Perfect Moment Ltd

Previous wording

Perfect Moment is a luxury lifestyle brand that combines fashion and technical performance for its ranges of skiwear, outerwear, swimwear and activewear. 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.

Current wording

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.

Previous wording

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) by 18% from March 31, 2023 through March 20, 2024. 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.

Current wording

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 1.3% from March 31, 2024 through June 30, 2024 and increased 19% compared to June 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.

Previous wording

Improving our gross margins in ecommerce has been a focus in fiscal year 2024, with anticipated improvements to our gross margins in fiscal year 2025. Currently, all ecommerce orders are 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 are paying duties at full retail and not at a transfer price. We plan on opening third party operated distribution centers in key markets to lower our duty costs. The local distribution centers will improve our customer experience, lower our duty cost plus reduce outbound and return shipping cost. Our first third party distribution center outside of the United Kingdom will be in the United States.

Current wording

Improving our gross margins in ecommerce remains a focus in fiscal year 2025, and we anticipate our gross margins in fiscal year 2025 to surpass our gross margins reported in fiscal year 2024. Currently, all ecommerce orders are 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 are paying duties at full retail and not at a transfer price. Subsequent to June 30, 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 represents over 30% of our revenue. We are reviewing our UK and European distribution strategy to improve margins in fiscal year 2026.

Previous wording

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 grow brand awareness and attract new customers to Perfect Moment through word of mouth, brand marketing and performance marketing.

Current wording

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.

Previous wording

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 e-commerce website, www.perfectmoment.com.

Current wording

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

Previous wording

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 1,000 ski resorts to be open by 2030, according to reports by Daxue Consulting and Capital Mind. We plan to enter the Chinese market directly in 2024 on Tmall, using local partners to operate, with a digital approach to selling. We are forecasting running 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. We 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.

Current wording

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 1,000 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.

Previous wording

Elevate Fall and Winter. Perfect Moment will continue to focus on quality materials and distinctive designs in order 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.

Current wording

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.

Previous wording

*Expand Spring and Summer.*We intend to continue building our successful Spring and Summer collections in categories such as surfwear, 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.

Current wording

*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.

Previous wording

During the fiscal year ended March 31, 2023 and the nine months ended December 31, 2023, we have restructured and invested in our design, product development, merchandizing and production teams to create a pathway to execute on this underpinning strategy. We expect the first products resulting from this investment to launch in the summer of 2024. We plan to then gradually increase our product offering as we evaluate demand, supply and profitability.

Current wording

During the fiscal year ended March 31, 2024 and the three months ended June 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.

Previous wording

Perfect Moment has grown to date without a Perfect Moment owned physical stand-alone store presence. Sales growth has been driven by our online offering and wholesale network. 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.

Current wording

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.

Previous wording

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 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 pop-up 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, 2026.

Current wording

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 pop-up 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. Subsequent to June 30, 2024 the Company executed a six-month lease for our first pop-up in SOHO, New York for AW24.

Previous wording

For the nine months ended December 31, 2023 and 2022, the largest single supplier of manufactured goods, Everich Garments Group Ltd., produced 75% and 72%, respectively, of the Company’s products. For the nine months ended December 31, 2023 and 2022, the largest fabric supplier, Toray International Inc., supplied 63% and 54%, respectively, of the fabric used to manufacture the Company’s products.

Current wording

For the three months ended June 30, 2024 and 2023, the largest fabric supplier, Toray International Inc., supplied 52% and 79%, respectively, of the fabric used to manufacture the Company’s products.

Previous wording

No single customer accounted for more than 10% of total revenue for the three months ended December 31, 2023. For the nine months ended December 31, 2023, we had one major customer, which accounted for approximately 16% or $3,168 of total revenue. The related accounts receivable balance for this customer was approximately $0 as of December 31, 2023, and $41 as of March 31, 2023.

Current wording

No single customer accounted for more than 10% of total revenue for the three months ended June 30, 2024.

Previous wording

For the three and nine months ended December 31, 2022, we had one major customer, which accounted for approximately 17% or $2,786 of total revenue and 14% or $2,786 of total revenue, respectively. The related accounts receivable balance for this customer was approximately $41 as of December 31, 2022, and $0 as of March 31, 2022.

Current wording

For the three months ended June 30, 2023, we had one major customer, which accounted for approximately 14% or $134 of total revenues individually and in aggregate. The related accounts receivable balance for this customer was approximately $190 as of June 30, 2023, and $219 as of March 31, 2023.

Previous wording

Cost of goods sold for the three months ended December 31, 2023 was $7,860 compared to $9,944 for the three months ended December 31, 2022, a decrease of $2,084 or 21%. The change in cost of goods sold is primarily attributed to a decline in sales.

Current wording

Cost of goods sold for the three months ended June 30, 2024 was $618 compared to $506 for the three months ended June 30, 2023, an increase of $112 or 22%. The change in cost of goods sold is primarily attributed to increased import duty and freight.

Previous wording

**Note 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.

Current wording

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.

Previous wording

Foreign currency transactions gains decreased by $557, from $1,436 for the three months ended December 31, 2022 to $879 for the three months ended December 31, 2023, mainly driven by fluctuations in the U.S. dollar to the U.K. pound sterling exchange rate.

Current wording

Foreign currency transactions gains decreased by $398, from $410 for the three months ended June 30, 2023 to $12 for the three months ended June 30, 2024, mainly driven by fluctuations in the U.S. dollar to the U.K. pound sterling exchange rate.

Previous wording

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 losses decreased by $165, from $923 for the three months ended December 31, 2022 to $758 for the three months ended December 31, 2023, mainly driven by fluctuations in the U.S. dollar to the U.K. pound sterling exchange rate.

Current wording

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 losses decreased unfavorably by $402, a gain of $388 for the three months ended June 30, 2023 to a loss of $14 for the three months ended June 30, 2024, mainly driven by fluctuations in the U.S. dollar to the U.K. pound sterling exchange rate.

Previous wording

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.

Current wording

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, income tax benefit (expense) and stock-based compensation.

Previous wording

Our business is seasonal with revenue concentrated in northern hemisphere countries. Revenue is elevated in the quarters ending December 31 and March 31 owing to sales of ski and outerwear through the fall and winter months. In the quarters ending June 30 and September 30 sales are driven by swimwear and activewear. 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 owing to 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.

Current wording

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. In the quarter ending June 30 sales are driven by swimwear and activewear. 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.

Previous wording

As of December 31, 2023, we had cash and cash equivalents of $3,370, restricted cash of $173 and an accumulated deficit of $43,235. Historically, Perfect Moment has generated negative cash flows from operations and has primarily financed its operations through private sales of equity securities, debt and working capital finance. Overall, cash and cash equivalents and restricted cash, in aggregate, decreased by $1,169 million, from $4,712 million as of March 31, 2023 to $3,543 million as of December 31, 2023.

Current wording

As of June 30, 2024, we had cash and cash equivalents of $1,102, restricted cash of $2,850 and an accumulated deficit of $52,365. Historically, Perfect Moment has generated negative cash flows from operations and has primarily financed its operations through private sales of equity securities, debt and working capital finance. Overall, cash and cash equivalents and restricted cash, in aggregate, decreased by $3,958 million, from $7,910 million as of March 31, 2024 to $3,952 million as of June 30, 2024.

Previous wording

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 December 31, 2023 and March 31, 2023, the outstanding balance under the trade finance facility was $999 and $26, respectively, and the Company had an available trade finance facility of $5.00 million. As of December 31, 2023, there was one outstanding pledged letter of credit by HSBC amounting to $173, however, the trade finance facility does not become the Company’s responsibility until the Company receives the manufactured clothing goods from suppliers. Once drawn, the company has 120 days credit on the 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%. The trade finance facility was originally secured by a standby documentary credit for $1.0 million from UBS Switzerland AG and a personal guarantee to the value of $4,000 from the Chairman of our board of directors, Max Gottschalk. The UBS standby documentary credit expired on April 30, 2023 and the facility was then secured by charge over cash deposits equal to the amount of the facility used at any given moment in time in addition to the aforementioned personal guarantee. On June 26, 2023, the UBS standby documentary credit was reinstated for $1,000, which standby documentary credit was secured by a guarantee from JGA. The UBS standby documentary credit was extended on November 26, 2023 through January 26, 2024 at a 10% interest rate. The JGA guarantee is in addition to the $4,000 personal guarantee of the trade finance facility by Mr. Gottschalk. The JGA guarantee accrues interest of between 8% and 10% per annum, payable by the Company. The interest charged for the nine months ended December 31, 2023 was $47. During the nine-month period ended December 31, 2023, the Company utilized $1,847 of borrowings under the facility, of which was $874 was repaid by December 31, 2023. The trade finance facility is also secured by a guarantee by Perfect Moment Ltd. in the amount of $2.0 million.

Current wording

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 June 30, 2024 and March 31, 2024, the outstanding balance under the trade finance facility was $0, respectively, and the Company had an available trade finance facility of $5.0 million. As of June 30, 2024, there was $2,850 in outstanding pledged letters of credit by HSBC. The trade finance facility does not become the Company’s responsibility until the Company receives the manufactured clothing goods from suppliers. Once drawn, the Company has 120 days credit on the 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%. The trade finance facility was originally secured by a standby documentary credit for $1.0 million from UBS Switzerland AG and a personal guarantee to the value of $4.0 million from the Chairman of our board of directors, Max Gottschalk, and a $3,150 corporate guarantee from Perfect Moment (UK) Limited. The UBS standby documentary credit expired on April 30, 2023 and the facility was then secured by charge over cash deposits equal to the amount of the facility used at any given moment in time in addition to the aforementioned personal and corporate guarantees. On May 31, 2023, the UBS standby documentary credit was reinstated for $1.0 million, which standby documentary credit was secured by a guarantee from Joachim Gottschalk & Associates, Ltd. (“JGA”). The UBS standby documentary credit was extended on November 26, 2023 through January 26, 2024 at a 10% interest rate. The JGA guarantee is in addition to the $4.0 million personal guarantee of the trade finance facility by Mr. Gottschalk. The UBS standby documentary credit was not extended and the $3,150 corporate guarantee from Perfect Moment (UK) Limited was replaced with a $2,000 corporate guaranteed from Perfect Moment, Limited.

Previous wording

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 18 months. 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 below 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.”

Current wording

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 12 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.”

Previous wording

The report of our independent registered public accounting firm that accompanies our audited consolidated financial statements contains for the fiscal years ended March 31, 2023 and March 31, 2022, contained in our final prospectus for our IPO dated February 7, 2024, and filed with the SEC on February 9, 2024, 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 report and in that prospectus 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.

Current wording

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.

Previous wording

During the nine months ended December 31, 2023, operating activities used $3,078 in cash and cash equivalents and restricted cash, primarily resulting from a net loss of $2,980, an adjustment to add back non-cash charges of $1,950 and a net cash outflow from changes in operating assets and liabilities of $2,048. Net cash used by changes in operating assets and liabilities during the nine months ended December 31, 2023 consisted primarily of an inflow of cash from a $1,537 increase in accrued expenses, a $704 increase in trade payables, offset by a cash outflow as a result of a $2,571 increase in accounts receivable and an $1,822 increase in inventories.

Current wording

During the three months ended June 30, 2024, operating activities used $3,880 in cash and cash equivalents and restricted cash, primarily resulting from a net loss of $3,388, an adjustment to add back non-cash charges of $398 and a net cash outflow from changes in operating assets and liabilities of $890. Net cash used by changes in operating assets and liabilities during the three months ended June 30, 2024 consisted primarily of an outflow of cash from a $1,645 increase in prepaid expenses and other current assets related to supplier deposits and a $857 decrease in accrued expenses, offset by a cash inflow as a result of a $642 decrease in accounts receivable, a $611 increase in unearned revenue and an $375 decrease in inventories.

Previous wording

During the nine months ended December 31, 2022, operating activities used $6,361 in cash and cash equivalents and restricted cash, primarily resulting from a net loss of $7,838, an adjustment to add back non-cash charges of $7,153 and a net cash outflow from changes in operating assets and liabilities of $5,676. Net cash used by changes in operating assets and liabilities during the nine months ended December 31, 2022 consisted primarily of an inflow of cash as a result of a $253 decrease in prepaid and other current assets and an increase of $165 in trade payables, offset by an outflow of cash as a result of a $4,667 increase in accounts receivable, a $1,094 increase in inventories, and a $259 decrease in unearned revenue. The movements being general timing of working capital receipts and payments.

Current wording

During the three months ended June 30, 2023, operating activities used $803 in cash and cash equivalents and restricted cash, primarily resulting from a net loss of $2,673, an adjustment to add back non-cash charges of $307 and a net cash inflow from changes in operating assets and liabilities of $1,563. Net cash used by changes in operating assets and liabilities during the three months ended June 30, 2023 consisted primarily of an inflow of cash as a result of a $2,255 increase in unearned revenue, and a $352 decrease in accounts receivable, all offset by an outflow of cash as a result of a $526 increase in prepaid expenses and other current assets, a $304 decrease in trade payables, and a $220 decrease in accrued expenses. The movements being general timing of working capital receipts and payments.

Previous wording

Cash used in investing activities was $194 in the nine months ended December 31, 2023 and $277 in the nine months ended December 31, 2022, a decrease of $83, primarily due to a reduction of software and website development capital expenditure.

Current wording

Cash used in investing activities was $64 in the three months ended June 30, 2024 and $29 in the three months ended June 30, 2023, an increase of $35, primarily due to an increase in software and website development capital expenditure.

Previous wording

Net cash obtained from financing activities during the nine months ended December 31, 2023 was $2,229 mainly attributed to $2,179 net proceeds from the issuance of common shares and $1,847 in net proceeds from trade finance facilities, offset by $923 in deferred offering costs and $874 in repayment of trade finance facilities. Net cash obtained from financing activities during the nine months ended December 31, 2022 was $10,154 primarily resulting from $5,200 net proceeds from the issuance of preferred shares, $4,132 in proceeds from trade finance facilities $2,709 in proceeds from debt financing transactions, and proceeds from other borrowings of $210, offset by $1,560 repayment of trade finance facilities and $537 repayment of shareholder loans.

Current wording

Net cash provided by financing activities during the three months ended June 30, 2023 was $1,242 mainly attributed to $1,270 net proceeds from the issuance of common shares, offset by $28 in repayment of trade finance facilities.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.