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 NINE MONTHS ENDED DECEMBER 31, 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 nine months ended December 31, 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 December 31, 2024, results of operations for the three and nine months ended December 31, 2024 and 2023, consolidated statements of shareholders’ equity for the three and nine months ended December 31, 2024 and 2023, and cash flows for the nine months ended December 31, 2024 and 2023. The Company’s results for the three and nine months ended December 31, 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 December 31, 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 $8,614 for the nine months ended December 31, 2024 and used cash in operations of $8,780 during the period. As of December 31, 2024, the Company had an accumulated deficit of $57,591. Also, we have accrued approximately $1,143 of delinquent payroll taxes.

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 December 31, 2024 and March 31, 2024, the returns provision was $704 and $346, respectively.

Revenue is comprised of direct-to-consumer ecommerce revenue through the Company’s website and revenue related to wholesalers, revenue related to retail stores, 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 December 31, 2024 and March 31, 2024, the Company had $587 and $558, respectively, in allowances for doubtful accounts. Accounts Receivable, net of allowances, as of December 31, 2024 and March 31, 2024 was $2,747 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.

Deferred Offering Costs

Deferred offering costs consist primarily of legal, accounting and underwriters’ fees incurred related to equity financing. These deferred costs are deferred and then charged against the proceeds received once the equity financing occurs or are charged to expense if the financing does not occur.

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:

Supplier concentration

For the three months ended December 31, 2024 and 2023, the largest single supplier of manufactured goods to the Company produced 62% and 92%, respectively, of the Company’s products. For the three months ended December 31, 2024 and 2023, the Company made no fabric purchases.

For the nine months ended December 31, 2024 and 2023, the largest single supplier of manufactured goods to the Company produced 40% and 75%, respectively, of the Company’s products. For the nine months ended December 31, 2024 and 2023, the single largest fabric supplier to the Company supplied 46% and 63%, respectively, of the fabric used to manufacture the Company’s products.

Customer concentration

No single customer accounted for more than 10% of total revenue for the three and nine months ended December 31, 2024.

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 $0 as of December 31, 2023, and $41 as of March 31, 2023.

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 Q3 2025 the company used the average of a peer group of similar companies based by one or all the following factors to determine volatility: industry, revenue, market capitalization. The risk-free rate assumption is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of the option. The Company has never paid dividends on its common stock and does not anticipate paying dividends on common stock in the foreseeable future. Therefore, the Company uses an expected dividend yield of zero.

Income / loss per share of common stock

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period. Diluted earnings per share is computed by dividing the net income applicable to common stockholders by the weighted average number of shares of common stock outstanding plus the number of additional shares of common stock that would have been outstanding if all dilutive potential shares of common stock had been issued using the treasury stock method. Potential shares of common stock are excluded from the computation when their effect is antidilutive. The dilutive effect of potentially dilutive securities is reflected in diluted net income per share if the exercise prices were lower than the average fair market value of common stock during the reporting period.

Potentially dilutive stock options and securities as presented in the table below were excluded from the computation of diluted net income (loss) per share, because the effect would be anti-dilutive. As the Company incurred income for the three months ended December 31, 2023, while incurring losses for the three months ended December 31, 2024 and nine months ended December 31, 2024 and 2023, the treasury stock method and basic and diluted weighted-average shares are different 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 $1,761 and $2,752 previously classified as cost of sales for the three and nine months ended December 31, 2023, respectively, to SG&A expenses to conform to the current year presentation.

Recently issued accounting pronouncements

In November 2024, FASB issued ASU 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) Disaggregation of Income Statement Expenses. The guidance in ASU 2024-03 requires public business entities to disclose in the notes to the financial statements, among other things, specific information about certain costs and expenses including purchases of inventory; employee compensation; and depreciation and amortization expense for each caption on the income statement where such expenses are included. The update is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted, and the amendments may be applied prospectively to reporting periods after the effective date or retrospectively to all periods presented in the financial statements. We are currently evaluating the provisions of this guidance and assessing the potential impact on our financial statement disclosures.

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. The Company will adopt ASU 2023-07 beginning April 1, 2025. The Company does not believe the impact of the new guidance and related codification improvements had a material impact to its financial position, results of operations and cash flows.

We have reviewed all accounting pronouncements recently issued by the FASB and the SEC. The authoritative pronouncements that we have already adopted did not have a material effect on our financial condition, results of operations, cash flows or reporting thereof, and except as otherwise noted above, we do not believe that any of the authoritative pronouncements that we have not yet adopted will have a material effect upon our financial condition, results of operations, cash flows or reporting thereof.

NOTE 3. CASH

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

Restricted cash represents amounts pledged as collateral against our outstanding borrowings under our trade finance facility. As of December 31, 2024, we have $2,703 of outstanding borrowings under this facility (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 December 31, 2024 and March 31, 2024.

Depreciation expense related to property and equipment was $71 and $158 for the three months ended December 31, 2024 and 2023, respectively. Depreciation expense related to property and equipment was $282 and $432 for the nine months ended December 31, 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 December 31, 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 March 31, 2024, there were no outstanding pledged letters of credit or trade loans issued by HSBC. During the period ended December 31, 2024, the Company was extended letters of credit by HSBC in the aggregate amount of $2,849, all of which were utilized as trade loans during the period. The Company made partial payment of the trade loans of $146 during the period, resulting in an outstanding trade loan balance of $2,703 as of December 31, 2024 (which was secured by $1,351 of restricted cash held with HSBC - see Note 3). As of December 31, 2024, there were no issued letters of credit outstanding.

NOTE 7. CONVERTIBLE NOTE PAYABLE

During the nine months ended December 31, 2024 the Company entered into a convertible note purchase agreement pursuant to which the Company sold an accredited investor (the “Investor”) a convertible secured promissory note (the “Convertible Note”) in the aggregate principal amount of $2.0 million, which remained outstanding as of the period then ended. The Convertible Note bears interest at rate of 15% per annum, is due and payable one year from the date of issuance, is secured by the assets of the Company and is convertible into shares of Common Stock of the Company at a conversion price of $1.00 per share. The Company intends to effect an offering of up to $10.0 million of its preferred stock and warrants further to Regulation A+ (the “Offering”). The Company agreed that 33% of all net proceeds received from the Offering after the first $2.0 million in net proceeds shall be used to repay outstanding amounts under this Note.

During the nine months ended December 31, 2024, the Company accrued $21 of interest in accordance with the terms of the note.

NOTE 8. ADVANCE ON FUTURE RECEIPTS

The Company has the following advances on future receipts as of December 31, 2024:

Note 1, 2, 3, 4, 5, and 6

During the nine months ended December 31, 2024, the Company received six secured advances from unaffiliated third parties totaling $4,604 for the purchase of future receipts/revenues of $6,883. Pursuant to the terms of the agreement, the unaffiliated third parties will auto withdraw an aggregate of $243 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. As a result, the Company recorded a liability of $6,883 to account for the future receipts sold and a debt discount of $2,280 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 nine months ended December 31, 2024, the Company paid $3,846 of the notes and received an early payment discount of $179, and as such, the outstanding balance of the notes was $2,858 as of December 31, 2024. The Company amortized $1,160 of the debt discount during the period and cancelled debt discount of $179 against the notes, which is related to the early payment discount of $179, resulting in unamortized balance of $941 as of December 31, 2024. As such, the balance of the notes net of unamortized discount was $1,917 as of December 31, 2024.

NOTE 9. COMMON STOCK

Common stock

Shares Issued for Services

During the nine months ended December 31, 2024, the Company issued 615,241 shares of restricted common stock to vendors for services rendered and to be rendered with a fair value of $681. 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 nine months ended December 31, 2024 the Company amortized $419 of the value of the shares as the services were rendered and $262 of the remaining fair value of the shares was included as a prepaid asset as of December 31, 2024.

NOTE 10. RESTRICTED STOCK UNITS

Restricted Stock Units

A summary of restricted stock unit activity for the nine months ended December 31, 2024 is presented below.

During the nine months ended December 31, 2024, the Company issued 805,866 shares of restricted stock units to employees and vendors for services rendered with a fair value of $946. 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 nine months ended December 31, 2024 was $488 and is included in selling, general and administrative expenses in the accompanying statements of operations. As of December 31, 2024, the amount of unvested compensation related to issuances of restricted stock award was $1,178 which will be recognized as an expense in future periods as the shares vest.

NOTE 11. 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 2,173,083 and 2,527,944 shares available to issue from the 2021 plan as of December 31, 2024 and March 31, 2024, respectively. 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 December 31, 2024 is presented below:

During the nine months ended December 31, 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.

During the nine months ended December 31, 2024, the Company cancelled 600,000 of vested and unvested stock previously issued to officers for services rendered and to be rendered with a fair value of $2,460. The shares were valued based on the market value of the Company’s stock price on the grant date and were amortized over their vesting terms. The Company credited back $14 to SG&A related to expense charged on unvested options through the cancelation date.

The total stock compensation expense recognized related to vesting of stock options for the nine months ended December 31, 2024 and 2023 amounted to $609 and $18, respectively. As of December 31, 2024 the total unrecognized stock-based compensation was $1,317, which is expected to be recognized as part of operating expense through September 2028.

At December 31, 2024, the intrinsic value of the outstanding options under the 2021 Plan was $162.

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 12. STOCK WARRANTS

A summary of warrant activity for the nine months ended December 31, 2024 is presented below:

No warrants were issued for the nine months ended December 31, 2024.

As of December 31, 2024 the outstanding warrants hadno intrinsic value.

NOTE 13. 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 December 31, 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.

14. 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.

On December 17, 2024 the Company received a notification from the NYSE American LLC stating that the Company is not in compliance with the minimum stockholders’ equity requirements of Sections 1003(a)(ii) of the NYSE American Company Guide requiring stockholders’ equity of $4.0 million or more if the Company has reported losses from continuing operations and/or net losses in three of the four most recent fiscal years. As of September 30, 2024, the Company had stockholders’ equity of $2.7 million and had losses in its three most recent fiscal years ended March 31, 2024.

The Company is now subject to the procedures and requirements of Section 1009 of the Company Guide. The Company had until January 10, 2025, to submit a plan (the “Plan”) of actions it has taken or will take to regain compliance with the continued listing standards by June 11, 2026. The Company submitted a plan to regain compliance with NYSE American listing standards on January 10, 2025. If the NYSE American accepts the Plan, the Company will be able to continue its listing during the Plan period and will be subject to periodic reviews including quarterly monitoring for compliance with the Plan until it has regained compliance. If the Plan is not accepted by the NYSE American, the Letter stated that delisting proceedings will commence. The Company may appeal to staff delisting determination in accordance with Section 1010 and Part 12 of the Company Guide.

The Letter has no immediate effect on the listing or trading of the Company’s common stock on the NYSE American. The Company’s receipt of the Letter from the NYSE American does not affect the Company’s business, operations or reporting requirements with the U.S. Securities and Exchange Commission.

Capital commitments - The Company had no purchase obligations as of December 31, 2024, related to purchase orders to factories for the manufacture of finished goods. All future 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 15. 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 $213 in the aggregate for the nine months end December 31, 2024. No other fees were paid to these individuals or entities during that period.

16. SUBSEQUENT EVENTS

Shares Issued for Services

Subsequent to December 31, 2024, the Company issued 336,861 shares of common stock to vendors for services rendered and to be rendered with a fair value of $288. 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.

NYSE American Delisting

On December 17, 2024 the Company received a notification from the NYSE American LLC stating that the Company is not in compliance with the minimum stockholders’ equity requirements of Sections 1003(a)(ii) of the NYSE American Company Guide requiring stockholders’ equity of $4.0 million or more if the Company has reported losses from continuing operations and/or net losses in three of the four most recent fiscal years. As of September 30, 2024, the Company had stockholders’ equity of $2.7 million and had losses in its three most recent fiscal years ended March 31, 2024.

The Company is now subject to the procedures and requirements of Section 1009 of the Company Guide. The Company had until January 10, 2025, to submit a plan (the “Plan”) of actions it has taken or will take to regain compliance with the continued listing standards by June 11, 2026.

The Company submitted a plan to regain compliance with NYSE American listing standards on January 10, 2025. If the NYSE American accepts the Plan, the Company will be able to continue its listing during the Plan period and will be subject to periodic reviews including quarterly monitoring for compliance with the Plan until it has regained compliance. If the Plan is not accepted by the NYSE American, the Letter stated that delisting proceedings will commence. The Company may appeal to staff delisting determination in accordance with Section 1010 and Part 12 of the Company Guide.

The Letter has no immediate effect on the listing or trading of the Company’s common stock on the NYSE American. The Company’s receipt of the Letter from the NYSE American does not affect the Company’s business, operations or reporting requirements with the U.S. Securities and Exchange Commission.

Executive Changes

On January 31, 2025, the Company terminated Mark Buckley as Chief Executive Officer of the Company. As of the date of this filing, the Company has not entered into a separation agreement with Mr. Buckley with respect to his termination. Mr. Buckley shall continue to serve as a director of the Company.

On January 31, 2025, the Company terminated Jeff Clayborne, the prior Chief Financial Officer of the Company. As of the date of this filing, the Company has not entered into a separation agreement with Mr. Clayborne with respect to his termination.

On February 3, 2025, the Board of Directors appointed Chath Weerasinghe as the Company’s Chief Financial Officer and Chief Operating Officer, effective February 3, 2025. Mr. Weerasinghe’s Employment Agreement provides for a base salary of £300,000 per year and allow for a performance bonus of up to 50% of Mr. Weerasinghe’s annual salary subject to achieving certain performance targets. Additionally, per the terms of the Employment Agreement, Mr. Weerasinghe will receive a sign-on bonus of £20,000, to be paid on Mr. Weerasinghe’s start date, February 3, 2025. In addition, Mr. Weerasinghe will be entitled to participate in the Company’s 2021 Equity Incentive Plan, with 300,000 restricted stock units (the “RSU’s) to be granted as of Mr. Weerasinghe’s start date. The RSU’s will vest over a period of four years pursuant to a Restricted Stock Unit Agreement, with 75,000 RSU’s vesting on the twelve (12) month anniversary of the start date and the remaining RSU’s will vest quarterly over three years, with 18,750 RSU’s vesting per quarter.

On February 3, 2025, The Board of Directors of the Company appointed Jane Gottschalk to the role of President of the Company, effective immediately. Other than the job title change adding the position of President, terms of Ms. Gottschalk’s current contract of employment will not change.