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

For the three months ended June 30, 2025 and 2024

(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 months ended June 30, 2025 and 2024

(Unless otherwise indicated, dollar amounts in thousands)

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, surf, and activewear collections under the brand name Perfect Moment. The Company’s collections are sold directly to customers.

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 June 30, 2025, results of operations for the three months ended June 30, 2025 and 2024, consolidated statements of shareholders’ equity for the three months ended June 30, 2025 and 2024, and cash flows for the three months ended June 30, 2025 and 2024. The Company’s results for the three months ended June 30, 2025 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, 2025. The terms “fiscal 2026” and “fiscal 2025” refer to the Company’s fiscal year ending March 31, 2026 and fiscal year ended March 31, 2025, respectively.

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 consolidated 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 significant intercompany balances and transactions have been eliminated in consolidation.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Going concern

Through June 30, 2025, the Company has funded its operations with proceeds from the sale of common stock from the initial public offering, a public offering during June 2025, and other sales of common stock; the sale of preferred stock, alongside existing trade, invoice and shareholder financing arrangements. The Company has incurred recurring losses, including a net loss of $3,819 for the three months ended June 30, 2025 and used cash in operations of $3,892 during that period. As of June 30, 2025, the Company had an accumulated deficit of $68,735. These factors raise substantial doubt about the Company’s ability to continue as a going concern for at least twelve months from the date these condensed consolidated financial statements were available to be issued. The Company’s ability to continue as a going concern is dependent upon management of its expenses and its ability to obtain necessary financing to meet its obligations and pay its liabilities arising from normal business operations when they come due, and upon profitable operations.

The Company’s future capital requirements will depend on many factors, including production costs and planned growth. In order to finance these opportunities and associated costs, it is possible that the Company would need to raise additional financing if working capital is insufficient to support its business needs. While there can be no assurances, the Company intends to raise such capital through additional short-term loan issuances, debt factoring, and additional equity raises. If additional financing is required from outside sources, the Company may not be able to raise it on terms acceptable to it or at all. If the Company is unable to raise additional capital on acceptable terms when needed, its product development, results of operations and financial condition would be materially and adversely affected.

As a result of the above, in connection with the Company’s assessment of going concern considerations in accordance with FASB’s Accounting Standards Update, Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management has determined that the Company’s liquidity condition raises substantial doubt about the Company’s ability to continue as a going concern through twelve months from the date these consolidated financial statements are available to be issued.

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, 2025, expressed substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

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 condensed consolidated financial statements. Significant estimates inherent in the preparation of the condensed consolidated financial statements include reserves for uncollectible accounts receivables, realizability of inventory, sales reserves, useful lives and impairments of long-lived assets, realization of deferred tax assets and related uncertain tax positions, classification of convertible preferred stock, classification of warrants, 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.

Seasonality

The Company experiences certain effects of seasonality with respect to its business. The Company generally experiences greater sales during its last three fiscal quarters, primarily driven by ski and outerwear sales being higher during the winter months and the Company’s customers concentrated in the northern hemisphere, and the lowest sales during its first fiscal quarter.

Revenue recognition

As of June 30, 2025 and March 31, 2025, the Company did not have any contract assets and had $807 and $264, deferred revenue on the accompanying consolidated balance sheets.

For the three months ended June 30, 2025 and 2024, revenue, net recognized from performance obligations related to prior periods was not material. Revenue, net expected to be recognized in any future period related to remaining performance obligations was not material.

Disaggregated revenue

The following table disaggregates the Company’s revenue, net by channel and geographic location:

Restricted cash

Restricted cash consists of cash deposits and certificate of deposits under the Company’s trade finance facility. Restricted cash is classified as current on the accompanying consolidated balance sheets as the trade finance facility can be due on demand.

Accounts receivable and allowance for credit losses

Accounts receivable primarily arise out of sales to customers. The allowance for credit losses is an amount equal to the estimated probable losses net of recoveries in accounts receivable using the incurred loss methodology. After considering current economic conditions and specific and financial stability of its customers, an allowance for credit losses is maintained in the consolidated balance sheet at a level which management believes is sufficient to cover all probable future credit losses as of the balance sheet date based on specific reserves and an expectation of future economic conditions that might impact collectability. Accounts receivable are carried net of allowances for credit losses as of March 31, 2025 and 2024. After all reasonable attempts to collect a receivable have failed, the amount of the receivable is written off against the allowance. As of June 30, 2025 and March 31, 2025, the Company had $624 and $547, respectively, in allowances for credit losses.

Concentration of credit risk

Supplier

For the three months ended June 30, 2025 and 2024, the largest fabric supplier supplied 56% and 52%, respectively, of the fabric used to manufacture the Company’s products.

Customer

For the three months ended June 30, 2025, we had one individual customer that accounted for approximately 11% of total revenue, net. This customer individually did not comprise more than 10% of total accounts receivable as of June 30, 2025. For the three months ended June 30, 2024, no single customer accounted for more than 10% of total revenue.

As of June 30, 2025, no customers accounted for more than 10% of total accounts receivable. As of March 31, 2025, two customers accounted for approximately 27% of total accounts receivable.

Foreign currency

We used the exchange rates in the following table to translate amounts denominated in non-USD currencies as of and for the periods noted:

Loss per share of common stock

Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period. Diluted net loss per share is computed by dividing the net loss 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. For diluted net loss per share, when the Company has a net loss, the weighted average number of shares of common stock is the same as for basic net loss per share due to the fact that when a net loss exists, dilutive securities are not included in the calculation as the impact is anti-dilutive.

For participating securities such as our preferred stock, basic and diluted net loss per share attributable to common stockholders is presented in conformity with the two-class method, an earnings allocation method that determines net income (loss) per share (when there are earnings) for common stock and participating securities. No income was allocated to the participating securities for three months ended June 30, 2025 and 2024 as results of operations were a loss and basic and diluted weighted-average shares are the same in the loss per share calculation for both periods.

Potentially dilutive stock options and securities excluded from the computation of diluted net income (loss) per share, because the effect would be anti-dilutive are as follows:

Recently issued accounting pronouncements

ASU 2025-01,Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures: Clarifying the Effective Date (“ASU 2025-01”) clarifies the effective date of ASU 2024-03 is for fiscal years beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact of ASU 2024-03 on its financial statements and disclosures.

NOTE 3. INVENTORIES

The following table details the primary categories of inventories as of:

NOTE 4. PREPAID ASSETS AND OTHER CURRENT ASSETS

The following table details the primary categories of prepaid and other currents assets as of:

NOTE 5. ACCRUED EXPENSES

The following table details the primary categories of accrued expenses as of:

NOTE 6. DEBT

Short-Term Borrowings

During the three months ended June 30, 2025, the Company entered into a business loan and security agreements (the “Q1 2026 Term Loan”) with the same lender as the Term Loans entered into during fiscal year 2025 for a short-term loan that matures 30-weeks from the date the amount is borrowed. No amount of repaid borrowings may be reborrowed. The Company borrowed a gross amount of $1,400, net of fees of $70 which was recorded as a debt discount and is being amortized over the term of the Q1 2026 Term Loan. The Q1 2026 Term Loan and the outstanding balance owed on the fiscal year 2025 Term Loans at March 31, 2025 are collectively referred to as the “Term Loans”.

During the three months ended June 30, 2025, the Company made total repayments of $2,241 on the Term Loans and amortized $825 of the debt discount to interest expense. As of June 30, 2025 and March 31, 2025, the Company had outstanding borrowings of $2,485 and $2,738, respectively, and an unamortized debt discount of $791 and $887, respectively, resulting in net balance of $1,694 and $1,851, respectively.

Related Party Note

During May 2025, the Company entered into a promissory note (the “Related Party Note”) with an entity controlled by the Chairman of the Company’s board of directors to borrow $500. The Related Party Note matures on December 31, 2025 and permits the Company to prepay the note in full without penalty at any time. If an Event of Default, as defined in the Related Party Note, occurs, the outstanding principal and accrued interest becomes due and payable immediately. Concurrently, with the closing of an offering in June 2025 (see Note 7), the Related Party Note and accrued unpaid interest of totaling $508 was extinguished through the issuance of 1,692,694 shares of the Company’s common stock at a per share price of $0.30. The issuance of shares was approved and determined to be on terms and conditions at arm’s length as the share price was the same price extended to third parties as part of a share offering that closed on the same day (see Note 7).

Trade Finance Facility

The Company repaid $2,495 on the trade finance facility in June 2025. During the three months ended June 30, 2025, there were letter of credits issued, and therefore, no outstanding letters of credits as of the period then ended.

NOTE 7. STOCKHOLDERS’ EQUITY

Shares and Warrants Issued as Part of the Offering

On June 30, 2025, the Company closed a public offering of 10,000,000 shares of its common stock at an offering price of $0.30 per share (the “Offering”), pursuant to its registration statement on Form S-3 (File No. 333-285612) for aggregate net proceeds of approximately $2,538, after deducting underwriting discounts and commissions and estimated offering expenses. There were $149 of offering expenses that were accrued for as of June 30, 2025 and included as a component of accrued expenses on the accompanying unaudited condensed consolidated balance sheets. The underwriters were also granted a 45-day option to purchase up to an additional 1,500,000 shares of common stock and/or pre-funded warrants to cover over-allotments, if any.

In connection with the Offering, the Company issued to the representative of the underwriters, warrants to purchase up to 500,000 shares of common stock at an exercise price of $0.375 per share (the “June 2025 Warrant”). The June 2025 Warrant is exercisable beginning on the date of issuance and expires five years thereafter. The holder of the June 2025 Warrants shall not have the right to convert any portion of the June 2025 Warrant to the extent that after giving effect to such conversion the holder of the June 2025 Warrant, together with any affiliates, would beneficially own in excess of 4.99% (which may be increased to 9.99% at the holder’s sole discretion) of the number of common shares outstanding immediately after giving effect to such conversion. Any increase to the beneficial ownership limitation will not be effective until the 61st day after notice is received by the Company.

The June 2025 Warrant was determined to be an equity classified warrant and fair value was calculated as $74 using the Black-Scholes option-pricing model with the following assumptions: volatility of 60%, risk-free rate of 4.2%, annual dividend yield of 0.0% and expected life offive years.

Shares Issued for Services

During the three months ended June 30, 2025, the Company issued 100,000 shares of common stock to a vendor for services to be rendered with a fair value of $62, as determined by the closing price on the day of issuance. During the three months ended June 30, 2025, the Company amortized $199 of the value of the shares as the services were rendered and $441 of the remaining fair value of the shares was included as a prepaid asset as of June 30, 2025. As of March 31, 2025, $578 of the remaining fair value of the shares issued during the year ended March 31, 2025 was included as a prepaid asset.

Series AA Preferred Stock Dividends

Dividends on the Series AA Preferred Stock accrue daily and will be cumulative from the first day of the calendar month in which they are issued, and shall be payable monthly in arrears on the 30th day of each calendar month, at the rate of 12.0% per annum of its original issue price, which is the equivalent to $0.6961 per annum per share.

For the three months ended June 30, 2025, the Company recorded dividends on our Series AA Preferred Stock of approximately $159. As of June 30, 2025, we have unpaid dividends on our Series AA Preferred Stock of $61 recorded as a component of accrued expenses on the accompanying condensed consolidated balance sheets (see Note 5).

NOTE 8. STOCK-BASED COMPENSATION PLANS

Time-based RSUs

A summary of time-based RSU activity is presented below:

The total stock compensation expense recognized related to vesting of time-based RSUs for the three months ended June 30, 2025 and 2024, was $36 and $76, respectively, and was recognized on the accompanying condensed consolidated statements of operations and comprehensive loss as a component of selling, general and administrative expenses. As of June 30, 2025, the total unrecognized stock-based compensation for time-based RSUs totaled $494 and are expected to be recognized over a weighted average period of 3.4 years.

Stock Options

A summary of option activity is presented below:

The total stock compensation expense recognized related to vesting of stock options for the three months ended June 30, 2025 and 2024 was $98 and $294, respectively, and was recognized on the accompanying condensed consolidated statements of operations and comprehensive loss as a component of selling, general and administrative expenses. As of June 30, 2025 the total unrecognized stock-based compensation for stock options was $874 and is expected to be recognized over a weighted average period of 2.6 years.

NOTE 9. WARRANTS****

The following table summarize the shares of the Company’s common stock issuable upon exercise of warrants outstanding at June 30, 2025:

A summary of warrant activity for the three months ended June 30, 2025 is presented below:

As of June 30, 2025, the intrinsic value of the outstanding warrants was $nil.

10. COMMITMENTS AND CONTINGENCIES

Notice from NYSE – On December 17, 2024 the Company received a notification from the NYSE American LLC (the “NYSE”) 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 (the “Company Guide”) requiring stockholders’ equity of $4,000 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 approximately $2,700 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 has until June 11, 2026 to regain compliance with the Company Guide. The Company submitted a plan of action to regain compliance with the Company Guide (the “Plan”) on January 10, 2025, which the NYSE accepted on March 4, 2025. Accordingly, 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.

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

Legal proceeding* –*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 May 14, 2025, we were named as a defendant in a lawsuit filed in the Superior Court of the State of California in and for the County of Los Angeles Central Judicial District by Amanda Archer and Archer Bytes LLC, a former public relations consultant for the Company. The complaint alleges breach of contract, and other claims and seeks specific damages of $600,000 and unspecified punitive damages. We believe the claims are entirely without merit and intend to vigorously defend the matter.

On April 24, 2025, the Company’s former Chief Executive Officer (the “Former CEO”) commenced ACAS Early Conciliation proceedings (a mandatory step in the UK prior to filing a legal claim) alleging, among other things, unfair dismissal from his position. The Company has not yet been notified that the Former CEO has filed a legal claim with the UK Employment Tribunal.

Capital commitments – The Company had $5,385 purchase obligations as of June 30, 2025, related to purchase orders to factories for the manufacture of finished goods.

Vendor lien on 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. As of June 30, 2025 and March 31, 2025, a lien has not been placed on the Company’s inventory in connection with this contract.

Leases – In April 2025, a two-year lease renewal agreement was executed during April 2025 with fixed monthly payments of approximately $0.6. At inception, the Company recorded a right of use asset and operating lease liability of approximately $18.

NOTE 11. RELATED PARTY TRANSACTIONS

One director and one related party of the Company provided consulting and advisory services for the Company totaling $180 and $45 for the three months ended June 30, 2025 and 2024, respectively, and are included in selling, general and administrative expenses on the accompanying consolidated statement of operations and comprehensive loss. As of June 30, 2025 and March 31, 2025 there were no amounts owed to either director.

NOTE 12. SEGMENT REPORTING

The following table includes additional information about reported segment revenue, significant segment expenses and segment measure of profitability:

See Note 2 for revenue by geographic location. Long-lived assets excluding other non-current assets, by geography are summarized as follows:

NOTE 13. SUBSEQUENT EVENTS

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed consolidated financial statements were issued. Based upon this review, other than as described below or within these condensed consolidated financial statements, the Company did not identify any other subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements.

On July 21, 2025, the over-allotment option was partially exercised by the underwriters for an additional 313,128 shares of the Company’s common stock, generating net proceeds of approximately $87, after deducting underwriting discounts and commissions and estimated offering expenses.

On July 21, 2025, in connection with the underwriter’s exercise of the over-allotment option, the Company issued the representative of the underwriters from the Offering (see Note 7) a warrant to purchase up to 15,656 shares of the Company common stock at an exercise price of $0.38 (the “July 2025 Warrant”). The July 2025 Warrant is exercisable beginning on the date of issuance and expires five years thereafter.

The Company received $3,390,000 in funding from one of its principal stockholders (a related party) to support working capital needs.

The Company is formalizing the related agreement, which is expected to include an interest rate of 12.0% per annum and a maturity date of November 8, 2025.