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FINANCIAL INSTRUMENTS
 3 Months Ended
Jun. 30, 2025
Investments, All Other Investments [Abstract]  
FINANCIAL INSTRUMENTS

14. FINANCIAL INSTRUMENTS

 

On January 4, 2023, the Company entered into a series of agreements with certain accredited investors, pursuant to which the Company received a net proceed of $15,000,000 in consideration of the issuance of:

 

  ● senior secured convertible notes in the aggregate original principal amount of approximately $16.7 million with an interest rate of 5% per annum (the “Convertible Notes”); The Convertible Notes matured on July 4, 2024. The conversion price is $1.25, subject to adjustment under several conditions.
  ● warrants (“Warrants”) to purchase up to approximately 16.1 million shares of common stock of the Company (the “Common Stock”) until on or prior to 11:59 p.m. (New York time) on the five-year anniversary of the closing date at an exercise price of $1.25 per share, also subject to adjustment under several conditions.

 

The Warrants are considered a freestanding instrument issued together with the Convertible Notes and measured at their issuance date fair value. Proceeds received were first allocated to the Warrants based on their initial fair value. The initial fair value of the Warrants was $3.9 million. The Warrants were marked to the market with the changes in the fair value of warrant recorded in the consolidated statements of operations and comprehensive loss. As of June 30, 2025, the balance of the Warrants was approximately $0.8 million (March 31, 2025: $1.0 million).

 

The Convertible Notes are classified as a liability and is subsequently stated at amortized cost with any difference between the initial carrying value and the repayment amount as interest expenses using the effective interest method over the period from the issuance date to the maturity date. The embedded conversion feature should be bifurcated and separately accounted for using fair value, as this embedded feature is considered not clearly and closely related to the debt host. The bifurcated conversion feature was recorded at fair value with the changes recorded in the consolidated statements of operations and comprehensive loss. The initial fair value of the embedded conversion feature was $1.2 million. As of June 30, 2025, the fair value of the conversion option was $0.03 million (March 31, 2025: $1.4 million).

 

The Company determined that the other embedded features do not require bifurcation as they either are clearly and closely related to the Convertible Notes or do not meet the definition of a derivative.

 

The total proceeds of the Convertible Notes and the Warrants, net of issuance cost, of $15.0 million were received by the Company in January 2023, and allocated to each of the financial instruments as following:

 

  

As of

January 4, 2023

 
     
Derivative liabilities – Fair value of the Warrants  $3,858,521 
Derivative liabilities – Embedded conversion feature   1,247,500 
Convertible Notes   9,893,979 
   $15,000,000 

 

In January 2023, the Company also granted to the placement agent a warrant as partial payment of an agency fee to purchase 0.7 million shares of Common Stock of the Company. The warrant matures in five years with an exercise price of $1.25 subject to adjustments under different conditions. The warrant was recognized as a derivative liability with an initial fair value of $0.168 million.

 

The Company’s Convertible Notes’ obligations were as the following for the three months ended June 30, 2025 and 2024:

 

   2025   2024 
   Three months ended 
   June 30, 
   2025   2024 
Carrying value – beginning balance  $2,900,160   $2,684,697 
Converted to ordinary shares   (2,290,408)   - 
Amortization of debt discount   66,222    682,648 
Deferred debt discount and cost of issuance   416,667    261 
Interest charge   69,563    151,393 
Carrying value – ending balance  $1,162,204   $3,518,999 

 

During the three months ended June 30, 2025, $2.3 million of Convertible Notes was converted into approximately 4.3 million shares of Common Stock, with an average effective conversion price of $0.5363 per share. During the three months ended June 30, 2024, no Convertible Notes was converted into shares of Common Stock.

 

 

The Company’s derivative liabilities were as the following for the three months ended March 31, 2025 and 2024:

 

   2025   2024 
   Three months ended June 30, 
   2025   2024 
Derivative liabilities –Warrants  $   $- 
Beginning balance   989,852    251,657 
Marked to the market   (251,657)   (134,217)
Ending fair value   738,195    117,440 
           
Derivative liabilities – Embedded conversion feature          
Beginning balance   1,782,498    36,298 
Converted to ordinary shares   (1,572,238)   - 
Remeasurement on change of convertible price   19,457    (261)
Marked to the market   (201,792)   - 
Ending fair value   27,925    36,037 
           
Total Derivative fair value at end of period  $766,120   $153,477