Cash-Starved Zoomcar Unsure Of Its Future

Due to mounting losses and cash outflows, Nasdaq-listed rental car marketplace Zoomcar said there is “substantial doubt” about the company’s ability to continue as a going concern.

In a SEC filing, the company said that it incurred a net loss of $3.35 Mn and $5.88 Mn during the three months and six months ended September 30, 2024, respectively, while it had a negative working capital of $35.02 Mn. 

“In addition, the company’s cash position is critically deficient and critical payments to the operational and financial creditors of the company are not being made in the ordinary course of business, all of which raises substantial doubt about the company’s ability to continue as a going concern,” it said. 

Further, the company does not predict a reversal of fortunes in the short term and expects to continue to incur net losses and significant cash outflows from operations for at least a year. 

The company said that its management has concluded that the company will not have sufficient funds to meet its obligations within a year if it fails to raise additional funding.

In light of the dire state of affairs, the management is depending on an additional external funding of $30 Mn to meet its financial obligations till November 14, 2025. 

To net the additional capital, Zoomcar onboarded Aegis Capital Corp in June as its placement agency. With the agreement, Zoomcar plans to raise the amount via a proposed private placement of up to $30 Mn of its Series A preferred stock and Series A warrants. 

As part of this, Zoomcar netted $7.63 Mn on November 7 and paid $3.8 Mn out of this towards outstanding redeemable promissory notes. 

It is pertinent to note that Zoomcar said on November 8 that it closed a private placement round at $9.15 Mn with the issuance of 2.13 Mn units at an effective unit price of $4.28 per unit to secure the funds from unnamed institutional investors.

“While this financing resulted in the payment of certain outstanding indebtedness, the company will still need to raise additional capital imminently in order to have sufficient capital,” it said.

“There can be no assurance that the company will be able to achieve its business plan, raise any additional capital or secure the additional financing necessary to implement its current operating plan. The ability of the company to continue as a going concern is dependent upon its ability to increase its revenues and eventually achieve profitable operations,” the filings added.

While Zoomcar managed to cut its loss on a year-on-year basis in the September quarter, its revenue from services went down 16.7% to $2.23 Mn from $2.68 Mn in the year-ago quarter. 

Further, its total income also fell 16.4% to $2.24 Mn during the quarter under review from $2.68 Mn in the same quarter last year.

The problems for the company come at a time when it is seeing unrest at its top level as well. In June, Zoomcar terminated cofounder and CEO Greg Moran amid mounting regulatory scrutiny over its revenue projections.

By the end of the month, its global president Adarsh Menon stepped down within six months of his association from the company.  

Zoomcar named Hiroshi Nishijima as its interim CEO after Moran’s termination.