Perfect Moment Ltd

Previous wording

Across all revenue channels, Perfect Moment distributes to over 60 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.

Current wording

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.

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) 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.

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 1.6% 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.

Previous wording

The first quarter historically represents less than 5% of our annual net revenue. Gross revenue for the three months ended June 30, 2024, increased to $1,884 an increase of $566 or 43% compared to the three months ended June 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 three months ended June 30, 2024, our returns as a percentage of sales increased to 49% from 34% for the three months ended June 30, 2023.

Current wording

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%.

Previous 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.

Current wording

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.

Previous wording

The Company has reclassified certain costs totaling $377 previously classified as cost of sales for the three months ended June 30, 2023 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 costsof revenue to SG&A, the our adjusted gross margin would have been 50.9% and 48.7%.

Current wording

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%.

Previous wording

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.

Current wording

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.

Previous wording

Having used the wholesale channel to establish our brand globally, we believe we will become less reliant on wholesale partners during the next 5 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.

Current wording

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.

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 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.

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 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.

Previous wording

Although in the next 5 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.

Current wording

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.

Previous 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.

Current wording

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. As 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.

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 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.

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 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.

Previous 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.

Current wording

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.

Previous 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.

Current wording

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.

Previous 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.

Current wording

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.

Previous wording

SG&A expenses for the three months ended June 30, 2024 were $3,298 compared to $2,482 for the three months ended June 30, 2023, an increase of $816 or 33%. The increase is primarily attributed to an increase in stock compensation expense of $361, an increase in people costs to support growth initiatives totaling $259, increased legal fees of $142k, increased insurance of $114k, and an increase in warehousing and merchant services due to increased returns totaling $103.

Current wording

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.

Previous wording

● The total number of unique visitors per month (UVPM) reached more than 1.4 billion during the period. This is the combined sum of UVPM reached by all global digital media coverage achieved during the quarter.

Current wording

● 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.

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 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.

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 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.

Previous wording

● The total social audience reached by content posted by global key opinion leaders (KOLs)1 about Perfect Moment was more than 134.0 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 (91.1 million followers) and Paris Hilton (26.2 million followers) wearing and tagging @perfectmomentsports.

Current wording

● 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.

Previous wording

● 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, Vogue Hong Kong, Vanity Fair, Harper’s BAZAAR, The Telegraph, WhoWhatWear, Grazia, and The Impression.

Current wording

● 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.

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

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, stock-based compensation, financing costs and changes in fair value of derivative liability.

Previous wording

The $944 decrease in adjusted EBITDA for the three months ended June 30, 2024 compared to the same period in 2023, is primarily attributed to an increase in people costs to support growth initiatives totaling $259, increased legal fees of $142, lower margin totaling $126, increased insurance of $114, and an increase in warehousing and merchant services due to increased returns totaling $103.

Current wording

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.

Previous 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.

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. 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 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.

Current wording

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.

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 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.

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 September 30, 2024 and March 31, 2024 the Company had an trade finance facility limit of $2,700 and $5,000 respectively.

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 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.”

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 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.”

Previous 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.

Current wording

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.

Previous 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.

Current wording

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.

Previous 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.

Current wording

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.

Previous 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.

Current wording

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.

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. 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 (“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.

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.

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 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.