Perfect Moment Ltd

ITEM 1. FINANCIAL STATEMENTS.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share data)

PERFECT MOMENT LTD AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Amounts in thousands, except share and per share data)

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

THREE MONTHS AND SIX MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

(Amounts in thousands, except share data)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

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)

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.

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:

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.

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:

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 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 inone business segment, product sales.

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:

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:

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.

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.

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 ofzero.

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.

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.

The three (3) levels of fair value hierarchy defined by ASC 820 are described below:

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.

NOTE 3. CASH

Cash consisted of the following as of September 30, 2024 and March 31, 2024.

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.

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.

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.

NOTE 6. TRADE FINANCE FACILITY

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:

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.

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.

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.

A summary of option activity for the period ended September 30, 2024 is presented below:

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 inten 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:

NOTE 11. STOCK WARRANTS

A summary of warrant activity for the six months ended September 30, 2024 is presented below:

No warrants were issued for the six months ended September 30, 2024.

As of September 30, 2024 the outstanding warrants hadno 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:

Period end exchange rate:

Average exchange rate:

The following table, reported in USD, disaggregates our cash balances by currency denomination:

Cash denominated in:

Our cash primarily consists of funds held in bank accounts and third party payment platforms.

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.

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.

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.

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).