Perfect Moment Ltd. 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission file number: 001-41930 Perfect Moment Ltd. (Exact name of registrant as specified in its charter) Delaware 86-1437114 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 244 5 th Ave Ste 1219 New York , NY 10001 (Address of principal executive offices) 315 - 615-6156 (Registrant’s telephone number, including area code) 307 Canalot Studios 222 Kensal Road London, United Kingdom W10 5BN (former address of principal executive offices) +44 (0)204 558 8849 (former registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $0.0001 PMNT NYSE American LLC Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No As of November 11, 2024 there were 16,012,889 shares of common stock, $ 0.0001 par value per share, outstanding. PERFECT MOMENT LTD. TABLE OF CONTENTS Page Number Special Note Regarding Forward-Looking Statements ii PART I - FINANCIAL INFORMATION 2 Item 1. Condensed Financial Statements (Unaudited) 2 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 21 Item 3. Quantitative and Qualitative Disclosures About Market Risk 35 Item 4. Controls and Procedures 35 PART II - OTHER INFORMATION 36 Item 1. Legal Proceedings 36 Item 1A. Risk Factors 36 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 36 Item 3. Defaults Upon Senior Securities 36 Item 4. Mine Safety Disclosures 36 Item 5. Other Information 36 Item 6. Exhibits 37 Signatures 38 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition, business strategy, and plans and objectives of management for future operations are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “toward,” “will,” or “would,” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following: ● our expectations regarding our revenue, expenses, profitability and other operating results; ● the growth rates of the markets in which we compete; ● the costs and effectiveness of our marketing efforts, as well as our ability to promote our brand; ● our ability to provide quality products that are acceptable to our customers; ● our reliance on key personnel and our ability to identify, recruit, and retain skilled personnel; ● our ability to effectively manage our growth, including offering new product categories and any international expansion; ● our ability to maintain the security and availability of our software; ● our ability to protect our intellectual property rights and avoid disputes in connection with the use of intellectual property rights of others; ● our ability to protect our users’ information and comply with growing and evolving data privacy laws and regulations; ● future investments in our business, our anticipated capital expenditures, and our estimates regarding our capital requirements; ● our ability to compete effectively with existing competitors and new market entrants; and ● our success at managing the risks involved in the foregoing. We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q. ii You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, and results of operations. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and our other filings with the SEC. Moreover, we operate in a very competitive environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe such information provides a reasonable basis for these statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements. The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information, actual results, revised expectations or the occurrence of unanticipated events, except as required by law. In this Quarterly Report on Form 10-Q, references to “Perfect Moment,” “we,” “us,” “our,” and the “Company” refer to Perfect Moment Ltd. and its subsidiaries, unless the context indicates otherwise. iii PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. PERFECT MOMENT LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except share and per share data) September 30, 2024 March 31, 2024 unaudited Assets Current assets: Cash and cash equivalents $ 725 $ 7,910 Restricted cash 1,825 - Accounts receivable, net 2,458 1,035 Inventories, net 5,331 2,230 Prepaid and other current assets 2,385 742 Total current assets 12,724 11,917 Non-current assets: Property and equipment, net 413 502 Operating lease right of use asset 97 143 Other non-current assets 41 47 Total non-current assets 551 692 Total Assets $ 13,275 $ 12,609 Liabilities and Shareholders’ Equity Current liabilities: Trade payables $ 4,144 $ 1,584 Accrued expenses 2,338 2,697 Trade finance facility 906 - Short-term borrowings, net of discount of $ 811 1,782 - Operating lease obligations, current portion 82 101 Unearned revenue 1,328 420 Total current liabilities 10,580 4,802 Non-current liabilities: Operating lease obligations, long-term portion 16 44 Total non-current liabilities 16 44 Total Liabilities 10,596 4,846 Shareholders’ equity: Preferred stock, $ 0.0001 par value, 10,000,000 shares authorized, none issued and outstanding as of September 30, 2024 and March 31, 2024, respectively - - Common stock; $ 0.0001 par value; 100,000,000 shares authorized; 15,962,889 and 15,653,449 shares issued and outstanding as of September 30, 2024 and March 31, 2024, respectively 1 1 Additional paid-in capital 57,865 56,824 Accumulated other comprehensive loss ( 78 ) ( 85 ) Accumulated deficit ( 55,109 ) ( 48,977 ) Total shareholders’ equity 2,679 7,763 Total Liabilities and Shareholders’ Equity $ 13,275 $ 12,609 The accompanying notes are an integral part of these condensed consolidated financial statements 2 PERFECT MOMENT LTD AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Amounts in thousands, except share and per share data) (Unaudited) Three Months Ended September 30, 2024 Three Months Ended September 30, 2023 Six Months Ended September 30, 2024 Six Months Ended September 30, 2023 Revenues: Wholesale $ 2,678 $ 2,798 $ 2,731 $ 2,829 Collaborations - 2,024 - 2,024 Ecommerce 1,155 1,066 2,077 2,023 Total Revenue 3,833 5,888 4,808 6,876 Cost of goods sold 1,762 2,609 2,378 3,115 Gross Profit 2,071 3,279 2,430 3,761 Operating Expenses: Selling, general and administrative expenses 3,923 2,693 7,223 5,176 Marketing and advertising expenses 705 888 1,158 1,597 Total operating expenses 4,628 3,581 8,381 6,773 Loss from operations ( 2,557 ) ( 302 ) ( 5,951 ) ( 3,012 ) Interest expense ( 188 ) ( 392 ) ( 194 ) ( 766 ) Foreign currency transaction gains/(losses) 1 ( 817 ) 13 ( 406 ) Net loss ( 2,744 ) ( 1,511 ) ( 6,132 ) ( 4,184 ) Other comprehensive gains/(losses) Foreign currency translation gains/(losses) 21 739 7 351 Comprehensive loss $ ( 2,723 ) $ ( 772 ) $ ( 6,125 ) $ ( 3,833 ) Net loss per share to common stockholders – basic and diluted $ ( 0.17 ) $ ( 0.29 ) $ ( 0.39 ) $ ( 0.82 ) Weighted average number of common shares outstanding – basic and diluted 15,781,264 5,186,555 15,717,356 5,082,805 The accompanying notes are an integral part of these condensed consolidated financial statements 3 PERFECT MOMENT LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT) THREE MONTHS AND SIX MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 (Amounts in thousands, except share data) (Unaudited) Shares Amount Shares Amount Shares Amount Capital Income (Loss) Deficit Deficit Preference Shares Accumulated Total Series A Convertible Series B Convertible Common Shares Additional Paid-in Other Comprehensive Accumulated Shareholders’ Equity / Shares Amount Shares Amount Shares Amount Capital Income (Loss) Deficit (Deficit) Balance -June 30, 2023 5,323,782 $ 1 1,189,998 $ - 4,978,538 $ - $ 36,738 $ ( 185 ) $ ( 42,928 ) $ ( 6,374 ) Stock compensation expense for employee vested options - - - - - - 4 - - 4 Issuance of common stock, net - - - 254,864 - 1,361 - - 1,361 Foreign currency translation adjustment - - - - - - - 739 - 739 Net loss - - - - - - - - ( 1,511 ) ( 1,511 ) Balance - September 30, 2023 5,323,782 $ 1 1,189,998 $ - 5,233,402 $ - $ 38,103 $ 554 $ ( 44,439 ) $ ( 5,781 ) Balance - June 30, 2024 - $ - - $ - 15,653,449 $ 1 $ 57,194 $ ( 99 ) $ ( 52,365 ) $ 4,731 Fair value of shares issued for services - - - - 280,241 - 329 - - 329 Fair value of vested RSU’s - - - - 29,199 - 127 - - 127 Stock compensation expense for employee vested options - - - - - - 215 - - 215 Foreign currency translation adjustment - - - - - - - 21 - 21 Net loss - - - - - - - - ( 2,744 ) ( 2,744 ) Balance - September 30, 2024 - $ - - $ - 15,962,889 $ 1 $ 57,865 $ ( 78 ) $ ( 55,109 ) $ 2,679 The accompanying notes are an integral part of these condensed consolidated financial statements 4 Preference Shares Accumulated Series A Convertible Series B Convertible Common Shares Additional Paid-in Other Comprehensive Accumulated Total Shareholders’ Equity Shares Amount Shares Amount Shares Amount Capital Income (Loss) Deficit (Deficit) Balance -March 31, 2023 5,323,782 $ 1 1,189,998 $ - 4,824,352 $ - $ 35,910 $ 203 $ ( 40,255 ) $ ( 4,141 ) Stock compensation expense for employee vested options - - - - - - 14 - - 14 Issuance of common stock - - - - 409,050 - 2,179 - - 2,179 Foreign currency translation adjustment - - - - - - - 351 - 351 Net loss - - - - - - - - ( 4,184 ) ( 4,184 ) Balance - September 30, 2023 5,323,782 $ 1 1,189,998 $ - 5,233,402 $ - $ 38,103 $ 554 $ ( 44,439 ) $ ( 5,781 ) Balance - March 31, 2024 - $ - - $ - 15,653,449 $ 1 $ 56,824 $ ( 85 ) $ ( 48,977 ) $ 7,763 Balance - $ - - $ - 15,653,449 $ 1 $ 56,824 $ ( 85 ) $ ( 48,977 ) $ 7,763 Fair value of shares issued for services - - - - 280,241 - 329 - - 329 Fair value of RSU’s - - - - 29,199 - 204 - - 204 Stock compensation expense for employee vested options - - - - - - 508 - - 508 Foreign currency translation adjustment - - - - - - - 7 - 7 Net loss - - - - - - - - ( 6,132 ) ( 6,132 ) Balance - September 30, 2024 - $ - - $ - 15,962,889 $ 1 $ 57,865 $ ( 78 ) $ ( 55,109 ) $ 2,679 Balance - $ - - $ - 15,962,889 $ 1 $ 57,865 $ ( 78 ) $ ( 55,109 ) $ 2,679 5 PERFECT MOMENT LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) (Unaudited) September 30, 2024 September 30, 2023 Six Months Ended September 30, 2024 September 30, 2023 Cash flows from operating activities: Net loss $ ( 6,132 ) $ ( 4,184 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 217 299 Bad debt expense 30 145 Inventory reserve ( 290 ) - Unrealized foreign exchange loss - 327 Stock based compensation cost – employees 712 14 Amortization of stock based marketing and other services 111 185 Amortization of debt discount 181 348 Accrued interest - 400 Changes in operating assets and liabilities: Accounts receivable ( 1,435 ) ( 1,399 ) Inventories ( 2,811 ) ( 1,769 ) Prepaid and other current assets ( 1,425 ) 122 Operating lease right of use asset 46 109 Operating lease liability ( 46 ) ( 112 ) Trade payables 2,559 1,469 Accrued expenses ( 359 ) 305 Unearned revenue 908 1,891 Net cash used in operating activities ( 7,734 ) ( 1,850 ) Cash flows from investing activities: Purchases of property and equipment ( 102 ) ( 82 ) Net cash used in investing activities ( 102 ) ( 82 ) Cash flows from financing activities: Deferred offering costs - ( 125 ) Proceeds from trade finance facilities, net 906 847 Repayment of trade finance facilities, net - ( 875 ) Proceeds from issuance of common shares, net 2,179 Proceeds of other borrowings, net 2,000 - Repayment of other borrowings ( 399 ) - Net cash provided by financing activities 2,507 2,026 Effect of Exchange Rate Changes on Cash ( 31 ) ( 216 ) Net Change in Cash and Cash Equivalents and Restricted Cash ( 5,360 ) ( 122 ) Cash and Cash Equivalents and Restricted Cash – beginning of the period 7,910 4,712 Cash and Cash Equivalents and Restricted Cash – end of the period $ 2,550 $ 4,590 Supplemental disclosures of cash flow information: Interest paid on borrowings and bank loans $ - $ 178 Supplemental disclosure of non-cash investing and financing activities: Fair value of unamortized stock-based marketing and other services $ 218 $ - Recognition of debt discount on short-term borrowings $ 992 $ - Recognition of operating lease right of use assets and lease obligations $ - $ 107 The accompanying notes are an integral part of these condensed consolidated financial statements 6 PERFECT MOMENT LTD AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the three and six months ended September 30, 2024 and 2023 (Amounts in thousands, except share and per share data and exchange rate data) (Unaudited) NOTE 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION Nature of operations Perfect Moment Ltd., a Delaware corporation (“Perfect Moment” or “PML” and, together with its subsidiaries unless the context otherwise requires, the “Company”), is an owner and operator of a luxury fashion brand that offers ski, swim, and activewear collections under the brand name Perfect Moment. The Company’s collections are sold directly to customers through e-commerce, sales to wholesale accounts and through other sales partnerships. Basis of presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required for complete consolidated financial statements. In the opinion of our management, these condensed consolidated financial statements contain all normal recurring adjustments considered necessary for a fair presentation of the Company’s financial position at September 30, 2024, results of operations for the three and six months ended September 30, 2024 and 2023, consolidated statements of shareholders’ equity for the three and six months ended September 30, 2024 and 2023, and cash flows for the six months ended September 30, 2024 and 2023. The Company’s results for the three and six months ended September 30, 2024 are not necessarily indicative of the results expected for the full year. You should read these statements in conjunction with our audited consolidated financial statements and management’s discussion and analysis and results of operations included in our Annual Report on Form 10-K (the “Form 10-K”) for the fiscal year ended March 31, 2024. The terms “fiscal 2025” and “fiscal 2024” refer to the Company’s fiscal year ending March 31, 2025 and fiscal year ended March 31, 2024, respectively. The figures in the notes to the financials are presented in thousands, therefore the 000’s are removed. Principles of consolidation These unaudited condensed consolidated financial statements include the accounts of Perfect Moment Ltd. and its wholly owned subsidiaries; Perfect Moment Asia Limited (“PMA”), Perfect Moment (UK) Limited (“PMUK”), Perfect Moment USA, Inc., (“PMUSA”) and Perfect Moment TM Sarl. These unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments which are, in the opinion of management, necessary for the fair statement of the financial information for the interim periods presented. All intercompany balances and transactions have been eliminated. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Going concern The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. Through September 30, 2024, the Company has funded its operations with proceeds from the sale of common stock from the initial public offering, the issuance of common stock, convertible debt, and preferred stock, alongside existing trade, invoice and shareholder financing arrangements. The Company has incurred recurring losses, including a net loss of $ 6,132 for the six months ended September 30, 2024 and used cash in operations of $ 7,734 during the period. As of September 30, 2024, the Company had an accumulated deficit of $ 55,109 . 7 These factors raise substantial doubt about the Company’s ability to continue as a going concern. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s consolidated financial statements for the year ended March 31, 2024, expressed substantial doubt about the Company’s ability to continue as a going concern. These condensed consolidated financial statements do not include any adjustments that might result from this uncertainty. Management’s plans to alleviate the conditions that raise substantial doubt include: ● Taking out short-term loans, purchase order financing and debt factoring to assist with working capital shortfalls ● Exploring sources of long-term funding in the private markets and additional equity financing ● Closely monitoring the collection of debts ● Strategies and plans in place to deliver improved margins in the next financial year The Company’s ability to continue as a going concern for 12 months from the date of these unaudited condensed Consolidated Financial Statements were available to be issued is dependent upon its ability to generate sufficient cash flows from operations to meet its obligations, which it has not been able to accomplish to date, and to obtain additional capital financing. No assurance can be given that the Company will be successful in these efforts mentioned above. Use of estimates The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments in applying the Company’s accounting policies that affect the reported amounts and disclosures made in the condensed consolidated financial statements and accompanying notes. Management continually evaluates the estimates and judgments it uses. These estimates and judgments have been applied in a manner consistent with prior periods and there are no known trends, commitments, events or uncertainties that management believe will materially affect the methodology or assumptions utilized in making these estimates and judgments in these financial statements. Significant estimates inherent in the preparation of the condensed consolidated financial statements include reserves for uncollectible accounts receivables, realizability of inventory; customer returns; useful lives and impairments of long-lived tangible and intangible assets; realization of deferred tax assets and related uncertain tax positions; and the valuation of stock-based compensation awards. Actual results may differ from these judgements and estimates under different assumptions or conditions and any such differences may be material. Revenue recognition The majority of the Company’s revenue is recognized at a point in time based on the transfer of control. In addition, the majority of the Company’s contracts do not contain variable consideration and contract modifications are minimal. The majority of the Company’s revenue arrangements generally consist of a single performance obligation to transfer promised goods. Revenue is reported net of markdowns, discounts and sales taxes collected from customers on behalf of taxing authorities. Revenue is also presented net of an allowance for expected returns where contracts include the right of return. The Company estimates returns on an ongoing basis to estimate the consideration from the customer that the Company expects to ultimately receive. Consideration in determining the Company’s estimates for returns may include agreements with customers, the Company’s return policy and historical and current trends. The Company records the returns as a reduction to net sales in its consolidated statements of operations and the recognition of a provision for returns within accrued expenses in its consolidated balance sheets and the estimated value of inventory expected to be returned as an adjustment to inventories, net. As of September 30, 2024 and March 31, 2024, the returns provision was $ 156 and $ 346 , respectively. 8 Revenue is comprised of direct-to-consumer ecommerce revenue through the Company’s website and revenue related to wholesalers, and revenue related to short-term collaborations. The following table details the revenue split: SCHEDULE OF REVENUE SPLIT September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Three Months Ended Six Months Ended September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Wholesale revenues $ 2,678 $ 2,798 $ 2,731 $ 2,829 Ecommerce revenues 1,155 1,066 2,077 2,023 Revenues - subtotal $ 3,833 $ 3,864 $ 4,808 $ 4,852 Collaboration revenues - 2,024 - 2,024 Total $ 3,833 $ 5,888 $ 4,808 $ 6,876 Revenue is recognized when performance obligations are satisfied through the transfer of control of promised goods to the Company’s customers. Control transfers once a customer has the ability to direct the use of, and obtain substantially all of the benefits from, the product. This includes the transfer of legal title, physical possession, the risks and rewards of ownership, and customer acceptance. For direct-to-consumer ecommerce revenue, the Company receives payment before the customer receives the promised goods. Revenue is only recognized once the goods have been delivered to the customer. Sales to wholesale customers are recognized when the customer has control which will depend on the agreed upon International Commercial Terms. For inventories sold on consignment to wholesalers, the Company records revenue when the inventory is sold to the third-party customer by the wholesaler. The Company may issue merchant credits, which are essentially refund credits. The merchant credits are initially deferred and subsequently recognized as revenue when tendered for payment. Cost of goods sold Cost of goods sold includes the cost of purchased merchandise, which includes: - acquisition and production costs including raw material and labor as applicable; - the cost incurred to deliver inventory to the Company’s third-party distribution centers including freight, non-refundable taxes, duty, and other landing costs; - outbound duties; and - reserves for inventory. Accounts receivable Accounts receivable primarily arise out of sales to wholesale accounts and ecommerce partners. The allowance for doubtful accounts represents management’s best estimate of probable credit losses in accounts receivable using the incurred loss methodology. Receivables are written off against the allowance when management believes that it is probable the amount receivable will not be recovered. Additionally, the Company records higher allowances in the first and third quarters following its peak sales seasons after the Company determines it to be probable that it will not collect the related receivables. As of September 30, 2024 and March 31, 2024, the Company had $ 570 and $ 558 , respectively, in allowances for doubtful accounts. Accounts Receivable, net of allowances, as of September 30, 2024 and March 31, 2024 was $ 2,458 and $ 1,035 , respectively. Segment reporting Accounting Standards Codification (“ASC”) Topic 280, “Disclosures about Segments of an Enterprise and Related Information” establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires those enterprises to report selected information about operating segments in interim financial reports issued to stockholders. Management has determined that the Company operates in one business segment, product sales. 9 Geographic concentration Although the Company is organized fundamentally as one business segment, the Company’s revenues are primarily split between three geographic areas: the U.S., Europe and the United Kingdom (the “U.K.”). Customers in these regions are served by our leadership, production and operations teams in the U.K. and Hong Kong. The table below reflects total net revenues attributed to Europe (excluding the United Kingdom), United States, United Kingdom, and the rest of the world: SCHEDULE OF NET REVENUE BY GEOGRAPHIC AREAS September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Three Months Ended Six Months Ended September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Europe (excluding United Kingdom) $ 1,948 51 % $ 1,857 31 % $ 2,124 44 % $ 2,032 30 % United States 958 25 % 3,140 53 % 1,325 28 % 3,446 50 % United Kingdom 691 18 % 653 11 % 938 19 % 1,065 15 % Rest of the World 236 6 % 238 5 % 421 9 % 333 5 % Total $ 3,833 $ 5,888 $ 4,808 $ 6,876 The decrease in United States revenues as a percentage of total revenues is primarily attributed to a two-year collaboration with Hugo Boss totaling $ 2,024 that ended in FY24. The Company has not continued with the Hugo Boss collaboration as the relationship required the use of Perfect Moments supply chain, designers, and took precedence over all other wholesalers. The table below reflects Ecommerce net revenues attributed to Europe (excluding the United Kingdom), United States, United Kingdom, and the rest of the world: SCHEDULE OF NET REVENUE BY GEOGRAPHIC AREAS September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Three Months Ended Six Months Ended September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Europe (excluding United Kingdom) $ 229 20 % $ 192 18 % $ 405 19 % $ 351 17 % United States 406 35 % 379 36 % 721 35 % 673 33 % United Kingdom 302 26 % 375 35 % 561 26 % 786 39 % Rest of the World 218 19 % 120 11 % 390 19 % 213 11 % Total $ 1,155 $ 1,066 $ 2,077 $ 2,023 Long-lived assets The long-lived assets of the Company primarily relate to property and equipment, intangible assets and operating lease right-of-use assets in the U.K. and Hong Kong. Total long-lived assets as of September 30, 2024 were $ 440 and $ 74 in the U.K. and Hong Kong, respectively. As of March 31, 2024, total long-lived assets were $ 557 and $ 98 in the U.K. and Hong Kong, respectively. Supplier concentration For the three months ended September 30, 2024 and 2023, the largest single supplier of manufactured goods produced 45 % and 57 %, respectively, of the Company’s products. For the three months ended September 30, 2024 and 2023, the single largest fabric supplier supplied 44 % and 45 %, respectively, of the fabric used to manufacture the Company’s products. For the six months ended September 30, 2024 and 2023, the largest single supplier of manufactured goods produced 45 % and 57 %, respectively, of the Company’s products. For the six months ended September 30, 2024 and 2023, the single largest fabric supplier supplied 46 % and 63 %, respectively, of the fabric used to manufacture the Company’s products. Customer concentration For the three months ended September 30, 2024, we had one major customer, which accounted for approximately 15 % or $ 580 of total revenue. For the six months ended September 30, 2024, we had two major customers, which accounted for approximately 23 % or $ 1,089 of total revenue. The related accounts receivable balance for these customers was $ 1,027 as of September 30, 2024, and $ 71 as of March 31, 2024. For the three and six months ended September 30, 2023, we had two major customers, which accounted for approximately 47 % or $ 2,786 of total revenue and 40 % or $ 2,786 of total revenue, respectively. The related accounts receivable balance for these customers was approximately $ 760 as of September 30, 2023, and $ 41 as of March 31, 2023. Selling, general and administrative expenses (“SG&A”) SG&A expenses consist of all operating costs not otherwise included in cost of goods sold or marketing and advertising expenses. The Company’s selling, general and administrative expenses include personnel costs, sales commissions, the service fees of the Company’s third-party fulfilment and distribution centers, recruitment fees, legal and professional fees, information technology, accounting, travel and lodging, occupancy costs and depreciation and amortization. Foreign currency Foreign currency transactions denominated in a currency other than an entity’s functional currency are remeasured into the functional currency using the spot rate at the date of the transaction with any resulting gains and losses recognized in operating expenses except for gains and losses arising on intercompany foreign currency transactions that are of a long-term investment nature, which are recorded as a foreign currency translation adjustment in other comprehensive income or loss. The functional currency for each entity included in these condensed consolidated financial statements that is domiciled outside of the United States is generally the applicable local currency. Assets and liabilities of each foreign entity are translated into U.S. dollars at the exchange rate in effect on the balance sheet date. Revenue and expenses are translated on a monthly basis using the average rate for that month as a close approximation. Unrealized translation gains and losses are recorded as a foreign currency translation adjustment, which is included in other comprehensive income or loss, which is a component of accumulated other comprehensive income or loss included in shareholders’ deficit. 10 Stock-based compensation The Company accounts for equity-based awards according to ASC 505 and 718, whereby the value of the award is measured on the date of grant and recognized as compensation expense on a straight-line basis over the vesting period. The Company measures fair value as of the grant date for options and warrants using the Black Scholes option pricing model and for common share awards using a weighted average of the Black Scholes method and probability-weighted expected return method (PWERM). The inputs into the Black Scholes option pricing model are subjective and generally require significant judgment. The fair value of the shares of common and preferred stock has historically been determined by the Company’s management with the assistance of third-party specialists as there was no public market for the common stock up until February 8, 2024. The fair value is obtained by considering a number of objective and subjective factors, including the valuation of comparable companies, sales of preferred stock to unrelated third parties, projected operating and financial performance, the lack of liquidity of common and preferred stock and general and industry specific economic outlook, amongst other factors. The expected term represents the period that the Company’s stock options are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term) as the Company’s stock option exercise history does not provide a reasonable basis upon which to estimate expected term. Because the Company was privately held for a portion of the periods covered by these financial statements and historically did not have an active trading market for its common and preferred stock for a sufficient period of time, the expected volatility was estimated based on the average volatility for comparable publicly traded companies, over a period equal to the expected term of the stock option grants. The Company listed on NYSE American on February 8, 2024 and now uses the closing price on the day of grant to determine FMV and for the stock options issued in Q2 2025 the company used the average of a peer group of similar companies based by one or all the following factors to determine volatility: industry, revenue, market capitalization. The risk-free rate assumption is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of the option. The Company has never paid dividends on its common stock and does not anticipate paying dividends on common stock in the foreseeable future. Therefore, the Company uses an expected dividend yield of zero . Income / loss per share of common stock Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period. Diluted earnings per share is computed by dividing the net income applicable to common stockholders by the weighted average number of shares of common stock outstanding plus the number of additional shares of common stock that would have been outstanding if all dilutive potential shares of common stock had been issued using the treasury stock method. Potential shares of common stock are excluded from the computation when their effect is antidilutive. The dilutive effect of potentially dilutive securities is reflected in diluted net income per share if the exercise prices were lower than the average fair market value of common stock during the reporting period. Potentially dilutive stock options and securities as presented in the table below were excluded from the computation of diluted net income (loss) per share, because the effect would be anti-dilutive. As the Company incurred losses for the three and six months ended September 30, 2024 and 2023, basic and diluted weighted-average shares are the same in the loss per share calculation, in accordance with ASC 260-10-45-20. SCHEDULE OF ANTIDILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF DILUTED NET INCOME (LOSS) PER SHARE September 30, 2024 September 30, 2023 Options to acquire common stock 1,796,550 299,957 Restricted stock units to acquire common stock 225,000 - Warrants to acquire common stock 66,700 - Series A convertible preferred stock - 5,323,782 Series B convertible preferred stock - 1,189,998 Convertible debt financing - 2,242,679 Antidilutive securities 2,088,250 9,056,416 On February 12, 2024, all outstanding shares of our Series A and Series B convertible preferred stock were automatically converted into 5,323,782 and 1,189,998 shares of common stock in connection with the closing of the initial public offering. The $ 10,002 in principal amount due on convertible debt plus accrued interest in the amount of $ 1,985 automatically converted into Company common stock, into an aggregate of 2,497,267 shares of common stock. Fair Value of Financial Instruments The Company follows the guidance of ASC 820 and ASC 825 for disclosure and measurement of the fair value of its financial instruments. ASC 820 establishes a framework for measuring fair value under U.S. GAAP and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. 11 The three (3) levels of fair value hierarchy defined by ASC 820 are described below: Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 3: Pricing inputs that are generally observable inputs and not corroborated by market data. The carrying amount of the Company’s financial assets and liabilities, such as cash and cash equivalents, prepaid expenses, accounts payable and accrued expenses approximate their fair value due to their short-term nature. The carrying values of capital lease obligations and debt obligations approximate their fair values due to the fact that the interest rates on these obligations are based on prevailing market interest rates. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments. Reclassifications The Company has reclassified certain costs totaling $ 614 and $ 991 previously classified as cost of sales for the three and six months ended September 30, 2023, respectively, to SG&A expenses to conform to the current year presentation. Recently issued accounting pronouncements In September 2022, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2022-04, “Disclosure of Supplier Finance Program Obligations” (“ASU 2022-04”). ASU 2022-04 requires entities to disclose the key terms of supplier finance programs they use in connection with the purchase of goods and services, along with the amount of obligations outstanding at the end of each period and an annual roll forward of such obligations. This standard does not affect the recognition, measurement, or financial statement presentation of supplier finance program obligations. ASU 2022-04 is effective for the Company for the year ended March 31, 2024 and is to be applied retrospectively to all periods in which a balance sheet is presented. The annual roll forward disclosure is not required to be made until the year ending March 31, 2025 and is to be applied prospectively. The Company doesn’t believe the adoption will have a material effect on the financial statements. Other than the new disclosure requirements, ASU 2022-04 will not have an impact on the Company’s consolidated financial statements. In March 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2024-01 to amend the guidance in Accounting Standards Codification (“ASC”) 718 Compensation—Stock Compensation (Topic 718). Some entities compensate employees or other service providers by granting profits interest awards, which generally give the grantee an opportunity to participate in future profits and/or equity appreciation of the entity but do not give them rights to existing net assets of the entity. ASU 2024-01 adds an example showing how to apply the scope guidance in ASC 718 to determine whether profits interests and similar awards should be accounted for as share-based payment arrangements. The ASU is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company does not currently anticipate that the guidance will have a material impact on its financial statements. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense categories that are regularly provided to the chief operating decision maker and included in each reported measure of a segment’s profit or loss. The update also requires all annual disclosures about a reportable segment’s profit or loss and assets to be provided in interim periods and for entities with a single reportable segment to provide all the disclosures required by ASC 280, Segment Reporting, including the significant segment expense disclosures. This standard will be effective for the Company on January 1, 2024 and interim periods beginning in fiscal year 2025, with early adoption permitted. The updates required by this standard should be applied retrospectively to all periods presented in the financial statements. The Company does not expect this standard to have a material impact on its results of operations, financial position or cash flows. ASUs recently issued but not listed above were assessed and determined to be either not applicable or are expected to have minimal impact on the consolidated financial position or results of operations. 12 NOTE 3. CASH Cash consisted of the following as of September 30, 2024 and March 31, 2024. SCHEDULE OF CASH September 30, 2024 March 31, 2024 $’000 $’000 Cash and cash equivalents $ 725 $ 7,910 Restricted cash 1,825 - Total Cash $ 2,550 $ 7,910   Restricted cash represents amounts pledged as collateral against the trade finance facility that is currently limited to the issuance of letters of credit to suppliers. As of September 30, 2024, we have $ 1,940 of outstanding letters of credit issued to suppliers (see Note 6). NOTE 4. INVENTORIES Inventories are initially measured at cost and subsequently measured at the lower of cost or net realizable value. Cost is determined on a first-in, first-out basis. The following table details the primary categories for the periods presented. SCHEDULE OF INVENTORY September 30, 2024 March 31, 2024 $’000 $’000 Finished goods $ 4,829 $ 2,680 Raw materials 720 721 Goods in transit 684 14 Finished goods on consignment 201 205 Total inventories 6,434 3,620 Inventory reserve ( 1,103 ) ( 1,390 ) Total inventories, net $ 5,331 $ 2,230 Third-party services are used to warehouse and distribute inventory. Per the terms of one third-party service contract, a lien may be placed on the Company’s inventory if the Company fails to make a payment for services within 30 days from the date the third-party supplier notifies the Company of an outstanding payment. NOTE 5. PROPERTY AND EQUIPMENT Property and equipment consisted of the following as of September 30, 2024 and March 31, 2024. SCHEDULE OF PROPERTY AND EQUIPMENT September 30, 2024 March 31, 2024 $’000 $’000 Furniture and fixtures $ 178 $ 177 Office equipment 57 57 Leasehold improvements 29 29 Software and website development 2,098 1,886 Computer equipment 133 121 Total property and equipment 2,495 2,270 Accumulated depreciation ( 2,082 ) ( 1,768 ) Total property and equipment, net $ 413 $ 502 Depreciation expense related to property and equipment was $ 106 and $ 162 for the three months ended September 30, 2024 and 2023, respectively. Depreciation expense related to property and equipment was $ 211 and $ 301 for the six months ended September 30, 2024 and 2023, respectively. 13 NOTE 6. TRADE FINANCE FACILITY SCHEDULE OF TRADE FINANCE FACILITY September 30, 2024 March 31, 2024 $’000 $’000 Trade finance facility $ 906 $ - Total $ 906 $ - The Company, through our PMA subsidiary, has a trade finance facility extended on goods for which letters of credit are issued to the Company’s suppliers by HSBC. As of September 30, 2024 and March 31, 2024 the Company had a trade finance facility limit of $ 2,700 and $ 5,000 , respectively. Amounts owed relating to issued letters of credit do not become the Company’s responsibility until the Company receives the manufactured clothing goods from suppliers. Once drawn, the company has the option of 195 days credit, in the form of a loan, before repayment is due. For drawings in Hong Kong dollars, the interest rate equals HIBOR plus 3.0%, and for drawings in U.S. dollars, the interest rate equals SOFR plus 3.3 %. As of September 30, 2024 and March 31, 2024 the outstanding balance under the trade finance facility was $ 906 and $ 0 respectively. As of September 30, 2024 and March 31, 2024, there was $ 1,941 and $ 0 , respectively, in outstanding pledged letters of credit by HSBC. As of September 30, 2024 , total pledged letters of credit and trade loans were $ 2,845 , which was secured by $ 1,825 , restricted cash held with HSBC. The trade finance facility is also secured by a guarantee by Perfect Moment Ltd. in the amount of $ 2,000 . NOTE 7. ADVANCE ON FUTURE RECEIPTS The Company has the following advances on future receipts as of September 30, 2024: SCHEDULE OF ADVANCES ON FUTURE RECEIPTS Note Issuance Date Maturity Date Interest Rate Net Proceeds Obligations Related to Future Receipts Obligations at September 30, 2024 Note 1 July 25, 2024 February 7, 2025 33 % $ 500 $ 746 $ 506 Note 2 August 23, 2024 March 18, 2025 33 % 1,000 1,491 1,331 Note 3 September 25, 2024 March 11, 2025 34 % 500 756 756 Total $ 2,000 $ 2,993 2,593 Debt discount ( 811 ) Net $ 1,782 Note 1, 2, and 3 During the period ended September 30, 2024, the Company received three secured advances from unaffiliated third parties’ totaling $ 2,000 for the purchase of future receipts/revenues of $ 2,993 . Pursuant to the terms of the agreement, the unaffiliated third parties will auto withdraw an aggregate of $ 111 from the Company’s operating account weekly. The term of the agreement extends until the advances are paid in full. The notes did not bear any interest, however, the average interest was imputed at a rate of 33 % based on the face value of the note and the proceeds received. The Company may pay off the note for $ 2,472 if paid within 30 days of funding; for $ 2,562 if paid between 31 and 45 days of funding; or for $ 2,625 if paid within 46 to 60 days of funding. These advances are secured by the Company’s tangible and intangible assets. As a result, the Company recorded a liability of $ 2,993 to account for the future receipts sold and a debt discount of $ 993 to account for the difference between the liability related to the future receipts sold and the cash received. The debt discount is being amortized over the term of the agreement. During the six months ended September 30, 2024, the Company paid $ 399 of the notes, and as such, the outstanding balance of the notes was $ 2,593 as of the period then ended. The Company amortized $ 181 of the debt discount during the period, resulting in unamortized balance of $ 811 as of September 30, 2024. As such, the balance of the notes net of unamortized discount was $ 1,782 as of September 30, 2024. 14 NOTE 8. COMMON STOCK Common stock Shares Issued for Services During the six months ended September 30, 2024, the Company issued 280,241 shares of restricted common stock to vendors for services rendered and to be rendered with a fair value of $ 329 . These shares of common stock were valued based on the market value of the Company’s common stock price at the issuance date or the date the Company entered into the agreement related to the issuance. During the period ended September 30, 2024 the Company amortized $ 111 of the value of the shares as the services were rendered and $ 218 of the remaining fair value of the shares was included as a prepaid asset as of September 30, 2024. NOTE 9. RESTRICTED STOCK UNITS Restricted Stock Units A summary of restricted stock unit activity for the six months ended September 30, 2024 is presented below. SCHEDULE OF RESTRICTED STOCK UNIT ACTIVITY Weighted- Average Grant Date Shares Fair Value Fair Value Non-vested at March 31, 2024 225,000 $ 801 $ 4.10 Granted 29,199 50 - Vested/deemed vested ( 29,199 ) ( 204 ) - Forfeited - - - Non-vested at September 30, 2024 225,000 $ 647 $ 4.10 During the six months ended September 30, 2024, the Company issued 29,199 shares of restricted stock units to a vendor for services rendered with a fair value of $ 50 . The shares were valued based on the market value of the Company’s stock price on the grant date and amortized over its vesting term. The total fair value of restricted stock units that vested or deemed vested during the six months ended September 30, 2024 was $ 204 and is included in selling, general and administrative expenses in the accompanying statements of operations. As of September 30, 2024, the amount of unvested compensation related to issuances of restricted stock award was $ 647 which will be recognized as an expense in future periods as the shares vest. NOTE 10. STOCK OPTIONS The Company maintains the 2021 Equity Incentive Plan (the “2021 Plan”), which provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock units and performance units and performance shares to employees, directors and consultants of the Company or any parent or subsidiary of the Company. The purpose of the 2021 Plan is to enable the Company to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to employees, directors and consultants of the Company or any parent or subsidiary of the Company, and to promote the success of the Company’s business. The Company has 2,527,944 shares available to issue from the 2021 plan as of March 31, 2024. The Company has historically granted stock options to non-employees in exchange for the provision of services, both under the 2021 Plan and outside of the 2021 Plan. 15 A summary of option activity for the period ended September 30, 2024 is presented below: SCHEDULE OF STOCK OPTION ACTIVITY Weighted- Weighted- Average Average Remaining Aggregate Exercise Contractual Intrinsic Options Price Life (Years) Value Outstanding at March 31, 2024 1,108,356 3.42 3.45 595 Granted 688,194 2.15 - - Forfeited - - - - Exercised - - - - Outstanding at September 30, 2024 1,796,550 $ 2.94 3.11 $ 177 Vested September 30, 2024 610,996 $ 3.01 $ 177 Exercisable at September 30, 2024 417,237 $ 2.06 $ 177 During the six months ended September 30, 2024, the Company granted stock options to employees to purchase 688,194 shares of common stock for services rendered. The options have an average exercise price of $ 2.31 per share, expire in ten years , vesting equally over four years from the employees’ start date. The total fair value of these options at the grant date was approximately $ 1,444 using the Black-Scholes Option Pricing Model. The total stock compensation expense recognized related to vesting of stock options for the six months ended September 30, 2024 and 2023 amounted to $ 508 and $ 14 , respectively. As of September 30, 2024 the total unrecognized stock-based compensation was $ 2,652 , which is expected to be recognized as part of operating expense through September 2028. At September 30, 2024, the intrinsic value of the outstanding options under the 2021 Plan was $ 177 . The fair value of the share option awards was estimated using the Black-Scholes method and probability-weighted expected return method (PWERM) based on the following weighted-average assumptions: SCHEDULE OF FAIR VALUE ASSUMPTIONS OF SHARE OPTION AWARDS Six Months Ended September 30, 2024 Expected life in years 10 Stock price volatility 138.35 % - 142.42 % Risk free interest rate 2.09 % - 3.58 % Expected dividends 0 % Forfeiture rate 18.02 – 19.10 % 16 NOTE 11. STOCK WARRANTS A summary of warrant activity for the six months ended September 30, 2024 is presented below: SCHEDULE OF WARRANTS ACTIVITY Weighted- Weighted- Average Average Remaining Aggregate Exercise Contractual Intrinsic Options Price Life (Years) Value Outstanding at March 31, 2024 66,700 $ 7.50 4.87 $ - Granted - - - - Forfeited - - - - Exercised - - - - Outstanding at September 30, 2024, all vested 66,700 $ 7.50 4.37 $ - No warrants were issued for the six months ended September 30, 2024. As of September 30, 2024 the outstanding warrants had no intrinsic value. NOTE 12. FOREIGN CURRENCY TRANSLATION We report all currency amounts in USD. The Company’s subsidiaries in the U.K., Hong Kong and Switzerland maintain their books and records in their functional currencies, which are GBP, HKD and CHF, respectively. When consolidating the subsidiaries with non-USD functional currencies, we translate the amounts of assets and liabilities into USD using the exchange rate on the balance sheet date, and the amounts of revenue and expense are translated at the average exchange rate prevailing during the period. The gains and losses resulting from translation of financial statement amounts into USD are recorded as a separate component of accumulated other comprehensive loss within shareholders’ deficit. We used the exchange rates in the following table to translate amounts denominated in non-USD currencies as of and for the periods noted: SCHEDULE OF FOREIGN CURRENCY TRANSLATION Period end exchange rate: September 30, 2024 March 31, 2024 GBP:USD 1.33958 1.26254 HKD:USD 0.12870 0.12778 CHF:USD 1.18366 1.10871 Year end exchange rate 1.18366 1.10871 Average exchange rate: September 30, 2024 September 30, 2023 Three Months Ended September 30, 2024 September 30, 2023 GBP:USD 1.30047 1.26569 HKD:USD 0.12822 0.12780 CHF:USD 1.15520 1.13147 Average exchange rate 1.15520 1.13147 September 30, 2024 September 30, 2023 Six Months Ended September 30, 2024 September 30, 2023 GBP:USD 1.28116 1.25886 HKD:USD 0.12807 0.12768 CHF:USD 1.13043 1.12191 Average exchange rate 1.13043 1.12191 17 The following table, reported in USD, disaggregates our cash balances by currency denomination: SCHEDULE OF CASH BALANCES BY CURRENCY DENOMINATION Cash denominated in: September 30, 2024 March 31, 2024 $’000 $’000 USD $ 2,204 $ 7,187 GBP 189 598 HKD 70 27 CHF 14 14 EUR 73 84 Cash $ 2,550 $ 7,910 Our cash primarily consists of funds held in bank accounts and third party payment platforms. SCHEDULE OF FUNDS HELD IN BANK ACCOUNTS AND THIRD PARTY PAYMENT PLATFORMS Cash held by Chase $ 204 $ 6,180 Cash held by HSBC 490 1,637 Restricted cash held by HSBC 1,825 - Cash held by other banks 20 45 Cash held by third party payment platforms 10 46 Petty cash 1 2 Total cash $ 2,550 $ 7,910 With the exception of petty cash, all our cash consists of funds held in bank accounts and third-party payment platforms. The Company maintains the majority of cash at HSBC where the balances are insured by the Federal Deposit Insurance Corporation (FDIC) up to $ 250 . At times, the cash balances may exceed the FDIC-insured limit. As of September 30, 2024, we do not believe we have any significant concentrations of credit risk due to the strong credit rating of HSBC and the cash balance is expected to be utilized within 6 months to fund working capital requirements. The cash held by other banks is within the $ 250 FDIC insured amount and cash held by third party payment platforms are short term timing balances. 13. COMMITMENTS AND CONTINGENCIES Legal proceedings - The Company is, from time to time, involved in routine legal matters, and audits and inspections by governmental agencies and other third parties which are incidental to the conduct of its business. This includes legal matters such as initiation and defense of proceedings to protect intellectual property rights, liability claims, employment claims, and similar matters. The Company believes the ultimate resolution of any such legal proceedings, audits, and inspections will not have a material adverse effect on its consolidated balance sheets, results of operations or cash flows. On December 20, 2023, Aspen Skiing Company, LLC (“ASC”) filed a complaint against the Company in the United States District Court for the District of Colorado, alleging, among other things, trademark infringement, false association, false endorsement, unfair competition and deceptive trade practices by the Company (the “ASC Suit”). Management has determined, after the advice of legal counsel, that the claims and actions related to such complaint are not expected to have a material adverse effect on our financial condition because management believes that the lawsuit will not succeed on the merits and the risk of any material loss is remote. The claims relate to the Company’s social media posts of models and influencers in ski gondolas on the mountain owned by Aspen Skiing Company and now discontinued limited edition clothing sold by the Company that included images, which were licensed by the Company from a photographer, of a skier’s rest area in Aspen that Aspen Skiing Company calls the “AspenX Beach Club.” The complaint seeks injunctive relief, but no motion for injunctive relief has been filed in the suit. The complaint also seeks delivery of all infringing material to Aspen Skiing Company and an award of the Company’s profits and Aspen Skiing Company’s damages in an amount to be determined at trial, costs incurred by Aspen Skiing Company in the action, their attorney’s fees and treble damages. In August 28, 2024 the Company and ASC entered into a Settlement Agreement (the “Settlement Agreement”) with respect to the ASC Suit. The Company agreed to terminate all marketing, distribution and sale of the PM DeDe Johnston Apparel and to terminate all use of any marketing and advertising in which an ASC Trademark (as that those terms are defined in the Settlement Agreement) is visible and recognizable, and to pay ASC the sum of $ 10,000 . Capital commitments - The Company had $ 3,026 purchase obligations as of September 30, 2024, related to purchase orders to factories for the manufacture of finished goods. $ 888 purchase obligations are to be financed by HSBC letters of credit and comprise the balance held as restricted cash on the condensed consolidated balance sheets. 18 NOTE 14. RELATED PARTY TRANSACTIONS Certain directors of the Company and its subsidiaries previously provided consulting and advisory services for the Company which are recognized in selling, general and administrative expenses in the accompanying condensed consolidated statement of operations. Below are the directors of the Company and its subsidiaries, that provide consulting and advisory services. SCHEDULE OF DIRECTORS COMPANY SUBSIDIARIES September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Three Months Ended Six Months Ended September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 (A) Max Gottschalk (director of the Company) $ - $ 46 $ - $ 91 (B) Tracy Barwin (director of the Company) - 54 - 122 (C) Andreas Keijsers (director of a subsidiary) - 12 - 24 Total Expenses $ - $ 112 $ - $ 237 (A) We, through PMA, are party to a consulting agreement with Max Gottschalk, dated May 15, 2019, which continues until terminated in accordance with its terms, during which Mr. Gottschalk is entitled to receive fees for services rendered amounting to £ 8,000 per month from April 2021 to November 2022 and £ 12,000 per month since December 2022. These amounts are in lieu of any other cash payments or equity awards Mr. Gottschalk may otherwise have been entitled to receive as a member of our board of directors. (B) We were party to a consulting agreement with Tracy Barwin, dated November 18, 2022, pursuant to which Ms. Barwin was entitled to receive £ 1,500 per day for services rendered with a minimum commitment of two days per month. These amounts were in lieu of any other cash payments or equity awards Ms. Barwin may otherwise have been entitled to receive as a member of our board of directors. The consulting agreement with Ms. Barwin was terminated in October 2023 and replaced by an independent director agreement. (C) We, through PMA, were party to a consulting agreement with Arnhem Consulting Limited (“Arnhem”), a company controlled by Andre Keijsers, dated February 28, 2017, pursuant to which Arnhem was entitled to receive £ 1,200 per month for services rendered. The consulting agreement was terminated in September 2023 as a result of Mr. Keijsers becoming a director of the Company. For 2024, all these related parties became board members, and were paid board fees of $ 118 in the aggregate for the six months end September 30, 2024. No other fees were paid to these individuals or entities during that period. 19 15. SUBSEQUENT EVENTS Shares Issued for Services Subsequent to September 30, 2024, the Company issued 50,000 shares of common stock to a vendor for services rendered and to be rendered with a fair value of $ 51 . These shares of common stock were valued based on the market value of the Company’s common stock price at the issuance date or the date the Company entered into the agreement related to the issuance. Advance on Future Receipts Subsequent to September 30, 2024 the Company received two additional secured advances from an unaffiliated third party totaling $ 1,179 for the purchase of future receipts/revenues of $ 1,761 . Pursuant to the terms of the agreement the unaffiliated third-party will auto withdraw an aggregate of $ 60 from the Company’s operating account weekly. The term of the agreement extends until the advances are paid in full. The notes did not bear any interest, however, the average interest was imputed at a rate of 33 % based on the face value of the note and the proceeds received. The Company may pay off the note for $ 1,512 if paid within 30 days of funding; for $ 1,562 if paid between 31 and 45 days of funding; or for $ 1,612 if paid within 46 to 60 days of funding. These advances are secured by the Company’s tangible and intangible assets. As a result, the Company recorded a liability of $ 1,761 to account for the liability related to the future receipts sold and a debt discount of $ 582 to account for the difference between the future receipts sold and the cash received. The debt discount is being amortized over the term of the agreement. As part of the advance the Company paid off the remaining balance and amortized the remaining debt discount of Note 1(see Note 7). 20 ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview (Amounts in this Item 2 are presented in thousands, except (i) share and per share data and (ii) percentages) Perfect Moment is a high-performance, luxury skiwear and lifestyle brand that fuses technical excellence with fashion-led designs. We create apparel and products that feature what we believe is an unmatched combination of fashion, form, function and fun for women, men and children. Across all revenue channels, Perfect Moment distributes to over sixty countries. We design our products in-house and work with a variety of suppliers to manufacture materials and finished goods. Our collections are worn by an evolving list of celebrities and influencers whose perfect moments are captured across a range of social media platforms. Revenue Since fiscal year 2020, the company’s fiscal second quarter revenue averaged approximately 12% of the fiscal year’s total revenue, with the fiscal first half averaging only 15% of total annual revenue. Total revenue for the six months ended September 30, 2024 was $4,808 compared to $6,876 for the six months ended September 30, 2023, a decrease of $2,068 or 30%. The decrease is primarily attributed to a collaboration with Hugo Boss in FY24 totaling $2,024 that ended in FY24. The remaining decrease of $44 is attributed to the timing of wholesale shipments of $98 offset by an increase in ecommerce of $54. Total revenue for the three months ended September 30, 2024 was $3,833 compared to $5,888 for the three months ended September 30, 2023, a decrease of $2,054 or 35%. The decrease is primarily attributed to a collaboration with Hugo Boss that ended in FY24. The remaining decrease of $30 is attributed to timing of wholesale shipments of $120 or 4% offset by an increase in ecommerce of $90 or 8% attributed to enhanced brand awareness and the company’s focus on ecommerce. The Company did not look to extend the two-year collaboration with Hugo Boss as the collaboration required the use of Perfect Moments supply chain, designers, and took precedence over all other wholesalers. The change allows management to continue building the foundations of future growth through better delivery times, improved quality, consistency, and extend our supplier relationships which will better serve our wholesale partners and direct to consumer channels, driving longer terms sustainable revenue growth. Ecommerce The Company has deployed strategies across the entire sales and marketing funnel as we focus on building a direct relationship with our customer, which we believe is an important step of following our customer from the ski slopes, to après, to the chalet, and eventually home expanding our product offering across all seasons. We remain one of the most followed luxury ski brands globally and increased our followers across all social media platforms (Instagram, Facebook (Meta) and TikTok) increased by 1.6% from March 31, 2024 through September 30, 2024 and increased 19.2% compared to September 30, 2023. The number of unpaid celebrities and influencers driving the top of our funnel is extraordinary for a Company our size. The strength at the top of the funnel provides opportunities to move our customers through the funnel that not only leads to sales, but more importantly allows us to build a community and ultimately customer loyalty. Gross revenue for the six months ended September 30, 2024, increased to $3,398 an increase of $795 or 31% compared to the six months ended September 30, 2023, driven by continued growth in ecommerce revenue. The end of season sale for autumn/winter 2023 (AW23) included an unusually high percentage of product sold at a discount, making way for a significant new collection replacing many of our product lines for autumn/winter 2024 (AW24), in part due to an upcoming change in legislation in some of our markets for the use of Durable Water Repellency treatments. The Company experiences higher return rates on discounted products and for the six months ended September 30, 2024, our returns as a percentage of sales increased to 39% from 28% for the six months ended September 30, 2023. Overall, net revenue increased $54k or 3%. 21 Gross Profit and Margin Our gross profit for the six months ended September 30, 2024 was $2,430 compared to $3,761 for the six months ended September 30, 2023, a decrease of $1,331 or 35%. The decrease is driven by lower sales that is primarily attributed to a two-year collaboration with Hugo Boss that ended in FY24. Our gross margins were 51% compared to 55% in the prior year. Improving our gross margins remains an important focus, and we anticipate our gross margins in our current fiscal year 2025 to significantly improve year-over-year. We are making significant progress across all our margin expansion projects including opening our first U.S. distribution center last month. Following the facility opening in October 2024, we realized an immediate improvement in operating efficiency. We will experience reduced duty costs for ecommerce orders in the second half of this fiscal year, which will drive improved gross margins compared to last year. The decrease in gross margin for the six months ended September 30, 2024 versus the six months ended September 30, 2023 is attributed to the end of season sale for autumn/winter 2023 (AW23) that included an unusually high percentage of product sold at a discount, making way for a significant new collection replacing many of our product lines for autumn/winter 2024 (AW24), in part due to an upcoming change in legislation in some of our markets for the use of Durable Water Repellency treatments. We also had a greater percentage of ecommerce sales versus wholesale sales for the six months ended September 30, 2024 compared to September 30, 2023. Ecommerce margins are historically lower than wholesale. Our gross profit for the three months ended September 30, 2024 was $2,071 compared to $3,279 for the three months ended September 30, 2023, a decrease of $1,208 or 37%. The decrease is driven by lower sales that is primarily attributed to a collaboration with Hugo Boss that ended in FY24. Our gross margins were 54.0% compared to 56% achieved in the prior year. The decrease in gross margin is attributed to the continuation of the end of season sale noted above plus a greater percentage of ecommerce sales versus wholesale sales for the six months ended September 30, 2024 compared to September 30, 2023. Ecommerce margins are historically lower than wholesale. Third-Party Distribution Center Update Historically, all ecommerce orders were dispatched from a third-party distribution center in the United Kingdom and in most instances the Company is paying duties to cross international borders. Compounding the margin dilution is the fact we were paying duties at full retail and not at a transfer price. On July 15, 2024 we executed an agreement with Quiet Platforms to be our third party operated distribution center in the United States. The U.S. distribution center will improve our customer experience, lower our duty cost plus reduce outbound and return shipping cost in the U.S. market, which represented over 40% of our revenue for the fiscal year ended March 31, 2024. In fiscal year 2025 our ecommerce revenue will flow through the U.S. distribution center with Wholesale revenue running through the U.S. distribution center in fiscal year 2026. We are reviewing our European distribution strategy to improve margins in the fiscal year 2026, which represented over 30% of our revenue for the fiscal year ended March 31, 2024. The Company has reclassified certain costs totaling $614 and $991 previously classified as cost of sales for the three and six months ended September 30, 2023, respectively, to SG&A expenses to conform to the current year presentation. For fiscal year ended March 31, 2024 and March 31, 2023, had we reclassified $3.2 million and $2.7 million, respectively, of costs of revenue to SG&A, the our adjusted gross margin would have been 50.9% and 48.7%. 22 Summary of Key Strategies to Improve Margin ● Shift towards direct-to-consumer revenue (such as ecommerce and physical retail) . We expect that rebalancing our sales from wholesale to direct to consumer, coupled with the other margin initiatives would result in a double-digit percentage point improvement in our gross margin, due to channel mix, over time. ● Reducing product range within skiwear . We believe the current range offers too much choice, and yields poorer margins, resulting from a lack of economies of scale and higher levels of markdown and discounts. ● Review and modify supplier base . We are expecting our supplier base to evolve as we source fabrics and trims more efficiently and introduce new finished good suppliers with better commercial terms (such as lower labor costs or better duty rates due to factories being based in the EU, UK or Vietnam). ● Review and revise price positioning . We will continue reviewing our selling prices. We are expecting to introduce better discipline and processes to assess price positioning with a focus on margin by each product, country of manufacture and country of selling. We expect to raise selling prices to improve the gross margin over time as part of the range development process and will monitor price elasticity. We believe prices are relatively in-elastic for our industry and our customer segment, and that pricing increases are generally expected by customers annually for luxury goods. ● Focusing on reducing costs relating to crossing borders . Operating a global business requires crossing borders with products resulting in high costs for freight, duty, couriers and other handling costs. Perfect Moment has grown very quickly and as a result has not been able to focus on crossing borders in a cost-effective way. We are focused on reducing these costs and expect to see savings over time in freight (for example by using less air freight and more sea freight), lowering duty costs (for example moving production to countries with lower tariffs and opening third party logistic hubs) and reducing broker fees through better processes. Our Business Strategy Perfect Moment sits at the intersection of three large and growing markets (luxury ski apparel, premium outerwear and athleisure and lifestyle). Based on the characteristics of these respective markets, we believe we have the right brand profile, geographic footprint, target demographic, marketing tools and operational expansion plan to gain significant market share. We believe we are also well-positioned to drive sustainable growth and profitability by executing on the following strategies: 23 Grow Brand Awareness and Attract New Customers Building brand awareness among potential new customers and strengthening our connections with those who already know us will be a key driver of our growth. While we believe our brand has achieved substantial traction globally and those who have experienced our products demonstrate loyalty, our presence is relatively nascent in many of our markets. We believe we have a significant opportunity to increase brand awareness and attract new customers to Perfect Moment through word of mouth, brand marketing and performance marketing. In the past, Perfect Moment’s strong skiing heritage has been used to engage with a core ski audience for whom we believe the combination of technical performance and retro inspired designs resonate strongly. We believe the nature of skiing as a largely affluent, international pursuit means there is a large opportunity in aspirational, lifestyle-led social media engagement. We believe Perfect Moment has captured this social media opportunity to great effect, combining the style and form of the brand with celebrities, influencers, top-tier editorial, collaborations and luxury locations to create a distinct, fun and engaging aspirational lifestyle narrative. Beyond social media, we believe Perfect Moment has been able to deploy this same core brand proposition and narrative to direct digital marketing and traditional media, elevating brand profile and driving high levels of engagement simultaneously. Perfect Moment has also been able to build an effective online marketing engine driving large volumes of direct, organic search and paid search traffic to our ecommerce website, www.perfectmoment.com Perfect Moment expects to continue its approach to social media, building its follower base through a similar and evolving mix of celebrities, influencers, editorials and locations. It also expects to continue to pursue and scale the effective search engine optimization and paid search strategies which have contributed to online sales growth, as well as direct marketing and customer engagement via direct customer communications. Perfect Moment is developing plans to leverage a new Perfect Moment owned physical store network to deepen its brand identity and profile, as well as drive higher levels of loyalty and engagement at the local level. On August 1, 2024 the Company executed a six-month lease for our first seasonal store in SOHO, New York for AW24 and on October 25, 2024 the Company commenced a three-month lease for our second seasonal store in Bicester, England. Brand marketing and performance marketing also work together to drive millions of visits to our digital platforms. Brand marketing includes differentiated content, our network of ambassadors, and social media, all of which result in what we believe is outsized engagement with our community. Our performance marketing efforts are designed to drive customers from awareness to consideration to conversion. These efforts include retargeting, paid search and product listing advertisements, paid social media advertisements, search engine optimization and personalized email. We believe our highly productive, diversified strategy generates a significant return on brand equity, driving sales and building a growing customer database. We approach this strategy as a funnel, with brand awareness at the top and customer conversion at the bottom, allocating resources across the top, middle and bottom, and measuring returns on these respective investments. Accelerate Digital Growth Having used the wholesale channel to establish our brand globally, we believe we will become less reliant on wholesale partners during the next five years by committing more resources to our direct-to-consumer strategy and accelerating our digital growth. We believe technology and partnerships are the key underpinning factors in any e-commerce business and as such we will continue to enhance customer experience, focusing on mobile as the dominant growth channel and leveraging the emerging benefits of social and conversational commerce. Pursue International Expansion and Enter New Markets We believe there is an opportunity to increase penetration across our existing markets and selectively enter new regions. Although the Perfect Moment brand is recognized globally, our past investments have been focused on North America, the United Kingdom and the EU and have driven revenue growth in the United States during the past fiscal year. While we expect the majority of our near-term growth to continue to come from the United States, the United Kingdom and the EU, we believe there is a tremendous opportunity over the long term throughout the rest of the world. In the fiscal year ended March 31, 2024, we increased our outreach in what we believe are the most promising countries in continental Europe. As part of the plan to enter new markets, we will start with China, as we seek to enhance our ability to serve our international customers and further establish Perfect Moment as a global brand. 24 We believe there is a significant opportunity beyond our existing markets, with China representing the next market opening for Perfect Moment. China is projected to become the largest winter sports market, with people participating expected to reach 50 million by 2025 with one thousand ski resorts to be open by 2030, according to reports by Daxue Consulting and Capital Mind. We allocated a small amount of inventory to test the Chinese market directly in November 2024 on Tmall, using local partners to operate, with a digital approach to selling. We were originally forecasting to run losses with respect to such activities for two years, then become profitable from the third year of such activities, with China representing less than 10% of our revenue by 2027. The data we now have on this small test has led to exploring partnership models such as a Joint Venture, where we could benefit for local distribution, market expertise and financial support for inventory and marketing. We still believe the most significant hurdle to overcome with respect to our plan to enter the Chinese market is liquidity to fund the initial operating losses. In order to offer a more localized experience to customers internationally, we intend to offer market-specific languages, currency and content, as well as strategic international shipping and distribution hubs. We plan to leverage our social media strategy and expand our network of social media ambassadors to grow our brand awareness globally. Enhance Our Wholesale Network Although in the next five years we will be mainly focused on accelerating digital growth and our direct-to-consumer channel, we still intend to continue broadening customer access and strengthening our global foothold in new and existing markets by strategically expanding our wholesale network and deepening current relationships. In all of our markets, we have an opportunity to increase sales by adding new wholesale partners and increasing volume in existing retailers. Additionally, we are focused on strengthening relationships with our retail partners through broader offerings, exclusive products and shop-in-shop formats, which are dedicated spaces within another company’s retail store on a short-term rental basis. We believe our retail partners have a strong incentive to showcase our brand as our products drive customer traffic and consistent full-price sell-through in their stores. Broaden Our Product Offering Continuing to enhance and expand our product offering represents a meaningful growth driver for Perfect Moment. We expect that broadening our product line will allow us to strengthen brand loyalty with the existing Perfect Moment customer base, drive higher penetration in our existing markets and expand our appeal across new geographies. We intend to continue developing our offering through the following strategies. Elevate Fall and Winter . Perfect Moment will continue to focus on quality materials and distinctive designs to create luxury products which aim to deliver technical performance and style impact. However, believing that people want to bring the functionality of our ski apparel into their everyday lives, Perfect Moment is broadening the product range beyond the core “on-slope” skiwear to encompass less technical lifestyle products and a wide range of exceptional products for any occasion, including all year-round accessories. Expand Spring and Summer. We intend to continue building our successful Spring and Summer collections in categories such as activewear, loungewear and swimwear. We believe offering inspiring new and complementary product categories that are consistent with our values of heritage, functionality and quality and can become part of our core business represents an opportunity to develop a closer relationship with our customers and expand our addressable market. In June 2024, we launched an Ibiza-inspired Summer Capsule Collection across our global eCommerce channels. The collection was highlighted in a photoshoot published in British Vogue featuring photographer, Grace Burns, and models Stella Jones and Paloma Baygual wearing items from the collection. We believe this strategy will deliver a number of benefits: ● Increased Revenues . We expect that cross-over into adjacent product markets will increase sales by allowing us to sell outerwear, lifestyle products, activewear and swimwear to non-skiers and cross-sell lifestyle and “off-slope” products to existing skiwear customers in a winter setting. ● Reduced Seasonality . We expect that sales of new lifestyle products as well as activewear and swimwear products will be less concentrated in the winter months and increase revenue from new and existing customers as we grow brand awareness. ● Improved Margins . We believe that our margins will be improved by this strategy because modest price increases across the existing range will allow Perfect Moment to strengthen its gross margins, greater use of high-margin luxury materials such as cashmere will support price and margin increases and a move towards more less technically-complex lifestyle pieces will also drive margin improvement. Full price sales with limited promotional activity will further improve margins. During the fiscal year ended March 31, 2024 and the six months ended September 30, 2024, we restructured and invested in our design, product development, merchandizing and production teams to create a pathway to execute this underpinning strategy. We launched our first spring / summer capsule encapsulating our new strategy at the end of Q1 FY25. We plan to then gradually increase our product offering as we evaluate demand, supply and profitability. A s of this filing, we are ready to sell into the AW25 Wholesale Market which opens in December and closes in February for shipments in FY26. We have bolstered the team that includes hiring a Chief Merchant. The Chief Merchant is revising the calendar for 2026 (FY27) to increase the number of product drops, further capitalizing on opportunities to increase revenue and margin. 25 Establish Perfect Moment Owned Physical Retail Perfect Moment has grown to date without a Perfect Moment owned physical stand-alone store presence. Sales growth has been driven by our wholesale network and online offering. As part of our growth strategy, we believe opening directly operated stores in strategically selected major cities and pop-up stores in strategic ski resorts and high-traffic city locations would provide an excellent opportunity to generate sales in key locations, providing a luxury in-store experience, reflecting the character of the brand and providing an experiential contact point for customers. As our product range expands, we see the potential to further grow our community with a physical presence by opening directly operated stores. We already have a physical presence in department stores, operated under wholesale arrangements. Operating Perfect Moment owned stores would provide our community a home for the brand and act as a beacon for new or potential customers, but they also add extra complexity and risk. In order to test our retail model, we plan to first establish seasonal store locations. We evaluate each potential store location based on lease availability and projected viability, and plan to open popups in the fiscal year ending March 31, 2025 and year-round stores beginning the fiscal year ending March 31, 2027. On August 1, 2024 the Company executed a six-month lease for our first pop-up in SOHO, New York for AW24 and on October 25, 2024 the Company commenced a three-month lease for our second seasonal store in Bicester, England. Segment Reporting The Company applies ASC Topic 280, Segment Reporting, in determining reportable segments for its financial statement disclosure. The Chief Operating Decision Maker has been identified as the Chief Executive Officer. The Company reports segments based on the financial information it uses in assessing performance and deciding how to allocate resources. Management has determined that the Company operates in one business segment, product sales. Key financial measures including but not limited to gross profit, Adjusted EBITDA and net loss are not reported at a disaggregated level for wholesale and ecommerce and resource allocation decisions to the business strategy are not made based solely on our key financial measures. Geographic Concentration Although we are organized fundamentally as one business segment, our revenue is primarily split between three geographic areas: the United States, Europe and the United Kingdom. Customers in these regions are served by our leadership and operations teams in the United Kingdom and our production team in Hong Kong. The table below reflects total net revenues attributed to Europe (excluding the United Kingdom), United States, United Kingdom, and the rest of the world: Three Months Ended Six Months Ended September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Europe (excluding United Kingdom) $ 1,948 51 % $ 1,857 31 % $ 2,124 44 % $ 2,032 30 % United States 958 25 % 3,140 53 % 1,325 28 % 3,446 50 % United Kingdom 691 18 % 653 11 % 938 19 % 1,065 15 % Rest of the World 236 6 % 238 5 % 420 9 % 333 5 % Total Revenues $ 3,833 $ 5,888 $ 4,807 $ 6,876 The decrease in United States revenue as a percentage of total revenue is primarily attributed to a collaboration with Hugo Boss in FY24 totaling $2,024 that ended in FY24. The Company did not look to extend the two-year collaboration with Hugo Boss as the collaboration required the use of Perfect Moments supply chain, designers, and took precedence over all other wholesalers. The change allows management to continue building the foundations of future growth through better delivery times, improved quality, consistency, and extend our supplier relationships which will better serve our wholesale partners and direct to consumer channels, driving longer terms sustainable revenue growth. The table below reflects Ecommerce net revenues attributed to Europe (excluding the United Kingdom), United States, United Kingdom, and the rest of the world: Three Months Ended Six Months Ended September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Europe (excluding United Kingdom) $ 229 20 % $ 192 18 % $ 405 20 % $ 351 17 % United States 406 35 % 379 36 % 721 35 % 673 33 % United Kingdom 302 26 % 375 35 % 561 26 % 786 39 % Rest of the World 218 19 % 120 11 % 390 19 % 213 11 % Total Revenues $ 1,155 $ 1,066 $ 2,077 $ 2,023 Supplier concentration For the three months ended September 30, 2024 and 2023, the largest single supplier of manufactured goods produced 45% and 57%, respectively, of the Company’s products. For the three months ended September 30, 2024 and 2023, the single largest fabric supplier supplied 44% and 45%, respectively, of the fabric used to manufacture the Company’s products. For the six months ended September 30, 2024 and 2023, the largest single supplier of manufactured goods produced 45% and 57%, respectively, of the Company’s products. For the six months ended September 30, 2024 and 2023, the single largest fabric supplier supplied 46% and 63%, respectively, of the fabric used to manufacture the Company’s products. 26 Customer concentration For the three months ended September 30, 2024, we had one major customer, which accounted for approximately 15% or $580 of total revenue. For the six months ended September 30, 2024, we had two major customers, which accounted for approximately 23% or $1,089 of total revenue. The related accounts receivable balance for these customers was $1,027 as of September 30, 2024, and $71 as of March 31, 2024. For the three and six months ended September 30, 2023, we had two major customers, which accounted for approximately 47% or $2,786 of total revenue and 40% or $2,786 of total revenue, respectively. The related accounts receivable balance for these customers was approximately $760 as of September 30, 2023, and $41 as of March 31, 2023. Key Financial Measures We use the following US GAAP and non-US GAAP financial measures to assess the progress of our business, make decisions on where to allocate time and investment and assess then near-term and longer-term performance of our business: Three months ended September 30, Six months ended September 30, 2024 2023 2024 2023 (unaudited) (unaudited) (unaudited) (unaudited) Key Financial Measures Net revenue Wholesale $ 2,678 $ 2,798 $ 2,731 $ 2,829 Ecommerce 1,155 1,066 2,077 2,023 Net revenue - subtotal 3,833 3,864 4,808 4,852 Collaboration - 2,024 - 2,024 Total net revenue 3,833 5,888 4,808 6,876 Gross profit 2,071 3,279 2,430 3,761 Gross margin (1) 54 % 56 % 51 % 55 % Loss from operations (2,557 ) (302 ) (5,951 ) (3,012 ) Net loss $ (2,744 ) $ (1,511 ) $ (6,132 ) $ (4,184 ) Adjusted EBITDA (2) $ (1,996 ) $ (958 ) $ (4,898 ) $ (2,920 ) (1) Gross margin is defined as gross profit as a percentage of total net revenue. (2) We define “Adjusted EBITDA” as net loss excluding interest expense, income tax benefit (expense), depreciation and amortization and stock-based compensation expense. Adjusted EBITDA is a measure that is not defined in US GAAP. For further information about how we calculate Adjusted EBITDA, the limitations of its use and a reconciliations to the most comparable US GAAP measure. Results of Operations Three Months Ended September 30, 2024 as Compared to the Three Months Ended September 30, 2023 The following is a comparison of our results of operations for the three months ended September 30, 2024 and 2023. Three months ended September 30, 2024 2023 Change (Amounts in thousands) Statements of operations data: Net revenue Wholesale $ 2,678 $ 2,798 $ (120 ) Ecommerce 1,155 1,066 89 Revenue - subtotal 3,833 3,864 (31 ) Collaborations - 2,024 (2,024 ) Total Revenue 3,833 5,888 (2,055 ) Cost of goods sold 1,762 2,609 (847 ) Gross profit 2,071 3,279 (1,208 ) Operating expenses Selling, general and administrative expenses 3,923 2,693 1,230 Marketing and advertising expenses 705 888 (183 ) Total operating expenses 4,628 3,581 1,047 Loss from operations (2,557 ) (302 ) (2,255 ) Interest expense (188 ) (392 ) 204 Foreign currency transactions gains/(losses) 1 (817 ) 818 Net loss (2,744 ) (1,511 ) (1,233 ) Other comprehensive gains/(losses) Foreign currency translation gains 21 739 (718 ) Comprehensive loss $ (2,723 ) $ (772 ) $ (1,951 ) 27 Revenue Total revenue for the three months ended September 30, 2024 was $3,833 compared to $5,888 for the three months ended September 30, 2023, a decrease of $2,055 or 35%. The decrease is primarily attributed to a collaboration with Hugo Boss in FY24 that ended FY24. The remaining decrease of $30 is attributed to timing of wholesale shipments of $120 or 4% offset by an increase in ecommerce of $90 or 8% attributed to enhanced brand awareness and the company’s focus on ecommerce. Ecommerce gross revenue increased to $1,671 an increase of $356 or 27% compared to the three months ended September 30, 2023. The end of season sale for autumn/winter 2023 (AW23) included an unusually high percentage of product sold at a discount, making way for a significant new collection replacing many of our product lines for autumn/winter 2024 (AW24), in part due to an upcoming change in legislation in some of our markets for the use of Durable Water Repellency treatments. The Company experiences higher return rates on discounted products and for the three months ended September 30, 2024, our returns as a percentage of sales increased to 31% from 23% for the six months ended September 30, 2023. The Company did not look to extend the two-year collaboration with Hugo Boss as the relationship required the use of Perfect Moments supply chain, designers, and took precedence over all other wholesalers. The change allows management to continue building the foundations of future growth through better delivery times, improved quality, consistency, and extend our supplier relationships which will better serve our wholesale partners and direct to consumer channels, driving longer terms sustainable revenue growth. Cost of goods sold Cost of goods sold for the three months ended September 30, 2024 was $1,762 compared to $2,609 for the three months ended September 30, 2023, a decrease of $847 or 32%. The change in cost of goods sold is primarily attributed to a decline in sales. Gross profit and gross margin Our gross profit for the three months ended September 30, 2024, was $2,071 compared to $3,279 for the three months ended September 30, 2023, a decrease of $1,208 or 37%. The decrease in gross profit is primarily attributed to a collaboration with Hugo Boss that ended in FY24. Our gross margins were 54% compared to 56% in the prior year. Improving our gross margins remains an important focus, and we anticipate our gross margins in our current fiscal year 2025 to significantly improve year-over-year. We are making significant progress across all our margin expansion projects including opening our first U.S. distribution center in October 2024. Following the facility opening, we realized an immediate improvement in operating efficiency. We will experience reduced duty costs for ecommerce orders in the second half of this fiscal year, which will drive improved gross margins compared to last year. The decrease in gross margin for the current quarter is attributed to the continuation of the end of season sale for autumn/winter 2023 (AW23) that included an unusually high percentage of product sold at a discount, making way for a significant new collection replacing many of our product lines for autumn/winter 2024 (AW24), in part due to an upcoming change in legislation in some of our markets for the use of Durable Water Repellency treatments. In addition, the Company had a greater percentage of ecommerce sales versus wholesale sales for the three months ended September 30, 2024 compared to September 30, 2023. Ecommerce margins are historically lower than wholesale. The Company has reclassified certain costs totaling $614 and $991 previously classified as cost of sales for the three and six months ended September 30, 2023, respectively, to SG&A expenses to conform to the current year presentation. Selling, general and administrative expenses (“SG&A”) SG&A expenses consist of personnel related expenses, stock compensation expense, legal and professional fees, depreciation and amortization, other selling, information technology, occupancy costs, travel and product sample costs. SG&A expenses for the three months ended September 30, 2024 were $3,923 compared to $2,693 for the three months ended September 30, 2023, an increase of $1,230 or 46%. The increase is primarily attributed to an increase in stock compensation expense of $667, an increase in people costs to support growth initiatives totaling $204, an increase in warehousing and merchant services due to increased returns totaling $152, increased legal and professional fees of $119 attributed to the ASC litigation that has been settled and incremental public company costs, dues and subscriptions of $83 primarily attributed to NYSE, and increased insurance cost of $75 attributed to D&O. Marketing and advertising expense Marketing and advertising expenses for the three months ended September 30, 2024 were $705 compared to $888 for the three months ended September 30, 2023, a decrease of $183 or 21%. The decrease is primarily attributed to lower event costs $277 leveraging our collaboration with Diageo as the management is focused on lowering costs and return on investment, offset by the timing of photoshoots of $67, and digital marketing costs of $55 to support growth. Marketing and Brand Highlights ● The total social audience reached by content posted by global key opinion leaders (KOLs) 1 about Perfect Moment was more than 203.3 million during Q2. This represents the total combined followers of the celebrities, influencers, models, media publications, and fashion industry notables who organically posted about the brand during the quarter globally. Notable highlights include Instagram posts by Priyanka Chopra Jonas (92.1 million followers) and Nick Jonas (35.4 million followers) wearing & tagging @perfectmomentsports. Nina Dobrev also posted wearing Perfect Moment to her stories for her 26.2 million followers, as well as an Instagram story by Jasmine Tookes tagging @perfectmomentsports for her 7.5 million followers. ● The total number of unique visitors per month (UVPM) reached more than 1.2 billion during the period. This is the combined sum of UVPM reached by all global digital media coverage achieved during the quarter. ● Global media coverage during the quarter included an exclusive in Women’s Wear Daily on the new Soho store opening, as well as coverage across ELLE, Vogue Scandinavia, Vogue India, The Standard, Hello! Magazine, Fashion Network, Fashion United. 1 The company defines a key opinion leader (KOL) as a person who is considered an expert on a certain topic and whose opinions are respected by the public due to their trajectory and the reputation they have built. They are typically identified by their reach, social media following and stature. KOL may include but is not limited to celebrities, social media influencers, fashion models, contributors to media publications, and noted members of the fashion industry. There is no official listing or accreditation of KOLs, so the term is subjective, and therefore the list and definition may vary from company to company. The source of the KOLs, social media and audience reach statistics provided in this release are reports by the company’s public relations firm. No reliance should be made upon their accuracy or timeliness. 28 Foreign currency transactions gains (losses) Foreign currency transactions increased favourably by $818, from a loss of $817 for the three months ended September 30, 2023 to a gain of $1 for the three months ended September 30, 2024, mainly driven by fluctuations in the U.S. dollar to the U.K. pound sterling exchange rate. Foreign currency translation gains (losses) Foreign currency translation gains (losses) result from the process of translating the financial statements of our foreign entities’ functional currency into USD. Foreign currency translation gains decreased by $718, from $739 for the three months ended September 30, 2023 to $21 for the three months ended September 30, 2024, mainly driven by fluctuations in the U.S. dollar to the U.K. pound sterling exchange rate. Six Months Ended September 30, 2024 as Compared to the Six Months Ended September 30, 2023 The following is a comparison of our results of operations for the Six months ended September 30, 2024 and 2023. Six months ended September 30, 2024 2023 Change Statements of operations data: Net revenue Wholesale $ 2,731 $ 2,829 $ (98 ) Ecommerce 2,077 2,023 54 Revenue - subtotal 4,808 4,852 (44 ) Collaborations - 2,024 (2,024 ) Total Revenue 4,808 6,876 (2,068 ) Cost of goods sold 2,378 3,115 (737 ) Gross profit 2,430 3,761 (1.331 ) Operating expenses Selling, general and administrative expenses 7,223 5,176 2,047 Marketing and advertising expenses 1,158 1,597 (439 ) Total operating expenses 8,381 6,773 1,608 Loss from operations (5,951 ) (3,012 ) (2,939 ) Interest expense (194 ) (766 ) 572 Foreign currency transactions gains (losses) 13 (406 ) (419 ) Net loss (6,132 ) (4,184 ) (1,948 ) Other comprehensive gains Foreign currency translation gains 7 351 (344 ) Comprehensive loss $ (6,125 ) $ (3,833 ) $ (2,292 ) Revenue Total revenue for the six months ended September 30, 2024 was $4,808 compared to $6,876 for the six months ended September 30, 2023, a decrease of $2,068 or 30%. The decrease is primarily attributed to a collaboration with Hugo Boss in FY24 totaling $2,024 that ended in FY24. The remaining decrease of $44 is attributed to timing of wholesale shipments of $98 offset by an increase in ecommerce of $54 attributed to enhanced brand awareness and the company’s focus on ecommerce. Ecommerce gross revenue increased to $3,398 an increase of $795 or 31% compared to the six months ended September 30, 2023, driven by continued growth in ecommerce revenue. The end of season sale for autumn/winter 2023 (AW23) included an unusually high percentage of product sold at a discount, making way for a significant new collection replacing many of our product lines for autumn/winter 2024 (AW24), in part due to an upcoming change in legislation in some of our markets for the use of Durable Water Repellency treatments. The Company experiences higher return rates on discounted products and for the six months ended September 30, 2024, our returns as a percentage of sales increased to 39% from 28% for the six months ended September 30, 2023. The Company did not look to extend the two-year collaboration with Hugo Boss as the relationship required the use of Perfect Moments supply chain, designers, and took precedence over all other wholesalers. The change allows management to continue building the foundations of future growth through better delivery times, improved quality, consistency, and extend our supplier relationships which will better serve our wholesale partners and direct to consumer channels, driving longer terms sustainable revenue growth. Cost of goods sold Cost of goods sold for the six months ended September 30, 2024 was $2,378 compared to $3,115 for the six months ended September 30, 2023, a decrease of $737 or 24%. The change in cost of goods sold is primarily attributed to a decline in sales. Gross Profit and gross margin Our gross profit for the six months ended September 30, 2024 was $2,430 compared to $3,761 for the six months ended September 30, 2023, a decrease of $1,331 or 35%. The decrease in gross profit is primarily attributed to a collaboration with Hugo Boss in FY24 that ended in FY24. Our gross margins were 51% compared to 55% in the prior year. Improving our gross margins remains an important focus, and we anticipate our gross margins in our current fiscal year 2025 to significantly improve year-over-year. We are making significant progress across all our margin expansion projects including opening our first U.S. distribution center in October 2024. Following the facility opening, we realized an immediate improvement in operating efficiency. We will experience reduced duty costs for ecommerce orders in the second half of this fiscal year, which will drive improved gross margins compared to last year. The decrease in gross margin for the six months ended September 30, 2024 versus the six months ended September 30, 2023 is attributed to the end of season sale for autumn/winter 2023 (AW23) that included an unusually high percentage of product sold at a discount, making way for a significant new collection replacing many of our product lines for autumn/winter 2024 (AW24), in part due to an upcoming change in legislation in some of our markets for the use of Durable Water Repellency treatments. We also had a greater percentage of ecommerce sales versus wholesale sales for the six months ended September 30, 2024 compared to September 30, 2023. Ecommerce margins are historically lower than wholesale. Selling, general and administrative expenses (“SG&A”) SG&A expenses for the six months ended September 30, 2024 were $7,223 compared to $5,176 for the six months ended September 30, 2023, an increase of $2,047 or 39%. The increase is primarily attributed to an increase in stock compensation expense of $842, an increase in people costs to support growth initiatives totaling $409, an increase in warehousing and merchant services due to increased returns totaling $331, increased legal fees and professional fees of $255 attributed to the ASC litigation that has been settled and incremental public company costs, increased insurance cost of $188 attributed to D&O, and dues and subscriptions of $129 attributed to NYSE. 29 Marketing and advertising expense Marketing and advertising expenses for the six months ended September 30, 2024 were $1,158 compared to $1,597 for the six months ended September 30, 2023, a decrease of $439 or 28%. The decrease is primarily attributed to lower event costs $341 leveraging our collaboration with Diageo, no amortization of marketing services totaling $185 in the prior year offset digital marketing costs of $53 to support growth. Marketing and Brand Highlights ● The total social audience reached by content posted by global KOLs about Perfect Moment was more than 337.6 million during the period. This represents the total combined followers of the celebrities, influencers, models, media publications, and fashion industry notables who organically posted about the brand during the quarter globally. Notable highlights include Instagram posts by Priyanka Chopra (92.1 million followers), Nick Jonas (35.4 million followers) Paris Hilton (26.2 million followers) wearing and tagging @perfectmomentsports. ● The total number of unique visitors per month (UVPM) reached more than 2.6 billion during the period. This is the combined sum of UVPM reached by all global digital media coverage achieved during the quarter. ● Global media coverage during the quarter included an exclusive article in British Vogue featuring the company’s new Spring Summer 2024 (“SS24”) campaign photographed by Grace Burns, as well as coverage across Women’s Wear Daily for SS24 and the new Soho store opening, Vogue Hong Kong, Vogue Scandinavia, Vogue India, Vanity Fair, Harper’s BAZAAR, The Telegraph, WhoWhatWear, Grazia, The Impression, Elle, The Standard, Hello! Magazine, Fashion Network, and Fashion United. ● Launch of the Perfect Moment SS24 capsule collection at Soho House & Co’s Miami Pool House, generated significant brand awareness during the off-season. The event coincided with the commencement of Miami Swim Week, where Perfect Moment hosted a brand activation that included fashion models and social media influencers with collective reach of more than 1.8 million followers. ● Launched a product resale program, “Perfect Second Moment,” in partnership with leading luxury platform, Reflaunt. By facilitating the resale of pre-loved skiwear and accessories through Reflaunt’s technology, the program extends the longevity of Perfect Moment’s high-quality luxury items and builds upon the brand’s reputation for quality and durability. Foreign currency transactions gains (losses) Foreign currency transactions increased favourably by $419, from a loss of $406 for the six months ended September 30, 2023 to a gain of $13 for the six months ended September 30, 2024, mainly driven by fluctuations in the U.S. dollar to the U.K. pound sterling exchange rate. Foreign currency translation gains (losses) Foreign currency translation gains (losses) result from the process of translating the financial statements of our foreign entities’ functional currency into USD. Foreign currency translation gains decreased by $344, from $351 for the six months ended September 30, 2023 to $7 for the six months ended September 30, 2024, mainly driven by fluctuations in the U.S. dollar to the U.K. pound sterling exchange rate. Use of Non-GAAP Measures - Adjusted EBITDA In addition to our results under generally accepted accounted principles (“GAAP”), we present Adjusted EBITDA as a supplemental measure of our performance. However, Adjusted EBITDA is not a recognized measurement under GAAP and should not be considered as an alternative to net income, income from operations or any other performance measure derived in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of liquidity. We define Adjusted EBITDA as net income (loss), plus interest expense, depreciation and amortization, stock-based compensation, financing costs and changes in fair value of derivative liability. Management considers our core operating performance to be that which our managers can affect in any particular period through their management of the resources that affect our underlying revenue and profit generating operations in that period. Non-GAAP adjustments to our results prepared in accordance with GAAP are itemized below. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. For the Three months Ended For the Six months ended September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Net loss, as reported $ (2,744 ) $ (1,511 ) $ (6,132 ) $ (4,184 ) Adjustments: Interest expense 189 392 194 766 Stock compensation expense 342 4 712 14 Amortization of pre-paid marketing and services 111 - 111 185 Depreciation and amortization 106 157 217 299 Total EBITDA adjustments 748 553 1,234 1,264 Adjusted EBITDA $ (1,996 ) $ (958 ) $ (4,898 ) $ (2,920 ) The $1,038 decrease in adjusted EBITDA for the three months ended September 30, 2024 compared to the same period in 2023, is primarily attributed to lower margin of $1,208 primarily attributed to a collaboration with Hugo Boss that ended in FY24, an increase in people costs to support growth initiatives totaling $204, an increase in warehousing and merchant services due to increased returns totaling $152, increased legal fees of $119 attributed to the ASC litigation that has been settled and SEC legal fee, dues and subscriptions of $83 attributed to NYSE, and increased insurance cost of $75 attributed to D&O, all offset by favorable currency transactions totaling $818, and lower marketing and advertising of $183. The $1,978 decrease in Adjusted EBITDA for the six months ended September 30, 2024 compared to the same period in 2023, is primarily attributed to lower margin of $1,331 primarily attributed to a collaboration with Hugo Boss that ended in FY24, an increase in people costs to support growth initiatives totaling $409, an increase in warehousing and merchant services due to increased returns totaling $331, increased legal fees of $255 attributed to the ASC litigation that has been settled and SEC legal fees, increased insurance cost of $188 attributed to D&O, and dues and subscriptions of $129 attributed to NYSE, all offset by favorable currency transactions totaling $419, and lower marketing and advertising of $439. 30 We present adjusted EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use Adjusted EBITDA in developing our internal budgets, forecasts, and strategic plan; in analyzing the effectiveness of our business strategies in evaluating potential acquisitions; and in making compensation decisions and in communications with our board of directors concerning our financial performance. Adjusted EBITDA has limitations as an analytical tool, which includes, among others, the following: ● Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; ● Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; ● Adjusted EBITDA does not reflect future interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; and ● Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and the Adjusted EBITDA does not reflect any cash requirements for such replacements. Seasonality and Quarterly Trends Our business is seasonal with revenue concentrated in northern hemisphere countries. Revenue is elevated in the quarters ending September 30, December 31 and March 31 driven by sales of ski and outerwear through the fall and winter months. Our growth rate fluctuates quarter-on-quarter as a result of the seasonality of our business. We expect this fluctuation to continue. In addition to seasonality, quarter-on-quarter results are expected to be impacted by the timing of goods production and delivery, promotional activities and the addition of new products and geographies as the business grows. The business is also subject to the impact of economic cycles that influence retail apparel trends. Liquidity and Capital Resources As of September 30, 2024, we had cash and cash equivalents of $725, restricted cash of $1,825 and an accumulated deficit of $55,109. Historically, Perfect Moment has generated negative cash flows from operations and has primarily financed its operations through private and public sales of equity securities, debt and working capital finance. Overall, cash and cash equivalents and restricted cash, in aggregate, decreased by $5,360 million, from $7,910 million as of March 31, 2024 to $2,550 million as of September 30, 2024. The Company, through PMA, has a trade finance facility extended on goods for which letters of credit are issued to the Company’s suppliers by HSBC. As of September 30, 2024 and March 31, 2024 the Company had an trade finance facility limit of $2,700 and $5,000 respectively. Amounts owed relating to issued letters of credit do not become the Company’s responsibility until the Company receives the manufactured clothing goods from suppliers. Once drawn, the company has the option of 195 days credit, in the form of a loan, before repayment is due. For drawings in Hong Kong dollars, the interest rate equals HIBOR plus 3.0%, and for drawings in U.S. dollars, the interest rate equals SOFR plus 3.3%. As of September 30, 2024 and March 31, 2024 the outstanding balance under the trade finance facility was $906 and $0 respectively. As of September 30, 2024 and March 31, 2024, there was $1,941 and $0, respectively, in outstanding pledged letters of credit by HSBC. As of September 30, 2024 , total pledged letters of credit and trade loans sum to $2,845, which was secured by a charge of $1,825, held as restricted cash held with HSBC. The trade finance facility is also secured by a guarantee by Perfect Moment Ltd. in the amount of $2.0 million. 31 We expect operating losses and negative cash flows from operations to continue into the foreseeable future as we continue to invest in growing our business and expanding our infrastructure. Our primary uses of cash include personnel and marketing expenditures, inventory, capital investment and expenditures in technology and incremental expenses arising from distribution center operating costs to support our operations and our growth. As of September 30, 2024, our cash and cash equivalents and restricted cash are mainly held in U.S. dollar, U.K. pound sterling, Hong Kong dollar, and euro cash accounts with high credit quality financial institutions. As a result of the seasonality of our business, we typically draw down on our trade finance facilities during summer, fall and early winter to meet a large proportion of the cost of goods associated with the manufacture of our fall/winter collection. Trade finance and debt factoring facilities support our working capital cycle through to the late fall/winter season when wholesale receivables are paid and ecommerce revenues increase. Our ability to fund inventory, capital expenditures, and growth will depend on our ability to generate cash in the future. Our future ability to generate cash from operations is, to a certain extent, subject to general economic, financial, competitive, regulatory and other conditions. Based on our current level of operations, we believe our existing cash balances and expected cash flows from operations, alongside the continuance of our existing financing arrangements, will be sufficient to meet our operating requirements for at least the next 6 months, excluding financing to support production (i.e. timing of working capital). We may seek additional or alternative debt and equity financing to that set out above. If we raise equity financing, our shareholders may experience significant dilution of their ownership interests. If we conduct additional debt financing, the terms of such debt financing may be similar or more restrictive that the terms of our current financing arrangements and we would have additional debt service obligations. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, financial condition and results of operations could be harmed. See the sections set forth in our other filings with the Securities and Exchange Commission, including the Form 10-K, titled “Risk Factors – Risks Related to Ownership of Our Common Stock – Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our 2021 Equity Incentive Plan, could result in additional dilution of the percentage ownership of our stockholders” and “Risk Factors – Risks Related to Our Business, Our Brand, Our Products and Our Industry – We have a history of losses, expect to continue to incur losses in the near term and may not achieve or sustain profitability in the future, and as a result, our management has identified and our auditors reported that there is a substantial doubt about our ability to continue as a going concern.” The report of our independent registered public accounting firm that accompanies our audited consolidated financial statements for the fiscal years ended March 31, 2024 and March 31, 2023, includes a going concern explanatory paragraph in which such firm expressed that there is substantial doubt about our ability to continue as a going concern. Our consolidated financial statements contained in this Quarterly Report do not include any adjustments that might result if we are unable to continue as a going concern. If we are unable to continue as a going concern, holders of our securities might lose their entire investment. As discussed above, although we plan to attempt to raise additional capital through one or more private placements or public offerings, the doubts raised relating to our ability to continue as a going concern may make our shares an unattractive investment for potential investors. These factors, among others, may make it difficult to raise any additional capital and may cause us to be unable to continue to operate our business. The following table shows summary consolidated cash flow information for the periods presented: Six months ended September 30, 2024 2023 Consolidated statement of cash flow data: Net cash used in operating activities $ (7,734 ) $ (1,850 ) Net cash used in investing activities (102 ) (82 ) Net cash provided by financing activities $ 2,507 $ 2,026 Cash Flows from Operating Activities During the six months ended September 30, 2024, operating activities used $7,734 in cash and cash equivalents and restricted cash, primarily resulting from a net loss of $6,132, an adjustment to add back non-cash charges of $961 and a net cash outflow from changes in operating assets and liabilities of $2,563. Net cash used by changes in operating assets and liabilities during the six months ended September 30, 2024 consisted primarily of an inflow of cash from a $2,559 increase in trade payables, a $908 increase in unearned revenue, offset by a cash outflow as a result of a $2,811 increase in inventories, $1,435 increase in accounts receivable, $1,425 increase in prepaids and other current assets and a $359 decrease in accrued expenses. During the six months ended September 30, 2023, operating activities used $1,850 in cash and cash equivalents and restricted cash, primarily resulting from a net loss of $4,184, an adjustment to add back non-cash charges of $1,718 and a net cash inflow from changes in operating assets and liabilities of $616. Net cash used by changes in operating assets and liabilities during the six months ended September 30, 2023 consisted primarily of an inflow of cash as a result of a $1,891 increase in unearned revenue, an increase of $1,469 in trade payables, an increase of $305 in accrued expenses and a decrease of $122 in prepaids and other current assets, offset by an outflow of cash as a result of a $1,399 increase in accounts receivable, and a $1,769 increase in inventories. The movements being general timing of working capital receipts and payments. 32 Cash Flows from Investing Activities Cash used in investing activities was $102 in the six months ended September 30, 2024 and $82 in the six months ended September 31, 2023, an increase of $20, primarily due to an increase of software and website development capital expenditures. Cash Flows from Financing Activities Net cash obtained from financing activities during the six months ended September 30, 2024 was $2,507 mainly attributed to $2,000 net proceeds from short term borrowings and $906 in net proceeds from trade finance facilities, offset by $399 in repayment of short term borrowings. Net cash obtained from financing activities during the six months ended September 30, 2023 was $2,026 primarily resulting from $2,179 net proceeds from the issuance of common shares and $847 in proceeds from trade finance facilities, offset by $875 repayment of trade finance facilities and $125 of deferred offering costs. Off-Balance Sheet Arrangements We did not have during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Critical Accounting Policies and Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of those consolidated financial statements requires our management to make judgments and estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenue generated, and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgements about the carrying value of asset and liabilities that are not readily apparent from other sources. Significant estimates inherent in the preparation of the consolidated financial statements include reserves for uncollectible accounts receivables; realizability of inventory; customer returns; useful lives and impairments of long-lived tangible and intangible assets; accounting for income taxes and related uncertain tax positions; and the valuation of stock-based compensation awards. Actual results may differ from these judgements and estimates under different assumptions or conditions and any such differences may be material. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgements and estimates. Revenue recognition The majority of the Company’s revenue is recognized at a point in time based on the transfer of control. In addition, the majority of the Company’s contracts do not contain variable consideration and contract modifications are minimal. The majority of the Company’s revenue arrangements generally consists of a single performance obligation to transfer promised goods. Revenue is reported net of markdowns, discounts and sales taxes collected from customers on behalf of taxing authorities. Revenue is also presented net of an allowance for expected returns where contracts include the right of return. We estimate returns on an ongoing basis to estimate the consideration from the customer that we expect to ultimately receive. Consideration in determining our estimates for returns may include agreements with customers, the Company’s return policy and historical and current trends. We record the returns as a reduction to net sales in our consolidated statements of operations and the recognition of a provision for returns within accrued expenses in our consolidated balance sheets and the estimated value of inventory expected to be returned as an adjustment to inventories, net. 33 Revenue is comprised of direct-to-consumer ecommerce revenue through the Company’s website and revenue related to wholesalers. Revenue is recognized when performance obligations are satisfied through the transfer of control of promised goods to the Company’s customers. Control transfers once a customer has the ability to direct the use of, and obtain substantially all of the benefits from, the product. This includes the transfer of legal title, physical possession, the risks and rewards of ownership, and customer acceptance. For direct-to-consumer ecommerce revenue, the Company receives payment before the customer receives the promised goods. Revenue is only recognized once the goods have been delivered to the customer. Sales to wholesale customers are recognized when the customer has control which will depend on the agreed upon International Commercial Terms (“inco-terms”). For inventories sold on consignment to wholesalers, the Company records revenue when the inventory is sold to the third-party customer by the wholesaler. The Company may issue merchant credits, which are essentially refund credits. The merchant credits are initially deferred and subsequently recognized as revenue when tendered for payment. The Company’s business is significantly affected by the pattern of seasonality common to most retail apparel businesses. Historically, the Company has recognized a significant portion of its revenue in the fourth fiscal quarter of each year as a result of increased net revenue during the ski season. Accounts receivable Accounts receivable primarily arise out of sales to wholesale accounts and ecommerce partners. The allowance for doubtful accounts represents management’s best estimate of probable credit losses in accounts receivable using the incurred loss methodology. Receivables are written off against the allowance when management believes that it is probable the amount receivable will not be recovered. Additionally, the Company records higher allowances in the first and third quarters following its peak sales seasons after the Company determines it to be probable that it will not collect the related receivables. Inventories Inventories, consisting of finished goods, inventories in transit, and raw materials, are initially recognized at cost and subsequently measured at the lower of cost or net realizable value. Cost is determined on a first-in, first-out basis and is comprised of all costs of purchases, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. The Company periodically reviews its inventories and makes a provision as necessary to appropriately value goods that are obsolete, have quality issues, or are damaged. The amount of the provision is equal to the difference between the cost of the inventory and its net realizable value based upon assumptions about product quality, damages, future demand, selling prices, and market conditions. If changes in market conditions result in reductions in the estimated net realizable value of its inventory below its previous estimate, the Company would increase its provision in the period in which it made such a determination. In addition, the Company provides for inventory shrinkage based on historical trends from actual physical inventory counts. Inventory shrinkage estimates are made to reduce the inventory value for lost or stolen items. The Company performs a physical inventory at least count once a year and adjusts the shrinkage reserve accordingly. Stock-based compensation The Company maintains the 2021 Plan, which provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock units and performance units and performance shares to employees, directors and consultants of the Company or any parent or subsidiary of the Company. The purpose of the 2021 Plan is to enable the Company to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to employees, directors and consultants of the Company or any parent or subsidiary of the company, and to promote the success of the Company’s business. The Company has historically granted stock options to non-employees in exchange for the provision of services, both under the 2021 Plan and outside of the 2021 Plan. The Company accounts for such awards based on ASC 505 and 718, whereby the value of the award is measured on the date of grant and recognized as compensation expense on a straight-line basis over the vesting period. The Company measures fair value as of the grant date for options and warrants using the Black Scholes option pricing model and for common share awards using a weighted average of the Black Scholes method and probability-weighted expected return method (PWERM). The inputs into the Black Scholes option pricing model are subjective and generally require significant judgment. The fair value of the shares of common and preferred stock has historically been determined by the Company’s management with the assistance of third-party specialists as there was no public market for the common stock. The fair value is obtained by considering a number of objective and subjective factors, including the valuation of comparable companies, sales of preferred stock to unrelated third parties, projected operating and financial performance, the lack of liquidity of common and preferred stock and general and industry specific economic outlook, amongst other factors. The expected term represents the period that the Company’s stock options are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term) as the Company’s stock option exercise history does not provide a reasonable basis upon which to estimate expected term. Because the Company is privately held and does not have an active trading market for its common and preferred stock for a sufficient period of time, the expected volatility was estimated based on the average volatility for comparable publicly traded companies, over a period equal to the expected term of the stock option grants. The risk-free rate assumption is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of the option. The Company has never paid dividends on its common stock and does not anticipate paying dividends on common stock in the foreseeable future. Therefore, the Company uses an expected dividend yield of zero. Recent Accounting Pronouncements For recent accounting pronouncements, see Note 2 of our unaudited condensed consolidated financial statements included in this report. Quantitative and Qualitative Disclosures about Market Risk We are exposed to market risks in the ordinary course of our business. These risk primarily include: Interest rate risk The fair value of our cash equivalents, held primarily in cash deposits, have not been significantly impacted by increases or decreases in interest rates to date, due to the short term nature of these instruments. The interest expense associated with our letter of credit trade finance facility and debt factoring facilities are composed of a fixed spread over HIBOR or SOFR. The fee associated with revenue financing is fixed and the interest rate on our convertible bridge loan is accrued at a fixed rate also. We are exposed to interest rate risk where the interest expense associated with our financing arrangements is depending upon HIBOR or SOFR, a floating reference rate, or in the event that the fixed interest rate associated with our financing arrangements is increased upon roll-over of the financing arrangement at its contractual maturity. Fluctuations in interest rates have not been significant to date. We do not expect that interest rates will have a material impact on our results of operations, owing to the size and short-term nature of the floating rate financing arrangements and the fixed rate nature of the convertible bridge loan that is expect to convert to equity before its contractual maturity on February 15, 2024. Inflation risk We are beginning to observe increases in our costs of goods sold, in particular, transportation costs. If these cost increases are sustained and we become subject to significant inflationary pressures, we may not be able to fully offset such higher costs. Our inability to do so could harm our business, results of operations or financial condition. 34 Foreign exchange risk To date, revenue has primarily been generated in U.S. dollar, U.K. pound sterling and euro. As a result, our revenue may be subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in U.K. pound sterling and euros relative to the U.S. dollar. Our foreign exchange risk is less pronounced for our cost of sales as to our cost of goods sold being predominantly U.S. dollar denominated. Our selling, general and administrative expenses are primarily made up of U.S. dollar, Hong Kong dollar, U.K. pound sterling and euro amounts. Although a portion of our non-U.S. dollar costs offset non-U.S. dollar revenue, a currency mismatch arises as to the amount and timing of our different currency cash flows. To date, we have not hedged our foreign currency exposure. We will continue to monitor the impact of foreign exchange risk and review whether to implement a hedging strategy to minimize this risk in future accounting periods. Hedging strategies where implemented are unlikely to completely mitigate this risk. To the extent that foreign exchange risk is not hedged it may result in harm to our business, results of operations and financial condition. ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. ITEM 4 - CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. We carried out an evaluation under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d- 15(e) under the Exchange Act) as of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2023. Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Inherent Limitations on the Effectiveness of Controls Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. 35 PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS For information regarding legal proceedings, refer to Note 13, “ Commitments and Contingencies” of the Notes to our Condensed Consolidated Financial Statements, which is incorporated herein by reference. ITEM 1A. RISK FACTORS Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in “Part I, Item 1A. Risk Factors” in the Form 10-K. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there were no material changes to the risks and uncertainties described in the section titled “Risk Factors” in Part I, Item 1A of the Form 10-K for our fiscal year ended March 31, 2024. ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. ITEM 3 - DEFAULTS UPON SENIOR SECURITIES None. ITEM 4 - MINE SAFETY DISCLOSURES Not applicable. ITEM 5 - OTHER INFORMATION Insider Trading Arrangements During the quarter ended September 30, 2024, none of the Company’s directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” each as defined in Item 408(a) of Regulation S-K under the Exchange Act. 36 ITEM 6 - EXHIBITS The exhibits listed below are filed as part of this Quarterly Report on Form 10-Q, or are incorporated herein by reference, in each case as indicated below. Incorporated by Reference Exhibit Number Description Form File No. Exhibit Filing Date 3.1 Amended and Restated Certificate of Incorporation of the Company 8-K 001-41930 3.1 February 13, 2024 3.2 Amended and Restated Bylaws of the Company 8-K 001-41930 3.2 February 13, 2024 4.1 Form of the Company’s Common Stock Certificate S-1 333-274913 4.1 November 6, 2023 4.2 Form of Underwriter Warrants S-1 333-274913 4.2 January 22, 2024 10.1 Subordinated Business Loan and Security Agreement dated July 25, 2024 8-K 001-41930 10.1 August 29, 2024 10.2 Subordinated Business Loan and Security Agreement dated August 23, 2024 8-K 001-41930 10.2 August 29, 2024 10.3 Standard Merchant Cash Advance Agreement dated September 25, 2024 10.4 Subordinated Business Loan and Security Agreement dated October 2, 2024 10.5 Subordinated Business Loan and Security Agreement dated October 23, 2024 31.1 Certification of the Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of the Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1* Certifications of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2* Certifications of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). 101.SCH Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) * The certifications attached as Exhibit 32.1 that accompany this Quarterly Report on Form 10-Q are deemed furnished and not filed with the SEC and are not to be incorporated by reference into any filing of Perfect Moment Ltd. under the Securities Act or the Exchange Act, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing. 37 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PERFECT MOMENT LTD. Date: November 14, 2024 By: /s/ Mark Buckley Mark Buckley Chief Executive Officer (Principal Executive Officer) Date: November 14, 2024 By: /s/ Jeff Clayborne Jeff Clayborne Chief Financial Officer (Principal Financial and Accounting Officer) 38