company and its wholly owned subsidiaries and variable interest entities in which the Company is the primary\nbeneficiary, including an entity in India and in other geographical locations. All intercompany accounts and transactions have been eliminated\nin the Consolidated Financial Statements herein.\n\n \n\nii.Principles of consolidation\n\n** **\n\nThe Consolidated Financial Statements\ninclude the accounts of Zoomcar Holdings, Inc. and of its wholly owned subsidiaries and Variable\nInterest Entities (“VIE”) in which the Company is the primary beneficiary, including an entity in India and in other geographical\nlocations (collectively, the “Company”).\n\n \n\nF-11\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n2.Summary of Significant Accounting Policies (Continued)\n\n \n\nThe Company determines, at the inception\nof each arrangement, whether an entity in which it has made an investment or in which it has other variable interest is considered a VIE\nin accordance with ASC 810.\n\n \n\nPeriodically, the Company determines\nwhether any changes in its interest or relationship with the entity impact the determination of whether the entity is still a VIE and,\nif so, whether the Company is the primary beneficiary.\n\n \n\nAs at March 31, 2026, following are\nthe list of subsidiaries and step-down subsidiaries:\n\n \n\n**Name of Entity**   **Place of Incorporation**   **Investor Entity**   **Method of consolidation**\n\nZoomcar, Inc.   USA   Zoomcar Holdings, Inc.   Voting Interest\n\nZoomcar India Private Limited   India   Zoomcar, Inc.   Voting Interest\n\nFleet Holding Pte ltd   Singapore   Zoomcar, Inc.   Voting Interest\n\nPT Zoomcar Indonesia Mobility Service   Indonesia   Fleet Holding Pte ltd   Voting Interest\n\nFleet Mobility Philippines Corporation   Philippines   Zoomcar, Inc.   VIE\n\n \n\nOn November 14, 2025, Zoomcar Netherlands\nHolding B. V was dissolved. As at the date of dissolution, the subsidiary did not have any assets and had no ongoing operations. Accordingly,\nmanagement decided to dissolve the subsidiary. Therefore, on November 14, 2025, the Company de-recognized its cost of investment and liabilities\nof the subsidiary and recognized a gain upon derecognition of subsidiary in the Consolidated Statements of Operations.\n\n \n\nThe assets/liabilities consolidated\nfor the VIE are not material.\n\n \n\nFurther, in August 2023, Zoomcar Vietnam Mobility LLC had filed for bankruptcy\nwith the local authorities. This application was admitted by the local authorities and bankruptcy proceedings were ordered to commence\non June 4, 2025. On June 3, 2024, Zoomcar Egypt Information Technology Platform LLC had closed down its operations due to decrease in\noperations and rising economic difficulties and subsequently, on August 5, 2025, Zoomcar Egypt Information Technology Platform LLC’s\nname was deleted from the commercial register. Refer note 28 for details.\n\n \n\niii.Use of estimates and assumptions\n\n** **\n\nThe use of estimates\nand assumptions as determined by management is required in the preparation of Consolidated Financial Statements in conformity with US\nGAAP. These estimates are based on management’s evaluation of historical trends and other information available when the Consolidated\nFinancial Statements are prepared and may affect the amounts reported and related disclosures. Actual results could differ from those\nestimates. \n\n \n\nF-12\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n2.Summary of Significant Accounting Policies (Continued)\n\n \n\nEstimates and underlying assumptions\nare reviewed on an ongoing basis.\n\n \n\nThe significant estimates, judgments\nand assumptions that affect the Consolidated Financial Statements include, but are not limited to, are:\n\n \n\na.Estimation of defined benefit obligation\n\n \n\nb.Fair value measurement of financial instruments\n\n \n\nc.Estimation of utilization of loyalty points\n\n \n\nd.Leases – assumption to determine the incremental borrowing rate\n\n \n\ne.Valuation allowance on deferred tax assets\n\n \n\nf.Impairment of non-financial assets\n\n \n\ng.Fair value measurement of share-based payments\n\n   \n\n h.Estimation of lease term\n\n   \n\n i.Recognition and measurement of provisions and contingencies\n\n \n\nChanges in accounting estimates are\naccounted for in the period of change and for prospective periods, if applicable. A change to an accounting estimate is recorded based\non events, facts, or circumstances that occurred during the period in which the estimate was changed.\n\n \n\niv.Currency translation\n\n \n\nThe Consolidated Financial Statements\nare presented in US Dollars (“$”) which is the reporting currency of the Company.\n\n \n\nMonetary assets and liabilities, and\ntransactions denominated in currencies other than the functional currency are remeasured at the exchange rate on the Balance Sheet date\nand non-monetary assets and liabilities are measured at historical exchange rates. The gains and losses resulting from remeasurement are\nrecorded as foreign exchange gains (losses), within other income (expense), in the Consolidated Statements of Operations.\n\n \n\nThe functional currency of the Company’s\nforeign subsidiaries is either the local currency or U.S. dollar depending on the nature of the subsidiaries’ activities. The Company\ndetermines the functional currency for each of its foreign subsidiaries by reviewing their operations and currencies used in their primary\neconomic environments.\n\n \n\nAssets\nand liabilities of the subsidiaries with functional currency other than U.S. Dollar are translated into U.S. Dollar at the rate of\nexchange existing at the Balance Sheet date. Retained earnings and other equity items are translated at historical rates, revenues\nand expenses are translated at average exchange rates during the year. Foreign currency translation adjustments are recorded within\naccumulated other comprehensive income, a separate component of total equity (deficit).\n\n \n\nF-13\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n2.Summary of Significant Accounting Policies (Continued)\n\n \n\nv.Comprehensive Income (Loss)\n\n \n\nComprehensive income (loss) consists\nof two components, net income (loss) and other comprehensive income (loss), net of tax. Other comprehensive income (loss), net of tax,\nrefers to revenue, expenses, gains, and losses that under generally accepted accounting principles are recorded as an element of members’\nequity but are excluded from net income (loss). The Company’s other comprehensive income (loss), net of tax, consists of foreign\ncurrency translation adjustments that result from consolidation of its foreign entities and actuarial gain/ (loss) on defined benefit\nobligations.\n\n \n\nvi.Revenue recognition\n\n** **\n\nDuring the year ended March 31, 2026\nand March 31, 31, 2025, the Company derives its revenue principally from the following:\n\n \n\n*Facilitation revenue*\n\n* *\n\nZoomcar Host Services is a marketplace\nfeature of the platform that helps owners of vehicles (“Hosts/ Customer/Lessors”) connect with users (“Renters/Lessee”)\nin temporary need of a vehicle on leasehold basis for their personal use.\n\n \n\nFacilitation Services revenue consists\nof facilitation fees charged to Hosts, net of incentives and refunds and trip protection charged to the Renters. The Company’s primary\nperformance obligation in the transaction towards the Host is to facilitate the successful completion of the rental transaction and towards\nthe renter is to offer trip protection.\n\n \n\nCustomer support is rendered to both\nthe Host (customer/lessor) and the renter (lessee). Company being the intermediary between the two provides its platform through which\nall communication takes place related to any services e.g., extension of trip period. Such services also include the normal customer support\nrelated to any vehicle breakdowns, tracking of vehicles, renter background checks, vehicle ownership checks and various other activities\nwhich are part of an ongoing set of series required for successful listing, renting and completion of trip. These activities are not distinct\nfrom each other and are not separate performance obligations. As a result, these series of services integrate together to form a single\nperformance obligation.\n\n \n\nF-14\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n2.Summary of Significant Accounting Policies (Continued)\n\n \n\nIn\ncase of booking value collected from the renter on behalf of the Host, the Company evaluated the presentation of revenue on a gross\nversus net basis based on factors given under ASC 606 whether or not it is the principal (gross) or the agent (net) in the\ntransaction and concluded that it is acting in an agent capacity, and revenue is presented net reflecting the facilitation fees\nreceived from the Marketplace service. The customer simultaneously receives and consumes the benefits provided by the entity’s\nperformance as the entity performs. Revenue is recognized ratably over the trip period on straight line basis using the output\nmethod as its performance obligation is satisfied over time.\n\n \n\nThe Company offers various incentive\nprograms 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\nin cases where the amount of incentive paid to the Host are above the facilitation fees earned from that Host on cumulative basis, the\nexcess of the revenue amount is recorded as a marketing expense in the Consolidated Statements of Operations. These incentives are offered\nas part of overall marketing strategy of the Company and incentivize the hosts to refer the platform.\n\n \n\n*Loyalty program*\n\n* *\n\nThe Company offers loyalty program,\nZ-Points, wherein customers are eligible to earn loyalty points that are redeemable for payment towards facilitation fees. Under ASC 606,\neach transaction that generates loyalty points results in the deferral of revenue equivalent to the retail value at the date the points\nare earned. The associated revenue is recognized when the customer redeems the loyalty points. The retail value of points is estimated\nbased on the current retail value measured as of the date the loyalty points are earned, less an estimated amount representing loyalty\npoints that are not expected to be redeemed (“breakage”). Breakage is reviewed on an annual basis and includes significant\nassumptions such as historical breakage trends, internal Company forecasts and extended redemption period, if any. As at March 31, 2026\nand March 31, 2025, the Company’s deferred revenue balance amounted to $78,878 and $21,365 respectively and is included in Contract\nliabilities in the Consolidated Balance Sheets.\n\n \n\n*Vouchers*\n\n* *\n\nDuring\nthe year, the Company sold vouchers of certain redemption value that are utilized for payment towards facilitation fees. Vouchers\nmay be sold for less than their redemption value and in such cases, the transaction price is limited to the amount received, unless\nadditional consideration is expected. The sale of such vouchers results in the deferral of revenue equivalent to the amount received\non the date of sale. The associated revenue is recognized when the customer utilizes such voucher. On expiry of validity of the\nvoucher, the unutilized portion is recognized as Other operating revenues in the Consolidated Statements of Operations. As at March\n31, 2026 and March 31, 2025, the Company’s deferred revenue balance amounted to $30,292and $NIL respectively and is included\nin Contract liabilities in the Consolidated Balance Sheets\n\n \n\nF-15\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n2.Summary of Significant Accounting Policies (Continued)\n\n \n\n*Contract liabilities*\n\n* *\n\nContract liabilities primarily consist\nof obligations to customers for advance received against bookings, revenue-share payable to customers for vehicles listed by them on Company’s\nportal for short-term rentals and related to Company’s points-based loyalty program. As per ASC 606-10-50-14 the Company does not\naggregate amount of transaction price allocated to remaining performance obligations as required under ASC 606-10-50-13, since the company’s\nperformance obligation is a part of a contract that has an original expected duration of one year or less.\n\n \n\nvii.Cash and cash equivalents\n\n \n\nCash and cash equivalents include cash\non hand, bank balances. Cash and cash equivalents are recorded at cost, which approximates fair value.\n\n \n\nCash and cash equivalents include amounts\ncollected on behalf of but not yet remitted to the Hosts which are included in accrued and other current liabilities in the Consolidated\nFinancial Statements.\n\n \n\nviii.Restricted Cash\n\n \n\nThe Company is required to place cash\nin an indemnification escrow fund with the placement agent for all indemnification liabilities and expenses payable by the Company as\nper the placement agent agreement for a period of 3 years from closing of the November 2024 Offering. Such cash is classified as restricted\ncash and reported as a component of other non-current assets in the Consolidated Balance Sheets.\n\n \n\nix.Accounts receivable, net of allowance\n\n** **\n\nAccounts receivables are stated net\nof allowances and primarily represent corporate debtors and dues from payment gateways for amounts paid by customers. In case of corporate\ndebtors, the payment terms generally include a credit of 30-60 days. The amounts receivable from payment gateways are settled within 2\ndays.\n\n \n\nThe Company records an allowance for\ncredit losses for amounts owed for completed transactions that may never settle or be collected. The Company estimates its exposure to\nbalances deemed to be uncollectible based on factors including known facts and circumstances, historical experience, and the age of the\nuncollected balances. Accounts receivable balances are written off against the allowance of credit losses after all means of collection\nhas been exhausted and potential recovery is considered remote.\n\n \n\nx.Other receivables\n\n \n\nOther receivables\ninclude amounts recoverable from host. The receivable from host is adjusted for an allowance on account of host which are not active\non the platform for more than 90 days.\n\n \n\nF-16\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n2.Summary of Significant Accounting Policies (Continued)\n\n \n\nxi.Balances with government authorities – Input Tax Credit\n\n** **\n\nBalances with government authorities\nrepresent the tax credit with government agencies which are recognized when the Company has performed the required services and when they\nmeet the eligibility criteria outlined in the applicable government regulations.\n\n \n\nThe input tax credits are related to\nIndian Goods and Service Tax (“GST”). These balances are classified based on their expected period of utilization of future\nGST credit and GST debit that comes from domestic purchases and sales of services, respectively. If the tax credits are expected to be\nutilized within twelve months from the reporting date, they are classified as current assets. If the tax credits are not expected to be\nutilized within twelve months from the reporting date, they are classified as non-current assets.\n\n \n\nxii.Concentration of credit risk\n\n \n\nCash and cash equivalents, investments,\nother receivables, and accounts receivable are potentially subject to credit risk concentration. The Company has not experienced any material\nlosses related to these concentrations during the years presented. No customers accounted for 10% or more of revenue for the years ended\nMarch 31, 2026 and 2025.\n\n \n\nxiii.Property and equipment, net\n\n \n\nProperty and equipment are stated at\ncost less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful\nlives.\n\n \n\nThe devices installed on host vehicles\nin the marketplace business have been depreciated over 5 years. During the year ended March 31, 2025, the Company revised its estimate\nof the salvage value of the devices from 30% to 0%.\n\n \n\nWhen assets are retired or otherwise\ndisposed of, the cost and accumulated depreciation are removed from the Consolidated Balance Sheets and any resulting gain or loss is\nreflected on the Consolidated Statements of Operations in the period realized.\n\n \n\nxiv.Assets held for sale\n\n** **\n\nThe\nCompany classifies vehicles and office equipment to be disposed of as held for sale in the period in which they are available for\nimmediate sale in their present condition and the sale is probable and expected to be completed within one year. The Company\ninitially measures assets held for sale at the lower of their carrying value or fair value less costs to sell and assesses their\nfair value annually until disposed. The fair value of Assets held for sale not traded in an active market is determined using\nvaluation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates.\nIf all significant inputs required to fair value an asset are observable, the Valuation is included in Level 2. In case of certain\nvehicles which are not sold within one year from date of classification, the Company reassess the carrying value of the assets to\nadjust it for the realizable value.\n\n \n\nF-17\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n2.Summary of Significant Accounting Policies (Continued)\n\n \n\nxv.Impairment\n\n \n\nLong-lived assets such as property and\nequipment, right-of-use assets and intangible assets that are held and used by the Company are reviewed for impairment when events or\nchanges in circumstances indicate that the carrying amount of the asset may not be recoverable. The Company monitors the long-lived assets\nfor impairment indicators on an on-going basis. If impairment indicators exist, the Company determines the recoverability of the asset\nby comparing the undiscounted cash flows expected to be generated from the use and eventual disposition the long-lived asset groups to\nthe related net book values. If the net book value of the asset group exceeds the undiscounted cash flows, an impairment loss is recognized\nas the difference between the carrying value of the asset and its estimated fair value.\n\n \n\nThe Company estimate cash flows and fair\nvalue using internal budgets based on recent sales data and economic uncertainties. The key factors that affect estimates are (1) future\nrevenue estimates; (2) customer preferences and decisions; and (3) product pricing. Any differences in actual results from the estimates\ncould result in fair values different from the estimated fair values, which could materially affect our future results of operations and\nfinancial condition. The Company believes the projections of anticipated future cash flows and fair value assumptions are reasonable;\nhowever, changes in assumptions underlying these estimates could affect its valuations.\n\n \n\nxvi.Leases\n\n \n\nThe Company determines if an arrangement\nis a lease at inception of the contract. The Company’s assessment is based on whether: (1) the contract involves the use of a distinct\nidentified asset, (2) the Company obtains the right to substantially all the economic benefit from the use of the asset throughout the\nterm of the contract, and (3) the Company has the right to direct the use of the asset. A lease is classified as a finance lease if any\none of the following criteria are met: (1) the lease transfers ownership of the asset by the end of the lease term, (2) the lease contains\nan option to purchase the asset that is reasonably certain to be exercised, (3) the lease term is for a major part of the remaining useful\nlife of the asset or (4) the present value of the lease payments equals or exceeds substantially all of the fair value of the asset.\n\n \n\nOperating leases are presented within\n“Operating lease right-of-use assets,” “Current portion of operating lease liabilities” and “Operating lease\nliabilities, less current portion” in the Company’s Consolidated Balance Sheets. The current portion of finance lease liabilities\nare presented within “Finance lease liabilities” in the Company’s Consolidated Balance Sheets.\n\n \n\nROU assets\nrepresent the Company’s right to use an underlying asset during the lease term and lease liabilities represent the\nCompany’s obligation to make lease payments arising from the lease arrangement. Lease liabilities are recognized at\ncommencement date based on the present value of lease payments over the lease term. Operating lease ROU assets are recognized at\ncommencement date in an amount equal to lease liability, adjusted for any lease prepayments, initial direct costs, and lease\nincentives. For leases in which the rate implicit in the lease is not readily determinable, the Company uses its incremental\nborrowing rate based on the information available at commencement date. Lease terms includes the effects of options to extend or\nterminate the lease when it is reasonably certain at commencement of the lease that the Company will exercise that option. Lease\nexpense for operating lease arrangements is recognized on a straight-line basis over the lease term reflecting single operating\nlease cost. The Company evaluates lease agreements to determine lease and non-lease components, which are accounted for\nseparately.\n\n \n\nF-18\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n2.Summary of Significant Accounting Policies (Continued)\n\n \n\nLease payments that depend on factors\nother than an index or rate are considered variable lease payments and are excluded from the operating lease assets and liabilities and\nare recognized as expense in the period in which the obligation is incurred. The Company accounts for lease-related concessions in accordance\nwith guidance in Topic 842, Leases, to determine, on a lease-by-lease basis, whether the concession provided by lessor should be accounted\nfor as a lease modification.\n\n \n\nThe Company accounts for a modification\nas a separate contract when it grants an additional right of use not included in the original lease and the increase is commensurate with\nthe standalone price for the additional right of use, adjusted for the circumstances of the particular contract. Modifications which are\nnot accounted for as a separate contract are reassessed as of the effective date of the modification based on its modified terms and conditions\nand the facts and circumstances as of that date. Upon modification, the Company remeasures the lease liability to reflect changes to the\nremaining lease payments and discount rates and recognizes the amount of the remeasurement of the lease liability as an adjustment to\nthe ROU assets. However, if the carrying amount of the ROU assets is reduced to zero as a result of modification, any remaining amount\nof the remeasurement is recognized as an expense in Consolidated Statements of Operations.\n\n \n\nThe Company reviews ROU assets for impairment\nwhenever events or changes in circumstances indicate that the related carrying amount may not be recoverable.\n\n \n\nxvii.Expenses\n\n** **\n\n*Cost of revenue*\n\n \n\nCost of revenue expenses primarily consist\nof personnel-related compensation costs of local operations teams and teams who provide phone, email and chat support to users, repairs\nand maintenance expenses of vehicles, vehicle site rentals, devices depreciation, power, software support charges, payment gateway charges\nand other direct expenses.\n\n \n\n*Technology and development*\n\n \n\nTechnology and development expenses primarily\nconsist of personnel-related compensation costs and information technology and data science expenses. Technology and development costs\nare expensed as incurred.\n\n \n\n*Sales and marketing*\n\n \n\nSales and marketing expenses primarily\nconsist of personnel-related compensation costs, advertising expenses and marketing partnerships with third parties. Sales and marketing\ncosts are expensed as incurred. Advertising expenses incurred for the year ended March 31, 2026 amounts to $286,916 (March 31, 2025: $829,619).\n\n \n\n*General and administrative*\n\n \n\nGeneral and administrative expenses primarily\nconsist of personnel-related compensation costs, professional services fees, administrative fees, depreciation, facility costs, and other\ncorporate costs. General and administrative expenses are expensed as incurred.\n\n \n\nF-19\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n2.Summary of Significant Accounting Policies (Continued)\n\n \n\nxviii.Finance costs\n\n \n\nFinance costs comprises interest cost\non debt, transaction costs, fair value changes in financial instruments, SSCPN issue expenses, and interest expense on lease liabilities.\nBorrowing costs and interest on leases are recognized in the Consolidated Statements of Operations using the effective interest method.\n\n \n\nxix.Employee benefits\n\n** **\n\n*Defined benefit plan*\n\n \n\nEmployees in India are entitled to a\ndefined benefit retirement plan covering eligible employees of the Company. The plan provides for a lump-sum payment to eligible employees,\nat retirement, death, and incapacitation or on termination of employment, of an amount based on the respective employees’ salary\nand tenure of employment. The Company’s benefit plan is unfunded.\n\n \n\nManagement makes certain assumptions\nrelating to discount rates, salary growth, retirement rates, mortality rates and other factors when calculating annual amounts to be recognized.\nThese assumptions are reviewed annually by management, assisted by the enrolled actuary, and updated as warranted.\n\n \n\nAmortization\nof a net gain or loss included in accumulated other comprehensive income shall be included as a component of net pension cost for a\nyear if, as of the beginning of the year, that net gain or loss exceeds 10 percent of the greater of the projected benefit\nobligation or the market- related value of plan assets. If amortization is required, the minimum amortization shall be that excess\ndivided by the average remaining service period of active employees expected to receive benefits under the plan. Prior service cost\nis amortized on a straight-line basis from the date recognized over the average remaining service period of active participants,\nwhen applicable.\n\n \n\n*Compensated absences*\n\n \n\nThe Company’s liability for compensated\nabsences is determined based on an actuarial valuation using the projected unit credit method and is charged to Consolidated Statements\nof Operations in the year in which they accrue.\n\n \n\n*Defined contribution plan*\n\n \n\nEligible employees of the Company in\nIndia participate in a defined contribution fund in accordance with the regulatory requirements in the Indian jurisdiction. Both the employee\nand the Company contribute an equal amount to the fund which is equal to a specified percentage of the employee’s salary.\n\n \n\nThe Company has no further obligation\nunder defined contribution plans beyond the contributions made under these plans. Contributions are charged to profit or loss and are\nincluded in the Consolidated Statements of Operations in the year and/or period in which they accrue.\n\n \n\nF-20\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n2.Summary of Significant Accounting Policies (Continued)\n\n \n\nxx.Stock-based compensation\n\n \n\nThe Company accounts for stock-based\ncompensation expense in accordance with the fair value recognition and measurement provisions of US GAAP, which requires compensation\ncost for grant-date fair value of stock-based awards to be recognized over the requisite service period. The Company includes a forfeiture\nestimate in the amount of compensation expense being recognized based on the Company’s estimate of equity instruments that will\neventually vest. The fair value of stock-based awards, granted or modified, is determined on the grant date at fair value, using appropriate\nvaluation techniques. For the options that vest in a graded vesting manner over the vesting period, the Company has adopted the graded\nvesting approach for recognition of compensation cost over the vesting period.\n\n \n\nFor stock\noptions or restricted stock units with service-based vesting conditions only, the valuation model, typically the Black-Scholes\noption-pricing model, incorporates various assumptions including expected stock price volatility, expected term, and risk-free\nrates. For stock options or restricted stock units with graded vesting, the fair- value-based measure is estimated of the entire\naward by using a single weighted-average expected term. The Company estimated the volatility of common stock on the date of the\ngrant based on weighted-average historical stock price volatility of comparable publicly traded companies in its industry group. The\nrisk-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\nCompany estimates the term based on the simplified method for employee stock options considered to be “plain vanilla”\noptions as the Company’s historical share option exercise experience does not provide a reasonable basis upon which to\nestimate the expected term. The expected dividend yield is 0.0% as the Company has not paid and does not anticipate paying dividend\non its common stock.\n\n \n\nThe Company estimates a forfeiture rate\non an annual basis for the purpose of computation of stock-based compensation expense. The rate is used consistently across the subsequent\ninterim periods during the year.\n\n \n\nIn case of cancellation of stock-based\nawards with no concurrent grant of a replacement award or other valuable consideration, any unrecognized compensation cost is recognized\nimmediately on the cancellation date.\n\n \n\nxxi.Debt\n\n \n\nThe debt instruments of the Company consist\nof debentures and term loans from financial institutions. The Company based on available proceeds makes periodic prepayments of scheduled\ninstalments and the same has been accounted for under ASC 470-50.\n\n \n\n*Redeemable Promissory Notes*\n\n \n\nDuring the year ended March 31, 2025,\nthe Company has issued Redeemable Promissory Notes which are repayable at the principal value on maturity date and has been accounted\nfor under ASC 470-10. The Company issued these Redeemable Promissory notes on discount and incurred expenses on issue of the Redeemable\nPromissory Notes. As per ASC 835, the discount and the expenses incurred on issue of the Redeemable Promissory Notes have been amortized\nover the period of the Redeemable Promissory note on a straight-line basis. The Redeemable Promissory Notes liabilities have been presented\nnet off the discount and issue expenses.\n\n \n\nThe Company had allocated a portion of\nthe proceeds from the issue of its Redeemable Promissory Note to the warrants and Redeemable promissory note based on the relative fair\nvalues of warrants and Redeemable Promissory Note. Redeemable Promissory Notes may contain embedded features, such as accelerated redemption\noptions, which are evaluated under ASC 815 to determine if bifurcation is required. If the embedded feature meets the definition of a\nderivative and is not clearly and closely related to the host, it is measured at fair value with changes recognized in earnings. The embedded\nfeature was assessed and determined to be immaterial.\n\n \n\nF-21\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n2.Summary of Significant Accounting Policies (Continued)\n\n \n\n*Unsecured Notes*\n\n \n\nDuring the year\nended March 31, 2026, the Company has issued Bridge Notes which are repayable at the principal value along with an interest of 10-12%\np.a. on the maturity date and has been accounted for under ASC 470-10. The Company issued these Bridge Notes at discount and incurred\nexpenses on the issue of these Notes. As per ASC 835, the discount and the expenses incurred on issue of the Bridge Notes have been amortized\nover the contractual period using the effective interest method. The Bridge Notes liabilities have been presented net off the discount\nand issue expenses.\n\n \n\n*Convertible Notes*\n\n \n\nDuring the year ended March 31, 2026,\nthe Company has issued Convertible Notes which are repayable at the principal value along with an interest of 6-12% p.a. on the maturity\ndate or the holder as an option to convert those in variable number of equity shares and the same has been accounted for as a share settled\ndebt under ASC 480-10. The Company issued these Convertible Notes at discount and incurred expenses on the issue of these Convertible\nNotes. As per ASC 835, the discount and the expenses incurred on issue of the Convertible Notes have been amortized over the contractual\nperiod using the effective interest method. The Convertible Notes liabilities have been presented net off the discount and issue expenses.\n\n \n\n*Issuance costs on Debt*\n\n \n\nDebt issuance costs consist primarily\nof initial discount provided, arrangement fees paid to placement agent, professional fees and legal fees. These costs are netted off with\nthe related debt and are being amortized to interest expense over the term of the related.\n\n \n\nThe debt has been classified into current\nor non-current based on the payment terms of the debt instruments. Non-current obligations are those scheduled to mature beyond twelve\nmonths from the date of the Company’s Consolidated Balance Sheets.\n\n \n\nxxii.Warrants\n\n** **\n\nWhen the Company issues warrants, it\nevaluates the balance sheet classification of the warrant to determine whether the warrant should be classified as equity or as a derivative\nliability on the Consolidated Balance Sheets. In accordance with ASC 815- 40, Derivatives and Hedging-Contracts in the Entity’s\nOwn Equity (ASC 815-40), the Company classifies a warrant as equity so long as it is “indexed to the Company’s equity”\nand several specific conditions for equity classification are met. A warrant is not considered indexed to the Company’s equity,\nin general, when it contains certain types of exercise contingencies or adjustments to exercise price. If a warrant is not indexed to\nthe Company’s equity or it has net cash settlement that results in the warrants to be accounted for under ASC 480, Distinguishing\nLiabilities from Equity, or ASC 815-40, it is classified as a derivative liability which is carried on the Consolidated Balance Sheets\nat fair value with any changes in its fair value recognized currently in the Consolidated Statements of Operations.\n\n \n\nF-22\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n2.Summary of Significant Accounting Policies (Continued)\n\n \n\n*(a)**Warrants issued towards the November 2024 and December 2024 offering:*\n\n* *\n\nDuring the year ended March 31, 2025,\nthe Company issued shares of Common Stock, pre-funded, Series A and Series B warrants in the November 2024 and December 2024 offering\n(Refer note 19)and as consideration to the placement agents for the issuance. The Common stock and pre-funded warrants were classified\nas equity in accordance with ASC 815-40. The Series A warrants and Series B warrants were initially classified as derivative financial\ninstruments in accordance with ASC 815-10-15-83.\n\n \n\nSubsequently,\nduring the year ended March 31, 2025, the variability in number of warrants exercisable towards Series A and Series B of both the November\n2024 and December 2024 offering was fixed in accordance with agreement. Hence, as per ASC 815-10, the outstanding Series A Series B warrants\nfor both November 2024 and December 2024 offering have been reclassified to equity at the reclassification date fair value.\n\n \n\nWarrants exercised before the reclassification\nhave been reclassified at their respective exercise date fair value and warrants exercised after the reclassification were adjusted with\nadditional paid in capital.\n\n \n\n*(b)**Warrants issued along with Redeemable Promissory Note:*\n\n \n\nDuring the year ended March 31, 2025,\nthe Company issued warrants along with Redeemable Promissory Note and as consideration to the placement agent for the issuance of the\nRedeemable Promissory Note. These warrants were classified as equity in accordance with ASC 815-40 on the initial recognition.\n\n \n\nxxiii.Net profit/(loss) per share attributable to common stockholders\n\n** **\n\nThe Company computes net profit/(loss)\nper share using the two-class method required for participating securities. The two-class method requires income available to common stockholders\nfor the period to be allocated between common stock and participating securities based upon their respective rights to receive dividends\nas if all the income for the period had been distributed. The Company’s convertible preferred stock is participating security. The\nholders of the convertible preferred stock would be entitled in preference to common shareholders, at specified rate, if declared.\n\n \n\nThen any remaining earnings would be\ndistributed to the holders of common stock and convertible preferred stock on a pro-rata basis assuming conversion of all convertible\npreferred stock into common stock. This participating security do not contractually require the holders of such shares to participate\nin the Company’s losses. As such, net losses for the periods presented were not allocated to the Company’s participating securities.\n\n \n\nThe\nCompany’s basic profit/(loss) per share is computed using the weighted-average number of ordinary shares outstanding during\nthe period. The diluted profit/(loss) per share is computed by considering the impact of potential issuance of common stock on the\nweighted average number of shares outstanding during the period, except where the results would be anti-dilutive.\n\n \n\nF-23\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n2.Summary of Significant Accounting Policies (Continued)\n\n \n\nxxiv.Provisions and accrued expenses\n\n** **\n\nA provision is recognized in the Consolidated\nBalance Sheets when the Company has a present legal or constructive obligation as a result of a past event, and it is probable that an\noutflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are recognized at present\nvalue by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money.\n\n \n\nProvisions for onerous contracts are\nrecognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable costs of meeting the\nfuture obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating\nthe contract and the expected net cost of continuing with the contract. Before a provision is established, the Company recognizes any\nimpairment loss on the assets associated with that contract. The Company does not have any onerous contracts.\n\n \n\nxxv.Fair value measurements and financial instruments\n\n** **\n\nFair value is defined as the price\nthat would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement\ndate. In accordance with ASC 820, Fair Value Measurement (“ASC 820”), the Company uses the fair value hierarchy, which prioritizes\nthe inputs used to measure fair value. The hierarchy, as defined below, gives the highest priority to unadjusted quoted prices in active\nmarkets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of the fair value hierarchy\nare set forth below:\n\n \n\nLevel 1Observable inputs such as quoted\nprices in active markets for identical assets or liabilities.\n\n \n\nLevel 2Observable inputs other\nthan Level 1 prices such as quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not\nactive or inputs other than the quoted prices that are observable either directly or indirectly for the full term of assets or liabilities.\n\n \n\nLevel 3Unobservable inputs in which\nthere is little or no market data and that are significant to the fair value of the assets or liabilities.\n\n \n\nDuring the\nyear ended March 31, 2026, the Company’s primary financial instruments included cash and cash equivalents, investments,\naccounts receivables, other financial assets, accounts payable, debt, unsecured notes, convertible redeemable note, unsecured\nconvertible note and other financial liabilities. The estimated fair value of cash equivalents, accounts receivable, accounts\npayable and accrued liabilities approximate their carrying value due to short-term maturities of these instruments.\n\n \n\nF-24\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n2.Summary of Significant Accounting Policies (Continued)\n\n \n\nxxvi.Troubled debt restructuring\n\n \n\nAs per ASC 470-60 Troubled Debt Restructuring\n(TDR) refers to a situation where the creditor, grants concessions to a borrower experiencing financial difficulties. These concessions\nmay include modifications to the terms of the payable, such as reducing the interest rate, extending the repayment period, or forgiving\na portion of the payable. Such restructuring is done with the intent to provide relief to the borrower and to maximize the potential for\npayable recovery by the Company.\n\n \n\nIn accordance with ASC 470-60, when the\ntotal future cash payments under the new terms are less than the carrying amount of the payable at the date of restructuring, the difference\nbetween the carrying amount and the total future cash payments is recognized as a ‘Gain on Troubled Debt Restructuring’ in\nthe Consolidated Financial Statements. This gain is recorded immediately in the period the restructuring occurs.\n\n \n\nIf the total future cash payments under\nthe new terms exceed the carrying amount of the payable at the date of restructuring, no adjustment to the carrying amount of the payable\nis made. Instead, the company calculates a New Effective Interest Rate (EIR) based on the revised terms of the restructured payable. The\ndebt is then amortized over the remaining life of the payable using the new EIR, with interest expense recognized based on this rate in\nfuture periods.\n\n \n\nxxvii.Taxes\n\n \n\nIncome taxes are accounted for under\nthe asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences\nbetween the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss\nand tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income\nin the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities\nof a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded for\ndeferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized.\n\n \n\nThe Company recognizes the effect\nof income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured\nat the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period\nin which the change in judgment occurs. Interest related to unrecognized tax benefits in interest expense and penalties.\n\n \n\nF-25\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n2.Summary of Significant Accounting Policies (Continued)\n\n \n\nxxviii.Contingencies\n\n \n\nThe Company is subject to legal proceedings\nand claims that arise in the ordinary course of business. The Company accrues for losses associated with legal claims when such losses\nare probable and can be reasonably estimated. These accruals are adjusted as additional information becomes available or circumstances\nchange.\n\n \n\nxxix.Segment information\n\n \n\nOperating segments are defined as\ncomponents of an entity for which discrete financial information is available and is regularly reviewed by the Chief Operating Decision\nMaker (“CODM”) in making decisions regarding resource allocation and performance assessment. The Company’s CODM is its\nBoard of Directors. The Company has determined it has one operating and reportable segment as the CODM reviews financial information presented\non a consolidated basis for purposes of allocating resources and evaluating financial performance.\n\n \n\nxxx.Common Stock Reverse Split\n\n** **\n\nIn October 2024 and March 2025, the\nCompany effectuated a one-for-hundred and a one-for-twenty reverse stock split respectively. All share, stock option and warrant information\nhas been retroactively adjusted to reflect these stock splits. See Note 3A for additional disclosure.\n\n \n\nxxxi.Reclassification\n\n \n\nCertain prior year amounts have been\nreclassified to conform with current year presentation. These changes did not have any effect on net loss, stockholder’s equity, the Consolidated\nStatements of Operations or the net change in cash and cash equivalents in the Consolidated Statement of Cashflows.\n\n \n\nxxxii.Recent Accounting Pronouncements\n\n* *\n\n*Accounting Pronouncement Adopted*\n\n* *\n\nIn December\n2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” to improve income\ntax disclosure requirements by requiring (1) consistent categories and greater disaggregation of information in the rate\nreconciliation and (2) the disaggregation of income taxes paid by jurisdiction. The guidance makes several other changes to the\nincome tax disclosure requirements. The guidance in ASU 2023-09 is effective for annual reporting periods in fiscal years beginning\nafter December 15, 2024. The Company adopted ASU 2023-09 for the year ended March 31, 2026, and applied the new disclosure\nrequirements prospectively to the current annual period. Prior period disclosures have not been adjusted to reflect the new\ndisclosure requirements. The adoption of ASU 2023-09 did not have a material impact on the Company’s Consolidated Financial\nStatements. Refer Note 23 in the notes to the Consolidated Financial Statements for further detail.\n\n \n\nF-26\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n2.Summary of Significant Accounting Policies (Continued)\n\n \n\nIn March 2024, the FASB issued ASU\n2024-02 Codification Improvements – Amendments to Remove References to the Concept Statements to provide amendments to the Codification\nthat remove references to various FASB Concepts Statements. ASU 2024-02 is effective for our annual periods beginning December 15, 2024,\nwith early adoption permitted. This update does not have any impact on the Company’s Consolidated Financial Statements.\n\n \n\nIn March 2025, the FASB issued ASU 2025-02 “Liabilities\n(Topic 405): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 122” to\nremove the text of SAB Topic 5.FF, “Accounting for Obligations to Safeguard Crypto-Assets an Entity Holds for Its Platform Users.”\nThe change is being made as a result of the release of SEC Staff Accounting Bulletin (SAB) 122, which rescinded SAB Topic 5.FF (added\nby SAB 121) that required an entity to recognize a liability and corresponding asset for its obligation to safeguard crypto assets. The\nentities shall apply SAB 122 on a fully retrospective basis in annual periods beginning after December 15, 2024. Additionally, entities\nhave the option to apply SAB 122 in any earlier interim or annual financial statement period included in filings with the SEC after January\n30, 2025 (the effective date of SAB 122). The above amendment does not have an impact on the Company’s Consolidated Financial Statements.\n\n \n\n*Accounting Pronouncement Pending Adoption*\n\n* *\n\nIn November 2024, the Financial Accounting\nStandards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, “Disaggregation of Income Statement\nExpenses, which requires public companies to disaggregate key expense categories such as inventory purchases, employee compensation and\ndepreciation in their financial statements. Further, in January 2025, the Financial Accounting Standards Board (“FASB”) issued\nAccounting Standards Update No. 2025-01, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures\n(Subtopic 220-40): Clarifying the Effective Date” which clarifies the effective date of ASU 2024-03. The guidance is effective for\nall public entities with fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December\n15, 2027. Early adoption is permitted. The Company is evaluating the impact that adoption of the provisions of ASU 2024-03 will have on\nthe Company’s Consolidated Financial Statements.\n\n \n\nIn\nDecember 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2024-03,\n“Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt\nInstruments”. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2025 (and\ninterim reporting periods within those annual reporting periods). Early adoption is permitted as of the beginning of a reporting\nperiod if the entity has also adopted ASU 2020-06 for that period. This update does not have any impact on the Company’s\nConsolidated Financial Statements.\n\n \n\nIn May 2025, the FASB issued ASU 2025-03\nwhich revises the guidance in ASC 805 on identifying the accounting acquirer in a business combination in which the legal acquiree is\na variable interest entity (VIE). ASU 2025-03 is effective for fiscal years beginning after December 15, 2026, including interim periods\nwithin those fiscal years. Early adoption is permitted. The amendments in ASU 2025-03 must be applied prospectively to any business combination\nthat occurs after the initial adoption date. The Company is evaluating the impact that adoption of the provisions of ASU 2025-03 will\nhave on the Company’s Consolidated Financial Statements.\n\n \n\nIn May 2025, the FASB issued ASU 2025-04\nwhich clarifies the guidance in both ASC 606 and ASC 718 on the accounting for share-based payment awards that are granted by an entity\nas consideration payable to its customer. ASU 2025-04 is effective for fiscal years beginning after December 15, 2026, including interim\nperiods within those fiscal years. Early adoption is permitted. The Company is evaluating the impact that adoption of the provisions of\nASU 2025-04 will have on the Company’s Consolidated Financial Statements.\n\n \n\nF-27\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n2.Summary of Significant Accounting Policies (Continued)\n\n \n\nIn July 2025, the FASB issued ASU 2025-05\nwhich amends ASC 326-202 to provide a practical expedient (for all entities) and an accounting policy election (for all entities, other\nthan public business entities, that elect the practical expedient) related to the estimation of expected credit losses for current accounts\nreceivable and current contract assets that arise from transactions accounted for under ASC 606. ASU 2025-05 is effective for fiscal years\nbeginning after December 15, 2025, including interim periods within those fiscal years. Early adoption is permitted. This update does\nnot have any impact on the Company’s Consolidated Financial Statements.\n\n \n\nIn September 2025, the FASB issued\nASU 2025-06 which amends certain aspects of the accounting for and disclosure of software costs under ASC 350-40. The update clarifies\nthe guidance for accounting for costs related to internal use-software. ASU 2025-06 is effective for annual periods beginning after December\n15, 2027, including interim periods within those annual periods. Early adoption is permitted. This update does not have any impact on\nthe Company’s Consolidated Financial Statements.\n\n \n\nIn\nSeptember 2025, the FASB issued ASU 2025-07 which refines the scope of the guidance on derivatives in ASC 815 and clarifies the\nguidance on share-based payments from a customer in ASC 606. The ASU is intended to address concerns about the application of\nderivative accounting to contracts that have features based on the operations or activities of one of the parties to the contract\nand to reduce diversity in the accounting for share-based payments in revenue contracts. ASU 2025-07 is effective for annual\nreporting periods beginning after December 15, 2026, including interim periods within those annual periods. Early adoption is\npermitted. The Company is evaluating the impact that adoption of the provisions of ASU 2025-07 will have on the Company’s\nConsolidated Financial Statements.\n\n \n\nIn December 2025, The FASB issued ASU\n2025-11 to clarify and improve the guidance in ASC Topic 270, *Interim Reporting*,\nby enhancing the navigability and applicability of interim disclosure requirements. The amendments provide a comprehensive and clarified\nlist of interim disclosures currently required under GAAP without expanding or reducing existing requirements. The ASU introduces a disclosure\nprinciple requiring entities to disclose material events occurring since the end of the last annual reporting period. It also clarifies\nthe types of interim reporting subject to Topic 270 and the form and content of interim financial statements prepared in accordance with\nGAAP. The guidance is intended to improve consistency and transparency in interim reporting. The ASU is effective for interim periods\nbeginning after December 15, 2027, with early adoption permitted. The Company is evaluating the impact that adoption of the provisions\nof ASU 2025-11 will have on the Company’s Consolidated Financial Statements.\n\n \n\nIn December 2025, The FASB issued ASU\n2025-12 as part of its ongoing Codification Improvements project to address stakeholder feedback and make incremental improvements to\nU.S. GAAP. The amendments are intended to correct technical errors, clarify guidance, and address unintended applications of the Codification\nacross a broad range of Topics. These changes are not expected to significantly affect current accounting practice or impose significant\ncosts on most entities. The ASU includes targeted amendments, with explanations provided within the Codification amendments rather than\na separate basis for conclusions. The amendments apply to all reporting entities within the scope of the affected accounting guidance.\nThis update does not have any impact on the Company’s Consolidated Financial Statements.\n\n \n\nThere are other new accounting pronouncements\nissued by the FASB that the Company has adopted or will adopt, as applicable, and the Company does not believe any of these accounting\npronouncements have had, or will have, a material impact on its Consolidated Financial Statements or disclosures.\n\n \n\nF-28\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n**3A**\nReverse Stock Split\n\n \n\nThe Company’s shareholders authorized, and the Board of Directors\napproved for a 1-for-100 Reverse Stock Split (the “ First Reverse Stock Split”), which became effective on October 21, 2024.\nAny fractional shares that would have otherwise resulted from the First Reverse Stock Split were rounded up to the nearest whole share.\n\n \n\nEvery 100 shares of issued and outstanding Common Stock has\nbeen consolidated into one share, without affecting the par value. In addition, (i) a proportionate adjustment has been made to the number\nof outstanding warrants, per share exercise price and the number of shares issuable upon the exercise of all outstanding stock options\nand warrants to purchase shares of common stock as per the terms and conditions of the respective warrant agreements, and (ii) the number\nof shares reserved for issuance pursuant to the Company’s equity incentive plans was also reduced proportionately.\n\n \n\nThe Company’s shareholders authorized, and the Board of Directors\napproved for a 1-for-20 Reverse Stock Split (the “Second Reverse Stock Split”), which became effective on March 21, 2025. Any\nfractional shares that would have otherwise resulted from the Second Reverse Stock Split were rounded up to the nearest whole share.\n\n \n\nEvery 20 shares of issued and outstanding Common Stock has\nbeen consolidated into one share, without affecting the par value. In addition, (i) a proportionate adjustment has been made to the number\nof outstanding warrants, per share exercise price and the number of shares issuable upon the exercise of all outstanding stock options\nand warrants to purchase shares of common stock as per the terms and conditions of the respective warrant agreements, and (ii) the number\nof shares reserved for issuance pursuant to the Company’s equity incentive plans was also reduced proportionately.\n\n \n\n**3B**\n**Troubled Debt Restructuring**\n\n** **\n\nOn April 22, 2025, the Company entered\ninto a settlement agreement with Siddharth Assets, wherein the lessor has waived a portion of the outstanding liability and penalty accrued\nthereon. The Company agreed to make settlement in four monthly instalments, starting from April 2025. This outstanding liability is recorded\nunder “Other liabilities” in “Other non-current liabilities” in the Consolidated Balances Sheets for the year. In\nthe event of default, for every defaulted installment until realization of the entire settlement amount, a stipulated amount as per the\nagreement shall be paid additionally each month until the default is cured. The Company has accounted for this transaction as troubled\ndebt restructuring under ASC 470-60. As at March 31, 2026, the Company has fully paid the balance payable against rental dues to Siddharth\nAssets.\n\n \n\nThe total gain on troubled debt restructuring recorded for\nthe year ended March 31, 2026 is $72,912 ($1,171,161 for the year ended March 31, 2025 respectively). Basic EPS was increased by $0.006\nas a result of these gains during the year ended March 31, 2026.\n\n \n\nF-29\n\n* *\n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n* *\n\n**4****Cash and cash equivalents***\n\n \n\nThe components of cash and cash equivalents were as follows:\n\n \n\n**(In USD)**** **\n**March 31,**** **** **\n**March 31,**** **\n\nAs at** **\n2026  \n2025 \n\nBalances in bank accounts** **\n**$****328,586**  \n**$**1,077,275 \n\nCash and cash equivalents** **\n**$**328,586  \n**$**1,077,275 \n\n \n\n*Refer to Note 28 – VIE.\n\n \n\n**5**\n**Accounts receivable, net of allowance for credit losses**\n\n \n\nThe components of accounts receivable were as follows:\n\n \n\n**(In USD)**** **\n**March 31,**** **** **\n**March 31,**** **\n\nAs at \n2026  \n2025 \n\nAccounts receivable \n**$**112,333  \n**$**214,083 \n\nAllowance for credit losses \n** **(12,166) \n** **(13,433)\n\nNet accounts receivable \n**$**100,167  \n**$**200,650 \n\nThe Company records an allowance for credit losses for amounts\nowed for completed transactions that may never settle or be collected. For the year ended March 31, 2026, allowance amounting to $NIL\nwas created for expected credit losses respectively (March 31, 2025 :$NIL).\n\n \n\n**Movement in allowance for expected credit loss**\n\n \n\n**(In USD)**** **\n**March 31,**** **** **\n**March 31,**** **\n\nAs at \n2026  \n2025 \n\nBalance at the beginning of the period \n**$**13,433  \n**$**13,774 \n\nForeign currency translation adjustment \n** **(1,267) \n** **(341)\n\nClosing balance \n**$**12,166  \n**$**13,433 \n\n \n\nF-30\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n**6****Balances with government authorities**\n\n \n\nThe components of balances with\ngovernment authorities were as follows:\n\n \n\n**(In USD)**** **\n**March 31,**** **** **\n**March 31,**** **\n\nAs at \n2026  \n2025 \n\nCurrent \n   \n  \n\nGoods and service tax receivable \n**$**3,400,071  \n**$**3,941,649 \n\nLess: Impairment* \n** **(3,400,071) \n** **(3,754,191)\n\n  \n**$**\n-\n  \n**$**187,458 \n\n \n\n* As of March 31, 2026, the impairment amounts to $3,400,071 (March 31, 2025 : $3,754,191) for the estimated losses resulting from substantial doubt about the utilization of the tax credits. This allowance for impairment of tax credits was determined by estimating future uses of tax credits against output Goods and Service Tax (“GST”). No impairment allowance has been created for the year ended March 31, 2026 and March 31, 2025.\n\n \n\n**7****Other current assets***\n\n \n\nThe components of other current assets were as follows:\n\n \n\n(In USD) \nMarch 31,  \nMarch 31, \n\nAs at \n2026  \n2025 \n\nSecurity deposits \n$24,405  \n$24,997 \n\nFranchise tax refund receivable \n \n-\n  \n 84,490 \n\nAdvance to employees \n 13,297  \n 29,730 \n\nAdvance to suppliers \n 43,514  \n 5,201 \n\nReceivables from car sale \n 3,037  \n 57,892 \n\nOther receivables \n 19,320  \n 58,890 \n\nOther current assets \n$103,573  \n$261,200 \n\n \n\n*Refer to Note 28 – VIE.\n\n \n\nF-31\n\n* *\n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n* *\n\n**8****Assets held for sale**\n\n \n\nThe components of assets held for sale were as follows:\n\n \n\n**(In USD)**** **\n**March 31,**** **** **\n**March 31,**** **\n\nAs at \n2026  \n2025 \n\nVehicles \n$\n      -\n  \n$267,293 \n\nTotal assets held for sale \n$\n-\n  \n$267,293 \n\n \n\nAssets held for sale represents the vehicles and office equipments\nheld for sale in the Indian subsidiary, Zoomcar India Private Limited. The gain or loss on sale of these assets is included in (Gain)/Loss\non sale of assets held for sale under Other (income)/expense of Consolidated Statements of Operations.\n\n \n\nDuring the year ended March 31, 2026, total gain of $10,755\nwas recorded against gain on sale of assets held for sale (gain of $1,054 for the year ended March 31, 2025). Further, during the year\nended March 31, 2026, the Company has recorded $23,789 towards impairment expense ($448,484 for the year ended March 31, 2025).\n\n \n\nDuring the year ended March 31, 2026, the closing balance has\nbeen reclassed to ‘Other non current assets’ as the sale of these assets are not probable within 12 months.\n\n \n\n**9****Property and equipment, net**\n\n \n\nThe components of property and equipment\nwere as follows:\n\n \n\n**(In USD)**\n \n**Estimated**\n \n**March 31,**\n \n \n**March 31,**\n \n\n**As at**\n \n**useful life**\n \n**2026**\n \n \n**2025**\n \n\nVehicles and devices\n \n5 years\n \n**$**\n**168,782**\n \n \n**$**\n**2,399,282**\n \n\nComputer equipments\n \n2 - 7 years\n \n \n498,528\n \n \n \n551,877\n \n\nOffice equipments\n \n3 - 10 years\n \n \n205,365\n \n \n \n229,481\n \n\nFurniture and fixtures\n \n10 years\n \n \n1,081\n \n \n \n1,720\n \n\nTotal, at cost\n \n \n \n \n873,756\n \n \n \n3,182,360\n \n\nLess: Accumulated depreciation\n \n \n \n \n(720,261\n)\n \n \n(2,855,236\n)\n\nTotal property and equipment, net\n \n \n \n**$**\n**153,495**\n \n \n**$**\n**327,124**\n \n\n \n\nDepreciation expense for the year ended\nMarch 31, 2026 was $86,615 ($430,613 for the year ended March 31, 2025).\n\n \n\nF-32\n\n* *\n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n* *\n\n**10****Leases**\n\n** **\n\nThe Company’s leases primarily include\nvehicles and corporate offices which have been classified as finance leases and operating leases, respectively. The lease term of operating\nand finance leases varies between 3 to 7 years. The lease agreements do not contain any covenants to impose any restrictions except for\nmarket-standard practice for similar lease arrangements. In assessment of the lease term, the Company considers the extension option as\npart of its lease term for those lease arrangements where the Company is reasonably certain of availing the extension option.\n\nThe components of lease expense\nwere as follows:\n\n \n\n**(In USD)**** **\n**March 31,**** **** **\n**March 31,**** **\n\nPeriod ended \n2026  \n2025 \n\nInterest on finance lease liabilities \n$281,808  \n$550,903 \n\nOperating lease cost \n 327,517  \n 363,435 \n\nShort term lease cost \n 104,764  \n 486,289 \n\nTotal lease cost \n$714,089  \n$1,400,627 \n\n \n\nSupplemental cash flow information\nrelated to leases was as follows:\n\n \n\n**(In USD)**** **\n**March 31,**** **** **\n**March 31,**** **\n\nPeriod ended \n2026  \n2025 \n\nCash paid for amounts included in the measurement of lease liabilities: \n   \n  \n\nOperating cash outflows for operating leases \n$(326,005) \n$(338,626)\n\nFinancing cash outflows for finance leases \n$(291,326) \n$(2,103,219)\n\n \n\nSupplemental balance sheet information\nrelated to leases was as follows:\n\n \n\n(In USD) \nMarch 31,  \nMarch 31, \n\nAs at \n2026  \n2025 \n\nOperating Leases \n   \n  \n\nOperating lease right-of-use assets \n$739,652  \n$1,021,898 \n\n  \n    \n   \n\nCurrent operating lease liabilities \n$225,655  \n$316,756 \n\nNon-current operating lease liabilities \n 601,759  \n 801,981 \n\nTotal operating lease liabilities \n$827,414  \n$1,118,737 \n\n  \n    \n   \n\nFinance Leases \n    \n   \n\nCurrent finance lease liabilities \n$2,058,281  \n$3,966,962 \n\nTotal finance lease liabilities \n$2,058,281  \n$3,966,962 \n\n \n\nIn prior years, the Company had impaired property and equipment acquired under finance leases.\n\n \n\n**Weighted Average Remaining Lease Term**\n \n \n \n \n \n \n \n \n\nOperating leases\n \n \n36 months\n \n \n \n48 months\n \n\nFinance leases\n \n \n6 months\n \n \n \n18 months\n \n\n**Weighted Average Discount Rate**\n \n \n \n \n \n \n \n \n\nOperating leases\n \n \n13.00\n%\n \n \n13.00\n%\n\nFinance leases\n \n \n9.00\n%\n \n \n9.00\n%\n\n \n\nF-33\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n**10****Leases (Continued)**\n\n \n\nThe Company determines the incremental borrowing rate by adjusting\nthe benchmark reference rates, with appropriate financing spreads applicable to the respective geographies where the leases were entered\nand lease specific adjustments for the effects of collateral.\n\n \n\n \n \n**Year ended March 31, 2026**\n \n\n \n \n**Operating\nLeases**\n \n \n**Finance\nLeases**\n \n\nMaturities of lease liabilities are as follows:\n \n \n \n \n \n \n \n \n\n2027\n \n$\n320,092\n \n \n$\n2,084,656\n \n\n2028\n \n \n335,673\n \n \n \n-\n \n\n2029\n \n \n352,034\n \n \n \n-\n \n\n**Total Lease Payments**\n \n$\n1,007,799\n \n \n$\n2,084,656\n \n\nLess : Imputed Interest\n \n \n180,385\n \n \n \n26,375\n \n\n**Total Lease Liabilities**\n \n**$**\n**827,414**\n \n \n**$**\n**2,058,281**\n \n\n \n\nAs at March 31, 2026, the Company continues to default on equated monthly\ninstallments (EMI) payments owed to Ayvens India Private Limited (formerly Leaseplan India Private Limited) (Lender). In adherence to\nthe agreement, the Company has accumulated penal interest at a simple interest rate of 1% per month on the overdue EMIs for first 2 months\nof default and an additional simple interest of 1.5% per month is levied on the overdue amount as it is continues to be unpaid after 60\ndays from date of default, amounting to $284,404 for the year ended 31 March 2026 ($225,142 for the year ended 31 March 2025). During\nthe year ended March 31, 2026, a previously granted conditional waiver of $1,131,835 was withdrawn upon the occurrence of a contractual\ndefault under the restructuring agreement. Accordingly, the Company recognized $1,131,835 as Loss on withdrawal of Lease Waiver. The unpaid\nlease installments and penal interest totaling to $2,983,165 has been included under Accounts Payable.\n\n \n\nF-34\n\n** **\n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n** **\n\n**11****Intangible Assets**\n\n \n\nThe components of intangible assets, were as follows:\n\n \n\n   **March 31, 2026**   March 31, 2025 \n\n**As at (In USD)**** ** **Average useful life**** ** **Gross Carrying Amount**** **** ** **Accumulated Amortization**** **** ** **Net Carrying Amount**** **** ** **Average useful life**** ** **Gross Carrying Amount**** **** ** **Accumulated Amortization**** **** ** **Net Carrying Amount**** **\n\nComputer software  5 years   14,846   **$**(12,859)  **$**1,987   5 years   16,392   **$**(10,941)  **$**5,451 \n\nTotal       14,846    (12,859)   1,987       16,392    (10,941)   5,451 \n\n \n\nAmortization expense for the year ended March 31, 2026 and\nMarch 31, 2025 was $3,151 and $3,292 respectively. \n\n \n\nFuture\namortization of intangible assets that will be recorded in general and administrative expenses is estimated as follows.\n\n \n\n  \nYear\nended\n\n31 March \n\n   \nAmount\n($) \n\n2027 \n**$**1,987 \n\nTotal\nremaining amortization \n 1,987 \n\n \n\nF-35\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n ** **\n\n**12****Investments***\n\n \n\nThe components of investments were as follows:\n\n \n\n(In USD) \nMarch 31,  \nMarch 31, \n\nAs at \n2026  \n2025 \n\nLong term investments \n   \n  \n\nInvestments in certificate of deposits** \n$21,066  \n$25,653 \n\n  \n$21,066  \n$25,653 \n\n \n\n* Refer to Note 28 – VIE.\n\n** Investments includes certificate of deposits and interest accrued on the same.      \n\n \n\n**13****Other non-current assets**\n\n \n\nThe components of other non-current assets were as follows:\n\n \n\n**(In USD) As at**\n \nMarch 31,\n2026\n \n \nMarch 31,\n2025\n \n\n \n \n \n \n \n \n \n\nSecurity deposits\n \n**$**\n170,922\n \n \n**$**\n188,723\n \n\nDeposits with tax authorities\n \n** **\n453,327\n \n \n** **\n422,282\n \n\nAssets previously held for sale*\n \n \n213,875\n \n \n \n\n \n\n \n\nRestricted cash**\n \n** **\n-\n \n \n** **\n94,762\n \n\nOther non-current assets\n \n**$**\n838,124\n \n \n**$**\n705,767\n \n\n \n\n* During the year ended March 31, 2026, the Company reassessed the assets held for sale that were previously presented under current assets. As the sale of these assets is no longer expected to be completed within one year, the conditions for classification as held for sale under ASC 360-10-45-9 are no longer met. Accordingly, the assets have been reclassified from assets held for sale to other non-current assets . In accordance with ASC 360-10-35-44, the assets have been measured at the lower of their carrying amount before classification as held for sale, adjusted for the depreciation that would have been recognised had they been continuously classified as held and used, and their fair value at the date of the decision not to sell. No adjustment was required as the adjusted carrying amount was lower than fair value.\n\n \n\n** Restricted cash represented amount held as an indemnification escrow fund with the placement agent for all indemnification liabilities\nand expenses payable by the Company as per the placement agent agreement for a period of 3 years from closing of the November 2024 Offering.\nAs at March 31, 2026, all dues towards the same have been settled by the Company.\n\n \n\n**14****Accounts Payable***\n\n \n\nThe components of accounts payable were as follows:\n\n \n\n(In USD)\nAs at \nMarch 31,\n2026  \nMarch 31,\n2025 \n\nCurrent \n   \n  \n\nAccounts payable towards related parties \n$152,435  \n$152,435 \n\nAccounts Payable towards others \n 22,484,767  \n 12,396,147 \n\nTotal accounts payable \n$22,637,202  \n$12,548,582 \n\n** **\n\n*Refer to Note 28\n– VIE.\n\n** **\n\nThe Indian subsidiary company has payables aggregating $238,207\nand $219,285 as at March 31, 2026 and March 31, 2025 respectively towards services received from overseas parties, the settlement of which\nhas been delayed beyond the period stipulated under the Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder,\nand for which approval of its Authorised Dealer bank for the delay is yet to be obtained. Management of the subsidiary company intends\nto regularise the delay with the Authorised Dealer bank and, where required, to file an application for compounding of the contravention\nwith the Reserve Bank of India under Section 15 of the Foreign Exchange Management Act, 1999. Based on its assessment, management is of\nthe opinion that any consequential penal liability arising from such contravention will not be material to these financial statements,\nand accordingly no adjustment has been made in respect thereof in these financial statements.\n\n \n\nF-36\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n**15****Debt**\n\n \n\nThe components of long term and short term debt were as follows:\n\n \n\n**(In USD)\nAs at**   **Effective\ninterest rates**     **Maturities***   **March 31,\n2026**     **March 31,\n2025**  \n\n**Current**                      \n\nFrom NBFCs                            \n\n- Mahindra & Mahindra Financial Services Limited**     -     March 31, 2027   **$** 344,977     **$** 439,415  \n\n- TATA Motors Finance Limited     12.27 %   May 31, 2027     1,172,688       1,749,415  \n\n- Orix Leasing and Financial Services India Limited     12.00 %   December 15, 2025     -       58,978  \n\n                             \n\nFrom Others                            \n\n- Kotak Mahindra Financial Services Limited**     1.00 %   March 31, 2027     370,416       376,861  \n\n- Clix Finance India Private Limited**     0.05 %   March 2, 2027     71,085       64,621  \n\n- AON Risk Insurance Services West, Inc     8.25 %   April 28, 2025     -       162,051  \n\n- Honor PCF Trust I     9.05 %   October 28, 2026     552,278       -  \n\n                **$** 2,511,444     **$** 2,851,341  \n\nTotal maturity for the year ending on March 31,                            \n\n2027                       **$** 2,511,444  \n\n                        **$** 2,511,444  \n\n \n\n* Maturities have been stated as per the estimated repayment timelines. For Tata Motors Finance Limited, due to non-payment of scheduled EMIs, the loan is immediately payable and is classified as current. The debts are not associated with any restrictive covenants.\n\n** These debts are past overdue based on the contractual maturities.\n\n \n\nThe Company has recorded an interest expense amounting to $207,611\nfor the year ended March 31, 2026 ($311,826 for the year ended March 31, 2025).\n\n \n\nAs of March 31, 2026, the Company has\ndefaulted on debt obligations owed to various lenders totaling to $874,580 (March 31, 2025 - $820,679). Further, the Company has recorded\npenal interest expense amounting to $84,237 for the year ended March 31, 2026 ($159,269 for the year ended March 31, 2025 ).\n\n \n\nThe Company has refinanced its D&O insurance through\nHonor PCF Trust I. During the year ended March 31, 2026, the Company has defaulted on payment of installments amounting to $124,100.\nThe Company has recorded interest expense of $12,603 and a default penalty of $6,205 in the Consolidated Statements of Operations\nfor the year ended March 31, 2026.\n\n \n\nF-37\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n**15A**\n**Unsecured notes**\n\n** **\n\nThe following is a summary of the Company’s Unsecured\nnotes payable as of March 31, 2026 and March 31, 2025:\n\n \n\n**(In\nUSD)\nAs at** \nMarch\n31,\n\n2026  \nMarch\n31,\n\n2025 \n\nBridge\nnotes \n**$**890,596  \n$- \n\nLess:\nDiscount and debt issuance cost on issuance, net of amortization \n** **(79,418) \n - \n\nTotal \n**$**811,178  \n$             - \n\n** **\n\nDuring the year ended March 31, 2026, the Company entered into\nSecurities Purchase Agreements with certain institutional accredited investors pursuant to which the Company issued Bridge notes for a\ntotal principal amount of $1,427,825 with an initial issue discount of $ 152,825. The net proceeds disbursed to the Company were\n\n$1,223,500 after deduction of legal and due diligence fees of\n$ 51,500.\n\n \n\nAdditionally, $45,500 (i.e. 13% of net proceeds for the note\nissued in June) is due to the placement agent relating to the issuance of these bridge notes which is directly attributable to the loan\nraised, thereby bringing the total debt issuance costs to $97,000.\n\n \n\nThe Company defaulted on loan installments due in March 2026\npayable to 1800 Diagonal Lending LLC and Boot Capital LLC, amounting to $94,693. Subsequently, on April 5, 2026, the Company has taken\na new loan from Walsh Capital Industries Corporation amounting to $ 100,000 at an initial discount of $5,000 to pay these installments.\n\n \n\nThe discount and issuance cost on bridge notes has been amortized\nover the contractual period using the effective interest method. The unamortized discount and issuance cost have been presented as net\nof the bridge notes liability.\n\n \n\nThe summary of the Bridge notes is as follows:\n\n \n\nParticulars  Issue date  Effective\nInterest\nRates   Original\nmaturity  March 31,\n2026   March 31,\n2025 \n\n1800 Diagonal Lending LLC  June 23, 2025   62.00%  March 30, 2026  $36,330   $- \n\nBoot Capital LLC  June 23, 2025   54.55%  March 30, 2026   14,005    - \n\n1800 Diagonal Lending LLC  July 31, 2025   51.72%  May 31, 2026   45,425    - \n\nBoot Capital LLC  July 31, 2025   38.39%  May 31, 2026   17,329    - \n\n1800 Diagonal Lending LLC  November 28, 2025   57.83%  September 30, 2026   98,293    - \n\nBoot Capital LLC  November 28, 2025   39.73%  September 30, 2026   37,955    - \n\nFirstfire Global Opportunities Fund, LLC  December 10, 2025   26.91%  December 10, 2026   217,512    - \n\nAuctus Fund, LLC  December 24, 2025   46.38%  December 24, 2026   111,035    - \n\n1800 Diagonal Lending LLC  February 25, 2026   42.96%  December 30, 2026   156,002               - \n\nBoot Capital LLC  February 25, 2026   32.80%  December 30, 2026   77,292    - \n\n              $811,178   $- \n\n  \n\n**Terms of Bridge notes**\n\n** **\n\nThe Bridge notes issued during the year\nended March 31, 2026, bear interest at an annual rate of 10-12%. The notes include scheduled monthly installment repayments and interest\npayments starting November 30, 2025 for notes issued in June 2025, August 30, 2025 for notes issued in July 2025, December 30, 2025 for\nnotes issued in November 2025, June 8 and 24, 2026 for notes issued in December 2025 and August 30, 2026 for notes issued in February\n2026.\n\n \n\nThe notes may be prepaid in part or full by the Company at a discount to\nthe outstanding balance. The notes are subject to default interest rate of 8-22% (as specified in the Note agreement) per annum and include\ncustomary events of default.\n\n \n\nIn the event of an uncured default under\nany of the Bridge notes, the holder has the right to elect to convert the outstanding amount (includes principal, accrued interest, default\ninterest, and other fees as applicable) into the Company’s Common stock at a conversion price equal to 73-75% of the lowest trading\nprice of the Company’s Common stock during the ten or fifteen trading days (as specified in the Note agreement) immediately prior\nto the applicable conversion date.\n\n \n\nThe interest on the Unsecured notes was $229,582 for the year ended March\n31, 2026 ($NIL for the year ended March 31, 2025) which has been recognized in the Consolidated Statements of Operations for their respective\nyear.\n\n \n\nF-38\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n**15B****Convertible\nnotes**\n\n** **\n\nThe following is a summary of the Company’s Convertible\nRedeemable notes payable as of March 31, 2026 and March 31, 2025:\n\n \n\n**(In USD)\nAs at** \nMarch\n31,\n\n2026  \nMarch\n31,\n\n2025 \n\nConvertible Redeemable notes \n**$**277,882  \n$- \n\nLess: Discount and debt issuance cost on issuance,\nnet of amortization \n** **(15,047) \n - \n\n  \n** **   \n   \n\nPromissory note \n**$**194,128  \n$- \n\nLess:\nDiscount and debt issuance cost on issuance, net of amortization \n** **(5,615) \n - \n\nTotal \n**$**451,348  \n$         - \n\n \n\nOn August 19, 2025 , the Company entered into Securities Purchase\nAgreement with certain institutional accredited investor pursuant to which the Company issued a Promissory note for a total principal\namount of $180,000 with an initial issue discount of $18,000. The net proceeds disbursed to the Company were $158,500 after deduction\nof legal and due diligence fees of $3,500. Hence, the total debt issuance costs amounts to $3,500.\n\n \n\nOn August 24, 2025 , the Company entered into Securities Purchase\nAgreements with certain institutional accredited investors pursuant to which the Company issued convertible redeemable notes for a total\nprincipal amount of $225,000 with an initial issue discount of $15,000. The net proceeds disbursed to the Company were\n\n$201,000 after deduction of legal and due diligence fees of\n$9,000. Hence, the total debt issuance costs amounts to $9,000.\n\n \n\nOn January 8, 2026 , the Company entered into Securities Purchase\nAgreements with certain institutional accredited investors pursuant to which the Company issued convertible redeemable notes for a total\nprincipal amount of $ 42,614 with an initial issue discount of $ 5,114. The net proceeds disbursed to the Company were $ 35,000 after\ndeduction of legal and due diligence fees of $ 2,500. Hence, the total debt issuance costs amounts to $ 7,614.\n\n \n\nThe discount and issuance cost on convertible notes has been\namortized over the contractual period using the effective interest method. The unamortized discount and issuance cost have been presented\nas net of the convertible note liability.\n\n \n\n**Terms of Convertible notes**\n\n \n\nThe convertible redeemable notes issued\nhave a maturity date of July 8, 2026 and August 24, 2026 and bear interest at an annual rate ranging from 6 - 12% as specified in the\nagreement. The Company will pay each interest payment and the outstanding principal due upon this convertible redeemable notes before\nor on the Maturity Date. These convertible redeemable notes may be prepaid in part or full, by the Company at a discount to the outstanding\nbalance. One of the convertible redeemable note are subject to default interest rate of 22% per annum and include customary events of\ndefault and upon default, in the other convertible redeemable note, the then outstanding principal shall be increased by 50%.\n\n \n\nThe Holders of these convertible redeemable\nnotes is entitled, at its option, at time specified in the agreements, to convert all or any amount of the principal face amount of these\nconvertible redeemable notes then outstanding into shares of the Company’s common stock (the “Common Stock”) at a price (“Conversion\nPrice”) equal to 72% - 75% (as specified in the agreement) of the lowest trading prices of the Common Stock (as stipulated in the\nagreement) as reported on the OTC Markets on which the Company’s shares are then traded or any exchange upon which the Common Stock\nmay be traded in the future (the “Exchange”), for the seven or fifteen prior trading days (as specified in the agreement) including\nthe day upon which a Notice of Conversion is received by the Company.\n\n \n\n**Terms of Promissory notes**\n\n \n\nThe Promissory notes have a maturity date\nof August 19, 2026 and bear interest at an annual rate of 12%. The notes include scheduled monthly installment repayments as stipulated\nin the agreement and may be prepaid in part or full, by the Company at a discount to the outstanding balance.\n\n \n\nThe Holder shall have the right, on any\nTrading Day, at any time on or following the earlier of (i) the date that an Event of Default occurs under this Note or (ii) the date\nthat that is one hundred eighty (180) calendar days after the Issue Date, to convert all or any portion of the then outstanding and unpaid\nPrincipal Amount and interest (including any Default Interest) into fully paid and non-assessable shares of Common Stock. The per share\nconversion price into which Principal Amount and interest (including any Default Interest) under this Note shall be convertible into shares\nof Common Stock hereunder as further described in this Note (the “Conversion Price”) shall equal the Market Price (as defined\nin this Note), subject to adjustment as provided in this Note. “Market Price” shall mean 75% of the lowest closing bid price\nof the Common Stock on the Principal Market during the fifteen (15) Trading Day period immediately preceding the respective Conversion\nDate.\n\n \n\nThe interest on the convertible redeemable notes was $56,849 for the year\nended March 31, 2026 ($NIL for the year ended March 31, 2025) which has been recognized in the Consolidated Statements of Operations for\ntheir respective year.\n\n* *\n\nF-39\n\n* *\n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n* *\n\n**16****Unsecured convertible note (‘Atalaya Note’)**\n\n** **\n\nThe following is a summary of the\nCompany’s Atalaya Note payable for which it elected fair value option as on March 31, 2026 and March 31, 2025:\n\n \n\n**(In USD)\nAs at** \nMarch\n31,\n\n2026  \nMarch\n31,\n\n2025 \n\nAtalaya\nNote \n$6,554,074  \n$6,002,269 \n\nTotal \n$6,554,074  \n$6,002,269 \n\n \n\nThe Atalaya Note was initially\nrecorded at the fair value of $10,167,194 on issuance. The Atalaya Note was issued at 7.5% discount on principal amounting to\n$632,596 and bears an interest of 8% and an additional interest on default of 8% compounded monthly.\n\n \n\nDuring the year ended March 31, 2025, partial liability was\nsettled by issue of 6,257 shares to the Atalaya Note holders for a settlement of $2,324,696.\n\n \n\nSubsequently, the Company received notices from Atalaya/(ACM Zoomcar Convert\nLLC) regarding equity line transactions and incurring debt without the Purchaser’s consent. Atalaya filed a case against the Company\nseeking relief from the above mentioned defaults. On March 28, 2025, the Supreme Court of the State of New York ordered the Company to\npay the outstanding principal and accrued interest totaling $5,997,833, with additional interest at 9% per annum until full payment.\n\n \n\nDuring the year ended March 31, 2026,\nthe outstanding liability is $6,554,074, representing the outstanding principal, accrued interest and attorney fees and costs. The Company\nhas recognised a loss on settlement of litigation of $12,000 in the Consolidated Statements of Operations on account of this.\n\n \n\nThe change in fair value resulted\nin loss of $539,805 that is recorded for the year ended March 31, 2026 respectively (gain of $1,740,636 for the year ended March 31,\n2025) in the Consolidated Statements of Operations (as no portion of such fair value adjustment resulted from instrument-specific credit\nrisk). Also, Refer Note 29.\n\n* *\n\nF-40\n\n* *\n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n* *\n\n**17****Other\ncurrent liabilities***\n\n \n\nThe components of other current liabilities were as follows:\n\n* *\n\nAs at \nMarch 31, 2026  \nMarch 31, 2025 \n\nPayable to customers\n \n$168,266  \n$273,591 \n\nStatutory dues payable \n 303,640  \n 1,588,047 \n\nCapital creditors \n 5,243  \n 5,790 \n\nEmployee benefit expenses payable \n 485,100  \n 274,049 \n\nOther liabilities** \n 631,162  \n 1,058,172 \n\nOther current liabilities \n$1,593,411  \n$3,199,649 \n\n \n\n* Refer to Note 28 – VIE.\n\n** Includes payables related to operating leases and the residual value of vehicles acquired from Ayvens India Private Limited (Formerly Leaseplan India Private Limited).\n\n* *\n\n**18**\n**Accumulated other comprehensive income/ (loss)**\n\n** **\n\nThe components of accumulated other comprehensive income/(loss) were as\nfollows:** **\n\n** **\n\n**(In USD)\nAs at** \nMarch\n31,\n\n2026  \nMarch\n31,\n\n2025 \n\n(Loss)/ Gain on employee\nbenefit \n** **   \n** **  \n\nBalance, beginning of year \n**$**(18,186) \n**$**46,101 \n\nRecognized during the period, net of taxes amounts to $NIL \n** **(51,788) \n** **(57,663)\n\nReclassification to\nnet income: Amortization gains \n** **5,570  \n** **(6,624)\n\nBalance, end of year \n**$**(64,404) \n**$**(18,186)\n\n  \n** **   \n** **  \n\nForeign currency translation\nadjustment \n** **   \n** **  \n\nBalance, beginning of year \n**$**2,149,708  \n**$**1,749,891 \n\nTranslation adjustment on derecognition of\nsubsidiary \n** **(1,293,717) \n** **- \n\nTranslation adjustments gain recognized during the period, net of taxes amounts to $NIL \n** **1,605,278  \n** **399,817 \n\nBalance,\nend of year \n**$**2,461,269  \n**$**2,149,708 \n\nAccumulated\nother comprehensive income \n**$**2,396,865  \n**$**2,131,522 \n\n** **\n\nF-41\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n**19 **\n**Capital Stock and Warrants**\n\n** **\n\nDuring the year ended March 31, 2025,\nthe Company executed four equity offerings. These offerings involved the sale of Common Stock, Pre-Funded Warrants, Series A Warrants\nand a maximum number of Series B Warrants as defined in the respective agreements.\n\n \n\nHolders of common stock are entitled to\none vote per share, dividends at the discretion of the Board of Directors, and a pro-rata share of residual assets upon liquidation. This\ncomprehensive activity reflects the Company’s capital restructuring and financing strategy during the reporting period.\n\n \n\nSeries A warrants were issued with initial\nexercise prices of $80.60, $39.00, and $6.24, each exercisable for five years from the initial exercise date. Series B warrants were issued\nwith zero initial eligibility, subject to increase on the Reset Date based on the Reset Share Amount formula. Placement agents received\n10% of the Series A and Series B warrants issued to investors, along with Common Stock Warrants, as compensation. The Company classified\nall Series A and Series B warrants as derivative financial instruments under ASC 815-10-15-83 upon initial recognition. During the year\nended March 31, 2025, due to anti-dilution and reset provisions, the exercise prices of Series A and Series B warrants were adjusted to\nthe floor price during the year, and the number of warrants was increased to maintain the aggregate exercise price. As a result, the number\nof exercisable warrants became fixed, eliminating variability, and the outstanding Series A and Series B warrants were reclassified to\nequity at their respective reclassification date fair values. Warrants exercised before reclassification were reclassified at their exercise\ndate fair value, while those exercised after were adjusted through additional paid-in capital.\n\n \n\nAs of March 31, 2026, 870,187 Series\nA warrants exercisable at $16.12, 2,549,143 Series A warrants exercisable at $6.24, 781,122 Series B warrants exercisable at $0.002 and\n64,600 Pre-funded warrants remains outstanding for the above equity offerings. During the year ended March 31, 2026, 4,654,461 shares\nwere issued on exercise of Series A warrants, 1,469,497 shares on exercise of Series B warrants and 20,000 shares on exercise of Pre-funded\nwarrants. Also during the year ended March 31, 2026, 233,645 Series A warrants were foregone by the investor.\n\n \n\nAs of March 31, 2026, 53,447 Placement\nagent warrants exercisable at $16.12, remains outstanding. During the year ended March 31, 2026, 93,500 shares were issued on exercise\nof Placement agent warrants.\n\n \n\nFurther, during the year ended March 31, 2026, the Company\nhas cancelled 1,384 shares of common stock inadvertently issued in excess earlier on exercise of warrants.\n\n \n\nAs of March 31, 2026, the Company has issued 2,874,559 Pre-Funded\nwarrants in lieu of liquidation damages payable to some investors. Out of these, 33,458 Pre-Funded warrants has been exercised during\nthe period.\n\n \n\nFurther, during the year ended March 31, 2026, the Company\nhas issued 2,400,310 Pre-Funded warrants in exchange of common stock cancelled during the period.\n\n \n\nOn February 25, 2026, the Company consummated\nthe closing of Common stock warrants in a private placement offering. The Company issued an aggregate of 939 warrants for aggregate gross\nproceeds of $939. Each Warrant is exercisable for one share of the Company’s common stock with a par value $0.0001 per share and\nat an initial exercise price of $6,000 per share, subject to adjustment as mentioned in the Securities Purchase Agreement. No placement\nagent, underwriter, broker or dealer manager was engaged in connection with the Private Placement, and no commissions or placement agent\nfees were paid by the Company.\n\n \n\nAs of March 31, 2026, the Company has 1,940,251 number of restricted\nshares (1,909,833 as of March 31, 2025) and 5,493,740 number of unrestricted shares (552,585 as on March 31, 2025).\n\n \n\nF-42\n\n** **\n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n** **\n\n**20****Revenue**\n\n** **\n\nThe components of revenue, net were as follows:** **\n\n \n\n  \nYear\nended March 31, \n\n**(In USD)**  \n2026  \n2025 \n\nRevenue from services \n   \n  \n\nFacilitation revenue (net) \n$9,072,184  \n$9,024,576 \n\n  \n    \n   \n\nOther\noperating revenues \n 83,841  \n$81,315 \n\nTotal \n$9,156,025  \n$9,105,891 \n\n \n\n  \nYear\nended March 31, \n\n  \n2026  \n2025 \n\nRevenue by geographical location \n   \n  \n\nIndia \n$9,156,025  \n$9,088,885 \n\nEgypt \n -  \n 13,094 \n\nIndonesia \n -  \n 3,912 \n\n  \n$9,156,025  \n$9,105,891 \n\n \n\n**Contract balances**\n\n \n\nThe Company’s contract liabilities for consideration collected\nprior to satisfying the performance obligations against scheduled trips is $406,684 and $450,355 as at March 31, 2026 and March 31, 2025\nrespectively.\n\n \n\nDuring the year ended March 31, 2026, the Company has offered\nvouchers that results in the deferral of revenue equivalent to amount received on the date of purchase of such vouchers. The accumulated\ndeferred revenue in relation to vouchers issued amounts to $30,292 and $NIL as at March 31, 2026 and March 31, 2025, respectively.\n\n \n\nFurther, the Company offers loyalty program, Z-Points, that\nresults in the deferral of revenue equivalent to the retail value on the date points are earned. The Company had accumulated deferred\nrevenue amounting to $78,878 and $21,365 as at March 31, 2026 and March 31, 2025, respectively in relation to loyalty program.\n\n \n\nThe total balance under contract liability as at March 31,\n2026 and March 31, 2025 is $515,854 and $471,720, respectively.\n\n \n\nRevenue recognized during the year ended March 31, 2026 which\nwas included in contract liabilities balance at the beginning of the respective period amounts to $181,982 ($262,940 recognized during\nthe year ended March 31, 2025).\n\n \n\nF-43\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n**21****Finance costs**\n\n \n\nThe components of finance costs\nwere as follows: (In USD)\n\n \n\n  \nYear ended March 31, \n\n(In USD) \n2026  \n2025 \n\nFinance costs -other than related parties \n   \n  \n\nInterest on vehicle loans \n$195,008  \n$293,430 \n\nInterest on finance leases \n 281,808  \n 550,903 \n\nInterest on subcontractor liability \n \n-\n  \n 91,891 \n\nIssuance cost towards issue of warrants \n \n-\n  \n 3,294,526 \n\nInterest on redeemable promissory notes \n \n-\n  \n 1,995,967 \n\nAmortisation of discount and debt issuance cost on redeemable promissory notes \n \n-\n  \n 1,765,615 \n\nInterest on unsecured notes \n 229,582  \n \n-\n \n\nInterest on Convertible notes \n 56,849  \n \n-\n \n\nChange in fair value of Atalaya Note \n 539,805  \n   \n\nBank charges \n 17,776  \n 25,067 \n\nLoss on withdrawal of lease waiver \n 1,131,835  \n \n-\n \n\nOther borrowings cost \n 730,485  \n 589,774 \n\nTotal \n$3,183,148  \n$8,607,173 \n\n ** **\n\n**22****Other (income)/expense, net**\n\n \n\nThe components of other (income)/expense, net were as follows:\n(In USD)\n\n \n\n  \nYear\nended March 31, \n\n**(In USD)** \n2026  \n2025 \n\nOther (income)/expense, net - other than related\nparties \n   \n  \n\nInterest income \n$(9,007) \n$(40,428)\n\nChange in fair value of derivative financial\ninstruments \n -  \n (9,035,085)\n\nLoss on modification of finance leases \n -  \n 456,715 \n\nChange in fair value of Atalaya Note \n - \n (1,740,636)\n\nLoss on litigation settlement* \n 5,603,193  \n 12,738,865 \n\nLoss on settlement of liability \n 42,558  \n - \n\nLoss/(gain) on sale of property & equipment \n 2,188  \n (114)\n\nGain on sale of assets held for sale \n (10,755) \n (1,054)\n\nLoss on extinguishment of liability** \n -  \n 3,458,248 \n\nBad debts written off on receivables from car\nsale \n -  \n 452,014 \n\nGain on derecognition of subsidiary, net (Refer\nNote 28)*** \n (1,748,507) \n - \n\nLiquidated damages to Investors**** \n 2,568,936  \n 570,893 \n\nImpairment on assets held for sale \n 23,789  \n 448,484 \n\nLoss on assets written off \n 111,094  \n 853,194 \n\nPayable to customers and provision written\nback \n \n(102,815\n) \n (227,643)\n\nGain on recovery of goods and service tax receivable \n \n(439,204\n) \n - \n\nGain on write off of liabilities (Refer Note 25) \n \n(1,272,825\n) \n (219,284)\n\nOther, net \n \n(25,351\n) \n 71,123 \n\nTotal \n$4,743,294  \n$7,785,292 \n\n** **\n\n* For the year ended March 31, 2026, this amount includes:\n\n1. $12,000 as litigation related attorney fees in the case of ACM Zoomcar Convert LLC/(Atalaya), pursuant to court direction.\n\n2. $152,798 towards settlement agreement Company entered with Dbest Cars India Private Limited to resolve a dispute arising from a previously entered agreement for sale of used cars.\n\n3. $150,000 towards final settlement with Gregory Bradford Moran, founder and former Chief Executive Officer.\n\n4. $5,288,395 towards the litigation settlement of certain warrant holders by issuing 39,000,000 shares at fair value, issuable at a future date.\n\n \n\nFor the year ended March 31, 2025, the Company entered into\nagreements with Randall Yanker, Aegis Capital Corp and Ellenoff Grossman & Schole LLP for settlement of litigations. Pursuant to the\nsettlement agreements, the Company has issued shares and warrants to them.\n\n \n\n** On March 31, 2025, the Company entered into settlement agreement with certain investors in exchange for waivers of rights under prior financing agreements. Pursuant to the Settlement Agreement, the Company agreed to issue shares and warrants to them.\n\n*** This is a gain of $ 1,285,826 net of Company’s cost of investment and related liabilities of the subsidiaries resulting from the derecognition of Zoomcar Vietnam Mobility LLC, Egypt Information Technology Platform LLC, and Zoomcar Netherlands Holding B. V.\n\n**** This relates to liquidated damages to the Investors on account of delay in filing of registration statements for securities issued under multiple offerings made during the previous year.\n\n \n\nF-44\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n**23****Income taxes**\n\n** **\n\nThe components of (loss)/gain before income taxes consist of\nthe following: (In USD)\n\n \n\n  \nYear ended March 31, \n\n(In USD) \n2026  \n2025 \n\nDomestic \n$(15,622,131) \n$(17,567,764)\n\nForeign \n 1,001,018  \n (8,054,539)\n\nLoss before income taxes \n$(14,621,113) \n$(25,622,303)\n\n \n\n**The following is a reconciliation\nof the statutory federal income tax rate to our effective tax rate:**\n\n \n\n  \nMarch 31, 2026 \n\n  \nAmount  \nPercentage \n\nAccounting profit/(loss) before tax \n (14,621,113) \n   \n\nTax using the Company’s domestic tax rate \n (3,070,434) \n 21%\n\n  \n    \n   \n\nTax impact of : \n    \n   \n\nU.S. state and local taxes \n 2,692,078  \n -18.5%\n\nFederal benefit for state taxes \n (2,692,078) \n 18.5%\n\n  \n    \n   \n\nForeign tax effects \n    \n   \n\nIndia \n (114,307) \n 0.8%\n\nSingapore \n (15,834) \n 0.1%\n\nOther foreign jurisdiction \n (3,751) \n 0.0%\n\nValuation allowance \n 3,204,325  \n -21.9%\n\nEffective tax rate \n \n-\n  \n 0.0%\n\nCurrent Tax expense \n \n-\n  \n 0%\n\nDeferred Tax expense \n \n-\n  \n 0%\n\nIncome tax expense reported in the Statements of operations/Effective Tax Rate \n \n-\n  \n 0%\n\n \n\nF-45\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n**23****Income taxes (Continued)**\n\n \n\n**The following table presents a reconciliation of the provision\nfor income taxes to the amount computed by applying the 21% U.S. federal statutory income tax rate to the income before taxes prior to\nthe adoption of ASU 2023-09 for the periods presented (in percentages):**\n\n \n\n  \nMarch\n31,\n\n2025 \n\nAccounting profit/(loss)\nbefore tax \n (25,622,303) \n\nTax using the Company’s\ndomestic tax rate \n (5,380,684) \n\n  \n   \n\nTax impact of : \n 21%\n\nU.S. state and local taxes \n 0.3%\n\nFederal benefit for state taxes \n -0.3%\n\nValuation allowance \n -22.2%\n\nDifference in tax rates \n 1.20%\n\nEffective tax rate \n 0.0%\n\nCurrent Tax expense \n - \n\nDeferred Tax expense \n - \n\nIncome tax expense reported\nin the Statement of profit and loss/Effective Tax Rate \n - \n\n \n\nZoomcar Holdings, Inc. and Zoomcar,\nInc. have combined unused tax losses amounting to $59,823,957 and $51,733,104 as at March 31, 2026 and March 31, 2025 respectively. $59,008,831\ncan be carried forward indefinitely, whereas $64,347 can be carried forward up to 2033; $294,720 up to 2034; $220,520 up to 2035; $115,253\nup to 2036 and $120,286 up to 2037.\n\n \n\nThe Company’s operations are\nprimarily based out of Indian jurisdiction. There are unused tax losses amounting to $94,903,655 and $113,344,007 as at March 31, 2026\nand March 31, 2025 respectively in the Indian subsidiary. The tax benefit for these losses, if not utilized, will expire on various dates\nstarting from financial year 2026 to 2033. Additionally, net operating losses amounting to $35,630,707 (March 31, 2025: 38,896,865) is\navailable for set-off against future income without any expiration date. Under the Indian jurisdiction, a period of 3 financial years\nremain open to assessment by tax authorities or a period of 10 financial years if the assessing officer has evidence that undeclared income\nexceeds certain limit.\n\n \n\nThe Company has created valuation allowance\non the deferred tax asset resulting from such losses due to Company’s history of past losses and lack of conclusive evidence to support\nthe view that sufficient taxable profit will be generated in the future by the Company to offset such losses.\n\n \n\nZoomcar Holdings, Inc. files tax returns in the U.S. federal,\nvarious state, and foreign jurisdictions. In the normal course of business, the Company is subject to examination by tax authorities.\nOur major tax jurisdiction is in India. The Indian tax authority is currently examining our 2016 through 2023 tax returns. There are other\nongoing audits in various other jurisdictions that are not material to the Consolidated Financial Statements.\n\n \n\nThe Company has filed appeals against the above orders before\nthe higher authority.\n\n \n\nThe Company has not recognized any uncertain tax position for\nthe year ended March 31, 2026 and March 31, 2025, respectively. The Company believes these orders are unlikely to be sustained at the\nhigher appellate authorities.\n\n \n\nF-46\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n**23****Income taxes (Continued)**\n\n** **\n\nDeferred income taxes reflect the net tax effects of temporary\ndifferences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax\npurposes. The Company’s deferred income tax assets and liabilities as of March 31, 2026 and 2025 consisted of the following:\n\n \n\n  \nYear ended March 31, \n\n  \n2026  \n2025 \n\nDeferred tax assets: \n   \n  \n\nNet operating loss carryforwards \n 19,524,872  \n 39,199,954 \n\nTrade Receivable \n 3,042  \n 3,358 \n\nAssets held for sale \n 106,045  \n 110,941 \n\nRestricted stock units \n 5,595  \n 11,950 \n\nProvision for expenses \n 57,666  \n 1,062,347 \n\nGratuity \n 86,772  \n 76,127 \n\nLeave encashment \n 48,915  \n 59,273 \n\nBonus \n 23,041  \n 52,526 \n\n Total deferred tax assets \n 19,855,949  \n 40,576,476 \n\nLess: Valuation allowance \n (18,205,599) \n (39,174,653)\n\nDeferred tax assets, net of valuation allowance \n 1,650,350  \n 1,401,823 \n\nDeferred tax liabilities: \n    \n   \n\nRight of use assets, net of Lease liability \n (486,356) \n (444,747)\n\nDepreciation on property, plant and equipment and intangible assets \n (612,239) \n (358,219)\n\nBorrowings \n (551,756) \n (598,857)\n\nOthers \n \n-\n  \n \n-\n \n\nTotal deferred tax liabilities \n (1,650,350) \n (1,401,823)\n\nNet deferred tax assets \n \n-\n  \n \n-\n \n\n \n\nIn assessing the realization of the deferred\ntax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized.\nThe ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which\ntemporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred\ntax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of\nthe information available, management believes that significant uncertainty exists with respect to future realization of the deferred\ntax assets and has therefore established a full valuation allowance. For the year ended March 31, 2026, the change in the valuation allowance\nwas $20,969,054.\n\n \n\nThe Company has computed income tax expense/(benefit) for the\nyear ended March 31, 2026 and March 31, 2025 by using a forecasted annual effective tax rate and adjust for any discrete items arising\nduring the period. The Company has recorded $NIL tax expense for the given years. Our effective tax rate was 0.00% for the year ended\nMarch 31, 2026 and March 31, 2025, respectively. The Company has computed a valuation allowance on deferred tax assets for the year ended\nMarch 31, 2026 and hence no deferred tax asset is recognized as at March 31, 2026. The effective tax rate differs from the statutory tax\nrate of 21% for the year ended March 31, 2026 and 2025, due to changes in valuation allowance on the deferred tax assets.\n\n \n\nThe Company has received various orders from Indian tax authorities,\nfor details Refer Note 30.\n\n \n\nF-47\n\n* *\n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n* *\n\n**24****Net loss per share**\n\n \n\nThe components of basic and diluted loss per share were as\nfollows:\n\n \n\n \n \n**Year ended March 31,**\n \n\n**(In USD, except loss per share)**\n \n**2026**\n \n \n**2025**\n \n\n \n \n \n \n \n \n \n\nNet loss available for common shareholders (A)\n \n**$**\n**(14,621,113**\n**)**\n \n**$**\n**(25,622,303**\n**)**\n\nWeighted average outstanding shares of common stock (B) #^\n \n \n11,451,192\n \n \n \n490,140\n \n\nDilutive effect of potentially dilutive outstanding securities\n \n \n-\n \n \n \n-\n \n\nCommon Stock and Common Stock Equivalents\n \n \n11,451,192\n \n \n \n490,140\n \n\n**Loss per share**\n \n \n \n \n \n \n \n \n\nBasic (A/B)\n \n**$**\n**(1.28**\n**)**\n \n**$**\n**(52.28**\n**)**\n\nDiluted (A/C)\n \n**$**\n**(1.28**\n**)**\n \n**$**\n**(52.28**\n**)**\n\n \n\n#Prior\nperiod numbers have been adjusted to reflect the First Reverse Stock Split and the Second Reverse Stock Split of the Common Stock at\na ratio of 1-for-100 and 1-for-20 respectively. (Refer Note 3A)\n\n^Including pre-funded/cashless exercise warrants.\n\n \n\nShare related amounts have been retroactively adjusted to reflect\nthe reverse stock-split for all periods presented.\n\n \n\nSince the Company was in a loss position for the year ended\nMarch 31, 2026 and March 31, 2025, basic loss per share was same as diluted net loss per share for the years presented. The following\npotentially dilutive outstanding securities as of March 31, 2026 and March 31, 2025 were excluded from the computation of diluted loss\nper share because their effect would have been anti-dilutive for the years presented, or issuance of such shares is contingent upon the\nsatisfaction of certain conditions which were not satisfied by the end of the year.\n\n \n\n  \nYear ended March 31, \n\n  \n2026  \n2025 \n\nConvertible preferred stock \n   \n  \n\nPreferred stock warrants \n   \n  \n\nStock options* \n 16  \n 16 \n\nRestricted Stock Units (Refer Note 26) \n 4,216,250  \n 17,966 \n\nPublic warrants \n 11,500,000  \n 11,500,000 \n\nPrivate warrants \n 19,180  \n 19,180 \n\nWarrants issued along with redeemable promissory note \n 5,297  \n 5,297 \n\nWarrants issued in February 2026 private placement offering \n 939  \n \n-\n \n\nWarrants issued in November 2024 and December 2024 offering (including Second and Third closing of December offering) \n 3,472,777  \n 12,335,519 \n\nTotal \n 19,214,459  \n 23,877,978 \n\n \n\n*In 2012, the Company adopted its 2012 Equity Incentive Plan,\nunder which the Company may grant options and restricted stock to eligible participants. The plan is equity settled. Options are generally\ngranted for a term of ten years. Options have a graded vesting period of up to four years and the expenses are recorded on a straight-line\nbasis over the requisite service period for each separately vesting portion of the awards. The Company cancelled certain outstanding\noptions at the time of Reverse Recapitalization. The remaining 16 fully vested options were assumed by the Company on the Reverse Recapitalization\ndate, exercisable at exercise price ranging from $120 to $300.\n\n \n\nF-48\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n**25****Employee benefit plans (unfunded)**\n\n** **\n\nEmployee benefit plans includes gratuity and compensated absences payable\nto employees. These benefit plans consist of a defined benefit plan for gratuity payable by the Indian subsidiary of the Company under\nIndian regulations. These are determined under the projected unit credit method, with actuarial valuations being carried out at each reporting\ndate. The retirement benefit obligations recognized in the Consolidated Balance Sheets represents the present value of the defined obligations.\nUnder an employee benefit plan, it is the Company’s obligation to provide agreed benefits to the employees. The related actuarial\nand investment risks fall on the Company. The summary of current and non-current employee benefit plans obligations along with its components\nare as below:\n\n \n\n**Pension and other employee obligations**\n\n** **\n\nAs at \nMarch 31,\n\n2026  \nMarch 31,\n\n2025 \n\nCurrent \n   \n  \n\nGratuity \n$104,910  \n$82,547 \n\nCompensated absences \n 72,629  \n 70,325 \n\n  \n$177,539  \n$152,872 \n\nNon-current \n    \n   \n\nGratuity \n$242,179  \n$221,961 \n\nCompensated absences \n 126,243  \n 170,062 \n\nOther statutory dues \n 2,007  \n 2,007 \n\n  \n$370,429  \n$394,030 \n\n \n\n  \nYear ended March 31, \n\n**I. Gratuity** \n2026  \n2025 \n\nChanges in projected benefit obligation (PBO) \n   \n  \n\nPBO at the beginning of the year \n$304,508  \n$352,492 \n\nService cost \n 73,992  \n 68,406 \n\nInterest cost \n 17,081  \n 18,298 \n\nActuarial loss \n 51,788  \n 57,663 \n\nBenefits paid \n (66,710) \n (184,057)\n\nEffect of exchange rate changes \n (33,570) \n (8,294)\n\nPBO at the end of the year \n$347,089  \n$304,508 \n\n  \n    \n   \n\nAccrued pension liability \n    \n   \n\nCurrent liability \n$104,910  \n$82,547 \n\nNon-current liability \n 242,179  \n 221,961 \n\n  \n$347,089  \n$304,508 \n\n  \n    \n   \n\nAccumulated benefit obligation \n$264,656  \n$245,162 \n\n** **\n\n  \nYear ended March 31, \n\n**Net gratuity cost recognized in income statement** \n2026  \n2025 \n\nService cost \n$73,992  \n$68,406 \n\nInterest cost \n 17,081  \n 18,298 \n\nAmortization of net actuarial loss/(gain) \n 5,570  \n (6,624)\n\nNet periodic benefit cost \n$96,643  \n$80,080 \n\n** **\n\nF-49\n\n** **\n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n** **\n\n**25****Employee benefit plans (unfunded) (Continued)**\n\n** **\n\n \n \n**Year ended March 31,**\n \n\n**Re-measurement losses in other comprehensive income**\n \n**2026**\n \n \n**2025**\n \n\nActuarial Loss\n \n**$**\n**33,488**\n \n \n**$**\n**57,663**\n \n\nChange in Plan assets\n \n \n18,300\n \n \n \n-\n \n\nAmortization (loss)/gain\n \n \n(5,570\n)\n \n \n6,624\n \n\n**Total**\n \n**$**\n**46,218**\n \n \n**$**\n**64,287**\n \n\n \n\n  \nYear ended March 31, \n\n**Components of actuarial loss:** \n2026  \n2025 \n\nActuarial gain due to demographic assumption changes in defined benefit obligation \n$(577) \n$(3,524)\n\nActuarial loss due to financial assumption changes in defined benefit obligation \n 4,498  \n 8,720 \n\nActuarial loss due to experience on defined benefit obligation \n 47,867  \n 52,467 \n\nTotal \n$51,788  \n$57,663 \n\n \n\nThe\nassumptions used in accounting for the gratuity plan are as follows:\n\n** **\n\n  \nMarch 31,\n2026  \nMarch 31,\n2025 \n\nDiscount rate - staff \n 6.79% \n 6.54%\n\nDiscount rate - independent service provider* \n 6.64% \n 6.54%\n\nAttrition rate - staff \n 44.10% \n 42.61%\n\nAttrition rate - independent service provider* \n 75.50% \n 82.00%\n\nRate of increase in compensation levels - staff \n 14.39% \n 12.98%\n\nRate of increase in compensation levels - independent service provider* \n 10.31% \n 10.96%\n\n \n\n*Independent service provider are contract employees responsible\nfor assisting in the day to day operations of the Company.\n\n \n\nDuring the year ended March 31, 2026 and March 31, 2025, actuarial\nloss was driven by changes in actuarial assumptions, offset by experience adjustments on present value of benefit obligations.\n\n \n\nThe Company evaluates these assumptions annually based on its\nlong-term plans of growth and industry standards. The discount rates are based on current market yields on government securities adjusted\nfor a suitable risk premium.\n\n \n\nF-50\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n**25****Employee benefit plans (unfunded) (Continued)**\n\n \n\n**Sensitivity analysis for the :**\n\n** **\n\n  \nMarch 31, 2026  \nMarch 31, 2025 \n\n**Year ended** \nIncrease  \nDecrease  \nIncrease  \nDecrease \n\nDiscount rate (- / + 1%) \n$(10,318) \n$11,192  \n$(10,343) \n$11,236 \n\nSalary growth rate (- / + 1%) \n 5,177  \n (5,271) \n 5,206  \n (5,074)\n\nAttrition rate (- / + 1%) \n (2,263) \n 2,325  \n (2,647) \n 2,691 \n\nMortality rate (- / + 10% of mortality rates) \n (17) \n \n-\n  \n (8) \n \n-\n \n\n** **\n\n**Expected\nbenefit payments as of March 31, 2026 is as follows:**\n\n \n\nYear ended March 31, \n  \n\n2027 \n 104,910 \n\n2028 \n 56,197 \n\n2029 \n 34,172 \n\n2030 \n 22,293 \n\n2031 \n 13,586 \n\nThereafter \n 115,931 \n\nTotal \n$347,089 \n\n** **\n\n**II. Compensated absences**\n\n \n\nThe employees are permitted to encash\na maximum of 45 days of accumulated leave balance on separation. The Company has provided liability for compensated absences as per an\nactuarial valuation carried out by an independent actuary as of the Consolidated Balance Sheets date. The amount of compensated absences\ncost is $39,297 for the year ended March 31, 2026 ($ 37,723 for the year ended March 31, 2025).\n\n \n\n**III. Defined contribution plan**\n\n \n\nThe Indian subsidiary makes provident\nfund contributions which are defined contribution plans, for qualifying employees. Under the Schemes, the Indian subsidiary is required\nto contribute a specified percentage of the payroll costs to fund the benefits. The contributions are made to provident fund in accordance\nwith the fund rules. The interest rate payable to the beneficiaries every year is notified by the Government. The amount of contributions\nmade to provident fund is $212,203 for the year ended March 31, 2026 ($266,053 for the year ended March 31, 2025 respectively).\n\n \n\nIn prior years, the Company recognized\nliabilities for potential exposures relating to Employees’ Provident Fund (“PF”), Employees’ State Insurance (“ESI”),\nProfessional Tax (“PT”) and gratuity (including applicable interest) in respect of certain individual service providers (“ISPs”)\nwho were engaged as independent consultants during FY 2017-18 to FY 2020-21.\n\n \n\nDuring the year ended March 31, 2026,\nthe Company obtained an external legal opinion and, based on such opinion together with management’s assessment of the relevant\nfacts and circumstances, including the new wage code effective November 21, 2025, concluded that no present obligation exists as of the\nreporting date in respect of these matters. Accordingly, the previously recognized liability was reversed during the year ended March\n31, 2026, resulting in a gain of $1,231,164 which has been presented under “Gain on write off of liabilities.”\n\n \n\nF-51\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n**26****Stock-based compensation expense**\n\n \n\nThe Company adopted the 2023 Equity and Incentive Plan, which\nprovides for grants of share-based awards, including Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units\n(“RSUs”), and other forms of share-based awards. The Company settles employee stock-based options with newly issued common\nstock of the Company. As at March 31, 2026, the Company has reserved 5,242,167 shares of common stock for the issuance of awards under\nthe 2023 Plan.\n\n \n\nIn addition, the number of shares of common\nstock reserved and available for issuance under the 2023 Plan will automatically increase on January 1 of each year for a period of ten\nyears, beginning on January 1, 2024 and on each January 1 thereafter until January 1, 2033, by a number equal to (i) 3% of the issued\nand outstanding number of shares of common stock of the Company on the preceding December 31, or (ii) a lesser number of shares as approved\nby the Company’s board of directors.\n\n \n\nAdditionally, during the year ended March 31, 2025, the stockholders\napproved a one-time increase in the number of Common Stock shares reserved for issuance under the 2023 Plan. The increase is equal to\n15% of the total number of Common Stock shares issued and outstanding on that date.\n\n \n\nOn February 12, 2025, the Company granted 17,950 RSUs to its\ndirectors and employees wherein all the RSU’s granted will fully vest on the vesting commencement date i.e. March 31, 2025 pursuant to\nthe amendment agreement dated March 31, 2025.\n\n \n\nOn August 4, 2025, the Company granted an additional 4,525,000\nRSUs to its directors and employees with a total vesting period of 3 years. The RSUs follow a graded vesting schedule under which 25%\nof the units will vest after the 6th, 12th, 24th and 36th month following the vesting commencement date. During the year ended March 31,\n2026, the vesting date for the first tranche of the Restricted Stock Unit Award Agreement dated August 4, 2025, has been amended from\nMarch 31, 2026 to June 30, 2026.\n\n \n\nOn December 11, 2025, the Company further granted 475,000 RSUs\nto its directors where the RSUs will vest 6 months from the vesting commencement date.\n\n \n\nThe following tables summarizes total stock-based compensation\nexpense by function for the year ended March 31, 2026 and March 31, 2025:\n\n \n\n  \nYear ended March 31, \n\n  \n2026  \n2025 \n\nCost of revenue \n$40,110  \n$3,650 \n\nTechnology expenses \n 101,640  \n 10,273 \n\nMarketing expenses \n 52,524  \n 1,778 \n\nGeneral and administrative expenses \n 689,694  \n 36,760 \n\nTotal stock-based compensation expense \n 883,968  \n 52,461 \n\n \n\nF-52\n\n** **\n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n** **\n\n**26****Stock-based compensation expense (Continued)**\n\n \n\nThe stock-based compensation expense is recorded in the employee benefit\ncost and apportioned basis respective functions.\n\n \n\nThe fair value of options granted is estimated on the date\nof grant using the Black-Scholes- option-pricing model using the weighted average assumptions. The assumptions used in the valuation are\nas follows:\n\n \n\n   March 31,\n2026 \n\nDividend yield   0.00%\n\nExercise price   - \n\nExpected life (in years)   0.5 - 3 \n\nStock price   0.15-0.501 \n\nAttrition rate   0%-19%\n\n \n\nThe movement in number of stock-based options outstanding and\ntheir related weighted average exercise price for the 2023 Plan are as follows:\n\n \n\n  \nYear ended March 31, 2026 \n\n  \nNo. of\n\noptions  \nWeighted average\n\nexercise price \n\nOutstanding at the beginning of the year \n 17,966  \n 0.00 \n\nAdd: Granted during the year \n 5,000,000  \n \n \n \n\nLess: Exercised \n (282,648) \n 0.00 \n\nLess: Forfeited/Cancelled during the year \n (510,843) \n 0.00 \n\nOutstanding at the end of the period \n 4,224,475  \n 0.00 \n\n  \n    \n   \n\nExercisable at the end of the year \n 8,225  \n \n-\n \n\nUnvested at the end of the year \n 4,216,250  \n 0.00 \n\n \n\nThe weighted average grant date fair value of stock options\ngranted during the year ended March 31, 2026 and March 31, 2025 were $0.47 and $$2.92 per share, respectively.\n\n \n\n**Restricted shares issued to CEO**\n\n \n\nOn May 9, 2025, the Company entered into a consulting agreement\nwith Mr. Deepankar Tiwari to engage him as the Chief Executive Officer (“CEO”) of the Company. As consideration for services\nrendered, Mr. Tiwari shall be eligible to receive a monthly consultancy fee and restricted shares of the Company. As per the terms of\nthe agreement, 1,000,000 restricted shares were granted, of which 250,000 restricted shares shall vest at the end of each quarter starting\nJune 30, 2025. Such restricted shares granted shall be subject to- i) execution of relevant Restricted Shares award agreement, ii) approval\nby Board of Directors, and iii) Compliance with applicable securities laws and tax regulations in the relevant jurisdictions, collectively\ncalled as ‘conditions for grant’. The Board had approved the restricted shares granted to Mr. Tiwari on July 16, 2025 pursuant to which\nthe Inducement Award Agreement was executed on July 17, 2025 and Form S-8 along with required documents were submitted with relevant regulators\non July 18, 2025. Therefore, July 18, 2025 has been taken as the grant date as all the required conditions were satisfied on this date.\n\n \n\nThe Company has registered 1,000,000 shares of common stock\nissuable to Mr. Deepankar Tiwari to induce Mr. Tiwari to accept employment as the Company’s CEO and the executed inducement award\nagreement. Such inducement awards granted to the CEO are outside of the 2023 Equity and Incentive Plan.\n\n \n\nDuring the year ended March 31, 2026, 750,000 restricted shares\nhave been issued and 250,000 shares are pending to be issued to Mr. Tiwari. Stock based compensation expense of $570,000 pertaining to\nthese Restricted shares have been recorded in the Consolidated Statements of Operations.\n\n \n\nF-53\n\n* *\n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n* *\n\n**27****Related Party Transactions**\n\n** **\n\n**Key managerial personnel (KMP)**\n\n** **\n\nGregory Bradford Moran   Chief Executive Officer & Director (until June 20, 2024)\n\nHiroshi Nishijima   Chief Executive Officer (until May 02, 2025)\n\nUri Levine*   Director (w.e.f. March 31, 2025)\n\nEvelyn D’An   Director\n\nGraham Gullan   Director (until June 18, 2024)\n\nSwatick Majumdar   Director\n\nMohan Ananda   Director\n\nMadan Menon   Director (until April 16, 2025)\n\nJohn Robert Clarke   Director (w.e.f. June 20, 2024)\n\nMark Bailey**   Director (until December 06, 2024)\n\nDeepankar Tiwari   Chief Executive Officer (w.e.f May 09, 2025)\n\n \n\nRelated party transactions pertaining to debt, investments, and\nother current liabilities have been stated on the face of the Consolidated Balance Sheets and Consolidated Statements of Operations.\n\n \n\n**The Company had following transactions with related parties:**\n\n \n\n  \nYear ended March 31, \n\n  \n2026  \n2025 \n\nAmount received for November 2024 Offering \n   \n  \n\nMark Bailey** \n$\n-\n  \n$2,499,959 \n\n  \n    \n   \n\nAmount received for December 2024 Offering \n    \n   \n\nHiroshi Nishijima \n$\n-\n  \n$50,001 \n\nUri Levine* \n$\n-\n  \n$300,000 \n\n  \n    \n   \n\nConsultancy Charges \n    \n   \n\nUri Levine \n$\n-\n  \n$145,830 \n\nDeepankar Tiwari \n$716,408  \n$\n-\n \n\n  \n$716,408  \n$2,995,790 \n\n \n\n**The Company has the following outstanding balances\nwith related parties:**\n\n** **\n\nAs at \nMarch 31, 2026  \nMarch 31, 2025 \n\nPayable to Director \n   \n  \n\nMohan Ananda \n$152,435  \n$152,435 \n\n  \n    \n   \n\nAccounts Payable \n    \n   \n\nUri Levine \n$\n-\n  \n$62,176 \n\nDeepankar Tiwari \n$19,265  \n$\n-\n \n\n  \n    \n   \n\n  \n$171,700  \n$214,611 \n\n \n\nF-54\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n**27****Related\nParty Transactions (Continued)**\n\n** **\n\nRemuneration and other compensation\narrangements with key managerial personnel and directors, comprising transactions of USD 1,051,534 (previous year USD 1,112,557) and related\npayable balances of USD 533,032 (previous year USD 213,526), have been excluded from the related party disclosures above in accordance\nwith the scope exception in ASC 850-10-50-5(a), which excludes compensation arrangements, expense allowances and other similar items arising\nin the ordinary course of business.\n\n \n\n*Uri Levine become related party on March 31, 2025. However,\nthe transactions disclosed with Uri Levine were incurred before he become a related party.\n\n \n\n**Mark Bailey was a related party until December 6, 2024. Accordingly,\ntransactions until December 6, 2024 with him has been disclosed. However, outstanding balances as of March 31, 2025, have not been disclosed,\nas he was no longer classified as a related party on that date.\n\n \n\n**28****Variable Interest Entities**\n\n** **\n\nAn entity is a VIE if it has any of the following characteristics\n:\n\n \n\n●The entity does not have enough equity to finance its activities without additional subordinated financial support.\n\n   \n\n●The equity holders, as a group, lack the characteristics of a controlling financial interest.\n\n   \n\n●The entity is structured with non-substantive voting rights (i.e., an anti-abuse clause).\n\n \n\nWe consolidate VIEs in which Company hold\na variable interest and are the primary beneficiary. Company is the primary beneficiary because it has the power to direct the activities\nof a VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses of the VIE that potentially\ncould be significant to the VIE and the right to receive benefits from the VIE that potentially could be significant to the VIE (benefits).\nAs a result, we consolidate the assets and liabilities of these consolidated VIEs.\n\n \n\nThe VIEs have been incorporated in their respective locations\nto perform the business of providing mobility solutions to consumers and businesses.\n\n \n\nThe\nfollowing table summarizes the assets and liabilities related to the Company’s consolidated VIEs:\n\n \n\n  \nMarch 31,\n2026  \nMarch 31,\n2025 \n\nAssets \n   \n  \n\nCash and cash equivalents \n$\n-\n  \n$2,878 \n\nOther current assets \n$\n-\n  \n$391 \n\nLong term Investments \n$\n-\n  \n$3,991 \n\n  \n    \n   \n\nLiabilities \n    \n   \n\nAccounts payable \n$52,571  \n$383,355 \n\nCurrent portion of pension and other employee obligations \n$\n-\n  \n$80 \n\nOther current liabilities \n$8,510  \n$141,164 \n\n \n\nF-55\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n**28****Variable\nInterest Entities (Continued)**\n\n \n\n**Nature\nof investment in the VIEs is as follows:**\n\n \n\n**Name of the VIE**   **Place of incorporation**   **Nature of investment**   **Investor entity**\n\nFleet Mobility Philippines Corporation *   Philippines   Debt   Zoomcar Inc.\n\n \n\nThese amounts have been eliminated during the process of consolidation.\n\n \n\n*In May 2022, Company had initiated the process of winding-up\nfor Fleet Mobility Philippines Corporation. The assets consolidated for the VIE are not material.\n\n \n\nIn August 2023, Zoomcar Vietnam Mobility\nLLC had filed for bankruptcy with the local authorities. This application was admitted by the local authorities and bankruptcy proceedings\nwere ordered to commence on June 4, 2025. In accordance with ASC 810-10-15-10, the Company consolidated the VIE till June 3, 2025 since\nthe Company held a variable interest and continued to be the primary beneficiary. However on June 4, 2025, the Company ceased to be the\nprimary beneficiary and consequently, the Company has derecognized it’s cost of investment and assets and liabilities of the VIE and recognized\na net gain upon derecognition of VIE amounting to $401,180 as ‘Gain on derecognition of subsidiary’ under Other expense/(income), net.\n\n \n\nOn June 3, 2024, Zoomcar Egypt Information Technology Platform LLC had\nclosed down its operations due to decrease in operations and rising economic difficulties. On December 15, 2024, Zoomcar Egypt Information\nTechnology Platform LLC held an extraordinary general meeting to initiate the liquidation process and appoint a liquidator. Subsequently,\non August 5, 2025, Zoomcar Egypt Information Technology Platform LLC’s name was deleted from the commercial register.\n\n \n\nIn accordance with\nASC 810-10-15-10, the Company consolidated the VIE till August 4, 2025 since the Company held a variable interest and continued to be\nthe primary beneficiary. However on August 05, 2025, the Company ceased to be the primary beneficiary and consequently, the Company has\nderecognized it’s cost of investment and assets and liabilities of the VIE and recognized a net gain upon derecognition of VIE amounting\nto $1,459,154 as ‘Gain on derecognition of subsidiary’ under Other expense/(income), net.\n\n \n\nThe VIE included in the Consolidated Financial Statements is\nseparate legal entity and its assets are legally owned by the entity and is not available to the Company’s creditors or creditors of the\nCompany’s other subsidiaries.\n\n \n\n**Nature of, and changes (if any) in, the risks associated\nwith a reporting entity’s involvement with the VIE**\n\n \n\nIn case of all the entities, the reporting entity is exposed\nto foreign currency exchange risk of the subsidiaries since the subsidiaries are incorporated in countries other than the country in which\nthe reporting entity has been incorporated.\n\n \n\nF-56\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n**29****Financial Instruments - Fair Value Measurements**\n\n \n\nASC Topic 820, “Fair Value Measurements\nand Disclosures” (“ASC 820”) defines fair value as the price that would be received upon sale of an asset or paid upon\ntransfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous\nmarket for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing\nthe asset or liability as against assumptions specific to the entity. In addition, the fair value of liabilities should include consideration\nof non-performance risk, including the Company’s own credit risk.\n\n \n\nThe carrying\nvalue of financial instruments not carried at fair value by categories are as below:\n\n \n\n \n \n**March 31,\n2026**\n \n \n**March 31,\n2025**\n \n\n**As at**\n \n**Carrying value**\n \n \n**Carrying value**\n \n\n**Financial assets**\n \n \n \n \n \n \n\nCash and cash equivalents\n \n**$**\n**328,586**\n \n \n**$**\n**1,077,275**\n \n\nAccounts receivable\n \n \n100,167\n \n \n \n200,650\n \n\nReceivable from government authorities\n \n \n-\n \n \n \n187,458\n \n\nLong term investments\n \n \n21,066\n \n \n \n25,653\n \n\nOther financial assets\n \n \n240,193\n \n \n \n365,433\n \n\n**Total assets**\n \n**$**\n**690,012**\n \n \n**$**\n**1,856,469**\n \n\n**Financial liabilities**\n \n \n \n \n \n \n \n \n\nAccounts payable\n \n**$**\n**22,637,202**\n \n \n**$**\n**12,548,582**\n \n\nDebt\n \n \n2,511,444\n \n \n \n2,851,341\n \n\nOperating lease\n \n \n827,414\n \n \n \n1,118,737\n \n\nFinance lease\n \n \n2,058,281\n \n \n \n3,966,962\n \n\nUnsecured notes\n \n \n811,178\n \n \n \n-\n \n\nConvertible notes\n \n \n451,348 \n \n \n \n-\n \n\nOther financial liabilities\n \n \n1,289,771\n \n \n \n1,611,602\n \n\n**Total liabilities**\n \n**$**\n**30,586,638**\n \n \n**$**\n**22,097,224**\n \n\n \n\nThe following tables present information about the Company’s\nfinancial assets and liabilities measured at fair value on a recurring basis:\n\n \n\n  \nMarch 31, 2026 \n\n  \nTotal Carrying\n\nvalue  \nLevel 1  \nLevel 2  \nLevel 3 \n\nLiabilities: \n    \n    \n    \n   \n\nAtalaya Note \n$6,554,074  \n$\n-\n  \n$\n-\n  \n$6,554,074 \n\n \n\nF-57\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n**29****Financial Instruments - Fair Value Measurements (Continued)**\n\n \n\n  \nMarch 31, 2025 \n\n  \nTotal Carrying\n\nvalue  \nLevel 1  \nLevel 2  \nLevel 3 \n\nAssets: \n   \n   \n   \n  \n\nAssets held for sale \n$267,293  \n$\n      -\n  \n$267,293  \n$\n-\n \n\nLiabilities: \n    \n    \n    \n   \n\nAtalaya Note \n$6,002,269  \n$\n-\n  \n$\n-\n  \n$6,002,269 \n\n \n\nLevel 2: The fair value of Assets held for sale not traded\nin an active market is determined using the quoted prices in markets that are not active or inputs other than the quoted prices that are\nobservable either directly or indirectly considering all the relevant factors of assets.\n\n \n\nThe Company’s recurring Level 3 financial instruments within\nthe Company’s fair value hierarchy as of March 31, 2026 consist of Company’s unsecured convertible note.\n\n \n\nThe changes in the fair value are summarized below:\n\n \n\n  \nUnsecured\n\nConvertible Note\n\n(‘Atalaya Note’) \n\n  \n  \n\nBalance as of April 1, 2024 \n$10,067,601 \n\nShares issued to Atalaya Note holders \n (2,324,696)\n\nChange in fair value of unsecured convertible note \n (1,740,636)\n\nBalance as of March 31, 2025 \n$6,002,269 \n\n  \n   \n\nBalance as of April 1, 2025 \n 6,002,269 \n\nChange in fair value of unsecured convertible note \n 539,805 \n\nLoss on litigation settlement \n 12,000 \n\nBalance as of March 31, 2026 \n$6,554,074 \n\n \n\nDuring the year ended March 31, 2026 and March 31, 2025 , there were\nno non-recurring fair value measure of assets or liabilities subsequent to initial recognition.\n\n \n\nF-58\n\n* *\n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n* *\n\n**30****Commitments and contingencies**\n\n** **\n\n**Contingencies**\n\n** **\n\n(A) Claims filed by customers and third-parties\nnot acknowledged as liability amounted to $368,616 and $220,868 as at March 31, 2026 and March 31, 2025, respectively. The claims made\nby the customers against the Company includes claims that have been made for amounts charged to customers by the Company as damages for\nimproper use of vehicles and/or physical damages made to vehicles during an active trip ; or claims made by customers for unavailability\nof the booked vehicle or for any mechanical default in the booked vehicle ; or claims against any similar issue faced by either the host\nor the customer. Under the erstwhile business model of the Company , the Company had procured third-party insurance policies for fleet\nunder its management which indemnifies against personal death and/or injuries suffered either by the customer or third-parties during\nthe use of its vehicles. Based on the insurance coverage, the Company is confident that liability, if any, arising from the claims under\nthe previous business model will be covered by the insurance. Further, under the current business model of the Company, wherein the Company\nacts only as a facilitator, any issues arising from breach of any terms including improper use of vehicles and/or physical damages made\nto the vehicles or any mechanical issues in the vehicle will be the responsibility of either the host or the customer. While uncertainties\nare inherent in the final outcome of these matters, the Company believes that the disposition of these proceedings will not have a material\nadverse effect on the Company’s financial position, results of operations or cash flows.\n\n \n\n(B) The Company has received various orders\nand show cause notices from Indian indirect tax authorities relating to disputes on input tax credits, service tax liabilities, GST dues,\nand taxability of car rental revenue for periods between 2014 and 2023, totaling $3,363,842 (March 31, 2025: $9,514,651). These disputes\ninclude disallowance of input credits, service tax liabilities on booking fees and penalty charges, disputes on goods and service tax\ninput availed, and GST demands on gross booking value. The Company has taken necessary steps, including filing appeals, submissions, and\ndeposits, and is awaiting further communication from the authorities. In relation to the GST demands on gross booking value, the Company\nhas filed a writ petition with various authorities challenging the order. Based on the submissions provided and documents available, management\nbelieves that no significant outflow is expected, and therefore, no provision has been recorded as of March 31, 2026 and March 31, 2025.\n\n \n\n(C) In\nFebruary 2023, a former employee of Zoomcar India instituted a suit before the City Civil and Sessions Judge at Mayo Hall, Bengaluru against\nZoomcar India, Zoomcar, Inc. and Zoomcar Holdings, Inc. (formerly IOAC) challenging his termination, claiming damages amounting to $359,573\nand claiming that 100,000 options to purchase shares of Zoomcar, Inc. have vested. On March 3, 2023, the City Civil and Sessions Judge\nat Mayo Hall, Bengaluru, issued an interim injunction to restrain each of Zoomcar, Inc. and Zoomcar Holdings, Inc. from “alienating\nor dealing” the 100,000 shares of Zoomcar, Inc. claimed by the former employee while the suit is pending. Zoomcar believes that\nsuch claims are baseless and is attempting to have the interim order vacated. In addition, Zoomcar India filed an application in the former\nemployee’s suit, seeking that Zoomcar Holdings, Inc. be deleted from the array of parties in the suit.\n\n \n\n(D) Zoomcar\nHoldings, Inc. files tax returns in the U.S. federal, various state, and foreign jurisdictions. In the normal course of business, the\nCompany is subject to examination by tax authorities. Our major tax jurisdiction is in India. The Indian tax authority is currently examining\nour 2016 through 2023 tax returns. There are other ongoing audits in various other jurisdictions that are not material to our financial\nstatements. The Company received an order for fiscal year 2015-16 in relation to non-deduction of tax deducted at source withholding taxes\non certain payments to resident payees/service providers amounting to $113,969 (March 31, 2025: $125,839). Penalty of $113,969 has been\nclaimed but the proceedings are kept under abeyance until the above order is disposed off. The Company has filed appeals against the above\norders before higher authority.\n\n \n\nThe Company has not recognized any uncertain tax position as\nat March 31, 2026 and March 31, 2025, respectively. The Company believes these orders are unlikely to be sustained at the higher appellate\nauthorities.\n\n \n\nF-59\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n**31****Subsequent events**\n\n \n\n(A) On January 23, 2026, Zoomcar Holdings,\nInc. (the “Company”) filed a Current Report on Form 8-K announcing a voluntary offer to exchange multiple classes of its outstanding\nwarrants for shares of the Company’s common stock. Under the offer, holders of each Common Warrant are entitled to receive 20,000\nshares of common stock for each warrant tendered and accepted, and holders of each Series A Warrant, Series B Warrant, Pre-Funded Warrant,\nBridge Placement Agent Warrant, Placement Agent Warrant and Series A Placement Agent Warrant are entitled to receive 10 shares of common\nstock for each such warrant tendered and accepted. The exchange offer is subject to customary terms and stockholder approval of an increase\nin authorized common shares and is intended to simplify the Company’s capital structure. On April 15, 2026, the Company extended\nthe time period for offer to exchange to May 11, 2026. Subsequently, on May 12, 2026, the Company further extended the time period for\noffer to exchange to June 30, 2026, and on June 25, 2026, the Company further extended the time period for offer to exchange to July 24,\n2026.\n\n \n\nConcurrently, the Company also commenced a private placement offering of\nup to $5 million of units, each consisting of one share of Series A convertible preferred stock initially convertible at $0.05 per share\nof common stock and one warrant exercisable at $0.0625 per share of common stock, subject to customary anti-dilution adjustments, with\na minimum raise of $2 million and proceeds intended for general corporate purposes, including working capital. On February 12, 2026, the\nCompany filed an amendment to the Form 8-K to reflect revised terms, including the addition of an overallotment option exercisable by\nthe placement agent for up to an additional $5.0 million of units, an updated offering termination date of March 31, 2026, and clarification\nthat subscription funds will be returned if the minimum offering amount of $2 million is not achieved. On April 15, 2026 the scheduled\ntermination date of the Offering was extend to May 11, 2026. On May 12, 2026, the Company further extend the termination date for the\nOffering to June 30, 2026. Subsequently on June 26, 2026 the Company extended the scheduled termination date of the Offering from June\n30, 2026 to July 30, 2026. \n\n \n\n(B) On May 11, 2026, the Company entered into a Letter of Understanding\nwith ACM Zoomcar Convert LLC/(Atalaya) (“ACM”) for settlement of a liability with respect to a previous judgement order of\n$6,009,833 (together with interest and other amounts). Refer Note 16 for further details. The liability shall be settled partly by cash\nto the extent of $2,500,000 on or before October 31, 2026 and the remaining balance by issuance of equity at a price and on the economic\nterms of the next financing closed by the Company prior to the date the cash payment is made in full. Further, ACM is entitled to receive\nat least 10% of the gross proceeds of any capital raising activity of the Company.\n\n \n\n(C)\nOn April 28, 2026, Shachi Singh notified the Company of her resignation as Chief Legal Officer & General Counsel of the Company.\n\n \n\n(D)\nOn May 10, 2026, Mohan Ananda notified the Company of his resignation from the Board of Directors of the Company, effective as of May\n10, 2026.\n\n \n\n(E) On May 14, 2026,\nthe Company entered into a standstill agreement with CFI Capital LLC (“CFI”) relating to the Convertible Redeemable notes\nissued to CFI on August 24, 2025, with an original principal amount of $150,000 (the “CFI Note”). Pursuant to the agreement,\nCFI agreed not to exercise any conversion rights under the CFI Note that would permit conversion into shares of the Company’s common\nstock at a market-based conversion price prior to September 30, 2026.\n\n \n\nF-60\n\n \n\n**ZOOMCAR HOLDINGS, INC.**\n\n**NOTES TO THE CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n**31****Subsequent events (Continued)**\n\n \n\n(F) On May 15, 2026,\nthe Company entered into a standstill agreement with Labrys Fund II, L.P. (“Labrys”) relating to the Promissory note issued\nto Labrys on August 19, 2025, with an original principal amount of $180,000 (the “Labrys Note”). Pursuant to the agreement,\nLabrys agreed to forbear from exercising any rights to convert the Labrys Note into shares of the Company’s common stock at a market-based\nconversion price following an event of default prior to September 30, 2026.\n\n \n\n(G) On April 13, 2026, the Company\nentered into a Termination Letter and an Indemnification Agreement with Aegis Capital Corp. (“Aegis”) (collectively, the “Aegis\nDocuments”). Pursuant to the Aegis Documents, the Company’s prior placement agent and underwriting engagement agreements with\nAegis will terminate in exchange for the future issuance to Aegis of units of securities, on the same terms as the units issued to investors\nin the Company’s contemplated private placement of Series A Convertible Preferred Stock and warrants, with an aggregate value of\n$2,000,000. The Aegis Documents are executory and will not become effective until the issuance of such consideration securities, which\nis expected to occur on the earlier of (i) the date that is 60 days following the consummation of the Company’s contemplated uplisting\nto a national securities exchange and (ii) December 31, 2026. *Refer to Exhibit 10.56 and Exhibit 10.57 for more details on the Aegis\nDocuments.*\n\n \n\n(H) During June 2026, Zoomcar Holdings,\nInc. entered into a securities purchase agreement with accredited investors for a private placement of Series A units, each consisting\nof one share of Series A Convertible Preferred Stock and one warrant to purchase common stock at a purchase price of $1,000 per unit.\nAt the first closing on June 2, 2026, the Company issued 1,143 units, raising approximately $1,143 million before fees and expenses. At\nthe second closing on June 18, 2026, the Company issued an additional 537 Units, raising approximately $0.537 million before fees and\nexpenses. On June 30, 2026, the Company completed the third closing of its private placement of Series A Units, issuing 195 Units (consisting\nof Series A Convertible Preferred Stock and accompanying warrants) for gross proceeds of approximately $0.2 million, before deducting\nplacement agent fees and offering expenses\n\n \n\nThe\nOffering allows for the sale of up to $5,000,000 of Units, plus an additional $5,000,000 issuable under the exercise of the placement\nagent’s overallotment option in one or more closings, with a minimum subscription threshold of $1,000,000 to be satisfied. The Preferred\nShares and warrants are both convertible into common stock at an initial price of $0.05 per share and $0.0625 per warrant respectively.\nThinkEquity LLC acted as the exclusive placement agent for the Offering and is entitled to receive a cash fee equal to 10% of the gross\nproceeds from each closing, a non-accountable expense allowance of 1% of the gross proceeds of each closing, reimbursement of expenses,\nand warrants representing 10% of the common shares underlying the sold units. The Company is required to issue Placement Agent Warrants\nto purchase up to 2,186,000 shares of Common Stock for the first closing, 1,074,000 shares of common stock for the second closing and\n390,000 shares of common stock for the third closing on substantially similar terms to those offered to investors. \n\n \n\n(I) Subsequently, the Company entered into\nSecurities Purchase Agreements with certain institutional accredited investors and issued Bridge Notes with a total principal amount of\n$300,800. These notes were issued with an initial issue discount of $32,800. After deducting legal and due diligence fees of $18,000,\nthe net proceeds received by the Company amounted to $250,000. The Bridge Notes bear interest at an annual rate ranging from 10% to 12%\nand require scheduled monthly installment repayments beginning November 30, 2026, through July 2, 2027. The Company has the option to\nprepay the notes, in full or in part, at a discounted rate applied to the outstanding balance. Additionally, the notes carry a default\ninterest rate ranging from 8% to 22% per annum and include customary events of default.\n\n \n\nF-61"}