FINANCIAL INSTRUMENTS

6 Months Ended

Sep. 30, 2025

Investments, All Other Investments [Abstract]

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 September 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 September 30, 2025, the fair value of the conversion option was $Nil (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:

SCHEDULE OF FINANCIAL INSTRUMENTS

	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 and six months ended September 30, 2025 and 2024:

	Three months ended						Six months ended
	September 30,						September 30,
	2025			2024			2025			2024
Carrying value – beginning balance	$	1,162,204		$	3,518,999		$	2,900,160		$	2,684,697
Converted to ordinary shares		(763,832	)		(82,642	)		(3,054,240	)		(82,642	)
Redemption		(400,756	)		-			(334,534	)		-
Amortization of debt discount		1,843			-			418,510			682,648
Deferred debt discount and cost of issuance		-			(264,186	)		-			(263,925	)
Interest charge		541			44,187			70,104			195,580
Carrying value – ending balance	$	Nil		$	3,216,358		$	Nil		$	3,216,358

During the three months ended September 30, 2025, $0.8 million of Convertible Notes was converted into approximately 1.5 million shares of Common Stock, with an average effective conversion price of $0.5222 per share. During the six months ended September 30, 2025, approximately $3.1 million of the Convertible Notes was converted into approximately 5.7 million shares of Common Stock, with an average effective conversion price of $0.5327 per share.

During the three and six months ended September 30, 2024, $82,642 of the Convertible Notes was converted into 132,994 shares of Common Stock, with average effective conversion price of $0.6214 per share.

The Company’s derivative liabilities were as the following for the three and six months ended September 30, 2025 and 2024:

SCHEDULE OF DERIVATIVE LIABILITIES

	2025			2024			2025			2024
	Three months ended						Six months ended
	September 30,						September 30,
	2025			2024			2025			2024
Derivative liabilities –Warrants	$			$			$			$
Beginning balance		738,195			117,440			989,852			251,657
Marked to the market		452,983			184,549			201,326			50,332
Ending fair value		1,191,178			301,989			1,191,178			301,989

Derivative liabilities – Embedded conversion feature
Beginning balance		27,925			36,036			1,782,498			36,298
Converted to shares of Common Stock		(17,114	)		(1,330	)		(1,589,352	)		(1,330	)
Remeasurement on change of convertible price		(1,832	)		264,186			17,625			263,925
Redemption		(8,979	)		-			(8,979	)		-
Marked to the market		-			347,065			(201,792	)		347,064
Ending fair value		Nil			645,957			Nil			645,957

Total Derivative fair value at end of period	$	1,191,178		$	947,946		$	1,191,178		$	947,946

ADDENTAX GROUP CORP. 10-Q