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 INCOME (LOSS)

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

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Amounts in thousands, except share data)

F****or the three months ended December 31, 2025, and 2024

F****or the nine months ended December 30, 2025, and 2024

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, 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 December 31, 2025, results of operations for the three and nine months ended December 31, 2025 and 2024, consolidated statements of shareholders’ equity for the three and nine months ended December 31, 2025 and 2024, and cash flows for the nine months ended December 31, 2025 and 2024. The Company’s results for the three and nine months ended December 31, 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 International AG (“PMCH”). 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 December 31, 2025, the Company has funded its operations with proceeds from the sale of common stock from the initial public offering, 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 $5,566 for the nine months ended December 31, 2025 and used cash in operations of $8,882 during that period. As of December 31, 2025, the Company had an accumulated deficit of $70,482. 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 condensed 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 condensed 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 December 31, 2025 and March 31, 2025, the Company did not have any contract assets and had $380 and $264, respectively, of deferred revenue on the accompanying consolidated balance sheets.

For the three and nine months ended December 31, 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 as of March 31, 2025 consisted of cash deposits and certificate of deposits under the Company’s trade finance facility and was classified as current on the accompanying consolidated balance sheets as the trade finance facility was due on demand. There was no restricted cash as of December 31, 2025.

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 December 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 December 31, 2025 and March 31, 2025, the Company had $944 and $547, respectively, in allowances for credit losses.

Concentration of credit risk

Supplier

For the three and nine months ended December 31, 2025, the largest single supplier of manufactured goods produced approximately 29% of the Company’s products and for the same periods in 2024, produced 62% and 40% respectively, of the Company’s products.

For the three and nine months ended December 31, 2025, the largest single fabric supplier supplied approximately 0% and 56%, respectively, of the fabric used to manufacture the Company’s products, and for the same periods in 2024, supplied 0% and 46%, respectively, of the fabric used to manufacture the Company’s products.

Customer

For the three and nine months ended December 31, 2025 and 2024, no single customer accounted for more than 10% of total revenue.

As of December 31, 2025, one customer accounted for approximately 12% 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:

Net 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 net income (loss) per share is computed by dividing the net income (loss) applicable to common shareholders 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 income (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 shareholders 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 the three and nine months ended December 31, 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:

1 Certain prior period presentation of these categories were reclassified to ensure comparability with current period presentation.

NOTE 4. PREPAID 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 nine months ended December 31, 2025, the Company entered into business loan and security agreements (the “2026 Term Loans”) with the same lender as the Term Loans entered into during fiscal year 2025 for short-term loans that mature 30-weeks from the date of a borrowing. No amount of repaid borrowings may be reborrowed. The Company borrowed a gross amount of $1,988, net of fees of $658 which was recorded as a debt discount and is being amortized over the term of the 2026 Term Loans. The 2026 Term Loans 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 nine months ended December 31, 2025 and 2024, the Company made total repayments on the Term Loans of $4,725 and $3,846, respectively. During the three and nine months ended December 31, 2025, the Company amortized $251 and $1,544, respectively, of the debt discount to interest expense. During the three and nine months ended December 31, 2024, the Company amortized $979 and $1,160, respectively, of the debt discount to interest expense. During the three and nine months ended December 31, 2024, the Company received an early payment discount of $179 that was recorded as a cancelled debt discount in the same amount. As of December 31, 2025 and March 31, 2025, the Company had outstanding borrowings of $nil and $2,738, respectively, and an unamortized debt discount of $nil and $887, respectively, resulting in a net balance of $nil and $1,851, respectively.

Related Party Notes

During May 2025, the Company entered into a promissory note (the “May 2025 Related Party Note”) with an entity controlled by the Chairman of the Company’s board of directors to borrow $500. The May 2025 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 May 2025 Related Party Note, occurs, the outstanding principal and accrued interest becomes due and payable immediately. Concurrently, with the closing of an offering in September 2025 (see Note 7), the May 2025 Related Party Note and accrued unpaid interest 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).

During August 2025, the Company received $3,390 from one of its principal shareholders (a related party) in exchange for an unsecured promissory note that matures on March 9, 2026 (the “First August 2025 Related Party Note”), and $1,700 from two of its principal shareholders (related parties) in exchange for an unsecured promissory note that matures on August 18, 2030 (the “Second August 2025 Related Party Note”, collectively with the First August 2025 Related Party Note, the “August 2025 Related Party Notes”).

In consideration for providing the August 2025 Related Party Notes, the Company issued the principal shareholder 652,253 restricted stock units of the Company’s common stock, with 521,802 restricted stock units vesting immediately and 130,451 restricted stock units vesting over the term of the August 2025 Related Party Notes. The fair value of the restricted stock units was $305, as determined by the average closing price of the Company’s common stock for the five trading days immediately preceding the issuance of the August 2025 Related Party Notes, and was recorded as a debt discount and is being amortized over the terms of the August 2025 Related Party Notes.

The August 2025 Related Party Notes permit the Company to prepay the note in full without penalty at any time. If an Event of Default, as defined in the August 2025 Related Party Notes, occurs, the outstanding principal and accrued interest becomes due and payable immediately. If the Company prepays the notes, the unvested restricted stock units would vest proportionately with the amount of the prepayment.

During the three and nine months ended December 31, 2025, the Company amortized $41 and $139, respectively, of the debt discount to interest expense. As of December 31, 2025, the Company has outstanding borrowings of $5,090 and an unamortized discount of $166 resulting in a net balance of $4,924, of which $3,319 is current.

During the three and nine months ended December 31, 2025, the Company incurred and paid interest on the August 2025 Related Party Notes totaling $153. As of December 31, 2025, there were no amounts of accrued but unpaid interest on the August 2025 Related Party Notes.

Trade Finance Facility

The Company repaid $2,495 on the trade finance facility in June 2025, and the facility was terminated in August 2025.

NOTE 7. SHAREHOLDERS’ EQUITY

Sale of Common Stock

Public 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. 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. 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 $83, after deducting underwriting discounts and commissions and estimated offering expenses.

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 June 2025 Warrant was determined to be an equity classified warrant and fair value was calculated as $5 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.

In connection with the underwriter’s exercise of the over-allotment option, the Company issued the representative of the underwriters from the Offering a warrant to purchase up to 15,656 shares of the Company common stock at an exercise price of $0.375 (the “July 2025 Warrant”). The July 2025 Warrant is exercisable beginning on the date of issuance and expires five years thereafter.

The July 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 113%, risk-free rate of 4.2%, annual dividend yield of 0.0% and expected life offive years.

The holder of the June 2025 Warrants and July 2025 Warrants shall not have the right to convert any portion of the respective warrants to the extent that after giving effect to such conversion the holder of the respective warrants, 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.

Securities Purchase Agreement: On August 27, 2025, the Company entered into a securities purchase agreement (the “August SPA”) to issue and sell 3,172,858 shares of its common stock (the “August SPA Shares”) at a per share price of $0.46822, which represents the average closing price of the Company’s common stock for the five trading days immediately preceding the sale, and a warrant to purchase up to 3,204,908 shares of its common stock (the “August 2025 Warrant Shares”, and together with the August SPA Shares, the “August SPA Securities”) at an exercise price of $0.46822 per share (the “August 2025 Warrant”) for aggregate net proceeds of approximately $1,429, after deducting direct offering expenses. The August 2025 Warrant is exercisable beginning on the date of issuance and expires three years thereafter. The August 2025 Warrant can be exercised on a cashless basis if the shares underlying the August 2025 Warrant are not registered at the time it is exercised.

The August 2025 Warrant was determined to be an equity classified warrant and fair value was calculated as $1,125 using the Black-Scholes option-pricing model with the following assumptions: volatility of 113%, risk-free rate of 4.2%, annual dividend yield of 0.0% and expected life ofthree years.

The holder of the August 2025 Warrants shall not have the right to convert any portion of the respective warrants to the extent that after giving effect to such conversion the holder of the respective warrants, together with any affiliates, would beneficially own in excess of 9.99% (which may be increased to 19.99% 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.

Beginning in August 2026, the Company may, at its sole discretion, require the holder of the August 2025 Warrant to exercise the warrant in full on a specified date (the “Mandatory Exercise Date”), provided that, prior to and as of the Mandatory Exercise Date (a) the closing price of the Company’s common stock has exceeded the exercise price of the August 2025 Warrant during any consecutive five trading days within a fifteen trading-day period at least once and (b) the Company has an effective registration statement registering the resale of both the August 2025 Warrant and the shares issuable upon exercise of the August 2025 Warrant. On the Mandatory Exercise Date, the beneficial ownership limitation will be automatically increased to 19.99%. If the holder of the August 2025 Warrant does not pay the amount due in cash within thirty days of the Mandatory Exercise Date, then the Company may effect, in its discretion, either (i) a cashless exercise of the August 2025 Warrants or (ii) a redemption and subsequent cancellation of the August 2025 Warrant, in exchange for $0.001 per warrant.

Equity Line of Credit (“ELOC”): On October 7, 2025, the Company entered into an equity purchase agreement (the “ELOC”), whereby the Company has the right, but not the obligation, to direct an investor to purchase up to $25,000 of the Company’s common stock (the “Put Shares”), wherethe Company directs the investor to purchase Put Shares in increments between $5 and the lesser of (a) $500 or (b) 20.0% of the Average Daily Trading Value (as defined in the ELOC), on the terms and conditions set forth in the ELOC. The purchase price of the Put Shares will be the lesser of (i) 97.0% of the Market Price (as defined in the ELOC) or (ii) 102.0% of the Market Alternative Price (as defined in the ELOC). If the Company’s principal market is any tier of the OTC Markets on the date the investor receives the Company’s directive, the purchase price of the Put Shares will be the lesser of (i) 85.0% of the Market Price or (ii) 85.0% of the Market Alternative Price. The number of Put Shares to be purchased by the investor is subject to a beneficial ownership limitation of 4.99%.

The ELOC will not be effective until it is first approved by the Company’s shareholders and then approved by the Company’s board of directors. The ELOC was approved by the Company’s shareholders on January 14, 2026, but has not been approved by the Company’s Board as of the dates these condensed consolidated financial statements were issued. Once the ELOC is effective, the Company will issue the investor shares of the Company’s common stock (the “Commitment Shares”) that is determined by dividing 187,000 by the lesser of (i) the closing price of the Company’s common stock on the Trading Day (as defined in the ELOC) immediately preceding date the ELOC is approved by Company’s board of directors, or (ii) average of the five (5) closing prices of the Company’s common stock during the five Trading Days immediately preceding the date the ELOC is approved by Company’s board of directors. As of the date these condensed consolidated financial statements were issued, the approvals were not yet received.

In connection with the ELOC, the Company entered into a registration rights agreement (the “ELOC RRA”) whereby the Company will file a registration statement covering the maximum number of registerable securities (as defined in the ELOC RRA) within forty-five calendar days from the date the ELOC is approved by the Company’s board of directors.

The ELOC will end on the earlier of (i) the date the investor purchased $25,000 of Put Shares, (ii) October 7, 2027, (iii) the date of written notice of termination by the Company to the investor (per the terms and conditions set forth in the ELOC), (iv) the ELOC RRA is no longer effective after the initial effective date of the ELOC RRA, or (v) the date that the Company commences a case or any person commences a proceeding against the Company, a custodian is appointed for the company or for all or substantially all of its property or the Company makes a general assignment for the benefit of its creditors.

Shares Issued for Services

The Company, from time to time, issues shares of its common stock for marketing and other services. The fair value of the shares is initially capitalized as a prepaid service cost and amortized over the service period. As of March 31, 2025, the unamortized service costs were $578. During the nine months ended December 31, 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 nine months ended December 31, 2025 and 2024, the Company amortized $455 and $419 respectively, of the value of the shares as the services were rendered. As of December 31, 2025, the unamortized service cost was $185 and was included as a component of prepaid and other current assets (see Note 4).

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 and nine months ended December 31, 2025, the Company recorded dividends on our Series AA Preferred Stock of approximately $161 and $481 respectively.

Subsequent to December 31, 2025, and following approval by the Company’s shareholders at the annual general meeting, all outstanding shares of the Series AA Preferred Stock were converted into shares of the Company’s common stock in accordance with the amended conversion terms (see Note 13). The conversion had no impact on the Company’s consolidated financial position as of December 31, 2025.

NOTE 8. STOCK-BASED COMPENSATION PLANS

Time-based RSUs

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

The total stock compensation expense related to vesting of time-based RSUs for the three months ended December 31, 2025 and 2024, was $91 and $285, respectively, and for the nine months ended December 31, 2025 and 2024, was $167 and $489, respectively, was recognized on the accompanying condensed consolidated statements of operations and comprehensive income as a component of selling, general and administrative expenses. As of December 31, 2025, the total unrecognized stock-based compensation for time-based RSUs totaled $1,016 and was expected to be recognized over a weighted average period of 3.2 years.

Stock Options

A summary of option activity is presented below:

During August 2025, the Company re-purchased 208,400 stock options from certain directors and officers at fair value as determined by the closing price on the day of re-purchase, for cash consideration of $60. The re-purchase provided for $37 in excess fair value of the cash consideration over the fair value of the initial options, which was recognized as compensation expense and was included as a component of selling, general and administrative expenses for the three and nine months ended December 31, 2025.

The total stock compensation expense recognized related to vesting of stock options for the three months ended December 31, 2025 and 2024 was $54 and $101, respectively and for the nine months ended December 31, 2025 and 2024 was $224 and $609, respectively, and was recognized on the accompanying condensed consolidated statements of operations and comprehensive income as a component of selling, general and administrative expenses. As of December 31, 2025 the total unrecognized stock-based compensation for stock options was $375 and is expected to be recognized over a weighted average period of 2.1 years.

NOTE 9. WARRANTS

The following table summarizes the shares of the Company’s common stock issuable upon exercise of warrants outstanding at December 31, 2025:

A summary of warrant activity for the nine months ended December 31, 2025 is presented below:

As of December 31, 2025, the intrinsic value of the outstanding warrants was $31.

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 shareholders’ equity requirements of Sections 1003(a)(ii) of the NYSE American Company Guide (the “Company Guide”) requiring shareholders’ 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 December 31, 2025, the Company had shareholders’ equity of approximately $1,057 and had losses in its three most recent fiscal years ended March 31, 2025.

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 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 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 we continue to vigorously defend the matter.

On October 6, 2025, the Company received notice that its former Chief Executive Officer of the Company, Mark Buckley, filed Grounds of Complaint with the UK Employment Tribunal against the Company alleging, among other things, unfair dismissal from his position. The Company filed its Grounds of Resistance to Mr. Buckley’s claims on October 30, 2025. The Company intends to continue vigorously defending the matter. The Company’s attempts to resolve the dispute will continue in parallel with the ongoing litigation.

Capital commitments – The Company had $382 purchase obligations as of December 31 2025, related to purchase orders to factories for the manufacture of finished goods.

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. In October 2025, the Company notified its landlord of its intent to terminate this lease in January 2026.

NOTE 11. RELATED PARTY TRANSACTIONS

Consulting and Advisory Services

One director and one related party of the Company provided consulting and advisory services for the Company totaling $191 and $46 for the three months ended December 31, 2025 and 2024, respectively, and totaling $563 and $139 for the nine months ended December 31, 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 December 31, 2025 and March 31, 2025 there were no amounts owed to either the director or the related party.

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.

Submission of Matters to a Vote of Security Holders

On January 14, 2026, the shareholders holding a majority of the voting power of the Company entitled to vote as of the record date of November 21, 2025 approved a number of corporate matters. These actions included authorizing certain issuances of common stock and warrants, amending the Certificate of Incorporation to increase authorized shares, approving the ELOC, and authorizing an additional reverse stock split of the common stock at a ratio to be determined by the Company’s board of directors. Refer to the definitive information statement filed via form DEF 14A with the SEC on November 26, 2025.

Series AA Preferred Stock Conversion

On January 15, 2026, the Company issued 11,458,306 shares of its common stock upon conversion of all outstanding shares of Series AA Preferred Stock at a reduced conversion price of $0.46822 per share, as approved by the shareholders of the Company on January 14, 2026.

Warrant Issuance

During January 2026, the August 2025 Warrant was amended and restated to provide for (i) preemptive rights of the holder of the August 2025 Warrant to participate in future financings by the Company, pro rata, except in connection with certain issuance; (ii) the right of the holder of the August 2025 Warrant to match any proposal to provide equity or debt financing to the Company so long as the holder of the August 2025 Warrant holds at least 4.99% of the outstanding common stock of the Company; and (iii) weighted average anti-dilution price protection, with customary carve outs including for the excluded issuance. Additionally, the Company issued the holder of the August 2025 Warrant an additional Warrant (the “January 2026 Warrant”) to purchase up to an amount of shares of its common stock equal to the difference between (i) 19.99% of the number of shares of its common stock outstanding as of the closing date of the conversion of the Series A Preferred Stock and (ii) the August SPA Securities (see Note 9).

Leases

During January 2026, the Company entered into a lease for office premises at 5th Floor, Gramophone Works, 326 Kensal Road, London W10 5BZ, commencing January 2026. The lease has a ten-year term and includes a mutual break option after five years. Lease payments for the first five-years total approximately GBP 1,600 (approximately $2,151 as of December 31, 2025). The Company accounted for the lease under ASC 842 beginning on the commencement date.